Supreme Court Makes It Easier To Challenge Constitutionality Of Administrative Agency Structure

• Jurisdiction: United States,Federal
• Law Firm: Rimon
• Subject Matter: Government, Public Sector, Litigation, Mediation & Arbitration, Constitutional & Administrative Law, Trials & Appeals & Compensation
• Author: Mr Michael S. Lazaroff
• Published date: 24 May 2023

On April 14, 2023, in Axon Enterprise, Inc. v. Federal Trade Commission et al., 143 S.Ct. 890 (2023) (No. 21-86), the Supreme Court issued a unanimous decision holding that district courts have jurisdiction to resolve constitutional challenges to the structure of the Federal Trade Commission (the "FTC") and the Securities and Exchange Commission (the "SEC") without any prior agency hearing or determination. This decision permits, in appropriate circumstances, those challenged by agency administrative action to bring constitutional challenges directly to a federal district court without having to first expend the time, energy and money having these claims tried and decided by an administrative law judge from the agency itself.

The Supreme Court considered in this decision two different appeals from two different underlying actions ((a) Axon Enterprises, Inc. v. FTC, No. 21-86; and (b) SEC v. Cochran, No. 21-1239). In the two underlying actions, administrative enforcement actions had been brought by the FTC and SEC respectively in front of administrative law judges. However, respondents (Axon Enterprises and Michelle Cochran) sued the respective agencies directly in district courts to enjoin the administrative proceedings because respondents in those actions claimed that the FTC and SEC's respective structures violate the Constitution. Respondents argued that the district courts had jurisdiction based on "district courts' ordinary federal-question authority'their power, under 28 U.S.C. '1331". Axon, 143 S.Ct. at 898. The Supreme Court explained that these "challenges [from respondents] are fundamental, even existential. They [the respondents] maintain in essence that the agencies, as currently structured, are unconstitutional in much of their work.". Id. at 897.

However, the district courts in both cases dismissed the claims by respondents for lack of jurisdiction. The district courts claimed that the respective Congressional Acts (the FTC Act and the Securities Exchange Act) implicitly divested the district courts of jurisdiction. On appeal, the Ninth Circuit affirmed the lower court decision in the Axon case finding that the FTC Act divested the district court of jurisdiction. See Axon Enterprises, Inc. v. FTC, 986 F. 3d 1173 (9th Cir. 2021). However, the Fifth Circuit reversed the lower court and found that Cochran's claim against the SEC could proceed in the district court because in this instance the factors identified by the Supreme Court in Thunder...