In Axon Enterprise v. Federal Trade Commission, the U.S. Court of Appeals for the Ninth Circuit affirmed the dismissal of an action by Axon Enterprises, Inc., ("Axon") arguing that the FTC's administrative enforcement process violated Axon's constitutional rights.
Originally, the FTC filed an administrative complaint challenging Axon's acquisition of a competitor, demanding that Axon spin off the company. In response, Axon filed a lawsuit in the U.S. District Court for the District of Arizona that argued that the FTC's administrative enforcement process, which precludes the case from being heard in a federal court, violates due process rights and "runs afoul of separation-of-powers principles." The district court dismissed the complaint.
On appeal, the Ninth Circuit held that the Federal Trade Commission Act requires Axon to raise its constitutional challenge first in the administrative proceeding, as mandated by the Supreme Court's Thunder Basin Coal Co. v. Reich trilogy of cases. The Court also found that Axon has not "suffered any cognizable harm" because Axon can present its case to an appellate court after the FTC administrative proceeding.
The Court concluded that the Supreme Court precedent "compels the preclusion" of district court jurisdiction over Axon's constitutional challenge to the FTC's process.
Commentary
Axon is a potentially significant case. Axon's constitutional challenge strikes at the heart of the FTC's structure as an independent agency. Axon argues that the FTC's authority to investigate and enforce against potential law violations is fundamentally unconstitutional because the heads of the agency are beyond the President's power of removal and that such power was given to the President as a fundamental check against abusive prosecutors. Significantly, the judges on the appellate panel indicated in dicta that they might support Axon's argument if the case reaches the Ninth Circuit on appeal from an FTC judgment against Axon. Thus, while the Ninth Circuit affirmed the dismissal on highly technical grounds, the case has the potential to upend FTC enforcement generally if it should ever return to the Ninth Circuit. Presumably, another FTC respondent now may raise the same argument before another court. Stay tuned. . . .
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