Legal Brief: Reigning in Federal Agencies

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MARY REICHARD, HOST: It’s Monday morning, November 21, and it’s The WORLD and all it contains. Thank you for listening and hello! I am Mary Reichard.

NICK EICHER, HOST: And I’m Nick Eicher. Today, we’re covering two oral arguments the United States Supreme Court heard earlier this month.

Each involves the possibility of curbing the considerable power of federal agencies.

Specifically, the FTC, the Federal Trade Commission, and the SEC, the Securities and Exchange Commission. But the implications go far beyond these cases.

REICHARD: Here, an accountant in one case and in the other, a company that manufactures equipment for the police. Everyone says they were treated unfairly by the agencies. That they made unreasonable demands and imposed penalties that cannot be challenged without going through a long and costly process within the administrative system. A system in which the agencies set the rules, make the allegations, and then serve as investigator, prosecutor, and judge.

EICHER: The accountant and the company say that the administrative judges who heard their cases are so irresponsible that it violates the Constitution. Additionally, they say, they should be able to take their complaints against the agencies directly to federal court.

But the government says no. They must wait until all administrative procedures are final. But that of course takes years.

REICHARD: I’m going to review the facts in just one of those cases, because the legal issues are essentially the same. And for our purposes today, I’ll use the courtroom audio of both arguments.

Axon Enterprises—AXON—we’re not talking about the energy company, Exxon. Axon Enterprises makes Tasers and body cameras for the police. Four years ago, the company bought out a struggling competitor.

Shortly after, the FTC told Axon that the acquisition could violate antitrust law because the deal lessened competition too much.

The FTC began its investigation and made so many demands that Axon quickly spent over a million dollars in legal fees and with no end in sight.

EICHER: It wasn’t worth it, so Axon offered to drop the acquisition.

The company’s legal filing describes what happened next: “The FTC demanded that Axon turn [the other company] in a ‘clone’ of Axon using Axon’s intellectual property” and threatened Axon with “an administrative procedure” if he refused to comply.

All of this could have bankrupted Axon, so Axon sued the government to end what it sees as an abuse of power and a violation of the constitution.

But the lower courts ruled in favor of the FTC. They felt that Axon had to follow all internal procedures to their conclusion before they could challenge the agency in court.

Again, a process that could take many years.

Axon says he should be able to go straight to court. So he hired Paul Clement to take this case to the U.S. Supreme Court.

CLEMENT: Congress expressly granted the district courts original jurisdiction over all civil actions arising under the Constitution, and it is common ground that Congress has never expressly removed or restricted that jurisdiction with respect to the constitutional claims at issue here.

REICHARD: Judge Samuel Alito posed an obvious question to U.S. Deputy Solicitor General Malcolm Stewart, who has defended the agencies in both disputes.

ALITO: What does that mean for a claim against the very structure of the agency that has to go through the administrative process?

Stewart said something about agency expertise, and that sometimes an agency will lose a case they’re trying. So why clutter the federal courts with challenges?

But Chief Justice John Roberts didn’t see the point:

ROBERTS: …well, doesn’t that point to the need for a direct process — a direct process to raise the constitutional claim rather than waiting many years for the agency? It is a series of cases that form a constellation around fairly basic propositions. And repeating it over and over again makes the case for the need for direct resolution of a related claim pretty strong.

EICHER: Things weren’t going well for the government. Judge Elena Kagan said:

KAGAN: I told Mr. Clement that I thought his worst factor was a meaningful exam. I–I think the other two factors are pretty damn bad for you.

REICHARD: It means the agency can do a meaningful review of certain issues. But other elements to be analyzed do not support the agencies’ arguments. For example, warranty; that is to say, unrelated to the subject of the dispute.

Here, a claim that the very structure of the agency is unconstitutional has no bearing on the subject matter of the administrative proceeding.

KAGAN: So why aren’t these two wins easy enough for Mr. Clement?

REICHARD: Yeah! Not something you want to hear from a Supreme Court justice about your opponent.

Attorney Gregory Garre of the accountant in the other case hammered home the effect of an uncontrollable administrative state on individuals:

GARRE: This case illustrates the critical importance of this district court jurisdiction for ordinary Americans who find themselves trapped before an unconstitutional agency decision maker.

Administrative agency proceedings are not entitled to a jury, only limited discovery and no counterclaim. These are the guarantees of due process in ordinary courts.

Some conservative justices wondered why these cases were still before him now. In 2010, the court issued a decision in a case called Lucia against the SEC. There, a man pointed out that the administrative judge who ruled against him was not correctly named.

He won. Judge Elena Kagan announced the opinion:

KAGAN: We therefore conclude that the administrative judges of the SEC are officers of the United States and must be appointed in the manner mandated by the Constitution. Because the ALJ who conducted Lucia’s hearing was not named that way, he is struck from the books. He has the right to a new hearing before a new duly appointed official.

EICHER: So the SEC had to refer all pending cases for retrial before a duly appointed administrative law judge.

But Stewart, for the government, said Congress made the rules, and those rules say people have to complete the internal process before they go to court.

He says: Stick first to the problem the agency is trying to solve. Don’t introduce broader conflicts too soon:

STEWART: Which is to say, usually we would say that we will particularly try to avoid constitutional challenges if it is possible to do so. It would therefore be strange to say that at a stage in the proceedings where you cannot raise any other type of challenge, you can raise a major constitutional challenge against the very composition and structure of the ‘agency.

REICHARD: Judge Sonia Sotomayor seemed sympathetic:

SOTOMAYOR: I don’t know why we should allow the interference of the district court in the process that Congress has given the agency to conclude this case.

The opportunities to reduce the power of these agencies have come and gone. The FTC and EPA have seen their powers reduced in the last term.

I think the writing is on the wall this round…and a majority will allow for legal challenges to the administrative power of the state. If they do, they could restore the founders’ vision of the separation of powers…and prevent the concentration of power and preserve the system of checks and balances.

And that’s this week’s legal brief.


WORLD Radio transcriptions are created on very short notice. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative recording of WORLD Radio programming is the audio recording.

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