Last Friday the Supreme Court of the United States issued its decision in Axon Enterprise, Inc. v. Federal Trade Commission (and its companion case, Securities and Exchange Commission v. Cochran). I haven’t seen any news coverage of it, and it is going to be one of those decisions that has little to no public interest. I, however, have found several nuggets worthy of a blog post.
To start with the most basic facts, the Securities and Exchange Commission (SEC) started an enforcement action against Michelle Cochran, a certified public account. The Federal Trade Commission (FTC) started a separate, unrelated enforcement action against Axon. The targets of both actions sought to challenge the legal ability of the agency based upon constitutional claims((Neither the merits of the investigations nor of the targets’ challenges thereto were before the Court.)) and did so by filing an action in a United States District Court, based upon 28 U.S.C. § 1331, which provides that “district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States.” The district courts, however, noted that the agencies’ ultimate decisions were subject to some form of judicial review by a United States court of appeals and questioned whether, and ultimately held that, Congress’s establishment of the administrative adjudication((The initial decisions are made by “administrative law judges” (ALJs) appointed by the agency, which can be appealed to the commission itself. Both agencies also have the option to bring their enforcement actions in court.)) followed by judicial review process impliedly displaced the district court’s original jurisdiction. In Axon the Ninth Circuit affirmed, while in Cochran the Fifth Circuit, on en banc review,((Appeals are decided by panels of three judges, but the unsuccessful party can ask that a decision be reconsidered by all active judges in the circuit. Grants of such petitions are rare.)) ultimately reversed. The Supreme Court granted certiorari to review both decisions.
The first interesting bit is that every Justice agreed that Axon and Cochran get to have their challenges adjudicated by the district court and do not have to wait to appeal an adverse agency determination, but they came to this result by somewhat different routes. The Court’s opinion was written by Justice Kagan and joined by all but Justice Gorsuch. This opinion applied a previous case, Thunder Basin Coal Co. v. Reich, 510 U. S. 200, 212 (1994), to identify and apply various factors to determine whether Congress’s creation of a special statutory review scheme for the SEC and FTC precludes district courts from exercising jurisdiction over challenges to agencies’ actions. The ultimate conclusion, for these challenges to these investigations, was that it does not.
Justice Thomas, as he is wont to do, joined the Court’s opinion in full but wrote a concurring opinion to express his thoughts about matters suggested by the issue but that did not have to be decided to resolve the case, here his “grave doubts about the constitutional propriety of Congress vesting administrative agencies with primary authority to adjudicate core private rights with only deferential judicial review on the back end.”((I raised similar concerns last fall in my post Administrative Agency Should Not Be Lawgiver, Prosecutor, Judge, Jury, and Executioner.)) As Justice Thomas points out, the commissions overwhelmingly agree with their own agency decisions: “between October 2010 and March 2015, SEC won more than 90% of cases brought before its ALJs as compared to 69% of cases brought before federal courts” while “the FTC has not lost a single case [in administrative proceedings] in the past quarter-century.'” [Slip op. at 2, n. 1, quoting Cochran’s brief, bracketed text in Thomas’s opinion.]
Justice Gorsuch concurred in the result. Eschewing “the ‘Thunder Basin factors,’” Justice Gorsuch looks to the language of 28 U.S.C. § 1331, quoted above: “Not may have jurisdiction, but shall. Not some civil actions arising under federal law, but all. The statute is as clear as statutes get, and everyone agrees it encompasses the claims Ms. Cochran and Axon seek to pursue. [citation omitted] End of case, right?”((Add this effort to my list of recommended Gorsuch opinions, Gorsuch’s Buffington Dissent a Well-Written Critique of Chevron Deference and Justice Gorsuch’s Dissent in Arizona v. Mayorkas a Good Read.))
Jay Bohn
April 17, 2023