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Legal developments emerging in the wake of the Supreme Court’s decision in SEC v. Jarkesy, 603 U.S. 109 (2024), present an important question for entities licensed by the New York State Department of Financial Services (NYDFS): in an administrative enforcement action brought by NYDFS, does Jarkesy entitle the targeted entity to a jury trial?
Background on SEC v. Jarkesy
When enacting the Dodd-Frank Act in 2010, Congress granted the U.S. Securities and Exchange Commission enhanced authority to impose civil penalties in enforcement actions brought through its administrative hearing process.[1] The Supreme Court trimmed that authority in Jarkesy, ruling that where the SEC seeks civil penalties against a respondent for securities fraud, the Seventh Amendment entitles the respondent to a jury trial.
Recognizing the Seventh Amendment’s deep historical connection to common law cases involving allegations of fraud, the Court held that the right to a jury trial was not limited to only those common law forms of action recognized at the time of the Seventh Amendment’s adoption. The Court emphasized that the right to a jury trial extends to any statutory claim if the claim is legal in nature.[2]
The Court ruled that “civil penalties” imposed by the SEC “are a type of remedy at common law that could only be enforced in courts of law.”[3] Of particular importance was the fact that “the SEC is not obligated to return any money to victims”; its civil penalties by definition“ are designed to punish and deter, not compensate.” Monetary penalties imposed by the SEC are thus akin to common law fraud claims, said the Court, which must be adjudicated before a jury.[4]
Nor was the securities fraud cause of action brought by the SEC saved by the “Public Rights” exception. This exception provides that, when Congress creates a “public right,” it may freely assign enforcement of that right to a federal agency without a jury trial consistent with the Seventh Amendment. Application of the exception, according to Jarkesy’s majority, turns largely on the nature of the remedy sought.[5] The Court’s precedents involving the government’s collection of revenue and tariffs, and power over immigration, stand as examples of the type of “public right” falling within this exception.[6]
The fallout from Jarkesy has been swift. Respondents in administrative enforcement actions brought by federal banking regulators, for example, 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 executive of a regulated bank via administrative proceeding. The executive moved the Seventh Circuit for an emergency stay of the FDIC Board’s Decision and Order pending judicial review, on several grounds. One basis for the motion was Jarkesy, with the former executive arguing entitlement to a jury trial because “the FDIC was seeking to impose a civil penalty against him,” and that the “Public Rights” exception did not apply because the FDIC in this case was “regulating transactions made between private parties.”[8] The Seventh Circuit granted the executive’s unopposed stay motion and the issue is currently in litigation.[9]
In another case, CBW Bank v. F.D.I.C.,[10] the FDIC brought an administrative enforcement action against a Kansas bank for alleged violations arising under the federal Bank Secrecy Act and from other activity purporting to constitute an unsafe and unsound practice.[11] These allegations are typical of those brought by federal banking regulators.[12]
As in Bonan, the target bank in CBW sought to enjoin the proceeding by arguing that Jarkesy obligated the FDIC to commence a federal civil action because the agency was seeking to impose a civil penalty. The bank reasoned that the FDIC’s charges were akin to common law tort claims involving notions of reasonableness and risk – claims it said historically were entitled to jury consideration.[13] The district court ultimately dismissed for lack of jurisdiction without reaching the merits of the Seventh Amendment claim; the matter is now on appeal to the Tenth Circuit.[14]
Application of the Seventh Amendment to the States
The gating issue for the application of Jarkesy to NYDFS enforcement actions is whether the Seventh Amendment’s protections extend to state law proceedings. Over one hundred years ago, the Supreme Court said it did not. Minn. & St. Louis R.R. v. Bombolis, 241 U.S. 211 (1916) (Seventh Amendment inapplicable to state court conduct when enforcing the state’s own procedural law regarding elements necessary to constitute a valid civil verdict).[15]
Bombolis significantly predates a number of more recent Supreme Court decisions holding that the Fourteenth Amendment incorporates most of the Amendments set out in the Bill of Rights, and thereby apply to the States. Notably, in its 2010 ruling in McDonald v. City of Chicago, where the Court held that the Fourteenth Amendment incorporates the Second Amendment and therefore applies to state gun laws, the Court observed that it has overruled a number of its precedents previously holding that amendments contained in the Bill of Rights did not to apply to the States.[16] Thus, in a finely-honed challenge to a state administrative proceeding that seeks civil penalties, it is conceivable the Court could reexamine Bombolis and broaden the reach of the Seventh Amendment to extend to state administrative enforcement proceedings.
Other courts are not waiting for the Supreme Court – or even a federal court — to speak on this issue. Indeed, Jarkesy’s impact has already been felt in New York State, where a trial court recently held that an Emergency Medical Technician subject to an administrative hearing brought by the New York State Department of Health is entitled to the protection of the Seventh Amendment.
In Ball v. New York State Dep’t of Health, the Department of Health sought to impose civil penalties, and revoke the respondent’s license, via an administrative hearing arising out of misconduct allegedly committed while serving as a licensed EMT.[17] In embracing the EMT’s challenge to the administrative hearing process, the court held (in a lengthy, detailed opinion) that “the Seventh Amendment is both fundamental to our scheme of ordered liberty and deeply rooted in this Nation’s history and tradition. Therefore the Seventh Amendment applies to the States through the Due Process Clause.”[18] The trial court then rebuffed the Department of Health’s invocation of the Public Rights exception in these circumstances.[19]
The court further held that each of the remedies sought by the Department of Health — civil penalties and revocation of respondent’s EMT license — entitled Respondent to resolution by jury:
[T]he Seventh Amendment as made applicable to the States through the Due Process Clause entitles Petitioner to a civil jury trial in New York Supreme Court to determine whether he is liable for civil penalties under Public Health Law §§ 12 and 12-a and subject to revocation of his EMT license under 10 NYCRR § 800.16 based upon the allegations contained in Respondent‘s Statement of Charges.[20]
This broad holding will no doubt spur other challenges to administrative enforcement proceedings brought in New York.
Applying Jarkesy and Ball to NYDFS Administrative Enforcement Actions
State law authorizes NYDFS to bring administrative enforcement actions seeking to punish and remedy violations of the New York Banking, Insurance and Financial Services Laws.[21] Following notice and a hearing, a NYDFS administrative proceeding usually concludes in a final order of the Superintendent. Upon a finding of liability, NYDFS may impose a civil penalty in most circumstances — and typically does. In more extreme circumstances, NYDFS may seek to revoke an entity’s or individual’s license altogether.[22]
Violations enforced by NYDFS often include (a) conducting business in an “unsafe and unsound” manner, (b) running afoul of state regulations obligating regulated entities to maintain compliance programs that satisfy requirements imposed by the Bank Secrecy Act or OFAC regulations, and (c) violating a written agreement with the agency, such as a supervisory agreement or other agreement imposing a condition of compliance.[23]
Under Jarkesy and Ball, the NYDFS administrative enforcement structure may be subject to a Seventh Amendment challenge. Focusing on remedies available to NYDFS, as Jarkesy directs,[24] suggests this vulnerability. When assessing a civil penalty, NYDFS by statute may consider factors such as (a) the degree to which senior management participated in the investigation, (b) the degree of the entity’s cooperation, (c) any other sanction imposed by another regulator, (d) the entity’s financial resources and good faith, (e) the seriousness of the violation, (f) any history of prior violations and (g) any other matters that may be necessary for the sake of justice and the public interest.[25]
Notably absent from these statutory elements is any authorization for NYDFS to impose restitution. Indeed, NYDFS is forbidden from doing so; the State Finance Law directs penalties received by the agency must go directly to the state’s general fund.[26] As in Jarkesy and Ball, then, it may be argued that civil penalties imposed by NYDFS serve only punitive and deterrent purposes, not compensatory ones, thus requiring jury resolution. And for reasons akin to those adopted by Ball, an effort by NYDFS to strip a regulated entity or individual of a license also may necessitate trial by jury.
As Applied to the New York Banking and Insurance Laws
The rationale offered in the Bonan and CBW Bank cases in the federal context (noted above) would appear to have similar force when applied to administrative actions brought NYDFS. In the federal matters, the regulated person argued that administrative charges for violations of compliance rules such as the Bank Secrecy Act, or for unsafe and unsound practices under federal banking law, are analogous to common law tort claims involving notions of reasonableness and risk and thus entitled to jury determination.[27]
Administrative claims for Bank Secrecy Act violations, and unsafe and unsound banking practices, make up a significant portion of NYDFS enforcement actions. For example, regulations issued under the New York Banking Law require banks, trust companies and money transmitters to maintain anti-money laundering programs compliant with Bank Secrecy Act and OFAC regulations.[28] Moreover, Section 44(a) of the Banking Law authorizes NYDFS to adjudicate that a regulated entity violated the law by engaging in “unsafe and unsound practice[s].”
Similarly, the New York Insurance Law allows for administrative enforcement resulting in imposition of civil penalties under a number of provisions. Section 109 of the law, for example, serves as a catchall penalty statute, empowering the Superintendent to impose a penalty of $1,000 “for each offense” where a licensed entity or person willfully violates any provision of the Insurance Law or regulation promulgated thereunder.[29] These fines constitute civil penalties levied following notice and an administrative hearing, and therefore are likewise subject to challenge under Jarkesy or Ball.[30]
As Applied to the New York Financial Services Law
Jarkesy and Ball also might extend to other administrative proceedings brought by NYDFS. The agency takes certain enforcement actions under New York Financial Services Law § 408(a)(1)(A).[31] This subsection imposes a civil penalty of up to $5,000 for a violation constituting “any intentional fraud or intentional misrepresentation of a material fact with respect to a financial product or service or involving any person offering to provide or providing financial products or services.”
NYDFS thus may pursue a wide range of administrative actions rooted in fraud to recover a civil penalty which, according to Jarkesy, may be equivalent to common law fraud claims and a “type of remedy at common law that could only be enforced in courts of law.”[32] Because NYDFS “is not obligated to return any money to victims” when taking action under § 408(a)(1)(A), it may be argued that the Financial Services Law’s civil penalties “are designed to punish and deter, not compensate.”[33] Jarkesy’s (and Ball’s) reasoning thus would appear to attach to an effort under § 408 (a)(1)(A) to impose civil penalties, also requiring adjudication by a New York jury.
Less clear is whether an enforcement action brought under another prong of the Financial Services Law, § 408(a)(2), runs afoul of Jarkesy and Ball. That section sets up a civil penalty of up to $1,000 for “any other violation of this chapter or the regulations issued thereunder . . . .” NYDFS has employed this provision most frequently to pursue violations of two of its marquee regulations: the Cybersecurity Regulation (Part 500) and the BitLicense Regulation (Part 200).[34] Whether administrative enforcement carried out under these regulations should be considered “legal in nature” is less apparent, given their strictly compliance-focused objectives — but nonetheless a question that one day may be litigated.
Injunctive Relief Sought by NYDFS
Finally, another enforcement tool occasionally employed by NYDFS resides in Financial Services Law § 309, which authorizes the agency to seek injunctive relief in state court to protect consumers from injurious conduct:
In addition to such other remedies as are provided under this chapter, the superintendent may maintain and prosecute an action against any person subject to this chapter, the insurance law or the banking law, or the person’s officers, directors, trustees or agents, for the purpose of obtaining an injunction restraining such person or persons from doing any acts in violation of the provisions of this chapter, the insurance law or the banking law.
Because injunctive relief is by its nature equitable,[35] an action under § 309 would seem immune from a challenge under Jarkesy or Ball, and properly subject to resolution by a state judge.
Conclusion
Administrative enforcement actions have served as a vital tool for NYDFS in carrying out its mission as a financial regulator. Jarkesy and Ball present a potential challenge to the agency’s use of this administrative process, possibly leading to judicial modification or legislative reform to permit jury trials in certain enforcement actions. Accelerating developments in this area are well worth watching.
Footnotes
[1] Previously, the SEC could only obtain civil penalties in a federal court action, except in cases against 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 Amendment entitles defendant to jury trial in fraudulent conveyance action).
[3] Id. (citing Tull v. United States, 481 U.S. 412, 422 (1987)) (Seventh Amendment guaranteed a defendant a jury trial where government sought civil penalties under Clean Water Act).
[4] Id. at 124-25.
[5] Id. at 126-32.
[6] Id.
[7] Case No. 24-3296 (7th 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 bank also argued that the Public Rights exception did not apply to divert the proceeding away from the protections of federal courts and a jury trial. Id.
[12] See, e.g., https://www.occ.treas.gov/topics/laws-and-regulations/enforcement-actions/enforcement-action-types/index-enforcement-action-types.html.
[13] See CBW Bank, Dkt. No. 18 at 8-16.
[14] Id. Dkt. No. 35 at 17-18, on app., No. 25-3056 (10th Cir. Mar. 31, 2025). See also Ponte v. FDIC, 23-cv-0165-MSM-LDA, 2023 WL 6441976, at *2 & n.1 (D.R.I. Oct. 3, 2023) (where FDIC brought enforcement action against individual, district court dismissed case for lack of jurisdiction without reaching Seventh Amendment claim); AT&T, Inc. v. Federal Communications Comm’n, 135 F.4th 230 (5TH Cir. 2025) (monetary penalties imposed by FCC were legal remedy requiring jury trial before FCC could impose forfeiture order).
[15] See also GTFM, LLC v. TKN Sales, Inc., 257 F.3d 235, 240 (2d Cir. 2001) (“The Seventh Amendment has not, however, been applied to the States through the Fourteenth Amendment and hence does not 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 Court has expressly held that the Seventh Amendment right to a trial by jury in civil cases does not apply to civil trials in state courts.”) (citations omitted).
[16] 561 U.S. 742, 764-65 & n.13 (2010) (“Our governing decisions regarding the Grand Jury Clause of the Fifth Amendment and the Seventh Amendment’s civil jury requirement long predate the era of selective incorporation.”)
[17] Ball v. New York State Dep’t of Health, 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 generally Alexis, Levine & Tayman, “A View from Inside: A Guide to NYDFS Investigations,” The Review of Banking and Financial Services (Feb. 2021), available at https://blogaboutnydfs.com/wp-content/uploads/2021/04/Levine_RBFS_Final-Part-Two.pdf.
[23] See id.; see also https://www.dfs.ny.gov/system/files/documents/2023/01/ea20230104_coinbase.pdf; https://www.dfs.ny.gov/system/files/documents/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) (“Notwithstanding any other provision of law to the contrary, every state officer, employee, department, institution, commission, board or other agency of the state receiving money for or on behalf of the state from fees, penalties, forfeitures, costs, fines, refunds, reimbursements, sales of property or otherwise, shall on the first day of each month pay into the state treasury. . . .”). Where restitution is part of a DFS Consent Order, it is usually because the entity against which the action is taken agrees to it voluntarily as part of a resolution.
[27] See supra nn. 10, 11.
[28] See, e.g., 3 N.Y.C.R.R. § 116.2 (anti-money laundering programs); 3 N.Y.C.R.R. § 417.2 (anti-money laundering and OFAC compliance programs).
[29] See N.Y. Ins. L. § 109. Other Insurance Law provisions authorizing civil penalties include § 1102 (acting as insurer without license); § 2102 (acting as an agent or broker without license); and § 2403 (engaging in conduct constitute unfair competition or unfair and deceptive acts or practices).
[30] N.Y. Ins. L. § 109(c). Notably, § 109(d) also authorizes NYDFS to “maintain a civil action in the name of the people of the state to recover a judgment for a money penalty imposed by law for the violation of any provision of this chapter.” A novel legal scenario would be presented if NYDFS commences a court action under §109(d) to enforce the Superintendent’s order imposing a civil penalty and is subject to a challenge under Jarkesy or Ball – raising the question of how to proceed if a jury is required to make determinations in this instance.
[31] See, e.g., https://www.dfs.ny.gov/system/files/documents/2024/10/ea20231127_co_first_american.pdf.
[32] Jarkesy, 603 U.S. at 125.
[33] Id. Indeed, the Financial Services Law mandates that penalties received by NYDFS via § 408 first must be applied to reduce the regular annual assessments made against each regulated entity under the Banking and Insurance Laws; only then shall any remainder “be paid to the general 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.2d 90, 93 (1st Dep’t 1961).
Matthew L. Levine previously served as Executive Deputy Superintendent for Enforcement at the New York State Department of Financial Services and is a partner at Elliott Kwok Levine Jaroslaw Neils LLP.
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