Of Separation of Powers, the SEC, and the Limits of Originalism

Tomorrow the Supreme Court will hear oral argument in a complicated case involving the constitutionality of the Securities and Exchange Commission ("SEC"). The SEC employed its in-house enforcement proceedings to fine the plaintiff's firm $300,000 for securities fraud and ordered it to repay nearly $700,000. The plaintiff brought three challenges to the fines, and he prevailed in the lower court. 

First, he argued that he was entitled to a jury trial under the Seventh Amendment, which provides that in "suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved...." The Court has long held that this right to a jury trial does not apply to so-called public rights which were not in existence in 1791, such as those created by the securities laws. The plaintiff wants the Court to overturn or greatly limit that doctrine.

The plaintiff's second argument is that Congress is not allowed to delegate to administrative agencies the decision whether a case should be litigated in an administrative proceeding before a non-Article III administrative law judge or as a civil enforcement action in a federal district court. According to the plaintiff, Congress may have the authority to require one or the other in the first instance but cannot delegate that decision to the SEC.

The plaintiff's final argument is a highly technical one that the SEC's judges are unconstitutionally insulated from firing by the President because they can only be removed by principal officers at the SEC whom the President cannot fire for any reason. This argument relies on a 2010 uber-formalist decision by the Roberts Court declaring a similar agency structure unconstitutional. The government argues that case is distinguishable because it did not involve judicial officers. 

The point of this post is not to suggest how this case should ultimately be resolved, though I do favor the government's arguments. Rather, this post argues that originalism in any form cannot shed proper light on these and most other separation of powers issues.

In probably the most famous separation of powers opinion in Supreme Court history, Justice Jackson, concurring in the Steel Seizure case, said the following about how the Court should not decide separation of powers issues:

Just what our forefathers did envision, or would have envisioned had they foreseen modern conditions, must be divined from materials almost as enigmatic as the dreams Joseph was called upon to interpret for Pharaoh. A century and a half of partisan debate and scholarly speculation yields no net result but only supplies more or less apt quotations from respected sources on each side of any question. They largely cancel each other.

Jackson went on in his now famous concurring opinion to discuss and resolve the issue in the case with his attention focused on modern conditions and policy arguments, not speculation as to what the Constitution originally may or may not have meant.

For most of the 1980's, the Court decided major separation of powers cases without much regard to original meaning. Some of these cases, like INS.. v. Chada and Bowsher v. Synar, were highly formalist decisions striking down innovative mechanisms to make government more efficient, while other cases such as Morisson v. Olson and Mistretta v. United States, were functionalist decisions affirming new and innovative efforts to make the government more efficient. 

Recently, however, the Roberts Court has had a decidedly formalist bent, issuing numerous opinions cutting back on agency discretion and requiring that the President have unconditional power to fire certain federal officers. The Roberts Court's resurrection of the pre-New Deal non-delegation doctrine under the name of the major questions doctrine also has the potential to drastically limit how much authority Congress is allowed to delegate to the Executive.

Many of the amicus briefs in this case as well as the parties' briefs debate the originalist bona fides for and against the constitutionality of the SEC's enforcement powers. Numerous briefs written by prominent academics take opposite views on whether the Constitution's original meaning supports broad delegations of power from Congress to the President and how much authority Congress has to limit the President's ability to fire federal officers (an issue on which the Constitution's text is silent). 

My view is that these conflicting historical accounts, in Justice Jackson's words, "largely cancel each other." Judges and lawyers are not historians, and trying to recreate the many conflicting views held by the Framers on separation of powers issues is similar to the "whack-a-mole" game. One brief cites this history, another brief cites that counter history, and everyone ends up disagreeing on what inferences to draw from those materials, usually based on their own ideological priors.

In 1788, the federal government's reach extended mostly to just 13 states, all on the East Coast. The economy was largely agrarian and local. The second Industrial Revolution (which was much more substantial than the first) that would transform the country would not happen for almost 100 years. Whatever the Founding Fathers thought about the reach of the national government has to be examined in the context of a much smaller country and a decidedly more limited economy. The times they have changed, and dramatically so.

Judges should recognize the limited relevance of originalist materials to modern separation of powers cases and also largely defer to the political branches when it comes to how the federal government will govern. 

In any event, the obvious desire of the Roberts Court to narrow the reach of the national government is based mostly on libertarian policy concerns, not persuasive accounts of text, history, and precedent. And, as I've written before, the "Roberts Court wants to make it as difficult as possible for the federal government to meaningfully and efficiently regulate the national economy, something Congress simply cannot do without the substantial assistance of the Executive Branch." 

Whether I am right or wrong about the need for federal regulation of the economy and the need for substantial congressional delegation to the Executive are questions that in most cases should be resolved by voters and their representatives, not unelected, life-tenured federal judges. But if judges are going to second guess how the political branches have structured their relationship, that debate should consider modern conditions and current values, not hopelessly contested historical accounts of what our country was like in 1788.