Sotomayor Torches Supreme Court’s Short-Sightedness in SEC Ruling

U.S. Supreme Court Justice Sonia Sotomayor wrote a scathing dissent Thursday, arguing that the court’s decision to gut the Security and Exchange Commission’s power to seek civil penalties was a threat to the separation of powers.

In a 6–3 majority opinion penned by Chief Justice John Roberts, the Supreme Court held that when the SEC seeks civil penalties, the defendant is entitled to a jury trial in federal court.

This decision was a major hit to a provision of the Dodd-Frank Act, which allowed the SEC to impose civil penalties during administrative proceedings against those who break the law. Justices Clarence Thomas, Samuel Alito, Neil Gorsuch, Brett Kavanaugh, and Amy Coney Barrett joined Roberts.

In her dissent, Sotomayor brutally rebuffed the majority opinion as “plainly wrong” and slammed her conservative colleagues for undermining Congress’s authority to impose rules that entitle the government to civil penalties. She warned that the decision came as a result of ignoring a “mountain of precedent against it.”

“Beyond the majority’s legal errors, its ruling reveals a far more fundamental problem: This Court’s repeated failure to appreciate that its decisions can threaten the separation of powers,” she wrote. “Here, that threat comes from the Court’s mistaken conclusion that Congress cannot assign a certain public-rights matter for initial adjudication to the Executive because it must come only to the Judiciary.”

“The majority today upends longstanding precedent and the established practice of its coequal partners in our tripartite system of Government. Because the Court fails to act as a neutral umpire when it rewrites established rules in the manner it does today, I respectfully dissent.”

The decision has the potential to significantly weaken the ability of federal agencies, including the National Labor Relations Board, the Federal Trade Commission, and the Federal Communications Commission, to enforce fines against those who break laws, as those agencies lack the resources to pursue complaints in federal court. Functionally, the court’s decision will allow financial fraudsters to get off scot-free.