Bloomberg Law: The Supreme Court Puts In-House Tribunals on the Chopping Block

On April 14, the US Supreme Court unanimously handed a loss on a silver platter to the administrative state. In Cochran v. SEC and Axon Enterprise, Inc. v. FTC, the court concluded the executive adjudication schemes set out in the Securities Exchange Act and the Federal Trade Commission Act don’t displace a federal district court’s power to hear constitutional claims against those agencies.

Justice Elena Kagan, writing for the unanimous court, explained how agencies that seek to keep their enforcement actions in their home tribunal deprive the nongovernmental litigant of meaningful judicial review. Supposed “agency expertise” doesn’t justify in-house adjudication because the agency lacks expertise in deciding most constitutional issues. And agencies have no incentive to decide against themselves when their asserted prerogatives are challenged.

But concurring opinions from Justices Clarence Thomas and Neil Gorsuch examine even deeper issues. Gorsuch expertly described the agency adjudicator, which is answerable only to agency bosses. They don’t have to follow any set rules of procedure or evidence and have free rein to change the rules at will. These adjudicators often create tremendous settlement pressures.

A party brave enough not to settle is seldom better off. That’s because the executive agency becomes the final arbiter of the facts and courts must defer to the facts found by the agency. An “appeal” from the in-house hearing officer goes to the agency heads who decided to prosecute the party in the first place—they therefore have little, if any, incentive to rule against themselves.

That is a chimera of executive, legislative, and judicial power all rolled into one neat affront to the Constitution. Eventually when the case does end up in an actual court, in addition to fact deference, courts often defer to the agency’s statements of law—even when agency hearing officers, complying with their boss’s instructions, decline to follow federal-court precedent.

Thomas went even further, expressing well-founded “doubts about the constitutional propriety of Congress vesting administrative agencies with primary authority to adjudicate core private rights with only deferential review on the back end.” Private rights are those that “appertain and belong to particular men merely as individuals,” and they can be “adjudicated and divested only by Article III courts.”

Indeed, Thomas’ objections to agency adjudication focus on the due process protections found in Article III courts, but absent from agency courts. Nebulous “notions of administrative efficiency,” as Thomas puts it, can’t explain away the deficits of such a system. Agency hearing officers are not “factfinding adjuncts to the federal judiciary.” That is the jury’s role, protected by the Seventh Amendment in civil cases and the criminal-jury clause of Article III.

In snatching it out of the judicial branch and assigning it to the executive, Congress renders ineffectual the checks and balances a factfinding jury provides. The jury is meant to keep judges and prosecutors accountable to the people. There can be no democratic accountability when a bureaucrat serves as the lone juror.

The straightforward thrust of the Constitution’s separation of powers requires ending coercive adjudication inside agencies. As Thomas put it, “because federal administrative agencies are part of the Executive Branch, it is not clear that they have power to adjudicate claims involving core private rights.”

Eventual judicial review is no review at all for it raises grave due-process concerns; to satisfy due process of law, judicial review must be meaningful, timely, and plenary. The principal and concurring opinions poignantly chronicle the real-world impact of agencies shunting their enforcement actions to in-house tribunals.

In the Cochran/Axon decision, the Supreme Court called for a stop to coercive executive adjudication that requires the likes of Michelle Cochran to “endur[e] multi-year odysseys through the entire federal judicial system.”

Others whom agencies haul into their home tribunals will now be able to go directly to the federal district court, at least where they challenge “the structure or very existence of an agency.” Whether the court’s holding applies to other constitutional challenges remains to be seen.

Thomas’ question remains: does the Constitution permit executive agencies to operate their own in-house “courts”? His answer to that question—removal of adjudication of private-right cases to Article III courts—serves as a road map to address the myriad failings of agency tribunals. My colleagues and I at Pacific Legal Foundation intend to follow that roadmap and end such executive adjudication.

This op-ed was originally published at Bloomberg Law on May 1, 2023.