Judges appear receptive to opening early challenges to agency procedures

ARGUMENT ANALYSIS

Judges heard nearly three hours of arguments on Monday in two cases challenging the traditional framework for agency review: Axon Enterprise v. Federal Trade Comission and Securities and Exchange Commission v. Cochran. If these arguments tell us anything, several judges are strongly inclined to accept the invitation of these cases to reshape the traditional framework, in which challenges to the agency’s procedures must await the end of these procedures before they can be brought before the Federal Court, even if the proceedings drag on for years and years (as they so often do).

Both cases involve substantially identical laws that govern challenges to final orders issued by the FTC and SEC. In each case, the articles of association provide that the only method of contesting these orders is a petition for review before the court of appeal. In both cases, the targets of the agencies’ investigations did not wait out the proceedings, but instead proceeded directly to federal district court. In both cases, the plaintiff argued that the agency’s procedures are so biased that they violate the Due Process Clause and also that the processes for appointing the ALJs (Administrative Law Judges) who would eventually hear any proceedings violate the appointment clause of the Constitution.

Several of the judges appeared strongly and irrevocably opposed to the government’s argument that district courts cannot hear these cases. Judge Neil Gorsuch, for example, repeatedly asked lawyers to “tell me what I’m missing.” For him, the general grant of jurisdiction to the district court in 28 USC § 1331 was sufficient to resolve the case. As he said on one of the many occasions when he insisted on this point:

1331 says that district courts have jurisdiction over such claims in the absence of any other consideration. … Then we have the FTC law which states that cease and desist orders can be reviewed by appellate courts rather than district courts. Those are the two laws we have. We don’t have a cease and desist order here. I would have thought that could have been the end of the game. … Again, what am I missing?

Malcolm Stewart (presenting arguments on behalf of the government) at one point suggested that a general provision in section 704 of the Administrative Procedure Act shows that review of the final order is meant to include review any preliminary action that the plaintiff might contest. Gorsuch interrupted, “And what about the argument that the sentence you’re pointing to in 704 speaks to agency action that’s not directly reviewable, [and that the same statute defines] agency action … typically an order, license, sanction, or remedy. For Gorsuch, because “we don’t have any of that here,” “we don’t have any agency action” that would engage either the APA or the FTC.

Chief Justice John Roberts and Justice Samuel Alito also seemed indifferent to Stewart’s presentation. Roberts, for example, pointed to the court’s decision in Free Enterprise Fund v Public Company Accounting Oversight Board — in which the Supreme Court approved an action in federal district court raising a challenge to the nominating clause notwithstanding the availability of an appellate court review at the end of the proceedings. To Roberts, this case seemed to pose “a pretty insurmountable barrier” to Stewart’s argument. When Stewart resisted this characterization, Roberts replied that he “thought it was pretty clear in this opinion” – which he himself wrote – “that the grant of jurisdiction in other forums would not be construed as an implied removal of jurisdiction in 1331.”

Alito was even more biting, as he took issue with Stewart’s argument that this case is different from Free Enterprise Fund because claimants could get a “meaningful review” of their claims at the end of the agency’s process. Alito chimed in, “Do you think meaningful review means no review?” Do you think a party gets a meaningful review if, at the end of the administrative process, they can’t get any review of their claim? For Alito, the fundamental problem was the irrelevance of an after-the-fact review of a claim challenging the basic organization of the agency: “What sense does that have for a claim that affects the very structure of the agency having to go through the administrative process? ”

Taking a slightly different approach, Justice Brett Kavanaugh seemed less definitely settled in his opinions, but he was apparently only deciding between voting against the government on the simple reasoning proposed by Gorsuch and a narrower vote against the government based on the self. -saying thunder pool factors (the basis of the opinion that Roberts wrote in Free Enterprise Fund).

So, at one point, Kavanaugh pointed out to Gregory Garre (representing Michelle Cochran in the SEC case) that

your larger argument … would suggest, I think, starting over on how the court analyzes this whole area. And that may just be out of sympathy for the district court judges and the appellate court judges who have to deal with the fallout of this. But isn’t that an easier way to handle this just to [say that] a questioning of the structure of the agency is quite collateral, end of story?

To Kavanaugh, it seemed at least relevant that “there are plenty of precedents interpreting this text, thunder pool, Elgin [a similar case involving challenges to federal employment procedures], Free Enterprise Fund … And so to start all over again would create a sort of tsunami of litigation.

Even Judge Elena Kagan was skeptical of the government’s argument – and it’s pretty much impossible to imagine the government getting five votes to win if it can’t convince her. She had serious questions for both parties on the application of the analysis of Free Enterprise Fund and thunder poolbut his sharpest comments were to Stewart, highlighting his persistent efforts to avoid analysis of these cases:

I guess I was quite surprised when I read your brief, Mr. Stewart, because, you know, three times in the last two decades we’ve had a case like this, and three times we used thunder pool to decide it. And your memory does not speak of thunder pool up to page 51, and he doesn’t talk about thunder pool at all in your summary of the argument. And I guess reading your memoir, I’m trying to figure out, do you think you’re losing under thunder pool? Because I thought thunder pool was the law here.

I have omitted many topics that the judges touched on in consecutive closing arguments on Monday morning. The problem for the government is that much of the detailed discussion resembled efforts to find a specific form of words to describe exactly how the judges could explain the vote against the government without making it too easy for the disputes of the district courts to interfere with the routine process of administrative agencies. I don’t think there’s much doubt that a strong majority of judges will find a way to do just that.


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