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Axon Enterprise, Inc. v. Federal Trade Commission

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Axon Enterprise, Inc. v. Federal Trade Commission
Term: 2022
Important Dates
Argued: November 7, 2022 Decided: April 14, 2023
Outcome
United States Court of Appeals for the Ninth Circuitreversed and caseremanded
Vote
9-0
Majority
Chief Justice John Roberts •Elena Kagan •Samuel Alito •Sonia Sotomayor •Brett Kavanaugh •Amy Coney Barrett •Ketanji Brown Jackson
Concurring
Clarence Thomas •Neil Gorsuch

Axon Enterprise Inc. v. Federal Trade Commission was aU.S. Supreme Court case decided on April 14, 2023, that questioned the jurisdiction of federal courts over constitutional challenges to the structure of theFederal Trade Commission (FTC). Axon Enterprise Inc. argued in part that the double for-cause removal protections afforded to the FTC’sadministrative law judges unconstitutionally insulate them from presidential control. At issue was whether plaintiffs must make constitutional challenges through the agencyadjudication process before bringing the issue before a federal court. The court unanimously held that federal courts have jurisdiction to hear constitutional challenges to the structure of the FTC and theSecurities and Exchange Commission (SEC).^[1]^[2]

The case was argued before theSupreme Court of the United States on November 7, 2022, during the court'sOctober 2022-2023 term.

HIGHLIGHTS

The case: Axon, a body camera company, acquired a competitor. The Federal Trade Commission (FTC) ordered Axon to undo the acquisition on antitrust grounds. Axon sued, arguing that the FTC's administrative proceeding violated due process rights, that the structure of the FTC's double for-cause removal protections afforded to itsadministrative law judges violates Article II of the U.S. Constitution, and that the acquisition did not violate antitrust law. The district court dismissed the case, ruling that Congress stripped the court of jurisdiction over Axon's claims.^[1]Click here to learn more about the case's background.

The issue: The case concerned whether federal courts have the authority to review constitutional challenges to the structure of the Federal Trade Commission before plaintiffs raise such challenges during agencyadjudication proceedings.

The question presented: "Whether Congress impliedly stripped federal district courts of jurisdiction over constitutional challenges to the Federal Trade Commission’s structure, procedures, and existence by granting the courts of appeals jurisdiction to 'affirm, enforce, modify, or set aside' the Commission’s cease-and-desist orders."

The outcome: TheU.S. Supreme Court ruled unanimously that federal courts have jurisdiction to hear constitutional challenges to the structure of the FTC and the SEC. Itreversed theNinth Circuit’s ruling andremanded the case for further proceedings.

The case came on awrit ofcertiorari to theUnited States Court of Appeals for the Ninth Circuit. To review the lower court's opinion,click here.

Why it matters: The U.S. Supreme Court's decision in the case provided clarity on whether plaintiffs can raise constitutional challenges to the structure ofadministrative agencies in federal court without first going through administrative proceedings. The ruling affirmed that federal court’s maintain federal-question jurisdiction to hear challenges to the structure of the FTC and the SEC.

Timeline

The following timeline details key events in this case:

April 14, 2023: The U.S. Supreme Courtreversed the decision from theUnited States Court of Appeals for the Ninth Circuit andremanded the case for further proceedings.^[3]
November 7, 2022: The U.S. Supreme Court heard oral argument.
January 24, 2022: The U.S. Supreme Court agreed to hear the case.
July 20, 2021: Axon Enterprise, Inc. appealed to the U.S. Supreme Court.
January 28, 2021: TheUnited States Court of Appeals for the Ninth Circuit affirmed a district court ruling, dismissing Axon's constitutional challenge to the Federal Trade Commission's structure because the company had not raised the issue before the agency first.^[1]

Background

Federal Trade Commission (FTC) takes antitrust action against Axon

Axon Enterprise, Inc., a body camera company, acquired a competitor in 2018 and the Federal Trade Commission (FTC) opened an antitrust investigation. The FTC ordered Axon to undo the acquisition and turn the competitor company "into a 'clone' of Axon using Axon's intellectual property."^[1]

Axon sues the FTC

Axon challenged the FTC's antitrust demand, filing a lawsuit in a federal district court on January 3, 2020.^[1] Axon made the following three claims:^[1]

1) The FTC's administrative proceeding violated Axon's due process rights.

2) The FTC's structure violates Article II by providing improper insulation from the president. Axon argued in part that the double for-cause removal protections afforded to the FTC’sadministrative law judges unconstitutionally insulate them from presidential control.

3) Axon's acquisition of a competitor company did not violate antitrust law.

Lower courts hold that they lack jurisdiction over Axon's challenge

The district court dismissed Axon's case, saying it lacked jurisdiction.^[1] The court held that when Congress created the FTC's administrative review procedures it implied that district courts did not have authority to review constitutional challenges to the agency before the agency considered those challenges throughadjudication.^[1]

TheUnited States Court of Appeals for the Ninth Circuit affirmed the lower court's decision and Axon appealed to the U.S. Supreme Court.^[4]

Questions presented

Thepetitioner presented the following questions to the court:

Question presented:

“

Whether Congress impliedly stripped federal district courts of jurisdiction over constitutional challenges to the Federal Trade Commission’s structure, procedures, and existence by granting the courts of appeals jurisdiction to “affirm, enforce, modify, or set aside” the Commission’s cease-and-desist orders.^[5]

^[6]

”

Oral argument

The U.S. Supreme Court heard oral argument on November 7, 2022.

Audio

Audio of oral argument:^[7]

Your browser doesn't support the audio tag.

Transcript

Transcript of oral argument:[8]

Outcome

The court ruled unanimously that federal courts have jurisdiction to hear constitutional challenges to the structure of theFederal Trade Commission and theSecurities and Exchange Commission. Itreversed theUnited States Court of Appeals for the Ninth Circuit’s ruling andremanded the case for further proceedings.

JusticeElena Kagan delivered the opinion of the court. JusticeClarence Thomas delivered a concurring opinion and JusticeNeil Gorsuch delivered an opinion concurring in the judgment.^[2]^[9]

Opinion

Opinion of the court

JusticeElena Kagan delivered the opinion of the court, which argued that federal courts have jurisdiction to hear constitutional challenges to the structure of the FTC and the SEC. The court considered three factors to determine whether constitutional challenges of agency action fall under the jurisdiction of district courts. These factors are referred to as theThunder Basin factors, as they stem from the decision inThunder Basin Coal Co. v. Reich. The factors consider whether federal jurisdiction could “foreclose all meaningful judicial review” of a claim, whether the challenge is collateral to a statute’s review provisions, and whether the challenge falls outside of “the agency’s expertise.” After consideration of theThunder Basin factors, the court delivered the following opinion:^[9]

“

All threeThunder Basin factors thus point in the same direction—toward allowing district court review of Axon’s and Cochran’s claims that the structure, or even existence, of an agency violates the Constitution. For the reasons given above, those claims cannot receive meaningful judicial review through the FTC Act or Exchange Act. They are collateral to any decisions the Commissions could make in individual enforcement proceedings. And they fall outside the Commissions’ sphere of expertise. Our conclusion follows: The claims are not “of the type” the statutory review schemes reach. Id., at 212. A district court can therefore review them.^[6]

”

Concurring opinions

JusticeClarence Thomas delivered a concurring opinion. He agreed with the ruling and the precedent applied, however, he expressed concerns over constitutional concerns that could arise from the ruling:^[9]

“

I write separately, however, because I have 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.^[6]

”

JusticeNeil Gorsuch wrote an opinion concurring in the judgment, but argued against the use of theThunder Basin factors.^[9]

“

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-it-in-a-blender approach to jurisdiction imposes serious and needless costs on litigants and lower courts alike.^[6]

”

Text of the opinion

Read the full opinionhere.

Commentary about the case

Pre-decision commentary

Stone Washington argued in an article for theCompetitive Enterprise Institute that administrative law courts (ALCs) are responsible for executive overreach by administrative agencies and that cases such asAxon provide the opportunity to limit such authority. Washington wrote that “ALCs are just part of the administrative state’s seemingly unchecked growth in recent decades. Administrative law courts can deny citizens the right to a jury trial and the right to present or appeal a case before an Article III court. Nor are ALCs impartial. Agencies with ALCs appear to reign by their bureaucratic authority alone, operating beyond the separation of power constraints of the Constitution.”^[10]

Law professor Kent Barnett argued that a SCOTUS decision in favor ofAxon would not have a significant impact on agency enforcement. Barnett stated, according toReuters, “These challenges will prove disruptive in some degree to agency enforcement proceedings because they permit additional litigation… But that is not an unfair burden when Congress has exceeded its powers in fashioning the administrative state.”^[11]

In a blog post from theYale Journal on Regulation, Asheesh Agarwal argued that “by expanding its regulatory reach in ways that may exceed its mandate, the FTC could persuade the Court that companies need the ability to go into federal court immediately to challenge activities that exceed the agency’s statutory authority. Moreover, by pushing the envelope on rulemakings and policy guidance, the FTC may well lay the groundwork for the Court to revisit the FTC’s constitutionality in future cases.”^[12]

Post-decision commentary

Sean Heather, Senior Vice President of International Regulatory Affairs and Antitrust for theU.S. Chamber of Commerce, released a statement following the SCOTUS decision stating, “Today’s unanimous Supreme Court decision ensures businesses will get their day in court to challenge those procedures. They do not have to wait to raise constitutional claims until the end of the very unconstitutional procedures they seek to challenge.”^[13]

Troutman Pepper’s Consumer Financial Services practice argued that “because the Consumer Financial Protection Bureau’s (CFPB) administrative powers and processes are modeled after the FTC and SEC, the Supreme Court’s decision should apply to the CFPB, as well as other federal agencies with similar administrative enforcement powers. We also believe that, between the Court’s joint decision inAxon Enterprise andCochran and itsFree Enterprise ruling, a company can likely bring constitutional challenges against an agency in federal court at any point during an administrative enforcement process, without waiting until the agency starts an administrative proceeding by formally asserting alleged violations.”^[14]

Corbin K. Barthold wrote in an essay forLaw & Liberty magazine arguing against the unanimous nature of the decision. Barthold argued, “The Supreme Court’s cases on jurisdiction have a way of drawing lone dissents. The Court has often had—and benefited from having—that one curmudgeonly justice who errs on the side of keeping the federal judiciary to a limited agenda.Axon Enterprise Inc. v. FTC was a missed chance for someone to carry on the tradition.”^[15]

Impact

See also:Independent federal agency

The decision inAxon Enterprises, Inc. v. Federal Trade Commission allows individuals and businesses to challenge administrative action by the FTC and SEC in court without first completing agency proceedings. The SCOTUS decision permits individuals to circumvent administrative review procedures in certain situations and places constitutional limitations on administrative agencies. The decision in this case could also extend to other executive agencies.^[16]

October term 2022-2023

See also:Supreme Court cases, October term 2022-2023

The Supreme Court began hearing cases for the term on October 3, 2022. The court's yearly term begins on the first Monday in October and lasts until the first Monday in October the following year. The court generally releases the majority of its decisions in mid-June.^[17]