U.S. Supreme Court plans to ease FTC and SEC challenges

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WASHINGTON — The U.S. Supreme Court is set to hear arguments Monday in two cases that could make it easier to challenge the regulatory power of federal agencies in disputes involving the Federal Trade Commission and the Securities and Exchange Commission.

Judges are considering an appeal by Axon Enterprise Inc, based in Scottsdale, Arizona, after a lower court dismissed the Taser maker’s lawsuit challenging the constitutionality of the FTC’s structure in an attempt to counter a related antitrust lawsuit to its acquisition of a rival.

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In a separate case, judges will consider the SEC’s appeal of a lower court’s decision reviving a challenge by a Texas accountant named Michelle Cochran to the legality of her house court after it questioned its audits of listed companies.

In either case, the question is whether the targets of an agency’s enforcement action can challenge its structure or processes in federal district court or must first undergo the agency’s administrative process. , which can be time-consuming and costly.

The role of the FTC is to protect consumers from anti-competitive and fraudulent business practices. The job of the SEC is to maintain fair and orderly markets and to enforce investor protection laws.

Reducing the regulatory authority of federal agencies — which can enforce laws and rules in important areas such as energy, environment, climate policy and workplace safety — has been a key goal of many business groups. businesses and conservatives, who complain about what they call the “administrative state”.

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The Supreme Court has a 6-3 conservative majority. Its conservative justices have expressed skepticism of broad regulatory power and the duty of judges under Supreme Court precedent to respect that authority. . The eventual decisions in the two cases, expected by the end of next June, could be based on the recent decisions of the authority of the court’s control agency.

A ruling last June, with the majority Conservative justices and dissenting Liberals, limited the Environmental Protection Agency’s power to issue sweeping regulations to cut carbon emissions from power plants. In 2019, the court curtailed a legal doctrine that gave agencies leeway to interpret their own rules.

The Federal Trade Commission Act and the Securities Exchange Act direct judicial review of adverse agency orders to federal appeals courts once those orders become final. The Justice Department, representing the agencies, said in a legal filing that the statutes allow Axon and Cochran to pursue their claims after the agencies’ rulings end, not before.

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“The question here is whether Axon and Cochran can circumvent the review programs established by Congress by preemptively suing in district court to enjoin the agency’s proceedings. They cannot,” the Justice Department filing said.

Axon sued the FTC in 2020 in federal court in Arizona following an investigation by the agency into its 2018 acquisition of Vievu, a rival body-camera provider.

The company said the agency was acting as “prosecutor, judge and jury” in violation of the U.S. Constitution’s Fifth Amendment guarantees of due process and equal protection under the law, and that its administrative law judges were illegally isolated from the president’s power to control the executive branch. officers under Article II of the Constitution.

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In 2021, the 9th United States Circuit Court of Appeals, based in San Francisco, dismissed the case, ruling that under FTC law, Axon must first assert its claims under the administrative procedure.

In Cochran’s case, an SEC judge found she failed to comply with auditing standards, fined her $22,500, and barred her from practicing as an accountant before the committee for five years.

After the Supreme Court ruled in 2018 that the manner in which SEC judges were appointed violated the Constitution, the agency reversed the decision against Cochran and gave his case to a new, duly appointed judge.

Cochran filed a lawsuit in 2019 to end the enforcement action, like Axon challenging internal SEC judges under Article II.

A Texas federal judge dismissed Cochran’s challenge, but the New Orleans-based 5th Circuit Court of Appeals in 2021 revived the case.

(Reporting by Andrew Chung; Editing by Will Dunham)

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