FTC Gets Yellow Card over Post-Lucia Constitutional Concerns
After Free Enterprise Fund and Lucia, the constitutionality of independent agency adjudications became an open question. This legal uncertainty, in turn, engendered a spate of original actions brought by parties in ongoing adjudications, alleging that the presiding ALJ is impermissibly insulated from presidential management by “double layer” tenure protections.
To my knowledge, 100% of these cases have foundered on the rocks of implied preclusion and administrative exhaustion. That is, circuit courts uniformly have concluded that Congress intended for these constitutional challenges to be funneled first through the agency process, before the regulated parties could get their day in an Article III court.
Last month, in Axon v. FTC, a split CA9 panel became the latest circuit court to deny Article III jurisdiction over a post-Lucia challenge to an ongoing administrative adjudication.
Axon, a body cameras manufacturer, incurred the FTC’s interest after the company’s purchase of a competitor. In late 2019, the FTC offered onerous terms to settle alleged antitrust violations. If Axon refused, the agency threatened to initiate an administrative proceeding against the company.
In response, Axon filed an original action in federal district court challenging the constitutionality of FTC adjudications, on both due process and FEF/Lucia-based claims. The district court dismissed the case, determining that Congress impliedly precluded jurisdiction over Axon’s suit. On appeal, a split CA9 panel reluctantly affirmed.
Judge Kenneth Lee’s majority opinion conceded that “it makes little sense to force a party to undergo a burdensome administrative proceeding to raise a constitutional challenge against the agency’s structure before it can seek review from the court of appeals.” Lee further allowed that the panel would have asserted Article III jurisdiction over the controversy, “if we were writing on a clean slate.” Nevertheless, the majority felt bound by Supreme Court precedent, as has every other circuit court to consider the matter.
In dicta, the majority took pains “not to minimize Axon’s serious concerns about how the FTC operates.” The panel noted that “Axon raises substantial questions about whether the FTC’s dual-layered for-cause protection for ALJs violates the President’s removal powers under Article II.” The court also acknowledged “legitimate questions about whether the FTC has stacked the deck in its favor in its administrative proceedings . . . Axon claims—and FTC does not appear to dispute—that FTC has not lost a single case in the past quarter-century.” Cheekily, the court observed, “[e]ven the 1972 Miami Dolphins would envy that type of record.”
Dissenting in part, Judge Bumatay argued that Supreme Court precedent allows—and law of the circuit compels—federal courts to hear “existential” challenges to administrative agencies, such as the one brought by Axon.
Although the agency ultimately carried the day, the panel clearly was troubled by the status quo of the FTC’s in-house adjudications.
More on Axon v. FTC
Until I read Axon, I’d not known that federal antitrust statutes are enforceable by *either* the Justice Department or the FTC. That’s weird! I’ve heard of Congress delegating shared decision-making authority, but I’ve never heard of redundant enforcement responsibilities shared between independent and executive agencies.
Compounding the weirdness, the two agencies employ different procedures. The Justice Department brings its enforcement actions before an Article III court. The FTC, by contrast, can bring its enforcement actions before an administrative adjudication.
To avoid coordination problems, the two agencies manage their overlapping jurisdiction through an informal “clearance” process. Axon alleges that this process is a “black box,” and that the government offers no explanation for why some parties get their day in federal court, while others are required to undergo a prosecution before the FTC, where the agency hasn’t lost in 25 years.
As discussed in the previous section, the panel majority was sympathetic to Axon’s due process claims against the clearance process. Ultimately, however, the panel required the company to first exhaust these arguments at the FTC.
Would the CA9 Majority Go Nuclear?
A couple month ago, I blogged about CA9’s *limited* en banc procedures. Remember, in the Ninth Circuit, the full court (29 active judgeships) votes whether to grant a party’s petition (or a judge’s request) for an en banc rehearing. If a majority (of the full court) grants the petition/request, then the rehearing is performed by a subset panel of 11 judges, comprised of the Chief Judge and 10 additional judges drawn by lot.
In fact, CA9’s rules allow for one more step in the process. According to Circuit Rule 35-3, “in appropriate cases, the Court may order a rehearing by the full court following a hearing or rehearing en banc.” General Order 5.8 further establishes two pathways to a full court rehearing: a party’s petition or a judge’s sua sponte request. Either way, the ultimate decision is made by a vote of all active judges.
I can find no instance of CA9 resorting to a full court rehearing. The court’s reticence is understandable. After all, the full court looks more like a small legislature than a judicial tribunal. At 29 active judges, CA9’s bench exceeds the number of Senators in the first Congress! I can’t even wrap my head around how such a full court proceeding would work. For example, imagine the difficulty of parsing meaning from a plurality holding! Doing so for nine justices is hard enough, but how about 29 judges?
Despite these obvious concerns, I wonder whether circumstances are aligning such that CA9 might kick the tires on its full court proceedings.
Here’s why. At its core, the impetus for a full court rehearing would be the rapid shift in CA9’s ideological composition over the last four years. Before Trump, Democratic-appointed judges held an 11-seat majority; at present, it’s a three-seat majority. The court’s new balance makes it much more likely that an 11-judge panel would draw a majority of Republican-appointees. We know, moreover, that this math weighs on the court’s mind. In a blockbuster article, based on interviews with anonymous CA9 judges, the LA Times reported that members of the court’s Democratic majority (16 of 29 active judges) would consider denying a limited en banc rehearing rather than risk the ~30% chance that the 11-judge bench would draw a majority of Republican appointees.
The upshot is that judges reportedly are playing political games with the court’s en banc procedures. Further, I’ve blogged about instances where this political gamesmanship seems to be occurring.
So, CA9’s Democratic-appointed majority is willing to play hardball on votes over whether to undertake a limited en banc rehearing. But does the hardball stop there?
That’s the question in my mind on reviewing United States v. Collazo. Setting aside the law and facts of this criminal case, a limited en banc panel voted 6-to-5 along clean partisan lines, with the Republican-appointed judges carrying the majority.
In their dissent, the five Democrat-appointed judges claim that the majority contravened long-established law of the circuit. Given these circumstances, Collazo might present a tempting test case—if there’s any appetite on the Ninth Circuit to inaugurate full court en banc proceedings.
Will 117th Congress Modify CA9?
The size of federal courts is getting fresh attention in Congress. In late January, Senate Majority Leader Chuck Schumer signaled that his caucus is keen on expanding district and appellate courts.
The Ninth Circuit figures uneasily into these discussions. On the one hand, the court is buckling under the weight of its immense workload (11,000 new appeals every year), and CA9’s massive backlog accounts for nearly one-third of all pending federal appeals. For these reasons, the Judicial Conference of the U.S., in its most recent biennial report, recommended that Congress add 5 judges to the Ninth Circuit’s bench, increasing the circuit’s total to 34 authorized judgeships.
On the other hand, the court also is buckling under its own size, as I’ve explained in prior posts. With so many cases and so many judges, it’s well-nigh impossible for CA9 to maintain a cohesive law of the circuit. These problems would worsen with any expansion of the court.
Cross Circuit Thoughts
- Is CA5 the New CA9? During the Trump administration, a pattern emerged in CA9 whereby California won preliminary injunctions against immigration policies in a district court, and this preliminary relief was then upheld by the Ninth Circuit. There are early indications that the mirror image of this dynamic is unfolding in CA5, with Texas challenging Biden’s immigration decisions. In late January, a Texas federal judge granted the Lone Star State’s request for a temporary injunction against President Biden’s order to halt for 100 days the deportations of certain immigrants. [h/t @DanielEWalters_]
- CA7’s Zany Rule on Precedents: This blew my mind. In the Seventh Circuit, panels can overrule prior published opinions *unless* the court votes to go en banc. Usually, of course, published opinions become law of the circuit and, as such, can be overruled only by an en banc court. Imagine what a mess would be law in CA9 were it to abide CA7’s anomalous rule. [h/t @smmarotta via @gabrielmalor]
William Yeatman is a research fellow at the Cato Institute