As this blog has observed, SEC v. Jarkesy is as much about Article III as it is about the Seventh Amendment. The Supreme Court there confirmed that if a case concerns private rights, a respondent is presumptively entitled to an Article III court. An agency may not funnel a civil prosecution through in-house administrative proceedings unless the public-rights exception applies. But Jarkesy had little to say about what private rights are and when a case implicates them. In explaining why the SEC’s suit did not fall into the public-rights exception, Jarkesy offered the following:

A hallmark that we have looked to in determining if a suit concerns private rights is whether it is made of the stuff of the traditional actions at common law tried by the courts at Westminster in 1789. If a suit is in the nature of an action at common law, then the matter presumptively concerns private rights, and adjudication by an Article III court is mandatory.

As the if-then construction shows, this passage sets forth a sufficient condition for finding private rights that trigger Article III: if a suit is in the nature of a case in law. Crucially, however, this condition is not a necessary one. If a suit is in the nature of a case in equity—that is, the stuff of disputes heard by the English courts of chancery before 1789, which differed from the common-law courts in that they could grant injunctive relief and other equitable remedies but not (primarily) monetary damages—then the matter also presumptively concerns private rights, and adjudication by an Article III court is mandatory. After all, Article III extends the judicial power to “all Cases, in Law and Equity.” The Supreme Court fortified this understanding in its 1856 decision of Murray’s Lessee v. Hoboken Land & Improvement Co., which held that Congress may not “withdraw from judicial cognizance any matter which, from its nature, is the subject of a suit at the common law, or in equity, or admiralty.”

Courts and litigants alike appear to be undervaluing the equitable path to private rights—to curious effect. In late July, for example, the Third Circuit decided Sun Valley Orchards v. DOL, holding that the DOL had violated Article III when it bypassed a judicial forum to assess civil penalties and back wages against a New Jersey farm for violating H-2A visa obligations. Although backpay assessments have traditionally been characterized as restitutionary and thus equitable, the court took pains to emphasize that the DOL’s backpay assessment had a punitive tenor and was thus legal in nature: the Administrative Law Judge had “assessed back wages at least in part to deter such harm from occurring in the future,” and the Administrative Review Board had “likewise cited the need to deter other H-2A employers when upholding the award.” Yet shoehorning the backpay assessment into the common-law category was unnecessary. While a Seventh Amendment claim requires the plaintiff to establish that the action is legal in nature, an Article III claim does not: equitable actions, along with legal actions, may trigger Article III. Put differently, the Third Circuit’s Article III analysis may have gilded the lily. Under the court’s logic, the farm was entitled to a jury trial under the Seventh Amendment. But since only Article III was at issue, the farm received the lesser protection within that greater protection: a judicial forum.

Three weeks later, the U.S. District Court for the Middle District of North Carolina decided Manis v. USDA, which similarly overlooked the equitable path to Article III. Through its in-house administrative process, the USDA imposed a fine and a one-year disqualification on a show-horse owner for allowing a sore horse to enter a show in violation of the Horse Protection Act. The court held that the public-rights exception applied, not only because the case did not fall into any of Jarkesy’s listed public-rights buckets (i.e., “the collection of revenue,” “immigration,” “tariffs,” “relations with Indian tribes,” “the administration of public lands,” and “the granting of public benefits”), but also because the agency’s claim (like the claim in Atlas Roofing) was “unknown to the common law.” Putting aside whether the decision was correct to draw from Jarkesy two separate “pathways” to public rights—the second pathway seems to mirror the Seventh Amendment inquiry—the decision appears analytically incomplete. Jarkesy, in holding that the SEC had violated the Seventh Amendment and that the public-rights exception did not abrogate the respondent’s entitlement to an Article III forum, had no occasion to address equity: analogizing the SEC’s claim to common-law fraud was sufficient. But to reject an Article III challenge to an agency’s issuance of monetary and injunctive relief, it is not enough for a court to assess whether the claim brings “common-law soil” and stop there—the court should also assess whether the claim brings “equitable soil.” To be sure, rendering a complete analysis would have made no difference to Manis’s outcome. In the court’s view, because “the heart of the violation is the fact that the horse was sored,” and because animal abuse was “foreign to the common law ethos,” any analogy to common-law fraud or breach-of-contract was too “collateral” to trigger the Seventh Amendment. The court would have said the same of equity: animal abuse was foreign to the equitable ethos, and any analogy between the disqualification order and an equitable remedy would have been too “collateral” to trigger Article III. (The novelty of customer data, by contrast, did not distract the Fifth Circuit from the claim’s underlying nature in its April decision of AT&T v. FCC: “However ‘technical’ section 222 [of the Telecommunications Act] may be, its substance is closely analogous to a negligence action.”) The point remains that Jarkesy should not be read as a license to ignore the equitable path to Article-III-triggering private rights.

For a recent decision acknowledging that equity has a role to play in Article III analysis, consider Asbury Auto Group, Inc. v. FTC, decided by the U.S. District Court for the Northern District of Texas about a week before Manis. After the FTC brought an administrative complaint against automative retailers, alleging that they had charged customers for additional items and seeking a cease-and-desist order, the retailers brought a collateral Axon attack to declare the agency’s proceeding unconstitutional and enjoin it. In denying the FTC’s motion to dismiss the action, the court observed:

Throughout the briefing, Defendants [i.e., the FTC], not Plaintiffs [i.e., the retailers], expressly argue that the cease-and-desist order is ‘akin to an equitable injunction.’ The Court agrees. But, Article III can be implicated in equity. Here, Article III is not implicated at law because the remedy sought—a cease-and-desist order—is akin to an equitable injunction not a legal remedy.

As the court proceeded to hold, because it was “plausible that the FTC action implicates private rights in equity,” and because the FTC had “not overcome the presumption in favor of Article III for the public rights exception to apply,” the retailers had “sufficiently stated an Article III claim based in equity.” In other words, the FTC appears to have missed that Jarkesy sets forth a sufficient but not a necessary condition for finding Article-III-triggering private rights. In pressing that the case lay in equity rather than law while disregarding equity’s own path to private rights, the FTC itself seemingly sealed the conclusion that private rights were plausibly at stake.

Readers of this blog should pay close attention to the arguments raised in the forthcoming Asbury summary-judgment papers—and, in particular, the degree to which the FTC recasts its arguments to avoid being hoisted by its own petard.

Although recognizing the equitable pathway to private rights is a step in the right doctrinal direction, the theory of private rights remains sorely under-developed. Identifying the triggering conditions for private rights says little about what they are. Justice Thomas’s Axon concurrence and Wellness International dissent (quoting Blackstone) provided some content: “Private rights encompass the three ‘absolute’ rights, life, liberty, and property, so called because they ‘appertain and belong to particular men merely as individuals,’ not ‘to them as members of society or standing in various relations to each other’”—and “[s]uch rights could be adjudicated and divested only by Article III courts.” And as Judge Henry St. George Tucker put the point in his 1803 annotations to Blackstone’s Commentaries: “No person shall be deprived of life, liberty, or property, (and these are the objects of all rights) without due process of law; which is the peculiar province of the judiciary to furnish.” In Jarkesy’s wake, courts and commentators should seek to connect the triggering conditions for private rights to such deeply rooted observations.

Amit R. Vora is a Partner at Kasowitz LLP and Chair of its Appellate & Constitutional Litigation Practice Group.