Court Is Open !

On April 14, the United States Supreme Court decided Axon Enterprise, Inc. v. Fed. Trade Comm’n, a case addressing whether district courts have jurisdiction to hear certain challenges to administrative agency action. The consolidated appeal decided two cases.

In one case, the plaintiff sued the Securities and Exchange Commission. In the other case, the plaintiff sued the Federal Trade Commission. Both plaintiffs sued in district court, generally alleging that the agencies’ enforcement actions against them were unconstitutional because the administrative law judges hearing the cases were too insulated from Presidential control or because the agency impermissibly possessed both prosecutorial and adjudicatory functions. At issue before the Court in Axon Enterprise was whether such claims were permissibly brought in federal court or whether they had to be litigated in the agency first and then later appealed to the federal courts.

In an opinion for the Court, Justice Kagan noted that with respect to both the FTC and SEC, Congress had established a statutory review scheme in which the respective agency first decided issues in adversary proceedings, with those agency decisions later being appealable to federal courts of appeal. As a consequence of such scheme, the Court explained, federal district courts were generally divested of jurisdiction over claims regarding matters within the agency’s jurisdiction. But the Court highlighted that this divestiture did not apply to all claims touching on the agency or its work.

To determine whether district courts had jurisdiction regarding the plaintiffs’ claims that the agencies’ adjudicatory structure was unconstitutionally composed, the Court employed the framework established in Thunder Basin Coal Co. v. Reich and applied in later cases. The Thunder Basin factors ask three questions: (1) Does precluding district court review foreclose all meaningful judicial review of the claim? (2) Is the claim wholly collateral to the statute’s review provisions? And (3) is the claim outside the agency’s expertise?

Applying these factors, the Court concluded that the plaintiffs’ claims in Axon Enterprise were permissibly brought in the district courts. First, the Court reasoned that preclusion of district court jurisdiction would foreclose meaningful judicial review. In each case, the plaintiff claimed injury by being subjected to an illegitimate proceeding. According to the Court, appellate review of the plaintiffs’ constitutional concerns of the agency’s adjudicatory structure would simply come too late to be meaningful. As the plaintiffs’ theory went, the plaintiffs would already be injured by the time their appeal occurred. As to the second Thunder Basin factor, the Court concluded that the plaintiffs’ constitutional arguments were collateral to their alleged wrongdoing that was being litigated in the agencies. In other words, whether the agencies’ adjudicatory structure was constitutional was largely separate from the specifics of the enforcement cases brought against the plaintiffs. And finally, on the third factor, the Court concluded that the plaintiffs’ claims that the agencies’ composition violated constitutional principles were legal questions that were not within the core competencies of the agencies. Applying these three Thunder Basin factors, the Court concluded that the district court had jurisdiction over the plaintiffs’ challenges and remanded the matters for further proceedings.

Justice Thomas wrote separately to voice concerns regarding the constitutionality of administrative review schemes more generally. While no other Justice joined Justice Thomas’s opinion, the opinion provides some aggressive arguments for attorneys whose clients are parties in administrative proceedings. Justice Thomas has “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.” When “private rights are at stake, full Article III adjudication is likely required.” Justice Thomas suggested that deferential review of an administrative adjudication involving private rights may violate several constitutional provisions including Article III, due process, and the Seventh Amendment. If adopted by courts, Justice Thomas’s position in Axon Enterprise could radically transform the landscape of administrative law.

In sum, the Court’s opinion in Axon Enterprise is a reaffirmation of the principle that certain challenges to an agency or its actions may be litigated in Article III district courts outside the administrative process. These may include challenges to the FAA’s or NTSB’s procedures. And while it failed to attract the votes of any other Justice, Justice Thomas’s concurrence provides several avenues for argument that, if adopted by courts, could radically alter the landscape of administrative law.

Daniel Hassing was a trusted PPS panel attorney before officially joining AOPA. He received his bachelor’s in psychology and Spanish from the University of     Nebraska-Omaha. He obtained his Juris Doctorate from the University of   Nebraska. Daniel has also earned his private pilot license.

In his spare time, Daniel enjoys spending time with his wife, their daughter, and  their dog.  He also plays golf and guitar (poorly).  He is holding out hope that  his Nebraska Cornhuskers will have a good season this year but, as has been the case for the past 20 years, is prepared for crushing disappointment.


Topics: Pilot Protection Services, FAA Information and Services

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