The US Department of Agriculture's adjudication process is facing a significant constitutional challenge as a federal appeals court prepares to hear oral arguments on Tuesday. This case has the potential to chip away at what is often referred to as the administrative state. Joe Manis contends that the USDA's adjudication system violates his Seventh Amendment right to litigate common law claims in an Article III court. It follows on the heels of the US Supreme Court's June decision in SEC v. Jarkesy, where the justices ruled that the SEC's civil penalties for securities fraud involve private rights that invoke the Seventh Amendment right to a jury trial.

Unraveling the Constitutional Implications of the USDA's Adjudication System

Challenges to the USDA's Adjudication System

Joe Manis filed a complaint in federal court in March, asserting that the agency's in-house process violates his constitutional rights. He sought a preliminary injunction to halt the agency's proceedings while his suit was being decided. However, the district court in April denied his request, concluding that he had failed to demonstrate a likelihood of success on the merits.The USDA alleges that Manis violated the Horse Protection Act by showing a "sored" horse in a Virginia competition. The statute prohibits horse owners from inflicting pain on the animal's limbs to enhance their gait for competitions. The USDA adjudicates such enforcement actions in-house, with its administrative law judges issuing decisions that can be appealed to a secretary-appointed judicial officer.Manis argues that the allegation effectively operates as a common law fraud claim and seeks punitive civil penalties, thus falling under his Seventh Amendment right to a jury trial. However, the USDA contends that enforcement actions under the statute are not common law actions akin to securities fraud and are in the public interest. The agency also stated in its brief to the court that "nothing in the statute requires an intent to deceive."

The Jarkesy Question and Its Implications

The Supreme Court's decision in Jarkesy is crucial to this case. Manis argued in a letter brief to the Fourth Circuit that the decision "decides Manis's Seventh Amendment and Article III claims." He believes that the claim concerns private rights and should be heard in an Article III court.Gillian Metzger, a law professor at Columbia University Law School, noted that the Fourth Circuit is likely to avoid deciding whether the case implicates the Seventh Amendment given the lowered penalty. However, it serves as a signal of the uncertainty among agencies about the implications of the Jarkesy decision and its impact on administrative enforcement.The issue still on the table is how the Fourth Circuit will interpret Jarkesy and determine if the statutory claim falls within Manis' private rights. The justices' ruling on what constitutes public rights could be interpreted differently, and it remains unclear whether the court intended to take a narrow approach to public rights as the opinion might suggest.

Diverging Circuits and Removal Protections

The Fourth Circuit will also have to address the question of whether the removal protections for the in-house judges are unconstitutional. This is a question that the Supreme Court dodged in Jarkesy and has already led to disagreements among the circuits.The Tenth and Ninth circuits have stated that administrative law judges (ALJs) are constitutional, conflicting with the Fifth Circuit's 2022 ruling in Jarkesy v. SEC. The Fifth Circuit's decision said that the SEC's two-layered removal protections for ALJs interfere with the president's authority to remove them in violation of Article II.Challenges over agency judge removal protections have cited the Supreme Court's 2010 ruling in Free Enterprise Fund v. Public Company Accounting Oversight Board, where the high court ruled that the layered protections for PCAOB board members are unconstitutional. However, other circuits have argued that the protections for ALJs who perform purely adjudicative functions are not necessarily unconstitutional under Free Enterprise.Manis also contends that the USDA's secretary-appointed judicial officer has sufficient authority to be classified as a principal officer, which would violate Article II. But Metzger suggested that the secretary "has much more authority to oversee … and to control" the officer, indicating that it likely fits more into the definition of an inferior officer.If the Fourth Circuit finds constitutional issues with the agency's ALJs or judicial officer, those problems could potentially be resolved by stripping the tenure protections or giving the secretary authority to review the judicial officer's decisions. However, if the appeals court determines that the agency's in-house adjudication system is unconstitutional under the Seventh Amendment or Article III, the USDA may face significant challenges, as not all federal agencies can seek civil penalties in an Article III court.Pacific Legal Foundation and Kakassy Law PLLC are representing Manis in this case. The case is Manis v. USDA, 4th Cir., No. 24-01367, 12/10/24.