SCOTUS Justices Question Consequences of SEC v. Cochran Ruling

Conservative Supreme Court justices at Monday’s oral argument in SEC v. Cochran appeared open to allowing entities to bring structural, constitutional challenges to federal agency actions in district court before a final judgment but expressed concern about the possible ramifications. A decision in the case could have implications for federal agencies (see 2211030063), particularly those with administrative law judges, such as the FCC. SCOTUS heard argument in a related case, Axon v. FTC, the same day (see 2211070049).

“Starting over on all that would create a kind of tsunami of litigation,” said Justice Brett Kavanaugh. “Maybe that’s OK, maybe it’s not.” Left-leaning justices also focused on the consequences of a possible ruling, with Justice Elena Kagan doubting there would in practice be a limit on the sorts of challenges that could be brought before final agency action. “The way you want us to decide this case is going to have ramifications far beyond structural, constitutional claims,” she said to Latham & Watkins' Gregory Garre, who represented respondent Michelle Cochran before the court. “The district courts have been applying tools in determining when or whether to exercise jurisdiction for centuries,” Garre said.

"It's always hazardous to predict, but based on the argument and the Court's recent moves, one would almost have to make the agencies the underdog in these cases," tweeted antitrust consultant Asheesh Agarwal, formerly of Tech Freedom. "The biggest question might be how the Court frames the rule about when people can sue directly in federal court."

The case concerns an accountant’s attempt to challenge in district court an ongoing SEC ALJ proceeding against her while that proceeding is ongoing. Garre argued Monday that because the harm Cochran is challenging is the agency process itself, she can’t get any relief from the courts if she has to wait for that process to play out before seeking redress. The principle that courts don’t intervene in pending agency proceedings dates back over a century, countered DOJ Deputy Solicitor General Malcolm Stewart. The authority of the courts to give relief where they don’t have explicit statutory authority has “never been unlimited,” he said.

Justice Ketanji Brown Jackson and Kavanaugh both suggested a possible framework for a SCOTUS opinion in the case limiting what sorts of challenges could proceed in the district courts before a final judgment. Kavanaugh asked about a ruling limited to cases concerned with structural issues considered collateral to an agency’s subject matter, referencing 1994 SCOTUS case Thunder Basin Coal v. Reich, which established a set of factors for determining agency jurisdiction over a legal challenge. Jackson suggested a limit could be if a case were concerned with a matter that would allow the district court to completely terminate the challenged proceeding.

Justice Sonia Sotomayor seemed to agree, pointing out other instances where legal challenges are restricted to final rulings. “If there’s a due process violation of any kind in a proceeding ... those things we routinely leave to the end,” said Sotomayor. “I don’t know why we should be permitting district court interference with a process that Congress has given to the agency.” Constitutional claims are different because there is no way for the courts to grant relief from the injury, Garre said. Justice Clarence Thomas asked how often agency proceedings like Cochran’s end up with a final judgment that can be appealed. Most end with settlements, responded Garre.

Kavanaugh and Chief Justice John Roberts appeared to suggest that allowing such challenges in district court might be more efficient than the agency process. An agency can argue for the value of its processes by submitting a brief to a district court just as it could in and in-agency proceeding, Roberts said. “The clarity, the certainty, the speed, isn't that all upside to allowing a challenge to the structure of the agency to go forward in the district court?” asked Kavanaugh. A district court wouldn’t provide certainty because it could be appealed to a higher court, Stewart responded.

“The thing that is bugging me about your argument is that we could look at the statute that is here and discern that Congress intended to allow the agency to do its work and then have judicial review,” Jackson told Garre. Statutory language calls for the U.S. Court of Appeals to wait for final agency action, and that would seem to suggest district courts should wait too, she said. “Congress knows how to strip jurisdiction when it wants to,” said Garre.