This is the first of a two-part article discussing a defendant’s Seventh Amendment right to jury in an enforcement action by the Commodity Futures Trading Commission under the Commodity Exchange Act for civil monetary penalties. Civil penalties for violation of the CEA are now no less than $180,000 per violation and regularly assessed in the hundreds of millions dollars. Part I of this article analyzes existing Supreme Court cases regarding the scope of the right to jury in regulatory enforcement cases. It concludes that existing Supreme Court cases should be expanded to include a jury determination of the amount of civil penalty. It proposes that defendants in CEA enforcement actions make a jury demand notwithstanding existing case law and develops arguments in support of such a demand. Part II of the article will examine lower court cases where courts have determined the amounts of civil penalties for violations of the CEA. It concludes that the law is in disarray and the decisions are inconsistent. So that juries may be properly instructed, Part II proposes a new method for juries to determine civil penalties under the CEA that is organically related to the conduct regulated by the statute.
I. INTRODUCTION
The Commodity Futures Trading Commission (“CFTC”) is an independent administrative agency of the federal government charged with oversight of the commodity futures, options and swaps markets, regulation of market professionals, and protection of market participants. The CFTC is authorized to bring an administrative proceeding or an action in federal district court against persons who violate the Commodity Exchange Act, 7 U.S.C. § 1-26 [hereinafter “CEA”], and to seek various remedies including a civil monetary penalty. CEA § 13a-1(a)-(b). On February 11, 2019, the civil monetary penalty for attempted or actual manipulation of a commodity market was adjusted upward to a minimum of $1,191,842. For all other violations of the CEA, the minimum civil monetary penalty was adjusted upward to $182,031. CEA § 13a-1(d)(1)(A)-(B). See also 28 U.S.C. § 2461 and 7 C.F.R. § 143.8. The civil penalties can be staggering.[1]
The CFTC has not employed in-house administrative law judges for almost a decade, so its current practice is to file contested enforcement actions in federal court. In federal court, defendants enjoy many of the procedural due process rights that are lacking in administrative proceedings; such as, full discovery, robust motion practice and direct appellate review. But, whether there is a Seventh Amendment right to jury for all phases of court litigation is more nuanced.[2]
II. CONSTITUTIONAL BASIS FOR THE RIGHT TO JURY FOR CIVIL MONETARY PENALTIES
The Seventh Amendment to the U.S. Constitution provides the right to jury in all civil cases other than those in equity and admiralty. It states:
In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise re-examined in any Court of the United States, than according to the rules of the common law.
Because the Amendment says “In Suits at common law,” the right to jury is broader than just actions that existed before the Amendment was adopted. It extends to statutory causes of action later created by Congress.[3] As Professor Phillip Hamburger explains:
Although the US Constitution in 1789 guaranteed juries only in criminal cases, this prompted an outcry that juries also needed to be guaranteed in civil cases. The Seventh Amendment therefore secured the right to a jury in “Suits at common law.” If, instead, the amendment had provided for juries “in common-law actions,” it would have allowed the government to avoid juries in statutory actions. And if it had provided for juries “in existing common-law actions,” it would have allowed the government to avoid juries in newly created actions. But the phrase “Suits at common law” meant civil suits brought in the common-law system, as opposed to those brought in equity or admiralty. Thus, in addition to the debates leading up to the Bill of Rights, the Seventh Amendment’s very words make clear that the Amendment does not exclude statutory actions …. Instead, it secures juries in all civil cases other than those in equity and admiralty.[4]
In Tull v. United States, 481 U.S. 412 (1987), the U.S. Supreme Court addressed whether the defendant had a Seventh Amendment right to a jury for violating the Clean Water Act, which provides violators “shall be subject to a civil penalty not to exceed $10,000 per day” during the period of the violation.[5] The district court denied the defendant’s timely request for trial by jury on all issues. After a bench trial, the district court assessed a total civil penalty of $75,000 calculated with reference to the number of sites illegally polluted rather than on the number of days as stated in the statute.
The Supreme Court reversed because the defendant had a right to a jury determination of liability for a civil penalty. Under the Seventh Amendment, the right to jury depends on “the nature of the action and of the remedy sought.”[6] Historically, “a civil penalty was a type of remedy at common law that could only be enforced in courts of law” and tried to a jury.[7] Further, the legislative history shows Congress intended § 1319(d) of the Clean Water Act to be a penal remedy, as distinguished from equitable remedies that restore the status quo ante and do not require a jury; such as, restitution or disgorgement.[8] As to the amount of the civil penalty, however, the legislative history of the Clean Water Act shows Congress intended that a judge “perform the highly discretionary calculations necessary to award civil penalties after liability is found.”[9] The Supreme Court concluded that the Seventh Amendment does not forbid Congress from delegating to a judge the determination of the amount of the penalty even if liability constitutionally must be determined by a jury because the amount “is not one of the ‘most fundamental elements’” of the right to a jury.[10] Dissenting in part, for reasons discussed below, Justices Scalia and Stevens held the view that a defendant is entitled to a jury determination both as to liability and as to the amount of the civil monetary penalty.[11]
In contrast, eleven years later in Feltner v. Columbia Pictures Television, Inc., 523 U.S. 340 (1998), the Supreme Court held the defendant had a right to a jury determination both as to liability and as to the amount of statutory damages for violations of the Copyright Act, which provides that a copyright owner may “recover, instead of actual damages and profits, an award of statutory damages …, in a sum of not less than $500 or more than $20,000 as the court considers just.[12] The district court denied the defendant’s timely request for a jury trial on damages.[13] After a bench trial, the district court assessed statutory damages of $8,800,000, finding that each airing of an episode on television (440) constituted a separate violation multiplied by $20,000.[14]
The Supreme Court reversed because the Seventh Amendment preserves the common law right to a jury trial for copyright violations even though there was nothing in the statute or its legislative history to suggest that Congress had intended to provide for a jury trial. The Supreme Court employed the Seventh Amendment analysis in Tull, concluding that the nature of a copyright action and the statutory damages remedy are legal not equitable. Historically, copyright suits were tried in courts of law to juries.[15] The remedy for infringement, either actual damages or statutory damages, is intended to punish infringers of copyrights.[16] However, unlike in Tull, the Supreme Court concluded that the “right to a jury trial includes the right to have a jury determine the amount of statutory damages ….”[17] Historically, juries determined damages where the amount was “uncertain.”[18] The Supreme Court distinguished Tull because in that case no evidence was presented “that juries historically had determined the amount of civil penalties to be paid to the Government.”[19] The Court also distinguished Tull because determining the amount of a civil penalty is “analogous to sentencing in a criminal proceeding.”[20]
In sum, the U.S. Supreme...
