[21-86] Axon Enterprise, Inc. v. Federal Trade Commission

Axon Enterprise, Inc. v. Federal Trade Commission

Wikipedia · Justia (with opinion) · Docket · oyez.org

Argued on Nov 7, 2022.
Decided on Apr 14, 2023.

Petitioner: Axon Enterprise, Inc..
Respondent: Federal Trade Commission, et al..

Advocates:

• Paul D. Clement (for the Petitioner)
• Malcolm L. Stewart (for the Respondents)

Facts of the case (from oyez.org)

Axon Enterprises manufactures personal body cameras for law enforcement. In 2018, it acquired a competitor body camera company called Vievu. After the acquisition, the Federal Trade Commission informed Axon that the transaction raised antitrust concerns and that the Commission would be investigating.

At the end of 2019, the FTC informed Axon of its demands, which it could either accede or face administrative proceedings. Axon filed a lawsuit in federal district court alleging that (1) the FTC’s administrative proceeding violates Axon’s Fifth Amendment due process rights, (2) the FTC’s structure violates Article II by providing improper insulation from the President, and (3) Axon’s acquisition of Vievu did not violate antitrust law.

The district court dismissed Axon’s complaint, holding that the FTC’s statutory scheme required Axon to raise its constitutional challenge first in the administrative proceeding. The U.S. Court of Appeals for the Ninth Circuit affirmed, finding that Congress impliedly barred jurisdiction in federal district court.

Question

Do federal courts have jurisdiction to hear constitutional challenges to the Federal Trade Commission’s structure, procedure, and existence, or must such challenges be raised first in the administrative proceeding?

Conclusion

Federal courts have federal-question jurisdiction to hear constitutional challenges to the structure or existence of the SEC or FTC notwithstanding statutory review schemes set out in the Securities Exchange Act and Federal Trade Commission Act. Justice Elena Kagan authored the majority opinion holding that the Federal Trade Commission Act (in 21-86) and the Securities Exchange Act (in 21-1239) did not preclude district courts’ ordinary subject-matter jurisdiction to hear challenges to those agencies’ structure, procedure, or existence.

The Court considered three factors, known as the Thunder Basin factors, to determine whether particular claims concerning agency

action are “of the type Congress intended to be reviewed within th[e] statutory structure,” and thus would preclude district court jurisdiction. The three factors are: (1) Could precluding district court jurisdiction “foreclose all meaningful judicial review” of the claim? (2) Is the claim “wholly collateral” to the statute’s review provisions? (3) Is the claim “outside the agency’s expertise”?

The Court concluded that all three factors supported the conclusion that district courts retained subject-matter jurisdiction.

First, preclusion of district court jurisdiction “could foreclose all meaningful judicial review” because Axon and Cochran will lose their rights not to undergo the complained-of agency proceedings if they cannot assert those rights until the proceedings are over.

Second, the claims are “wholly collateral” to the statutes’ review provisions because challenges to the Commissions’ authority have nothing to do with either the enforcement-related matters the Commissions regularly adjudicate or those they would adjudicate in assessing the charges against Axon and Cochran.

Finally, the claims are outside the agencies’ expertise because neither specializes in constitutional issues like separation of powers.

Justice Clarence Thomas authored a concurring opinion to express “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.”

Justice Neil Gorsuch authored an opinion concurring in the judgment, arguing that he would reach the same conclusion as the majority by applying only 28 U.S.C. § 1331, which establishes federal-question jurisdiction of federal courts.