Amicus Brief: Axon Enterprise, Inc. v. Federal Trade Commission, et al.

AMICUS BRIEF SUMMARY

NCLA filed amicus curiae briefs supporting Axon Enterprise Inc.in the body camera company’s fight to keep its constitutional claims against the U.S. Federal Trade Commission (FTC) in federal court. NCLA’s initial brief solely addressed the “Tentative Ruling” issued by the U.S. District Court for the District of Arizona, which concluded that federal courts do not have jurisdiction to evaluate a facial challenge brought under the U.S. Constitution.

As NCLA argued in its Lucia, Cochran, and Gibson cases against the U.S. Securities & Exchange Commission (SEC), defendants have a due process right not to endure hearings in front of constitutionally defective tribunals. The Supreme Court ruled as much in Lucia v. SEC in 2018. Axon Enterprise vindicated a similar right against FTC and to do so relied on rulings such as the preliminary injunction that NCLA obtained for client Michelle Cochran in the U.S. Court of Appeals for the Fifth Circuit.

NCLA contended that the District of Arizona should retain jurisdiction to discharge its Article III powers and address these threshold issues going to the constitutional defects in the tribunal itself, which FTC had no authority to address and where delay would have irreparably harmed Axon.

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CASE: Axon Enterprise, Inc. v. Federal Trade Commission, et al.

DECIDING COURT: U.S. Court of Appeals for the Ninth Circuit

ORIGINAL COURT: U.S. District Court for the District of Arizona

DOCUMENT: 1) No. 2:20-cv-00014-PHX-DWL; 2) 20-15662; 3) No. 20-15662

ATTORNEY FOR AMICUS CURIAE: 1) Adi Dynar; 2) Adi Dynar, John Vecchione; 3) Richard Samp, Peggy Little, Adi Dynar, Jared McClain

FILED: 1) March 27, 2020; 2) May 8, 2020; 3) March 25, 2021

CASE DOCUMENTS

March 25, 2021 | Amicus Curiae Brief of the New Civil Liberties Alliance in Support of Appellant’s Petition for Rehearing En Banc
Click here to read the full document.
May 8, 2020 | Brief Amici Curiae of the New Civil Liberties Alliance and TechFreedom in Support of Plaintiff-Appellant and Reversal
Click here to read the full document.
April 8, 2020 | Order of the U.S. District Court for the District of Arizona Dismissing the Complaint
Click here to read the full document.
March 27, 2020 | Brief Amicus Curiae of the New Civil Liberties Alliance in Support of Plaintiff
Click here to read the full document.

PRESS RELEASES

March 25, 2021 | NCLA Amicus Brief Argues District Courts May Hear Constitutional Claims Against Federal Agencies

Washington, DC (March 25, 2021) – The Federal Trade Commission’s (FTC) enforcement proceedings are unconstitutionally structured, and Axon, a maker of body cameras for law enforcement use, is entitled to raise its constitutional objections in front of an Article III court before enduring the agency’s internal—costly, multi-year, and almost certainly futile—adjudicative process. Today’s amicus brief filed by the New Civil Liberties Alliance, a nonpartisan, nonprofit civil rights group, makes this argument to the U.S. Court of Appeals for the Ninth Circuit in Axon Enterprise, Inc. v. Federal Trade Commission, et al. 

NCLA’s brief asks for rehearing en banc after a split three-judge panel of the Ninth Circuit ruled 2-1 against Axon in January, thereby creating an intra-circuit conflict regarding the scope of district court jurisdiction to hear constitutional challenges like Axon’s. The panel decision directly conflicts with the Ninth Circuit’s prior decisions in Mace and Latif. Those cases hold that plaintiffs are entitled to file district-court constitutional challenges to agency proceedings from the outset.

FTC is acting in violation of separation-of-powers principles because its Administrative Law Judges (ALJs) are insulated from control by the President by at least two layers of for-cause removal restrictions. In 2018 the U.S. Supreme Court held in Lucia v. SEC that defendants have a due process right to not be subjected to hearings in front of constitutionally defective tribunals—where government agencies, like FTC, act as prosecutor, judge, and jury.

For the past 20 years, FTC has ruled in its own favor in 100% of the cases appealed from an ALJ to the full Commission. The agency also has not lost an administrative proceeding trial in the past quarter-century. Under the FTC’s dispositive home-court advantage, Axon’s constitutional claims against the very legitimacy of the agency and its ALJs would remain unaddressed for years.

NCLA is asking the court to grant the petition for rehearing en banc to rightly resolve an issue of exceptional importance—whether the federal agencies’ statutes impliedly prevent federal district courts from hearing a structural challenge. NCLA is still awaiting decision in a similar case from the en banc U.S. Court of Appeals for the Fifth Circuit argued in January. In Cochran v. SEC, NCLA likewise argued in favor of a defendant’s ability to first raise constitutional arguments in federal district court, albeit in the SEC enforcement context.  

NCLA released the following statements: 

“Recent Supreme Court decisions indicate that the manner in which FTC conducts its administrative proceedings is unconstitutional. But the Ninth Circuit has held that the federal courthouse doors are closed to the targets of the FTC’s unconstitutional actions. The Ninth Circuit should reconsider its mistaken decision and allow those individuals to seek vindication of their constitutional rights.”

 Richard Samp, NCLA Senior Litigation Counsel 

“The full Ninth Circuit Court of Appeals should consistently apply its own precedents and follow controlling Supreme Court precedent to vindicate Axon Enterprise’s right to have its claims adjudicated before a lawful judge qualified to decide them—in a federal court. The FTC administrative proceedings and orders not only put Axon in a bet-the-company posture, but they threaten to make Axon repeat that costly fiasco once it secures a ruling on the legitimacy of its FTC administrative law judge. This isn’t exhaustion of remedies—it’s annihilation by administrative process.”

 Peggy Little, NCLA Senior Litigation Counsel 

For more information about this case visit here

ABOUT NCLA 

NCLA is a nonpartisan, nonprofit civil rights group founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the Administrative State. NCLA’s public-interest litigation and other pro bono advocacy strive to tame the unlawful power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans’ fundamental rights.

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May 12, 2020 | NCLA’s Joint Amicus Brief in 9th Cir. Challenges Decision Rejecting Constitutional Claims Versus FTC

Washington, DC (May 12, 2020) – The New Civil Liberties Alliance, a nonpartisan, nonprofit civil rights group filed a joint amicus brief in the United States Court of Appeals for the Ninth Circuit in Axon Enterprise Incorporated v. Federal Trade Commission, et al. The brief filed in conjunction with TechFreedom, a public policy think tank based in Washington, DC, asks the Court to reverse the district court and find subject-matter jurisdiction over Axon’s constitutional claims against the FTC.

The appeal by Axon (f/k/a TASER Int’l) seeks to avoid irreparable harm to the company and the body camera industry. Amici argue in the brief that Axon is entitled to a hearing before an Article III court and should not have to endure FTC’s internal adjudicative process (wherein FTC acts as prosecutor, judge, and jury) on Axon’s claims unrelated to antitrust law. Forcing Axon into such a hearing, amici contend, violates, inter alia, the Due Process Clause of the Fifth Amendment.

The main issue in the case is whether the FTC Act requires constitutional claims like those asserted here to be brought first to the FTC’s in-house adjudicatory process. The FTC Act’s purpose and design demonstrate that Congress intended to prevent delay in FTC’s antitrust enforcement, but not to grant FTC exclusive jurisdiction over constitutional claims.

In 2018 the U.S. Supreme Court held in Lucia v. SEC that defendants have a due process right to not be subjected to hearings in front of constitutionally defective tribunalsNCLA is presenting the same argument in courts across the country in its ongoing Lucia, Cochran, and Gibson cases against the U.S. Securities & Exchange Commission (SEC). Axon Enterprise is now trying to vindicate a similar due process right against FTC by relying on rulings such as the preliminary injunction that NCLA obtained for client Michelle Cochran in the U.S. Court of Appeals for the Fifth Circuit last fall.

The decision by the district court would mean Axon’s constitutional case against FTC and its Administrative Law Judges would linger unaddressed for years to come. The Ninth Circuit should not tolerate FTC’s desire to bury all constitutional claims against the agency until it has run a company through its administrative ringer. No rational legislature would choose this process for the vindication of constitutional rights.

NCLA released the following statements:

“NCLA filed in support of Axon because constitutional rights should not be subject to bureaucratic delay and obfuscation. The federal district courts were put on earth to vindicate those constitutional rights. Congress has given no direction to strip them of jurisdiction, so Axon and everyone in a similar position should have an independent judiciary available to determine whether the Constitution has been followed.”

–John J. Vecchione, Senior Litigation Counsel, NCLA

“Should federal courts stand aside and do nothing while a federal agency thoroughly bullies and drags a company through its administrative-review process that is famously rigged against the company? The answer ought to be a resounding “No!” because constitutional claims that ask federal courts to decide whether the agency’s process is lawful properly belong in federal court.”

Adi Dynar, Litigation Counsel, NCLA

ABOUT NCLA

NCLA is a nonpartisan, nonprofit civil rights group founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the Administrative State. NCLA’s public-interest litigation and other pro bono advocacy strive to tame the unlawful power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans’ fundamental rights.

ABOUT TECHFREEDOM 

TechFreedom is a non-profit, non-partisan technology policy think tank. We work to chart a path forward for policymakers towards a bright future where technology enhances freedom, and freedom enhances technology.

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March 31, 2020 | NCLA Urges AZ District Court to Reverse Tentative Ruling Against Body Camera Co.

Washington, DC (March 31, 2020) – The New Civil Liberties Alliance, a nonpartisan, nonprofit civil rights organization filed an amicus curiae brief in the U.S. District Court for the District of Arizona in support of Axon Enterprise Inc. in the body camera company’s fight to keep its constitutional claims against the U.S. Federal Trade Commission (FTC) in federal court. NCLA’s brief solely addresses the “Tentative Ruling” issued by the Court, which concluded that federal courts do not have jurisdiction to evaluate a facial challenge brought under the U.S. Constitution.

On March 10, 2020, the Court issued a Tentative Ruling stating that the case should be dismissed and that Axon should first have to exhaust FTC’s adjudicatory process. This decision by the court would mean Axon’s constitutional claims against the very legitimacy of the FTC and its Administrative Law Judges would remain unaddressed for years.

As NCLA has argued in its ongoing Lucia, Cochran, and Gibson cases against the U.S. Securities & Exchange Commission (SEC), defendants have a due process right not to endure hearings in front of constitutionally defective tribunals. The Supreme Court ruled as much in Lucia v. SEC in 2018. Axon Enterprise is trying to vindicate a similar right against FTC and to do so it is relying on rulings such as the preliminary injunction that NCLA obtained for client Michelle Cochran in the U.S. Court of Appeals for the Fifth Circuit.

The District of Arizona should retain jurisdiction to discharge its Article III powers and address these threshold issues going to the constitutional defects in the tribunal itself, which FTC has no authority to address and where delay would irreparably harm Axon.

A motion hearing is scheduled for Wednesday, April 1, 2020, before Judge Dominic W. Lanza of the U.S. District Court for the District of Arizona concerning the Court’s subject matter jurisdiction. Due to the pandemic and the fact that some counsel in this case are not based in Arizona, it was reset as a telephonic hearing.

NCLA released the following statements:

“The FTC retains the power to put a company through the administrative ringer and then either force settlement or, if no settlement is forthcoming, drop the matter without ruling—avoiding the constitutional issues raised. We think it is vital that any American faced with an unconstitutionally constituted tribunal get a hearing before an impartial Article III judge rather than be subject to a process that is itself the injury, and then, years later, maybe, get an appellate court ruling that you were right all along but you have suffered the injury with no means of redress.”

–John J. Vecchione, Senior Litigation Counsel, NCLA

“FTC complained to its own administrative law judge after the company had filed suit in federal court. FTC’s action, it now claims, prevents the federal court from deciding the constitutional issues presented by the company. Such procedural antics should not be able to strip the federal courts’ otherwise ‘unflagging obligation’ to adjudicate properly-presented constitutional questions.”

Adi Dynar, Litigation Counsel, NCLA

ABOUT NCLA

NCLA is a nonpartisan, nonprofit civil rights group founded by prominent legal scholar Philip Hamburger to protect constitutional freedoms from violations by the Administrative State. NCLA’s public-interest litigation and other pro bono advocacy strive to tame the unlawful power of state and federal agencies and to foster a new civil liberties movement that will help restore Americans’ fundamental rights.

For more information visit us online at NCLAlegal.org.

Click here to download

OPINION

BLOGS

February 4, 2021 | Axon Suffers a Defeat in the 9th Circuit but Both Majority and Dissent See the Problem

We have discussed Axon v. FTC before and followed it closely since its inception. On January 28, 2021, the Ninth Circuit gave us more to consider. First, a recap is in order. Axon Enterprise, Inc. (Axon) is a corporation that makes law enforcement equipment such as tasers and body cameras. The FTC determined to investigate it under antitrust jurisdiction for acquisition of another corporation. After about a year-long investigation it became clear that the FTC wanted to order Axon to not only divest itself of this purchase but, incredibly, give the new entity Axon’s own patented tech which the acquired company did not have prior to the acquisition. Seeing the writing on the wall, Axon struck first by suing the FTC in Arizona Federal District Court and challenging the unconstitutionality of the “pre-clearance” procedure by which the FTC and the Justice Department decides which agency will prosecute antitrust cases—and also challenging the constitutionality of the FTC’s administrative law judges (ALJ’s).

Axon conceded, shortly after filing its suit, that the actual antitrust matters were properly before the FTC but maintained that the constitutional issues could and should be tried in Federal Court. The FTC had no special expertise in constitutional law, it never rules on constitutional issues when raised, and the constitutional injury was appearing before a wrongfully instituted tribunal could not be corrected upon appeal because the harm would have been inflicted by the proceeding. Axon noted that no federal court would be able to look at its claims for many years, if at all, and that appellate court would be deferential to all FTC findings even though no litigant before an FTC ALJ had won in more than a quarter of a century! The district court judge determined that three Supreme Court cases, often called “the trilogy” (Thunder Basin Coal Co., Reich, 510 U.S. 200 (1994); Free Enter. Fund v. Pub. Co. Acct. Oversight Bd., 561 U.S. 477 (2010); Elgin v. Dep’t of Treasury, 567 U.S. 1 (2012)) directed that the entire case must be heard before the FTC ALJ and that Congress implicitly stripped the federal district courts of jurisdiction in the FTC Act.

Undaunted, Axon appealed to the Ninth Circuit and that opinion has issued and can be found here. It affirms the district court and determined that as long as, someday in the sweet by and by, an appellate court gets to look at the Dante-like procedure that must be followed before then still allows “meaningful review.” This outcome, though regrettable, is not unexpected given the rulings in other Circuits. What is not regrettable is the dissent by recent appointee to the Ninth Circuit Patrick J. Bumatay. He would have allowed the constitutional issues to move forward in the district court while letting the antitrust questions proceed in the FTC. The legal analysis of the majority and the dissent both deal with the “trilogy” in some detail but come to different conclusions about what those cases require. But what is heartening, to anyone who wants the Supreme Court to take this case and reverse, is the stark recognition by every member of the Court of the injustice of the process Axon is being put through.

The majority was open to Axon’s arguments that the administrative review process could not address its constitutional complaints stating, “Axon’s argument makes sense from a policy perspective: it seems odd to force a party to raise constitutional challenges before an agency that cannot decide them.” But it believed that the Supreme Court had decided this issue in Elgin. The majority also noted, “As the dissent cogently points out, it 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. And if we were writing on a clean slate, we would agree with the dissent.” Unfortunately, the majority disagreed with Axon and the dissent’s view of Free Enterprise. It then stated, “Perhaps the Supreme Court in the near future will clarify and extend the holding of Free Enterprise to include any constitutional challenge to any agency’s structure, procedure, or existence.” But in the majority’s view it had not done so yet. The Court then found that “while it is a close call” whether Axon’s claim was “wholly collateral” to the FTC action was precluded by Thunder Basin. It also called the third factor, agency expertise, the Supreme Court outlined in Thunder Basin as “cloaked in ambiguity.” The majority went on to note that its opinion should not “[M]inimize Axon’s serious concerns about how the FTC operates.” The court noted there were “substantial questions” on whether the two-layer of protections for FTC ALJ’s stood up to the Supreme Court’s view of separation of powers concerns. It went on to note, “This case implicates one of the inherent tensions in the modern administrative state: Congress wants to insulate ALJs from political interference, but ALJ’s wield tremendous power and still remain part of the executive branch…”—and so should have to answer to the President and the people.

The majority was also concerned about Axon’s “legitimate questions about whether the FTC has stacked the deck in its favor..” because “Axon claims—and the 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.” It noted 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.” But Thunderdome did not move them past Thunder Basin and Axon would have to wait until appeal from the agency decision.

Judge Bumatay thought differently. In his view precedent allowed the constitutional questions to be determined in federal court as long as the anti-trust questions went to the administrative agencies. He believed that because the FTC procedure might, hypothetically, result in a win by Axon on the substance or a settlement, the constitutional questions might never get to court. He believed the issue of “preclearance” (whether the FTC or Justice received the antitrust jurisdiction) was entitled to immediate judicial review.

He stated, “By forcing Axon’s claims into the FTC administrative process, we effectively shut the courtroom doors to a party seeking relief from alleged constitutional infringements.”

This nicely sets this case up for further proceedings if Axon wishes to proceed with them. Given the strong position it has taken so far, and what can only be termed judicial encouragement by the Ninth Circuit, I hope we will see the challenge continue.