On November 29, the U.S. Supreme Court will hear oral arguments about the constitutionality of Securities and Exchange Commission adjudication of securities fraud claims. The challenger, who prevailed in the Fifth Circuit, says that Congress may not empower an executive agency to perform an Article III judicial function, and, because fraud claims were recognized in the American common law of 1791, he has a Seventh Amendment jury trial right. If either assertion persuades five Justices, the Administrative State may be hobbled, at least temporarily.
Case in point: the National Labor Relations Board. Congress authorized the Board to adjudicate “unfair labor practices.” The Board decided long ago that an employer commits the unfair labor practice of bad faith bargaining (29 U.S.C. 158(a)(5)) when the employer breaches its union contract. In such cases, the union complains to the Board, and the Board prosecutes the employer before a Board Administrative Law Judge. No jury. No discovery. The employer first gets judicial review when, after years of Board proceedings, the employer appeals the Board’s affirmance of the ALJ’s remedial order. Normally, the appellate court defers to the Board.
If Mr. Jarkesy’s Article III argument is a winner, it’s hard to see how the NLRB gets a pass. If Mr. Jarkesy wins only the Seventh Amendment argument, loads of union contract breach claims should shift from NLRB proceedings to arbitration or judicial venues. Either result would fundamentally refashion American labor law.
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