Supreme Court Endorses Streamlined Challenges to Agency Power

WASHINGTON — The Supreme Court made it easier on Friday to challenge the structure and authority of administrative agencies. In a unanimous ruling, the court said that people and companies with constitutional objections to agency power need not wait until administrative proceedings are completed before they can raise their arguments in court.

Justice Elena Kagan, writing for eight justices, said the substance of those arguments was not before the court.

“The challenges are fundamental, even existential,” she wrote. “They maintain in essence that the agencies, as currently structured, are unconstitutional in much of their work.”

But she added that “our task today is not to resolve those challenges; rather, it is to decide where they may be heard.”

The answer, she wrote, is that constitutional objections to agencies’ power may be brought in federal trial courts before the challenged enforcement actions are concluded.

The ruling resolved two cases, one involving the Federal Trade Commission and the other, the Securities and Exchange Commission.

The first case, Axon Enterprise v. Federal Trade Commission, No. 21-86, concerned a company that makes body cameras for law enforcement and was investigated by the F.T.C. as part of a merger review. Rather than waiting for the conclusion of the proceedings before the agency, the company tried to sue in a federal trial court in Arizona, arguing that the agency’s structure was unconstitutional and that it did not have the authority to review the merger.

Even as it rejected that attempt, a divided three-judge panel of the U.S. Court of Appeals for the Ninth Circuit said Axon’s position had force. “Axon’s argument makes sense from a policy perspective: It seems odd to force a party to raise constitutional challenges before an agency that cannot decide them,” Judge Kenneth K. Lee wrote for the majority.

The second case, Securities and Exchange Commission v. Cochran, No. 21-1239, concerned an accountant accused of misconduct by the S.E.C. The accountant, Michelle Cochran, similarly sought to challenge the agency’s structure in federal court in Texas before administrative procedures were completed. The Fifth Circuit agreed that she should be able to bring her claims, creating the sort of conflict between federal appeals courts that often prompts Supreme Court review.

Justice Kagan wrote that it would be pointless to allow only after-the-fact challenges.

“The harm Axon and Cochran allege is ‘being subjected’ to ‘unconstitutional agency authority,’” she wrote. “That harm may sound a bit abstract; but this court has made clear that it is ‘a here-and-now injury,’” she added, quoting an earlier opinion.

“And — here is the rub — it is impossible to remedy once the proceeding is over, which is when appellate review kicks in,” she wrote.

She added: “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.”

Justice Neil M. Gorsuch voted with the majority but did not adopt its reasoning, which he said was needlessly complicated. He said he would have resolved the cases under a federal law that says “district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws or treaties of the United States.”

Justice Gorsuch wrote that the plain words of the law required allowing the suits at issue to be filed in federal court, emphasizing what he wrote were the key ones: “Not may have jurisdiction, but shall. Not some civil actions arising under federal law, but all.”