The Supreme Court opened the pathway for constitutional challenges against two powerful regulatory agencies to be heard in federal court on Friday.
In a unanimous decision, the Court ruled that those facing complaints from the Securities and Exchange Commission (SEC) and the Federal Trade Commission (FTC) can dispute their constitutionality directly in federal court rather than going through the agency’s proceedings. Justice Elena Kagan wrote in the majority opinion, stating that the “ordinary statutory review scheme does not preclude a district court from entertaining these extraordinary claims.”
Typically, when an agency chooses to enforce statutory violations through its own administrative proceedings, the one facing the complaint must go through the process with an in-house administrative law judge (ALJs). In the two cases before the Court, however, the plaintiffs circumvented the process, suing the agency in federal court without waiting for the ALJ decision.
In deciding Axon Enterprise v. FTC and SEC v. Cochran, the Court ruled this is a permissible option, reigning in some agency power and opening the door for further constitutional challenges.
Victory!
In a historic ruling in SEC v. Cochran, #SCOTUS has held that Texas Accountant Michelle Cochran has the right to challenge the constitutionality of her Administrative Law Judge’s removal protections in federal court before undergoing an administrative proceeding.
— New Civil Liberties Alliance (@NCLAlegal) April 14, 2023
The plaintiffs, manufacturer Axon Enterprise and accountant Michelle Cochran, argue that ALJs are insufficiently accountable to the President, a claim Kagan noted is “existential” and would make the agences “unconstitutional in much of their work.”
The Ninth Circuit previously rejected Axon’s lawsuit, holding that it did not have jurisdiction to hear its claims, which must go through the FTC’s administrative proceeding. Meanwhile, the Fifth Circuit had determined that the district court did have jurisdiction to hear Cochran’s claim against the SEC.
“For decades, Americans have been haled before agencies which act as investigator, prosecutor, judge and their first court of appeal,” said New Civil Liberties Alliance Senior Litigation Counsel Peggy Little, who represented Cochran, said in a statement. “Michelle Cochran had the courage to insist that any hearing that put her CPA license at stake must be constitutional. And today the Supreme Court unanimously agreed that she is entitled to her day in court before the constitutional injury takes place.”
After being “stuck” in the SEC system for seven years, Cochran said she is “thrilled” by the justices’ decision.
“From the first hearing forward, it was clear that the odds were stacked against me,” she said. “I am thrilled that every one of the Supreme Court justices agree that whether this costly, bruising and biased system is constitutional must be heard by a real judge before I have to undergo a second one.”
Justice Clarence Thomas filed a concurring opinion, and Justice Neil Gorsuch—the only one who did not join the majority—filed a separate opinion concurring in judgement.
Thomas stated that he had “grave doubts about the constitutional propriety of Congress vesting administrative agencies with primary authority to adjudicate core private rights.”
“[It] may violate due process by empowering entities that are not courts of competent jurisdiction to deprive citizens of core private rights,” Thomas wrote.
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