Amicus Curiae Brief — Securities and Exchange Commission, Petitioner v. George R. Jarkesy, Jr., et al.

NO. 22-859

In the

Supreme Court of the United States

SECURITIES AND EXCHANGE COMMISSION,

Petitioner,

v.

GEORGE R. JARKESY, JR., ET AL.,

Respondents.

__________________________

On Writ of Certiorari to the

United States Court of Appeals for the Fifth Circuit

BRIEF OF AMICUS CURIAE

THE FORUM OF UNITED STATES

ADMINISTRATIVE LAW JUDGES

IN SUPPORT OF NEITHER PARTY

Steven A. Glazer

Counsel of Record

THE FORUM OF UNITED STATES

ADMINISTRATIVE LAW JUDGES

P.O. Box 14076

Washington, D.C. 20044

(301) 332-9214

forumalj@gmail.com

August 28, 2023

SUPREME COURT PRESS

Counsel for Amicus Curiae

♦

(888) 958-5705

♦

BOSTON, MASSACHUSETTS

i

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ...................................... iii

INTEREST OF THE AMICUS CURIAE ................... 1

SUMMARY OF ARGUMENT .................................... 2

ARGUMENT ............................................................... 3

I.

THE SEVENTH AMENDMENT DOES NOT

APPLY TO THIS SEC PROCEEDING ..................... 3

A. SEC Actions for Securities Fraud

Vindicate “Public Rights.” .......................... 3

1. Jarkesy’s Take on the “Public Rights”

Doctrine ................................................. 4

2. Jarkesy’s Misquote of Blackstone’s

COMMENTARIES Is Fatal to Its

Holding .................................................. 6

B. History and Tradition Supports SEC

Administrative Enforcement Actions

Without Juries ............................................ 9

II. ALJ “FOR-CAUSE” REMOVAL PROTECTIONS

ARE CONSTITUTIONAL ..................................... 11

A. The Fifth Circuit Misapplies Free

Enterprise Fund ........................................ 12

1. The Place of ALJs in the Hierarchy

of Removal Layers Is Irrelevant ......... 13

a. The “Upper Layer” of Protection

for Heads of Departments Does Not

Weaken Executive Removal Power ... 14

b. The “Lower Layer” of Protection for

ALJs Does Not Weaken Executive

Removal Power ................................ 17

ii

TABLE OF CONTENTS – Continued

Page

2. The MSPB’s Standard for ALJ

Removal Does Not Weaken Executive

Removal Power .................................... 19

B. Far from Interfering with Executive

Power, ALJ Removal Protections Are a

Constitutional Expression of It ................ 20

III. RESPONDENTS ARE NOT HARMED BY ALJ

REMOVAL PROTECTIONS .................................. 22

IV. THIS COURT SHOULD NOT ENTERTAIN

FATUOUS COLLATERAL ATTACKS INTENDED

TO SABOTAGE SEC ENFORCEMENT .................. 24

CONCLUSION.......................................................... 26

iii

TABLE OF AUTHORITIES

Page

TABLE OF AUTHORITIES

CASES

Atlas Roofing Co. v. Occupational Safety &

Health Rev. Comm’n, 430 U.S. 442 (1977) ..... 2, 4

Butz v. Economou,

438 U.S. 478 (1978) ............................................ 11

Calcutt v. FDIC,

37 F.4th 293 (6th Cir. 2022).................... 2, 12, 23

Collins v. Yellen,

141 S. Ct. 1761 (2021) ........................................ 23

Cunningham v. Brown,

265 U.S. 1 (1924) ................................................. 9

Decker Coal Co. v. Pehringer,

8 F.4th 1123 (9th Cir. 2021)........ 2, 12, 13, 14, 15

Dep’t of Labor v. Avery,

120 M.S.P.R. 150 (2013) .................................... 19

Ernst & Ernst v. Hochfelder,

425 U.S. 185 (1976) ............................................. 9

Free Enter. Fund v. Pub. Co. Acct. Oversight

Bd., 561 U.S. 477 (2010) ....... 2, 12, 13, 15, 16, 18

Granfinanciera, S.A. v. Nordberg,

492 U.S. 33 (1989) ....................................... 2, 4, 5

Humphrey’s Ex’r v. United States,

295 U.S. 602 (1935) ......................... 16, 17, 18, 21

Jarkesy v. Securities and Exchange Comm’n,

34 F.4th 446 (5th Cir. 2022) .. 1, 3-6, 10, 13, 14, 16

Jarkesy v. Securities and Exchange Comm’n,

reh’g en banc denied,

51 F.4th 644 (5th Cir. 2022) ............................. 1, 5

iv

TABLE OF AUTHORITIES – Continued

Page

Lucia v. SEC,

138 S. Ct. 2044 (2018) ........................................ 11

Myers v. United States,

272 U.S. 52 (1926) ........................... 16, 17, 21, 22

Obergefell v. Hodges,

576 U.S. 644 (2015) ............................................. 9

Thermo-Stitch, Inc. v. Chemi-Cord Processing

Corp., 294 F.2d 486 (5th Cir. 1961) ..................... 3

Tull v. United States,

481 U.S. 412 (1987) ......................................... 4, 5

Youngstown Sheet & Tube Co. v. Sawyer,

343 U.S. 579 (1952) ........................................... 20

CONSTITUTIONAL PROVISIONS

U.S. Const. amend. VII ....................................... 3, 4, 8

U.S. Const. art. II, § 2, cl. 1 ...................................... 10

U.S. Const. art. II, § 3 ........................................... 2, 20

STATUTES

5 U.S.C. § 556 ............................................................ 21

5 U.S.C. § 1202(d) ..................................................... 19

5 U.S.C. § 7521 .................................................... 17, 19

v

TABLE OF AUTHORITIES – Continued

Page

OTHER AUTHORITIES

Corpus Juris Secundum,

Vol. 87, Trespass (2023) ..................................... 7

Ron Chernow,

THE HOUSE OF MORGAN (1990)............................ 9

U.S. Electoral Commission,

Proceedings of the Electoral Commission,

44th Cong. 20 (1877) ......................................... 11

WEBSTER’S NEW WORLD DICTIONARY

(2d coll. ed. 1974) ............................................... 11

William Blackstone,

3 COMMENTARIES ON THE LAWS OF ENGLAND

(1768) ................................................... 4, 5, 6, 7, 8

William Shakespeare,

HAMLET .............................................................. 24

1

INTEREST OF THE AMICUS CURIAE

The Forum of United States Administrative Law

Judges (FORUM) is a professional organization of

federal administrative law judges (ALJs) which was

founded in 1983. FORUM’s membership is made up

of active and retired ALJs who have been appointed

by approximately 30 federal agencies.1

This Court’s grant of certiorari in Jarkesy v.

Securities and Exchange Commission, 34 F.4th 446

(5th Cir. 2022) (Jarkesy I), reh’g en banc denied, 51

F.4th 644 (5th Cir. 2022) (Jarkesy II), will significantly

affect the judicial functions of ALJs if the rulings of

the Fifth Circuit are upheld by this Court. Of the

three Questions Presented by this case, Questions I

and III directly concern the work of ALJs.

1 No party or counsel for a party authored this brief in whole or in

part, and no party or counsel for a party made a monetary

contribution intended to fund the preparation or submission of

this brief. FORUM has authored this brief and fully funded the

preparation and submission of this brief. The views expressed

here are the views of individual citizens; they are not the views

of any agency that employs FORUM members.

2

SUMMARY OF ARGUMENT

FORUM’s answer to both Questions I and III is

“No.” As to Question I, the acts authorizing the

Securities and Exchange Commission (SEC) to conduct

non-jury administrative enforcement proceedings

seeking civil penalties, which for the most part are

presided over by ALJs, are consistent with this Court’s

expressed view that Congress may assign factfinding

functions and initial adjudications to such proceedings

in cases involving “public rights”; that is, “cases in

which the Government sues in its sovereign capacity

to enforce public rights created by statutes within

the power of Congress to enact.” Atlas Roofing Co. v.

Occupational Safety & Health Rev. Comm’n, 430 U.S.

442, 450 (1977); accord Granfinanciera, S.A. v.

Nordberg, 492 U.S. 33, 53-54 (1989).

As to Question III, the law delineating the President’s power to remove ALJs of the SEC from office

only “for good cause,” by means of an action brought

by the SEC pursuant to the Administrative Procedure

Act (APA) before the Merit Systems Protection Board

(MSPB), when the members of both the SEC and the

MSPB may themselves only be removed from their

offices “for cause,” does not violate the Executive’s

power pursuant to Article II of the Constitution to “take

Care that the Laws be faithfully executed.” U.S.

Const. art. II, § 3. See Free Enter. Fund v. Pub. Co.

Acct. Oversight Bd., 561 U.S. 477, 507 n.10 (2010);

accord Decker Coal Co. v. Pehringer, 8 F.4th 1123,

1135 (9th Cir. 2021); Calcutt v. FDIC, 37 F.4th 293,

319-20 (6th Cir. 2022), rev’d on other grounds, 598

U.S. 623 (2023).

3

ARGUMENT

I.

THE SEVENTH AMENDMENT DOES NOT APPLY

TO THIS SEC PROCEEDING.

A. SEC Actions for Securities Fraud

Vindicate “Public Rights.”

The Seventh Amendment to the U.S. Constitution

guarantees that “[i]n Suits at common law, where

the value in controversy shall exceed twenty dollars,

the right of trial by jury shall be preserved.” U.S.

Const. amend. VII. As the Fifth Circuit in Jarkesy

acknowledges, not all “Suits” at the time of the

framing of the Constitution were “at common law.”

Some were “suits in equity,” which did not have juries.

See Jarkesy I, 34 F.4th at 452 (“The Supreme Court

has interpreted ‘Suits at common law’ to include all

actions akin to those brought at common law as

those actions were understood at the time of the

Seventh Amendment’s adoption.”); Thermo-Stitch, Inc.

v. Chemi-Cord Processing Corp., 294 F.2d 486, 488

(5th Cir. 1961) (“Of course, at common law a jury trial

was available as of right in any action brought at

law; in suits in equity, on the other hand, questions

of fact were determined by the court sitting without

a jury.”).

In the modern day, this “law-equity” distinction

has transformed into a distinction between “private

rights,” i.e., suits legal in nature for which the right

to a jury trial is guaranteed; and “public rights,” i.e.,

“cases in which the Government sues in its sovereign

capacity to enforce public rights created by statutes

4

within the power of Congress to enact.” Atlas Roofing,

430 U.S. at 450. “[I]n cases in which ‘public rights’

are being litigated,” Atlas Roofing holds, “the Seventh

Amendment does not prohibit Congress from assigning

the factfinding function and initial adjudication to an

administrative forum with which the jury would be

incompatible.” Id.

1. Jarkesy’s Take on the “Public Rights”

Doctrine.

In concluding that the public rights doctrine does

not apply to SEC administrative enforcement proceedings, the Jarkesy panel employs a familiar two-part

analysis: “First, a court must determine whether an

action’s claims arise ‘at common law’ under the

Seventh Amendment. Second, if the action involves

common-law claims, a court must determine whether

the Supreme Court’s public-rights cases nonetheless

permit Congress to assign it to agency adjudication

without a jury trial.” Jarkesy I, 34 F.4th at 453

(citing Tull v. United States, 481 U.S. 412, 417

(1987)); see also Granfinanciera, 492 U.S. at 54-55;

Atlas Roofing, 430 U.S. at 455.

For the first test, the Fifth Circuit rejects the

applicability of the “public rights” doctrine to the longstanding, statutorily-enacted administrative enforcement process of the SEC because (it says) “[f]raud

prosecutions were regularly brought in English courts

at common law.” Jarkesy I, 34 F.4th at 453. The panel

cites as support its interpretation of a passage from

the third book of William Blackstone’s four-volume

treatise, COMMENTARIES ON THE LAWS OF ENGLAND,

which were published between 1765 and 1769; and

its interpretation of Tull that Clean Water Act

5

enforcement actions seeking civil penalties “are akin

to special types of actions in debt from early in our

nation’s history which were distinctly legal claims.”

Id. at 453-54 (first citing 3 William Blackstone,

COMMENTARIES ON THE LAWS OF ENGLAND *42 (1768);

then citing Tull, 481 U.S. at 418-19).

Under the second test, the relevant considerations

include: (1) whether Congress created a new cause of

action, and remedies for it, unknown to the common

law “because traditional rights and remedies were

inadequate to cope with a manifest public problem;”

(2) whether jury trials would “go far to dismantle the

statutory scheme” or “impede swift resolution” of the

claims created by statute; and (3) whether such proceedings are “uniquely suited for agency adjudication.”

Jarkesy I, 34 F.4th at 453, 455 (internal punctuation

omitted) (citing Granfinanciera, 492 U.S. at 60-63).

It is FORUM’s view that the panel misapplies

this Court’s precedent, for the reasons aptly stated in

the dissents below, when holding that SEC proceedings

do not satisfy the second test. See Jarkesy I, 34 F.4th

at 466-74 (Davis, J., dissenting); Jarkesy II, 51 F.4th

at 646 (Haynes, J., joined by Stewart, Dennis, Graves,

and Higginson, JJ., dissenting). Reaching this conclusion is unnecessary, however, because the Jarkesy

analysis falls at the first hurdle: the proceedings in

question do not arise at common law as a historical

matter.

6

2. Jarkesy’s Misquote of Blackstone’s

COMMENTARIES Is Fatal to Its Holding.

Jarkesy is dispositively wrong on the first

“public rights” test because its own historical support

shows that fraud prosecutions in English courts were

principally matters in equity, not common law, and

therefore did not require juries. The Fifth Circuit

misreads Book III of Blackstone’s COMMENTARIES for

its contrary premise. Jarkesy I, 34 F.4th at 453-54

(citing 3 Blackstone at *42).

The original 1768 version of Book III, page *42

of Blackstone’s COMMENTARIES, is publicly available

on the internet.2 Unlike the Fifth Circuit’s version,

the passage in the original COMMENTARIES does not

mention “fraud” or “juries” at all. The following table

(with modifications for unnecessary punctuation and

archaic spelling, and with conflicting passages highlighted in bold) illustrates the panel’s mistake:

3 Blackstone at *42

(1768)

Jarkesy I, 34 F.4th at

453-54 (Court’s Version

of 3 Blackstone at *42)

“[T]he common-law

“[The Court of King’s

Bench] has an original courts’ jurisdiction over

jurisdiction and

‘actions on the case

cognizance of all

which allege any

trespasses, and other falsity or fraud; all of

injuries, alleged to be which savour of a

committed vi et

criminal nature,

armis: which, being a although the action is

breach of the peace,

brought for a civil

2 See https://pennlawdigital.contentdm.oclc.org/digital/collection/

p17083coll7/id/55 (last visited Aug. 3, 2023).

7

savour of a criminal

nature, although the

action is brought for a

civil remedy; and for

which the defendant

ought in strictness to

pay a fine to the king,

as well as damages to

the injured party.”

remedy; and make the

defendant liable in

strictness to pay a fine to

the king, as well as

damages to the injured

party.’”

By substituting “falsity or fraud” for “trespass” in

the passage and by implying that a fine is mandatory,

the Fifth Circuit evades the real passage’s purpose of

defining the original jurisdiction of the English law

courts over actions for trespass vi et armis (“with

immediate force”). This term was the “name given to

an action for injury committed with direct or immediate

force or violence against the plaintiff’s person or

property.” 87 C.J.S. Trespass § 65 (2023).

Trespass vi et armis is not an action akin to SEC

administrative enforcement proceedings for securities

fraud. Causes of action for trespass have to do with

unlawful entry onto property and theft of goods, not

fraud. See id. §§ 66-68.

Had the Fifth Circuit read Blackstone a little

further, it would have discovered a more relevant

passage in Book III (again, with modifications for

unnecessary punctuation and archaic spelling):

“AGAIN, it hath been said, that fraud, accident,

and trust are the proper and peculiar objects of

a court of equity.” 3 Blackstone at *431 (emphasis in

bold added). In yet another passage ignored by the

Fifth Circuit, Blackstone writes:

8

From the same fruitful source, the

compulsive discovery upon oath, the

courts of equity have acquired a

jurisdiction over almost all matters of

fraud; all matters in the private

knowledge of the party, which, though

concealed, are binding in conscience;

and all judgments at law, obtained

through such fraud or concealment.

Id. at *437-38 (punctuation and archaic spelling modified) (emphasis in bold added) (footnote omitted).

The original version of Blackstone thus suggests,

in several passages not even mentioned in the Fifth

Circuit’s erroneous version, that “fraud,” “accident,”

and “trust” actions in eighteenth-century England

were brought in courts of equity, and only certain

specific issues were farmed out to law courts for

adjudication. In courts of equity, cases were not tried

by juries. Blackstone suggests, in fact, that courts of

equity possessed original jurisdiction over fraud and

trust actions. Blackstone also points out that the

power of courts of equity to obtain testimony under

oath was a useful tool for suppressing fraudulentlyobtained judgments in courts of law, because of the

power of the injunction to “prohibit[] the plaintiff

from taking any advantage of a judgment, obtained

by suppressing the truth; and which, had the same

facts appeared on the trial, as now are discovered, he

would never have obtained at all.” Id. at *438 (footnote

omitted).

Consequently, Blackstone does not support the

Fifth Circuit’s holding that SEC administrative enforcement actions arise at common law and thus does not

support the application of the Seventh Amendment.

9

B. History and Tradition Supports SEC

Administrative Enforcement Actions

Without Juries.

In recent years, this Court has recognized the

importance of legal “history and tradition” in reviewing

the structure of our legal system. As it held in

Obergefell v. Hodges, “[h]istory and tradition guide

and discipline this inquiry but do not set its outer

boundaries. That method respects our history and

learns from it without allowing the past alone to rule

the present.” 576 U.S. 644, 664 (2015) (citation

omitted).

It is undisputed that, for nearly a century, the

administrative proceedings of the SEC have promoted

an important national interest in protecting the

integrity of financial markets, products, and services.

As this Court has held, in enacting the securities

laws, Congress sought to “protect investors against

fraud” and to “promote ethical standards of honesty

and fair dealing.” Ernst & Ernst v. Hochfelder, 425

U.S. 185, 195 (1976). These efforts do not violate this

Nation’s historical tradition of financial regulation in

any way, shape, or form. Rather, they define it.

In its first century, the federal government had

no role in the regulation of financial markets. It took

the Great Depression of the 1930s, the revelations of

the “Pecora Hearings” before the Senate Banking

and Currency Committee of 1932-1933, and the

advent of “Ponzi schemes” and market manipulations

to induce the Government to act more boldly. See

Ron Chernow, THE HOUSE OF MORGAN 352-74 (1990);

Cunningham v. Brown, 265 U.S. 1, 7-8 (1924).

10

Although the panel holds that fraud prosecutions seek civil penalties akin to ancient English

actions at law, it nevertheless admits that “[h]ere,

the SEC sought to ban Jarkesy from participation in

securities industry activities and to require Patriot28

to disgorge ill-gotten gains—both equitable remedies.”

Jarkesy I, 34 F.4th at 454 (emphasis added). At the

very least, then, an administrative proceeding before

an ALJ that determines whether such “equitable”

remedies are warranted does not require a jury.

The risk of civil penalties, to the fraudster, is

merely a cost of doing business that is well worth

taking on, given the enormous financial gain that the

fraudster expects to acquire. The more important

equitable remedy of injunction against future practice

in the securities industry and seeking retrieval of illgotten gains is an effective method for policing such

industry actors.

Moreover, making decisions about individual cases

has been an administrative function of the federal

government since the founding of the Republic. In

the statement in our Constitution that the President

“may require the Opinion, in writing, of the principal

Officer in each of the executive Departments, upon

any Subject relating to the Duties of their respective

Offices,” the antecedent usage of the word “Departments” illustrates that the administrative state existed

even as early as 1787.3 U.S. Const. art. II, § 2, cl. 1.

3 A good description of the adjudicative functions of such officers

in our history is found in the testimony of a Pensacola, Florida

attorney that appears in the record of the Congressional Electoral

Commission of 1877. It describes the “judicial” functions of a

federal “shipping commissioner” at that port, including presiding

over “[t]he ordinary questions of difference between seamen and

11

II. ALJ “FOR-CAUSE” REMOVAL PROTECTIONS ARE

CONSTITUTIONAL.

Just as such federal officers did in the past,

ALJs today are tasked with taking evidence and

deciding cases that arise in their agency’s pursuit of

its statutory mission. The primary job of the ALJ is

to make independent initial or recommended decisions

on the cases.

“Independent,” in plain English, means “free from

influence, persuasion, or bias; objective.” WEBSTER’S

NEW WORLD DICTIONARY 714 (2d coll. ed. 1974). In

order for ALJs to decide agency cases, their independence is crucial to assuring the public of the due process

to which it is entitled to receive from the agency. This

assurance is damaged – indeed, irreparably impaired –

when the ALJ is not independent because the agency

is empowered to fire an ALJ at will, for any reason or

no reason. Thus, as Congress unanimously concluded

by enacting the APA in 1946, there must be mechanisms in place to shield ALJs from influence, persuasion,

or bias. See Butz v. Economou, 438 U.S. 478, 514 (1978)

(“Since the securing of fair and competent hearing

personnel was viewed as ‘the heart of formal administrative adjudication,’ the [APA] contains a number

of provisions designed to guarantee the independence

of [ALJs].”) (citation omitted). Indeed, as Justice

Breyer observed in his partial concurrence in Lucia

v. SEC, 138 S. Ct. 2044, 2060 (2018), “[t]he substantial

independence that the [APA’s] removal protections

masters of vessels; questions of the right to their discharge and

the right to receive their wages” in an “informal court” in which

testimony was taken and arguments heard. Proceedings of the

Electoral Commission, 44th Cong. 20, at *38-39 (1877).

12

provide to administrative law judges is a central part

of the Act’s overall scheme.”

A. The Fifth Circuit Misapplies Free

Enterprise Fund.

ALJs are judges who make decisions that are

subject to vacatur by people without tenure

protection. With this structure, the President

continues to enjoy an “ability to execute the

laws—by holding his subordinates accountable for their conduct,” especially because

these ALJs exercise only adjudicative power in

the first instance and are not imposed on

the President in this context.

Decker, 8 F.4th at 1135 (quoting Free Enter. Fund,

561 U.S. at 496); see also Calcutt, 37 F.4th at 319.

The Ninth Circuit, in this passage examining

the removal issue in a case before the Department of

Labor, correctly describes the President’s control

over ALJs. Decker noted that “Free Enterprise Fund

is the last [Supreme Court] case addressing twolayer removal protections for an inferior officer.” Id.

at 1131-32. The Jarkesy case is the first opportunity

for this Court to offer guidance on whether and how

Free Enterprise Fund applies to ALJs.

This Court should not interpret Free Enterprise

Fund to alter ALJ tenure protections important to

performing their statutory functions. Free Enterprise

Fund expressly noted that its holding on the unconstitutional dual protection afforded to the Public

Company Accounting Oversight Board (PCAOB)

“does not address that subset of independent agency

employees who serve as administrative law judges,”

13

in part because it recognized that ALJs exercise purely

adjudicative powers that are far different from the

significant “enforcement or policymaking functions”

exercised by PCAOB members. 561 U.S. at 507 n.10.

1. The Place of ALJs in the Hierarchy of

Removal Layers Is Irrelevant.

The contrast between the views of the Fifth and

Ninth Circuits, evaluating two different agencies,

derives from the different ways in which each

perceives the structure of the agency involved. The

number of protective “layers” that the Ninth Circuit

perceives is smaller than the number that the Fifth

Circuit sees. Unlike the Fifth Circuit, the Ninth Circuit

in Decker deems the “upper” layer, made up of the

heads of agencies who are appointed by the President

with the advice and consent of the Senate, to be

directly answerable to the President because he or

she is the one who personally decides whether those

agency heads demonstrate “good cause” to be fired.

The President may be required to furnish a statutory

reason for such dismissal, but no one can question it.

That fact leaves an ALJ with only one layer of removal

protection between the ALJ and the President, which

is vested in the MSPB, whose members are similarly

answerable to the President directly. In evaluating the

power of the Executive Branch to remove ALJs, “the

function performed by the officer is critical to the

analysis,” as Judge Davis points out in his dissent.

Jarkesy I, 34 F.4th at 477 (Davis, J., dissenting)

(emphasis added).

14

a. The “Upper Layer” of Protection

for Heads of Departments Does

Not Weaken Executive Removal

Power.

Jarkesy and cases like it are based on the incorrect

perception that “at least two layers of for-cause

protection stand in the President’s way” of firing an

ALJ. Jarkesy I, 34 F.4th at 465. This Court must put

an end to this destructive myth.

The Fifth Circuit’s structural view in Jarkesy

opines that there are at least two layers of removal

protection between the President and an ALJ. Within

the “lower” layer, the MSPB must decide whether “good

cause” exists to remove an ALJ and the SEC must

decide whether to act on that finding. Within the

“upper” layer, members of both the MSPB and the SEC

are presumed by the Fifth Circuit to have “for-cause”

protection from removal by the President. Jarkesy I,

34 F.4th at 465. The mere existence of these back-toback layers is enough, in the view of the Fifth Circuit,

to render the entire structure unconstitutional.

The Ninth Circuit in Decker, by contrast, looks at

process, not structure. The Ninth Circuit finds that once

an ALJ has adjudicated a claim, the Benefits Review

Board (BRB) of the Department of Labor (DOL) can

on appeal “readily overturn an ALJ’s decision that is

legally erroneous or unsupported by substantial evidence.” Decker, 8 F.4th at 1134. It continues:

BRB members serve at the pleasure of the

Secretary of Labor. And because the Secretary of Labor is subject to at-will removal by

the President, just like other department

heads, the President has direct control over

15

BRB members through the Secretary—his

“alter ego.” Thus, the President could at any

time order the Secretary of Labor to replace

members of the BRB. . . . In sum, we think

the BRB has ample control over DOL ALJs

and the President, in turn, has direct control

over BRB members through the Secretary

of Labor.

Id. at 1135 (citations omitted).

The supposed presence of an “upper layer” of

protection for SEC and MSPB members, therefore,

does not lessen Executive power over the functions that

ALJs perform. All initial and recommended decisions

issued by ALJs go through “Heads of Departments,”

as the Constitution refers to them, who may approve,

modify, or reject those opinions in whole or in part.

There are no “positions for life” among the Heads

of Article II Departments. All such positions have set

terms of appointment, and all Heads of Departments

submit their resignations to the President when an

Administration changes hands. Appointments are

renewable at the pleasure of the President with the

Senate’s advice and consent. The President may ask

for the resignation of any Head of a Department that

he wishes to remove.

But who makes the determination of “cause” that

permits the President to fire a Head of Department

in mid-term? In Free Enterprise Fund, the Supreme

Court found that, at the lower layer, the members of

the PCAOB answered to the SEC Commissioners,

and could be removed only for “willful violations of

the [Sarbanes–Oxley] Act, Board rules, or the securities

laws; willful abuse of authority; or unreasonable failure

16

to enforce compliance–as determined in a formal

Commission order, rendered on the record and after

notice and an opportunity for a hearing.” 561 U.S. at

503.

At the upper layer, Free Enterprise Fund observed

that the President could remove SEC Commissioners

for “inefficiency, neglect of duty, or malfeasance in

office.” Id. at 487 (citing Humphrey’s Ex’r v. United

States, 295 U.S. 602, 620 (1935)). But there is no

intervening layer a step away from the President that

makes that call. Hence, as the President is the one

who determines whether “inefficiency, neglect of duty,

or malfeasance in office” has been exhibited by an

SEC Commissioner, nothing precludes him or her from

firing an SEC Commissioner personally and directly.

The President has the authority to do so whenever,

as the Fifth Circuit in Jarkesy quotes, “the discretion

regularly entrusted to that officer by statute has not

been on the whole intelligently or wisely exercised.”

Jarkesy I, 34 F.4th at 464 (quoting Myers v. United

States, 272 U.S. 52, 135 (1926)).

The notion that the President is somehow “weakened” by statutory removal limitations should be of

little concern to this Court. That the upper layer of

protection afforded to a few Heads of Departments

might trouble it to the point of upending the judicial

independence of ALJs, as promulgated by a unanimous

Congress in its 1946 passage of the APA, is tantamount

to killing a fly with a sledgehammer.

17

b. The “Lower Layer” of Protection for

ALJs Does Not Weaken Executive

Removal Power.

The standard of protection to which ALJs are

entitled under the federal personnel laws is set out

as follows in 5 U.S.C. § 7521(a):

An action may be taken against an administrative law judge appointed under section

3105 of this title by the agency in which the

administrative law judge is employed only

for good cause established and determined

by the Merit Systems Protection Board on the

record after opportunity for hearing before

the Board.

Is this “lower layer” of protection from removal

possessed by ALJs an unconstitutional limitation on

the Executive power? The Supreme Court’s answer has

long been “No.”

Myers held that the Executive power conferred

by the Constitution includes “the exclusive power of

removal.” 272 U.S. at 122. But only nine years later,

in Humphrey’s Executor, the Supreme Court limited

Myers as it applied to “quasi-judicial officers” in

agencies such as the Federal Trade Commission, the

Interstate Commerce Commission, and the Court of

Claims:

We think it plain under the Constitution that

illimitable power of removal is not possessed

by the President in respect of officers of the

character of those just named. The authority

of Congress, in creating quasi legislative or

quasi judicial agencies, to require them to

act in discharge of their duties independently

18

of executive control cannot well be doubted;

and that authority includes, as an appropriate incident, power to fix the period during

which they shall continue, and to forbid their

removal except for cause in the meantime.

For it is quite evident that one who holds his

office only during the pleasure of another

cannot be depended upon to maintain an

attitude of independence against the latter’s

will.

295 U.S. at 629 (emphases added).

This view was reaffirmed in Free Enterprise Fund:

Humphrey’s Executor did not address the

removal of inferior officers, whose appointment Congress may vest in heads of departments. If Congress does so, it is ordinarily the

department head, rather than the President,

who enjoys the power of removal. This Court

has upheld for-cause limitations on that power

as well.

561 U.S. at 493 (emphasis added) (citations omitted).

The Ninth Circuit’s interpretation of the impact

of Executive removal power on ALJs, therefore, is

correct. This Court, like the Ninth Circuit, has focused

on the functions and duties of “inferior officers,”

among whom are ALJs, rather than in which “layer”

ALJs are found in the agency hierarchy. One cannot

exercise the office of an ALJ without an assurance of

judicial independence, and the power to terminate an

ALJ at will is tantamount to no independence at all.

19

2. The MSPB’s Standard for ALJ Removal

Does Not Weaken Executive Removal

Power.

The “for good cause” standard of ALJ removal

protection was not promulgated by Congress in order

to shield incompetence or contumacious behavior.

Moreover, the MSPB’s standard is nowhere nearly as

impregnable as that of the PCAOB. To quote the

MSPB itself:

Congress has not defined the term “good

cause” for purposes of section 7521, and the

Board has adopted a flexible approach in

which good cause is defined according to the

individual circumstances of each case. However, the baseline for evaluating good cause

in any action against an ALJ is whether the

action improperly interferes with the ALJ’s

ability to function as an independent and

impartial decision maker.

Dep’t of Labor v. Avery, 120 M.S.P.R. 150, ¶ 5 (2013)

(citations omitted).

The MSPB, in turn, consists of a Board of

members who themselves “may be removed by the

President only for inefficiency, neglect of duty, or

malfeasance in office.” 5 U.S.C. § 1202(d). Again, as

with the members of the SEC, it is the President who

makes this call, not an intervening layer one step

away. Thus, as with the SEC, the President has the

authority to dismiss an MSPB member on the

statutory grounds whenever “the discretion regularly

entrusted to that officer by statute has not been on

the whole intelligently or wisely exercised.” Jarkesy

I, 34 F.4th at 464 (quoting Myers, 272 U.S. at 135).

20

The President is therefore fully empowered to

terminate the Heads of the SEC and the MSPB—and

the President, through these Heads, may demand

the termination of an ALJ for any reason other than

one that “improperly interferes with the ALJ’s ability

to function as an independent and impartial decision

maker.” This is precisely as it should be, in order to

accede to Executive power as authorized by statute,

while still protecting the ALJ’s decisional independence,

the essence of the job. The so-called “layers” of removal

hierarchy do not stand in the way of an Executive

power that is not at all weakened by these restraints.

B. Far from Interfering with Executive

Power, ALJ Removal Protections Are

a Constitutional Expression of It.

Congress makes laws that establish executive and

independent agencies. The President is tasked with

taking care that those laws are “faithfully executed.”

U.S. Const. art. II, § 3. If the agency official whose job

it is to create a record of facts in individual agency

cases and recommend a decision to the agency has no

protection from removal and therefore cannot render

an unbiased opinion untainted by politics, can it

truthfully be said that the laws are being “faithfully

executed?”

Justice Tom C. Clark, concurring in Youngstown

Sheet & Tube Co. v. Sawyer, wrote:

[W]here Congress has laid down specific

procedures to deal with the type of crisis

confronting the President, he must follow

those procedures in meeting the crisis; but

that in the absence of such action by Congress, the President’s independent power to

21

act depends upon the gravity of the situation

confronting the nation.

343 U.S. 579, 662 (1952) (Clark, J., concurring).

Here, “Congress has laid down specific procedures

to deal with the type of crisis confronting the President.” Cases brought before executive and independent

agencies must be heard; evidence must be gathered;

and a recommended, initial, or final decision must be

made, by either the agency itself, one or more members

of the body that comprises the agency, or an ALJ. See

5 U.S.C. § 556. The President, and by extension the

agency in question, “must follow those procedures in

meeting the crisis.” If this law requires, as part of its

“specific procedures,” a process whereby the ALJ is to

be removed from office only for “good cause” in order

to preserve that officer’s judicial independence, a

critical condition of the job, then where is the interference with Executive power? This procedure is the

“Executive power.”

It is the law, and only the law, that defines

“Executive power.” If faithful execution of the law

requires the President to follow a certain removal

procedure in order to protect the judicial independence of ALJs, then the President who abides by this

procedure is, by definition, taking care that the laws

are “faithfully executed” as the Constitution requires.

The so-called “Decision of 1789” discussed in Myers

and Humphrey’s Executor—whereby the First Congress

acceded to the President’s power to remove officers of

agencies even though the new Constitution was silent

on the subject—does not countervail this fact. Indeed,

Myers recognized that the President’s power to remove

officers could be expressly limited by Congress, as

22

occurred with the passage of the APA. Myers states

that as the President

is charged specifically to take care that [the

laws] be faithfully executed, the reasonable

implication, even in the absence of express

words, was that as part of his executive

power he should select those who were to act

for him under his direction in the execution

of the laws. The further implication must

be, in the absence of any express limitation

respecting removals, that as his selection of

administrative officers is essential to the

execution of the laws by him, so must be his

power of removing those for whom he cannot

continue to be responsible.

Myers, 272 U.S. at 117 (emphasis added).

III. RESPONDENTS ARE NOT HARMED BY ALJ

REMOVAL PROTECTIONS.

In his reply to the SEC’s petition for certiorari,

Jarkesy says:

Congress vested the SEC with the unconstrained and unreviewable power to pick and

choose unilaterally whether to force its targets

into an Article I administrative court or to

prosecute its claims in an Article III court.

And an enforcement target relegated to the

administrative forum would be subjected to

protracted proceedings over many years

presided over by an inferior constitutional

officer called an administrative law judge

(“ALJ”) who enjoyed multiple layers of forcause tenure protection, as the Commission

itself conceded in 2018.

23

Brief in Opposition to Solic. Gen. Petition for Certiorari

at 1, SEC v. Jarkesy, No. 22-859 (U.S. May 23, 2023)

(Opposition Brief).

This statement by Jarkesy contrives a “harm” to

himself that does not exist. In Collins v. Yellen, 141

S. Ct. 1761, 1787-89 (2021), this Court explained that

an unconstitutional limit on the removal of an official

justifies undoing the officer’s past actions only if the

challenger shows, at minimum, that the provision

“inflicted harm.” See also Calcutt, 37 F.4th at 318, 320

(applying Collins to deny challenge to ALJ removal

protections). Jarkesy shows no past, present, or future

“harm” to himself from the tenure protections of an

ALJ, any more than he shows “harm” from the tenure

protections of a District Judge or Magistrate.

The Constitution’s use of the words “inferior

officer,” which include ALJs, is not meant to demean.

The words merely distinguish ALJs whose appointments are vested in “the President alone, in the

Courts of Law, or in the Heads of Departments,” from

specifically-identified “officers” who are appointed by

the President by and with the Senate’s advice and

consent. If, as Jarkesy says, an enforcement target

“relegated to the administrative forum” would suffer

“protracted proceedings” presided over by an “inferior”

judicial officer “who enjoyed multiple layers of forcause tenure protection,” how is that any different from

what he would experience in an Article III court?

District Court securities cases, like ALJ proceedings, may take years to litigate. Although District

Court cases may or may not have juries, the presence

of a jury adds to the time and expense necessary to

litigate the case. Of course, a District Judge is entitled to tenure protection too. The District Judge may

24

be removed only upon impeachment by Congress,

not by the President; therefore, he is not subject to

removal at the pleasure of the Chief Executive at all.

So where is the harm to Jarkesy if he faces an ALJ

rather than a District Judge or Magistrate?

IV. THIS COURT SHOULD NOT ENTERTAIN FATUOUS

COLLATERAL ATTACKS INTENDED TO SABOTAGE

SEC ENFORCEMENT.

Jarkesy’s reply to the SEC’s petition for certiorari

also complains:

Following the trend experienced across the

administrative state, the SEC’s enforcement

power has expanded exponentially since its

creation in 1934, each new financial crisis propelling the accumulation of more and more

executive, legislative and judicial authority

for this “independent” agency. At some point

the never-ending power creep was bound to

crash headlong into the tripartite constitutional structure, and it did so here.

Opposition Brief at 2.

Jarkesy “doth protest too much, methinks.”4

FORUM respectfully reminds this Court that Jarkesy

is not an innocent victim here. He is not a guileless

target of injustice at the hands of a powerful, unconstrained “administrative state.” He has been found by

the SEC to be a fraudster, which he does not dispute.

This fraudster has brought his collateral attack

solely to evade this Nation’s securities laws. He tries

to gum up the administrative works by attacking the

4 William Shakespeare, HAMLET, Act III, Scene 2.

25

ALJ who ruled against him, not by asserting his

innocence on the merits. He does not even accuse the

ALJ of committing any wrong against him.

The SEC, pursuant to its well-settled statutory

authority and practice, found that Jarkesy had harmed

investors. The fraudulent funds that Jarkesy set up

attracted approximately 120 investors and mishandled

approximately $24 million in assets. Petition for Writ

of Certiorari at 3, SEC v. Jarkesy, No. 22-859 (U.S.

Mar. 8, 2023).

For Jarkesy, this collateral attack is not an effort

to answer the SEC’s charges of fraud or explain why he

did not violate the securities laws. Jarkesy has failed

to prove how the tenure protections of an ALJ have

affected the accuracy of the fraud findings against

him.

26

CONCLUSION

ALJs have the authority to conduct non-jury

administrative proceedings seeking civil money penalties because those cases involve public rights. ALJs

primarily perform quasi-judicial functions; therefore,

their removal protections do not violate Article II of

the Constitution. No matter how the Court resolves the

questions in this case, it should confirm and maintain

the fundamental protections of federal ALJ independence that promote and ensure impartial adjudication

in formal, adversarial, administrative proceedings.

Respectfully submitted,

Steven A. Glazer

Counsel of Record

THE FORUM OF UNITED STATES

ADMINISTRATIVE LAW JUDGES

P.O. Box 14076

Washington, D.C. 20044

(301) 332-9214

forumalj@gmail.com

Counsel for Amicus Curiae

August 28, 2023