Now this is very interesting:
A federal judge ruled Monday that the Securities and Exchange Commission’s use of an in-house judge to preside over an insider-trading case was “likely unconstitutional,” a potential blow to the agency’s controversial use of its internal tribunal.
The decision possibly creates a serious headache for the SEC, which is increasingly using its five administrative-law judges to hear its cases, rather than sending them to federal court, legal experts said. Although the ruling was preliminary, and won’t necessarily be duplicated in other federal courts, it could have ramifications for other SEC cases and potentially other federal agencies.
You may recall that we began this series last month with a look at the problem of how the SEC’s use of its own judges violates the basic constitutional principle of the separation powers and the old common law maxim that “no man shall be a judge in his own case” (or “Nemo judex in parte sua” in Latin, because that’s the language God uses in lawgiving mode). As that previous post noted, the SEC had a very high success rate in enforcement actions brought before its own judges. Funny how that works. Not that the SEC is novel in doing this; time once again to remind everyone of Gary Lawson’s summary description of this corruption (below).
My first question was, who is the federal judge who issued this ruling? Surely Judge Leigh Martin May is some old Reagan appointee who has been hiding in the shadows. Probably a graduate of George Mason University Law School or some other renegade outfit that still takes the Constitution seriously. But lo and behold it turns out Judge May is an Obama appointee! Is this a sign that the overreach of the administrative state is becoming too obvious even for Democrat-appointed judges?
I’ll await word from Jonathan Adler or someone at the Volokh Conspiracy to sort this out for us. I note that the news story seems to suggest that the problem here may be of a narrow or technical nature having to do with how the SEC’s in-house judges are appointed (the complete 45-page opinion is here), so there may be an easy workaround. But given the deference the judiciary has given to administrative agencies for decades now, even a small nick based on constitutional principle is noteworthy, and should be built upon.
Once again, with feeling—from Gary Lawson’s 1994 Harvard Law Review article “The Rise and Rise of the Administrative State”:
The [Federal Trade] Commission promulgates substantive rules of conduct. The Commission then considers whether to authorize investigations into whether the Commission’s rules have been violated. If the Commission authorizes an investigation, the investigation is conducted by the Commission, which reports its findings to the Commission. If the Commission thinks that the Commission’s findings warrant an enforcement action, the Commission issues a complaint. The Commission’s complaint that a Commission rule has been violated is then prosecuted by the Commission and adjudicated by the Commission. This Commission adjudication can either take place before the full Commission or before a semi-autonomous Commission administrative law judge. If the Commission chooses to adjudicate before an administrative law judge rather than before the Commission and the decision is adverse to the Commission, the Commission can appeal to the Commission. If the Commission ultimately finds a violation, then, and only then, the affected private party can appeal to an Article III court. But the agency decision, even before the bona fide Article III tribunal, possesses a very strong presumption of correctness on matters both of fact and of law.
Worth memorizing and repeating often.