Supreme Court Seems Poised to Streamline Challenges to Agency Power

WASHINGTON — The Supreme Court, which has in recent years become increasingly skeptical of the power of administrative agencies, seemed ready on Monday to make it easier to challenge their structure and authority.

The court heard separate arguments in two cases, one involving the Federal Trade Commission and the other the Securities and Exchange Commission. The question in both was where and when constitutional objections to agency power may be pursued.

A majority of the justices seemed prepared to say that people and companies subject to agencies’ enforcement actions should not have to wait until administrative proceedings are completed before they can raise at least some constitutional objections to the agencies’ structures in federal trial courts.

“What sense does it make for a claim that goes to the very structure of the agency having to go through the administrative process?” Judge Samuel A. Alito Jr. asked.

Malcolm L. Stewart, a lawyer for the federal government, responded that courts should avoid piecemeal litigation. “By deferring review until the end of the day,” he said, “we ensure that all of those challenges can be consolidated in a single proceeding.”

Justice Sonia Sotomayor appeared to agree, saying that it was commonplace for legal issues to be decided in an orderly way.

“Going through the process is what due process is all about,” she told Paul D. Clement, a lawyer seeking to mount an immediate challenge to the F.T.C.’s structure. “I don’t understand why you are any different than any other administrative agency petitioner who has to go through the process, a flawed process, and wait until the end to have that corrected.”

Mr. Clement said it was pointless to make some kinds of arguments in administrative proceedings. “No agency has the authority to declare itself unconstitutional,” he said.

The first case, Axon Enterprise v. Federal Trade Commission, No. 21-86, concerned a company that makes body cameras for law enforcement and was investigated by the F.T.C. as part of a merger review. Rather than waiting for the conclusion of the proceedings before the agency, the company tried to sue in a federal trial court in Arizona, arguing that the agency’s structure was unconstitutional and that it did not have the authority to review the merger.

Even as it rejected that attempt, a divided three-judge panel of the U.S. Court of Appeals for the Ninth Circuit said Axon’s position had force. “Axon’s argument makes sense from a policy perspective: It seems odd to force a party to raise constitutional challenges before an agency that cannot decide them,” Judge Kenneth K. Lee wrote for the majority.

The second case, Securities and Exchange Commission v. Cochran, No. 21-1239, concerned an accountant accused of misconduct by the S.E.C. and involved a similar issue. The accountant, Michelle Cochran, sought to challenge the agency’s structure in federal court in Texas before administrative procedures were completed. The Fifth Circuit agreed that she should be able to bring her claims, creating the sort of conflict between federal appeals courts that often prompts Supreme Court review.

Gregory G. Garre, a lawyer for Ms. Cochran, said her case presented a contrast with the first one.

“Unlike the Axon case, in which the plaintiff is a corporation, this case illustrates the crucial importance of this district court jurisdiction for everyday Americans who find themselves trapped before an unconstitutional agency decision maker,” he said. “The S.E.C. acts as prosecutor, judge and, in effect, executioner in its own proceedings, all of which give it an extraordinary home court advantage.”

Justice Alito asked Mr. Stewart why the government would not want prompt adjudication of important constitutional questions. “Isn’t it in your interest to get this decided?” he asked.

Mr. Stewart responded that a recent federal appeals court decision had held aspects of the S.E.C.’s structure unconstitutional — after administrative proceedings.

Similarly, he said, the Supreme Court “has always resolved those challenges in the context of an appeal from an actual agency adjudication.”

Chief Justice John G. Roberts Jr. noted the government had lost in a run of recent cases. “Doesn’t that underscore the need for a direct proceeding to raise the constitutional claim rather than waiting however many years before the agency?” he asked

Two federal laws are at issue in the cases. One gives federal district courts “original jurisdiction of all civil actions arising under the Constitution.” The other grants federal appeals courts jurisdiction to review agencies’ final orders.

Mr. Clement said that the two laws did not conflict and that the second one did not limit the scope of the first.

He acknowledged that there would be some claims on the margin that could be heard immediately in federal district court or in due course by a federal appeals court after administrative proceedings were complete.

“I’d rather live in a republic,” he said, “where the rule for the edge cases was: We err on the side of giving the citizen early access to the courts as opposed to erring on the side of deferring judicial review.”