January 29, 2021 - This Week at the Ninth

This Week at the Ninth: The FTC (Always) Wins

This week, a divided Ninth Circuit panel holds (with some apparent reluctance) that constitutional challenges to the Federal Trade Commission (FTC) cannot be brought directly in federal court, but must instead wend their way through the FTC’s review process.

AXON ENTERPRISE v. FTC
The Court holds that district courts lack jurisdiction over claims challenging the constitutionality of the FTC’s structure and its adjudicative procedures.

The panel:  Judges Siler (CA6), Lee, and Bumatay, with Judge Lee writing for the majority and Judge Bumatay dissenting in part.

Key highlight:  “Axon claims—and FTC does not appear to dispute—that FTC has not lost a single case in the past quarter-century.  Even the 1972 Miami Dolphins would envy that type of record.  Indeed, a former FTC commissioner acknowledged that the FTC adjudication process might unfairly favor the FTC given the agency’s stunning win rate.  Axon essentially argues that the FTC administrative proceeding amounts to a legal version of the Thunderdome in which the FTC has rigged the rules to emerge as the victor every time.  But we cannot move beyond the Thunder Basin factors, which mandate our conclusion that Axon cannot bring a claim in district court.”

Background:  Axon, a manufacturer of body-worn cameras, acquired one of its competitors.  After investigating the antitrust implications of this acquisition for a year and half, the FTC directed Axon to spin off the competitor.  The FTC threatened to bring an administrative enforcement action of Axon did not comply.

Axon responded by suing the FTC in federal district court.  It claimed that the FTC’s administrative procedures would violate its right to due process, and that the FTC’s structure contravened the separation of powers.  The district court dismissed for lack of subject matter jurisdiction.

Result:  A divided Ninth Circuit panel affirmed.  The majority explained that, under what is known as the Thunder Basin doctrine (after the Supreme Court case of that name), a statutory scheme of administrative review may impliedly preclude district-court jurisdiction over any challenge to an agency’s enforcement processes.  The majority held that doctrine applicable here.  First, the majority explained, the FTC Act contained a “fairly discernible intent” to preclude district court jurisdiction, because it “provides a detailed overview of how the FTC can issue complaints and carry out administrative proceedings.” 

Next, the majority addressed the key disputed question:  whether Axon could “obtain meaningful judicial review in the statutory scheme.”  The majority held that it could, reasoning that Axon would eventually be able to seek review of any FTC decision in a federal Court of Appeals.  That was the case, the majority explained, even if Axon would be unable to press its constitutional claims during the agency review process.  The majority acknowledged 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,” and that if it “were writing on a clean slate, [it] would agree with the dissent.”  But the panel majority viewed the dissent’s contention that such structural claims were exempt from the Thunder Basin doctrine to be precluded by the Supreme Court’s decisions.  It held that so long as “there is eventual judicial review,” a party must go through the administrative process. 

Two other factors relevant to the jurisdiction-stripping analysis—whether Axon’s claims were “collateral” to that scheme, and whether its claims were “outside the agency’s expertise”—pointed in opposite directions.  Axon’s claims were not, the majority held, “wholly collateral,” as they constituted a “vehicle by which Axon seeks to prevail at the agency level,” thus making them less susceptible to district-court jurisdiction.  But on the other hand, the majority continued, the claims were “outside the agency’s expertise,” which “weigh[ed] against jurisdiction-stripping.”  Ultimately, however, the majority concluded that it “agreed with the other circuits . . . that under Supreme Court precedent the presence of meaningful judicial revise is enough to find that Congress precluded district court jurisdiction over the type of claims that Axon brings.” 

Judge Bumatay dissented in part.  He believed the relevant Supreme Court and Ninth Circuit decisions establish a “straightforward” principle:  “Absent legislative language to the contrary, challenges to an agency’s structure, procedures, or existence, rather than to an agency’s adjudication of the merits on an individual case, may be heard by a district court.”  Under that standard, he concluded, the district court had no jurisdiction over Axon’s claim that the FTC’s adjudicatory process would deprive Axon of due process.  But, he concluded, Axon’s variation on this due process claim—which attacked the mechanisms by which the FTC and the Department of Justice divide their antitrust responsibilities—along with Axon’s separation-of-powers challenge to the structure of the FTC itself, should be allowed to proceed.