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Administrative Law

Unanimous Supreme Court Affirms Right to Challenge Federal Agencies in Federal Court

Those claiming they are subject to unconstitutional agency proceedings need not suffer through agency proceedings before bringing their claims to federal court.


Yesterday a unanimous Supreme Court held that those subject to federal agency adjudicaiton can challenge the constitutionality of such adjudication in federal court before such adjudication concludes. What some had billed as an attack on the viability of the adminstrative state was not viewed that way by the justices, who all agreed the agencies' attempts to insulate themselves from federal judicial review lacked legal basis.

Justice Elena Kagan wrote the opinion for the Court in Axon v. Federal Trade Commission (which was combined with Securities and Exchange Commission v. Cochran). It is a clear and engaging opinion that makes the underlying issues readily accessible, even to those with no particular affinity for administrative law. Justice Thomas wrote a separate concurrence, and Justice Gorsuch wrote an opinion concurring in the judgment.

The introduction to Justice Kagan's opinion lays out the issues rather clearly:

In each of these two cases, the respondent in an administrative enforcement action challenges the constitutional authority of the agency to proceed. Both respondents claim that the agencies' administrative law judges (ALJs) are insufficiently accountable to the President, in violation of separation-of-powers principles. And one respondent attacks as well the combination of prosecutorial and adjudicatory functions in a single agency. The challenges are fundamental, even existential. They maintain in essence that the agencies, as currently structured, are unconstitutional in much of their work.

Our task today is not to resolve those challenges; rather, it is to decide where they may be heard. The enforcement actions at issue were initiated in the Securities and Exchange Commission (SEC) and the Federal Trade Commission (FTC). Most objections to those Commissions' proceedings follow a well-trod path. As prescribed by statute, a party makes its claims first within the Commission itself, and then (if needed) in a federal court of appeals. The parties here, however, sidestepped that review scheme. Seeking to stop the administrative proceedings, they instead brought their claims in federal district court. The question presented is whether the district courts have jurisdiction to hear those suits—and so to resolve the parties' constitutional challenges to the Commissions' structure. The answer is yes. The ordinary statutory review scheme does not preclude a district court from entertaining these extraordinary claims.

Under existing precedent, whether the existence of the agency adjudicative scheme precludes district court jurisdiction over related suits against agencies is determined by the so-called Thunder Basin factors. While the proper application of this test may be unclear in some cases, Justice Kagan's opinion makes clear that there was no real question how these factors should apply here. There was no basis for forcing Axon and Cochran to subject themselves to allegedly unconstitutional agency proceedings before bringing their constitutional challenges.

From Justice Kagan's opinion:

The harm Axon and Cochran allege is "being subjected" to "unconstitutional agency authority"—a "proceeding by an unaccountable ALJ." . . . That harm may sound a bit abstract; but this Court has made clear that it is "a here-and-now injury." . . . And—here is the rub—it is impossible to remedy once the proceeding is over, which is when appellate review kicks in. Suppose a court of appeals agrees with Axon, on review of an adverse FTC decision, that ALJ-led proceedings violate the separation of powers. The court could of course vacate the FTC's order. But Axon's separation-of-powers claim is not about that order; indeed, Axon would have the same claim had it won before the agency. The claim, again, is about subjection to an illegitimate proceeding, led by an illegitimate decisionmaker. And as to that grievance, the court of appeals can do nothing: A proceeding that has already happened cannot be undone. Judicial review of Axon's (and Cochran's) structural constitutional claims would come too late to be meaningful.

Justice Thomas wrote a separate concurrence acknowledging that existing precedent required application of the Thunder Basin factors, while reiterating 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." Writes Thomas:

whether any form of administrative adjudication is constitutionally permissible likely turns on the nature of the right in question. If private rights are at stake, the Constitution likely requires plenary Article III adjudication. Conversely, if privileges or public rights are at stake, Congress likely can foreclose judicial review at will.

Thus, as Thomas often does, he suggests this is an issue the Court should confront in a future case.

Justice Gorsuch only concurred in the judgment, arguing that the Court should disregard the Thunder Basin factors because Congress has provided for federal jurisdiction over claims such as those brought by Axon and Cochran under 28 U.S.C. Section 1331.

As Gorsuch writes:

As the Court sees it, Ms. Cochran, Axon, and others like them must satisfy not only §1331. They must also satisfy a judge-made, multi-factor balancing test. One assembled from remarks scattered here and there across the pages of Thunder Basin Coal Co. v. Reich, 510 U. S. 200 (1994). And one, we are told, designed to ferret out whether the legislators who adopted the Federal Trade Commission Act in 1914 and the Securities Exchange Act in 1934 harbored an "implici[t]" wish to "ous[t]" district courts of jurisdiction in favor of agency proceedings. Ante, at 7. So, yes, the law on the books may promise you the right to be heard in a court of law. But sometimes that doesn't count for much. Sometimes judges can shunt you to an agency instead—so long as a test we have fabricated suggests to us that is what Congress really wanted. . . .

No one disputes that §1331 represents a valid exercise of Congress's authority to regulate the jurisdiction of the district courts. No one questions that §1331 permits cases like those before us to proceed. No Member of the Court points to any statute Congress has adopted that speaks otherwise. Under the law, that should be the end of the matter. . . .

At bottom, Thunder Basin rests on a view that it is sometimes more important to allow agencies to work without the bother of having to answer suits against them than it is to allow individuals their day in court. But when Congress holds that view, it does not ask us to juggle a variety of factors and then guess at the implicit intentions of legislators past. It simply tells us.

Justice Gorsuch also explains why the approach adopted in these sorts of cases matters.

While the Court reaches the right result today, its choice of the wrong path matters. Not just because continuing to apply the Thunder Basin factors leaves the law badly distorted. It also matters because Thunder Basin's throw-itin-a-blender approach to jurisdiction imposes serious and needless costs on litigants and lower courts alike.

Jurisdictional rules, this Court has often said, should be "clear and easy to apply." . . . For parties, "[c]omplex jurisdictional tests complicate a case, eating up time and money as [they] litigate, not the merits of their claims, but which court is the right court to decide those claims." . . . For courts, jurisdictional rules "mark the bounds" of their "'adjudicatory authority.'". . . Judges therefore "benefit from straightforward rules under which they can readily assure themselves of their power to hear a case," . . . while "adventitious" rules leave them with "almost impossible" tasks to perform that squander their limited resources,

There are many words to describe the Thunder Basin factors, but "clear and easy to apply" are not among them. . . .

Justice Gorsuch concludes:

When Congress withholds jurisdiction, we must respect its choice. But when Congress grants jurisdiction to the Nation's courts, we must respect that choice too. We have no authority to froth plain statutory text with factors of our own design, all with an eye to denying some people the day in court the law promises them. Respectfully, this Court should be done with the Thunder Basin project. I hope it will be soon.

While the Axon decision is solely concerned with where claims challenging the constitutionality of agency structure and composition may be brought, a consequence of this decision is that such claims–particularly those challenging tenure protections for administrative law judges–will likely return to the Supreme Court sooner rather than later. When those cases arrive, a unanimous judgment seems much less likely.