The Fallout from SEC v. Jarkesy: Is There a Proper to a Jury Trial in Administrative Enforcement Actions Introduced by NYDFS?

by Matthew L. Levine

Picture courtesy of creator

Authorized developments rising within the wake of the Supreme Courtroom’s choice in SEC v. Jarkesy, 603 U.S. 109 (2024), current an necessary query for entities licensed by the New York State Division of Monetary Providers (NYDFS):  in an administrative enforcement motion introduced by NYDFS, does Jarkesy entitle the focused entity to a jury trial?

When enacting the Dodd-Frank Act in 2010, Congress granted the U.S. Securities and Alternate Fee enhanced authority to impose civil penalties in enforcement actions introduced by means of its administrative listening to course of.[1]  The Supreme Courtroom trimmed that authority in Jarkesy, ruling that the place the SEC seeks civil penalties in opposition to a respondent for securities fraud, the Seventh Modification entitles the respondent to a jury trial.

Recognizing the Seventh Modification’s deep historic connection to frequent regulation instances involving allegations of fraud, the Courtroom held that the fitting to a jury trial was not restricted to solely these frequent regulation types of motion acknowledged on the time of the Seventh Modification’s adoption.  The Courtroom emphasised that the fitting to a jury trial extends to any statutory declare if the declare is authorized in nature.[2]

The Courtroom dominated that “civil penalties” imposed by the SEC “are a kind of treatment at frequent regulation that would solely be enforced in courts of regulation.”[3]  Of explicit significance was the truth that “the SEC just isn’t obligated to return any cash to victims”; its civil penalties by definition“ are designed to punish and deter, not compensate.”  Financial penalties imposed by the SEC are thus akin to frequent regulation fraud claims, mentioned the Courtroom, which have to be adjudicated earlier than a jury.[4]

Nor was the securities fraud reason for motion introduced by the SEC saved by the “Public Rights” exception.  This exception gives that, when Congress creates a “public proper,” it could freely assign enforcement of that proper to a federal company with no jury trial in keeping with the Seventh Modification.  Software of the exception, in response to Jarkesy’s majority, turns largely on the character of the treatment sought.[5]  The Courtroom’s precedents involving the federal government’s assortment of income and tariffs, and energy over immigration, stand as examples of the kind of “public proper” falling inside this exception.[6]

The fallout from Jarkesy has been swift.  Respondents in administrative enforcement actions introduced by federal banking regulators, for instance, wasted no time deploying Jarkesy to petition for a jury trial.  In Bonan v. F.D.I.C.,[7] the FDIC sought to impose a civil penalty on a former govt of a regulated financial institution by way of administrative continuing.  The chief moved the Seventh Circuit for an emergency keep of the FDIC Board’s Determination and Order pending judicial evaluation, on a number of grounds.  One foundation for the movement was Jarkesy, with the previous govt arguing entitlement to a jury trial as a result of “the FDIC was in search of to impose a civil penalty in opposition to him,” and that the “Public Rights” exception didn’t apply as a result of the FDIC on this case was “regulating transactions made between non-public events.”[8]  The Seventh Circuit granted the manager’s unopposed keep movement and the problem is at the moment in litigation.[9]

In one other case, CBW Financial institution v. F.D.I.C.,[10] the FDIC introduced an administrative enforcement motion in opposition to a Kansas financial institution for alleged violations arising underneath the federal Financial institution Secrecy Act and from different exercise purporting to represent an unsafe and unsound apply.[11] These allegations are typical of these introduced by federal banking regulators.[12]

As in Bonan, the goal financial institution in CBW sought to enjoin the continuing by arguing that Jarkesy obligated the FDIC to begin a federal civil motion as a result of the company was in search of to impose a civil penalty.  The financial institution reasoned that the FDIC’s expenses have been akin to frequent regulation tort claims involving notions of reasonableness and danger – claims it mentioned traditionally have been entitled to jury consideration.[13]  The district court docket finally dismissed for lack of jurisdiction with out reaching the deserves of the Seventh Modification declare; the matter is now on enchantment to the Tenth Circuit.[14]

The gating subject for the appliance of Jarkesy to NYDFS enforcement actions is whether or not the Seventh Modification’s protections prolong to state regulation proceedings.  Over 100 years in the past, the Supreme Courtroom mentioned it didn’t.  Minn. & St. Louis R.R. v. Bombolis, 241 U.S. 211 (1916) (Seventh Modification inapplicable to state court docket conduct when implementing the state’s personal procedural regulation concerning parts essential to represent a legitimate civil verdict).[15]

Bombolis considerably predates numerous more moderen Supreme Courtroom choices holding that the Fourteenth Modification incorporates many of the Amendments set out within the Invoice of Rights, and thereby apply to the States.  Notably, in its 2010 ruling in McDonald v. Metropolis of Chicago, the place the Courtroom held that the Fourteenth Modification incorporates the Second Modification and due to this fact applies to state gun legal guidelines, the Courtroom noticed that it has overruled numerous its precedents beforehand holding that amendments contained within the Invoice of Rights did to not apply to the States.[16]  Thus, in a finely-honed problem to a state administrative continuing that seeks civil penalties, it’s conceivable the Courtroom might reexamine Bombolis and broaden the attain of the Seventh Modification to increase to state administrative enforcement proceedings.

Different courts are usually not ready for the Supreme Courtroom – or perhaps a federal court docket — to talk on this subject.  Certainly, Jarkesy’s influence has already been felt in New York State, the place a trial court docket just lately held that an Emergency Medical Technician topic to an administrative listening to introduced by the New York State Division of Well being is entitled to the safety of the Seventh Modification.

In Ball v. New York State Dep’t of Well being, the Division of Well being sought to impose civil penalties, and revoke the respondent’s license, by way of an administrative listening to arising out of misconduct allegedly dedicated whereas serving as a licensed EMT.[17]  In embracing the EMT’s problem to the executive listening to course of, the court docket held (in a prolonged, detailed opinion) that “the Seventh Modification is each basic to our scheme of ordered liberty and deeply rooted on this Nation’s historical past and custom.  Subsequently the Seventh Modification applies to the States by means of the Due Course of Clause.”[18]  The trial court docket then rebuffed the Division of Well being’s invocation of the Public Rights exception in these circumstances.[19]

The court docket additional held that every of the treatments sought by the Division of Well being — civil penalties and revocation of respondent’s EMT license — entitled Respondent to decision by jury:

[T]he Seventh Modification as made relevant to the States by means of the Due Course of Clause entitles Petitioner to a civil jury trial in New York Supreme Courtroom to find out whether or not he’s responsible for civil penalties underneath Public Well being Legislation §§ 12 and 12-a and topic to revocation of his EMT license underneath 10 NYCRR § 800.16 primarily based upon the allegations contained in Respondent‘s Assertion of Fees.[20]

This broad holding will little question spur different challenges to administrative enforcement proceedings introduced in New York.

State regulation authorizes NYDFS to convey administrative enforcement actions in search of to punish and treatment violations of the New York Banking, Insurance coverage and Monetary Providers Legal guidelines.[21]  Following discover and a listening to, a NYDFS administrative continuing often concludes in a remaining order of the Superintendent.  Upon a discovering of legal responsibility, NYDFS might impose a civil penalty in most circumstances — and sometimes does.  In additional excessive circumstances, NYDFS might search to revoke an entity’s or particular person’s license altogether.[22]

Violations enforced by NYDFS usually embrace (a) conducting enterprise in an “unsafe and unsound” method, (b) operating afoul of state laws obligating regulated entities to keep up compliance applications that fulfill necessities imposed by the Financial institution Secrecy Act or OFAC laws, and (c) violating a written settlement with the company, resembling a supervisory settlement or different settlement imposing a situation of compliance.[23]

Beneath Jarkesy and Ball, the NYDFS administrative enforcement construction could also be topic to a Seventh Modification problem.  Specializing in treatments accessible to NYDFS, as Jarkesy directs,[24] suggests this vulnerability.  When assessing a civil penalty, NYDFS by statute might think about elements resembling (a) the diploma to which senior administration participated within the investigation, (b) the diploma of the entity’s cooperation, (c) some other sanction imposed by one other regulator, (d) the entity’s monetary assets and good religion, (e) the seriousness of the violation, (f) any historical past of prior violations and (g) some other issues which may be mandatory for the sake of justice and the general public curiosity.[25]

Notably absent from these statutory parts is any authorization for NYDFS to impose restitution.  Certainly, NYDFS is forbidden from doing so; the State Finance Legislation directs penalties obtained by the company should go on to the state’s basic fund.[26]  As in Jarkesy and Ball, then, it could be argued that civil penalties imposed by NYDFS serve solely punitive and deterrent functions, not compensatory ones, thus requiring jury decision.  And for causes akin to these adopted by Ball, an effort by NYDFS to strip a regulated entity or particular person of a license additionally might necessitate trial by jury.

The rationale supplied within the Bonan and CBW Financial institution instances within the federal context (famous above) would seem to have comparable pressure when utilized to administrative actions introduced NYDFS.  Within the federal issues, the regulated particular person argued that administrative expenses for violations of compliance guidelines such because the Financial institution Secrecy Act, or for unsafe and unsound practices underneath federal banking regulation, are analogous to frequent regulation tort claims involving notions of reasonableness and danger and thus entitled to jury dedication.[27]

Administrative claims for Financial institution Secrecy Act violations, and unsafe and unsound banking practices, make up a good portion of NYDFS enforcement actions.  For instance, laws issued underneath the New York Banking Legislation require banks, belief corporations and cash transmitters to keep up anti-money laundering applications compliant with Financial institution Secrecy Act and OFAC laws.[28]  Furthermore, Part 44(a) of the Banking Legislation authorizes NYDFS to adjudicate {that a} regulated entity violated the regulation by partaking in “unsafe and unsound apply[s].”

Equally, the New York Insurance coverage Legislation permits for administrative enforcement leading to imposition of civil penalties underneath numerous provisions.  Part 109 of the regulation, for instance, serves as a catchall penalty statute, empowering the Superintendent to impose a penalty of $1,000 “for every offense” the place a licensed entity or particular person willfully violates any provision of the Insurance coverage Legislation or regulation promulgated thereunder.[29]  These fines represent civil penalties levied following discover and an administrative listening to, and due to this fact are likewise topic to problem underneath Jarkesy or Ball.[30]

Jarkesy and Ball additionally would possibly prolong to different administrative proceedings introduced by NYDFS.  The company takes sure enforcement actions underneath New York Monetary Providers Legislation § 408(a)(1)(A).[31]  This subsection imposes a civil penalty of as much as $5,000 for a violation constituting “any intentional fraud or intentional misrepresentation of a fabric truth with respect to a monetary services or products or involving any particular person providing to supply or offering monetary services or products.”

NYDFS thus might pursue a variety of administrative actions rooted in fraud to recuperate a civil penalty which, in response to Jarkesy, could also be equal to frequent regulation fraud claims and a “sort of treatment at frequent regulation that would solely be enforced in courts of regulation.”[32]  As a result of NYDFS “just isn’t obligated to return any cash to victims” when taking motion underneath § 408(a)(1)(A), it could be argued that the Monetary Providers Legislation’s civil penalties “are designed to punish and deter, not compensate.”[33]  Jarkesy’s (and Ball’s) reasoning thus would seem to connect to an effort underneath § 408 (a)(1)(A) to impose civil penalties, additionally requiring adjudication by a New York jury.

Much less clear is whether or not an enforcement motion introduced underneath one other prong of the Monetary Providers Legislation, § 408(a)(2), runs afoul of Jarkesy and Ball.  That part units up a civil penalty of as much as $1,000 for “some other violation of this chapter or the laws issued thereunder . . . .”  NYDFS has employed this provision most often to pursue violations of two of its marquee laws:  the Cybersecurity Regulation (Half 500) and the BitLicense Regulation (Half 200).[34]  Whether or not administrative enforcement carried out underneath these laws ought to be thought-about “authorized in nature” is much less obvious, given their strictly compliance-focused targets — however nonetheless a query that in the future could also be litigated.

Lastly, one other enforcement instrument often employed by NYDFS resides in Monetary Providers Legislation § 309, which authorizes the company to hunt injunctive aid in state court docket to guard shoppers from injurious conduct:

Along with such different treatments as are supplied underneath this chapter, the  superintendent  might  preserve and prosecute an motion in opposition to any particular person  topic to this chapter, the insurance coverage regulation or the banking  regulation, or the  particular person’s  officers, administrators, trustees or brokers, for the aim of acquiring an injunction restraining such particular person or individuals from doing any acts in violation of the provisions of this chapter, the insurance coverage regulation or the banking regulation.

As a result of injunctive aid is by its nature equitable,[35] an motion underneath § 309 would appear immune from a problem underneath Jarkesy or Ball, and correctly topic to decision by a state decide.

Administrative enforcement actions have served as a significant instrument for NYDFS in finishing up its mission as a monetary regulator.  Jarkesy and Ball current a possible problem to the company’s use of this administrative course of, probably resulting in judicial modification or legislative reform to allow jury trials in sure enforcement actions.  Accelerating developments on this space are nicely value watching.

[1] Beforehand, the SEC might solely get hold of civil penalties in a federal court docket motion, besides in instances in opposition to registered entities.  See Jarkesy, 603 U.S. at 117 (statutory citations omitted).

[2] Id. at 122 (citing Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 53 (1989)) (Seventh Modification entitles defendant to jury trial in fraudulent conveyance motion).

[3]  Id. (citing Tull v. United States, 481 U.S. 412, 422 (1987)) (Seventh Modification assured a defendant a jury trial the place authorities sought civil penalties underneath Clear Water Act).

[4] Id. at 124-25.

[5] Id. at 126-32. 

[6] Id.

[7] Case No. 24-3296 (7^th Cir. Dec. 31, 2024).

[8]  Id. Dkt. No. 3 at 10-11 (cleaned up).

[9] Id., Dkt. No. 8.

[10] 24-CV-02535-DDC-BGS (D. Kan.), Dkt. No. 35 at 3-4. 

[11]  Id. Dkt. No. 18 at 8-16.  The financial institution additionally argued that the Public Rights exception didn’t apply to divert the continuing away from the protections of federal courts and a jury trial.  Id.

[12] See, e.g., https://www.occ.treas.gov/matters/laws-and-regulations/enforcement-actions/enforcement-action-types/index-enforcement-action-types.html.

[13] See CBW Financial institution, Dkt. No. 18 at 8-16.

[14] Id. Dkt. No. 35 at 17-18, on app., No. 25-3056 (10^th Cir. Mar. 31, 2025).  See additionally Ponte v. FDIC, 23-cv-0165-MSM-LDA, 2023 WL 6441976, at *2 & n.1 (D.R.I. Oct. 3, 2023) (the place FDIC introduced enforcement motion in opposition to particular person, district court docket dismissed case for lack of jurisdiction with out reaching Seventh Modification declare); AT&T, Inc. v. Federal Communications Comm’n, 135 F.4^th 230 (5^TH Cir. 2025) (financial penalties imposed by FCC have been authorized treatment requiring jury trial earlier than FCC might impose forfeiture order).

[15] See additionally GTFM, LLC v. TKN Gross sales, Inc., 257 F.3d 235, 240 (2nd Cir. 2001) (“The Seventh Modification has not, nonetheless, been utilized to the States by means of the Fourteenth Modification and therefore doesn’t require that jury trials be held in proceedings in State tribunals.”); Panchisak v. State of New York, slip op. 14-CV-1706 (AJN), 2015 WL 221526, at *3 (S.D.N.Y. Jan. 12, 2015) (“The Supreme Courtroom has expressly held that the Seventh Modification proper to a trial by jury in civil instances doesn’t apply to civil trials in state courts.”) (citations omitted).

[16] 561 U.S. 742, 764-65 & n.13 (2010) (“Our governing choices concerning the Grand Jury Clause of the Fifth Modification and the Seventh Modification’s civil jury requirement lengthy predate the period of selective incorporation.”)

[17] Ball v. New York State Dep’t of Well being, Index. No. 2024-469, NYSCEF No. 41 (Sup. Ct. Schoharie Cty., Apr. 14, 2025).

[18] Id. at 19.

[19] Id. at 23-26.

[20]  Id. at 27 (cleaned up).

[21]  See, e.g., N.Y. Banking L. § 44; N.Y. Ins. L. § 109; N.Y. Fin. Servs. L. § 408.

[22] See typically Alexis, Levine & Tayman, “A View from Inside: A Information to NYDFS Investigations,” The Evaluate of Banking and Monetary Providers (Feb. 2021), accessible at https://blogaboutnydfs.com/wp-content/uploads/2021/04/Levine_RBFS_Final-Half-Two.pdf.

[23] See id.; see additionally https://www.dfs.ny.gov/system/recordsdata/paperwork/2023/01/ea20230104_coinbase.pdf; https://www.dfs.ny.gov/system/recordsdata/paperwork/2024/08/ea20220801_robinhood_crypto.pdf.

[24] Jarkesy, 603 U.S. at 123. 

[25] See, e.g., N.Y. Banking L. § 44(5); 23 N.Y.C.R.R. § 500.20(c).

[26] See N.Y. State Finance L. § 121(1) (“However some other provision of regulation on the contrary, each  state  officer,  worker,  division, establishment, fee, board or different  company of the state receiving cash for or on behalf of the  state  from   charges,  penalties,  forfeitures,  prices,  fines, refunds, reimbursements,   gross sales of property or in any other case, shall on the primary day of every month pay into the state treasury. . . .”).   The place restitution is a part of a DFS Consent Order, it is actually because the entity in opposition to which the motion is taken agrees to it voluntarily as a part of a decision.

[27] See supra  nn. 10, 11.

[28] See, e.g., 3 N.Y.C.R.R. § 116.2 (anti-money laundering applications); 3 N.Y.C.R.R. § 417.2 (anti-money laundering and OFAC compliance applications).

[29] See N.Y. Ins. L. § 109.  Different Insurance coverage Legislation provisions authorizing civil penalties embrace § 1102 (appearing as insurer with out license); § 2102 (appearing as an agent or dealer with out license); and § 2403 (partaking in conduct represent unfair competitors or unfair and misleading acts or practices).

[30] N.Y. Ins. L. § 109(c).  Notably, § 109(d) additionally authorizes NYDFS to “preserve a civil motion within the title of the folks of the state to recuperate a judgment for a cash penalty imposed by regulation for the violation of any provision of this chapter.”  A novel authorized state of affairs can be offered if NYDFS commences a court docket motion underneath §109(d) to implement the Superintendent’s order imposing a civil penalty and is topic to a problem underneath Jarkesy or Ball – elevating the query of how you can proceed if a jury is required to make determinations on this occasion.

[31] See, e.g., https://www.dfs.ny.gov/system/recordsdata/paperwork/2024/10/ea20231127_co_first_american.pdf.

[32] Jarkesy, 603 U.S. at 125. 

[33] Id. Certainly, the Monetary Providers Legislation mandates that penalties obtained by NYDFS by way of § 408 first have to be utilized to scale back the common annual assessments made in opposition to every regulated entity underneath the Banking and Insurance coverage Legal guidelines; solely then shall any the rest “be paid to the overall fund.”  Fin. Servs. L. § 408(b).

[34] 23 N.Y.C.R.R. §§ 200, 500.

[35] See, e.g., Lesron Junior, Inc. v. Feinberg, 13 A.D.2nd 90, 93 (1^st Dep’t 1961).

Matthew L. Levine beforehand served as Govt Deputy Superintendent for Enforcement on the New York State Division of Monetary Providers and is a accomplice at Elliott Kwok Levine Jaroslaw Neils LLP.

The views, opinions and positions expressed inside all posts are these of the creator(s) alone and don’t signify these of the Program on Company Compliance and Enforcement (PCCE) or of the New York College College of Legislation. PCCE makes no representations as to the accuracy, completeness and validity or any statements made on this web site and won’t be liable any errors, omissions or representations. The copyright of this content material belongs to the creator(s) and any legal responsibility close to infringement of mental property rights stays with the creator(s).

by Matthew L. Levine

Picture courtesy of creator

Authorized developments rising within the wake of the Supreme Courtroom’s choice in SEC v. Jarkesy, 603 U.S. 109 (2024), current an necessary query for entities licensed by the New York State Division of Monetary Providers (NYDFS):  in an administrative enforcement motion introduced by NYDFS, does Jarkesy entitle the focused entity to a jury trial?

When enacting the Dodd-Frank Act in 2010, Congress granted the U.S. Securities and Alternate Fee enhanced authority to impose civil penalties in enforcement actions introduced by means of its administrative listening to course of.[1]  The Supreme Courtroom trimmed that authority in Jarkesy, ruling that the place the SEC seeks civil penalties in opposition to a respondent for securities fraud, the Seventh Modification entitles the respondent to a jury trial.

Recognizing the Seventh Modification’s deep historic connection to frequent regulation instances involving allegations of fraud, the Courtroom held that the fitting to a jury trial was not restricted to solely these frequent regulation types of motion acknowledged on the time of the Seventh Modification’s adoption.  The Courtroom emphasised that the fitting to a jury trial extends to any statutory declare if the declare is authorized in nature.[2]

The Courtroom dominated that “civil penalties” imposed by the SEC “are a kind of treatment at frequent regulation that would solely be enforced in courts of regulation.”[3]  Of explicit significance was the truth that “the SEC just isn’t obligated to return any cash to victims”; its civil penalties by definition“ are designed to punish and deter, not compensate.”  Financial penalties imposed by the SEC are thus akin to frequent regulation fraud claims, mentioned the Courtroom, which have to be adjudicated earlier than a jury.[4]

Nor was the securities fraud reason for motion introduced by the SEC saved by the “Public Rights” exception.  This exception gives that, when Congress creates a “public proper,” it could freely assign enforcement of that proper to a federal company with no jury trial in keeping with the Seventh Modification.  Software of the exception, in response to Jarkesy’s majority, turns largely on the character of the treatment sought.[5]  The Courtroom’s precedents involving the federal government’s assortment of income and tariffs, and energy over immigration, stand as examples of the kind of “public proper” falling inside this exception.[6]

The fallout from Jarkesy has been swift.  Respondents in administrative enforcement actions introduced by federal banking regulators, for instance, wasted no time deploying Jarkesy to petition for a jury trial.  In Bonan v. F.D.I.C.,[7] the FDIC sought to impose a civil penalty on a former govt of a regulated financial institution by way of administrative continuing.  The chief moved the Seventh Circuit for an emergency keep of the FDIC Board’s Determination and Order pending judicial evaluation, on a number of grounds.  One foundation for the movement was Jarkesy, with the previous govt arguing entitlement to a jury trial as a result of “the FDIC was in search of to impose a civil penalty in opposition to him,” and that the “Public Rights” exception didn’t apply as a result of the FDIC on this case was “regulating transactions made between non-public events.”[8]  The Seventh Circuit granted the manager’s unopposed keep movement and the problem is at the moment in litigation.[9]

In one other case, CBW Financial institution v. F.D.I.C.,[10] the FDIC introduced an administrative enforcement motion in opposition to a Kansas financial institution for alleged violations arising underneath the federal Financial institution Secrecy Act and from different exercise purporting to represent an unsafe and unsound apply.[11] These allegations are typical of these introduced by federal banking regulators.[12]

As in Bonan, the goal financial institution in CBW sought to enjoin the continuing by arguing that Jarkesy obligated the FDIC to begin a federal civil motion as a result of the company was in search of to impose a civil penalty.  The financial institution reasoned that the FDIC’s expenses have been akin to frequent regulation tort claims involving notions of reasonableness and danger – claims it mentioned traditionally have been entitled to jury consideration.[13]  The district court docket finally dismissed for lack of jurisdiction with out reaching the deserves of the Seventh Modification declare; the matter is now on enchantment to the Tenth Circuit.[14]

The gating subject for the appliance of Jarkesy to NYDFS enforcement actions is whether or not the Seventh Modification’s protections prolong to state regulation proceedings.  Over 100 years in the past, the Supreme Courtroom mentioned it didn’t.  Minn. & St. Louis R.R. v. Bombolis, 241 U.S. 211 (1916) (Seventh Modification inapplicable to state court docket conduct when implementing the state’s personal procedural regulation concerning parts essential to represent a legitimate civil verdict).[15]

Bombolis considerably predates numerous more moderen Supreme Courtroom choices holding that the Fourteenth Modification incorporates many of the Amendments set out within the Invoice of Rights, and thereby apply to the States.  Notably, in its 2010 ruling in McDonald v. Metropolis of Chicago, the place the Courtroom held that the Fourteenth Modification incorporates the Second Modification and due to this fact applies to state gun legal guidelines, the Courtroom noticed that it has overruled numerous its precedents beforehand holding that amendments contained within the Invoice of Rights did to not apply to the States.[16]  Thus, in a finely-honed problem to a state administrative continuing that seeks civil penalties, it’s conceivable the Courtroom might reexamine Bombolis and broaden the attain of the Seventh Modification to increase to state administrative enforcement proceedings.

Different courts are usually not ready for the Supreme Courtroom – or perhaps a federal court docket — to talk on this subject.  Certainly, Jarkesy’s influence has already been felt in New York State, the place a trial court docket just lately held that an Emergency Medical Technician topic to an administrative listening to introduced by the New York State Division of Well being is entitled to the safety of the Seventh Modification.

In Ball v. New York State Dep’t of Well being, the Division of Well being sought to impose civil penalties, and revoke the respondent’s license, by way of an administrative listening to arising out of misconduct allegedly dedicated whereas serving as a licensed EMT.[17]  In embracing the EMT’s problem to the executive listening to course of, the court docket held (in a prolonged, detailed opinion) that “the Seventh Modification is each basic to our scheme of ordered liberty and deeply rooted on this Nation’s historical past and custom.  Subsequently the Seventh Modification applies to the States by means of the Due Course of Clause.”[18]  The trial court docket then rebuffed the Division of Well being’s invocation of the Public Rights exception in these circumstances.[19]

The court docket additional held that every of the treatments sought by the Division of Well being — civil penalties and revocation of respondent’s EMT license — entitled Respondent to decision by jury:

[T]he Seventh Modification as made relevant to the States by means of the Due Course of Clause entitles Petitioner to a civil jury trial in New York Supreme Courtroom to find out whether or not he’s responsible for civil penalties underneath Public Well being Legislation §§ 12 and 12-a and topic to revocation of his EMT license underneath 10 NYCRR § 800.16 primarily based upon the allegations contained in Respondent‘s Assertion of Fees.[20]

This broad holding will little question spur different challenges to administrative enforcement proceedings introduced in New York.

State regulation authorizes NYDFS to convey administrative enforcement actions in search of to punish and treatment violations of the New York Banking, Insurance coverage and Monetary Providers Legal guidelines.[21]  Following discover and a listening to, a NYDFS administrative continuing often concludes in a remaining order of the Superintendent.  Upon a discovering of legal responsibility, NYDFS might impose a civil penalty in most circumstances — and sometimes does.  In additional excessive circumstances, NYDFS might search to revoke an entity’s or particular person’s license altogether.[22]

Violations enforced by NYDFS usually embrace (a) conducting enterprise in an “unsafe and unsound” method, (b) operating afoul of state laws obligating regulated entities to keep up compliance applications that fulfill necessities imposed by the Financial institution Secrecy Act or OFAC laws, and (c) violating a written settlement with the company, resembling a supervisory settlement or different settlement imposing a situation of compliance.[23]

Beneath Jarkesy and Ball, the NYDFS administrative enforcement construction could also be topic to a Seventh Modification problem.  Specializing in treatments accessible to NYDFS, as Jarkesy directs,[24] suggests this vulnerability.  When assessing a civil penalty, NYDFS by statute might think about elements resembling (a) the diploma to which senior administration participated within the investigation, (b) the diploma of the entity’s cooperation, (c) some other sanction imposed by one other regulator, (d) the entity’s monetary assets and good religion, (e) the seriousness of the violation, (f) any historical past of prior violations and (g) some other issues which may be mandatory for the sake of justice and the general public curiosity.[25]

Notably absent from these statutory parts is any authorization for NYDFS to impose restitution.  Certainly, NYDFS is forbidden from doing so; the State Finance Legislation directs penalties obtained by the company should go on to the state’s basic fund.[26]  As in Jarkesy and Ball, then, it could be argued that civil penalties imposed by NYDFS serve solely punitive and deterrent functions, not compensatory ones, thus requiring jury decision.  And for causes akin to these adopted by Ball, an effort by NYDFS to strip a regulated entity or particular person of a license additionally might necessitate trial by jury.

The rationale supplied within the Bonan and CBW Financial institution instances within the federal context (famous above) would seem to have comparable pressure when utilized to administrative actions introduced NYDFS.  Within the federal issues, the regulated particular person argued that administrative expenses for violations of compliance guidelines such because the Financial institution Secrecy Act, or for unsafe and unsound practices underneath federal banking regulation, are analogous to frequent regulation tort claims involving notions of reasonableness and danger and thus entitled to jury dedication.[27]

Administrative claims for Financial institution Secrecy Act violations, and unsafe and unsound banking practices, make up a good portion of NYDFS enforcement actions.  For instance, laws issued underneath the New York Banking Legislation require banks, belief corporations and cash transmitters to keep up anti-money laundering applications compliant with Financial institution Secrecy Act and OFAC laws.[28]  Furthermore, Part 44(a) of the Banking Legislation authorizes NYDFS to adjudicate {that a} regulated entity violated the regulation by partaking in “unsafe and unsound apply[s].”

Equally, the New York Insurance coverage Legislation permits for administrative enforcement leading to imposition of civil penalties underneath numerous provisions.  Part 109 of the regulation, for instance, serves as a catchall penalty statute, empowering the Superintendent to impose a penalty of $1,000 “for every offense” the place a licensed entity or particular person willfully violates any provision of the Insurance coverage Legislation or regulation promulgated thereunder.[29]  These fines represent civil penalties levied following discover and an administrative listening to, and due to this fact are likewise topic to problem underneath Jarkesy or Ball.[30]

Jarkesy and Ball additionally would possibly prolong to different administrative proceedings introduced by NYDFS.  The company takes sure enforcement actions underneath New York Monetary Providers Legislation § 408(a)(1)(A).[31]  This subsection imposes a civil penalty of as much as $5,000 for a violation constituting “any intentional fraud or intentional misrepresentation of a fabric truth with respect to a monetary services or products or involving any particular person providing to supply or offering monetary services or products.”

NYDFS thus might pursue a variety of administrative actions rooted in fraud to recuperate a civil penalty which, in response to Jarkesy, could also be equal to frequent regulation fraud claims and a “sort of treatment at frequent regulation that would solely be enforced in courts of regulation.”[32]  As a result of NYDFS “just isn’t obligated to return any cash to victims” when taking motion underneath § 408(a)(1)(A), it could be argued that the Monetary Providers Legislation’s civil penalties “are designed to punish and deter, not compensate.”[33]  Jarkesy’s (and Ball’s) reasoning thus would seem to connect to an effort underneath § 408 (a)(1)(A) to impose civil penalties, additionally requiring adjudication by a New York jury.

Much less clear is whether or not an enforcement motion introduced underneath one other prong of the Monetary Providers Legislation, § 408(a)(2), runs afoul of Jarkesy and Ball.  That part units up a civil penalty of as much as $1,000 for “some other violation of this chapter or the laws issued thereunder . . . .”  NYDFS has employed this provision most often to pursue violations of two of its marquee laws:  the Cybersecurity Regulation (Half 500) and the BitLicense Regulation (Half 200).[34]  Whether or not administrative enforcement carried out underneath these laws ought to be thought-about “authorized in nature” is much less obvious, given their strictly compliance-focused targets — however nonetheless a query that in the future could also be litigated.

Lastly, one other enforcement instrument often employed by NYDFS resides in Monetary Providers Legislation § 309, which authorizes the company to hunt injunctive aid in state court docket to guard shoppers from injurious conduct:

Along with such different treatments as are supplied underneath this chapter, the  superintendent  might  preserve and prosecute an motion in opposition to any particular person  topic to this chapter, the insurance coverage regulation or the banking  regulation, or the  particular person’s  officers, administrators, trustees or brokers, for the aim of acquiring an injunction restraining such particular person or individuals from doing any acts in violation of the provisions of this chapter, the insurance coverage regulation or the banking regulation.

As a result of injunctive aid is by its nature equitable,[35] an motion underneath § 309 would appear immune from a problem underneath Jarkesy or Ball, and correctly topic to decision by a state decide.

Administrative enforcement actions have served as a significant instrument for NYDFS in finishing up its mission as a monetary regulator.  Jarkesy and Ball current a possible problem to the company’s use of this administrative course of, probably resulting in judicial modification or legislative reform to allow jury trials in sure enforcement actions.  Accelerating developments on this space are nicely value watching.

[1] Beforehand, the SEC might solely get hold of civil penalties in a federal court docket motion, besides in instances in opposition to registered entities.  See Jarkesy, 603 U.S. at 117 (statutory citations omitted).

[2] Id. at 122 (citing Granfinanciera, S.A. v. Nordberg, 492 U.S. 33, 53 (1989)) (Seventh Modification entitles defendant to jury trial in fraudulent conveyance motion).

[3]  Id. (citing Tull v. United States, 481 U.S. 412, 422 (1987)) (Seventh Modification assured a defendant a jury trial the place authorities sought civil penalties underneath Clear Water Act).

[4] Id. at 124-25.

[5] Id. at 126-32. 

[6] Id.

[7] Case No. 24-3296 (7^th Cir. Dec. 31, 2024).

[8]  Id. Dkt. No. 3 at 10-11 (cleaned up).

[9] Id., Dkt. No. 8.

[10] 24-CV-02535-DDC-BGS (D. Kan.), Dkt. No. 35 at 3-4. 

[11]  Id. Dkt. No. 18 at 8-16.  The financial institution additionally argued that the Public Rights exception didn’t apply to divert the continuing away from the protections of federal courts and a jury trial.  Id.

[12] See, e.g., https://www.occ.treas.gov/matters/laws-and-regulations/enforcement-actions/enforcement-action-types/index-enforcement-action-types.html.

[13] See CBW Financial institution, Dkt. No. 18 at 8-16.

[14] Id. Dkt. No. 35 at 17-18, on app., No. 25-3056 (10^th Cir. Mar. 31, 2025).  See additionally Ponte v. FDIC, 23-cv-0165-MSM-LDA, 2023 WL 6441976, at *2 & n.1 (D.R.I. Oct. 3, 2023) (the place FDIC introduced enforcement motion in opposition to particular person, district court docket dismissed case for lack of jurisdiction with out reaching Seventh Modification declare); AT&T, Inc. v. Federal Communications Comm’n, 135 F.4^th 230 (5^TH Cir. 2025) (financial penalties imposed by FCC have been authorized treatment requiring jury trial earlier than FCC might impose forfeiture order).

[15] See additionally GTFM, LLC v. TKN Gross sales, Inc., 257 F.3d 235, 240 (2nd Cir. 2001) (“The Seventh Modification has not, nonetheless, been utilized to the States by means of the Fourteenth Modification and therefore doesn’t require that jury trials be held in proceedings in State tribunals.”); Panchisak v. State of New York, slip op. 14-CV-1706 (AJN), 2015 WL 221526, at *3 (S.D.N.Y. Jan. 12, 2015) (“The Supreme Courtroom has expressly held that the Seventh Modification proper to a trial by jury in civil instances doesn’t apply to civil trials in state courts.”) (citations omitted).

[16] 561 U.S. 742, 764-65 & n.13 (2010) (“Our governing choices concerning the Grand Jury Clause of the Fifth Modification and the Seventh Modification’s civil jury requirement lengthy predate the period of selective incorporation.”)

[17] Ball v. New York State Dep’t of Well being, Index. No. 2024-469, NYSCEF No. 41 (Sup. Ct. Schoharie Cty., Apr. 14, 2025).

[18] Id. at 19.

[19] Id. at 23-26.

[20]  Id. at 27 (cleaned up).

[21]  See, e.g., N.Y. Banking L. § 44; N.Y. Ins. L. § 109; N.Y. Fin. Servs. L. § 408.

[22] See typically Alexis, Levine & Tayman, “A View from Inside: A Information to NYDFS Investigations,” The Evaluate of Banking and Monetary Providers (Feb. 2021), accessible at https://blogaboutnydfs.com/wp-content/uploads/2021/04/Levine_RBFS_Final-Half-Two.pdf.

[23] See id.; see additionally https://www.dfs.ny.gov/system/recordsdata/paperwork/2023/01/ea20230104_coinbase.pdf; https://www.dfs.ny.gov/system/recordsdata/paperwork/2024/08/ea20220801_robinhood_crypto.pdf.

[24] Jarkesy, 603 U.S. at 123. 

[25] See, e.g., N.Y. Banking L. § 44(5); 23 N.Y.C.R.R. § 500.20(c).

[26] See N.Y. State Finance L. § 121(1) (“However some other provision of regulation on the contrary, each  state  officer,  worker,  division, establishment, fee, board or different  company of the state receiving cash for or on behalf of the  state  from   charges,  penalties,  forfeitures,  prices,  fines, refunds, reimbursements,   gross sales of property or in any other case, shall on the primary day of every month pay into the state treasury. . . .”).   The place restitution is a part of a DFS Consent Order, it is actually because the entity in opposition to which the motion is taken agrees to it voluntarily as a part of a decision.

[27] See supra  nn. 10, 11.

[28] See, e.g., 3 N.Y.C.R.R. § 116.2 (anti-money laundering applications); 3 N.Y.C.R.R. § 417.2 (anti-money laundering and OFAC compliance applications).

[29] See N.Y. Ins. L. § 109.  Different Insurance coverage Legislation provisions authorizing civil penalties embrace § 1102 (appearing as insurer with out license); § 2102 (appearing as an agent or dealer with out license); and § 2403 (partaking in conduct represent unfair competitors or unfair and misleading acts or practices).

[30] N.Y. Ins. L. § 109(c).  Notably, § 109(d) additionally authorizes NYDFS to “preserve a civil motion within the title of the folks of the state to recuperate a judgment for a cash penalty imposed by regulation for the violation of any provision of this chapter.”  A novel authorized state of affairs can be offered if NYDFS commences a court docket motion underneath §109(d) to implement the Superintendent’s order imposing a civil penalty and is topic to a problem underneath Jarkesy or Ball – elevating the query of how you can proceed if a jury is required to make determinations on this occasion.

[31] See, e.g., https://www.dfs.ny.gov/system/recordsdata/paperwork/2024/10/ea20231127_co_first_american.pdf.

[32] Jarkesy, 603 U.S. at 125. 

[33] Id. Certainly, the Monetary Providers Legislation mandates that penalties obtained by NYDFS by way of § 408 first have to be utilized to scale back the common annual assessments made in opposition to every regulated entity underneath the Banking and Insurance coverage Legal guidelines; solely then shall any the rest “be paid to the overall fund.”  Fin. Servs. L. § 408(b).

[34] 23 N.Y.C.R.R. §§ 200, 500.

[35] See, e.g., Lesron Junior, Inc. v. Feinberg, 13 A.D.2nd 90, 93 (1^st Dep’t 1961).

Matthew L. Levine beforehand served as Govt Deputy Superintendent for Enforcement on the New York State Division of Monetary Providers and is a accomplice at Elliott Kwok Levine Jaroslaw Neils LLP.

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