CALANDRELLA v. United States

In the United States Court of Federal Claims No. 25-1552 Filed: June 12, 2026 FOR PUBLICATION STEPHEN G. CALANDRELLA, et al., Plaintiffs, v. UNITED STATES, Defendant. William Copley, August J. Matteis, and William E. Jacobs, Weisbrod Matteis and Copley PLLC, Washington, DC; Edward J. Meehan, Groom Law Group, Chtd., Washington, DC, for plaintiffs. Matthew Jude Carhart, Civil Division, U.S. Department of Justice, Washington, DC, for the defendant. MEMORANDUM OPINION HERTLING, Judge This putative class action is brought by plaintiffs Stephen Calandrella, Charles Powell, Clifford Thygesen, Fuad Ahmed, and Arthur Jacob (collectively “the plaintiffs”), who challenge civil penalties imposed by the United States, acting through the Securities and Exchange Commission (“SEC” or “the Commission”). The plaintiffs argue that these civil penalties were levied in contravention of the Constitution and constitute illegal exactions. Between 2003 and 2018, the SEC brought administrative proceedings before an in-house administrative law judge, alleging violations of securities laws and seeking civil penalties, against each plaintiff. Messrs. Calandrella, Powell, and Thygesen were found liable in 2006; Mr. Ahmed was found liable in 2015; and Mr. Jacob was found liable in 2018. In each case, the SEC issued orders requiring the plaintiffs, among other sanctions, to pay civil penalties. The civil penalties imposed were as follows: $50,000 for Mr. Calandrella; $20,000 for Mr. Powell; $20,000 for Mr. Thygesen; $12,777,395.80 for Mr. Ahmed; and $160,000 for Mr. Jacob. In 2024, the Supreme Court decided SEC v. Jarkesy, holding that the Seventh Amendment to the Constitution guarantees the right to a jury trial when the SEC seeks civil penalties for securities fraud. 603 U.S. 109, 120 (2024). Consequently, the Court held Congress could not permit the SEC to adjudicate and levy claims for civil penalties administratively, as doing so infringes on the exclusive jurisdiction of Article III courts and violates defendants’ constitutional right to trial by jury. Id. at 127, 135.  The plaintiffs allege that the SEC’s administrative orders requiring payment of civil penalties violated their Seventh Amendment right to a jury trial under Jarkesy. They allege that, because the penalties were imposed unconstitutionally, the funds were illegally exacted, and the plaintiffs are entitled to damages. The defendant moves to dismiss under Rule 12(b)(1) of the Rules of the Court of Federal Claims (“RCFC”). The defendant argues, among other defenses, that the claims are time-barred by the Tucker Act’s six-year statute of limitations. 28 U.S.C. 2501. The plaintiffs counter that the accrual suspension rule applies. The plaintiffs argue that Jarkesy represents a change in the law, so they could not have known before that decision that they had a claim, and therefore the limitations period did not begin to run until the Supreme Court decided Jarkesy in 2024. The plaintiffs also argue that Federal Circuit precedent barred them from bringing their illegal exaction claim and that precedent is no longer applicable to their claim after Jarkesy. Additionally, the plaintiffs argue that Mr. Ahmed’s ongoing payments render his claim timely, regardless of whether there was a change in law that suspended the accrual dates for the claims of the other plaintiffs. Jarkesy did not constitute a change in the law, and previous Federal Circuit precedent did not preclude the plaintiffs from bringing their claims before Jarkesy. The accrual suspension rule therefore does not apply and cannot save the plaintiffs’ untimely claims, which accrued when the SEC issued its final orders imposing civil penalties, and the plaintiffs made their initial payments. Although Mr. Ahmed has continued to make payments within the past six years, the continuing claims doctrine does not apply because he was aware of the entire penalty when the order was entered and is challenging the order itself, not the individual payments. Therefore, none of the claims falls within the Tucker Act’s six-year limitations period, and the complaint must be dismissed under RCFC 12(b)(1). I. FACTUAL BACKGROUND A. SEC Civil Penalty Process Congress created the SEC to administer and enforce three statutes to combat securities fraud and increase market transparency: the Securities Act of 1933, the Securities Exchange Act of 1934, and the Investment Advisers Act of 1940. 1 Each law regulates different aspects of the securities markets, but all contain anti-fraud provisions that prohibit misrepresenting or concealing material facts. These anti-fraud provisions are Section 17(a) of the Securities Act, Section 10(b) of the Securities Exchange Act, and Section 206 of the Investment Advisers Act. Section 17(a) of the 1 Although these acts form the nucleus of the SEC’s authority and its enforcement of registered entities and investment advisers, the SEC enforces several additional acts, including the Investment Company Act of 1940, Pub. L. No. 76-768, 54 Stat. 789 (codified at 15 U.S.C. § 80a-1 et seq.), which regulates mutual funds, exchange-traded funds, and other investment companies. The Investment Company Act is relevant to the SEC proceedings against some of the plaintiffs. 2 Securities Act prohibits regulated individuals from “obtain[ing] money or property by means of any untrue statement of a material fact,” as well as causing certain omissions of material fact. 15 U.S.C. § 77q(a)(2). As implemented by Rule 10b–5, Section 10(b) of the Securities Exchange Act prohibits using “any device, scheme, or artifice to defraud,” making “untrue statement[s] of . . . material fact,” causing certain material omissions, and “engag[ing] in any act . . . which operates or would operate as a fraud.” 17 C.F.R. § 240.10b–5 (2023); see 15 U.S.C. § 78j(b). Section 206(b) of the Investment Advisers Act, as implemented by Rule 206(4)–8, prohibits investment advisers from making “any untrue statement of a material fact” or engaging in “fraudulent, deceptive, or manipulative” acts with respect to investors or prospective investors. 17 C.F.R. § 275.206(4)–8(a)(1), (2); see 15 U.S.C. § 80b–6(4). Under these various provisions, “[t]he SEC may bring an enforcement action in one of two forums. First, the Commission can adjudicate the matter itself. See [15 U.S.C. § 77h–1, 15 U.S.C. §§ 78u–2, 78u–3, 15 U.S.C. § 80b–3]. Alternatively, it can file a suit in federal court. See [15 U.S.C. § 77t, 15 U.S.C. § 78u, 15 U.S.C. § 80b–9].” Jarkesy, 603 U.S. at 116. The agency forum and the judicial forum are distinct, and the process a defendant receives depends on which forum the SEC brings its enforcement action in. When the SEC brings an enforcement action in federal court, a jury typically acts as the fact finder, a life- tenured, salary-protected Article III judge presides; and the litigation is governed by the Federal Rules of Evidence and the Federal Rules of Civil Procedure. When the SEC brings an enforcement action through in-house adjudication, however, the Commission or, more typically, an administrative law judge (“ALJ”), who is hired by the Commission and does not have life- tenure and salary protection, presides and finds the facts, while the SEC’s Division of Enforcement prosecutes the case. The ALJ also resolves discovery disputes and determines the scope and form of permissible evidence. The SEC’s own rules of practice govern the proceeding, and any judicial review of the outcome is conducted under a standard of review deferential to the SEC’s conclusion. When the SEC sought civil penalties for violations of the anti-fraud provisions it enforces, it originally had to bring such claims in federal court. In 1990, Congress gave the SEC the power to impose civil penalties through administrative proceedings on registered individuals and entities under the Securities Act, the Investment Company Act, and the Investment Advisers Act. See Securities Enforcement Remedies and Penny Stock Reform Act of 1990, Pub. L. No. 101-429, 104 Stat. 931 (codified at 15 U.S.C. § 78u-2(a)(1)). In 2010, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), Pub. L. No. 111-203, that expanded the SEC’s authority to seek civil penalties by making “the SEC’s authority in administrative penalty proceedings coextensive with its authority to seek penalties in Federal court.” H. R. Rep. No. 111–687 at 78 (2010). Section 929P of the Dodd-Frank Act amended the Securities Act, the Securities Exchange Act, the Investment Company Act, and the Investment Advisers Act by empowering the SEC to impose civil penalties against any person who has violated a provision of these laws. Dodd-Frank Act, Pub. L. No. 111-203, § 929P, 124 Stat. 1376, 1862-65 (2010). Thus, after 2010, the SEC had the authority to seek civil penalties against any person, either in federal court or through its own in- house proceedings, regardless of whether the respondent was a registered individual or entity. 3  When a Commission member or an ALJ presides over an in-house enforcement proceeding, including when civil penalties are sought, the full Commission can review that official’s findings and conclusions, but it is not obligated to do so. See 15 U.S.C. § 78d; 117 C.F.R. § 201.360. While judicial review is available once the proceedings have concluded, 15 U.S.C. §§ 77i(a), 78y(a)(1), 80b–13(a), such review is deferential; a reviewing court must treat the agency’s factual findings as “conclusive” if they are supported by the record, even when they rest on evidence that could not have been admitted in federal court. See, e.g., 15 U.S.C. § 78y(a)(4). B. The Plaintiffs’ SEC Adjudications Each of the five plaintiffs’ claims derives from SEC enforcement actions that the Commission adjudicated in-house. At the end of each proceeding, the Commission levied, among other penalties, civil penalties. 1. Messrs. Calandrella, Powell, and Thygesen Between 1993 and 1995, Messrs. Calandrella, Powell, and Thygesen served as directors of the Rockies Fund and as officers or directors of that Fund’s portfolio companies. Rockies Fund, Inc. v. SEC, 428 F.3d 1088, 1090 (D.C. Cir., 2005) (Rockies Fund I). According to the Commission, the Rockies Fund’s filings “misstated the classification, valuation, and ownership of stock of the Fund’s largest holding, Premier Concepts.” Rockies Fund, Inc. v. SEC, 298 F. App’x 4, 5 (D.C. Cir. 2008) (Rockies Fund II). The SEC instituted administrative proceedings against the petitioners under various provisions, including Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b–5. Rockies Fund I, 428 F.3d at 1092. Following an evidentiary hearing, the ALJ issued an initial decision with three principal findings: first, that Mr. Powell and Mr. Calandrella violated Section 10(b) and Rule 10b–5 by manipulating the stock of a portfolio company, Premier, through matched orders and wash sales; second, that the Fund violated Section 10(b) and Rule 10b–5, as well as Section 13(a) and Rules 12b–20, 13a–1, and 13a–13, by “misclassifying, overvaluing, and misrepresenting” ownership of Premier stock in quarterly SEC filings; third, that Mr. Calandrella violated Section 57(k)(1) of the Investment Company Act and Rule 10b–5 by improperly accepting compensation and failing to report the resulting conflict of interest to the Rockies Fund board. Id. Under the authority of the Securities Exchange Act and the Investment Company Act, the ALJ imposed civil penalties totaling $500,000 against Mr. Calandrella and $160,000 each against Mr. Powell and Mr. Thygesen, along with a cease-and-desist order against all three and their fund. Id. The ALJ also permanently barred Mr. Calandrella and temporarily barred Mr. Powell and Mr. Thygesen from associating with an investment company. Id. On appeal, the full Commission conducted a de novo review and affirmed the ALJ’s ruling and sanctions, and denied reconsideration. Id. These three plaintiffs then appealed to the D.C. Circuit, which affirmed in part and vacated in part. Id. at 1099. The Court of Appeals affirmed three key findings: (1) that the plaintiffs had acted with “extreme recklessness” by misclassifying the Fund’s holdings in SEC 4 filings, id. at 1096; (2) that the Fund had overvalued its largest asset, using a valuation methodology that was “inconsistent and slipshod” and reflected a “haphazard process for valuing the largest holding of the Fund constitut[ing] an ‘extreme departure from the standards of ordinary care’ that should have been obvious to all of the Fund’s directors,” id. at 1097 (quoting SEC v. Steadman, 967 F.2d 636, 641-42 (1992)); and (3) that “the Fund falsely claimed ownership of an additional 200,000 Premier shares in its September 1995 filing.” Id. at 1097-98. The Court of Appeals vacated, as not sufficiently supported by the record, other findings, including that a series of wash sales and matched orders violated Rule 10b-5, and that Mr. Calandrella impermissibly accepted a waiver of legal claims as compensation in exchange for the sale of Fund assets. Id. at 1099. The D.C. Circuit also vacated the monetary penalties imposed by the Commission. Id. On remand, the SEC imposed reduced civil penalties based on the findings affirmed by the Court of Appeals. Mr. Calandrella’s civil penalty was reduced to $50,000, and Mr. Powell’s and Mr. Thygesen’s civil penalties were reduced to $20,000. Rockies Fund II, 298 F. App’x. at 5. The plaintiffs again appealed, and the D.C. Circuit affirmed the revised sanctions. Id. These plaintiffs paid the civil penalties in October 2016. (ECF 12 at ¶ 21.) 2. Mr. Ahmed Mr. Ahmed’s claim arises from an order issued by the Commission in In re Success Trade, Inc., Success Trade Secs., Inc., and Fuad Ahmed, 112 S.E.C. Docket 936 (Aug. 14, 2015). Mr. Ahmed and two companies he led, Success Trade, Inc. (“STI”) and Success Trade Securities, Inc. (“STS”), submitted a settlement offer consenting to the Commission’s entry of an order requiring payment of civil penalties; the SEC accepted the proposed settlement in its final order. (ECF 12 at ¶ 22.) From February 2009 through at least February 2013, STI, its subsidiary STS (a registered broker-dealer), and Mr. Ahmed (president and CEO of both entities) offered and sold approximately $20 million in STI promissory notes (“STI Notes”) to at least 65 investors through unregistered, non-exempt transactions. In re Fuad Ahmed, 112 S.E.C. Docket 936, at *1. Many investors were customers of STS and advisory clients of Investment Adviser A, an investment adviser that offered and sold STI Notes to its clients and whose employees were registered representatives associated with STS. Id. Contrary to representations in private placement memoranda and other communications, Mr. Ahmed and his two companies misappropriated proceeds to pay Mr. Ahmed’s personal expenses, remit checks to Mr. Ahmed’s brother, and fund Investment Adviser A’s payroll and operations. Id. STI and Mr. Ahmed also used proceeds from later STI Note sales to make interest payments to earlier noteholders. Id. In late 2012 and early 2013, Mr. Ahmed and his companies fraudulently induced some noteholders to convert or extend their STI Notes. Id. The scheme collapsed in April 2013. Mr. Ahmed consented to disgorge $12,777,395.80, payment of prejudgment interest of $1,503,424.84, and civil penalties of $12,777,395.80. Id. at *9. Mr. Ahmed liquidated STS, and the Commission credited $900,000 of proceeds from that liquidation toward the disgorgement amount. Id. 5  Under the agreement, Mr. Ahmed had to pay the penalties within 30 days of the final order; failure to do so would allow the SEC to pursue additional interest under 31 U.S.C. § 3717. Id. Subsequently, the SEC and Mr. Ahmed agreed that Mr. Ahmed could make periodic payments after the 30-day deadline, with the SEC forgoing enforcement of its right to additional interest. Thus far, Mr. Ahmed has paid $18,236.32 to the SEC, including 11 payments totaling $14,500 over the last six years. (ECF 12 at ¶¶ 27-28.) 3. Mr. Jacob Mr. Jacob’s claim arises from the sanction imposed in In re Arthur F. Jacob, CPA and Innovative Bus. Sols., LLC, 113 S.E.C. Docket 5399 (April 14, 2016). Mr. Jacob, and his company, Innovative Business Solutions LLC (“IBS”), consented to the entry of an order by the Commission setting out findings and imposing sanctions for false statements and omissions of truth. Id. at *1. The Commission found that Jacob and IBS, unregistered investment advisers to about 30 client households with approximately $18 million under management, violated the anti-fraud provisions of the federal securities laws. Id. From mid-2009 through at least July 2014, Mr. Jacob and IBS engaged in a fraudulent scheme involving material misrepresentations and omissions, as well as other deceptive practices, to obtain and retain investment advisory clients and collect advisory fees. Id. During this time, Mr. Jacob (alone and through IBS): routinely made false statements and omissions to current clients, prospective clients, and others, where he: concealed his 2003 disbarment and his 2005 suspension from practicing or appearing before the Internal Revenue Service (“IRS”); misstated to clients the risks and profitability of their investments, including in investment newsletters Jacob drafted and distributed; falsely informed clients that he was not required to register as an investment adviser and failed to disclose that, in fact, he and IBS were required to be registered as investment advisers with several states; and provided false information about the advisory services they provided in order to retain trading authority in clients’ accounts. Id. at *1-2. According to the SEC, Mr. Jacob and IBS breached their duties as investment advisers to the clients. As a result of their scheme, Mr. Jacob and IBS collected approximately $320,000 in investment advisory fees from their clients. Id. at *2. Following in-house proceedings, the SEC imposed injunctive relief on Mr. Jacob and IBS, who were required to disgorge $320,000, and pay prejudgment interest of $37,986.98 and a civil penalty of $160,000. Id. at *12. Mr. Jacob and IBS did not seek review of the Commission’s final order. In 2016, Jacob paid $517,986.98 to the SEC. (ECF 12 at ¶ 34.) 6 II. LEGAL BACKGROUND A. Jarkesy and its Precedents The Seventh Amendment provides that “[i]n [s]uits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved . . . .” U.S. Const. amend. VII. The phrase “[s]uits at common law” has been construed to refer to cases that at the time of the adoption of the Seventh Amendment were tried in courts of law, in which jury trial was customary, as distinguished from proceedings in courts of equity or admiralty, in which jury trial was not. Parsons v. Bedford, 28 U.S. 433, 446-47 (1830) (Story, J.). The Supreme Court has referred to these suits at common law as claims involving private rights. Crowell v. Benson, 285 U.S. 22, 50-51 (1932). Private rights are legal entitlements that belong to individuals and may be asserted in court. Such private rights typically involve personal interests for which the holder of the right may seek a legal remedy for a violation of the right through a lawsuit like those that were available at common law when the Bill of Rights was adopted. The Constitution bars Congress from removing from judicial review matters that are fit for judicial resolution, including claims subject to suit at common law. Murray’s Lessee v. Hoboken Land & Improvement Co., 59 U.S. (18 How.) 272, 284 (1855). When such a suit falls within federal jurisdiction, an Article III court must hear it, and if the Seventh Amendment applies, a jury must be provided. Stern v. Marshall, 564 U.S. 462, 484 (2011). Congress can create causes of action and allow executive agencies to adjudicate them in Article I forums, without a jury, in compliance with the Seventh Amendment, if these causes of action do not resemble suits at common law. Murray’s Lessee, 59 U.S. (18 How.) at 284. Such cases have been identified as involving public rights. Public rights refer to legal claims arising between the federal government and private parties; they are often integral to a public regulatory scheme. Because disputes arising under such regulatory schemes were amenable to resolution exclusively by the executive agency charged with enforcement of the regulations, Congress could authorize such agencies to assign these matters to non-Article III tribunals, in which parties accused of regulatory violations were not guaranteed the same due process protections that Article III courts provided, including adjudication by a jury. Jarkesy, 603 U.S. at 128. Jarkesy is now the leading Supreme Court case defining the distinction between private and public rights. 2 The holding in Jarkesy addressing the scope of public rights builds on the Supreme Court holdings in Atlas Roofing Co., Inc. v. Occupational Safety and Health Rev. 2 On June 4, 2026, the Supreme Court decided FCC v. AT&T, Inc., No. 25-406 (June 4, 2026). AT&T involved a claim that the authority of the Federal Communications Commission (“FCC”) to impose civil penalties in an in-house proceeding violates the Seventh Amendment. Because of factual distinctions between the FCC’s authority and the SEC’s authority at issue in Jarkesy, the Supreme Court did not need to address the public rights doctrine. See AT&T, slip op. at 10-11. Thus, AT&T does not displace Jarkesy as the controlling authority on the relationship between the public rights doctrine and the Seventh Amendment. 7 Com’n, 430 U.S. 442 (1977), Tull v. United States, 481 U.S. 412 (1987), and Granfinanciera, S.A. v. Nordberg, 492 U.S. 33 (1989). 1. Atlas Roofing Co., Inc. v. Occupational Safety and Health Review Comm’n The issue in Atlas Roofing was whether Congress could, consistent with the Seventh Amendment, create a new cause of action enforceable by an administrative agency in an in- house administrative proceeding without a jury trial. In resolving the question, the Court focused on whether the cause of action was either identical or analogous to a suit at common law. When a new cause of action was neither identical nor analogous to a suit at common law, Congress has the authority to remove it from an Article III court and assign its adjudication to an agency. Atlas Roofing arose under the Occupational Safety and Health Act of 1970 (“OSHA”), which established a duty to prevent unsafe or unhealthy working conditions and empowered the Secretary of Labor to set health and safety standards. OSHA also created remedies for violations: through administrative proceedings, the agency could both obtain abatement orders requiring employers to correct unsafe conditions and impose civil penalties on employers. Challenges to agency orders were heard by ALJs, who could uphold, modify, or vacate the agency’s proposed orders. No jury trial was available. The petitioners in Atlas Roofing faced abatement and civil penalties under OSHA and unsuccessfully challenged their violations before agency ALJs. The petitioners then appealed to the Third and Fifth Circuits, arguing that the lack of a jury trial violated the Seventh Amendment. After differing outcomes in the circuit courts, the Supreme Court granted certiorari. The Supreme Court concluded that proceedings conducted by agency ALJs were not equivalent to suits at common law for purposes of the Seventh Amendment but instead involved compliance with statutory obligations unique to OSHA. As the Court explained, when Congress creates new statutory “public rights,” it may assign their adjudication to an administrative agency, even if the agency cannot provide a jury trial, without violating the Seventh Amendment’s requirement that jury trials be preserved in suits at common law. Atlas Roofing, 430 U.S. at 455. The Court held that Congress may establish rights not recognized at common law and authorize in-house agency enforcement and adjudication without violating the Seventh Amendment, which does not cover suits unknown at the time of its adoption. The Court made clear that congressional authority to create a forum for administrative adjudication extends only to new public rights, not pre-existing private rights. “Our prior cases support administrative factfinding in only those situations involving public rights, e.g., where the Government is involved in its sovereign capacity under an otherwise valid statute creating enforceable public rights. Wholly private tort, contract, and property cases, as well as a vast range of other cases as well are not at all implicated.” Id. at 458 (cleaned up). At the same time, the Court rejected the suggestion that the Seventh Amendment applies to all suits that have a historical analogue, regardless of the nature of the right or the forum for adjudication. Historical practice and precedent support the principle that the right to a jury trial depends not only on the type of issue to be resolved, but also on the chosen forum. Id. at 460-61. 8 While juries were common factfinders in common-law courts, they were not universally used in all legal contexts. Generally, when courts of law have supplied a cause of action and adequate remedy to litigants, then cases involving that cause of action would be tried in a court of law before a jury. When, however, courts of law did not supply an adequate cause of action and remedy to address a specific harm, then courts of equity could try the case without a jury. Id. at 458-59. Based on this historical principle, the Court held that when Congress identifies an issue and believes the cause of action and remedy provided by the common law are inadequate, Congress may supplant the common law action with a statutory cause of action. Id. In such instances, when a new right involves the federal government acting in its sovereign capacity, Congress can designate that actions arising under, or seeking to enforce, that new right may be referred to and resolved by a non-Article III body in which the Seventh Amendment right to a jury trial does not apply. Under OSHA, Congress determined that common law and existing remedies for workplace injuries caused by unsafe conditions were inadequate. Consequently, it created a new cause of action and remedies unknown to the common law and assigned their enforcement to a specialized tribunal able to provide swift and expert resolution. Id. at 461. Therefore, because the government, in its sovereign capacity, created a new statutory right under a valid statute, a jury trial was not required. Id. at 452-55. 2. Tull v. United States Tull addressed an issue distinct from that considered in Atlas Roofing. Atlas Roofing addressed whether Congress could assign a matter to an administrative tribunal without a jury; the issue in Tull was whether Congress could assign a legal action to an Article III court but carve out a defendant’s right to a jury trial. The petitioner, a real estate developer, was dumping fill on wetlands. The federal government sued the petitioner in district court for violating the Clean Water Act (“CWA”), which prohibits the discharge, without a permit, of dredged or fill material into “navigable waters,” including adjacent wetlands. 33 U.S.C. §§ 1311, 1344, and 1362(7). The CWA authorizes injunctive relief against violators and subjects them to a civil penalty not to exceed $10,000 per day. After denying the developer’s timely demand for a jury trial, the district court imposed civil penalties and granted injunctive relief. The court of appeals affirmed, and the Supreme Court granted certiorari to consider whether the petitioner was entitled to a jury trial. To resolve the issue, the Supreme Court determined that it first had to “compare the statutory action to 18th-century actions brought in the courts of England prior to the merger of the courts of law and equity,” and then “examine the remedy sought and determine whether it is legal or equitable in nature.” Tull, 482 U.S. at 417-18. As the Court explained, the first step is more important than the second and that, on balance, if the action and the remedy sought are legal in nature, then the defendant is entitled to a jury under the Seventh Amendment. The Court analogized the claim under the CWA either to a public nuisance or action in debt claim. Both these forms of actions were like actions available in common-law courts in 9 18th century England. The Court then explained that “[r]emedies intended to punish culpable individuals, as opposed to those intended simply to extract compensation or restore the status quo, were issued by courts of law, not courts of equity.” Id. at 422. Thus, the imposition of a civil penalty was the type of remedy available at common law and could be enforced only in courts of law and heard by a jury. From this analysis, the Court concluded that enforcement actions under the CWA were not equitable in nature, because the availability of a civil penalty was designed to punish violators and deter future violations, rather than make other parties or the government whole. While not a public rights case, Tull clarified that the Seventh Amendment can apply to novel actions created by Congress, when the claims and remedies are akin to those at common law. 3. Granfinanciera, S.A. v. Nordberg In Granfinanciera, the Supreme Court considered whether the petitioners were entitled to a jury trial in bankruptcy court on a fraudulent-transfer claim. As codified in the Bankruptcy Code, under a fraudulent transfer claim a trustee may void a transfer or obligation made by the debtor before bankruptcy if the debtor “received less than a reasonably equivalent value in exchange for such transfer or obligation.” 11 U.S.C. § 548(a)(1)(B)(i). Following chapter 11 bankruptcy, the plan of reorganization approved by the bankruptcy court vested in the trustee in bankruptcy, Nordberg, any causes of action for fraudulent conveyance. The trustee then filed suit against Granfinanciera, S.A. and Medex, Ltda., in district court for a fraudulent conveyance. The case was referred to the bankruptcy court, and the defendants requested a jury trial. The bankruptcy court denied that request and ultimately entered judgment for the trustee. The defendants’ appeals to the district court and the court of appeals were denied, and the Supreme Court granted certiorari to consider whether the denial of a jury trial violated the Seventh Amendment. The Court first performed a Tull-style analysis, analyzing whether a fraudulent-transfer action resembled an 18th-century suit at common law. Granfinanciera, 492 U.S. at 42. As the Court held, a fraudulent transfer is identical to any fraudulent conveyance claim and is a suit at common law for purposes of the Seventh Amendment. Id. at 46-47. The Court also concluded that the remedy sought by the trustee was legal rather than equitable in nature. Id. at 48-49. Following its conclusion that the claim against the petitioners required a jury trial, the Court noted that some claims requiring a jury trial under Tull could be exempted from that requirement under Atlas Roofing’s public rights analysis. Id. at 49. Therefore, the Court turned to Atlas Roofing to determine whether a fraudulent-transfer claim in bankruptcy fell within the public rights exception. In Atlas Roofing, the Court had explained that Congress can create new statutory public rights and assign their adjudication to an administrative agency without violating the Seventh Amendment. These new statutory public rights could “effectively supplant a common-law cause of action carrying with it a right to a jury trial with a statutory cause of action shorn of a jury trial 10 right if that statutory cause of action inheres in, or lies against, the Federal Government in its sovereign capacity.” Id. at 53. Although Atlas Roofing’s public rights exception to the Seventh Amendment could be read broadly, the Court in Granfinanciera clarified that this exception should instead be construed narrowly to avoid sweeping in situations in which “‘[w]holly private tort, contract, and property cases, as well as a vast range of other cases, are not at all implicated.’” Id. at 51 (quoting Atlas Roofing, 430 U.S. at 458). The Court put two limitations on the public rights exception: (1) Congress cannot take a claim that existed at common law and refashion and relabel it as a public right, free from Article III adjudication; and (2) even when Congress sets up a regulatory framework and authorizes a government agency to enforce it as a party to a case, proceedings under the regulatory program are not automatically exempt from resolution by an Article III tribunal subject to the Seventh Amendment. Id. at 52, 54. While Congress may create new causes of action involving public rights and assign their adjudication to tribunals without implicating the Seventh Amendment, the Court held that Congress may not deprive parties of their constitutional right to a jury trial in a dispute over their private rights. Id. at 53. “‘[L]egal claims are not magically converted into equitable issues by their presentation to a court of equity,’ nor can Congress conjure away the Seventh Amendment by mandating that traditional legal claims be brought there or taken to an administrative tribunal.” Id. at 52 (quoting Ross v. Bernhard, 396 U.S. 531, 538 (1970)). Although on its face, Atlas Roofing could be read as permitting Congress to fashion public rights that closely resembled traditional legal claims and assign their resolution to adjudication by non-Article III tribunals, the Court clarified that Congress’s ability to create public rights is limited to claims that were not subject to adjudication in courts of law when the Seventh Amendment was adopted. Thus, under Atlas Roofing, several factors were relevant when determining whether a right is private or public. Under Granfinanciera the determining factor was the underlying nature of the claim itself: if the claim is legal in nature, Congress cannot circumvent the right to a jury trial by changing the forum or creating a regulatory scheme. As a result, the Court held that the existence of a regulatory scheme does not necessarily permit Congress to assign the adjudication of all claims within that regulatory scheme to a forum outside Article III adjudication. The Court went on to hold that the government’s status as a party to a case is not determinative of whether a claim falls within Atlas Roofing’s public rights exception, although it remains a relevant consideration. When the government is not a party to the case, the key inquiry is whether Congress, acting within its constitutional authority, has created a right so closely integrated into a public regulatory scheme that it is appropriate for agency resolution with minimal Article III judicial involvement. Id. at 54. If the right is part of a closely integrated regulatory scheme, it may still be a public right, even when the dispute involves two private parties. When a statutory right is not closely intertwined with a federal regulatory program that Congress has the authority to enact, and that right neither belongs to nor exists against the federal government, then disputes involving that right must be adjudicated by an Article III court. Id. at 54-55. The converse is not necessarily true: a right does not automatically become a public right simply because it is intertwined with a federal regulatory program or involves the federal 11 government; such a right may still constitute a private right subject only to adjudication in an Article III court in which the Seventh Amendment applies. Under this framework, the crucial inquiry becomes whether the right at issue is “legal in nature.” Id. at 55. If the claim is legal in nature, Congress lacks the constitutional authority to integrate it into a public regulatory scheme, and it must be adjudicated before an Article III court. Although “Congress may effectively supplant a common-law cause of action carrying with it a right to a jury trial with a statutory cause of action shorn of a jury trial right,” it may do so only when the cause of action is not legal in nature. Id. at 53. When Congress supplants a common-law cause of action, and that cause of action is legal in nature, “Congress may not assign its adjudication to a specialized non-Article III court.” Id. (citing Crowell, 285 U.S. at 51). The Court held that a claim for a fraudulent transfer closely resembles a traditional action that existed at common law for which a legal remedy was being sought. Thus, the claim concerned a private right, and Congress lacks the power to remove the claim from Article III jurisdiction. Accordingly, the Seventh Amendment right to a jury applied to the claim. 4. SEC v. Jarkesy The question presented in Jarkesy was whether the Seventh Amendment entitles a defendant to a jury trial when the SEC seeks civil penalties for securities fraud. As the Court noted, its “analysis of this question follows the approach set forth in Granfinanciera and Tull.” Jarkesy, 603 U.S. at 120. The case arose when the SEC filed an in-house enforcement action against George Jarkesy, Jr., and Patriot28, LLC for securities fraud. After a hearing before an ALJ, the SEC found that Jarkesy and Patriot28 had committed fraud and imposed $300,000 in civil penalties. On appeal, the court of appeals vacated the order, ruling that the SEC’s in-house process had been unconstitutional for several reasons, including the lack of a jury. The Supreme Court granted certiorari. Applying the Tull test, the Court determined that both the nature of the remedy and the cause of action triggered the application of the Seventh Amendment. The SEC sought civil penalties, a form of monetary relief, for the alleged fraud. The Court noted that it had established in Tull that “‘civil penalt[ies are] a type of remedy at common law that could only be enforced in courts of law.’” Id. at 123 (quoting Tull, 482 U.S. at 422). Thus, relying on the analysis in Tull, the Court again held that civil penalties are a legal remedy. The Court then concluded that the cause of action for securities fraud is closely related to common law fraud, as both address similar conduct: misrepresenting or concealing material facts. Id. at 125. Because of this close relationship, the two claims cannot be meaningfully separated. Id. at 125-26. Thus, when Congress created the