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Axon Enterprise, Inc. v. FTC

Supreme Court of the United States
598 U. S. ____ (2023) (2023)
ELI5:

Rule of Law:

Statutory review schemes that direct appeals of final agency orders to federal courts of appeals do not displace a district court’s federal-question jurisdiction over claims that challenge the fundamental structure or existence of the administrative agency as unconstitutional.


Facts:

  • The Securities and Exchange Commission (SEC) initiated an administrative enforcement action against Michelle Cochran, a certified public accountant, alleging she violated auditing standards.
  • Following a Supreme Court decision that found SEC Administrative Law Judges (ALJs) were improperly appointed, the SEC ordered a new hearing for Cochran before a properly appointed ALJ.
  • Before the new hearing began, Cochran challenged the constitutionality of the SEC ALJs' dual-layer tenure protections, arguing they were improperly insulated from presidential control in violation of the separation of powers.
  • Separately, the Federal Trade Commission (FTC) initiated an administrative enforcement action against Axon Enterprise, Inc., alleging its acquisition of a competitor was anti-competitive.
  • Before the FTC proceeding concluded, Axon challenged the constitutionality of the FTC's structure.
  • Axon argued that the FTC ALJs possessed unconstitutional dual-layer tenure protections, violating the separation of powers.
  • Axon also argued that the FTC's combination of prosecutorial and adjudicative functions within a single agency was unconstitutional.

Procedural Posture:

  • Michelle Cochran sued the SEC in U.S. District Court, seeking to enjoin its administrative proceeding against her.
  • The district court dismissed the suit for lack of jurisdiction.
  • The U.S. Court of Appeals for the Fifth Circuit, sitting en banc, reversed the district court, finding jurisdiction was proper.
  • Axon Enterprise sued the FTC in U.S. District Court, seeking to enjoin its administrative proceeding against it.
  • The district court dismissed the suit for lack of jurisdiction.
  • The U.S. Court of Appeals for the Ninth Circuit affirmed the dismissal.
  • The U.S. Supreme Court granted certiorari in both cases to resolve the circuit split on whether district courts have jurisdiction over such claims.

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Issue:

Does a statutory review scheme, which provides for judicial review of a final agency order in a court of appeals, implicitly divest a federal district court of jurisdiction over a collateral, structural constitutional challenge to the agency's authority to conduct its proceedings?


Opinions:

Majority - Justice Kagan

No. The statutory review schemes of the SEC and FTC do not displace a district court's jurisdiction over these extraordinary constitutional claims. The challenges here are not the type Congress intended to funnel through the standard agency review process. First, precluding district court jurisdiction would foreclose meaningful judicial review because the alleged harm is the 'here-and-now injury' of being subjected to an unconstitutional proceeding, an injury that cannot be remedied by a court of appeals after the proceeding has concluded. Second, the claims are 'wholly collateral' to the merits of the enforcement actions, as they object to the agencies' very existence and power to proceed, not to any specific agency action or standard being applied. Third, the claims are 'outside the agency's expertise,' as they raise standard questions of constitutional and administrative law regarding the separation ofpowers, about which the agencies possess no special competence.


Concurring - Justice Thomas

Joins in full. The Court correctly applies precedent, but this case raises grave doubts about the constitutional propriety of Congress vesting administrative agencies with the authority to adjudicate core private rights with only deferential judicial review. The entire 'appellate review model' of agency adjudication, where agencies effectively act as courts in matters involving private rights like property, may violate Article III, the separation of powers, and the Seventh Amendment. When private rights are at stake, the Constitution likely requires full adjudication by an Article III court, not an executive agency.


Concurring in the judgment - Justice Gorsuch

The result is correct, but the Court's reliance on the confusing, judge-made 'Thunder Basin factors' is wrong. The proper analysis is simple: 28 U.S.C. §1331 grants district courts jurisdiction over these constitutional claims. The relevant statutes for the SEC and FTC only channel appeals of 'final orders' to the courts of appeals. Because Cochran and Axon are not challenging a final order but rather the agency's fundamental authority to act, the statutory review schemes do not apply, and the district court's jurisdiction under §1331 remains intact without any need for a multi-factor balancing test.



Analysis:

This decision solidifies a pathway for parties to bring pre-enforcement, structural constitutional challenges against federal agencies directly in district court, rather than enduring the entire administrative process first. It distinguishes such fundamental challenges from ordinary merits-based or procedural claims that must be exhausted within the agency. The ruling is significant because it allows for immediate judicial review of claims alleging an agency's very structure is unconstitutional, potentially enabling defendants to halt costly and lengthy administrative proceedings at the outset and weakening the leverage agencies have in such enforcement actions.

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