On April 16, 2023, the US Supreme Court issued a unanimous decision in Axon Enterprise, Inc. v. Federal Trade Commission, holding that challenges to the structure of the Securities and Exchange Commission (SEC) and the Federal Trade Commission (FTC) may proceed in federal court. This decision confirms that district courts retain federal question jurisdiction over constitutional challenges, despite the agency’s statutory scheme allowing the commission to handle its adjudication process. The opinion, written by Justice Elena Kagan, clarified that constitutional questions are beyond the expertise of both agencies.
The plaintiffs in the cases before the court argued that the agencies’ adjudication processes were unconstitutional due to the insufficiency of political accountability of the pseudo-judicial officers who oversee the agency adjudications to the US president. They contended that this structure violated the separation of powers under the US Constitution. As a result, they argued that the adjudication process against them was unconstitutional and had to be blocked. However, the Supreme Court did not rule on the constitutionality of the agencies, only that the claims – initially dismissed in federal district court – may proceed.
The SEC and FTC’s statutory scheme allows each commission to handle violations by filing a civil suit in a federal district court or instituting administrative proceedings. In the cases before the court, the commission chose the latter. However, the plaintiffs in the two suits bypassed the adjudication process by bringing their claims to the federal district court. The plaintiffs argued that the agencies’ adjudication processes were unconstitutional and could not stand under the US Constitution’s separation of powers doctrine.
When reviewing a case involving an agency’s ability to adjudicate claims, the Supreme Court uses a three-factor test from Thunder Basin Coal Co. v. Reich to determine if the claims brought are “of the type Congress intended to be reviewed within this statutory scheme.” First, the court asks if precluding district court jurisdiction closes all meaningful judicial review of the claim. Second, the court asks if the claim is “wholly collateral to [the] statute’s review provisions.” Lastly, the court asks if the claim is outside the agency’s expertise. The majority found that constitutional interpretation fell outside both agencies’ expertise.
Don’t settle for less. Search BCG Attorney Search for the highest-paying legal jobs in your area.
Justice Clarence Thomas filed a concurring opinion, and Justice Neil Gorsuch filed an opinion concurring with the judgment but criticizing the majority’s reasoning. The Court’s decision reaffirms that constitutional questions are best decided by the federal judiciary rather than the agencies themselves.
In conclusion, the Supreme Court’s unanimous decision in Axon Enterprise, Inc. v. Federal Trade Commission clarifies that constitutional challenges to agency structures can proceed in federal court. This decision confirms that district courts retain federal question jurisdiction over such challenges, even when the agency’s statutory scheme allows for self-adjudication. However, the Court did not rule on the constitutionality of the SEC or FTC but instead allowed the claims to proceed in district court. The decision reaffirms the federal judiciary’s role in deciding constitutional questions, as they fall outside the agencies’ expertise.