# Axon Enterprise v. FTC

Note: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES
Syllabus
AXON ENTERPRISE, INC. v. FEDERAL TRADE COMMISSION ET AL. CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT No. 21–86. Argued November 7, 2022—Decided April 14, 2023
Michelle Cochran and Axon Enterprise, Inc.—respondents in separate enforcement actions initiated in the Securities and Exchange Commission (SEC) and the Federal Trade Commission (FTC)—each filed suit in federal district court challenging the constitutionality of the agency proceedings against them. When, as in the enforcement actions against Cochran and Axon, a Commission elects to institute administrative proceedings to address statutory violations, it typically delegates the initial adjudication to an Administrative Law Judge (ALJ) with authority to resolve motions, hold a hearing, and then issue a decision. As prescribed by statute, a party objecting to the Commission proceedings makes its claims first within the Commission itself, and then (if needed) in a federal court of appeals. But the parties here sidestepped that review scheme and brought their claims in district court, seeking to enjoin the administrative proceedings. Cochran and Axon asserted that the tenure protections of the agencies’ ALJs render them insufficiently accountable to the President, in violation of separation-of-powers principles. Axon also attacked as unconstitutional the combination of prosecutorial and adjudicatory functions in the FTC. Each suit premised jurisdiction on district courts’ ordinary federal-question authority to resolve “civil actions arising under the Constitution, laws, or treaties of the United States.” 28 U. S. C. §1331.
Held: The statutory review schemes set out in the Securities Exchange Act and Federal Trade Commission Act do not displace a district court’s federal-question jurisdiction over claims challenging as unconstitutional the structure or existence of the SEC or FTC. Pp. 7–18.
(a) Although district courts may ordinarily hear challenges to federal agency actions by way of §1331’s jurisdictional grant for claims “arising under” federal law, Congress may substitute an alternative review scheme. In both the Exchange Act and the FTC Act, Congress did so: It provided for review of claims about agency action in a court of appeals following the agency’s own review process. The creation of such a review scheme divests district courts of their ordinary jurisdiction over covered cases. But the statutory scheme does not necessarily extend to every claim concerning agency action. See, e.g., Thunder Basin Coal Co. v. Reich, 510 U. S. 200, 207–213. This Court has identified three considerations—commonly 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.” Id., at 212. First, could precluding district court jurisdiction “foreclose all meaningful judicial review” of the claim? Id., at 212–213. Next, is the claim “wholly collateral” to the statute’s review provisions? Id, at 212. And last, is the claim “outside the agency’s expertise”? Ibid.
The Court applied similar reasoning in Elgin v. Department of Treasury, 567 U. S. 1, which involved a statutory review scheme that directed federal employees challenging discharge decisions to seek review in the Merit Systems Protection Board (MSPB) and then, if needed, in the Federal Circuit. Elgin filed suit in district court when the government fired him for failing to register for the draft. This Court held that the district court lacked jurisdiction even though Elgin mainly claimed that the draft’s exclusion of women violated the Equal Protection Clause. Although the MSPB might not be able to hold the draft law unconstitutional, the Court of Appeals could—and that was sufficient to ensure “meaningful review” of Elgin’s claim. Id., at 21. Further, Elgin’s challenge to his discharge was neither collateral to the MSPB’s ordinary proceedings nor unrelated to its expertise in the employment context.
In contrast, the Court in Free Enterprise Fund applied the Thunder Basin factors to determine that an accounting firm’s Article II challenge to the structure of the Public Company Accounting Oversight Board—an agency regulating the accounting industry under the SEC’s oversight—landed outside the Exchange Act’s review scheme. Because not all Board action culminates in Commission action—which alone the statute makes reviewable in a court of appeals—the Court determined that the Exchange Act provided no “meaningful avenue of relief.” 561 U. S., at 490–491. And even if the SEC took up a matter arising from the Board’s investigation of the firm, the firm’s constitutional challenge to the Board’s existence would be “collateral” to the subject of that proceeding, as well as “outside the Commission’s competence and expertise.” Ibid. Pp. 7–10.
(b) The Court must decide if the constitutional claims here are “of the type” Congress thought belonged within a statutory review scheme. Thunder Basin, 510 U. S., at 212. Like the accounting firm in Free Enterprise Fund, Cochran and Axon assert sweeping constitutional claims: They charge that the SEC and FTC are wielding authority unconstitutionally in all or broad swaths of their work. Applying the Thunder Basin factors here, the Court comes out in the same place as in Free Enterprise Fund.
First, preclusion of district court jurisdiction “could foreclose all meaningful judicial review.” Id., at 212–13. Adequate judicial review does not usually demand a district court’s involvement. And the statutes at issue in this case provide for judicial review of adverse SEC and FTC actions in a court of appeals. But Cochran and Axon assert a “here-and-now injury” from being subjected to an illegitimate proceeding, led by an illegitimate decisionmaker. Seila Law LLC v. Consumer Financial Protection Bureau, 591 U. S. ___, ___. That injury is impossible to remedy once the proceeding is over, which is when appellate review kicks in. Judicial review of the structural constitutional claims would thus come too late to be meaningful. To be sure, “the expense and disruption” of “protracted adjudicatory proceedings” on a claim do not alone justify immediate review. FTC v. Standard Oil Co. of Cal., 449 U. S. 232, 244. But the nature of the injury here is different: As with a right “not to stand trial” that is “effectively lost” if review is deferred until after trial, see Mitchell v. Forsyth, 472 U. S. 511, 526, 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.
The collateralism factor also favors Axon and Cochran. The 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. Elgin, 567 U. S., at 22. The parties’ claims are thus “ ‘collateral’ to any Commission orders or rules from which review might be sought.” Free Enterprise Fund, 561 U. S., at 490.
Finally, Cochran’s and Axon’s claims are “outside the [Commissions’] expertise.” Thunder Basin, 510 U. S., at 212. The Court in Free Enterprise Fund determined that claims that tenure protections violate Article II raise “standard questions of administrative” and constitutional law, detached from “considerations of agency policy.” 561 U. S., at 491. That statement covers Axon’s and Cochran’s claims that ALJs are too far insulated from the President’s removal authority. And Axon’s constitutional challenge to the combination of prosecutorial and adjudicative functions in the FTC is similarly distant from the FTC’s “competence and expertise.” Ibid. The Commission knows a good deal about competition policy, but nothing special about the separation of powers. For that reason, “agency adjudications are generally ill suited to address structural constitutional challenges”—like those maintained here. Carr v. Saul, 593 U. S. ___, ___. The Court concludes that the claims here are not the type the statutory review schemes at issue reach. Pp. 10–18.
No. 21–86, 986 F. 3d 1173, reversed and remanded; No. 21–1239, 20 F. 4th 194, affirmed and remanded.
This work is in the public domain in the United States because it is a work of the United States federal government (see 17 U.S.C. 105).
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