Deep Dive Episode 245 – Courthouse Steps Oral Argument: Axon v. Federal Trade Commission
On November 7, the U.S. Supreme Court heard Axon Enterprise, Inc. v. Federal Trade Commission, to decide whether Congress stripped federal district courts of jurisdiction over constitutional challenges to the FTC by granting the courts of appeals jurisdiction over FTC cease-and-desist orders. This panel will discuss key take-aways from the oral argument and implications for administrative litigation at the Federal Trade Commission, and perhaps for other agencies as well.
Although this transcript is largely accurate, in some cases it could be incomplete or inaccurate due to inaudible passages or transcription errors.
[Music and Narration]
Introduction: Welcome to the Regulatory Transparency Project’s Fourth Branch podcast series. All expressions of opinion are those of the speaker.
On November 15, 2022, The Federalist Society’s Regulatory Transparence Project hosted a virtual event titled, “Courthouse Steps Oral Argument: Axon v. the Federal Trade Commission.” The following is the audio from the event.
Svetlana Gans: Good afternoon, everyone. My name is Svetlana Gans, and welcome to our Courthouse Steps Oral Argument review from Axon versus Federal Trade Commission. Thank you all for joining us. I first wanted to introduce our amazing panelists and then talk a little bit about the case and answer some questions that we prepared as well as take audience question and answers. If you have a question, please utilize the Q&A button on your Zoom or the Chat feature.
So, with that, I’ll get started. Our panelists today are Ron Cass, who’s Dean Emeritus of the Boston University School of Law and President of Cass & Associates. He is also Senior Fellow at the C. Boyden Gray Center for the Study of Administrative State. He is a member of the Council of Administrative Conference of the United States and has received several presidential appointments, spanning Presidents Ronald Reagan to Donald J. Trump. As a law professor, lecturer, and scholar, Dean Cass has been teaching and writing about a wide array of legal issues on topics such as administrative law and regulation, antitrust, and constitutional law. He has published more than 140 scholarly books, chapters, articles, and papers, including a leading casebook on administrative law. Dean Cass, thank you so much for being here.
Next, we have Henry Su. He is a Partner at the law firm of Bradley Arant Boult and Cummings. He has more than 20 years of experience litigating disputes involving antitrust, intellectual property, and technology. His background includes more than six years at the Federal Trade Commission, where he and I were colleagues. During his time at the FTC, he held several senior leadership positions, including trial lawyer in the Bureau of Competition’s Litigation Group, which is a specialized unit responsible for litigating anticompetitive mergers and acquisitions. He also served as an attorney advisor to Commissioner Rosch as well as to Chair Ramirez. So, Henry, thanks so much for being here.
And next, we have Ashley Baker, who is the Director of Public Policy at the Committee for Justice. Her focus areas include the Supreme Court, technology, and regulatory policy as well as judicial nominations. Her writings have appeared in Fox News, USA Today, Boston Globe, The Hill, among many others. Ashley is an active member of The Federalist Society, where she serves as a member of the Regulatory Transparency Project: Cyber & Privacy Working Groups, as well as other affiliations of FedSoc. Ashley has worked closely on the efforts to confirm Justices Neil Gorsuch and Brett Kavanaugh. During the Kavanaugh confirmation in particular, she wrote extensively on his record as a federal judge on the DC Circuit, focusing on administrative law and free speech. Ashley, thanks so much for being here.
All right. So, with that introduction, I would like to dive into the case that we will be discussing today, Axon versus Federal Trade Commission. The issue before the Court is whether the — a party subject to an agency administrative proceeding, here Axon, has a right to sue constitutional challenges to the agency in federal district court prior to the conclusion of an agency administrative proceeding. This case arises from Axon’s acquisition of a small competitor in 2020. The FTC began investigating this transaction. After an 18-month antitrust investigation, Axon offered to divest the acquired assets and walk away from the transaction.
The FTC rejected this offer and proposed an alternative settlement, which Axon refused. Rather than agreeing to the settlement, Axon sued the FTC in federal district court in Arizona. Axon challenged the DOJ and FTC clearance process and the FTC administrative law judges’ authority to preside over the administrative case, given their so-called impermissible dual layer of cause, removal restrictions, and the constitutionality of the FTC’s structure, which Axon claimed violated the Fifth Amendment due process by combining investigative, prosecutorial, adjudicative, and appellate functions, which, according to Axon, has resulted in a 25-year win streak in its administrative court. The District would dismiss Axon’s complaint for lack of subject matter, jurisdiction, and denied Axon’s motion for preliminary injunction as moot.
On appeal, the Ninth Circuit, in a 2-1 decision in a three-judge panel, affirmed the District Court’s decision. The Ninth Circuit held that Axon must wait until exhausting the administrative process at the FTC to have its day in federal court. However, the majority opinion emphasized that Axon’s serious concerns about how the FTC operates “should not be discounted.” After the Ninth Circuit denied Axon’s petition for rehearing en banc, Axon appealed to the US Supreme Court, presenting both jurisdictional and constitutional questions. The Supreme Court denied to take up the constitutional issues related to the FTC’s structure and procedures but granted the cert, only as to the jurisdictional question.
So fast forward, and we — here we are at the oral argument last week. I wanted to turn to Ashley and Henry to discuss, please, the key legal arguments presented at the Supreme Court. Ashley, I could start with you, please?
Ashley Baker: Sure. Thank you. And thank you for hosting, Svetlana, and thank you to The Federalist Society for having us all here today. So the — as Svetlana had just mentioned, the question that’s actually before the Court currently is a pretty narrow one. They declined to take up review on the broader questions regarding the structure of the agency and the ALJ question but did grant the jurisdiction stripping question. But whether not, essentially, the normal rules under Section 1331 apply, which give jurisdiction to federal courts appealing cease-and-desist orders. But — sorry — it gives rules to the federal courts for appeals, and then, there’s the FTC Act. Specifically, under the FTC Act, you have the provision that gives — for the cease-and-desist orders, they go to Courts of Appeals instead of two federal district courts.
So the case is really about or the nearer question, at least, that’s being presented is really about whether or not those normal rules of procedure apply or whether there’s some sort of an exception because of the language of the FTC Act that discusses the agency’s jurisdiction and hearing these sorts of claims. One side of that argument is, no. And also, ALJs can’t — it was a bit stacked for ALJs to hear the constitutional claim against them to begin with, but also that is the proper role of a federal Court of Appeals to decide what do agencies do. What can agencies do under the Constitution? The agency can’t really decide that by design. So that’s kind of the core of the first argument.
There’s a lot of various arguments in here and a lot of various pieces outside of it, so I’m going to actually stop there, and then, we can keep going and discuss the broader circumstances surrounding the case.
Svetlana Gans: Great. Thanks so much, Ashley. Henry, do you have anything to add in terms of the questions presented for the Supreme Court?
Henry Su: Sure. So, first of all, thank you, Svetlana and The Federalist Society, for having me today. So the answered question, I guess — and this is something that comes up in the colloquy with the justices is sort of what’s the source. Right? What’s the argument for jurisdiction as of yet? Do we just look at the text of Section 5 of the FTC Act, Section 1331, Section 704? Is that how we answer this, or is there something else? And obviously, Axon took the position, well, there’s nothing in the text that says one way or the other, so let’s look — instead look at these so-called Thunder Basin factors, which were also more recently applied in another case called Free Enterprise.
And under those three factors, we win. We don’t — if we wait, we don’t get meaningful review. Our challenge is collateral to the agency adjudication. And then, last but not least — sorry. I’m just blanking on the last one. And then, the claims that we’re bringing are outside the agency’s expertise.
So that’s really Axon’s argument, and the Solicitor General came back and said, well, no, actually, we answered this from the statute and specifically from the Administrative Procedure Act under 704, which says that, look, when you’re in this special agency adjudication environment, the only way you get judicial review is after you get a final agency action, and then, that goes to a Court of Appeals. So that’s kind of what I will add to that.
Svetlana Gans: Okay. Great. Dean Cass, anything from you on just the questions presented?
Ronald Cass: Well, the great thing about listening to this argument is it’s like you were at an oral version of a final exam in fed court because what a lot of the back and forth is between the attorneys and the justices is about particular cases, how the cases apply, what the margins are along which you can push on this or that. But the big issue here is whether there is something different about this case from the sort of cases where the plaintiffs have been told, “You have to wait. You have to wait. You can’t bring this yet.”
And the argument by Paul Clement, who is arguing on behalf of Axon, is, yes, this is different. It’s different because what I’m looking for here is relief that the agency can’t give. The agency can’t give it, in part, because it involves a statute outside the agency’s purview. And the agency can’t give it because, essentially, it would involve having to reconstitute at least part of the agency, part of the personnel there in ways that the agency is unlikely to have any inclination to do or any ability to do. So those are the sort of big issues that are teed up on front in the case.
Svetlana Gans: Thank you all for that. So, in terms of the questioning from the justices, maybe we could start with Henry and then Ashley and Dean Cass. Any Q&A that struck you or that particularly interested — interesting to you in terms of where the Court might be heading in this case? Henry, I’ll turn it over to you first.
Henry Su: Thank you. So kind of picking up on Dean Cass’s point — right? — this really was like a federal court exam. And, so, many of the recurring questions were about that standard. Where do we — how do we come to the result we want? Is it just a textual argument, looking at Section 5, looking at Section 704, looking at 1331? Or do we apply Thunder Basin?
And if so — if it’s Thunder Basin, how do they come out? Do you have to win all of the factors or not? So there was — that was kind of a recurring theme in the argument is what’s the source? How do we operationalize this standard and make it so that it’s not just about your case, but it’s about other people who may have grievances with the way an agency is constituted or the way it runs this?
Ashley Baker: So I’ll add to that, in terms of what some of the individual justices focused on and the questions they asked. Henry’s absolutely right. It was mostly about whether or not you have to meet those factors, or is this a straightforward application, just looking at Section 5, just looking at Section 1331. For Justice Gorsuch, specifically, he thought that it — 1331 itself was enough for [inaudible 00:13:29] to resolve this, it seemed like. In his question, he was asking why not — Congress was silent on the rest of this. Why do we not apply the usual rules of federal jurisdiction here?
Roberts and also — well, a couple of the justices all brought up Free Enterprise Fund. There’re obviously several issues that are relevant here that are at the heart of Free Enterprise Fund, particularly just that — how is this similar to the circumstances there, and how is it similar to know what the Court said regarding judicial review provisions in an institute that was very much similar and said the text does not expressly limit the jurisdiction that other statutes confer on district courts nor does it do so implicitly so to here. I think the first justice to really kind of cut to the chase with that question right at the beginning was Justice Thomas. It was definitely a recurring view. It’s notable to, too, Chief Justice Roberts wrote the majority opinion in that case, and actually, he adopted a lot of the reasoning from a dissent that Justice — or then Judge Kavanaugh wrote on the DC Circuit in this case as well. But it was also notable, too, that a lot of the back and forth between the justices was, do we even need to get to Thunder Basin?
It wasn’t, does this strip them of jurisdiction? Does this strip federal courts of jurisdiction here? It was actually kind of a step — if you consider that a step higher or step lower — it was – didn’t even quite reach that question, so they seemed pretty decided about what’s in the text of 1331 in that the FTC Act does not take jurisdiction away from federal courts here.
Ronald Cass: I do think that some of the justices signaled, to the extent you can take things away from oral argument, a concern about the degree to which they were going to allow interference with the usual agency process going all the way through. Certainly, Justice Kagan repeatedly came back to other analogies, other issues, other settings in which you might be seeking review of an issue along the way. Some of the other justices were more concerned about the broader questions that underline the case, which weren’t — cert was not granted at this point on those questions. But they clearly were in the minds of some of the justices. Justice Thomas, Justice Alito, Justice Gorsuch seemed to be asking questions that showed attention to those concerned about the importance of those issues, and that does tie in with what the Court has been doing in a series of other cases.
We can talk about those other cases later, but I think there was certainly a questioning that showed concern about cutting off access to the courts for resolution of those and prolonging it. And the fact that, in this case, you’ve already had the Plaintiff here spend 20 million dollars going back and forth with the FTC. It’s not as though you’ve just paid a five-dollar entrance fee and then get the FTC’s process. It’s a long, involved, expense process, and it is very burdensome on companies that want to actually move on and get something done.
Henry Su: If I could just —
Svetlana Gans: Yeah — go ahead, Henry.
Henry Su: — just add to that. Another justice who kind of was worried about whether these types of actions would, essentially, be tantamount to a district judge managing what’s going on with the — inside the agency was Justice Jackson. She used to work — superintend a couple times. So definitely, that’s — on the side favoring the Government, there’s that concern. But then on the side favoring Axon, there’s the point, well, look, these are very weighty constitutional questions, so why not. What’s the argument against getting them addressed up front, ahead of time? So —
Svetlana Gans: Yeah, and on that note I found it telling that the Solicitor General — he seemed to concede that the FTC couldn’t make the decision anyway on the merits as to the constitutionality of the process and the appointments of the ALJ, and rather that it would be — they would inform other decision-makers on the process and the procedure but not necessarily take that up and make a decision on the merits. I thought that was interesting, especially given the overlay between DOJ and FTC jurisdiction on the merger side and how there is kind of a lack of transparency and perhaps some perceived due process issues with the coin toss that happens with respect to jurisdiction on the antitrust merger side. So very helpful discussion. I wanted to ask a related question as to the Standard Oil case that was raised a few times in the oral argument where the argument was made that Standard Oil stands for the proposition that a litigant can wait until the very end and then go to district court after the administrative procedure is done. So Dean Cass, any thoughts on the Standard Oil case and how that plays into the analysis here?
Ronald Cass: Standard Oil involved a very different sort of issue. It involved an issue that was really integral to the case and the decision the FTC was making. This case, you have an — it’s a set of issues that are raised that are entirely outside what the FTC is going to go and look at in its proceeding. And that, I think, was — the core of the argument was being made about Standard Oil by Paul Clement really was that Standard Oil doesn’t apply in a case like this.
All of the reasons in Standard Oil for waiting — letting the process go forward, letting them grapple with the issues, grapple with the arguments — are missing here because there is nothing the agency has to really add to this. They can offer their thoughts about it, but they don’t have expertise on the sort of issues that are being raised about the constitutionality of the structure. They don’t have something to argue that it — nothing of what is being argued here is specific to the claims being made by Axon. Nothing is specific to the particular issues that would be before the FTC, if the case went forward. And I think that that is a compelling argument. I understand why justices are concerned about interrupting the process, why justices are worried about letting claims go forward that might not need to be addressed.
I think in a case like this, though, when you have a very long, very costly, very drawn-out process, which has repeated parts of it — and don’t forget here, Axon offered to drop the entire acquisition that started the case, and the FTC said, no, you can’t even — we won’t even let you not do what you started to do. You can’t either go forward or go backward. You just have to stick with us so we can smack you around a bit. That does give a different flavor to the case than you had in the Standard Oil case, which, again, we’re looking back 42 years ago to Standard Oil, so it may be, even if that case came up today, you wouldn’t get the same answer. But clearly, it involves a different scenario.
Ashley Baker: And also — sorry. Oh, I was going to say Axon’s — our complaint about the FTC was never that its proceedings are too costly and annoying. That is, obviously, a really big problem, and I would agree with them that it keeps — that is a barrier to meaningful judicial review, which has to be prompt because a lot of these companies don’t make it to the end of these Part 3 processes. But one of them can’t make it through. I think at one point, the justices asked how many — what percentage of cases were settled, which I think makes that point pretty well.
But I didn’t see until this morning — so Axon’s reply brief in the petition stage, it had this great couple of lines I think are the — a really good counter argument, or as best as you can make it, to the Standard Oil argument, which it says that the Government dismisses this — the expense and annoyance of litigation as simply “part of the social burden of living under government.” That is an argument only the Government could love. It only misses — it also misses the point, which I think really sums it up. It’s not really even relevant here necessarily because that was never Axon’s argument to begin with.
Svetlana Gans: Henry, any kind of responses or thoughts from you on the Standard Oil case or just process at the FTC generally?
Henry Su: Yeah. No, I would agree with Dean Cass that I don’t think Standard Oil is really — it’s not on all fours. It is an APA case that stands for the very simple proposition that a decision to prosecute is not a final agency action. And, so, while you may have complaints about the product of that decision, for instance, maybe there was internal argument among the staff about the theories, that’s all going to come out in your litigation. It’s all going to come out at the hearing. And, so, you can challenge those kinds of defects as part of the petition for review to a circuit court. But that’s not this — that’s not what this is about. Now, I do have some points I want to make about the FTC uniquely, and I can kind of push them towards the end or —
Svetlana Gans: No, go ahead. That’s fine. Yeah.
Henry Su: — to throw out something. So one thing I will say about the double cause removal claim is that it actually is easily fixed by the Commission. Okay. So, yes, the Commission has no power to interpret a statute governing ALJs, but it can easily substitute a commissioner as the presiding officer, replacing the ALJ. Right? And the commissioner, himself/herself, under Humphrey’s, would be constitutionally legitimate. And, so, that would have been easily solved.
And in fact, there’s a recent example involving my former boss, Tom Rosch. He was actually designated by the Commission to be the Hearing Officer, the judge, if you will, in the Inova Health, Prince Williams merger litigation. So it can be done. It could have been done here to avoid this argument about the double cause removal.
Ronald Cass: It is, however — let me speak of a former commissioner of a different agency. It is a costly way of fixing the problem, to substitute commissioners — doing this. Not only that, when you have — and the FTC is a good example right now — there are some tensions within the ranks of commissioners and different viewpoints. And, so, the process of selecting one to overhear this is not without its own costs and problems.
I think it is more likely that the fix is going to end up being changing the terms under which ALJs serve and changing them in a way that is very different than ALJs have been arguing for over the last 50 or 60 years. So I think that while it — you’re absolutely right. It is possible. I think it is both costly enough and fractious enough to be unlikely.
Henry Su: Yeah, I agree with you that it is kicking the can down the road. Right? It’s still going to have to be dealt with at some point. But I think if we’re talking about statutes — right? — if we’re talking about Section 5, Section 5 makes no mention of administrative law judges. The decision-maker is the constitutionally legitimate Commission. And it’s the Commission’s order that actually, ultimately, gets reviewed by a circuit court. And, so, yes, we’ve kind of introduced this extra layer of the ALJ through the Commission’s Rules of Practice, but I think, under its Rules of Practice and under 556 B2, it’s — I think it’s easily cured, at least for the time being, not — obviously, not forever, but I think that could have been done. So —
Ronald Cass: I would just say I think Henry’s point is there are ways of dealing with this here. There are ways that the FTC could deal with it. I think in the broader sense of the issues that are being raised to the courts and that are being looked at by the Supreme Court — and don’t forget, this is part of a series of cases the Court has been looking at to ask whether agency organization, agency structure, agency [procedures [inaudible 00:27:07] constitutional . In that framework, I think we’re going to keep coming back to issues like this, and the question isn’t can we get a fix right now — and you’re quite right on that — but is there an underlying problem? How do we address the problem?
To be sure, the Court didn’t grant cert on that yet in this case. They, in fact, consciously decided to take up the procedural issue here instead of that. But I think that issue is definitely coming back, and the Court can see it returning. So that’s the question that Axon wants to put on the table. That’s the one they want to get answered, and that’s the one that the FTC can’t come up with a really easy answer to.
Henry Su: And very — indeed. That’s what Chief Justice Roberts pushed — well, Malcolm Stewart has. Why wait? Why do you want to hide under a rock and not deal with this directly?
Ashley Baker: And that — one quick, last point about what happened in the arguments itself, too, and that kind of goes to Henry’s previous point too. So there was an interesting question and some also similar questions down the road from Justice Sotomayor that seems to frame this — and the Government did this, too, as if the agency’s getting some sort of a — sorry — as if Axon’s getting some sort of exception here to the normal rule. I think what Justice Sotomayor said was due process is about going through the process — or something of that sort. But then going through the normal process wouldn’t be this process. And there’s — it’s interesting. I see meaningful judicial review and due process as being much hand in hand, and they seem to very much see it differently.
Svetlana Gans: Kind of just going to one other question presented at the oral argument, and then I want to get your predictions on the future because everyone likes to get that. One other line of questioning was whether or not this might open the floodgates to more challenges of agencies — constitutional challenges before agencies and could potentially open the floodgates to challenges and wanting to get each of your views, whether that’s a legitimate concern, or how the — how you think the Court will deal with this issue when they analyze the case? Ashley, I guess I’ll start with you and then, Dean Cass and Henry.
Ashley Baker: Sure. I, also in terms of making predictions, which, yes, of course, is what everyone wants, that even — so I like to say that with Supreme Court decisions, even those of us who are right more often than most people are about outcomes are still wrong most of the time, in one way or another. I do think it’s pretty clear here where most of the justices stand on the pure statutory question, though, regarding federal courts and 1331. I think this one — I would not be surprised to see it come out [inaudible 00:30:04] about [inaudible 00:30:05]. I think it would be a lot more interesting, too, to see what kind of concurrences are written along with this, which might be where you can see them exploring some of those broader questions about what’s going on at the FTC, calling into question whether or not these internal proceedings should be hearing any cases that are not directly within the statutory authority of the Commission, which is an interesting question right now as the FTC’s broadening its scope to enforce Section 5 and take on other agency actions that are arguably not within its statutory authority.
Ronald Cass: I agree that making predictions is something that if any of us was really good at it, we wouldn’t be in the jobs we have now. We’d be in the stock market as investors. I think that it looks like the Court is leaning toward letting the case go forward, letting the challenge go forward. For me, the interesting question is how do you write them because you heard different justices make different suggestions. And if you go back to Thunder Bay, interestingly in Thunder Bay, Justice Scalia has a special concurrence there, which says basically, I don’t care if there’s a reputable harm or not a reputable harm; I think that there are issues that just don’t go forward unless you go through the whole process. And Justice Thomas joined with Justice Scalia in that.
And, so, the question is how much reservation is there about letting the ordinary case go forward. How do you write it up, though you distinguish this from the ordinary case? How do you let important structural questions go forward on which the agency has nothing to add, on which there is nothing that the agency will do, and it’s not as if you have an officious interloper who just says, “I have an idea.” It’s not like this is a project for a class at a law school to challenge this. This is the real issue for real companies that have this problem on their plate. Axon is such a company. It’s not a question of standing in the usual sense. So I think the Court will find a way, but I’m interested in seeing exactly what grounds they articulate to distinguish this from the run-of-the-mill case.
Henry Su: Yeah, and I think definitely several of the justices were struggling with how to — how does Axon’s case stack with other cases. Several of them asked about the differences between Axon and Free Enterprise, for instance. So definitely, they’re looking at, okay, if there is a rule, how does the rule apply, and are there ways we can — principled ways that we can distinguish between Axon’s case and, in your words, Dean Cass, the run-of-the-mill case. So I think that’s certainly a struggle.
So here’s where I come in with my other sort of FTC-specific observation, which is I do think that Axon, in one sense, anyway, may not be the perfect case to decide this because Axon’s what they call the clearance of black box claim. It’s unique. Right? It’s unique in a sense that Axon actually has an alternative, a concrete alternative appointee, look, we could have been sued by DOJ, and we could have been before an Article III right away. And that’s what you’re denying us. Right? So I think most litigants may not have that. They may have other claims about kind of the legitimacy of the administrative process, but they’re not going to have this concrete alternative. And, so, in that respect, Axon may be difficult, may require more work to distinguish or to kind of harmonize with the other fact patterns that are out there.
Svetlana Gans: Interesting. So going to the question on how this might impact administrative litigation at the FTC going forward, Henry, you mentioned that there are other cases out there where they also might have — otherwise have the choice to go before DOJ if it wasn’t for this alleged black box clearance process. It’s the JUUL-Altria case and Illumina-GRAIL case. So I wonder, in particular, how this case might impact those cases as they are going through the administrative litigation process at the FTC? So, Ashley, maybe I’ll start with you and, then, Dean Cass and Henry, just query on the pathway forward for those cases in light of the Axon case.
Henry Su: Well, to be honest with you, I am struggling with what to say about JUUL-Altria and Illumina-GRAIL — right? — because I — well, certainly Illumina-GRAIL, the FTC lost. Right? So it kind of cuts against the argument that, well, we don’t like ALJs because they’re under the thumb of the Commission, and Commission always wins when you have an ALJ. That’s not true. That’s not what happened in Illumina-GRAIL. And then, my other point would be, if you look at Section 5, the final product, the final agency product that is reviewed by an appellate court is the — is a Commission’s opinion. It’s not the ALJ’s opinion. And the Commission — actually, the standard is de novo review when it reviews an ALJ’s initial decision.
So query whether it really does anything to some of these pending cases. Certainly, the claims haven’t been raised. That’s one thing. But, again, at the end of the day, these are Commission opinions that are being reviewed, and — so I struggle with kind of answering a question about what it does to other FTC cases. Now, I will have another point that I’ll reserve for later, but that’s what I would say.
Ronald Cass: I thought Henry was going to say that the JUUL case went up in smoke, but I guess he had a different take on.
Svetlana Gans: Well, and the —
Henry Su: I like your choice words.
Svetlana Gans: In the Altria-JUUL case, the ALJ actually ruled in favor of the parties and against the agency. And now, that case is being appealed to the full Commission. Ashley, did you want to opine on the ramifications of this case for others in administrative litigation?
Ashley Baker: Sure. So I would say we probably won’t get a decision in this case either, until seven months from now. And those cases both on their way to being appealed before the Commission. One has already been heard. I think we’ll have a — some sort of answer on what the Commission decides. As you said, the commissioner — the Commission itself does ultimately decide and not the ALJ. We should probably have that well before we would have an opinion here.
However, I do think that there are broader implications for just any of the litigation regarding the agencies. So as the justices are considering Axon — they’re considering Cochran — they’re also considering these procedures and processes and saying, hey, wait. The ALJ just ruled against the Commission, and Complainant authorized, not once but twice, for the time in 25 years in the past couple of months. What’s the point of even having this internal process? And that’s outside the scope of the question, but that doesn’t mean that we couldn’t see some sort of concurring opinion with some sort of commentary on that.
Ronald Cass: Although it is odd that when a case raises the fact that nobody has — that the Commission has not had an adverse ruling in 25 years, and you get two — all these cases are pending before the courts, people may look at it as something that has at least a little bit of strategy to it. And that may not explain what’s going on actually at the agency, but I think that will be something that people will be at least a little suspicious on. But also, you have this in the context of changes at the agency itself that make the agency much more aggressive along the number of margins than it has been in my lifetime, and — which goes back longer than anybody else’s here. So I think there are a lot of things that will cause people to be skeptical about what the agency is doing and how it’s doing it, and you’ll have a lot more hard look at agency procedures with the FTC than you have had for quite some time.
Henry Su: Yeah, I have to agree with that. Certainly, we’ve seen the motions for recusal, for instance — right? — because we have — we do have a very aggressive agency right now. So it’s not that these kinds of claims won’t be considered. That’s for sure.
Ronald Cass: I think it may be, Svetlana, that there is more impact on what’s happening elsewhere than there will be in what’s happening at the FTC because if you look right now, there are a lot of cases that are going through the process of being filed, being constructed, being reviewed in court that challenge the adjudicative processes at a variety of different agencies. You have the FTC. You have the FCC. You had the companion case, the Cochran case, argued the same day in the Supreme Court. You have challenges being made to the agency interpretation of the scope of their own authority, to the agencies’ ability to actually have deference on its construction of its own jurisdiction. A lot of different margins are going on at once, and I think you see a lot of that driven by the Supreme Court’s skepticism about the procedures that have been used at agencies and the nature of the appointment processes at different agencies.
Ashley Baker: I agree. I would just add to that too. I think you’ll see more defendants just bringing cases in federal court, challenging the constitutionality of the agency in the processes. Given how aggressive both the FTC and FCC as well as these other agencies in cases that you just mentioned, given how aggressive they’ve been in their enforcement actions, particularly, I think we can see that. And it’ll probably create a little bit of a mess, I think, at first too. And there are lots of these cases.
Svetlana Gans: Yeah, and there are certainly a lot of challenges right now to the FTC in terms of both administrative litigation and other — just the constitutionality of the structure of the agency. You have the Walmart motion to dismiss in that case, among others. Henry, I don’t know if we got to hear from you on your prediction on where — how the Supreme Court might rule on this case. Given your early stint as the FTC’s Chief Litigator, I want to get your sense on where you think the Supreme Court will go here.
Henry Su: Yeah. No, I think it’s likely that the Court — the majority of the Court will decide in favor of Axon, in favor of this kind of challenge. My only concern or caveat is I do think that Axon’s claim is quite different because, at least for its black box clearance claim, there really is an alternative. They can really say, look, if we want — if we had our druthers, we would be before an Article 3 judge right now. Right? And that’s what they want. They don’t want to be before some illegitimately appointed administrative law judge.
And, so, I think that’s what they have that other litigants won’t have, which is this clear alternative. We know we could have been sued by DOJ. We could have been in federal court instead. And — I guess I’ll go ahead and make my second point here now, or, I don’t know, second, third point, but — which is I think, from the standpoint of merger litigation, which is what we’ve talking about with the Axon case, with Altria, with Illumina — right? — the FTC is a law enforcement agency, through and through, just like DOJ. And there really shouldn’t be any procedural distinction between the two of them.
And that’s why I’ve always thought that the Smarter Act proposed by Senator Lee, Senator Grassley is a great idea. Why do we have a different route for parties if they draw the FTC? And I really think that that would solve a lot of the problems because there’s no — there’s simply no reason why the FTC can’t litigate this in federal court. And indeed, when I was a trial lawyer for the Commission, we litigated one of our merger cases in the District of Idaho before a federal — Article III judge. And, so, there’s really no compelling reason to go through that administrative process.
Svetlana Gans: Now, what I found interesting in the Altria-JUUL case, I think, just last week, the Commission ordered the parties to brief whether the claim should be analyzed under the per se rule versus the rule of reason, which was the theory that was tried before the ALJ. So it’s interesting how that works in process in terms of switching legal theories while the case is on appeal from a decision from the ALJ that ruled in favor of the parties. I don’t know if anyone wants to opine on the procedural issues there or why you think the FTC made that request of the parties in that case.
Ronald Cass: Don’t all jump in at once.
Svetlana Gans: Henry, any thoughts on that, or Dean Cass?
Ronald Cass: I’ll let Henry jump in on this. I think he’s [inaudible 00:44:38] —
Henry Su: I don’t have any specific thoughts about that other than that, again, the final product that gets reviewed is the Commission’s decision. And, so, I do think there are things the Commission can do as part of its own internal review process to address problems with what it views to be a defective ALJ product, and I don’t think it completely solves the constitutional problem, the double cause removal problem. But keep in mind, again, that what is reviewed is an opinion from a Commission that’s been constitutionally created, at least for now. Right?
Ashley Baker: Also, when I pointed out earlier that courts and the Supreme Court might start to think about whether or not the FTC should be reviewing any of these cases that are at all outside of their statutory authority, one thing that I specifically had in mind was the policy statement on Section 5, which tries to kind of redefine what the boundaries are there. And they’re very, very broad, to sum it up, much broader than before and just looking at it as a matter of strict statutory interpretation and things such as does this violate the spirit of antitrust laws. A lot of these are — it’s very vague. It’s very indirect. It’s very much out there in terms of where exactly the text is versus where that policy statement says it is.
Ronald Cass: You also have a host of other issues that are coming up in terms of both the standard deference that’s used in interpretation and the ability of Congress, even if you’re interpreting the law right, the ability of Congress to give certain issues under certain instructions to agencies. And I think we’ll see more challenges of that sort, not only in the antitrust area, not only in the area of the FTC and DOJ but also in a variety of other statutes and other agencies.
Svetlana Gans: Indeed. So we have just a few moments left, and I wanted to remind the audience to please post any questions in your Q&A or in the Chat. So if — while we’re gathering questions, I just wanted to give each of the panelists one last word on key takeaways or where we go from here or things that you’re looking forward to in an admin law space, FTC space going forward. So Dean Cass, I’ll start with you.
Ronald Cass: Well, I’m looking forward to seeing the way the Court resolves this issue but also the issues about the appointment of adjudicators at the agencies, about the way agencies deal with adjudication, about whether there ought to be an issue, that if there is an option of going to court goes to court, whether there are certain issues that just, no matter what, ought to end up in court. But there isn’t — it’s one thing if you are taking care of somebody who has violated rules about how to use a national park, and people are looking at whether the rules were drawn the right way, whether they were compiled with or not. It’s another thing when you’re talking about potentially criminal penalties because the antitrust laws do have potentially criminal penalties behind them, and you’re talking about major interference with the operation of large parts of American industry or American life. And I think we will see time and again now that the courts will take a much harder look at what sort of authority can be given to agencies to oversee those things.
Svetlana Gans: Ashley, how about you?
Ashley Baker: Sure. So I also — I’ll be looking forward to how exactly the Court, particularly majority, decides to address this but also because that’s going to, I feel like, sets the groundwork for — and there’s so many other administrative law cases coming through the pipeline that the Court could grant that would be heard next term. There’s the — there’s a challenge to ALJs. There’s a potential Chevron challenge. There’s an Appointment Clause challenge. And I think they’re probably going to grant at least one of those, most likely. And there are circuit splits in several of those cases, so I think that whoever writes this opinion might be doing so with that in mind.
Svetlana Gans: Henry, how about you?
Henry Su: Yeah. No, I don’t disagree that there are lots of challenges from different corners to kind of — the scope, the breadth, the power welded by the administrative state. And as Dean Cass says it has become this entity that has so much power over our lives that, I think, people are responding to that. I think, though, looking just at the FTC, I go back to what I’ve always thought about the FTC, which is it’s really not like a regulatory agency like the FCC. It is a law enforcement agency more like DOJ. And at least, I kind of envision that maybe that, through all this, after all the dust settles, we still have a law enforcement agency that has some — is able to carry out these important missions of competition and consumer protection and maybe doesn’t do a lot of rule-making, for instance, that is much more undemocratic.
Svetlana Gans: I may have to quote you on the undemocratic on the rule-making, given that there is now a preference for rule-making over law enforcement, but we could talk offline about that. So I want to thank all the panelists, and then, I’ll turn it over to Steve since there are no Q&As to close us out. Thank you.
Steven D. Schaefer: Thank you to our stellar panel of experts and to you, the audience. If you would like to see more content like this, please visit rtp.fedsoc.org. That is rtp.fedsoc.org. Thank you.
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