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In the past couple years, the Federal Trade Commission has gone
0 for 2 before the Supreme Court. In AMG, the Court found that Section
13(b) of the FTC Act does not provide the Commission with the
authority to obtain equitable monetary relief. Last month,
in Axon, the Court held that parties need
not wait until the conclusion of administrative proceedings before
challenging the constitutionality of the FTC’s structure, but
may bring their complaints to district courts. Given this recent
track record, the Commission probably wasn’t thrilled to find
itself before the Fifth Circuit, defending against constitutional
challenges raised by Traffic Jam Events, and its owner, David
Jeansonne.

The Fifth Circuit is probably not the venue administrative
agencies would choose to hear these issues, having recently handed
down decisions in Jarkesy (vacating a SEC
administrative order on the ground that it was unconstitutional
because: the petitioners were deprived of the right to a jury trial
where the agency sought penalties; the congressional delegation of
power permitting the SEC to determine whether it brought cases
administratively or in district court was unintelligible; and the
ALJ’s removal restrictions were unconstitutional) and Community Financial Services Association of
America
(finding the funding structure of the CFPB
unconstitutional). But, nonetheless, on May 3, 2023, a three-judge
panel of the Fifth Circuit heard oral argument in Traffic
Jam Events LLC v. FTC
.

The road to the Fifth Circuit was circuitous, and began in June
2020, when the FTC filed a complaint in the U.S. District Court for
the Eastern District of Louisiana against the marketing services
company and its owner. Traffic Jam specialized in providing
marketing materials for auto dealerships. The complaint alleged
that the company misled consumers by sending deceptive mailings
suggesting that the company was affiliated with a government
COVID-19 stimulus program, and indicated that consumers had won
specific, valuable prizes that they could collect once they visited
car dealership. The District Court denied the FTC’s Motion for
a Temporary Restraining Order.

Subsequently, in August 2020, the FTC filed an administrative
complaint mirroring the prior federal court complaint. Traffic Jam
challenged the filing on the grounds that the injunctive order was
not based on substantial evidence, that the alleged acts or
practices did not involve interstate commerce, that it was not a
creditor subject to the Truth in Lending Act, and finally, that the
Commission lacked substantial evidence to hold Jeansonne
individually liable. Traffic Jam lost before the Commission on
summary decision, and the Commission entered an order that, among
other things, banned Traffic Jam and Jeansonne from virtually all
commercial activity pertaining to the auto industry.

Traffic Jam then appealed to the Fifth Circuit, challenging the
constitutionality of the FTC’s entire administrative process,
as well as the validity of the broad-sweeping injunctive order.
Traffic Jam argued that the FTC’s administrative process denied
petitioners their due process rights. In addition, Traffic Jam
alleged that the ALJ and Commissioners enjoy unconstitutional
removal protections (i.e., they can only be removed for cause).
Finally, in the wake of Jarkesy, Traffic Jam argued
that the order’s ban on allowing the company or Jeansonne to
operate in the auto industry was akin to the issuance of a civil
penalty and, therefore, the administrative process deprived them of
their Seventh Amendment right to a jury trial.

The oral argument focused on whether Traffic Jam had waived
these constitutional challenges, as well as its challenge to the
order, by failing to raise them below in the administrative
proceeding. The panel was relatively quiet, and its limited
questions to Traffic Jam primarily focused on whether they even had
jurisdiction over such claims.

Although there’s always some danger in making predictions
based on oral arguments, the judges did not seem particularly keen
to use this case to further weaken the FTC. While the FTC may
prevail in this matter, the case itself is just the latest in a
long (and growing) chain of cases challenging the authority of
administrative agencies writ large. We’ve written about the
recent judicial chipping away at what some call the administrative
state here
here
, and here. We’ll continue to watch this case
closely and post updates here.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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