Evolution of Administrative Adjudication Post-Jarkesy

"4 Use of ALJs ALJ tribunals are used by dozens of federal agencies to prosecute violations of statutes and regulations.5 Some agencies, like the SEC, have the ability to address statutory violations either in internal administrative proceedings or by filing claims in federal court.6 Others, like the Federal Deposit Insurance Corporation, the Federal Reserve, and Office of the Comptroller of the Currency, can only seek civil penalties in administrative proceedings.7 Differences between Federal Court and ALJ Proceeding One of the reasons this decision is important is that the ALJ process provides the SEC with certain home court advantages. According to a 2015 report, the SEC won approximately 90 percent of contested matters in ALJ proceedings, compared with about 69 percent of cases litigated in district court.8 This is attributable, at least in part, to differences in the process and protections afforded litigants in federal court versus in ALJ proceedings.9 Discovery in ALJ tribunals is both limited and on an expedited timeline, meaning respondents are afforded less opportunity to accumulate evidence. In June 2018, the Supreme Court held in Lucia v. SEC that ALJs are officers of the United States and must be appointed by the president, a court of law, or department head rather than SEC Staff.10 In April 2023, the Supreme Court held in Axon v. FTC (consolidated with Cochran v. SEC) that parties may raise constitutional challenges to the Federal Trade Commission's (FTC) and SEC's inhouse administrative proceedings directly to district courts without having to first exhaust the administrative process, finding that the constitutionality of a proceeding is a "here-and-now" injury that merits immediate review.11 Most recently, in Loper Bright Enterprises v. Raimondo, announced the day after Jarkesy, the Supreme Court overruled Chevron deference in certain circumstances, expanding the ability of courts to review and disagree with agency determinations and rulemaking.12 Aftermath of Jarkesy- Expansion of Argument to Industry Bar Given the increased scrutiny on both the SEC's ALJ proceedings and agency action generally, the SEC had begun backing away in large part from using its administrative courts for contested cases even before Jarkesy. The SEC recently dropped misconduct charges against at least eight accountants who had faced suspensions or permanent bars for charges stemming from poor audit work.13 Among these cases was an action against a Marcum LLP partne