Federal Judges Receptive to FTC’s Arguments on Khan Recusal

A federal judge on Friday was receptive to the FTC’s argument that Meta’s attempts to have Chair Lina Khan recused from a lawsuit against the company’s purchase of Within Unlimited should be settled at the agency level and not before the U.S. District Court for Northern California (see 2210190038).

An attorney for Meta accused the agency of asking District Judge Edward Davila to turn a blind eye to Meta’s argument that Khan’s biases against the company have tainted the agency’s antitrust case. If the court enjoins the transaction and the injunction is affirmed, the deal to buy Within will “fail,” Meta attorney Mark Hansen told Davila during a hearing on the FTC’s motion to strike the company’s affirmative defenses.

“We will not have parties waiting a year or two years for” an administrative trial to begin before the FTC, including months of proceedings before the administrative law judge and the full commission, said Hansen. This delay would violate Meta’s due process if the court ignores its defenses regarding Khan, he said.

The FTC isn’t asking the court to turn a “blind eye” to valid defenses, said FTC Deputy Chief Trial Counsel James Weingarten. Cases before the 2nd U.S. Circuit Court of Appeals and the 4th U.S. Circuit Court of Appeals, as well as Axon Enterprise v. FTC and Thunder Basin Coal v. Reich, have firmly established why constitutional challenges should be heard in administrative proceedings, argued Weingarten. And Supreme Court precedent says Meta will have its opportunity to raise constitutional challenges at the administrative proceeding, he added: If the company walks away from its deal in the meantime, that can’t be “hung” on the FTC. Meta has every right to argue its case before the FTC, and the company not taking that opportunity doesn’t resolve the jurisdictional issues, said Weingarten.

The administrative questions are the FTC’s “domain,” Davila said after Weingarten’s opening remarks. “We are here for the limited purpose that you suggest."

The two cases Weingarten cited -- Axon and Thunder Basin -- have nothing to do with Meta’s arguments, argued Hansen. In Axon, which the Supreme Court is hearing on appeal this term, the defense is arguing against the inconvenience of the case moving forward, said Hansen. Meta has a deal that's going to “rise of fall” on the district court’s decision on the preliminary injunction, he said: It’s not “fair or right” to turn a “blind eye” to defenses courts have said are “valid.” The court needs to consider whether the balance of equities favors the FTC, which has a chair who overrode staff to bring the complaint after years of biased statements against Meta, said Hansen. Davila cut off Hansen’s arguments about why Khan is biased, saying those arguments are well-documented in the filings. “You cannot say there’s no conceivable way these defenses could prevail,” said Hansen. “They directly track defenses that have been successful.” He cited recusal proceedings in Cinderella Career and Finishing Schools v. FTC and American Cyanamid v. FTC.

Weingarten noted that in both those cases, claims of commissioner bias were heard after administrative proceedings before the court of appeals. No one is suggesting Meta should never have the opportunity to argue against Khan’s alleged bias, but the question is about the appropriate forum for recusal disputes, he said. He also noted U.S. District Judge James Boasberg threw out Facebook’s attempt to have Khan recused in a separate case in 1:20-cv-03590.

Within concurred with Hansen’s arguments, and the company fully intends to argue the agency’s antitrust arguments have no merit, said Within attorney Charles Loughlin.

“The FTC has moved to strike” defenses concerning Khan but refuses to produce “responsive documents until that motion is resolved, yet has not moved for a stay or a protective order,” said Meta in a joint statement with the FTC leading up to Friday’s hearing. The FTC’s position is that the court should take up this discovery dispute after Davila rules on the agency’s pending motion to strike Meta’s affirmative defenses that are “at the heart of this dispute,” said the agency.

The FTC’s Sept. 9 motion to strike “is fully briefed,” it said. The court should instruct the parties to meet and confer after Davila’s decision on the FTC’s motion, and if any disputes remain, the parties should submit such disputes to the court within three business days of the judge’s decision, it said: “This is the most efficient approach, since Judge Davila’s decision may eliminate the basis for this dispute altogether and will at the very least inform each party’s arguments regarding the discovery Meta seeks here.”