On Monday, November 7, the Supreme Court heard argument in Axon Enterprise, Inc. v. FTC and SEC v. Cochran to decide whether a party subject to an FTC or SEC administrative proceeding can simultaneously challenge the constitutionality of an administrative proceeding, or even of the agency itself, in federal district court rather than waiting for final agency action. At least five Justices expressed some measure of support for the private parties’ arguments, which indicates that the Court may permit certain kinds of collateral constitutional attacks (e.g., due process and appointments clause claims) at the outset of administrative proceedings.
Although predicting the outcome of any case from the oral argument is extremely difficult, three Justices – Neil Gorsuch, Samuel Alito, and Clarence Thomas – expressed strong support for finding in Axon’s and Cochran’s favor. Through their questions, they implied that 28 U.S.C. Section 1331, which grants federal district courts “original jurisdiction of all civil actions arising under the Constitution of the United States,” provides a clear grant of jurisdiction over constitutional claims and neither the FTC Act nor the Securities Exchange Act of 1934 (“the Exchange Act”) could strip district courts of that jurisdiction. They also suggested that Free Enterprise Fund v. PCAOB requires a finding for the companies. In PCAOB, the Court held that a district court had jurisdiction to hear an appointments clause challenge to PCAOB’s structure despite the fact that the SEC had not yet issued a final order against Free Enterprise Fund.
Other justices appeared to favor the private parties, but not as overtly. Chief Justice John Roberts’s questions suggested that PCAOB may prove to be an insurmountable barrier to the government’s claims and that the availability of jurisdiction in other forums (i.e., the court of appeals) under the FTC Act and the Exchange Act clearly does not act as an implied removal of jurisdiction from Section 1331. Justice Brett Kavanaugh’s questions indicated that he believes that the issue may be decided solely by reference to the “wholly collateral” factor of the Thunder Basin test, which courts have used to guide determinations about when a party may bring an Article III challenge to agency proceedings before those proceedings have concluded. Thunder Basin Coal Co. v. Reich, 510 U.S. 200 (1994) (holding that the statutory review scheme of the Federal Mine Safety and Health Amendments Act of 1977 precludes a district court from exercising subject-matter jurisdiction over a pre-enforcement challenge to the Act). He stated that clarity, certainty, and speed counseled in favor of permitting district courts to hear constitutional claims.