While the substantial backlog of decisions has many observers waiting for a flood of rulings, the Supreme Court is moving at its own pace. Thus, the Court has issued a single opinion today, but especially for readers who are involved in administrative law challenges to administrative agency determinations, it is an important one. And it might become even more significant to the extent that it augurs future limitations on agency autonomy.

The case is Axon Enterprise, Inc. v. Federal Trade Commission, and in an opinion written by Justice Kagan, and with separate concurrences by Justices Thomas and Gorsuch, the Court unanimously has held that federal district courts have the power to decide lawsuits challenging the structure of an agency, irrespective of internal agency review mechanisms. In Justice Kagan's words: “The ordinary statutory review scheme does not preclude a district court from entertaining these extraordinary claims.”

Notwithstanding its caption, the case involves two separate enforcement actions, one initiated in the Securities and Exchange Commission (SEC) and the other in the Federal Trade Commission (FTC). Each plaintiff had sued in federal district court, challenging the constitutionality of the agency proceedings against them. As is typical, the relevant agency statutes provide that when a party objects to a Commission proceeding, it first makes its claim within the agency itself, often with an intervening determination made by an Administrative Law Judge (ALJ), and then, if needed, to a federal court of appeals. The plaintiff companies, however, sidestepped that review scheme and instead asked district courts to enjoin the administrative proceedings on grounds including that the tenure protections of the agencies’ ALJs render them insufficiently accountable to the President, thus violating constitutional separation-of-powers principles, and that the combination of prosecutorial and adjudicatory functions in the FTC also violated the Constitution. 

In deciding these two cases, the Court held that the statutory review schemes set out in the Securities Exchange Act and Federal Trade Commission Act do not displace a district court’s federal-question jurisdiction over claims challenging the constitutionality of the existence or structure of the two subject agencies. While the statutory review schemes of these statutes might divest district courts of their ordinary jurisdiction over covered cases, those schemes do not necessarily extend to every claim relating to agency authority or action. 

Instead, the Court turned to the factors identified in Thunder Basin Coal Co. v. Reich, 510 U. S. 200 (1994), which pose three considerations in determining whether an agency's action is “of the type Congress intended to be reviewed within th[e] statutory structure:” First, does preclusion of district court jurisdiction “foreclose all meaningful judicial review” of the claim? Second, is the claim “wholly collateral” to the statute’s review provisions? And third, is the claim “outside the agency’s expertise”? 

The Court has applied these factors several times in the past, sometimes to uphold preclusion of district court jurisdiction, but more recently in a case that this blog has considered before, to reach the opposite result. In Free Enterprise Fund v. Public Company Accounting Oversight Board, 561 U.S. 477 (2010), the Court held that insulating inferior officers of the United States from removal by the President, with two layers of “for cause” requirements, violated Article II of the Constitution. With respect to the SEC and FTC matters decided today, the Court followed Free Enterprise Fund. 

The Court noted that preclusion of district court jurisdiction “could foreclose all meaningful judicial review.” Notwithstanding that adequate ultimate judicial review can be obtained without district court involvement, the assertions of these parties of a “here-and-now [constitutional] injury” from being subjected to an illegitimate proceeding, conducted by an illegitimate decisionmaker, whose result is impossible to remedy once the proceeding ends, even though court of appeals review could follow, requires a more immediate result to avoid condemning the structural constitutional claims to a time too late to be meaningful. 

The Court also noted that the instant constitutional challenges to the Commissions’ authority have nothing to do with the sorts of agency policy matters involved in what the ALJs generally assess, and hence are indeed “collateral.” Tellingly, the Court observed that the FTC “knows a good deal about competition policy, but nothing special about the separation of powers.” That is a judicial expertise, and it governs here.

I suggested that this decision might portend an even more profound result in the future. I derive that view from Justice Gorsuch's concurrence, which relates the many-year history of both cases, and the great expense incurred without having resolved the questions of agency action at issue. Gorsuch then concludes that the question of agency authority could be resolved without applying the Thunder Basin factors. The cases before the Court today both conclude with remands, not final resolutions. If these, or other cases like them, continue over protracted periods, where constitutional authority is questionable and merits results are delayed, Justice Gorsuch very well could find additional adherence to his views.

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