In a decision that has the potential to lessen the influence of two of the most influential federal regulators, the Supreme Court of the United States has established a new door for those who wish to challenge allegations made by the Securities and Exchange Commission and the Federal Trade Commission.
The Supreme Court’s justices came to a unanimous decision that corporations and individuals who are the subject of agency investigations or complaints have the right to go directly to federal court with certain constitutional concerns. These challenges can include assaults on the employment of in-house judges to handle matters.
The decision, which was penned by liberal Justice Elena Kagan, did not go as far as two conservative justices desired it to. However, this decision is the most recent in a series of rulings that have whittled away at the federal administrative state. As a result, the powers of agencies have been reduced, they have been placed more firmly under the supervision of the president, and now they are more susceptible to broad constitutional assaults.
The opponents, accountant Michelle Cochran in the SEC case and body-camera maker Axon Enterprise Inc. in the FTC case, argue that the job protections provided to ALJs violate the Constitution’s separation of powers by insulating the judges from presidential oversight. This is one of the main arguments of the challengers.
The administration of Vice President Joe Biden said that the only way for Cochran and Axon to make such points was if they first participated in the procedures of the panel and then challenged the final judgments in a federal appeals court. Both Cochran and Axon believe that they shouldn’t have to go through a time-consuming and perhaps expensive procedure.
“Cochran and Axon will lose their rights not to undergo the complained-of agency proceedings if they cannot assert those rights until the proceedings are over,” Kagan wrote for the court in her opinion for the case.
Thomas and Gorsuch Kagan based their argument on a case from 1994 that stated that federal trial courts have the authority to hear instant challenges in certain situations. According to this opinion, federal judges have jurisdiction when a contested legal matter may not otherwise obtain “meaningful judicial review,” when it goes outside the agency’s expertise, and when it is “wholly collateral” to the in-house review mechanism.
In addition, Kagan cited a decision made by the Supreme Court in 2010 that nullified safeguards of a like nature for members of the Public Company Accounting Oversight Board.
Justices Clarence Thomas and Neil Gorsuch have stated that they would have given a more comprehensive decision if they had been on the bench. Thomas stated that he had “grave doubts about the constitutional propriety of Congress vesting administrative agencies with primary authority to adjudicate core private rights with only deferential judicial review on the back end.” Thomas was referring to the fact that Congress had vested administrative agencies with main authority to adjudicate core private rights.
Gorsuch has stated that he would have disregarded the precedent set in 1994. He made reference to the expansive authority that Congress has bestowed upon the federal courts, allowing them to hear “all civil actions arising under the Constitution, laws, or treaties of the United States.”
The Federal Trade Commission did not provide a comment on the verdict. A spokeswoman for the SEC stated that the commission is evaluating the opinion at this time.
Since 2016, when the SEC initially accused Cochran of engaging in illegal professional conduct, the attorney has been engaged in a legal battle with the commission.
“We are thrilled that the Supreme Court has unanimously vindicated Michelle Cochran’s right to have her day in court to challenge the constitutionality of the administrative apparatus she has fought for nearly a decade against the SEC,” said Michelle Cochran’s lawyer, Gregory Garre of Latham & Watkins. “We are thrilled that the Supreme Court has unanimously vindicated Michelle Cochran’s right to have her day in court to challenge the constitutionality of the administrative apparatus.”
Axon is battling the Federal Trade Commission’s (FTC) attempt to undo the company’s acquisition of a competitor.
