ARGUMENT ANALYSIS

Justices seem receptive to opening up early challenges to agency proceedings

The justices heard nearly three hours of arguments Monday in a pair of cases challenging the traditional framework of agency review: Axon Enterprise v. Federal Trade Commission and Securities and Exchange Commission v. Cochran. If those arguments tell us anything, several justices are strongly inclined to accept the invitation of these cases to reshape the traditional framework, under which challenges to agency proceedings have to wait until the end of those proceedings before they can get into federal court, even if the proceedings stretch on for years and years (as they so often do).

The two cases involve substantively identical statutes that govern challenges to final orders issued by the FTC and the SEC. In each case, the statutes provide that the sole method for challenging those orders is a petition for review in the court of appeals. In both cases, the targets of the agencies’ investigations did not wait for the proceedings to conclude, but instead went straight to a federal district court. In both cases, the plaintiff contended that the agency proceedings are so biased that they offend the due process clause and also that the rules for removal of the ALJs (administrative law judges) who eventually would hear any proceedings violate the Constitution’s appointments clause.

Several of the justices sounded firmly and irrevocably opposed to the government’s argument that the district courts cannot hear these cases. Justice Neil Gorsuch, for example, repeatedly asked counsel to “Tell me what I’m missing.” For him, the general grant of district court jurisdiction in  28 U.S.C. § 1331 was enough to resolve the case. As he put it on one of several occasions when he pressed that point:

1331 says that district courts have jurisdiction over these claims absent any other consideration. … Then we have the FTC Act that says cease-and-desist orders can be reviewed in the courts of appeals rather than the district courts. Those are the two statutes we have. We don’t have a cease-and-desist order here. I would have thought that might have been the end of the game. … Again, what am I missing?

Malcolm Stewart (presenting argument on behalf of the government) suggested at one point that a general provision in Section 704 of the Administrative Procedure Act shows that the review of the final order is supposed to include review of any preliminary action the claimant might challenge. Gorsuch interrupted: “And what do you say to the argument that the sentence you’re pointing to in 704 speaks to an agency action that’s not directly reviewable, [and that the same statute defines] agency action … as a rule, an order, a license, a sanction, or relief.” For Gorsuch, because “we have none of those things here,” “we don’t have agency action” that would bring either the APA or the FTC Act into play.

Chief Justice John Roberts and Justice Samuel Alito seemed equally unmoved by Stewart’s presentation. Roberts, for example, emphasized the court’s decision in Free Enterprise Fund v. Public Company Accounting Oversight Board – in which the Supreme Court approved an action in federal district court raising an appointments clause challenge notwithstanding the availability of review in the court of appeals at the conclusion of the proceeding. For Roberts, that case seemed to pose “a pretty insurmountable barrier” to Stewart’s argument. When Stewart resisted that characterization, Roberts responded that he “thought it was pretty clear in that opinion” – which he himself wrote – “that the … grant of judicial jurisdiction in other forums wouldn’t be read as an implied removal of jurisdiction in 1331.”

Alito was even more biting, as he challenged Stewart’s argument that this case is different from Free Enterprise Fund because the claimants could get “meaningful review” of their claims at the end of the agency process. Alito interjected: “Do you think that meaningful review means no review? Do you think that a party gets meaningful review if, at the end of the administrative proceeding, it can’t get any review of its claim?” For Alito, the basic problem was with the irrelevance of review after the fact to a claim challenging the agency’s basic organization: “What sense does it make for a claim that goes to the very structure of the agency having to go through the administrative process?”

Taking a slightly different approach, Justice Brett Kavanaugh seemed less definitively settled in his views, but he apparently was only deciding between a vote against the government on the straightforward reasoning Gorsuch offered and a narrower vote against the government based on the so-called Thunder Basin factors (the basis for the opinion Roberts wrote in Free Enterprise Fund).

Thus, at one point, Kavanaugh commented to Gregory Garre (representing Michelle Cochran in the SEC case) that

your broader argument … would suggest, I think, starting over on how the court analyzes this whole area. And maybe it’s just out of sympathy for the district court judges and court of appeals judges who have to deal with the fallout from that. But isn’t a simpler way to deal with this just to [say that] a challenge to the structure of the agency is wholly collateral, end of story?

For Kavanaugh, it seemed at least relevant that “there’s a lot of precedent interpreting that text, Thunder Basin, Elgin [a similar case involving challenges to federal employment procedures], Free Enterprise Fund … And so kind of starting over on all that would create kind of a tsunami of litigation.”

Even Justice Elena Kagan was skeptical of the government’s argument – and it is just about impossible to imagine the government finding five votes to prevail if it can’t persuade her. She had serious questions for both sides about application of the analysis from Free Enterprise Fund and Thunder Basin, but her most pointed comments were to Stewart, underscoring his persistent efforts to avoid analysis of those cases:

I guess I was pretty surprised when I read your brief, Mr. Stewart, because, you know, three times in the last couple of decades we’ve confronted a case like this one, and three times we’ve used Thunder Basin to decide it. And your brief doesn’t talk about Thunder Basin until page 51, and it doesn’t talk about Thunder Basin at all in your summary of the argument. And I guess as I read your brief, I’m trying to figure out, do you think you lose under Thunder Basin? Because I thought Thunder Basin was the law here.

I’ve omitted many topics that the justices addressed during the back-to-back arguments Monday morning. The problem for the government is that so much of the detailed discussion sounded like efforts to come up with a specific form of words to describe exactly how the justices could explain voting against the government without making it too easy for district court litigation to interfere with the routine processes of administrative agencies. I don’t think there is much doubt that a strong majority of justices will find a way to do just that.