Collateral challenges to agency orders in enforcement
⚖️ Overview: What Are Collateral Challenges?
A collateral challenge is when a person or entity attacks the validity of an administrative agency’s order or regulation outside of the usual or direct review process, often during enforcement proceedings.
Instead of going through the administrative appeals process, the defendant might claim in court (typically during enforcement or penalty proceedings) that the agency’s order is unlawful, unconstitutional, or void.
🏛️ Key Legal Question:
Can a regulated party challenge an agency’s order during enforcement, rather than going through agency administrative appeals or statutory review?
✅ When Are Collateral Challenges Allowed?
Generally limited and disfavored, but may be allowed when:
The agency acted beyond its statutory authority.
The administrative process is inadequate or unavailable.
Constitutional rights are at stake.
There was no meaningful opportunity for judicial review.
The enforcement proceeding itself is the first time the order is being applied.
📚 Key Cases with Detailed Explanations
1. Thunder Basin Coal Co. v. Reich, 510 U.S. 200 (1994)
Issue: Can a mining company challenge an agency order in federal court without first exhausting administrative remedies under the Mine Act?
Facts:
Thunder Basin objected to a Mine Safety and Health Administration (MSHA) order requiring it to permit a union rep onsite.
Instead of following the statutory administrative process, Thunder Basin sued in federal district court.
Holding:
The Supreme Court ruled administrative remedies must be exhausted first.
Collateral challenge not allowed.
Court emphasized the comprehensive statutory review scheme.
Significance:
Set a precedent: if Congress intended exclusive review through agency procedures, collateral federal court suits are generally barred.
2. Free Enterprise Fund v. Public Company Accounting Oversight Board, 561 U.S. 477 (2010)
Issue: Could a party challenge the constitutionality of an agency’s structure before an enforcement action?
Facts:
Free Enterprise Fund challenged the structure of the PCAOB (created under Sarbanes-Oxley) as unconstitutional due to double-layered protection from removal.
No enforcement action was pending.
Holding:
The Court allowed the pre-enforcement challenge.
Said that waiting for an enforcement action would deny meaningful judicial review.
Significance:
Created a narrow path for collateral challenges, particularly when constitutional issues are involved and administrative processes offer no meaningful relief.
3. Sackett v. EPA, 566 U.S. 120 (2012)
Issue: Can property owners challenge an EPA compliance order without first waiting for enforcement?
Facts:
The Sacketts were told by the EPA to stop developing their land due to alleged Clean Water Act violations.
They wanted to challenge the EPA order in court before being fined.
Holding:
The Supreme Court allowed the immediate judicial review of the EPA compliance order.
Significance:
Recognized that agency orders with immediate legal consequences (like fines or restrictions) could be collaterally challenged, especially where no adequate administrative review exists.
4. Axon Enterprise, Inc. v. FTC, 598 U.S. 175 (2023)
Issue: Can a company challenge the constitutionality of the FTC’s structure before going through an agency enforcement proceeding?
Facts:
Axon, a body-camera maker, was under investigation by the FTC.
Axon sued in federal court, arguing the FTC’s structure was unconstitutional (removal protections, separation of powers issues).
Holding:
The Supreme Court ruled Axon could bring a collateral challenge directly in federal court.
Reasoning:
The Court applied the Thunder Basin factors:
Constitutional claims.
Outside agency expertise.
No meaningful opportunity for judicial review.
Significance:
Major decision that opened the door for certain constitutional collateral challenges, even before administrative proceedings are finished.
5. Commodity Futures Trading Commission (CFTC) v. Schor, 478 U.S. 833 (1986)
Issue: Can a party consent to adjudication by an agency, then collaterally challenge its authority?
Facts:
Schor agreed to have a dispute heard by the CFTC.
When he lost, he tried to collaterally challenge the agency’s authority to hear state-law counterclaims.
Holding:
The Court upheld the agency’s power, noting Schor had consented to agency adjudication.
Collateral challenge rejected.
Significance:
A party that participates in the administrative process cannot later collaterally challenge the agency’s authority after the fact.
6. City of Arlington v. FCC, 569 U.S. 290 (2013)
Issue: Can an agency determine the scope of its own jurisdiction, and can that be challenged collaterally?
Facts:
Cities challenged the FCC’s determination that it had jurisdiction to regulate wireless siting decisions.
Holding:
The Court held that courts must apply Chevron deference even to an agency’s interpretation of its own jurisdiction, as long as Congress has delegated authority.
Significance:
Made collateral challenges harder where Congress has granted broad rulemaking power, though the decision remains controversial.
🧩 Key Doctrines in Collateral Challenges
Exhaustion of Administrative Remedies:
You must usually go through the agency’s review process first.
Finality Doctrine:
Only final agency actions can usually be reviewed.
Thunder Basin Factors (from Thunder Basin v. Reich):
Courts use these to decide whether to allow a collateral challenge:
Does the claim fall outside the agency’s expertise?
Will the party suffer irreparable harm if not heard in court?
Is there meaningful judicial review available through administrative channels?
Constitutional Claims Exception:
Courts are more likely to allow constitutional challenges to be brought collaterally, especially when agencies cannot decide constitutional questions.
📌 Summary of When Collateral Challenges Are Likely to Be Allowed
| Situation | Collateral Challenge Likely? |
|---|---|
| Claim is constitutional in nature | ✅ Yes |
| No meaningful review available in agency process | ✅ Yes |
| Challenge occurs after enforcement has begun | ⚠️ Maybe |
| Challenge concerns agency expertise | ❌ No |
| Challenge is statutory, not constitutional | ❌ Rarely |
| Party has already participated in the process | ❌ Usually barred |
🧠 Conclusion
Collateral challenges are an important way to check agency power but are limited in scope.
Courts balance the need for efficient administrative processes with the need to protect constitutional rights and due process.
The Supreme Court has clarified in recent cases like Axon and Sackett that when the administrative process is structurally flawed or constitutionally deficient, courts can and will allow early and independent judicial review.
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