The Myth that Agency Adjudications Cannot Address Constitutional Claims

Category: Print Issues

The Myth that Agency Adjudications Cannot Address Constitutional Claims

Yonatan Gelblum

Volume 32

, Issue 2

Introduction

In its 2023 decision in Axon Enterprise, Inc. v. FTC,¹ a unanimous Supreme Court declined to hold that Congress implicitly intended to require litigants opposing Federal Trade Commission (“FTC”) and Securities and Exchange Commission (“SEC”)² enforcement actions, who claimed these agencies’ “structure or very existence” was unconstitutional, to seek relief from these agencies before suing in court.³ At oral argument five months earlier, the writing may have been on the wall after Justice Alito pressed the government to explain what purpose was served by forcing the petitioner to exhaust a constitutional challenge to administrative law judges’ (“ALJs”) statutory protection from at-will removal⁴ by raising it before the FTC.⁵ The government responded that the Agency could make a record “useful to a reviewing court” by discussing the “advantages and disadvantages of removal protections for our ALJs,” but conceded that “the agency couldn’t declare the statute unconstitutional, so it couldn’t provide relief on that ground at the end of the day.”⁶ This response matched the government’s focus during briefing on the agencies’ ability to grant relief on alternate nonconstitutional grounds.⁷ The government did not argue that the Agencies could grant relief on the constitutional claims, for example, by exercising their statutory prerogatives to not use ALJs in administrative proceedings,⁸ as the FTC previously held it could have done⁹ had it determined that ALJ removal protections were unconstitutional,¹⁰ or to proceed in court rather than administratively.¹¹ Nor did the government suggest that the Agencies might grant relief by exercising prosecutorial discretion to terminate the challenged proceedings altogether, as both Agencies ultimately did, citing nonconstitutional grounds.¹² The Court’s subsequent ruling did not mince words in describing the supposed uselessness of administratively exhausting constitutional challenges to agency structure, stating that agencies are “generally ill suited to address structural constitutional challenges.”¹³

Axon is the latest in a trio of Supreme Court rulings, along with Carr v. Saul¹⁴ and Free Enterprise Fund v. Public Co. Accounting Oversight Board,¹⁵ declining to require administrative exhaustion of structural constitutional claims, which follow earlier Supreme Court rulings declining to require exhaustion of other constitutional challenges.¹⁶ Language in these rulings paints a seeming dichotomy between courts that can meaningfully address constitutional claims and agencies that cannot. Axon asserted that compelling litigants to participate in allegedly unconstitutional agency proceedings causes injury that reviewing courts cannot remedy after the fact.¹⁷ The Court first described agencies as “ill suited to address structural constitutional challenges” in Carr,¹⁸ which refused to preclude litigants from raising an unexhausted Appointments Clause challenge to Social Security Administration (“SSA”) proceedings on subsequent judicial review.¹⁹ And Free Enterprise, which refused to require a litigant to exhaust constitutional challenges to statutory appointment and removal provisions,²⁰ described such claims as falling “outside the [Agency’s] competence and expertise.”²¹

Such disparagement of constitutional adjudication by agencies echoes similar language in a quartet of cases from the 1970s in which the Court addressed exhaustion of constitutional claims related to public benefits programs, and reflects a common skepticism of administrative resolution of constitutional claims shared by many courts, scholars, and even some agency officials. In Weinberger v. Salfi²² and Mathews v. Diaz,²³ the Court described adjudication of facial constitutional challenges to provisions of the Social Security and Medicare Acts as “beyond the [Agency’s] competence.”²⁴ Mathews v. Eldridge,²⁵ which concerned a due process challenge to agency rules for terminating disability benefits,²⁶ deemed it “unrealistic to expect that the [Agency] would consider substantial changes . . . at the behest of a single aid recipient raising a constitutional challenge in an adjudicatory context.”²⁷ Califano v. Sanders²⁸ contrasted a merits challenge to a benefits eligibility decision with “[c]onstitutional questions [that] obviously are unsuited to resolution in administrative hearing[s] . . . .”²⁹ Lower courts have voiced similar doubts,³⁰ as have commentators.³¹ Even some executive branch officials have expressed similar sentiments, as reflected by the government’s litigating position in Axon and agency rulings declining to consider constitutional claims.³²

The Court’s rulings disparaging agency resolution of constitutional claims often did so in dicta or concerned cases with other compelling circumstances weighing against exhaustion, and did not actually hold that agencies can never resolve structural or other constitutional claims.³³ Nor did they overrule precedents requiring exhaustion of some constitutional claims, including facial challenges to statutes.³⁴ But by disparaging agencies’ ability to consider constitutional claims, these decisions might imply that exhausting such claims is typically futile, which could support extending their holdings to other contexts. For example, futility exceptions may apply to statutes or regulations that, unlike the statute at issue in Axon, expressly require exhaustion before suing,³⁵ or differ from the scheme in Carr by expressly barring claims not raised before an agency on subsequent judicial review.³⁶ Not surprisingly, some courts have relied on language in these rulings to excuse exhaustion of constitutional claims in other contexts, such as when exhaustion was expressly required by agency rules that courts overrode by judicial fiat.³⁷

This readiness to exempt constitutional claims from exhaustion mandates stands in tension with judicial recognition that administrative exhaustion has many potential benefits.³⁸ It threatens to increase the workload of federal district courts that are already burdened by recent exponential growth in cases.³⁹ And having to litigate constitutional claims in court before proceeding with administrative enforcement actions may substantially increase the costs to agencies of pursuing such actions, as the FTC recognized when it ultimately dismissed the Axon matter due to resource constraints, citing the likelihood of “years of additional [court] litigation, further delaying the administrative adjudication that would reach the merits.”⁴⁰

The frequent disparagement of administrative adjudication of constitutional claims also contrasts with several recent trends in the legal literature. Recent decades have witnessed increased scholarly interest in a rich tradition of “administrative constitutionalism” by executive branch agencies engaging with the Constitution when taking official action.⁴¹ Conclusory assertions that agency adjudicators cannot or need not address constitutional challenges also overlook a vigorous scholarly debate on whether the executive branch can or must engage in constitutional interpretation or decline to implement unconstitutional statutes.⁴² And similarly categorical assertions about the superiority of court-awarded relief ignore a growing recognition by commentators (as well as disappointed litigants) that meaningful judicial redress for constitutional violations is often the exception rather than the norm.⁴³

This Article considers the relatively unexplored implications of these developments and debates with respect to administrative exhaustion of constitutional claims, and questions the common assumption of a stark dichotomy between the ability of agencies and courts to address constitutional claims. Instead of a binary division between courts that can effectively address constitutional claims and agencies that cannot, this Article argues that any differences are usually ones of degree, and may sometimes favor initial agency adjudication, which counsels against mechanically extending the holdings in Axon and similar cases to excuse exhaustion of constitutional claims in other contexts.

Part I reviews statutory, regulatory, and judicial authorities governing administrative exhaustion, and factors that the jurisprudence has identified as counseling for or against requiring exhaustion of particular claims. It also reviews Supreme Court decisions on exhaustion of constitutional claims, which have never categorically exempted these claims from administrative exhaustion mandates, while declining to require exhaustion of these claims when other compelling circumstances counseled against doing so.

Part II challenges the assumption that agencies lack competence or authority to pass on constitutional questions in general and on facial challenges to statutes in particular. It argues that agencies can competently address constitutional controversies because they regularly engage with constitutional questions, encounter the constitutional issues likeliest to arise in their proceedings with comparable frequency to many generalist courts, and have access to the Department of Justice’s (“DOJ’s”) recognized expertise in constitutional analysis. Agencies also have the necessary authority to address constitutional claims because, even if agencies cannot “declare” statutes or other official action unconstitutional in the same manner as courts, they can consider constitutional limits when deciding how and whether to execute the law. In addition, agencies may engage in “administrative avoidance” by exercising discretion in a manner that moots constitutional controversies, potentially without making any conclusive legal pronouncements. Part II also reviews constitutional, statutory, judicial, and historical authorities supporting a prerogative and possible duty on the part of agencies to avoid unconstitutional action, even if authorized or possibly required by statutes, which is similar to authority often attributed to the President.

Part III argues that agency resolution of constitutional claims is not categorically inferior to court adjudication. It explains how agencies may grant effective relief on constitutional claims by applying statutory or prosecutorial discretion or, potentially, by declining to give effect to laws they determine are unconstitutional. Because agencies may be especially well-suited to assess their own ability to grant such relief, courts that simply assume that exhaustion of constitutional claims is futile may short-circuit a process through which the agency could have identified ways to offer relief on these claims. Part III also explains why—notwithstanding judicial assertions about agencies’ purported inability to issue court-like “declarations” of unconstitutionality, or alleged harm from participation in unconstitutional agency proceedings—judicial relief is not always superior to the relief an agency might grant. And it demonstrates how agency rules facilitating immediate resolution of threshold legal issues, and judicial precedents permitting collateral order appeals from interlocutory agency rulings, can adequately protect any cognizable “right not to stand trial” in allegedly unconstitutional agency processes when litigants must first seek relief from the agency. Part III further argues that many benefits attributed to administrative exhaustion can apply to constitutional claims. Agency consideration of these claims may prevent unconstitutional acts as well as abusive litigation tactics and piecemeal appeals, leverage the agency’s specialized knowledge to resolve nonconstitutional questions relevant to assessing if statutes or agency rules even raise a constitutional question in the first place or are severable, and develop a record for review.

Part IV argues that since agencies are not a categorically inferior forum for resolving constitutional claims in the first instance, courts should not mechanically extend the holdings of Axon and similar cases with compelling circumstances weighing against exhaustion of a constitutional claim to every situation in which litigants raise constitutional claims. Instead, courts should apply a standard administrative exhaustion analysis, which, unless statutes or regulations instruct otherwise, would assess how effectively the applicable administrative scheme can address the particular constitutional claim at issue. Courts should therefore consider whether an agency is willing and able to address constitutional claims and, in cases where a “right not to stand trial” is at issue, whether agency rules permit litigants to obtain prompt relief on threshold legal challenges. Courts should also consider whether constitutional claims are intertwined with statutory, regulatory, or factual issues on which the agency can apply specialized knowledge or develop a record for judicial review. The constitutional nature of a claim may therefore still be relevant to determining whether exhaustion is required, but should not itself be dispositive.

I. Exhaustion Mandates and Their Applicability to Constitutional Claims

This Part provides a general overview of administrative exhaustion as well as a review of Supreme Court jurisprudence concerning exhaustion of constitutional claims. It describes statutory, regulatory, and judicial exhaustion mandates, as well as judicial rationales for mandating exhaustion or excusing it in some instances. It also explains that despite disparaging agency resolution of constitutional claims, the Supreme Court has not held that agencies can never resolve these claims or that these claims need never be exhausted. Instead, the Court has declined to require exhaustion of particular constitutional claims before specific agencies when additional compelling circumstances weighed against requiring exhaustion.

A. Administrative Exhaustion

Administrative exhaustion mandates require litigants to raise their claims administratively before seeking relief in court. Courts enforce ex ante exhaustion of remedies mandates by dismissing suits filed without first giving a responsible agency the opportunity to resolve the underlying controversy.⁴⁴ They enforce ex post issue exhaustion mandates on judicial review following an agency’s decision by barring parties from objecting to the decision on grounds not raised before the agency.⁴⁵ This Section reviews the legal bases for these mandates, as well as judicial justifications for requiring exhaustion and for occasionally declining to do so.

The sources of exhaustion mandates may be statutory, regulatory, or judicial. Statutes may expressly require litigants to exhaust administrative remedies before suing,⁴⁶ as do some agency rules,⁴⁷ or may achieve similar results by barring court interference with pending agency proceedings.⁴⁸ Statutes or agency regulations may mandate issue exhaustion by barring arguments not raised before an agency on judicial review of its decision.⁴⁹ Absent such express mandates, courts may themselves impose “prudential” exhaustion requirements by refusing to hear suits filed without first seeking relief from the agency⁵⁰ or to consider arguments not raised before an agency when reviewing its decision.⁵¹ Courts also read implicit exhaustion mandates into statutes creating comprehensive administrative review schemes for resolving certain controversies, treating such statutes as implicitly depriving district courts of jurisdiction over those cases.⁵²

Courts justify exhaustion mandates based on benefits to agencies, courts, and litigants, and may occasionally excuse exhaustion if the advantages of immediate court proceedings outweigh these benefits. One justification for requiring exhaustion rests on a comity principle “grounded in deference to Congress’ delegation of authority to coordinate branches of Government, that agencies . . . ought to have primary responsibility for the programs that Congress has charged them to administer,”⁵³ which “appl[ies] with particular force” when agencies can apply discretion or expertise to an issue.⁵⁴ Exhaustion mandates also allow an agency “to correct its own mistakes . . . before it is haled into federal court,”⁵⁵ and discourage “deliberate flouting of administrative processes.”⁵⁶ Exhaustion may also benefit courts.⁵⁷ It can prevent litigation altogether if claims are settled or remedied at the administrative level, or if a party losing before the agency foregoes court review.⁵⁸ And when court action follows, exhaustion can prevent piecemeal appeals, narrow or crystallize issues for judicial review, ensure cases are ripe for adjudication, and provide a record for review.⁵⁹ Courts have also suggested that exhaustion benefits litigants because agencies resolve claims “more quickly and economically” than courts⁶⁰ and because issue-exhaustion rules protect prevailing litigants from improper “sandbagging” by parties who lose before the agency and then seek a “second bite at the apple” on subsequent judicial review based on objections that they failed to raise before the agency.⁶¹

But if these advantages are attenuated, if pursuing administrative relief is futile, or if delayed judicial review would be ineffective, courts may elect not to require prudential exhaustion or may apply express or implied exceptions to statutes or regulations requiring exhaustion. Courts may decline to require prudential exhaustion of remedies “if the litigant’s interests in immediate judicial review outweigh the government’s interests . . . that the exhaustion doctrine is designed to further.”⁶² Balancing these interests requires an “intensely practical” assessment of “the claim presented and the characteristics of the particular administrative procedure.”⁶³ Courts may thus decline to require prudential exhaustion when agencies lack authority, willingness, or institutional competence to adjudicate a claim,⁶⁴ or if a party’s merits claim is that administrative remedies are inadequate.⁶⁵ They may also decline to require exhaustion when litigants face “an unreasonable or indefinite timeframe for [agency] action”⁶⁶ or irreparable harm from delayed judicial review.⁶⁷ Moreover, because courts require prudential issue exhaustion for the same reasons that they require litigants to raise arguments in adversarial trial court actions to preserve them for appeal,⁶⁸ they may decline to require prudential issue exhaustion when agencies utilize nonadversarial “inquisitorial” processes in which agency adjudicators, rather than litigants, bear primary responsibility for identifying and developing relevant issues.⁶⁹

Courts may also apply express or implied exceptions to statutory or regulatory exhaustion mandates. Because courts presume Congress favors meaningful judicial review of agency action, they avoid construing ambiguous statutes as requiring exhaustion if delayed judicial review would be inadequate.⁷⁰ They may also identify or imply futility or similar exceptions to some express exhaustion mandates⁷¹ and construe codified exceptions to such mandates for situations raising “extraordinary circumstances”⁷² or in which litigants had “reasonable grounds”⁷³ not to exhaust as applying in circumstances similar to those excusing prudential exhaustion.⁷⁴ Moreover, in Thunder Basin Coal Co. v. Reich,⁷⁵ the Supreme Court held that when determining whether to infer implied congressional intent to require exhaustion of a particular claim through a comprehensive review scheme, courts must consider whether delayed judicial review would be inadequate, whether the claim is “wholly collateral” to the statutory review scheme, and whether it falls “outside the agency’s expertise.”⁷⁶

B. Exhaustion of Constitutional Claims

Despite disparaging agency adjudication of constitutional claims in a number of rulings that declined to require litigants to exhaust particular constitutional claims before certain agencies,⁷⁷ the Supreme Court has not categorically exempted constitutional claims from exhaustion mandates.⁷⁸ It has required exhaustion of some constitutional claims or otherwise indicated that exhaustion mandates can apply to these claims. When the Court has declined to require exhaustion of constitutional claims, it has either rested its holding entirely on grounds other than the constitutional nature of the claim or cited this factor together with other compelling circumstances weighing against exhaustion.⁷⁹

The Court has declined to categorically exempt constitutional claims from exhaustion and in some cases, it has required exhaustion of various constitutional claims, including facial challenges to statutes. Thunder Basin, which required exhaustion of a facial due process challenge to a statutory adjudication scheme despite the lack of an express statutory exhaustion mandate, held that although “[a]djudication of the constitutionality of congressional enactments has generally been thought beyond the jurisdiction of administrative agencies,”⁸⁰ “[t]his rule is not mandatory.”⁸¹ In Elgin v. Department of the Treasury,⁸² the Court, applying Thunder Basin to another administrative scheme that lacked an express exhaustion mandate, required federal employees raising facial challenges to civil service laws on equal protection grounds to first seek relief from the Merit Systems Protection Board (“MSPB”).⁸³ It required exhaustion despite the MSPB’s claimed inability to adjudicate such facial challenges,⁸⁴ noting that the agency could “identify the legal principles that govern the constitutional analysis” in order to develop a useful record for subsequent judicial review.⁸⁵ United States v. Clintwood Elkhorn Mining Co.⁸⁶ held that the Internal Revenue Code’s express exhaustion mandate⁸⁷ applies to constitutional claims, including facial challenges to the tax laws.⁸⁸ And although Diaz and Salfi held that an agency had waived a statutory exhaustion mandate with respect to a constitutional claim,⁸⁹ Salfi also held that absent waiver, this mandate applied to constitutional claims,⁹⁰ and in subsequent cases the Court enforced this mandate against parties raising facial and other constitutional challenges when the agency had not waived exhaustion.⁹¹ Several earlier decisions by the Court also required litigants to exhaust facial challenges to statutes, as well as other constitutional claims, before seeking relief in court.⁹²

The Court’s reasoning elsewhere also reflects the lack of a categorical rule exempting even structural constitutional claims or facial challenges to statutes from exhaustion mandates. Instead of holding that facial or other constitutional challenges need never be exhausted, Carr merely reasoned that “it is sometimes appropriate for courts to entertain constitutional challenges to statutes or other agency-wide policies even when those challenges were not raised in administrative proceedings.”⁹³ Ryder v. United States⁹⁴ and Lucia v. SEC⁹⁵ held that litigants were entitled to relief on structural constitutional claims because they had raised them before a military court-martial and the SEC, respectively.⁹⁶ When the government cited these rulings to argue for an issue exhaustion mandate in Carr,⁹⁷ the Court did not overrule them or dismiss their analysis as dicta. Instead, it distinguished them based on differences in the administrative scheme at issue in Carr,⁹⁸ thus implying that in appropriate circumstances, exhaustion of structural constitutional claims is required. Accordingly, the Court has never categorically held that agencies cannot resolve constitutional claims or that such claims need never be exhausted.

Moreover, the Court has never relied solely on the constitutional nature of a claim as grounds for declining to require administrative exhaustion. Instead, it either excused exhaustion based entirely on other grounds or rested its holding at least partly on additional compelling factors that weighed against requiring exhaustion. In some cases, the Court simply excused exhaustion of a constitutional claim based on a standard exhaustion analysis that was not directly impacted by the constitutional nature of the claim. For example, McNary v. Haitian Refugee Center, Inc.⁹⁹ applied standard canons of construction in holding that a statutory exhaustion mandate did not bar facial challenges to agency rules, including constitutional challenges.¹⁰⁰ And Salfi and Diaz, despite stating in dicta that constitutional claims were “beyond [the Agency’s] jurisdiction”¹⁰¹ or “competence,”¹⁰² merely held, based on the language of a statutory exhaustion mandate, that the Agency could waive the mandate’s applicability and had done so in the cases before the Court.¹⁰³

Even when the Court has declined to require exhaustion based partly on the constitutional nature of a claim, it has also relied on other compelling factors, consistent with earlier jurisprudence explaining “that the presence of constitutional questions, coupled with a sufficient showing of inadequacy of prescribed administrative relief and of threatened or impending irreparable injury flowing from delay . . . [is] sufficient to dispense with exhausting the administrative process.”¹⁰⁴ For example, in Free Enterprise and Axon, the Court had to determine if a statute that did not address exhaustion implicitly required it, based in part on whether requiring exhaustion might preclude meaningful judicial review.¹⁰⁵ In this regard, the Court found it problematic that the administrative scheme at issue in Free Enterprise only permitted review of enforcement actions, thus requiring potential litigants wishing to challenge the respondent’s authority to conduct pre-enforcement investigations to purposely engage in sanctionable conduct and risk hefty penalties just to obtain review.¹⁰⁶ And in Axon, the government asserted that the agency could not grant relief on an objection that its allegedly unconstitutional structure precluded it from adjudicating the merits of an enforcement claim,¹⁰⁷ but argued that the petitioner still had to litigate these merits before the agency prior to seeking judicial relief on the constitutional claim.¹⁰⁸ The Court deemed such delayed relief inadequate since it would not undo the asserted “here-and-now” injury of having to litigate the merits before an unconstitutionally structured agency.¹⁰⁹ Similarly, Carr considered whether to impose an issue exhaustion mandate—not required by a statute or regulation—on litigants raising Appointments Clause claims¹¹⁰ in informal proceedings that differed from adversarial court litigation where waiver typically applies, and gave no direct access to an official able to grant relief by making a valid appointment.¹¹¹ Carr described the constitutional issue as a factor that merely “tip[ped] the scales”¹¹² against requiring exhaustion when “[t]aken together” with the agency’s nonadversarial process and the futility of seeking relief administratively.¹¹³

Similarly, in Eldridge, the Court read an implied exemption into a statutory exhaustion mandate applicable to a due process challenge to agency procedures for terminating benefits, because the procedural attack was “collateral” to the merits of the termination ruling and the plaintiff’s “physical condition and dependency upon the disability benefits” made delayed judicial review inadequate.¹¹⁴ Moreover, the petitioning agency in Eldridge, Salfi, and Diaz had repeatedly asserted that “constitutional claims are beyond [its] competence,”¹¹⁵ so any attempt to obtain relief administratively may have been futile. Absent these additional factors weighing against exhaustion, it is far from certain that the Court would have excused exhaustion in these cases, and the Court has subsequently asserted that these cases’ exhaustion holdings did not turn on the “constitutional character” of the claims at issue.¹¹⁶

II. Agencies Can Resolve Constitutional Controversies

Courts and commentators often imply that agencies cannot adjudicate constitutional claims because they purportedly lack expertise or authority to pass on constitutional issues in general and on the constitutionality of congressional enactments in particular. This Part challenges these assumptions. It argues that agencies have extensive experience and expertise in constitutional analysis, which may be comparable to that of many generalist courts when it comes to the constitutional issues most likely to arise in their proceedings. Additionally, agencies can draw on DOJ’s recognized expertise in constitutional law. This Part also explains that despite assertions that agencies cannot “declare” statutes or other official action unconstitutional, an agency can address constitutional controversies by taking corrective action, either in response to its formal resolution of a constitutional question, or by engaging in “administrative avoidance” to moot a constitutional controversy without conclusively resolving the constitutional issue (and potentially without making any legal pronouncements). In addition, this Part reviews constitutional, statutory, judicial, and historical authorities indicating that agencies are authorized, and possibly required, to refrain from taking unconstitutional action, including action authorized and possibly even mandated by statute. And it explains why arguments by commentators for similar presidential authority or responsibility should also apply to administrative agencies.

A. Agencies Have the Institutional Competence to Resolve Constitutional Controversies

Court rulings declining to require exhaustion of constitutional claims often disparage agencies’ institutional competence to address constitutional controversies. Thus, for example, courts have asserted that structural constitutional challenges “usually fall outside [agency] adjudicators’ areas of technical expertise,”¹¹⁷ and that “administrative agencies are without . . . expertise to pass upon the constitutionality of administrative or legislative action.”¹¹⁸ Commentators have made similar claims.¹¹⁹ This assumption that Article II agencies lack Article III courts’ competence to address constitutional questions, if true, would readily support excusing exhaustion of such claims on futility or similar grounds. After all, if only Article III judges can meaningfully consider constitutional claims, why force litigants to raise these claims before constitutionally clueless bureaucrats?¹²⁰

However, these categorical assertions do not match reality. As Judge Frank Easterbrook noted when discussing presidential resolution of constitutional controversies, “if expertise is important it parades down the halls of the executive branch.”¹²¹ Agencies have routinely addressed constitutional questions since the Founding Era and are no strangers to constitutional analysis. An agency may encounter the constitutional issues most likely to arise in its proceedings with comparable frequency to many generalist courts. And even if an agency were to lack sufficient expertise on its own, it could seek expert advice from DOJ, whose constitutional pronouncements are viewed as highly persuasive by courts. Categorical assertions that agencies are unqualified to pass on constitutional questions therefore lack a factual basis.

1. Agencies Routinely Engage in Administrative Constitutionalism

As the burgeoning literature on administrative constitutionalism demonstrates, agencies regularly analyze and apply the Constitution. Executive branch agencies have engaged with the Constitution from the Washington administration to the modern era. Legal incentives to conform to constitutional norms and the nature of many agencies’ missions necessarily compel agencies to routinely engage with various areas of constitutional law. Agencies therefore have expertise relevant to assessing challenges not only to the constitutionality of executive branch action, but also to the constitutionality of statutes.

a. Agencies’ Extensive Engagement with the Constitution

Agencies have a long history of engaging with constitutional questions. President Washington’s Secretaries of State, Treasury, and War analyzed and opined on the scope of the executive branch’s constitutional powers, such as presidential war powers,¹²² and on the constitutionality of statutes, such as the act creating the First Bank of the United States.¹²³ In the first century of the Republic’s existence, judicial review of agency action was the exception rather than the norm,¹²⁴ and most constitutional review was therefore conducted by agency officials exercising constitutional self-restraint.¹²⁵ Moreover, agencies sometimes took or avoided taking action based on assertions that statutes were unconstitutional. For example, after Congress overrode Andrew Jackson’s veto of a law reauthorizing the Second Bank of the United States, Roger Taney, who had drafted the President’s veto message claiming the bill was unconstitutional and was subsequently appointed Secretary of the Treasury,¹²⁶ withdrew the government’s deposits from the Bank in an effort to destroy it.¹²⁷

This tradition of administrative constitutionalism has continued into the twentieth and twenty-first centuries. For example, Professor Sophia Lee has documented how the Federal Communications Commission (“FCC”) interpreted the state action doctrine when formulating regulatory policies requiring nondiscrimination by regulated entities in a manner that extended judicial precedents on this constitutional issue to new situations.¹²⁸ She found that in some cases, the FCC’s actions were constitutionally motivated even when publicly justified on statutory grounds.¹²⁹ Countless other examples of agency engagement in constitutional analysis abound.¹³⁰ By way of illustration, rule-writers at the Department of Energy and the Environmental Protection Agency have considered whether their Agencies’ regulations effected compensable regulatory takings¹³¹ or provided adequate procedural due process.¹³² In connection with a single rulemaking concerning tobacco sales to minors, the Food and Drug Administration (“FDA”) considered these issues as well as separation of powers, nondelegation, First Amendment, equal protection, and substantive due process concerns.¹³³ Several agencies have also invoked the canon of constitutional avoidance when construing their organic acts.¹³⁴ And presidential guidance requires agencies to consider constitutional issues such as restraints relating to federalism and Fifth Amendment takings when taking official action.¹³⁵

Agency adjudicators also routinely address constitutional issues. Because agency adjudications can affect property or liberty interests, agencies must often resolve disputes about due process or related constitutional rights.¹³⁶ And agency adjudicators have considered a wide range of other constitutional issues.¹³⁷ For example, in a case that ultimately reached the Supreme Court, the SEC addressed an Appointments Clause challenge, deeming it “important that the Commission have an opportunity to address constitutional issues in the first instance” and noting that it had previously addressed Double Jeopardy and Seventh Amendment claims.¹³⁸ In a subsequent case, an SEC ALJ issued a lengthy ruling addressing Appointments Clause, Seventh Amendment, due process, and uncompensated takings arguments.¹³⁹

b. Agencies’ Need to Routinely Address Constitutional Issues

Agencies have multiple reasons for addressing constitutional issues. Judicial precedents and statutes incentivize agencies to consider constitutional constraints in order to mitigate legal hazards. Many statutes define agency authority in constitutional terms, requiring agencies to engage in constitutional analysis when construing or applying these statutes. And the nature of some agencies’ mission causes them to routinely confront constitutional questions.

The courts and Congress have incentivized agency engagement with the Constitution. By denying deference to regulations that “raise serious constitutional problems,”¹⁴⁰ courts encourage agency rule-writers to consider constitutional limits. More broadly, because courts may set aside constitutionally flawed agency action,¹⁴¹ agencies have a strong incentive to consider constitutional constraints on their actions. And the Equal Access to Justice Act penalizes agencies when qualifying litigants prevail on constitutional claims by making the losing agency pay attorney fees from its own budget if its position was not “substantially justified.”¹⁴²

In addition, statutes often expressly or implicitly define agency authority in constitutional terms, compelling agencies to engage in constitutional analysis when construing or applying their statutory mandates. For example, the statutory definition of income on which the Internal Revenue Service (“IRS”) can assess taxes is construed as coextensive with the Sixteenth Amendment.¹⁴³ Likewise, Congress authorized the FDA to restrict tobacco advertising and promotion “to [the] full extent permitted by the first amendment to the Constitution.”¹⁴⁴ And the Federal Energy Regulatory Commission’s jurisdiction to regulate hydroelectric plants under the Federal Power Act is coextensive with Congress’s Commerce Clause authority to regulate waterways.¹⁴⁵ When assessing their statutory authority, these Agencies necessarily engage in constitutional exegesis.¹⁴⁶

Moreover, the nature of many agencies’ mission necessarily implicates constitutional issues.¹⁴⁷ For example, the FCC must consider First Amendment issues when regulating broadcasters,¹⁴⁸ and the FTC, which “has a broad mandate to protect consumers from fraud and deception,”¹⁴⁹ claims expertise in “First Amendment commercial speech jurisprudence.”¹⁵⁰ The Federal Maritime Commission (“FMC”) has confronted various issues of first impression concerning state immunity under the Eleventh Amendment when adjudicating claims against public port authorities,¹⁵¹ and addressed the Amendment’s general applicability to agency proceedings in a case that ultimately reached the Supreme Court.¹⁵² The IRS and customs authorities have considered whether Export Clause limits preclude them from levying excise taxes or duties on certain goods or services.¹⁵³ Agencies that regulate economic activity have addressed the impact of the Commerce Clause on their authority¹⁵⁴ or the validity of state laws¹⁵⁵ and have also adjudicated claims that governmental action effected regulatory takings subject to the Fifth Amendment’s just compensation requirement.¹⁵⁶ And agencies adjudicating claims that may result in governmental outlays have considered Appropriations Clause limitations on the ability of agency contracts or representations by agency officials to bind the government.¹⁵⁷

c. Agencies’ Experience Considering the Constitutionality of Statutes

Although administrative constitutional analysis often focuses on agency action, agencies have also considered the constitutionality of statutes and related issues. A Government Accountability Office (“GAO”) review of a sample of statutory provisions that a presidential signing statement asserted were unconstitutional found that the responsible agencies had avoided implementing only some provisions,¹⁵⁸ suggesting some constitutional analysis at the agency level. Agencies have also commented on the constitutionality of proposed or enacted legislation raising separation of powers concerns or implicating due process and other constitutional rights.¹⁵⁹ And a number of significant court cases interpreting the Constitution resulted from agency officials’ disregard of statutes that the executive branch deemed to violate separation of powers provisions relating to appointments, limits on congressional power, and the President’s foreign affairs powers.¹⁶⁰

In addition, although some agencies resist adjudicating facial or other constitutional challenges to statutes,¹⁶¹ others have entertained such challenges. For example, some agencies have recently addressed the merits of constitutional challenges to statutory ALJ removal protections.¹⁶² Similarly, in 1887, the Department of the Interior rejected a railroad’s contention that an act of Congress giving priority of title to certain homestead claimants over land grants to railroads violated the Contract Clause.¹⁶³ More recently, the Commodity Futures Trading Commission rejected an argument that Commodities Exchange Act provisions authorizing it to bar an individual from participating in the derivatives industry due to criminal misconduct, despite a subsequent presidential pardon, were unconstitutional because “Congress cannot limit the . . . presidential pardon [power].”¹⁶⁴

In fact, several agencies or agency subcomponents that act as tribunals have viewed their statutory authority as expressly encompassing resolution of constitutional challenges to statutes and have therefore addressed such challenges. The Board of Tax Appeals, which was “an independent agency in the executive branch of the Government,”¹⁶⁵ affirmed the constitutionality of some tax statutes, while holding others unconstitutional.¹⁶⁶ The Agriculture Board of Contract Appeals claimed authority to pass on a constitutional challenge to its organic act since it had many characteristics of a court and was obliged to consider attacks on its jurisdiction, noting that other boards of contract appeals had considered similar constitutional questions.¹⁶⁷ The Department of Labor’s Benefits Review Board has similarly proceeded to consider facial challenges to statutes, reasoning that it was created to resolve disputes previously adjudicated by district courts, which can entertain such challenges.¹⁶⁸ And the Mine Safety and Health Review Commission agreed to entertain a challenge to its organic act, explaining that because Congress charged it with performing a role that a district court would otherwise perform, when applying this act, it could “decid[e] whether the law or a portion of it conforms to the Constitution” in the same way as a court.¹⁶⁹

Elsewhere, agencies have assessed whether an allegedly unconstitutional statutory provision could be severed. For example, an ALJ at the Department of Agriculture held that a statute concerning funding for agricultural marketing, which was alleged to violate the First Amendment, could be severed, so any purported constitutional defect did not bar the agency from enforcing another provision of the same act.¹⁷⁰ The Surface Transportation Board held on similar grounds that a pending court challenge to the constitutionality of a statutory provision did not warrant staying proceedings brought under a different provision of the same act.¹⁷¹

Moreover, the expertise gained through agencies’ constitutional analysis of their own actions should presumably enable them to assess as-applied or facial challenges to statutes. For example, if agency enforcement attorneys know enough constitutional law to avoid coercing confessions by torture, they would presumably understand that statutes authorizing or requiring such action would violate the Fifth and Eighth Amendments. Thus, the Supreme Court has indicated that the need to conform agency action to the Constitution can equip agencies to assess constitutional challenges to statutes, dismissing concerns that an agency that previously addressed constitutional challenges to its actions would be “befuddled” if required to prepare a record for review of a facial challenge to a statute.¹⁷² The common categorical claim that agencies lack competence to address constitutional issues therefore lacks an empirical basis.

2. Agencies Have Extensive Experience Addressing the Constitutional Issues that Are Relevant to Their Adjudications

Courts often assume that agencies have specialized knowledge of statutes they implement but “know[] . . . nothing special about” constitutional issues that might arise in administrative adjudications.¹⁷³ However, the Supreme Court has recognized that agencies may develop expertise in addressing laws they do not administer but that are often relevant to their proceedings.¹⁷⁴ It follows that agencies may have expertise in constitutional issues relevant to their proceedings, especially because unlike generalist district courts,¹⁷⁵ which adjudicate many more constitutional issues, agencies’ constitutional experience is necessarily related to those issues that arise in their proceedings. Such issues that agencies have adjudicated include controversies related to their statutory missions, such as Export Clause challenges to customs duties and Fifth Amendment takings challenges to benefits awards under the labor laws;¹⁷⁶ due process and related procedural arguments concerning how agencies conduct adjudications;¹⁷⁷ as well as separation of powers controversies concerning how agencies are structured, such as challenges to removal protections¹⁷⁸ or to an agency’s exercise of both adjudicatory and enforcement powers.¹⁷⁹ Although district courts likely encounter a greater volume of constitutional controversies, because litigation over agency action represents only a portion of these disputes, a significant fraction of these controversies may concern matters such as justiciability or criminal procedure that might not typically arise in agency proceedings. In contrast, an agency may encounter constitutional questions less often, but those constitutional issues that it addresses necessarily relate to its structure, administrative processes, or activities.

Consider, for example, the experience of the FTC, which was the respondent in Axon. The petitioner’s district court complaint challenging the removal protections enjoyed by FTC ALJs invoked Free Enterprise’s merits holding that two layers of for-cause removal protection for some inferior officers, who can be removed only for specified grounds by officers who are also removable only for cause, were unconstitutional.¹⁸⁰ A KeyCite search indicates that as of the date the plaintiff sued, the FTC had addressed the issue of Free Enterprise’s applicability to ALJ removal protections in three prior agency proceedings.¹⁸¹ Although three adjudications may not seem impressive, the same search indicates that the U.S. District Court for the District of Arizona, where the Axon petitioner mounted its collateral attack on the FTC proceeding against it, had not issued any opinion applying Free Enterprise’s removal holding in the same timeframe.¹⁸² A similar search of opinions by the U.S. District Court for the District of Columbia, “a principal venue for cases involving the separation of powers”¹⁸³ where the Free Enterprise litigation originated,¹⁸⁴ yields one opinion tangentially referencing Free Enterprise’s removal holding in a very different context.¹⁸⁵ The common assertion that agencies lack sufficient expertise to address constitutional issues thus overlooks the very real possibility that an agency may have substantial experience, comparable to that of many courts, in addressing precisely those constitutional issues most likely to arise in its proceedings.

3. Agencies Can Draw on DOJ’s Constitutional Expertise

Even if an agency were to encounter constitutional issues with which it is unfamiliar, it could draw on a unique executive branch resource: DOJ and its Office of Legal Counsel (“OLC”). When the First Congress created the office of the Attorney General, it required its holder to “give his advice and opinion upon questions of law . . . when requested by the heads of any of the departments.”¹⁸⁶ The Attorney General is still charged with this responsibility,¹⁸⁷ which is currently delegated to OLC.¹⁸⁸ From the earliest days of the Republic, such advice has addressed constitutional issues,¹⁸⁹ as acknowledged by a provision in DOJ’s 1870 organic act barring the Attorney General from delegating responsibility for advising on “construction of the Constitution of the United States” to subordinates.¹⁹⁰

DOJ routinely addresses agency requests for advice on constitutional issues, including separation of powers concerns and the constitutionality of legislation,¹⁹¹ conducting analyses comparable to those conducted by courts, which often cite to its opinions. Like courts, DOJ will survey and consider relevant Founding Era and other historical sources in addition to constitutional text and judicial precedents,¹⁹² and conduct severability analyses if it deems statutory provisions unconstitutional.¹⁹³ Based on its review, DOJ may advise agencies to refrain from taking certain action or giving effect to statutes that it deems unconstitutional.¹⁹⁴ Courts treat DOJ’s constitutional analysis as persuasive authority¹⁹⁵ and as evidence of the “longstanding ‘practice of the government’” relevant to interpreting ambiguous constitutional provisions.¹⁹⁶ Agencies’ ability to seek this advice when addressing novel constitutional questions not encountered in their own routine engagement with the Constitution further belies any claim that they lack the necessary institutional competence to address such issues.

B. Agencies Have the Authority and Responsibility to Resolve Constitutional Controversies

This Section challenges the assumption often expressed by courts and commentators that agencies have no obligation or authority to consider constitutional challenges in general¹⁹⁷ and, in particular, lack authority to consider facial constitutional challenges to statutes, often described as an inability to “declare a statute unconstitutional.”¹⁹⁸ It explains that as a semantic matter, such assertions about agencies’ purported inability to “declare” statutes or other official action unconstitutional mistakenly focus on differences in the nature of authority exercised by courts, which generally act by declaring the legal rights and obligations of other actors, and by agencies, which directly implement laws. But these differences do not prevent agencies from considering constitutional constraints on their own actions when implementing the law. Moreover, constitutional, statutory, judicial, and historical authorities indicate that agencies can and should conform their actions to the Constitution, usually by exercising statutory or prosecutorial discretion, but possibly also in rare cases when doing so may require them to disregard unconstitutional statutes. Although commentary arguing for such executive branch authority typically focuses on the President, this reasoning should also apply to agency officers.

Agencies’ Ability to Resolve Constitutional Issues Without Issuing Court-Like “Declarations” of Unconstitutionality

The assertion that agencies cannot address the constitutionality of statutes largely rests on a framing of the issue as whether agencies can “declare” statutes unconstitutional.¹⁹⁹ Some authorities have similarly asserted that agencies cannot “declare” even agency action unconstitutional.²⁰⁰ Framing resolution of constitutional controversies in this manner as solely involving the issuance of legal “declarations” has the effect of implying that it is the exclusive domain of courts, whose “province and duty . . . [is] to say what the law is.”²⁰¹ Courts must “declare” or “say” what the law is (i.e., communicate what the law requires) because they resolve “Cases” or “Controversies” between other actors.²⁰² Courts therefore “declare” to these actors what the law requires in the course of resolving disputes. These pronouncements may set precedents for future cases, and “may not lawfully be revised, overturned or refused faith and credit by another Department of Government.”²⁰³ In contrast, agencies themselves implement and must comply with the law, including the Constitution. Pursuant to the principle of judicial supremacy, they may have their actions set aside by courts and must comply with court orders and binding judicial interpretations of the Constitution and other legal authorities.²⁰⁴

Therefore, when courts adjudicate the rights and duties of agencies or other parties, they can declare agency action or acts of Congress that agencies implement to be unconstitutional in a way that agencies cannot. But agencies can still assess what the Constitution requires and then act (or decline to act) accordingly.²⁰⁵ Agency adjudicators often do so expressly, but agencies may also engage in “administrative avoidance” by exercising discretion in a manner that eliminates an alleged constitutional problem without formally ruling on, and sometimes without even acknowledging, the constitutional controversy, and without necessarily making any formal legal pronouncement. Such constitutional self-policing by agencies, which differs from formal judicial declarations of the law, allows agencies to ensure that their actions comport with the Constitution, and does not violate the principle of judicial supremacy.

a. Agencies May Address Constitutional Issues Expressly or Through “Administrative Avoidance” When Executing Laws

Even when agencies formally construe the law when acting in a so-called quasi-judicial capacity, they are deemed to merely be executing the law,²⁰⁶ and can conceivably consider constitutional constraints when deciding how they will do so. For example, an SEC ALJ refused to impose a penalty in the amount sought by agency enforcement counsel because he found that doing so would have violated the Excessive Fines clause of the Eighth Amendment.²⁰⁷ The Mine Safety and Health Review Commission reversed an ALJ’s grant of relief against a party joined after the conclusion of trial because it found that granting relief based on evidence adduced at trial would have violated the party’s due process rights.²⁰⁸ The FTC held that it may consider separation of powers arguments for disqualifying agency adjudicators.²⁰⁹ And the FMC has considered Eleventh Amendment constraints on its exercise of jurisdiction over public port authorities.²¹⁰

In addition, unlike courts, whose “‘obligation’ to hear and decide a case is ‘virtually unflagging,’”²¹¹ agencies can engage in what can be termed “administrative avoidance” by exercising their discretion about how to execute the law in order to take corrective action that a declaration of unconstitutionality might require, but without formally addressing the constitutional issue or even making any legal pronouncement. By exercising discretion in this manner, agencies can sidestep legal controversies—and mitigate legal hazards²¹²—by taking or refraining from taking actions in ways that can moot or prevent a constitutional dispute. In the process, the agency t not expressly hold that a statute or agency action is unconstitutional or even acknowledge the existence of a constitutional controversy. This procedural mechanism is arguably broader in scope than the constitutional avoidance engaged in by courts, which is only possible when a court can resolve a controversy by adopting a plausible construction of an ambiguous statute that avoids raising a serious constitutional question.²¹³ Unlike courts applying the canon of constitutional avoidance, agencies can simply tailor their actions to moot a constitutional controversy without making any legal pronouncement, and therefore do not need to identify statutory grounds for any remedial action they may take.²¹⁴

Agencies have utilized this type of “administrative avoidance” to resolve constitutional controversies that parties had or might have raised in administrative proceedings, without actually ruling on the constitutional issue and, at times, without even acknowledging the existence of a constitutional controversy or making any type of legal ruling. For example, the Sixth Circuit held that the Treasury Department mooted a state’s Spending Clause and Tenth Amendment challenge to a statute by issuing regulations construing the law in a manner that avoided raising a constitutional issue.²¹⁵ The agency’s action therefore resolved the constitutional controversy, although the agency cited only policy grounds for its construction of the statute.²¹⁶

Similarly, a few months after the Supreme Court’s Axon ruling, the SEC elected “to dismiss, as a matter of discretion” the SEC proceeding at issue in Axon, together with forty-one other pending enforcement proceedings in which enforcement staff were inadvertently given access to adjudicatory staff records as a result of what the SEC had termed a “control deficiency.”²¹⁷ Although the incident had been cited in support of constitutional attacks on these adjudications,²¹⁸ the SEC dismissed the actions without addressing whether dismissal was legally required or even suggesting that the incident might have had constitutional or other legal ramifications.²¹⁹ And several years before the Supreme Court held for the first time in Lucia v. SEC that an agency’s ALJs had to be appointed in accordance with the Appointments Clause,²²⁰ the FTC took steps to correct a potential Appointments Clause violation despite rejecting an administratively raised argument that a presiding ALJ should have been appointed in accordance with the Clause.²²¹ Although it refused to adjudicate the constitutional claim in the party’s favor, the Commission, which as a “Head[] of Department[]” could make valid appointments under the Clause,²²² stated that “purely as a matter of discretion [it] has ratified [the ALJ’s] appointment” in order to “put[] to rest any possible claim that this administrative proceeding violates the Appointments Clause.”²²³

b. Agency Resolution of Constitutional Issues Does Not Usurp Judicial Power

An agency’s choice to take corrective action in response to a constitutional challenge, either by exercising discretion to engage in “administrative avoidance” that moots the controversy without a formal ruling, or by expressly ruling that it cannot constitutionally implement a statute or administrative policy either in general or in a particular context, does not improperly trench on the courts’ power to “say what the law is.” Instead, such action allows the agency to engage in self-policing to ensure it complies with the Constitution without first awaiting a court’s determination that it has failed to comply. Such a decision by an agency on how it will act, even if motivated by constitutional considerations, is not equivalent to a judicial “declaration” to other actors that a statute or other official act is unconstitutional.²²⁴

This type of constitutional analysis by agencies allows them to monitor and adjust their actions to ensure compliance with the Constitution, without being ordered to do so by the courts, even in the absence of controlling judicial precedents. For example, it is “not controversial in practice” for the executive branch to “refuse to enforce a law that is ‘like’ one held invalid by the courts.”²²⁵ If agencies could not decline to enforce such laws absent express judicial rulings on each statute, the resulting litigation would likely overwhelm courts and force massive expenditure of resources by litigants.²²⁶ But confirming that a statute falls within the scope of a court ruling invalidating a different statute, or ascertaining the exact breadth of a ruling invalidating a statute administered by the agency, necessarily requires some independent analysis and judgment by agency officials.²²⁷

There is no obvious reason why agencies cannot perform this and other constitutional analyses to ensure that their actions comply with the law, including any constitutional strictures that render the statutes they implement invalid either in specific contexts or in toto. Such action does not contravene the principle of judicial supremacy, as long as agencies follow binding judicial precedents and respect any subsequent court rulings setting aside their actions.²²⁸ Thus, as a D.C. Circuit opinion authored by then-Judge Brett Kavanaugh asserted, the executive branch may decline to implement statutes that it determines are unconstitutional “unless and until a final Court order dictates otherwise.”²²⁹ As explained below, multiple authorities indicate that agencies can and possibly must engage in such self-policing. And when they do, agencies may be able to provide effective relief to parties raising constitutional claims even without “declaring” statutes or other official action unconstitutional.

2. Agencies’ Authority and Duty to Address Constitutional Issues

Despite expecting agencies to comply with the Constitution²³⁰ and holding that unconstitutional laws are a legal nullity,²³¹ courts often disregard these principles in the context of administrative adjudications. For example, Eldridge asserted that even when an agency’s own rules are alleged to be unconstitutional, “[i]t is unrealistic to expect that the [Agency] would consider substantial changes at the behest of a single [litigant] raising a constitutional challenge in an adjudicatory context” and the “[Agency] would not be required even to consider such a challenge.”²³² And Salfi stated in dicta that it “is beyond [an agency’s] jurisdiction” to consider “the constitutionality of a statut[e].”²³³ However, constitutional, statutory, judicial, and historical authorities indicate that agencies can and must follow the Constitution, even if doing so requires avoiding certain constructions or applications of statutes or, in rare cases where an agency lacks prosecutorial or statutory discretion to engage in such avoidance, entirely refusing to give effect to unconstitutional laws.

a. Constitutional Text

The Constitution indicates that executive branch officers have a primary responsibility to comply with its strictures that may trump any authority they might otherwise have to implement unconstitutional statutes. It directly mandates that “executive . . . Officers . . . shall be bound by Oath or Affirmation, to support this Constitution.”²³⁴ In contrast, these officers’ duty to execute statutes is indirect and not subject to an oath,²³⁵ flowing derivatively from their role as agents of the President,²³⁶ who is the only official directly charged with “tak[ing] care that the Laws be faithfully executed.”²³⁷ These textual differences suggest that the more important duty for “executive Officers,” including agency heads, is to uphold the Constitution rather than to execute unconstitutional laws.

b. Statutory Authorities

Congress itself typically gives agencies broad discretion and some impetus to refrain from taking unconstitutional action, including implementing unconstitutional laws. It is common for statutes to grant agencies discretion with respect to implementation, thereby empowering agencies to avoid exercising statutory authority that they deem unconstitutional. To cite an example implicated by Axon, if an agency determines the two levels of statutory removal protection enjoyed by ALJs are (or may be) unconstitutional²³⁸—absent contrary provisions in its organic act—it can decide not to utilize ALJs in adjudications because the Administrative Procedure Act (“APA”) also permits agency heads or members of multi-headed agencies to preside over hearings.²³⁹ Thus, there is often no clear line between facial and as-applied challenges to statutes,²⁴⁰ and the latter category concerns matters that agencies can address by exercising statutory discretion.²⁴¹

Moreover, Congress often expressly gives agencies discretion not to implement statutes, which can conceivably allow agencies to decline implementation on constitutional grounds. For example, the Internal Revenue Code authorizes the IRS to enter into agreements and compromises concerning taxpayers’ liabilities without prohibiting it from doing so based on doubts about the constitutionality of a statute.²⁴² The America Invents Act likewise gives the U.S. Patent and Trademark Office (“USPTO”) absolute discretion to determine whether or not to act on a request to institute inter partes review proceedings that consider whether previously issued patents do not meet the statutory criteria for patentability.²⁴³ In litigation, the government has asserted that due to this provision, “if the [Agency] determined that the retroactive application of IPRs to pre-AIA patents was an unconstitutional taking, [it] could exercise its discretion to decline to institute the IPR.”²⁴⁴ Multiple statutes also permit agencies to “compromise, modify, or remit” statutory penalties,²⁴⁵ or require them to consider “such . . . matters as justice may require” when fixing the amount of a penalty.²⁴⁶ Such discretion may permit consideration of constitutional strictures like the prohibition on “excessive fines,”²⁴⁷ as at least one agency adjudicator has held.²⁴⁸ More broadly, the APA’s carve-out for matters “committed to agency discretion”²⁴⁹ preserves agencies’ prosecutorial discretion to decline to enforce laws for almost any reason,²⁵⁰ presumably including constitutional reasons.²⁵¹ Such statutory provisions allowing agencies to exercise discretion make it much less likely that an agency would have to directly confront true facial challenges to statutes, where the only relief it could grant would require disobeying a statutory imperative.

In addition, some statutes acknowledge, incentivize, or potentially even require agency efforts to comply with the Constitution, including nonenforcement of unconstitutional statutes. For example, Congress specifically provides for agencies to report any “formal or informal policy to refrain . . . from enforcing, applying, or administering any provision of any Federal statute . . . on the grounds that such provision is unconstitutional.”²⁵² And the Equal Access to Justice Act—which has been held to apply to litigation over a statute’s constitutionality—penalizes agencies that take unconstitutional action, including implementing unconstitutional statutes, by providing for fee shifting funded out of agency budgets in certain instances when the government loses the resulting litigation.²⁵³ Statutes that transfer adjudicative responsibility from district courts to agencies or create agencies that act solely as tribunals may also imply a congressional intent for these agencies to consider all legal issues that a court might adjudicate, including facial constitutional challenges to statutes.²⁵⁴ More broadly, APA adjudicative provisions requiring agencies to “determine” requests for “disqualification of a presiding . . . employee”²⁵⁵ and to address “all the material issues of . . . law . . . presented on the record”²⁵⁶ may imply a duty to pass on constitutional challenges, including those directed at the proceeding itself.²⁵⁷

c. Judicial Precedents

Some Supreme Court and federal appellate court rulings have implied or even expressly endorsed a power or duty in the executive branch, including agencies, to avoid unconstitutional applications of statutes or to decline to implement unconstitutional statutes altogether, including when agencies act in an adjudicatory capacity. The Supreme Court has noted that “[i]n the performance of assigned constitutional duties, each branch of the Government must . . . interpret the Constitution.”²⁵⁸ It has also indicated that agencies’ ability to decline to enforce laws by exercising prosecutorial discretion, which has historically been invoked on constitutional grounds,²⁵⁹ has constitutional underpinnings.²⁶⁰ Such reasoning suggests that agencies may forego enforcing unconstitutional statutes even without express statutory authority to decline enforcement. Moreover, although the Court has not directly addressed the implication of the oath of office for federal officers tasked with implementing unconstitutional statutes, it has held that this oath bars state officials from enforcing unconstitutional state laws.²⁶¹ And it has held that when promulgating regulations, agencies lack authority to construe ambiguous statutes in a constitutionally dubious manner,²⁶² implying that agencies must at least consider whether some applications of a statute are unconstitutional.

The Court has also refrained from expressing disapproval of executive branch decisions to disregard statutes on constitutional grounds. Myers v. United States,²⁶³ which upheld the President’s removal of a postmaster in defiance of a statute the Court declared unconstitutional,²⁶⁴ affirmed on these merits grounds a lower-court judgment that had fully (and, according to the Court, erroneously) dismissed a suit for backpay on timeliness grounds.²⁶⁵ If the executive branch’s disregard of the statute were invalid absent judicial sanction, the Court would have presumably ordered backpay through the date of its ruling instead of affirming the dismissal in toto. And when litigation resulted from executive branch noncompliance with statutes on constitutional grounds, the Court has not criticized the noncompliance, regardless of whether it ultimately ruled that the statute was unconstitutional²⁶⁶ or upheld the statute over the executive branch’s objection.²⁶⁷

The federal courts of appeals have also issued rulings indicating that agency officials may have discretion or a duty to avoid unconstitutional action, potentially even when it is authorized by statute. Some courts have indicated that mandamus may issue to enjoin agency officers from enforcing unconstitutional statutes,²⁶⁸ thus implying that these officers are subject to a “clear duty” to not enforce these statutes.²⁶⁹ The Tenth Circuit, adopting the reasoning of a concurring opinion by Justice Thomas, asserted that the executive branch may decline to give effect to an unconstitutional statute, explaining that “the President always had the legal power to [act] in a manner consistent with the Constitution” since, as the Court’s majority opinion in the same case explained, “an unconstitutional provision is never really part of the body of governing law.”²⁷⁰ An earlier D.C. Circuit panel opinion authored by then-Judge Kavanaugh expressly deemed such reasoning applicable to administrative agencies, asserting that “settled, bedrock principles of constitutional law” permit a “President [who] has a constitutional objection to a statutory mandate or prohibition [to] decline to follow the law unless and until a final Court order dictates otherwise.”²⁷¹ It added that “[t]hose basic constitutional principles apply to the President and subordinate executive agencies.”²⁷²

Some judicial opinions have also specifically indicated that agencies can or should consider constitutional issues when acting in an adjudicatory capacity. For example, in Thunder Basin, the Supreme Court refused to adopt a “mandatory” rule barring agencies from “[a]djudicati[ng] . . . the constitutionality of congressional enactments.”²⁷³ In a later case, the Court noted that an agency may “reconsider its policies, interpretations and regulations [construing its organic act] in light of” constitutional challenges to such guidance raised in administrative proceedings.²⁷⁴ Similarly, the Federal Circuit held that when an agency adjudicates liability under a statute it administers, it may resolve a claim that a defense to liability under an unrelated statute is unavailable because the other statute is unconstitutional, since rejecting the defense on constitutional grounds “does not require the agency to question its own statutory authority or to disregard any instructions Congress has given it.”²⁷⁵ Furthermore, the Sixth Circuit suggested in dicta that a claim by the Department of Labor’s Benefits Review Board to have “authority to decide . . . the constitutional validity of statutes” “should be unsurprising” because “[t]he executive branch has just as much of an obligation to comply with the Constitution when enforcing the law as the judicial branch does when interpreting it.”²⁷⁶ Elsewhere, it indicated “that administrative agencies may [not] look the other way when it comes to as-applied constitutional challenges and constitutional-avoidance arguments,” reasoning that an agency has an “ongoing duty to conform its behavior with our highest law” that is “re-enforced by the oath each executive officer must take to ‘to [sic] support this Constitution.’”²⁷⁷ Based on similar reasoning, the D.C. Circuit criticized the FCC’s refusal to consider a First Amendment challenge to how it applied the Communications Act of 1947 because, the Agency claimed, “Congress and the courts are more appropriate venues for reacting to the constitutional questions.”²⁷⁸ The court strongly disagreed, reasoning that

Federal officials . . . take a specific oath to support and defend [the Constitution]. To enforce a Commission-generated policy that the Commission itself believes is unconstitutional may well constitute a violation of that oath, but, in any event, the Commission must discharge its constitutional obligations by explicitly considering [the] claim . . . . [F]ailure to do so [is] the very paradigm of arbitrary and capricious administrative action.²⁷⁹

d. Historical Practice

Longstanding historical practice also indicates that agency officials may consider the constitutionality of both agency action and legislation when taking official action. As previously discussed, agencies have engaged with the Constitution since the Founding Era with regard to their own actions,²⁸⁰ and in some instances have taken or avoided taking official action based on a finding that a statute was unconstitutional.²⁸¹ Attorneys General and their subordinates have also advised agency officials not to rely on certain statutory authorities or comply with some statutes on constitutional grounds.²⁸² And several important constitutional court cases stemmed from a refusal by the President or agencies to implement or comply with legislation deemed unconstitutional, such as President Wilson’s refusal to comply with an act requiring Senate approval to remove officers and the State Department’s refusal to comply with a statute purporting to compel executive branch recognition of a foreign state’s territorial claim.²⁸³ Therefore, agency consideration of constitutional constraints on both administrative and legislative power when acting or refusing to act is hardly unprecedented.

3. Agencies’ Shared Responsibility with the President for Upholding the Constitution

Although recent decades have witnessed extensive debate over executive branch authority or responsibility to interpret the Constitution or to disregard unconstitutional statutes, almost all such commentary focuses on the President.²⁸⁴ But arguments for such presidential authority or responsibility should also apply to the President’s subordinates, including the officers who head administrative agencies. Their status as unelected appointees holding offices created by Congress, rather than an elected office created by the Constitution, does not compel a different result.

Both textualist and functionalist principles imply this result. The Constitution’s text directly requires agency heads to take an oath to uphold the Constitution²⁸⁵ as required of the President.²⁸⁶ But the Constitution requires only the President to “take Care that the Laws be faithfully executed.”²⁸⁷ Agency officials’ duty to execute statutes thus derives from the President’s own duty to do so.²⁸⁸ It therefore follows that if the President is not obligated or permitted to execute unconstitutional statutes, neither are they. From a functionalist perspective, because these officers are the President’s agents,²⁸⁹ if the President can or must decline to enforce unconstitutional laws, the same is true for these officers and the agencies they run,²⁹⁰ as at least one federal court of appeals has implied.²⁹¹

Although it might be argued that only a democratically elected President may refuse to implement laws enacted by a democratically elected Congress,²⁹² agency action is subjected to democratic accountability by virtue of the President’s appointment and removal powers.²⁹³ Thus, for example, opinions by Attorneys General, whom the President can appoint and remove, are attributed to the President,²⁹⁴ and similar attribution should apply to other agency heads’ constitutional decisions.²⁹⁵ In addition, democratic accountability is a dubious metric for assessing authority to pass on the constitutionality of congressional enactments in the first place, given that the least controversial claim to such power belongs to the judiciary, which self-identifies as the least democratically accountable branch.²⁹⁶

It might also be argued that because the offices of agency officials, unlike the presidency, are “established by Law,”²⁹⁷ “an administrative agency’s power . . . is limited to the authority delegated by Congress.”²⁹⁸ It might therefore be argued that absent congressional authorization, agencies cannot pass on the constitutionality of statutes²⁹⁹ and potentially other constitutional questions. However, even setting aside the possibility that Congress may have provided such authorization in the APA or other statutes,³⁰⁰ these arguments overlook limitations that the Constitution imposes on the offices that Congress creates, including the requirement that their occupants “shall be bound . . . to support this Constitution.”³⁰¹ Just as Congress cannot evade other constitutional provisions when establishing offices,³⁰² it cannot legislate around this oath or other provisions that render statutes unconstitutional and therefore preclude them from having legal effect.³⁰³ Agencies’ status as creatures of legislation should therefore not diminish their authority or duty to address constitutional issues.

III. Agency Resolution of Constitutional Claims Is Not Categorically Inferior

This Part challenges the common assumption that agency resolution of constitutional claims is generally inferior to court adjudication. It describes how agencies may grant meaningful relief on constitutional claims by exercising statutory or prosecutorial discretion or, potentially, by declining to give effect to laws they determine to be unconstitutional. Further, it explains why agencies may be especially well-suited, relative to courts, to determine whether they can grant such relief in the first place. It also explores doctrinal and practical limitations on court-awarded relief that often render it no better than—and in some cases inferior to—the relief agencies might grant on constitutional claims. In addition, this Part explains why agency rules that allow for immediate relief on threshold legal issues may adequately protect any asserted “right not to stand trial” in an allegedly unconstitutional administrative proceeding. Lastly, this Part demonstrates how many benefits of exhaustion—such as early correction of errors, prevention of piecemeal appeals and improper “sandbagging,” application of an agency’s specialized knowledge, and development of a record for judicial review—may apply when litigants first present constitutional claims to agencies.

A. Agencies Can Grant Meaningful Relief on Constitutional Claims

Courts often assert that agencies cannot award adequate relief on constitutional claims, primarily because agencies cannot “declare” statutes or other official acts unconstitutional³⁰⁴ or because delayed judicial review might not remedy the injury of having to participate in constitutionally flawed agency proceedings.³⁰⁵ As explained in Section II.B.1, supra, the focus on court-like declarations of unconstitutionality overlooks an agency’s ability to decide for itself whether to take or avoid taking action based on the same constitutional principles. By deciding to exercise authority in certain ways or not exercise it at all, agencies can provide relief similar to the relief granted by court orders requiring them to do so.³⁰⁶ In fact, courts that refuse to require exhaustion of constitutional claims based on categorical assertions of futility may short-circuit a process that might allow an agency to apply its familiarity with its own statutory powers and administrative processes to assess whether it can potentially provide adequate relief to litigants raising constitutional claims. Such relief is not categorically inferior to court-awarded relief, particularly given doctrinal and practical constraints on judicial remedies. Moreover, even claims that an agency’s structure or other aspects of the administrative process itself are constitutionally flawed can be adequately addressed under rules adopted by many agencies that allow for immediate consideration of, and redress on, threshold legal objections to agency proceedings.

1. Agencies Can Remedy Constitutional Violations

Many statutory schemes grant agencies leeway to apply the law in a manner that avoids alleged constitutional violations. Even in the absence of such express grants, agencies have prosecutorial discretion to decline to enforce statutes, presumably including statutes to which litigants object on constitutional grounds. In less common situations where agencies truly lack such flexibility, they may still be able to grant appropriate relief by not giving effect to an unconstitutional statute.

a. Statutory Mechanisms for Granting Administrative Relief on Constitutional Grounds

Statutes often grant agencies broad discretion, allowing them to address structural or purportedly facial challenges to statutes as as-applied challenges by changing whether and how they exercise statutory discretion.³⁰⁷ For example, although Appointments Clause challenges are often considered “structural,” in case of a flaw in an inferior officer’s appointment, a “head of department” whom Congress has authorized to (re)appoint the officer “ha[s] the power to fix this problem” in response to objections raised administratively³⁰⁸ as long as agency procedural rules do not impair the ability to exercise this authority in the adjudicatory context.³⁰⁹ Thus, nearly three years before the Supreme Court held in Lucia that an agency’s ALJs had to be appointed in accordance with the Clause,³¹⁰ the FTC responded to an administrative litigant’s argument that the presiding ALJ should have been appointed in accordance with the Clause, without awaiting judicial resolution of the issue, by ratifying the ALJ’s appointment in order to “put[] to rest any possible claim that this administrative proceeding violates the Appointments Clause.”³¹¹ And following Lucia’s holding that the remedy for a hearing conducted by an improperly appointed ALJ is remand to a different, properly appointed ALJ,³¹² DOJ advised agencies to reassign cases to properly appointed ALJs in response to timely objections at the administrative stage,³¹³ thereby providing the same remedy that a court would have ordered. Similarly, the APA permits agency heads or members of multi-headed agencies to conduct hearings in lieu of ALJs,³¹⁴ allowing agencies to address what may at first appear to be purely facial challenges to ALJs’ two layers of statutory removal protections³¹⁵ by reassigning proceedings to officers directly removable by the President.³¹⁶ For example, after the Fifth Circuit held that SEC ALJs are unconstitutionally shielded from removal,³¹⁷ the SEC preemptively began routinely assigning new administrative cases to itself rather than to ALJs,³¹⁸ even in matters that were not subject to review in that circuit³¹⁹ while it sought Supreme Court review of the Fifth Circuit’s ruling.³²⁰

Many statutes also give agencies that exercise enforcement authority discretion to choose whether to proceed administratively or in court.³²¹ If these agencies find merit in constitutional challenges to their administrative proceedings, such as the Axon petitioner’s challenges to ALJ removal protections and the combination of prosecutorial and adjudicative actions in one agency,³²² they can provide relief by abandoning these proceedings and refiling in court. They can also take such action even without deciding the constitutional question, simply because they wish to mitigate legal hazards.³²³ Thus, for example, the SEC started routinely bringing most of its enforcement actions in court rather than administratively once its administrative adjudications became the subject of increased constitutional scrutiny.³²⁴ In fact, commentators have recently proposed that agencies adopt rules making such relief automatic if a party requests it, in order to address structural constitutional objections to their proceedings.³²⁵

In addition, as previously noted, many statutes expressly give agencies discretion to elect not to enforce their provisions.³²⁶ For example, had the Clintwood Elkhorn respondent timely filed an administrative tax refund claim based on its Export Clause challenge to an excise tax,³²⁷ and had the IRS determined that the applicable statute was unconstitutional, the Agency could have agreed to issue a refund pursuant to open-ended resolution and compromise authority granted to it by the Internal Revenue Code.³²⁸ In fact, Treasury regulations specifically provide that “doubt as to liability” can be grounds for compromising tax liabilities without excluding doubt resulting from constitutional considerations.³²⁹

b. Use of Prosecutorial Discretion to Grant Administrative Relief on Constitutional Grounds

Even absent express statutory authorization not to apply a statute, agencies acting in an enforcement posture, as was the case in Axon, may be able to exercise prosecutorial discretion to decline enforcement on constitutional grounds. Agencies generally have broad discretion to not enforce laws for almost any reason,³³⁰ and routinely choose not to fully enforce laws, often on a large scale, for various reasons.³³¹ Significantly, the executive branch has historically considered doubts about a statute’s constitutionality to be grounds for exercising its discretion not to enforce the law.³³² For example, Thomas Jefferson instructed federal prosecutors not to enforce the Sedition Act, which he considered repugnant to the First Amendment.³³³ More recently, DOJ voluntarily dismissed charges—after a conviction was affirmed³³⁴—in the face of a sharply worded dissenting opinion asserting that application of the Federal Rules of Evidence to exclude exculpatory hearsay by witnesses deported by the government violated the Sixth Amendment.³³⁵

Prosecutorial discretion thus provides an additional mechanism for agencies to address constitutional claims. If respondents in agency enforcement proceedings raise constitutional objections, including facial objections to the statutory enforcement scheme, an agency that agrees can ordinarily exercise this discretion and dismiss the proceeding. For example, not long after losing in Axon, the SEC voluntarily dismissed all its enforcement proceedings “as a matter of discretion” after discovering a procedural irregularity.³³⁶ The FTC similarly dismissed the proceeding at issue in Axon, following the Supreme Court’s ruling, on the grounds that constitutional litigation in the courts was expected to last years and therefore its “limited agency resources” would be better used elsewhere.³³⁷ No legal impediment would have prevented these agencies from taking the same actions had they determined they could not constitutionally maintain these proceedings. In fact, after the Supreme Court held last year that the SEC cannot bring administrative penalty proceedings concerning securities fraud partly because they are analogous to common law fraud actions falling within the ambit of the Seventh Amendment,³³⁸ the SEC dismissed, without comment, multiple other administrative actions concerning other alleged misconduct not directly addressed by the Court’s ruling.³³⁹

Other agencies have exercised similar discretion to not enforce statutes while expressly citing constitutional grounds for doing so. For example, the IRS entirely stopped enforcing an excise tax statute because it had been held unconstitutional in a district court ruling, although the ruling only directly applied to seven taxpayers.³⁴⁰ And the FDA has indicated that it exercises “enforcement discretion” with respect to certain marketing claims that Congress charged it with regulating in order to avoid First Amendment violations.³⁴¹ By exercising prosecutorial discretion in this way, agencies can remedy (or prevent) alleged constitutional harms.

c. Refusal to Give Effect to Statutes on Constitutional Grounds

Given the broad statutory and prosecutorial discretion available to agencies, it is likely to be the exception—rather than the rule—that a constitutional challenge raised before an agency cannot be addressed by exercising such discretion. But in exceptional cases where it cannot, for the reasons given in Section II.B.2, supra, the agency may be able to simply decline to implement a statute it determines is unconstitutional. For example, the FMC declined to exercise jurisdiction—granted to it by statute—to adjudicate challenges to other agencies’ rules on the grounds that the statute violated the separation of powers.³⁴² The Commission explained that it acted pursuant to the principle that “the exercise of jurisdiction by any governmental body . . . is subject to limitations reflecting principles of . . . constitutional law,” while taking pains to emphasize that it was “not declaring [the statute] ‘unconstitutional.’”³⁴³ Similarly, when the IRS acquiesced to a district court ruling invalidating an excise tax statute,³⁴⁴ it not only exercised prosecutorial discretion by declining to enforce the provision against all taxpayers, but also agreed to treat voluntary payments made pursuant to the statute as overpayments of tax subject to refund with interest.³⁴⁵ Thus, without purporting to declare the statute unconstitutional, the IRS declined to give the statute any effect despite having only been judicially ordered not to apply the statute to seven taxpayers in a single district court ruling, which would not have been binding in other cases even before the same judge.³⁴⁶

2. Agencies May Have a Relative Advantage in Assessing Whether They Can Grant Relief on Constitutional Claims

When courts excuse exhaustion of constitutional claims based on categorical assumptions about an agency’s purported inability to grant relief, they may short-circuit a process that might have allowed the agency to apply institutional expertise to identify ways in which it could effectively address a constitutional claim. Agencies may be especially well-situated to make such assessments of whether statutes they routinely apply, or their own procedural rules, grant them discretion to avoid unconstitutional acts³⁴⁷ or if prosecutorial discretion can allow them to avoid enforcing a statute in a manner that would moot constitutional concerns.³⁴⁸ Such agency expertise at identifying potential remedies may be particularly helpful when litigants purport to raise facial challenges to statutes, given that the distinction between facial and as-applied challenges “is hazy at best and incoherent at worst.”³⁴⁹ Thus, as one court explained:

Before delving into any constitutional quandary, we usually give the Executive a chance to confirm that the relevant statutes and regulations apply to the petitioner in the way that he claims. Without doing so, the courts would have no idea how things would shake out. The agency might interpret those authorities differently. It might drop the enforcement action as a matter of informed discretion. Or it might deny relief.³⁵⁰

When courts instead decline to require exhaustion of constitutional claims based on presumptions that the agency could not provide relief, they may thereby deprive the agency of an opportunity to apply its expertise to the very question of whether it can effectively redress the claim.³⁵¹ Courts that mechanically refuse to subject broad classes of constitutional claims to exhaustion mandates may therefore prematurely forego the benefits of exhaustion in cases where the agency might have determined it can prevent or correct the alleged constitutional violation at an early stage and thereby avoid constitutional harm and unnecessary litigation.

3. Court-Awarded Relief Is Not Categorically Superior

When declining to require exhaustion of constitutional claims, courts often assert that the relief agencies might grant, such as dismissal of enforcement proceedings, is inferior to judicial relief, such as a declaratory judgment holding that a statute is unconstitutional.³⁵² Commentators have made similar claims.³⁵³ Such assertions disregard doctrinal limits on the courts’ ability and willingness to consider and grant relief on constitutional questions, as well as practical limits on the relative precedential value of many lower court decisions compared to the potential impact of an agency ruling.

Claims that agency-granted relief on constitutional claims is inferior often appear to implicitly or expressly rest on the potentially more limited impact of an agency’s constitutional exegesis compared to judicial declarations of “what the law is.” Such agency precedents potentially “control” only in those controversies falling within the agency’s jurisdiction. In contrast, although district court rulings are not binding precedent,³⁵⁴ they may have a broader impact. These opinions may be persuasive authority in subsequent cases, including cases involving different agencies. Conversely, the typical disparagement of constitutional adjudication by agencies makes it unlikely that an agency’s constitutional analysis would be similarly cited. And although the losing side in district court can file an appeal that might result in binding precedent, in the common scenario where an agency resolves a dispute solely between itself and another party—and does so in a way that moots the controversy—Article III standing requirements preclude appellate review that might turn the agency’s rationale into binding precedent.³⁵⁵ Courts have also historically issued nationwide injunctions barring implementation of statutes or other official action “not only against the plaintiff, but also against anyone,”³⁵⁶ which, unlike an agency’s voluntary decision to exercise self-restraint, could apply to multiple agencies and may be modified only by another court order.

However, various judicial doctrines tend to reduce the likelihood that courts will resolve a constitutional controversy by providing this type of broad declaratory or injunctive relief that an agency cannot. Courts avoid issuing constitutional rulings if they can grant relief on statutory grounds,³⁵⁷ which agencies routinely do. And due to the judicial preference for severing unconstitutional statutory provisions,³⁵⁸ courts may avoid resolving constitutional questions by determining that deciding the issue would not provide any relief to the challenger.³⁵⁹ Justiciability and prudential considerations also tend to limit courts’ readiness and ability to grant facial relief rather than as-applied relief comparable to what an agency itself could grant,³⁶⁰ or may preclude judicial relief altogether.³⁶¹

Consequently, there is no legal entitlement to broad judicial relief on a constitutional claim if a cognizable injury can be otherwise redressed, which undermines the assertion that agencies’ purported inability to issue court-like constitutional pronouncements renders administrative remedies inferior. As Judge Easterbrook explained when addressing arguments that presidential refusal to enforce unconstitutional statutes improperly precludes judicial resolution of constitutional questions: “Constitutional decisions are byproducts of real cases, not the raison d’étre of the judicial system. . . . If the political branches arrange their affairs so as to eliminate occasions for litigation, neither the courts nor the people have a complaint.”³⁶² The type of practical as-applied relief that agencies can grant may therefore be no less effective at remedying alleged constitutional harms than the relief a court would likely grant.

But even if the potential precedential value or breadth of court rulings mattered, it is unclear that agency adjudication would always be inferior. Although agency rulings are less likely to lead to judicial precedents impacting future court cases and other agencies,³⁶³ agencies typically have nationwide jurisdiction³⁶⁴ and must provide “reasoned explanation[s]” for departing from their precedents.³⁶⁵ In this respect, their precedents may provide greater certainty in future agency proceedings than district court rulings that do not bind even the same judge.³⁶⁶ In addition, because agencies are not subject to Article III constraints such as standing, they may be able to grant relief in response to constitutional claims by litigants who cannot seek relief in court because their claims are not justiciable.³⁶⁷

Moreover, when constitutional challenges implicate third-party rights, judicial declarations of unconstitutionality, even by appellate courts, may be of limited benefit vis-à-vis the immediate remedial action an agency can take, because they cannot ordinarily bind nonparties. For example, the challenge to ALJ removal protections in Axon potentially implicated ALJ tenure rights, since courts typically remedy an unconstitutional removal protection by severing it.³⁶⁸ But if the district court hearing this challenge had severed the statutory removal protections for the FTC’s ALJs, the ruling would have been close to meaningless even if affirmed on appeal. Specifically, if the FTC were to subsequently discharge an ALJ, any challenge to the dismissal would be heard by the MSPB³⁶⁹ and reviewed in the Federal Circuit,³⁷⁰ which would not be bound by a district court or regional circuit court ruling. In contrast, had the FTC considered the constitutional claim meritorious, or simply wanted to reduce the associated legal hazards, it could have chosen to conduct proceedings without the use of ALJs, as the APA allows it to do.³⁷¹ By doing so, the FTC would have immediately and conclusively spared the Axon petitioner from what the petitioner had described as the “constitutional injury” of being “subject[ed] to an . . . enforcement proceeding by an unaccountable ALJ.”³⁷²

4. Administrative Collateral Review Mechanisms Can Protect a “Right Not to Stand Trial”

A closer question arises from Axon’s analogy of structural constitutional claims to invocations of immunity doctrines implying a “‘right[] not to stand trial’ or face other legal processes,”³⁷³ which support immediate appeal under the collateral order doctrine from interlocutory district court orders “treated as ‘final’” on practical grounds.³⁷⁴ Thus, for example, a state claiming a district court wrongly denied dismissal based on Eleventh Amendment immunity need not litigate through to a merits ruling before seeking appellate review.³⁷⁵ It has a cognizable right not to proceed further in district court before appealing because “[t]he very object and purpose of the 11th Amendment were to prevent the indignity of subjecting a State to the coercive process of judicial tribunals,” and this right would be “effectively lost” if the state could not immediately appeal a refusal to dismiss.³⁷⁶ Axon similarly reasoned that litigating the merits before an agency alleged to lack constitutional authority to decide a controversy creates a “here-and-now” injury that delayed judicial review cannot fully remedy, implying a “right[] ‘not to stand trial’” that would be “effectively lost” if a litigant could seek judicial redress only after litigating the merits before the agency.³⁷⁷

This Section argues that, notwithstanding Axon’s reference to the collateral order doctrine, Axon does not categorically excuse exhaustion of structural and other constitutional claims asserting a “right not to stand trial” before an agency. Language in Axon itself casts doubt on whether the Court viewed its discussion as a holding recognizing an absolute right to immediate relief for structural constitutional claims. But even if there were such a right, it could be protected through procedural rules at many agencies, allowing for prompt resolution of threshold legal questions, together with the general practice by appellate courts of considering collateral order appeals from agency adjudications. Such a procedure may preserve many benefits of exhaustion without unduly impairing any “right not to stand trial.” The Axon Court did not confront, address, or reject this possibility because the government did not raise this argument and instead implied that no such procedure was available.

Preliminarily, it is unclear that Axon intended its reference to a “right not to stand trial” to be a holding that immediate review must be available for structural challenges to an administrative adjudication scheme, as it is for Eleventh Amendment claims and other recognized grounds for immediate appeal. Axon described this reasoning as merely a “nearer analogy” to such claims rather than deeming the case before it an identical situation, and added that “[n]othing we say today portends newfound enthusiasm for interlocutory review.”³⁷⁸ This language suggests that the Court did not intend to extend its existing collateral order jurisprudence, under which rejection of claims that adjudicators should be disqualified, a tribunal lacks jurisdiction, or a suit was brought in an improper forum are not immediately appealable.³⁷⁹ Moreover, the Court previously held that some structural violations, including removal restrictions like those in Axon alleged to be unconstitutional, do not necessarily deprive an agency of authority.³⁸⁰ They thus would presumably not support a claim to an absolute “right not to stand trial” before the agency. In fact, the Court had previously rejected an argument that exhaustion of a claim that Congress could not have constitutionally authorized an enforcement proceeding should not be required based on assertions that “the mere holding of the prescribed administrative hearing would result in irreparable damage.”³⁸¹ It is possible, given Axon’s qualifications concerning its collateral order analysis and this existing jurisprudence, that Axon simply intended for this consideration to bear some weight in what it characterized as a type of balancing test,³⁸² rather than recognizing an absolute “right not to stand trial” in an unconstitutionally structured administrative process.

But even if Axon somehow recognized such a right, this right can still be vindicated when litigants must first seek relief administratively. It is only necessary that the agency provide a means for conclusively resolving and granting relief on such collateral threshold questions before proceeding with merits litigation. Specifically, agency rules must permit dispositive motions practice, expressly authorize stays pending resolution of dispositive motions (or give presiding officers sufficient discretion over scheduling to permit them to postpone merits proceedings until resolution of these motions), and must either provide for initial consideration of collateral legal issues by an agency official able to immediately grant relief, or a procedure for interlocutory appeals to such an official.³⁸³ Many agencies that regularly conduct adjudications have adopted such rules, including the Department of Housing and Urban Development, the Department of Education, the Federal Deposit Insurance Corporation, and the FCC³⁸⁴ to name just four.

A litigant asserting a “right not to stand trial” before an agency with such rules can move for a ruling on the issue and a stay of proceedings pending a decision and, if an initial adjudicator denies relief in a proceeding with multiple levels of administrative review, request internal interlocutory review. In Eldridge, the Supreme Court indicated that the collateral order doctrine can apply to agency rulings that are final in a “practical” sense,³⁸⁵ and all circuits have permitted appeals of interlocutory agency rulings under the doctrine.³⁸⁶ So if an agency denies interlocutory review or a stay pending review of a constitutional challenge asserting a “right not to stand trial” before the agency, or conclusively rules against the litigant on the claim, thus requiring it to proceed on the merits, the litigant could potentially obtain an immediate judicial ruling on the constitutional claim.³⁸⁷ For example, the Puerto Rico Ports Authority was able to benefit from motion to dismiss, summary judgment, and stay proceedings authorized by agency rules to obtain a ruling on a threshold Eleventh Amendment objection to three FMC proceedings prior to litigating the merits,³⁸⁸ and after the FMC rejected its Eleventh Amendment argument, the Authority successfully appealed to the D.C. Circuit under the collateral order doctrine.³⁸⁹

Such a procedure would effectively protect any asserted “right not to stand trial,” notwithstanding the need to first object administratively to the agency’s exercise of authority. By analogy, the collateral order doctrine requires that a district court first refuse to dismiss in a “conclusive” order,³⁹⁰ and thus does not entitle litigants to avoid initially seeking dismissal from the very tribunal alleged to lack authority.

By potentially allowing for immediate consideration of a constitutional claim by both the agency and a court before other issues are resolved, this process may attenuate one benefit of exhaustion, which is the avoidance of piecemeal litigation.³⁹¹ However, other benefits of exhaustion may still apply. As explained in greater detail in Section III.B, infra, exhaustion also prevents improper “sandbagging” by litigants who object to an agency ruling on judicial review based on grounds that they failed to raise before the agency, and allows an agency to take early corrective action, apply its expertise to intertwined statutory or regulatory issues, or develop a record for judicial review. These benefits would still apply even if litigants could obtain immediate court review of an agency’s interlocutory ruling on a constitutional claim.

Axon does not foreclose the possibility that an administrative process can adequately protect any “right not to stand trial” in this manner, because the government did not make this argument in Axon and the Axon Court therefore did not address it. Although the FTC and SEC had adopted rules that authorize summary adjudication, stays, and interlocutory review by agency heads,³⁹² the government’s brief did not reference these rules when describing these Agencies’ administrative processes.³⁹³ Instead, the only administrative relief the government indicated was available would have required litigating the merits before these Agencies, which the government claimed could not provide relief on the constitutional claims, thereby forcing litigants to wait until judicial review of the agency’s merits ruling before seeking relief on the constitutional claims.³⁹⁴ In contrast, in Thunder Basin, the Court treated the availability of expedited review before the agency as a factor favoring the application of an implicit exhaustion mandate to a facial due process challenge to the statute establishing the administrative adjudication scheme.³⁹⁵ Axon therefore does not preclude the possibility that even structural constitutional claims implicating a “right not to stand trial” might be adequately addressed through administrative adjudication schemes that allow for immediate relief on such claims prior to any merits litigation.

B. The Benefits of Exhaustion Can Apply to Constitutional Claims

Because agencies can resolve constitutional controversies³⁹⁶ and offer meaningful relief on constitutional claims³⁹⁷—and are thus not a categorically inferior forum for resolving such claims—many of the justifications for exhaustion mandates can apply to these claims. In particular, exhaustion may allow agencies to take corrective action that avoids constitutional violations altogether, resolves controversies without court involvement, and prevents piecemeal litigation and improper “sandbagging” by litigants. Administrative exhaustion can also allow agencies to apply specialized knowledge to address statutory or regulatory issues intertwined with constitutional questions, and to create a helpful record for judicial review.

1. Resolving Controversies at an Early Stage

Courts recognize that exhaustion benefits agencies and courts by allowing agencies to take corrective action or otherwise resolve or narrow disputes before they reach the courts.³⁹⁸ As explained in Section III.A.1, supra, when litigants raise constitutional claims administratively, agencies have an opportunity to utilize various procedural avenues for taking remedial action, and may do so based either on a formal constitutional ruling or by simply taking action to moot the issue and avoid its associated legal hazards.³⁹⁹ By doing so, they may avoid constitutional violations in the first place or moot constitutional controversies at an early stage, thereby preventing or minimizing injury from any constitutional violation and avoiding the need to expend judicial and other resources on court litigation.

2. Avoiding Piecemeal Litigation and Improper “Sandbagging”

In the common scenario where litigants raise both constitutional and nonconstitutional claims or defenses,⁴⁰⁰ exhaustion mandates can help to prevent inefficient piecemeal litigation and improper “sandbagging” by litigants who seek relief on new grounds in court after losing before the agency.⁴⁰¹ Administrative, judicial, and party resources may be conserved if the constitutional claims are brought in the same administrative forum that will adjudicate the nonconstitutional issues. If parties could instead bring constitutional claims in court rather than raising them before the agency that will decide the merits, the court may ultimately determine that a nonconstitutional issue that the agency could have resolved moots the constitutional claim, particularly given the judicial preference for avoiding unnecessary constitutional adjudication.⁴⁰² As the Supreme Court explained when it required exhaustion of a challenge to wartime price control laws on both constitutional and statutory grounds,

the very fact that constitutional issues are put forward constitutes a strong reason for not allowing this suit either to anticipate or to take the place of the [Agency’s] final performance of its function. When that has been done, it is possible that nothing will be left of appellant’s claim, asserted both in that proceeding and in this cause, concerning which it will have basis for complaint.⁴⁰³

In addition, if issue exhaustion mandates do not apply to constitutional claims, litigants who try their luck before the agency and lose on nonconstitutional grounds can engage in abusive “sandbagging” by raising new constitutional objections for the first time on judicial review as grounds for vacating the agency’s ruling.⁴⁰⁴ They thereby deprive the agency of an opportunity to take timely corrective action that could avoid the need for a costly do-over.

The record in Smith v. Board of Governors of the Federal Reserve System,⁴⁰⁵ which the Tenth Circuit decided a few months after Axon, demonstrates the potential for abuse and waste when parties do not exhaust constitutional claims concurrently with nonconstitutional arguments. Smith concerned a Federal Reserve Board enforcement action that the Board had referred to an ALJ for adjudication.⁴⁰⁶ In subsequent administrative litigation spanning twenty-seven months,⁴⁰⁷ the ALJ resolved multiple discovery disputes, issued a partial summary adjudication ruling, held a five-day trial involving hundreds of exhibits, and authored a 107-page recommended decision.⁴⁰⁸ In addition, the Board considered a request for interlocutory appeal on a statutory question,⁴⁰⁹ and later issued its own detailed merits opinion barring two bank employees from the banking industry because it found they had misused their employing bank’s information for personal gain.⁴¹⁰

Only in their opening brief in the Tenth Circuit, more than two and a half years after the Board assigned the matter to the ALJ, did the employees—who did not challenge the merits of the agency’s ruling⁴¹¹—attack the constitutionality of the ALJ’s two layers of removal protection and demand a remand for new “proceedings before an adjudicator accountable to the President.”⁴¹² In their reply brief they also raised an Appointments Clause objection to the ALJ for the first time.⁴¹³ The agency argued that had the petitioners made their objection to ALJ removal protections during the administrative process, the agency heads, who are not subject to multiple layers of removal protection,⁴¹⁴ could have provided relief by adjudicating the matter themselves rather than utilizing an ALJ.⁴¹⁵ The court sua sponte reached a similar conclusion with respect to the Appointments Clause challenge, noting the availability of interlocutory review by the Board, which could have granted immediate relief by appointing a new ALJ.⁴¹⁶ The court consequently refused to consider the petitioners’ structural arguments on issue exhaustion grounds.⁴¹⁷ Had the court instead granted relief on the constitutional claims, a tremendous waste of resources might have resulted due to the employees’ failure to administratively object to alleged constitutional injuries that the agency could have fully redressed before proceeding on the merits.

3. Applying Specialized Knowledge on Intertwined Nonconstitutional Issues

A common justification for administrative exhaustion mandates is the ability of an agency to apply specialized knowledge.⁴¹⁸ In this regard, exhaustion of constitutional claims may be beneficial because even matters that may appear at first glance to be abstract constitutional questions may be intertwined with nonconstitutional issues to which an agency can apply its “experience and informed judgment.”⁴¹⁹ Such issues may determine whether a statutory or regulatory scheme raises a constitutional question in the first place, or whether an allegedly unconstitutional statutory provision is severable in a manner precluding relief or avoiding the need to address the constitutional claim. Courts that mechanically excuse exhaustion of constitutional claims that they assume have nothing to do with agency expertise may therefore short-circuit a process by which an agency with specialized knowledge may construe relevant statutes or regulations in a manner that facilitates the resolution of the constitutional claim.

Because some statutory or regulatory interpretation is often necessary to determine if a statutory or regulatory scheme raises constitutional concerns in the first place, an agency’s intimate familiarity with the statutes and regulations it administers⁴²⁰ may be highly relevant to the adjudication of a constitutional claim. In fact, the Supreme Court has held that resolving facial challenges to statutes requires consideration of “any limiting construction that a[n] . . . enforcement agency has proffered.”⁴²¹ And in Elgin, it specifically noted that when a “challenged statute [is] one that the [Agency] regularly construes, . . . its statutory interpretation could alleviate constitutional concerns.”⁴²² Consequently, the familiarity of agency personnel with the statutes their agency administers and the regulations it has promulgated may be relevant to adjudicating even seemingly “generic” structural challenges or facial challenges to these authorities.

For example, notwithstanding Carr’s assertion that the “Petitioners raise[d] constitutional claims about which SSA ALJs have no special expertise,”⁴²³ resolving their Appointments Clause challenge to these ALJs would have first required construing SSA regulations and thus potentially implicated the ALJs’ expertise. Specifically, determining whether an officer is subject to the Appointments Clause initially requires determining if that officer exercises “significant authority,”⁴²⁴ necessitating an assessment of exactly what authority the officer exercises. Lucia made this assessment with respect to SEC ALJs by referencing government-wide provisions of the APA generally governing the role of ALJs at agencies that conduct formal proceedings on the record,⁴²⁵ as well as related SEC regulations and administrative precedents.⁴²⁶ In contrast to these SEC proceedings, SSA ALJ hearings are informal proceedings governed by agency-specific regulations⁴²⁷ that give SSA ALJs somewhat different authority than the SEC ALJs whose status was at issue in Lucia.⁴²⁸ The SSA is presumed to have a “nuanced understanding” of such agency rules defining its adjudicators’ authority,⁴²⁹ and therefore arguably had specialized expertise relevant to addressing a threshold legal question vital to adjudicating the structural constitutional claim raised by the Carr petitioners.

Even when a statute challenged on constitutional grounds is not one that an agency is responsible for implementing, the statute’s interaction with another statute the agency administers may be relevant to whether a constitutional concern arises in a particular case. Two recent cases illustrate the potential relevance of such interactions even in the context of seemingly generic structural constitutional challenges to ALJ removal protections in government-wide federal civil service laws. In Smith, the petitioners claimed that these protections improperly sheltered Federal Reserve Board ALJs from presidential control.⁴³⁰ But the Board argued that the Federal Reserve Act exempts its employees from otherwise-applicable civil service laws, allowing it to remove ALJs at will,⁴³¹ and that its proceedings therefore did not raise a constitutional question at all.⁴³² Conversely, in Decker Coal Co. v. Pehringer,⁴³³ the Ninth Circuit sua sponte rejected a similar challenge to removal protections for Department of Labor ALJs, partly because it concluded that the Agency’s organic act did not require it to use ALJs and thus the executive branch could simply elect not to use tenure-protected adjudicators,⁴³⁴ which was an argument the Agency itself had not raised.⁴³⁵ But as a subsequent court that had the benefit of the Agency’s briefing on the issue explained, the statutory provision that Decker Coal cited had expired several decades earlier.⁴³⁶ A categorical rule that structural or other “generic” constitutional challenges need never be exhausted would overlook such statutory interactions that may affect the constitutional analysis, which agencies are well positioned to consider.

In addition, the judicial preference for severing unconstitutional statutory provisions⁴³⁷ necessitates analysis of the relevant statutory scheme, which helps to determine what relief may be available and can also provide a basis for avoiding constitutional questions altogether.⁴³⁸ This analysis determines if a statute challenged on constitutional grounds can (and was presumably intended to) function without the allegedly unconstitutional provision(s).⁴³⁹ It also addresses—where a constitutional violation results from “a number of statutory provisions that, working together, produce a constitutional violation”⁴⁴⁰—which provision(s) should be severed while doing the least damage to congressional intent.⁴⁴¹

This “elusive inquiry”⁴⁴² into what “Congress, faced with the limitations imposed by the Constitution, would have preferred”⁴⁴³ would appear to be precisely the type of complex statutory issue over which courts assume agencies that implement a statute (and may have even participated in its development) are likely to have specialized knowledge.⁴⁴⁴ Agencies’ institutional knowledge in this regard may be especially helpful given the self-proclaimed institutional limitations of “courts [that] are not well equipped to imaginatively reconstruct a prior Congress’s hypothetical intent” as to severance,⁴⁴⁵ with jurists often reaching conflicting conclusions. For example, in United States v. Arthrex, Inc.,⁴⁴⁶ the Supreme Court disagreed with the Federal Circuit on which of two statutory provisions to sever in order to remedy a constitutional violation caused by the interaction of two different acts of Congress. The Federal Circuit determined that a provision of the Patent and Trademark Office Efficiency Act making Administrative Patent Judges (“APJs”) subject to government-wide civil service removal protections⁴⁴⁷ should be severed.⁴⁴⁸ The Supreme Court instead held that a provision in the America Invents Act allowing APJs appointed by the Secretary of Commerce to render final decisions for the USPTO⁴⁴⁹ should be severed.⁴⁵⁰ The lack of judicial unanimity over which provision to sever suggests that the USPTO, which had sought the personnel reforms adopted by the Patent and Trademark Office Efficiency Act⁴⁵¹ and was consulted when Congress drafted the America Invents Act,⁴⁵² may have had unique and relevant specialized knowledge.⁴⁵³ Administrative exhaustion of constitutional claims gives agencies the opportunity to apply such institutional familiarity with nonconstitutional issues relevant to adjudication of constitutional claims.

4. Developing a Record for Review

The judicial assertion that exhaustion benefits courts by “produc[ing] a useful record for subsequent judicial consideration”⁴⁵⁴ also holds true for many constitutional claims, because factual issues may impact resolution of various constitutional issues, including structural or facial constitutional challenges. For example, an appellate court held that “administrative proceedings are a more suitable venue” for initially resolving a Spending Clause challenge to the Department of Education’s interpretation of a statute that allegedly compelled a state to expend its own funds.⁴⁵⁵ It reasoned that agency proceedings “will allow for fact-intensive inquiries related to educational finance, the agency’s area of expertise.”⁴⁵⁶

Structural claims, which courts often presume are “generally ill suited” for administrative resolution,⁴⁵⁷ may also present various factual questions that can potentially benefit from the development of a relevant record in proceedings before the agency. For example, relief for unconstitutional removal protections is available only to litigants who make a showing that “the unconstitutional removal provision inflicted harm.”⁴⁵⁸ Similarly, whether constitutionally unauthorized action was subsequently ratified is a “case-specific factual . . . question[].”⁴⁵⁹ Assessing compliance with the Appointments Clause often requires resolution of factual questions concerning the manner in which an inferior officer was appointed.⁴⁶⁰ And resolution of separation of powers claims may rest on inferences about the practical impact of challenged statutes on executive branch officials or the impact of these officials’ actions on regulated entities.⁴⁶¹ An agency may therefore be able to develop a record helpful to subsequent judicial resolution of structural disputes,⁴⁶² particularly since any factual inquiry is likely to focus on the agency’s own processes.⁴⁶³

Even facial challenges to statutes are often adjudicated based on scientific, economic, or other factual considerations,⁴⁶⁴ and resolution of various other constitutional issues often requires some factfinding.⁴⁶⁵ Thus, an early Supreme Court opinion concerning exhaustion of facial and as-applied constitutional claims expressed concern that absent exhaustion, “important and difficult constitutional issues would be decided devoid of factual context.”⁴⁶⁶ Allowing an agency with expertise or relevant experience to develop an appropriate record may therefore facilitate judicial review. It is thus hardly surprising that in Elgin, the Supreme Court reasoned that despite an agency’s refusal to render a decision on a facial constitutional challenge to a statute, its ability to create a record on the issue supported requiring exhaustion.⁴⁶⁷

IV. Determining Whether Constitutional Claims Must Be Exhausted

Given the lack of a binary dichotomy between courts that can effectively address constitutional claims and agencies supposedly unable to do so, courts should not mechanically relieve litigants bringing such claims from otherwise-applicable exhaustion mandates. Instead, courts should apply a standard administrative exhaustion analysis. They thus should give effect to any express statutory or regulatory exhaustion mandate that might apply to the claim, and otherwise balance the standard factors used to determine if an implied or prudential exhaustion mandate applies based on how effectively the applicable administrative scheme can address the particular claim at issue.⁴⁶⁸ As part of this process, courts would consider any impact the constitutional nature of a claim may have under the relevant statutory, regulatory, or jurisprudential criteria for requiring exhaustion. This framework would comport with holdings in cases like Axon, Carr, and Eldridge that involved a constitutional claim together with other compelling factors weighing against requiring exhaustion, without mechanically extending these holdings to other situations where the case for exhaustion is stronger. Instead, to the extent relevant to a standard exhaustion analysis, courts would consider an agency’s willingness and ability to address constitutional claims, and whether (1) its rules facilitate early resolution of threshold objections to the administrative process, (2) nonconstitutional issues to which it can apply specialized knowledge might impact on the constitutional controversy, and (3) it can create a useful record for judicial review.

A. Applicability of Express Exhaustion Mandates

Courts determine if any express statutory or regulatory exhaustion mandate applies using regular canons of construction before considering whether a prudential or implied exhaustion mandate should apply.⁴⁶⁹ If an expressly worded mandate applies to all claims, courts must apply it without regard to the constitutional nature of a claim. But if the mandate’s applicability depends on characteristics of the claim or administrative scheme, factors such as whether a claim arises under the Constitution, as well as an agency’s willingness or ability to grant relief on the claim, provide for immediate review of threshold legal questions, or develop an adequate record, may be relevant.

Some express exhaustion mandates, by their own terms, apply to all claims, including constitutional claims. For example, the statute at issue in Clintwood Elkhorn required taxpayers to administratively request a refund before suing, providing that absent such exhaustion, “[n]o suit . . . shall be maintained in any court for the recovery of any internal revenue tax alleged to have been erroneously or illegally assessed or collected.”⁴⁷⁰ The Court reasoned that because this provision is broadly worded,⁴⁷¹ it applies to suits seeking tax refunds “whatever the source of the cause of action”⁴⁷² and “plainly cover[ed]” a facial challenge to a tax statute based on the Export Clause.⁴⁷³ In such situations, where an express exhaustion mandate in a statute or regulation⁴⁷⁴ clearly applies to all claims and makes no exceptions, a court should proceed no further if the plaintiff has not exhausted a constitutional claim.⁴⁷⁵ The Sixth and Fourth Circuits therefore erred by relying on Axon and Carr, which did not involve an express exhaustion requirement, to excuse issue exhaustion of constitutional claims for which agency rules lacking any exceptions expressly required exhaustion.⁴⁷⁶

The applicability of some express exhaustion mandates or codified exceptions to such mandates varies based on characteristics of a claim or administrative scheme. The constitutional, facial, or collateral nature of a claim and whether an agency can effectively address the particular type of claim at issue may therefore affect such a mandate’s applicability. For example, McNary applied standard canons of construction to hold that a statute barring “judicial review of a determination respecting an application” absent exhaustion⁴⁷⁷ did not mandate exhaustion of a collateral facial constitutional challenge (or other facial objections) to agency procedures if the challenger did not seek “review ‘of a determination’” on a particular application.⁴⁷⁸ Similarly, the Supreme Court construed statutory language referencing claims concerning “any question of law or fact under any law administered by the [Agency]” as not encompassing claims that “arise under the Constitution” rather than under a statute administered by the agency.⁴⁷⁹ Accordingly, an exhaustion mandate phrased in such terms would not apply to constitutional claims.

The particular phrasing of other express exhaustion mandates may make an agency’s refusal or inability to consider or provide immediate relief on constitutional challenges, or to create a record facilitating meaningful judicial review, relevant to the mandate’s applicability. For example, for purposes of statutes or regulations requiring litigants to exhaust “available” remedies,⁴⁸⁰ no administrative remedy is “available” if responsible officials are “unable or consistently unwilling to provide any relief.”⁴⁸¹ An agency’s willingness to address constitutional challenges is therefore relevant to the applicability of such mandates to constitutional claims. Some agencies refuse to adjudicate facial constitutional challenges to statutes or other constitutional claims,⁴⁸² or have adopted procedural rules that do not provide access to decision-makers able to grant relief on some constitutional claims, as occurred in Carr.⁴⁸³ In these or comparable situations, a requirement to exhaust “available” remedies would not apply to constitutional claims on which the agency will not or cannot grant relief. But the Supreme Court has refused to adopt a “mandatory” rule barring agencies from considering even facial challenges to statutes,⁴⁸⁴ and some agencies have claimed authority to consider facial, structural, and other constitutional challenges.⁴⁸⁵ In such cases, an administrative remedy is “available,” and the applicable exhaustion mandate should apply. Moreover, even in court, litigants do not have an unqualified right to broad declarations of facial invalidity when more limited relief is adequate.⁴⁸⁶ An agency’s purported inability to “declare” statutes invalid therefore does not render administrative relief “unavailable,” nor does it make exhaustion “a pointless exercise”⁴⁸⁷ as long as the agency can grant other adequate relief, such as dismissal of an enforcement proceeding.

Similarly, if a constitutional claim implicates a cognizable “right not to stand trial” before the agency, administrative relief may not be “available” if agency rules do not permit immediate review of threshold legal questions before merits litigation. But if an agency offers such review, administrative remedies are “available,” and courts should therefore require exhaustion even when a party challenges the constitutionality of the administrative process itself.

In some situations, an exhaustion provision permits judicial review only of an agency’s “final decision,” as was the case with the statute at issue in Eldridge,⁴⁸⁸ whose holding suggests that lack of an avenue for immediate relief on constitutional (or other) collateral attacks on the administrative process may effectively make an otherwise-interlocutory agency decision into a “final decision” eligible for immediate judicial review under such a statute. In Eldridge, where the respondent claimed that termination of his federal disability benefits without a predeprivation hearing violated due process and caused immediate hardship,⁴⁸⁹ the Court deemed the termination itself to be a “final decision” because of the immediate burdens it imposed on the respondent pending any judicial review.⁴⁹⁰ Therefore, the Court did not require pursuit of post-termination administrative relief before suing.⁴⁹¹ With respect to such claims separate from the merits that challenge the administrative process itself and implicate a cognizable “right not to stand trial,” various agency actions may be “final” for purposes of an exhaustion mandate phrased in terms of finality if the agency does not provide an adequate mechanism for obtaining timely relief on the claim prior to the litigation of any merits issues.⁴⁹²

If an exhaustion mandate is not clearly worded, the general presumption that Congress prefers to subject agency action to meaningful judicial review favors constructions rendering the mandate inapplicable if delayed judicial review might be inadequate.⁴⁹³ This situation can arise if an adjudicatory scheme requires judicial review on an agency record but does not permit development of an adequate administrative record with respect to a constitutional claim. For example, in McNary, the applicable administrative scheme provided for only a limited record focused on individual merits rulings and therefore did not ensure an adequate record for a facial constitutional challenge to agency rules.⁴⁹⁴ Similarly, if a constitutional claim concerns a cognizable “right not to stand trial” that would be lost if parties must first litigate the merits in an administrative process that lacks a mechanism for immediate relief on threshold collateral issues,⁴⁹⁵ it may be appropriate to construe any statutory ambiguity against requiring exhaustion.

Lastly, where express exhaustion mandates incorporate exceptions for “extraordinary circumstances” or “reasonable grounds,”⁴⁹⁶ and such exceptions have been construed to encompass futility or undue burden considerations,⁴⁹⁷ an agency’s refusal to consider constitutional claims or lack of a procedural mechanism for obtaining immediate relief on a cognizable “right not to stand trial” may implicate the exception. In the absence of such shortcomings, however, these exhaustion mandates should apply to constitutional claims.

B. Applicability of Implied or Prudential Exhaustion Mandates

When no statute or regulation expressly requires exhaustion, courts may still read implied exhaustion mandates into statutes creating comprehensive administrative review schemes, or they may impose judge-made prudential exhaustion requirements. In assessing whether a statute implicitly requires exhaustion of remedies, courts apply the Thunder Basin factors, assessing whether delayed judicial review would be inadequate as well as whether a claim is “wholly collateral” to the statutory scheme and falls outside an agency’s competence and “expertise.”⁴⁹⁸ Similar considerations guide decisions on whether to require prudential exhaustion based on factors such as prejudice from delayed judicial review and an agency’s ability to apply special expertise when resolving a claim.⁴⁹⁹

In applying these tests to constitutional claims, certain characteristics of the claim or administrative scheme may be especially relevant to assessing whether an exhaustion requirement should be implied or imposed on prudential grounds—including (1) the agency’s willingness to grant relief on constitutional claims, (2) the potential relevance of statutory or regulatory questions within the agency’s expertise to resolving the controversy, (3) the ability to obtain immediate rulings on threshold legal questions implicating a cognizable “right not to stand trial,” and (4) the utility of an agency record for judicial review. Courts should consider the impact of these characteristics on the Thunder Basin factors used to determine if a statute implicitly requires exhaustion or on the factors relevant to determining whether to require prudential exhaustion. Because both tests are balancing tests,⁵⁰⁰ no single factor is necessarily dispositive. Additional factors unrelated to the constitutional nature of a claim may also be relevant to the analysis, such as whether an agency’s adjudicative process is efficient, whether extreme hardship could result from delayed judicial review, or, with respect to prudential issue exhaustion, whether the agency’s administrative processes are comparably adversarial to trial court proceedings.⁵⁰¹

An agency’s willingness to grant relief on constitutional claims is relevant to the implied exhaustion analysis under Thunder Basin because if the agency typically refuses to address constitutional issues in its administrative proceedings, such issues are likelier to be collateral to the relevant adjudication scheme and the agency is likelier to lack relevant “expertise.”⁵⁰² Similarly, futility and lack of agency expertise weigh against requiring prudential exhaustion.⁵⁰³ Thus, for example, Carr declined to require prudential issue exhaustion after considering factors such as agency guidance instructing adjudicators not to consider Appointments Clause challenges as well as procedural rules precluding direct participation in adjudications by an official able to remedy unconstitutional appointments.⁵⁰⁴

The relevance of nonconstitutional issues, on which an agency may have specialized knowledge, to resolving a constitutional claim or an entire controversy also favors requiring exhaustion under the Thunder Basin test or the prudential exhaustion jurisprudence. In some cases, a statutory or regulatory question may determine whether a constitutional controversy arises in the first place, and as Elgin recognized, when a “challenged statute [is] one that the [Agency] regularly construes, . . . its statutory interpretation could alleviate constitutional concerns.”⁵⁰⁵ Thus, the claim in Smith that Federal Reserve Board ALJs unconstitutionally enjoy two layers of removal protection under government-wide civil service laws might have been resolved by application of the “informed judgment”⁵⁰⁶ of the Board, which construes its organic act as making these laws inapplicable to its employees.⁵⁰⁷ In other cases, a question of statutory interpretation may bear on severability. For example, in the Arthrex litigation, the Supreme Court and Federal Circuit reached very different conclusions on whether an Appointments Clause violation affecting USPTO officials should be remedied by severing a provision in one of two different patent acts, suggesting that the USPTO, which administered and contributed to the development of both statutes, may have had relevant institutional knowledge.⁵⁰⁸ Elsewhere, the presence of both nonconstitutional and constitutional claims or defenses may allow a ruling on a nonconstitutional claim or defense to resolve a dispute without reaching the constitutional issue.⁵⁰⁹

These three types of nonconstitutional issues that can affect the resolution of controversies involving constitutional claims can mean that constitutional controversies are not “wholly collateral” or outside the agency’s “competence and expertise” under the Thunder Basin test for implied exhaustion mandates. Since a key consideration in a prudential exhaustion analysis is whether adjudication would benefit from an agency’s specialized knowledge,⁵¹⁰ the potential relevance of statutes or regulations administered by the agency to the resolution of a controversy involving constitutional claims would similarly favor requiring prudential exhaustion.

Some constitutional claims challenge the administrative process itself, and thus potentially implicate a “right not to stand trial,” as in Axon and Eldridge.⁵¹¹ In such cases, the ability to obtain timely administrative relief on threshold legal questions may bear on the adequacy of delayed judicial review, which is relevant to both a Thunder Basin and prudential exhaustion analysis.⁵¹² For example, in Axon, where the government asserted that the petitioner would have to first litigate the merits before the agency just to obtain judicial review of a claim that the agency was constitutionally barred from deciding these merits, the Court held that this factor weighed against requiring exhaustion.⁵¹³ Conversely, in Smith, the Tenth Circuit noted that the availability of interlocutory appeal to agency heads able to grant immediate relief on a structural constitutional claim supported requiring issue exhaustion.⁵¹⁴

Lastly, because factual issues are often relevant to resolution of even facial or structural constitutional claims,⁵¹⁵ whether a constitutional claim may raise factual issues on which the agency can develop a record for subsequent judicial review may be relevant to both the Thunder Basin collaterality factor⁵¹⁶ and to assessing the relative benefits of requiring prudential exhaustion.⁵¹⁷ And if resolving a constitutional claim may require factual development, an agency’s inability to create a relevant record may weigh against requiring exhaustion under either test if it precludes meaningful judicial review. For example, the Court in Elgin, applying Thunder Basin, held that a facial challenge to a statute was not “wholly collateral” to a statutory review scheme where the agency could develop a record relevant to subsequent judicial review, notwithstanding the agency’s own refusal to pass on the constitutionality of statutes.⁵¹⁸ Conversely, the Court in McNary held that because an administrative adjudication scheme lacked a mechanism for developing an adequate record for assessing facial challenges, requiring exhaustion of such challenges would preclude effective judicial review.⁵¹⁹ An agency’s ability or inability to develop a relevant record on constitutional claims is therefore among the factors relevant to the nuanced analysis necessary to determine if litigants must exhaust such claims.

Conclusion

Axon Enterprise, Inc. v. FTC and similar rulings declining to require administrative exhaustion of constitutional claims often use broad language that disparages agencies’ ability to address such claims, implying a stark dichotomy between courts that can effectively do so and agencies that cannot. The Supreme Court has never held outright that agencies cannot resolve constitutional challenges, but these cases’ broad language might imply that exhaustion of such claims is categorically futile and therefore should generally be excused.

The reality is far more nuanced. Agencies often have extensive experience comparable to many courts in addressing the constitutional issues most likely to arise in their proceedings. And even if agencies ostensibly cannot “declare” statutes or other official acts unconstitutional as can courts, they may still take measures to conform their actions, including administrative adjudications, to the Constitution. Constitutional, statutory, judicial, and historical authorities indicate that agencies can and should avoid taking unconstitutional action, whether by relying on their typically broad prosecutorial and statutory discretion or, in rare cases, by potentially declining to implement unconstitutional statutes. By doing so, agencies can often provide meaningful relief to parties raising constitutional claims that is not categorically inferior to court-awarded relief.

Moreover, although the issue was not presented to the Axon Court and therefore not addressed in its ruling, many agencies’ procedural rules allow for immediate rulings on threshold legal issues, and circuit courts of appeals generally allow immediate judicial review of agency rulings raising a cognizable claim of a “right not to stand trial” before the agency. When litigants raise a cognizable claim to a right not to litigate the merits before an agency based on a constitutional challenge to its structure or its administrative processes, requiring exhaustion would not result in a loss of this right if the agency has adopted such rules.

In addition, the benefits typically associated with exhaustion may apply to many constitutional claims. Agency consideration of these claims may prevent constitutional violations from occurring in the first place and obviate the need for court litigation. It can also prevent piecemeal litigation and improper “sandbagging” by opportunistic litigants when both nonconstitutional and constitutional claims are at issue. In addition, agencies may have relevant institutional knowledge of statutes or regulations bearing on whether a constitutional issue arises in the first place or whether allegedly unconstitutional provisions may be severed. And they may be able to develop a useful record for judicial review.

Thus, rather than the sharp divide that some judicial opinions paint between the respective ability of agencies and courts to address constitutional challenges in the first instance, a more nuanced span exists, depending on the specific claim and the relevant administrative scheme. Consequently, when assessing whether to require exhaustion of constitutional claims, courts should apply a traditional administrative exhaustion analysis, taking account of the constitutional nature of a claim only to the extent it impacts the standard factors that determine whether exhaustion is required.

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The Myth that Agency Adjudications Cannot Address Constitutional Claims

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