In SEC v. Jarkesy, the Securities and Exchange Commission (SEC) sought $300,000 in civil penalties from George Jarkesy for securities fraud. In June of 2024, the United States Supreme Court ruled that when the SEC seeks civil penalties for securities fraud, the defendant has the right to a trial by jury pursuant to the Seventh Amendment to the United States Constitution.
The Court explained that SEC’s fraud claims are similar to common law fraud claims, which were traditionally decided by juries.
Secondly, the Court explained that the key factor in determining the applicability of the Seventh Amendment is the remedy sought. It concluded that when a civil penalty serves retributive, punitive or deterrent purposes rather than equitable ones, it is considered a punishment that can only be imposed through a jury trial, thereby triggering the Seventh Amendment right to a trial by jury.
The Jarkesy analysis strongly suggests that any enforcement action by a federal agency designed to punish and deter an individual or entity violates the Seventh Amendment if it proceeds through agency tribunals absent an applicable exception.
Thus, many agencies, such as the U.S. Department of Health and Human Services (HHS), may be affected by the Supreme Court’s decision in Jarkesy, potentially undermining the process for imposing civil penalties without a jury trial.
For example, the Centers for Medicare & Medicaid Services can impose penalties for violations of the No Surprises Act, the Office of Inspector General can impose penalties for submitting a false or fraudulent claim to federal health care programs, and the Office of Civil Rights can impose penalties for violations of the Health Insurance Portability and Accountability Act of 1996 (HIPAA).
Tamia J. Morris
410-576-4021 • tmorris@gfrlaw.com