Amicus Curiae Brief — Axon Enterprise, Inc., Petitioner v. Federal Trade Commission, et al.

No. 21-86

IN THE

Supreme Court of the United States

_________________________________________________

AXON ENTERPRISE, INC.,

Petitioner,

v.

FEDERAL TRADE COMMISSION, ET AL.,

Respondents.

____________________________________________________________________________________________________

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

____________________________________________________________________________________________________

BRIEF OF AMICUS CURIAE

AMERICANS FOR PROSPERITY FOUNDATION IN

SUPPORT OF PETITIONER

————

Michael Pepson

Counsel of Record

Cynthia Fleming Crawford

AMERICANS FOR PROSPERITY FOUNDATION

1310 N. Courthouse Road, Ste. 700

Arlington, VA 22201

(571) 329-4529

mpepson@afphq.org

Counsel for Amicus Curiae

August 20, 2021

i

TABLE OF CONTENTS

Table of Authorities ...................................................... ii

Brief of Amicus Curiae in Support of Petitioner ........ 1

Interest of Amicus Curiae ............................................ 1

Summary of Argument ................................................. 1

Argument ....................................................................... 6

I.

II.

The FTC Act Does Not Impliedly Strip

Jurisdiction Over Axon’s Claims......................... 6

A.

Recent Jurisdiction-Stripping Precedent

Breaks With Historical Practice ................. 6

B.

Courts

Have

Jurisdiction

Over

Constitutional and Ultra Vires Challenges

to Administrative Enforcement Actions .... 7

C.

Case Law Does Not Bar the Courthouse

Doors ........................................................... 11

Exhaustion Before the FTC is Futile For

Axon ..................................................................... 13

III. FTC’s Unconstitutional Structure Threatens

Individual Liberty .............................................. 17

IV. Axon’s Petition Provides an Ideal Vehicle to

Repudiate Humphrey’s Executor ....................... 21

Conclusion ................................................................... 24

ii

TABLE OF AUTHORITIES

Page(s)

Cases

AMG Capital Mgmt., LLC v. FTC,

141 S. Ct. 1341 (2021) ............................................. 4

American Gen. Ins. Co. v. FTC,

496 F.2d 197 (5th Cir. 1974) .................................. 6

Arbaugh v. Y & H Corp.,

546 U.S. 500 (2006) ................................................. 8

Bell v. Hood,

327 U.S. 678 (1946) ............................................... 10

Boise Cascade Co. v. FTC,

498 F. Supp. 772 (D. Del. 1980) ............................. 9

Borden, Inc. v. FTC,

495 F.2d 785 (7th Cir. 1974) .................................. 5

City of Arlington v. FCC,

569 U.S. 290 (2013) ............................................ 18, 21

Coca-Cola Co. v. FTC,

475 F.2d 299 (5th Cir. 1973) .................................. 6

Collins v. Yellen,

141 S. Ct. 1761 (2021) ............................. 3, 4, 20, 21

E.I. du Pont de Nemours & Co. v. FTC,

488 F. Supp. 747 (D. Del. 1980) ............................. 9

iii

Elgin v. Department of Treasury,

567 U.S. 1 (2012) ............................................. 11, 12

Fleming v. USDA,

987 F.3d 1093 (D.C. Cir. 2021)............................. 10

Free Enterprise Fund v. Public Co.

Accounting Oversight Board,

561 U.S. 477 (2010) .................. 7, 10, 13, 18, 20, 24

Free Enterprise Fund v. Public Co.

Accounting Oversight Board,

537 F.3d 667 (D.C. Cir. 2008)............................... 20

FTC v. Eastman Kodak Co.,

274 U.S. 619 (1927) ............................................... 18

FTC v. Ruberoid Co.,

343 U.S. 470 (1952) ................................... 17, 18, 21

Gamble v. United States,

139 S. Ct. 1960 (2019) ........................................... 24

Gupta v. SEC,

796 F. Supp. 2d 503 (S.D.N.Y. 2011) ............... 7, 14

Humphrey’s Ex’r v. United States,

295 U.S. 602 (1935) ............................................... 23

Ironridge Global IV, Ltd. v. SEC,

146 F. Supp. 3d 1294 (N.D.Ga. 2015) .................. 12

Kisor v. Wilkie,

139 S. Ct. 2400 (2019) ..................................... 20, 21

iv

LabMD, Inc. v. FTC,

No. 13-15267, 2014 U.S. App. LEXIS

9802 (11th Cir. Feb. 18, 2014) ................................ 6

LabMD, Inc. v. FTC,

No. 4-cv-00810, 2014 U.S. Dist.

LEXIS 65090 (N.D. Ga. 2014) ................................ 6

La. Real Estate Appraisers Bd. v. FTC,

917 F.3d 389 (5th Cir. 2019) .................................. 9

Lexmark Int’l, Inc. v. Static Control

Components, Inc.,

572 U.S. 118 (2014) ............................................... 10

Marbury v. Madison,

5 U.S. (1 Cranch) 137 (1803) .................................. 3

Morrison v. Olson,

487 U.S. 654 (1988) ............................................... 23

Ramos v. Louisiana,

140 S. Ct. 1390 (2020) ........................................... 22

Schering-Plough Corp. v. FTC,

402 F.3d 1056 (11th Cir. 2005) ............................ 17

Sebelius v. Auburn Reg’l Med. Ctr.,

568 U.S. 145 (2013) ................................................. 8

Sec’y of Labor v. Knight Hawk Coal,

LLC Sterling Drug, Inc. v.

Weinberger,

991 F.3d 1297 (D.C. Cir. 2021)............................. 12

v

Seila Law LLC v. Consumer Financial

Protection Bureau,

140 S. Ct. 2183 (2020) ......................... 21, 22, 23, 24

Sterling Drug, Inc. v. Weinberger,

509 F.2d 1236 (2d Cir. 1975) .................................. 6

Tilton v. SEC,

824 F.3d 276 (2d Cir. 2016) .............................. 9, 11

Thunder Basin Coal Co. v. Reich,

510 U.S. 200 (1994) ......................................... 11, 12

United States v. Arthrex, Inc.,

141 S. Ct. 1970 (2021) ..................................... 18, 20

United States v. Fausto,

484 U.S. 439 (1988) ............................................... 12

Williams v. Pennsylvania,

136 S. Ct. 1899 (2016) ..................................... 16, 18

Winter v. NRDC, Inc.,

555 U.S. 7 (2008) ..................................................... 7

Constitution

U.S. Const. Art. II, § 1 ................................................ 20

U.S. Const. Art. II, § 1, cl. 1 ....................................... 18

U.S. Const. Art. III, § 1 .............................................. 18

U.S. Const. Art. III, § 2 ................................................ 8

vi

Statutes

5 U.S.C. § 703 ................................................................ 8

15 U.S.C. § 41 .............................................................. 20

15 U.S.C. § 45(c) ........................................................ 2, 8

15 U.S.C. § 45(d) ....................................................... 2, 8

28 U.S.C. § 1331 ........................................................ 7, 8

28 U.S.C. § 1361 ............................................................ 8

28 U.S.C. § 1651(a) ....................................................... 8

28 U.S.C. § 2201 ............................................................ 8

28 U.S.C. § 2202 ............................................................ 8

Regulations

86 Fed. Reg. 38,542 (July 22, 2021) .......................... 19

16 C.F.R. § 3.31(c)(1) .................................................. 15

16 C.F.R. § 3.31(c)(2) .................................................. 15

16 C.F.R. § 3.54 ........................................................... 17

Rules

Sup. Ct. Rule 37.2 ......................................................... 1

vii

Other Authorities

Aaron L. Nielson, Is the FTC on a

Collison Course With the Unitary

Executive?, Yale Notice & Comment

(July 2, 2021),

https://www.yalejreg.com/nc/is-theftc-on-a-collison-course-with-theunitary-executive/ ................................................... 4

Antonin Scalia & Bryan Garner,

Reading Law (2012) ................................................ 9

Daniel Crane,

Debunking Humphrey’s Executor,

83 Geo. Wash. L. Rev. 1835 (2015) ...................... 23

Dissenting Statement of Comm’r

Christine S. Wilson Regarding the

Open Commission Meeting (July 1,

2021),

https://www.ftc.gov/system/files/docu

ments/public_statements/1591554/p2

10100wilsoncommnmeetingdissent.p

df .......................................................................... 4, 5

viii

Dissenting Statement of Comm’rs

Christine Wilson and Noah Phillips

Regarding the Commission

Statement On the Adoption of

Revised Section 18 Rulemaking

Procedures (July 9, 2021),

https://www.ftc.gov/system/files/docu

ments/public_statements/1591702/p2

10100_wilsonphillips_joint_statemen

t_-_rules_of_practice.pdf ....................................... 19

Dissenting Statement of Comm’rs Noah

Joshua Phillips & Christine S.

Wilson on “Statement of the

Commission on the Withdrawal of

the Statement of Enforcement

Principles Regarding ‘Unfair

Methods of Competition’ Under

Section 5 of the FTC Act” (July 9,

2021),

https://www.ftc.gov/system/files/docu

ments/public_statements/1591710/p2

10100phillipswilsondissentsec5enfor

cementprinciples.pdf .............................................. 5

Executive Order on Promoting

Competition in the American

Economy (July 9, 2021),

https://www.whitehouse.gov/briefing

-room/presidentialactions/2021/07/09/executive-orderon-promoting-competition-in-theamerican-economy/ ............................................... 19

ix

In re Exxon Corp.,

83 F.T.C. 1759,

1974 FTC LEXIS 226 (June 4, 1974)................... 15

Joshua D. Wright, Section 5 Revisited:

Time for the FTC to Define the Scope

of Its Unfair Methods of Competition

Authority (Feb. 26, 2015),

http://bit.ly/2c3FSYZ ............................................. 16

Joshua D. Wright, Lina Khan Is Icarus

at the FTC, WSJ (July 21, 2021),

https://www.wsj.com/articles/linakhan-ftc-monopoly-big-tech11626108008 ......................................................... 19

Letter from Ranking Members of House

Judiciary, Oversight, and Energy

and Commerce Committees to FTC,

1 (July 29, 2021),

https://republicansjudiciary.house.gov/wpcontent/uploads/2021/07/2021-07-29JDJ-CMR-JC-to-FTC.pdf ....................................... 5

McWane, Inc.,

F.T.C. No. 9351,

2014 FTC LEXIS 28 (Jan. 30, 2014).................... 17

Order, In re Axon Enterprise,

F.T.C. No. 9389,

2020 FTC LEXIS 127 (July 21, 2020).................. 15

x

Order, In re Axon Enterprise,

F.T.C. No. 9389,

2020 FTC LEXIS 124 (July 21, 2020).................. 15

Order, In re Axon Enterprise,

F.T.C. No. 9389 (Sept. 3, 2020) ............................ 14

Order, In re LabMD,

F.T.C. No. 9357,

2014 FTC LEXIS 35 (Feb. 21, 2014).................... 15

1

BRIEF OF AMICUS CURIAE

IN SUPPORT OF PETITIONER

Under Supreme Court Rule 37.2, Americans for

Prosperity Foundation (“AFPF”) respectfully submits

this amicus curiae brief in support of Petitioner.1

INTEREST OF AMICUS CURIAE

Amicus curiae AFPF is a 501(c)(3) nonprofit

organization committed to educating and training

Americans to be courageous advocates for the ideas,

principles, and policies of a free and open society. As

part of this mission, it appears as amicus curiae before

federal and state courts. AFPF believes judicially

created barriers to meaningful Article III review are

inconsistent with the separation of powers. Those

facing ultra vires or unconstitutional agency

enforcement actions should not have to face years of

potentially ruinous costs to have their day in court.

SUMMARY OF ARGUMENT

It should not be the law that an agency can do

whatever it wants for as long as it wants to a

business—no matter how ultra vires, abusive, or

unconstitutional—without being subject to review by

a court unless and until that abusive process ends.

The panel majority recognized as much: “it seems odd

All parties have consented to the filing of this brief after

receiving timely notice. Amicus curiae states that no counsel for

any party authored this brief in whole or in part, and no entity

or person, aside from amicus curiae or its counsel, made any

monetary contribution intended to fund the preparation or

submission of this brief.

1

2

to force a party to raise constitutional challenges

before an agency that cannot decide them.” App. 16.

“[I]t makes little sense to force a party to undergo a

burdensome administrative proceeding to raise a

constitutional challenge against the agency’s

structure before it can seek review from the court of

appeals.” App. 18. Nonetheless, the divided panel

mistakenly found it lacked jurisdiction, departing

from the plain text of 15 U.S.C. § 45(c)–(d). Based on

an all-too-common overreading of Thunder Basin and

Elgin, the majority mistakenly believed itself bound

to eschew review: “[I]f we were writing on a clean

slate, we would agree with the dissent.” App. 18.

This (mis)reading of this Court’s precedent has

caused hopeless confusion and intractable judicial

disagreements in the lower courts across the nation

on a recurring issue of immense practical importance

that implicates the inhouse enforcement proceedings

of an alphabet-soup of so-called “independent

agencies”

administering

numerous

statutory

schemes. See Pet. 27 (collecting cases illustrating

divergence of opinion). The decision below showcases

this confusion. Even under the panel majority’s

weighing of the “Thunder Basin factors,” the factors

pointed in different directions. See App. 24. Indeed,

the majority found two of the three factors were

“cloaked in ambiguity.” See App. 23. This Court’s

intervention is desperately needed to clarify for the

lower courts the proper scope of the Thunder Basin

line of cases.

Further delay serves no purpose. As the panel

majority itself highlighted, the FTC—which acts as

investigator, prosecutor, and judge—invariably finds

in favor of itself. The Commission has already ruled

3

against Axon on the merits of its Article II claim. And

the FTC’s administrative machinery does not allow

Axon to meaningfully pursue its due process and

equal protection claims, and bars the discovery

necessary to develop a factual record on Axon’s

clearance process claim.

It is a troubling state of affairs when all three

judges on a merits panel seem to agree that Axon

raised substantial constitutional claims about the

validity of FTC administrative proceedings, yet Axon

is prevented from pursuing those claims without first

subjecting itself to the very proceedings that it is

challenging. Axon is left with no remedy on its

constitutional claims, a situation inimical to the

“settled and invariable principle, that every right,

when withheld, must have a remedy, and every injury

its proper redress.” Marbury v. Madison, 5 U.S. (1

Cranch) 137, 147 (1803).

This Court should also grant certiorari to resolve

the second question presented by the Petition. Unlike

petitions raising related issues after the petitioner

already suffered the constitutional violations, this

case does not require the Court to grapple with

retrospective remedial doctrines. See Pet. 28, 33–34.

Instead, FTC’s inhouse prosecution of Axon has been

stayed and Axon solely seeks prospective relief. See

Pet. 18, 28, 33. Accordingly, the Petition provides an

ideal vehicle to cleanly resolve this important

constitutional question.

On the merits, the short answer to that

constitutional question is plainly “no.” The multi-tier

removal protections for FTC’s Chief ALJ do not pass

constitutional muster; nor, in light of Collins v. Yellen,

4

141 S. Ct. 1761 (2021), does the for-cause removal

protection the FTC Chair enjoys. At a minimum, the

president must be able to remove FTC’s “executive

and administrative head”—the Chair—at will, so the

People may oversee the FTC through the politically

accountable president. After all, as Professor Aaron

Nielson observed: “If the president must be directly

responsible to the people of the United States for what

the FHFA and the CFPB do, then why shouldn’t the

president also have to be equally responsible for what

the FTC does?” Aaron L. Nielson, Is the FTC on a

Collison Course With the Unitary Executive?, Yale

Notice & Comment (July 2, 2021).2 Worse, the

combination of investigative, prosecutorial, and

judicial functions in FTC’s administrative process

violates Axon’s due process rights and Article III.

FTC’s recent actions underscore why this Court’s

review is needed. Just last term, this Court

unanimously rejected FTC’s premeditated usurpation

of Article I powers. See AMG Capital Mgmt., LLC v.

FTC, 141 S. Ct. 1341 (2021). But FTC is intent on

again bulldozing boundaries set by Congress and the

Constitution. See Dissenting Statement of Comm’r

Christine S. Wilson Regarding the Open Commission

Meeting, 9 (July 1, 2021) (“[T]he Commission was just

admonished by a unanimous Supreme Court in AMG

regarding the interpretation of our authority. The

response to that decision should not be a new

concerted effort by the Commission to exceed the

FTC’s authority regarding the use of Section 5 of the

https://www.yalejreg.com/nc/is-the-ftc-on-a-collison-coursewith-the-unitary-executive/

2

5

FTC Act.”);3 Dissenting Statement of Comm’rs Noah

Joshua Phillips & Christine S. Wilson on “Statement

of the Commission on the Withdrawal of the

Statement of Enforcement Principles Regarding

‘Unfair Methods of Competition’ Under Section 5 of

the FTC Act,” 3 & n.6 (July 9, 2021).4

Members of Congress have also expressed “serious

concerns about the partisan actions of” FTC in recent

weeks “to consolidate agency power, unilaterally

assert and expand regulatory authority, and abandon

bipartisan and open processes,” noting that “FTC is

embarking on a rapid and concerted effort to upend

long-standing bipartisan agency policy with little

public notice or opportunity to participate.” Letter

from Ranking Members of House Judiciary,

Oversight, and Energy and Commerce Committees to

FTC, 1 (July 29, 2021) (partial list of actions). 5

As FTC’s post-AMG conduct confirms, if this Court

does not act now, it may be too late to constitutionally

corral FTC. Thunder Basin must not and does not

stand in the way of that critical judicial review.

3https://www.ftc.gov/system/files/documents/public_statements/

1591554/p210100wilsoncommnmeetingdissent.pdf

4https://www.ftc.gov/system/files/documents/public_statements/

1591710/p210100phillipswilsondissentsec5enforcementprinciple

s.pdf

5https://republicans-judiciary.house.gov/wpcontent/uploads/2021/07/2021-07-29-JDJ-CMR-JC-to-FTC.pdf

6

ARGUMENT

I.

THE FTC ACT DOES NOT IMPLIEDLY STRIP

JURISDICTION OVER AXON’S CLAIMS.

A. Recent Jurisdiction-Stripping Precedent

Breaks With Historical Practice.

Until fairly recently,6 many Circuits recognized

that federal district courts could exercise Article III

jurisdiction to enjoin administrative enforcement

actions under at least two circumstances: where

agency action is (1) patently unconstitutional or

egregiously ultra vires; or (2) causing severe hardship.

See, e.g., American Gen. Ins. Co. v. FTC, 496 F.2d 197,

200 (5th Cir. 1974) (possible jurisdiction over “gross

and egregious” errors); Coca-Cola Co. v. FTC, 475 F.2d

299, 303 (5th Cir. 1973) (possible jurisdiction over

nonfrivolous constitutional claims); Borden, Inc. v.

FTC, 495 F.2d 785 (7th Cir. 1974); Sterling Drug, Inc.

v. Weinberger, 509 F.2d 1236 (2d Cir. 1975). These

decisions set a high bar but recognize courts do not

abdicate their Article III role because a case is related

to an administrative proceeding.

This approach makes sense by defending the

courts’ constitutional role while allowing for

pretextual or frivolous claims to be dismissed. As

Judge Jed Rakoff explained in finding jurisdiction

FTC, No. 1:14-cv-00810-WSD, 2014 U.S.

Dist. LEXIS 65090 (N.D. Ga. May 12, 2014) (not citing Thunder

Basin or Elgin), aff’d 776 F.3d 1275 (11th Cir. 2015); LabMD,

Inc. v. FTC, No. 13-15267, 2014 U.S. App. LEXIS 9802 (11th Cir.

Feb. 18, 2014) (unpublished) (same).

6 Cf. LabMD, Inc. v.

7

over an equal-protection clause challenge to an SEC

enforcement action, frivolous claims can be screened

out at the motion to dismiss stage. See Gupta v. SEC,

796 F. Supp. 2d 503, 514 (S.D.N.Y. 2011). And

respondent-plaintiffs

cannot

derail

ongoing

administrative proceedings by obtaining an injunction

unless they can show they are “likely to succeed on the

merits.” See Winter v. NRDC, Inc., 555 U.S. 7, 20

(2008). At the least, the district courts should look at

the merits of constitutional or non-statutory ultra

vires claims before dismissing them.

Here, the motions panel unanimously recognized

the possibility that Axon’s claims are meritorious, and

that it is facing irreparable harm. And the merits

panel seemed to agree that at least some of Axon’s

claims presented serious constitutional questions.

See App. 25–26. But it erred by holding the district

court lacked jurisdiction to adjudicate these claims on

the merits. See Free Enterprise Fund v. Public Co.

Accounting Oversight Board, 561 U.S. 477, 489–91

(2010); Bell v. Hood, 327 U.S. 678, 684 (1946) (“[I]t is

established practice for this Court to sustain the

jurisdiction of federal courts to issue injunctions to

protect rights safeguarded by the Constitution[.]”).

B. Courts

Have

Jurisdiction

Over

Constitutional and Ultra Vires Challenges

to Administrative Enforcement Actions.

The panel decision warrants this Court’s review

because it shuts the courthouse doors to claims over

which district courts have express federal-question

jurisdiction. Section 1331 states that “district courts

shall have original jurisdiction of all civil actions

arising under the Constitution, laws, or treaties of the

8

United States.” 28 U.S.C. § 1331; see also id. § 1361

(mandamus). The Declaratory Judgment Act

authorizes declaratory and injunctive relief. 7 See id.

§§ 2201, 2202. To be sure, Congress may statutorily

limit the subject-matter jurisdiction of federal courts.

See U.S. Const. Art. III, § 2; 5 U.S.C. § 703. But if

Congress wants to do that, it must clearly say so. See

Arbaugh v. Y & H Corp., 546 U.S. 500, 510 (2006).

Without a clear statement by Congress that a statute

bars the courthouse doors, “courts should treat the

restriction as nonjurisdictional in character.” Sebelius

v. Auburn Reg’l Med. Ctr., 568 U.S. 145, 153 (2013)

(cleaned up).

Here, Congress has not clearly stated an intent to

shut the courthouse doors to all of Axon’s claims. The

FTC Act’s judicial review provision creates only a

limited exception to the general rule of district-court

jurisdiction by providing jurisdiction in the Courts of

Appeals to review “an order of the Commission to

cease and desist from using any method of competition

or act or practice.” 15 U.S.C. § 45(c). “Upon the filing

of the record,” that jurisdiction “to affirm, enforce,

modify, or set aside orders of the Commission shall be

exclusive.” Id. § 45(d). No other straight-to-the-Courtof-Appeals process is provided to transfer jurisdiction

away from the district court when the case presents

itself in another posture.

7 In addition, under the All Writs Act, courts “may issue all writs

necessary or appropriate in aid of their respective jurisdictions

and agreeable to the usages and principles of law.” 28 U.S.C.

§ 1651(a).

9

No exception to ordinary jurisdiction of the federal

courts can be inferred from the narrow exclusive

jurisdiction provision in the FTC Act for appeals from

cease and desist orders. See Antonin Scalia & Bryan

Garner, Reading Law 107 (2012). As a federal district

court explained:

Section 45(d) does not grant to courts of

appeals any jurisdiction exclusive or

otherwise . . . until a cease and desist

order has issued. Consequently, that

section cannot be interpreted to deprive

this Court of jurisdiction to review any

orders issued or actions taken by the

FTC when a cease and desist order has

not yet been issued.

E. I. Du Pont de Nemours & Co. v. FTC, 488 F. Supp.

747, 750 (D. Del. 1980); see Boise Cascade Corp. v.

FTC, 498 F. Supp. 772, 777 (D. Del. 1980) (“[N]othing

in the [FTC] Act suggests that courts of appeals have

exclusive jurisdiction over agency actions prior to the

issuance of a cease and desist order.”) (citation

omitted). Cf. La. Real Estate Appraisers Bd. v. FTC,

917 F.3d 389, 391, 394 (5th Cir. 2019) (similar).

Rather, the FTC Act quite sensibly places

exclusive jurisdiction in the Courts of Appeals when a

suit involves a challenge to an FTC cease or desist

order—the role of the court in such circumstances is

more akin to that of an appellate court and, given the

administrative proceedings that have already

occurred, going straight to the court of appeals allows

for more prompt completion of judicial review. But

this path for exclusive review of a particular type of

agency order indicates nothing about the availability

10

of judicial review for other claims involving the

agency.

This Court has explained how a textually similar

judicial review provision works with other statutes,

not against them: “[T]he text does not expressly limit

the jurisdiction that other statutes confer on district

courts. Nor does it do so implicitly.” Free Enter. Fund,

561 U.S. at 489. So too here.8 See also Tilton v. SEC,

824 F.3d 276, 299 n.6 (2d Cir. 2016) (Droney, J.,

dissenting). The FTC Act provides for jurisdiction

channeling to the Courts of Appeals of claims

challenging an FTC cease and desist order; it

otherwise leaves in place district courts’ general

federal-question jurisdiction. District courts have a

“virtually unflagging” obligation to decide cases

within their jurisdiction. Lexmark Int’l, Inc. v. Static

Control Components, Inc., 572 U.S. 118, 126 (2014).

If the FTC scheme is unconstitutional, that is for

the courts to decide—let the chips fall where they

may. It is no answer to “allow the agency to duck and

weave its way out of meaningful judicial review” of

that question. See Fleming v. USDA, 987 F.3d 1093,

1111 (D.C. Cir. 2021) (Rao, J., concurring in part,

dissenting in part).

Forcing Axon through a

protracted

and

expensive

unconstitutional

administrative process “before [it] may assert [its]

constitutional claim in a federal court means that by

the time the day for judicial review comes, [it] will

already have suffered the injury that [it is] attempting

8 According to the panel

majority, “[t]his provision [15 U.S.C.

§ 45] is almost identical to the statutory review provision in the

SEC Act[.]” App. 10.

11

to prevent.” Tilton, 824 F.3d at 298 (Droney, J.,

dissenting).

C. Case Law Does Not Bar the Courthouse

Doors.

The panel decision is rooted in a misinterpretation

and expansion of Thunder Basin Coal Co. v. Reich,

510 U.S. 200 (1994), and Elgin v. Department of

Treasury, 567 U.S. 1 (2012). Thunder Basin and Elgin

were both rooted in implied congressional intent. The

principles they announce cannot be transplanted from

old soil to new without an assessment of the

congressional intent embodied there.

And that

assessment of the FTC Act confirms Congress did not

intend to preclude Axon from raising its claims in

federal district court. Nothing in Thunder Basin or

Elgin compels otherwise.

The FTC Act’s history and structure is

significantly different from that of the statutes at

issue in Thunder Basin and Elgin. In Thunder Basin,

for example, the Mine Act’s history shows Congress

specifically intended to narrow the scope of district

court review. See 510 U.S. at 209–11 & n.15 (noting

Congress amended the Act to eliminate district court

review and finding “the legislative history and these

amendments to be persuasive evidence that Congress

intended to” preclude judicial review). Similarly,

Congress intentionally narrowed the scope of district

court jurisdiction when it enacted the Civil Service

Reform Act (“CSRA”), the statute at issue in Elgin.

See 567 U.S. at 11–12. The FTC Act’s history includes

no similar history. The Mine Act also allowed

aggrieved mine operators, not the Secretary, to

initiate actions before the Commission. Thunder

12

Basin, 510 U.S. at 209. And the CSRA set forth in

“painstaking detail . . . the method for covered

employees to obtain review of adverse employment

actions[.]” Elgin, 567 U.S. at 11–12.

By contrast, entities like Axon have no ability to

obtain review of their constitutional challenges to the

FTC’s authority through the FTC Act scheme unless

and until the FTC issues a cease and desist order

against them. Moreover, the Mine Act involved

administrative proceedings before an independent

commission (rather than the agency enforcing the

Mine Act), see Thunder Basin, 510 U.S. at 204; Sec’y

of Labor v. Knight Hawk Coal, LLC, 991 F.3d 1297,

1300 (D.C. Cir. 2021), and the CSRA involved actions

by the government as an employer, rather than a

regulator, see United States v. Fausto, 484 U.S. 439,

443–47 (1988). Those are different animals from

inhouse enforcement proceedings brought by

administrative agencies, particularly when those

enforcement proceedings are interfering with private

rights. Thunder Basin itself confirms the panel’s

decision here was erroneous. There, the Court

emphasized that preclusion does not apply to claims

that are “wholly collateral to a statute’s review

provisions and outside the agency’s expertise,

particularly where a finding of preclusion could

foreclose all meaningful judicial review.” Thunder

Basin, 510 U.S. at 213 (cleaned up). Nor does it

preclude all constitutional claims. See id. at 216–18;

Ironridge Global IV, Ltd. v. SEC, 146 F. Supp. 3d

1294, 1303 n.5 (N.D. Ga. 2015) (“[S]ince Thunder

Basin, other courts have held that the Mine Act does

not preclude all constitutional claims from district

court jurisdiction.”) (citation omitted)). Yet here, the

13

panel found Axon’s constitutional claims precluded

even though they are collateral to the enforcement

proceeding, rely on superior law, and the FTC lacks

expertise or authority to address these claims. Cf. Free

Enter. Fund, 561 U.S. at 491 & n.2 (noting

“Petitioners’ constitutional claims are . . . outside the

Commission’s competence and expertise”).

The panel opinion essentially read Thunder Basin

as setting forth a one-factor test, not a three-factor

test. In doing so, it emphasized the one factor that is

least relevant to the implied preclusion question that

the factors are meant to address: Did Congress intend,

by enacting this statute, to foreclose ordinary routes

of judicial review? The fact that Congress provided an

opportunity for eventual judicial review through an

administrative proceeding sheds little light on that

question, given that Congress routinely creates

duplicative routes to judicial review. The relationship

between the claims, the statutory scheme, and the

agency’s expertise are a far better guide to

congressional intent in this context. There is very

little reason to believe Congress would have intended

regulated parties to be deprived of all opportunity to

present constitutional claims that are collateral to a

statutory scheme and do not require any agency

expertise merely because those parties are regulated

by an agency. The panel’s overreading of Elgin seems

to have led them astray from this basic point.

II.

EXHAUSTION BEFORE THE FTC IS FUTILE FOR

AXON.

As the panel majority observed, “Axon raises

legitimate questions about whether the FTC has

stacked the deck in its favor in its administrative

14

proceedings. . . . Axon essentially argues that the FTC

administrative proceeding amounts to a legal version

of the Thunderdome in which the FTC has rigged the

rules to emerge as the victor every time.” App. 26.

Axon is correct. Allowing the administrative

proceeding to continue without resolving Axon’s

constitutional claims serves no legitimate purpose.

With respect to Axon’s Article II claims, the

Commission lacks relevant expertise and has already

decided the issue against Axon. See Order, In re Axon

Enterprise, F.T.C. No. 9389 (Sept. 3, 2020). Further

administrative consideration of Axon’s equal

protection and due process claims would likewise

serve no purpose.

As Judge Rakoff observed in the course of finding

jurisdiction over an equal-protection claim in the SEC

context similar to Axon’s:

[T]he

SEC’s

administrative

machinery does not provide a reasonable

mechanism for raising or pursuing such

a claim. The SEC’s Rules of Practice do

not permit counterclaims against the

SEC, nor do they allow the kind of

discovery of SEC personnel that would

be necessary to elicit admissible evidence

corroborative of such a claim. The

Commission, having approved the OIP .

. . would be inherently conflicted in

assessing such a claim[.]

Gupta, 796 F. Supp. 2d at 513–14 (cleaned up).

15

So too here. FTC inhouse precedent bars inquiry

into the circumstances of the pre-complaint

investigation and reasons why a complaint is issued,

stating these matters “will not be reviewed by the

courts.” See In re Exxon Corp., 83 F.T.C. 1759, 1974

FTC LEXIS 226, at *2–3 (June 4, 1974). This

limitation on the scope of discovery, see also 16 C.F.R.

§ 3.31(c)(1)–(2), prevents respondents like Axon from

obtaining evidence necessary to substantiate

potentially meritorious constitutional defenses. See

Order, In re Axon Enter., F.T.C. No. 9389, 2020 FTC

LEXIS 124, at *4 (July 21, 2020) (denying “discovery

into the decision-making process that culminated in

the FTC, rather than the DOJ, taking enforcement

action against Axon”); Order, In re Axon Enter., F.T.C.

No. 9389, 2020 FTC LEXIS 127 (July 21, 2020)

(denying discovery as to clearance process); see also

Order, In re LabMD, F.T.C. No. 9357, 2014 FTC

LEXIS 35, at *9 n.3 (Feb. 21, 2014) (“[A]pplicable

precedent holds that the Commission’s decision

making in issuing a complaint is outside the scope of

discovery in . . . administrative litigation[.]”). Thus,

Axon cannot possibly obtain the information it needs

to show an equal protection or due process violation

until the conclusion of the administrative process.

Unsurprisingly, then, as the panel majority

recognized: “Axon claims—and FTC does not appear

to dispute—that FTC has not lost a single case in the

past quarter-century. Even the 1972 Miami Dolphins

would envy that type of record.” Pet. App. 26. As a

former FTC Commissioner has explained:

The FTC has voted out a number of

complaints

in

administrative

adjudication that have been tried by

16

administrative law judges in the past

nearly twenty years. In each of those

cases, after the administrative decision

is appealed to the Commission, the

Commission has ruled in favor of FTC

staff and found liability. In other words,

in 100 percent of cases where the

administrative law judge ruled in favor

of the FTC staff, the Commission

affirmed liability; and in 100 percent of

the cases in which the administrative

law judge ruled found no liability, the

Commission reversed.

Joshua D. Wright, Comm’r, FTC, Section 5 Revisited:

Time for the FTC to Define the Scope of Its Unfair

Methods of Competition Authority, 6 (Feb. 26, 2015),

available at http://bit.ly/2c3FSYZ. He concluded,

“This is a strong sign of an unhealthy and biased

institutional process. . . . Even bank robbery

prosecutions have less predictable outcomes than

administrative adjudication at the FTC.” Id.

And while the ALJ may find in favor of

respondents from time to time, it is the Commission—

the same body that votes out the complaint—that

always seems to find in favor of FTC staff.9 This

process presents additional unfairness for businesses:

For unlike in federal court, where appellate courts

generally give deference to district court factual

9 This Court has held that “an unconstitutional potential for bias

exists when the same person serves as both accuser and

adjudicator in a case.” Williams v. Pennsylvania, 136 S. Ct. 1899,

1905 (2016).

17

findings, the Commission reviews the ALJ’s factual

findings and “inferences drawn from those facts” de

novo, see McWane, Inc., F.T.C. No. 9351, 2014 FTC

LEXIS 28, at *30 (Jan. 30, 2014); 16 C.F.R. § 3.54, and

it is the Commission’s factual findings that are then

subject to deference in the Court of Appeals, see

generally Schering-Plough Corp. v. FTC, 402 F.3d

1056, 1062–63 (11th Cir. 2005).

Requiring Axon to proceed through this process

before it can obtain a ruling on its constitutional

claims—which numerous federal judges have already

recognized as substantial—is neither fair nor required

by law. This Court should grant Axon’s petition to

make clear that the federal courts remain open to

protect constitutional rights and that Axon need not

spend millions of dollars going through FTC’s rigged

Thunderdome just to get its day in court.

III.

FTC’S

UNCONSTITUTIONAL

STRUCTURE

THREATENS INDIVIDUAL LIBERTY.

As Justice Jackson explained long ago, “[t]he rise

of administrative bodies probably has been the most

significant legal trend of the last century and perhaps

more values today are affected by their decisions than

by those of all the courts, review of administrative

decisions apart. They also have begun to have

important consequences on personal rights.” FTC v.

Ruberoid Co., 343 U.S. 470, 487 (1952) (Jackson, J.,

dissenting). Justice Jackson continued: “They have

become a veritable fourth branch of the Government,

which has deranged our three-branch legal theories

much as the concept of a fourth dimension unsettles

our three-dimensional thinking.” Id. So too here.

18

As Petitioner explains, see Pet. 29–32 & n.4, the

FTC’s structure violates Article II, and no amount of

creative labeling can change this. 10 “Administrative

agencies have been called quasi-legislative, quasiexecutive or quasi-judicial, as the occasion required,

in order to validate their functions within the

separation-of-powers scheme of the Constitution.”

FTC v. Ruberoid Co., 343 U.S. at 487 (Jackson, J.,

dissenting). But the FTC Chief ALJ must necessarily

be an executive official, who cannot exercise the

judicial power.11 See also U.S. Const. Art. III, § 1;

FTC v. Eastman Kodak Co., 274 U.S. 619, 623 (1927)

(FTC does not exercise “judicial powers”). No matter

how one chooses to describe the work ALJs are tasked

with doing, “under our constitutional structure

they must be exercises of—the ‘executive Power.’”

City of Arlington v. FCC, 569 U.S. 290, 304 n.4 (2013)

(citing U.S. Const. Art. II, §1, cl. 1); see also Free

Enterprise Fund, 561 U.S. at 514); id. at 516 (Breyer,

J., dissenting). And as the panel majority explained,

“ALJs wield tremendous power and still remain a part

of the executive branch—even if Congress bestowed

them with the title ‘judge’—and they should thus

FTC’s combination of investigative, prosecutorial, and

adjudicative functions is also unconstitutional, see Pet. 29–35;

Williams, 136 S. Ct. at 1905, as is its “preclearance” process. If

FTC wants to prosecute Axon to deprive it of private property

rights, Article III and due process require FTC to do so in federal

court. See also United States v. Arthrex, Inc., 141 S. Ct. 1970,

1993 (2021) (Gorsuch, J., concurring in part, dissenting in part).

11 This is no reflection on the character, competence, integrity,

and impartiality of the FTC Chief ALJ, who is highly respected.

10

19

theoretically remain accountable to the President and

the people.” App. 25.

So too must the unelected FTC Chair, the

“executive and administrative head of the agency”

who recently assumed the power of “Chief Presiding

Officer” at FTC rulemakings, remain accountable to

the president.12 See Revisions to Rules of Practice,

Final Rule, 86 Fed. Reg. 38,542, 38,546 (July 22, 2021)

(§ 0.8 The Chair). Indeed, the President has issued an

Executive Order “encouraging” the “Chair of the FTC”

to engage in a host of major regulatory activities,

providing for the Chair’s inclusion on a “White House

Competition Council within the Executive Office of

the President.” See Executive Order on Promoting

Competition in the American Economy, §§ 4(a),(f),(g),

5(b)-(i) (July 9, 2021).13 Plainly, the Chair has

assumed the mantle of FTC’s top officer.14 This recent

consolidation of power in a single person makes it

See generally Dissenting Statement of Comm’rs Christine

Wilson and Noah Phillips Regarding the Commission Statement

On the Adoption of Revised Section 18 Rulemaking Procedures

(July 9, 2021) (discussing Chair’s arrogation of broad new powers

on

party-line

3-2

vote),

https://www.ftc.gov/system/files/documents/public_statements/1

591702/p210100_wilsonphillips_joint_statement__rules_of_practice.pdf

13https://www.whitehouse.gov/briefing-room/presidentialactions/2021/07/09/executive-order-on-promoting-competitionin-the-american-economy/

12

14 See also Joshua D. Wright, Lina Khan Is Icarus at the FTC,

WSJ (July 21, 2021) (“With the announcement of a global gag

order on FTC staff, Ms. Khan has made it clear the FTC will now

speak with one voice—hers.”), https://www.wsj.com/articles/linakhan-ftc-monopoly-big-tech-11626108008

20

even more critical that the President be able to

supervise and be politically accountable for the

Chair’s actions. But see 15 U.S.C. § 41.

To be sure, “the nature and breadth of an agency’s

authority is not dispositive in determining whether

Congress may limit the President’s power to remove

its head.” Collins, 141 S. Ct. at 1768. And “the

constitutionality of removal restrictions” does not

“hinge[]” on “the relative importance of the regulatory

and enforcement authority” of the agency. See id. at

1785. But it is undeniable that the FTC wields great

power. And it is a constitutional imperative that, at

the least, FTC Chair be removable at will. For “the

Constitution prohibits even ‘modest restrictions’ on

the President’s power to remove the head of an agency

with a single top officer.” Id. at 1787; see also Free

Enter. Fund v. Pub. Co. Accounting Oversight Bd., 537

F.3d 667, 692 (D.C. Cir. 2008) (Kavanaugh, J.,

dissenting) (“[T]he constitutional text and the original

understanding, including the Decision of 1789,

established that the President possesses the power

under Article II to remove officers of the Executive

Branch at will.”), overruled, 561 U.S. 477 (2010).

That is because “[t]he entire ‘executive Power’

belongs to the President alone.” Seila Law LLC v.

Consumer Fin. Prot. Bureau, 140 S. Ct. 2183, 2197

(2020); see U.S. Const. Art. II, § 1. And “[t]he buck

stops with the President[.]” Free Enter. Fund, 561

U.S. at 493; see id. at 497–98. For “[w]ithout

presidential responsibility there can be no democratic

accountability for executive action.” Arthrex, 141 S.

Ct. at 1988 (Gorsuch, J., concurring in part, dissenting

in part). After all, “agencies . . . have political

accountability, because they are subject to the

21

supervision of the President, who in turn answers to

the public.” Kisor v. Wilkie, 139 S. Ct. 2400, 2413

(2019). And “because the President, unlike agency

officials, is elected,” the President’s removal power “is

essential to subject Executive Branch actions to a

degree of electoral accountability.” Collins, 141 S. Ct.

at 1784.

Conversely, “[i]n the case of a removal defect, a

wholly unaccountable government agent asserts the

power to make decisions affecting individual lives,

liberty, and property. The chain of dependence

between those who govern and those who endow them

with power is broken.” Id. at 1797 (Gorsuch, J.,

concurring in part). Indeed, “[i]f anything, removal

restrictions may be a greater constitutional evil than

appointment defects. . . . It is the power to supervise—

and, if need be, remove—subordinate officials that

allows a new President to shape his administration

and respond to the electoral will that propelled him to

office.” Id. at 1796 (Gorsuch, J., concurring in part).

That is because “[f]ew things could be more perilous

to liberty than some ‘fourth branch’ that does not

answer even to the one executive official who is

accountable to the body politic.” Id. at 1797 (Gorsuch,

J., concurring in part) (citing FTC v. Ruberoid Co., 343

U.S. at 487 (Jackson, J., dissenting)); see also City of

Arlington, 569 U.S. at 313–14 (Roberts, C.J.,

dissenting). Such is the case here.

IV.

AXON’S PETITION PROVIDES AN IDEAL VEHICLE

TO REPUDIATE HUMPHREY’S EXECUTOR.

“Humphrey’s Executor poses a direct threat to our

constitutional structure and, as a result, the liberty of

the American people.” Seila Law, 140 S. Ct. at 2211

22

(Thomas, J., concurring in part and dissenting in

part). “Continued reliance on Humphrey’s Executor to

justify the existence of independent agencies creates a

serious, ongoing threat to our Government’s design.

Leaving these unconstitutional agencies in place . . .

subverts political accountability and threatens

individual liberty.” Id. at 2218–19 (Thomas, J.,

concurring in part and dissenting in part).

Axon’s Petition squarely presents this Court with

an opportunity to “repudiate what is left of this

erroneous precedent.” Id. at 2212 (Thomas, J.,

concurring in part and dissenting in part). When this

Court “revisits a precedent[,] this Court has

traditionally considered the quality of the decision’s

reasoning; its consistency with related decisions; legal

developments since the decision; and reliance on the

decision.” Ramos v. Louisiana, 140 S. Ct. 1390, 1405

(2020) (cleaned up). Each of these factors weigh in

favor of jettisoning Humphrey’s.

To begin with, Humphrey’s was poorly reasoned,

and its constitutional holding has only become

lonelier with time. See generally Seila Law, 140 S. Ct.

at 2211–19 (Thomas, J., concurring in part and

dissenting in part). “Humphrey’s Executor laid the

foundation for a fundamental departure from our

constitutional structure with nothing more than

handwaving and obfuscating phrases such as ‘quasilegislative’ and ‘quasi-judicial.’” Id. at 2216 (Thomas,

J., concurring in part and dissenting in part). It

“relies on one key premise: the notion that there is a

category of ‘quasi-legislative’ and ‘quasi-judicial’

power that is not exercised by Congress or the

Judiciary, but that is also not part of ‘the executive

power vested by the Constitution in the President.’”

23

Id. (Thomas, J., concurring in part and dissenting in

part). “The problem is that the [Humphrey’s] Court’s

premise was entirely wrong.” Id. (Thomas, J.,

concurring in part and dissenting in part). Under our

Constitution, “Congress [cannot] create agencies that

straddle multiple branches of Government”;

unaccountable, “[f]ree-floating agencies” like the FTC

“simply do not comport with th[e] constitutional

structure.” See id. (Thomas, J., concurring in part and

dissenting in part). That alone should end the matter.

Humphrey’s also rested on plainly erroneous

factual assumptions. The Humphrey’s Court placed

great weight on its view that the FTC’s “duties are

neither political nor executive, but predominantly

quasi-judicial and quasi-legislative.” Humphrey’s

Ex’r v. United States, 295 U.S. 602, 624 (1935); see also

id. at 628. “Humphrey’s Executor permitted Congress

to give for-cause removal protections to a

multimember body, balanced along partisan lines,

that performed legislative and judicial functions and

was said not to exercise any executive power.” Seila

Law, 140 S. Ct. at 2199 (emphasis added). But

Humphrey’s “conclusion that the FTC did not exercise

executive power has not withstood the test of time.”

Id. at 2198 n.2. Regardless of whether that was the

case in 1935 when Humphrey’s was decided, it

certainly does not hold true today. See Daniel Crane,

Debunking Humphrey’s Executor, 83 Geo. Wash. L.

Rev. 1835 (2015). Cf. Morrison v. Olson, 487 U.S. 654,

689 n.28 (1988) (“[I]t is hard to dispute that the

powers of the FTC at the time of Humphrey’s Executor

would at the present time be considered ‘executive,’ at

least to some degree.”); id. at 706 (Scalia, J.,

dissenting). These assumptions become even less true

24

with each consolidation of power in a single person,

rendering the notion of “multimember body, balanced

along partisan lines” increasingly mythical.

“[I]t is not clear what is left of Humphrey’s

Executor’s rationale. But if any remnant of that

decision is still standing, it certainly is not enough to

justify the numerous, unaccountable independent

agencies that currently exercise vast executive power

outside the bounds of our constitutional structure.”

Seila Law, 140 S. Ct. at 2218 (Thomas, J., concurring

in part and dissenting in part). Indeed, in Seila Law,

this “Court . . . repudiated almost every aspect of

Humphrey’s Executor.” Id. at 2212 (Thomas, J.,

concurring in part and dissenting in part). This Court

should no longer “giv[e] [it] the veneer of

respectability,” Gamble v. United States, 139 S. Ct.

1960, 1981 (2019) (Thomas, J., concurring).

Humphrey’s day has come.

Both questions presented by the Petition merit

this Court’s review, and this case also presents a clean

and timely vehicle to prune Humphrey’s Executor.

After all, “[o]ne can have a government that functions

without being ruled by functionaries, and a

government that benefits from expertise without

being ruled by experts.” Free Enter. Fund, 561 U.S. at

499.

CONCLUSION

This Court should grant Axon’s petition.

25

Respectfully submitted,

Michael Pepson

Counsel of Record

Cynthia Fleming Crawford

AMERICANS FOR PROSPERITY FOUNDATION

1310 N. Courthouse Road, Ste. 700

Arlington, VA 22201

(571) 329-4529

mpepson@afphq.org

Counsel for Amicus Curiae

August 20, 2021