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Heretical Thoughts on Axon v. FTC

If a federal agency hauls you into its administrative tribunal, may you file a separate lawsuit, in federal court, challenging the constitutionality of the tribunal itself? Last month, the Supreme Court said yes. It did this in two cases, Axon Enterprise, Inc. v. FTC and SEC v. Cochran, but for simplicity’s sake let’s home in on one of them, Axon, which involved the Federal Trade Commission (FTC).

There is much to be said for the result. The FTC’s in-house court is practically rigged—the agency almost never loses. And it might well be unconstitutional, just as the underlying lawsuit alleges, and as Justice Thomas argued in a separate opinion. The ruling also makes sense. The FTC Act says at Section 5(c)—15 USC § 45(c)—that “an order of the Commission” shall be reviewable in a federal court of appeals. The federal question statute—28 USC § 1331—says that the federal district courts shall have jurisdiction over “all civil actions arising under” the Constitution or federal law. The lawsuit does not contest “an order of the Commission.” It contests the constitutionality of the whole proceeding. That’s a claim that Section 1331 normally gives federal district courts jurisdiction to consider.

Sound result, sound reasoning. What more could one want?

Actually, one thing. Axon was unanimous—and it needed a dissent.

An Approach “Productive of Nothing More Than Chaos”

The FTC’s five commissioners decide whether to file a complaint with the agency’s administrative law judge (ALJ), and they also review the ALJ’s decision before the case heads to the federal court of appeals. Meanwhile, the ALJ enjoys “dual-layer” removal protection: both he and his bosses—the commissioners—can be fired only for cause. The petitioner before the Supreme Court—Axon Enterprise, a company known for making police body cameras—is a respondent in a proceeding before the FTC. Axon believes that the commissioners’ combination of functions (prosecutor plus judge) and the ALJ’s dual-layer job protection violate the Constitution. Rather than endure a trial before the ALJ, as well as an appeal before the commissioners, before pressing its constitutional challenges in a federal court of appeals, Axon proceeded directly to federal district court. This, the Supreme Court ruled, Axon may do.

That Congress “specif[ied]” in Section 5(c) “a different method to resolve claims about agency action,” the justices unanimously concluded, does not mean that it “implicitly” narrowed the district courts’ jurisdiction to hear cases under Section 1331. The majority opinion, authored by Justice Kagan, reaches this result by applying a three-factor test derived from Thunder Basin Coal Co. v. Reich (1994). In all, eight justices joined in the opinion—and, thus, in the application of the Thunder Basin factors. They found as follows: First, “precluding district court jurisdiction” would “foreclose all meaningful judicial review” of Axon’s claims. (This because Axon is suffering a “here-and-now” injury—more on that later.) Second, those claims are “wholly collateral” to the FTC Act’s “review provisions.” And third, “the claim[s]” are “outside the agency’s expertise.”

Writing separately, Justice Gorsuch concurred in the judgment, but rejected Thunder Basin’s “judge-made, multifactor balancing test.” He scoffed at “Thunder Basin’s throw-it-in-a-blender approach to jurisdiction.” He derided the “incoherence” of “the Thunder Basin project.” He urged the Court to get off “the Thunder Basin roller coaster” and start “resolving jurisdictional disputes by looking to the terms of the statutes Congress has adopted.” “Nothing,” he insisted, “gives courts authority to engage in this business of jurisdiction-stripping-by-implication.”

I’m all for kicking holes in Thunder Basin. But it does not follow, as Gorsuch maintains, that judges should never find an “implicit” congressional intention, in a statute, to “divest district courts of jurisdiction in favor of certain agency proceedings.”

Say you think a state-court judgment is unconstitutional, and you want a federal judge to overturn it. Invoking Section 1331, you sue in federal district court. Your complaint, I assure you, will be dismissed. Why? Not because a statute explicitly divests the district courts of jurisdiction. Rather, because 28 USC § 1257 says that “final judgments . . . rendered by the highest court of a State . . . may be reviewed by the Supreme Court.” Rooker v. Fidelity Trust Co. (1923) finds that this statute (implicitly!) strips the lower federal courts of jurisdiction.

For that matter, say you think a proceeding before the FTC is unlawful, and you want a federal court to enjoin it. The Administrative Procedure Act permits federal courts to review an “agency action” once it is “final” (e.g., when an agency’s internal trial and appeal are complete). In FTC v. Standard Oil Co. of California (1980), a company asked a federal court to block a proceeding in the FTC’s administrative tribunal. The company argued that the prosecution was baseless and politically motivated. No matter, the Court said. Comply with the APA, and await final agency action, before seeking review in federal court. Nothing in Standard Oil hints that, if only the company had put Section 1331 to creative use, it could have stayed in federal court.

Rooker and Standard Oil stand on a straightforward assumption: Congress crafts distinct jurisdictional schemes in the expectation that they will be used. To be sure, specific grants of jurisdiction don’t always trump general ones. It depends on the circumstances. (I suspect, for example, that Congress has gotten better, over time, about using precise language when it wants to close the door on jurisdiction.) Judges must try to make statutes fit together. To accept that specific jurisdictional statutes sometimes trump general ones is not, as Gorsuch supposes, to “froth” the “plain statutory text” with “factors of [judges’] own design.” It is simply to introduce a modicum of common sense into statutory interpretation, the better to ferret out Congress’s design. In hard cases, “judgment” is not a dirty word. (That great textualist, Justice Scalia, understood this.)

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.

Gorsuch is demanding something very like strict construction. (And not for the first time.) Section 1331 says that district courts “shall” have jurisdiction over “all” civil actions “arising under” the Constitution or laws of the United States. Gorsuch: “End of case, right?” But by this logic, litigants before the FTC would never have to follow Section 5(c) and wait for “an order of the Commission” before suing in federal court. They could always head directly to federal court by trying to stand their challenge on the adequacy of the complaint or the nature or legitimacy of the proceeding itself. And that would make a hash of Congress’s work—as many judges have recognized. They have instructed parties not to “short circuit” Congress’s “procedure for judicial review of administrative actions.” Parties “may not bypass” the “specific method” for review “that Congress has provided,” they have said, “simply by suing the agency . . . under 1331.” They have declared that federal jurisdiction “is not an escape hatch for litigants to delay . . . administrative action.” The point of “having a special review procedure in the first place,” they have observed, is to avoid “bifurcat[ed] jurisdiction,” “duplication,” and “inconsistency.” They have warned that ignoring Congress’s specific review schemes “would be productive of nothing more than chaos.”

Granted, a litigant that uses Section 1331 to invoke jurisdiction might still lack a cause of action. It is probable that only a constitutional claim will do. But many distinguished judges, upon considering this point, have still spotted the camel’s nose inside the tent. Here is an example: “An exception to an otherwise exclusive scheme for constitutional challenges in general, or facial attacks on a statute in particular, or some other as-yet-undefined category of constitutional claims”—this is Judge Srinivasan, joined by Judge Randolph and then-Judge Kavanaugh—“would encourage” parties “to frame their challenges to the Commission’s actions in those terms and thereby earn access to another forum.” (“We doubt,” they go on, that “Congress intended that result.”) Here’s another one: “The Bank has been called upon, much to its chagrin, to participate in a proceeding that lies beyond what [it] believes to be [the agency’s] lawful powers”—this time we have Judge Starr, joined by Judges Silberman and Sentelle—yet it must “patiently await the denouement of proceedings within the Article II branch.” In all these judges’ view (unless Kavanaugh, who went with the crowd in Axon, has changed his mind?), a constitutional claim should not be a ticket out of an agency proceeding.

There is nothing unusual, by the way, about making a party slog its way to relief. When things go sideways, constitutionally speaking, in state criminal trials, for instance, criminal defendants are almost never allowed to run to federal court for help. Some people suffer the ordeal of wrongful prosecution, and Axon might have had to do the same. The Axon majority responds—and Gorsuch agrees—that Axon was facing a special “here-and-now” injury, in the form of “subjection to an unconstitutionally structured decision-making process.” But tell that to the criminal defendant from whom the government withholds evidence, or who suffers racially biased jury selection. From the victim’s perspective, the harm of an unjustified proceeding is the harm of an unjustified proceeding. (Notice too that nothing in the text of Section 1331 lets Gorsuch create a special rule for supposed “here-and-now” injuries.)

If what we care about is plain statutory text, perhaps what we should focus on is the text of the APA—Congress’s effort (long after it enacted Section 1331) to codify the federal courts’ jurisdiction over the administrative state. A court’s power to review a final agency action, under the APA, includes the power to review related preliminary actions. According to Gorsuch, Axon is “not subject to,” and “do[es] not seek review of,” any such “thing”—but Standard Oil disagrees. The “issuance of [a] complaint” by the FTC, it concludes, is indeed a preliminary “agency action.” Axon believes that the FTC’s complaint is ultra vires. The APA funnels an attack on this preliminary agency action through “the special statutory review proceeding” that Congress has created for the agency in question. Under the APA, therefore, Axon must proceed before the FTC, obtain “an order of the Commission,” and then challenge the filing of the complaint before a federal court of appeals. End of case, right?

A Curmudgeon’s Guide to Jurisdiction

The judicial branch’s jurisdiction is constrained by the Constitution and defined by Congress. But the Supreme Court gets to decide for itself what all that means. Surprise, surprise: the Court is good at convincing itself of its own power to act. I readily admit that I’m quoting a justice writing for himself alone when I suggest that “federal judges” be “careful to construe their own authority strictly.” Or when I urge them to “avoid gratuitous exercise[s] of the judicial power.” Or when I implore them not to “rush out and meet the prospective constitutional litigant as he approaches [their] doors.”

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.

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