Two cases recently argued in the U.S. Supreme Court focus on whether federal agencies have the power to order prosecutions before Administrative Law Judges (ALJs). The plaintiffs in these cases have challenged the constitutionality of the ALJ’s proceedings and, depending on the scope of the resulting opinion, the Court’s decision could limit the authority of the ALJs throughout the federal government, including within the Environmental Protection Agency (EPA).

Earlier this month, the Supreme Court heard oral arguments in Axon Enterprise v. Federal Trade Commission and Securities and Exchange Commission v. Cochran. Both of these cases involve plaintiffs who brought their challenges in federal district court before the agency’s proceedings were completed, and the legal premise and argument in the cases are also similar. The cases involve appeals from decisions of the Ninth Circuit and Fifth Circuit, respectively.

Axon Enterprise involves a cease and desist order in antitrust enforcement action by the FTC. Plaintiff-appellant Axon, a manufacturer of body-worn cameras and digital evidence management systems, acquired a “substantially insolvent competitor”. Shortly thereafter, the Federal Trade Commission (FTC) raised antitrust concerns, leading to an extensive investigative proceeding that culminated in the FTC’s alleged request that Axon divest itself to another company and supply that company its intellectual property, essentially turning it into a clone. . It was at this point that Axon took the case to the federal district court, challenging the constitutionality of the FTC’s power of action, as well as its structure and procedures. Axon argues that the jurisdictional provisions of the FTC Act do not deprive district courts of jurisdiction to hear such constitutional challenges.

SEC vs. Cochran involves a certified public accountant challenging a U.S. Securities and Exchange Commission (SEC) order for allegedly failing to comply with audit documentation requirements. The SEC chose to proceed using administrative procedures rather than the federal court system. Michelle Cochran appeared for himself and was fined and banned from practicing. When she asked for a review, the SEC overturned the ALJ’s judgment, but also assigned her to a new round of administrative hearings before another ALJ. At this point, Cochran filed a challenge in federal district court. Similar to Axon Enterprisethe issue raised on appeal to the Court is whether the statute (the Securities Exchange Act of 1934) deprives federal district courts of jurisdiction to adjudicate structural constitutional claims that challenge SEC administrative proceedings.

The parties challenging the agency’s procedure in these two cases argue that the agency’s procedure violates due process due to bias in requiring the agency’s ALJs to adjudicate plaintiffs’ challenges to constitutional authority. of the agency. They also argue that the ALJ removal rules are unconstitutional under the Appointment Clause. If the Supreme Court agrees with these arguments, it could restrict the abilities of agency ALJs to hear these types of structural challenges related to agency enforcement actions and could allow these challenges to proceed more quickly to federal court. .

While the Axon Enterprise and Cochran the cases specifically implicate the FTC and SEC, respectively, the Supreme Court’s opinion in the cases could potentially implicate the authority of the ALJs in other federal agencies. In the environmental context, any Supreme Court decision restricting the authority of the ALJ over contested administrative proceedings could limit the authority of ALJs within the EPA to adjudicate certain types of challenges. This could involve challenges that may arise related to a contested penalty assessment, particularly with respect to the agency’s structure and authority to act. Such a decision would add to the existing limitation that ALJs do not have the power to issue an injunction in the manner of a federal district court.

The Axon Enterprise and Cochran the cases are before the court for his current term; a decision is therefore expected no later than early July 2023.