Securities Regulation Daily Wrap Up, FRAUD AND MANIPULATION—Del. Sup. Ct.: No entitlement to jury trial in state securities fraud administrative matter, court affirms, (Jul 20, 2026)

By Rebecca E. Hoffman, J.D.

The Delaware high court also affirmed the earlier finding that the plaintiffs’ due process claim was unripe.

Swan Energy, Inc. and four individuals, charged with fraud and with selling unregistered oil and gas mining securities in a Delaware administrative forum, were not deprived of their right to a jury trial, the Delaware Supreme Court affirmed in a declaratory judgment action, finding no common-law analog to those allegations that traditionally required a trial by jury (Swan Energy, Inc. v. Investor Protection Unit, No. N24C-03-071 (Del. Sup. Ct. July 16, 2026)).

The court also determined that the Delaware Superior Court properly found that the plaintiffs’ constitutional rights were not violated when the state agency declined to furnish all of its past rulings.

Alleged state securities law violations. The Investor Protection Unit (IPU) of the Delaware Department of Justice charged Swan Energy with securities fraud and with selling unregistered securities in November 2020. Nearly three years later, the presiding officer in the state’s administrative case issued an order telling the company that it would have to raise its jury trial issue in state court.

Initially, Swan Energy sought an injunction before the Delaware Chancery Court, but following an agreement between the company and the IPU for a stay of the administrative proceeding that mooted that injunction request, the case was transferred to the Delaware Superior Court, which denied Swan Energy’s request for a jury trial. It also found unripe the due process claim, based on the plaintiffs’ attempt to access all of the IPU’s past decisions.

Jury trial right. The plaintiffs argued that securities fraud actions must be tried before a jury because this was the case at common law. The lower court determined that securities fraud under the Delaware Securities Act was not sufficiently comparable to common law fraud to trigger the jury trial right due to the differences in pleading standards. “The court also noted that causes of action for common-law fraud and enforcement actions for securities fraud serve different purposes, the former providing a remedy for an individual’s injuries and the latter protecting the public,” the court here said.

The plaintiffs averred that the Seventh Amendment dictates that a jury trial is warranted where the SEC seeks civil penalties for securities fraud. But the Seventh Amendment has not been applied to the states, the court said, finding the two types of actions insufficiently analogous.

Admin enforcement history. Swan Energy had tried unsuccessfully to obtain information on all IPU’s past judgments through FOIA and production requests, to use as a basis for illustrating that they were treated disparately. “The crux of the plaintiffs’ due-process claim as alleged in the [complaint] was that their inability to secure the IPU’s prior orders, decisions, and proposed orders implicated and violated their due-process rights.”

The plaintiffs conceded that if this were an as-applied challenge, it would not be ripe since the plaintiffs have not been deprived of liberty or property. They argued that it was meant to be a facial challenge based on their claim that “because the presiding officer in IPU administrative enforcement actions is a Deputy Attorney General dependent on the Attorney General for compensation, assignments, and career advancement, the presiding officer’s impartiality is compromised.”

The court found, however, that there is a strong presumption of honesty and integrity on the part of attorneys' general. Further, the plaintiffs could seek a writ of mandamus if decisions of the presiding officer are not made available. The plaintiffs alleged that they were thwarted in their attempt to challenge the presiding officer’s impartiality “but the plaintiffs do not identify any aspect of the statutory or regulatory procedure governing IPU actions generally that deprives respondents in all cases of the information that these particular plaintiff’s believe is so vital to their defense.”

The case is No. N24C-03-071.

Judge: Traynor, G.

Attorneys: Travis J. Ferguson (McCarter & English, LLP) for Swan Energy, Inc., Brandon Davis, John Schiffner and Cody Davis. Ian R. Liston (Wilson Sonsini Goodrich & Rosati) for the Delaware Department of Justice.

Companies: Swan Energy, Inc.

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