A year has passed since the US Supreme Court opened the door to Americans trying to escape the federal government’s administrative tribunals. Yet real relief from agency proceedings remains elusive. Plaintiffs sometimes must litigate on two fronts, and the process is complicated and frustrating.
The Supreme Court held in Axon Enterprise v. Federal Trade Commission that federal courts can hear and resolve constitutional objections to administrative tribunals in federal agencies before individuals and entities are forced to endure them.
Since then, Pacific Legal Foundation has represented many clients litigating Axon-style challenges to federal agency tribunals, but the challenges are difficult to win. Meanwhile many federal district courts allow the tribunal’s work to continue despite a pending challenge, leading to an arduous litigation process.
The courthouse doors are open, but plaintiffs continue to struggle. The new decision has more often created a parallel lane of litigation in federal courts than chipped away at overreaching tribunals.
This parallel litigation drains plaintiffs’ resources. And it may take years for federal courts to decide about the constitutionality of the agency process.
Post-Axon Challenges
Axon arose because Congress empowers many federal agencies to accuse individuals or companies of breaking the law and adjudicate liability themselves. These proceedings involve neither an independent judge nor jury, as the Constitution requires.
Before Axon, you had to navigate the entire administrative process before receiving a hearing with a federal judge where you could object to anything unconstitutional about the process. Now, you have the opportunity to pause the hearing and have a court determine its constitutionality before the administrative proceedings.
Pacific Legal Foundation has litigated Axon-style challenges to actions of several federal agencies including the Department of Agriculture, Consumer Product Safety Commission, Environmental Protection Agency, National Credit Union Administration, and Securities and Exchange Commission. These cases have yielded some success, but even more frustration.
Importance of Stays
Some federal agencies recognize the constitutional uncertainties and are willing to pause their administrative actions, allowing Axon challenges to be resolved in federal court before proceeding.
For example, the NCUA agreed to stay its administrative proceeding against Jeffrey Moats for millions in restitution and civil penalties while a federal court hears his constitutional claims.
Moats was CEO of the Edinburg Teachers Credit Union in southern Texas for more than 25 years. The credit union had an excellent track record during his tenure until March 2020, according to Moats’ federal district court complaint.
The Texas Credit Union Department took control of the credit union in March 2021 and named the NCUA conservator. Moats was fired immediately, and the NCUA froze his withheld retirement benefits and seized personal property, the complaint said.
Eventually, the agency found Moats didn’t commingle business and personal assets and returned his property, the complaint said. Still, the NCUA is now seeking about $5 million in restitution and fines against him for unjust enrichment and breach of fiduciary duty through an in-house tribunal, where any initial appeal would be decided within the same agency, Moats alleged.
Moats argued to the federal district court that the NCUA’s administrative law judge is unconstitutionally protected from the president’s removal power, and that the administrative hearing deprives him of his constitutional rights to a jury and due process of law, his complaint said.
The agency’s agreement to stay the administrative proceeding allowed for more certainty in the process for both the agency and respondent while the federal court case proceeded. The federal district court recently ruled against Moats, who is considering an appeal. If the NCUA continues its stay and he prevails, it will prevent Moats from being subjected to an unconstitutionally structured administrative tribunal.
Litigation Complications
On the other hand, when agencies refuse to wait for a federal court to decide an Axon challenge, the path forward is much more complicated. To pause an administrative hearing, the plaintiff must seek a stay from a federal district court on an emergency basis. But the standard for obtaining that stay is high: The plaintiff must convince the court they are likely to win their case.
Additionally, a preliminary ruling in favor of an Axon plaintiff often has implications beyond the case itself. The constitutional problems with one administrative tribunal are frequently shared across federal agencies. Many judges are reluctant to issue a stay when that decision has broad implications and must be made quickly and on a preliminary basis.
This dynamic was evident in the Axon suit Jimmy McConnell brought with PLF against the USDA after the agency accused him of entering horses in a prohibited condition into Tennessee Walking Horse competitions, according to McConnell’s complaint.
McConnell challenged the USDA adjudication process in which an agency employee could have imposed fines and disqualified him from his business without a jury. The employee wasn’t properly appointed to an office in a manner consistent with the exercise of such significant power, McConnell alleged.
But the court refused to stay McConnell’s USDA hearing, saying the law cut against him in the preliminary injunction phase. This is despite favorable Supreme Court precedent and an acknowledgment that McConnell might have prevailed.
Ultimately, McConnell obtained a favorable settlement from the USDA, but his hearing process shouldn’t have continued based on the infirmities of the process.
So, while Axon made it possible to challenge administrative tribunals without going through the hearing process, actual relief is difficult to obtain. Courts are reluctant to stay the tribunals if the agency doesn’t do it itself. And final decisions on constitutionality can take years to obtain. In the meantime, the administrative tribunals grind on, taking our clients’ time and money and inflicting an emotional toll.
Perhaps as Axon challenges progress, this process will improve. More likely, real relief will only come if the Supreme Court ends these unconstitutional administrative tribunals once and for all.
The case is Axon Enter., Inc. v. FTC, U.S., Nos. 21-86 and 21-1239, 4/14/23.
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.
Author Information
Josh Robbins is an attorney at Pacific Legal Foundation, a public interest law firm that defends Americans’ liberty against government overreach and abuse.
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