Following this ruling, overzealous federal agencies may begin to get a taste of their own medicine.

Tweet

"The Commission knows a good deal about competition policy, but nothing special about the separation of powers."  

Believe it or not, that sarcastic rebuke came from none other than Justice Elena Kagan, writing last week for a unanimous United States Supreme Court striking the latest blow against the federal administrative state.  

When even Justices Kagan, Sonia Sotomayor and Ketanji Brown Jackson agree that agencies merit rebuke, it sends a welcome and unmistakable signal to a bureaucratic state that poses perhaps the greatest menace to individual freedom in America today.  

At issue in the combined cases of Axon Enterprise v. FTC and SEC v. Cochran was whether parties targeted by federal agencies must wait until they’ve litigated and lost in the agencies’ own tribunals before they can raise threshold constitutional questions in a federal court.  

To understand the importance of last week’s latest ruling in everyday terms, picture the following scenario.  

You get summoned before an administrative agency, which doesn’t merely accuse you of violating federal law, but also initiates a proceeding in which it serves as judge, jury and executioner.  You don’t believe that they’re even constitutionally entitled to be commanding your attendance to defend yourself.  But you’re out of luck – you can’t even appeal their summons to a federal court to challenge their authority.  Instead, you have to go through the exhaustive and costly process of accusation, trial, and sentence before you’re even allowed to petition a federal court.  

It allows unaccountable and politically activist bureaucrats to bleed you dry financially, typically terrifying you into settling with them rather than enduring the drawn-out and expensive process of fighting their charges, risking an adverse ruling by a “judge” employed by and answering to that same federal agency that’s accusing you, and then risking even further cost and time appealing in a federal court.  

In his concurring opinion, Justice Neil Gorsuch captured that process that is nothing short of tyrannical:  

Agencies like the SEC and FTC combine the functions of investigator, prosecutor, and judge under one roof.  They employ relaxed rules of procedure and evidence – rules they make for themselves.  The numbers reveal just how tilted this game is.  From 2010 to 2015, the SEC won 90% of its contested in-house proceedings compared to 69% of the cases it brought in federal court.  Meanwhile, some say the FTC has not lost an in-house proceeding in 25 years.  

When a case eventually makes its way to an appellate court, judges sometimes defer to the agency’s conclusions (especially when it comes to disputed questions of fact).  And how many people can afford to carry a case that far anyway?  Ms. Cochran’s administrative proceedings have already dragged on for seven years.  Thanks in part to these realities, the bulk of agency cases settle.  Aware, too, that few can outlast or outspend the federal government, agencies sometimes use this as leverage to extract settlement terms they could not lawfully obtain any other way.  

As Justice Gorsuch rightfully highlighted, years and fortunes are lost in this federal labyrinth where many cases don’t even belong.  The parties in the instant cases had already endured multi-year odysseys through the FTC and SEC systems without even reaching the merits of their underlying claims.  Absent court relief, he added, “The cost, time, and uncertainty associated with litigating a raft of opaque jurisdictional factors will deter many people from even trying to reach the court of law to which they are entitled.”  

Following this ruling, overzealous federal agencies may begin to get a taste of their own medicine.  If they’re going to bleed citizens and businesses dry through protracted litigation, then defendants now empowered to petition federal courts will respond in kind by challenging proceedings more frequently, forcing them to divert their own resources toward answering legal challenges that courts are increasingly likely to validate.  

In his own concurring opinion, Justice Thomas questioned whether agencies may rightfully adjudicate similar cases at all:  

As I have previously explained, “[b]ecause federal administrative agencies are part of the Executive Branch, it is not clear that they have the power to adjudicate claims involving core private rights.”  And, it may violate due process by empowering entities that are not courts of competent jurisdiction to deprive citizens of core private rights.  …  For much of the nation’s history, it was understood that Article III precluded “the political branches” from exercising “power over the determination of individualized adjudicative facts when core private rights were at stake.”  

In any event, the ruling strikes another blow for individual freedom versus the expanding federal administrative state.  

For years, Congress and presidents have allowed agencies to do their partisan dirty work with limited recourse.  Thanks to an increasingly skeptical Supreme Court, however, that era may be entering its twilight.