`
`
`
`Pamela B. Petersen
`Arizona Bar No. 011512
`Axon Enterprise, Inc.
`17800 N. 85th Street
`Scottsdale, AZ 85255-9603
`Telephone: (623) 326-6016
`Facsimile: (480) 905-2027
`ppetersen@axon.com
`Secondary: legal@axon.com
`
`Garret G. Rasmussen
`Antony P. Kim
`Jonathan A. Direnfeld
`Thomas Fu
`Orrick, Herrington & Sutcliffe LLP
`1152 Fifteenth Street N.W.
`Washington D.C. 20005
`Telephone: (202) 339-8400
`Facsimile: (202) 339-8500
`grasmussen@orrick.com
`akim@orrick.com
`jdirenfeld@orrick.com
`tfu@orrick.com
`
`Attorneys for Plaintiff Axon Enterprise, Inc.
`
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF ARIZONA
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`
`
`
`Axon Enterprise, Inc.,
`
`
`
`
`
`Plaintiff,
`v.
`
`
`
`Federal Trade Commission, et al.,
`
`
`
`
`
`Defendants.
`
`
`
`
`
`
`No. 2:20-cv-00014-PHX-DWL
`
`
`PLAINTIFF’S MOTION FOR
`PRELIMINARY INJUNTION
`AND SUPPORTING
`MEMORANDUM OF POINTS
`AND AUTHORITIES
`
`(Oral Argument Requested)
`
`
`
`
`
`
`
`
`
`Case 2:20-cv-00014-DWL Document 15 Filed 01/09/20 Page 2 of 24
`
`
`
`TABLE OF CONTENTS
`
`II.
`
`INTRODUCTION ......................................................................................................................................... 1
`ARGUMENT ................................................................................................................................................... 3
`I.
`THIS COURT HAS JURISDICTION TO HEAR AXON’S CONSTITUTIONAL
`CLAIMS. .............................................................................................................................................. 3
`THIS COURT SHOULD ISSUE A PRELIMINARY INJUNCTION. .................................. 6
`A.
`Axon Is Likely to Prevail on Count I—Its Fifth Amendment Due Process
`and Equal Protection Claims. .................................................................................. 6
`1.
`The FTC’s Internal Administrative Process Violates the Due Process
`Clause. ........................................................................................................ 6
`The FTC’s Structure and Procedural Rules Violate the Equal
`Protection Clause. ....................................................................................... 9
`Axon Is Likely to Prevail on Count II—Its Article II Claim. ................................. 12
`Axon Has Suffered and Will Continue to Suffer Irreparable Harm. ....................... 15
`Deprivation of Constitutional Rights. ........................................................ 15
`1.
`Impossibility of Monetary Recovery. ......................................................... 16
`2.
`The Balance of Equities Favor Axon. .................................................................... 16
`D.
`The Public Interest Favors Issuing a Preliminary Injunction. ................................. 17
`E.
`RELIEF REQUESTED ............................................................................................................................... 17
`
`
`
`2.
`
`B.
`C.
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`
`
`i
`
`
`
`Case 2:20-cv-00014-DWL Document 15 Filed 01/09/20 Page 3 of 24
`
`
`
`Cases
`
`TABLE OF AUTHORITIES
`
`American-Arab Anti-Discrimination Comm. v. Reno, 70 F.3d 1045 (9th Cir. 1995) ........................ 19
`
`Amos Treat & Co. v. SEC, 306 F.2d 260 (D.C. Cir. 1962) ............................................................. 18
`
`Baldwin v. Hale, 1 Wall. 223 (1864) ...................................................................................................... 8
`
`Bell v. Hood, 327 U.S. 678 (1946) ......................................................................................................... 3
`
`Citicorp Servs., Inc. v. Gillespie, 712 F. Supp. 749 (N.D. Cal. 1989) ................................................. 18
`
`City of Cleburne, Tex. v. Cleburne Living Center, 473 U.S. 432 (1985) ............................................... 11
`
`Cochran v. SEC, No. 19-10396 (5th Cir. Sept. 24, 2019) ................................................................ 18
`
`Correctional Servs. Corp. v. Malesko, 534 U.S. 61 (2001) ...................................................................... 3
`
`El Rescate Legal Servs., Inc. v. Exec. Office of Immigration Review, 959 F.2d 742 (9th Cir. 1991) ...... 7
`
`Ezell v. City of Chicago, 651 F.3d 684 (7th Cir. 2011) ................................................................... 2, 18
`
`Feinerman v. Bernardi, 558 F. Supp. 2d 36 (D.D.C. 2008) ............................................................... 19
`
`Free Enterprise Fund v. Pub. Co. Accounting Oversight Bd., 561 U.S. 477 (2010) ........................ passim
`
`FTC v. Cinderella Career & Finishing Schs., 404 F.2d 1308 (D.C. Cir. 1968) ................................... 9
`
`Goldie’s Bookstore, Inc. v. Superior Court, 739 F.2d 466 (9th Cir. 1984) ....................................... 2, 18
`
`Grolier Inc. v. FTC, 615 F.2d 1215 (9th Cir. 1980) .......................................................................... 10
`
`Hamdi v. Rumsfeld, 542 U.S. 507 (2004) .............................................................................................. 8
`
`Hosp. Corp. of America v. FTC, 807 F.2d 1381 (7th Cir. 1986) ....................................................... 14
`
`Howard v. FAA, 17 F.3d 1213 (9th Cir. 1994) .................................................................................. 4
`
`Humphrey’s Executor v. United States, 295 U.S. 602 (1935) ......................................................... 15, 16
`
`Jones Bros., Inc. v. Sec’y of Labor, 898 F.3d 669 (6th Cir. 2018) .......................................................... 4
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`
`
`ii
`
`
`
`Case 2:20-cv-00014-DWL Document 15 Filed 01/09/20 Page 4 of 24
`
`
`
`Kennecott Copper Corp. v. FTC, 467 F.2d 67 (10th Cir. 1972) ............................................................ 9
`
`McNary v. Haitian Refugee Center, Inc., 498 U.S. 479 (1991) .............................................................. 6
`
`Morrison v. Olson, 487 U.S. 654 (1988) ............................................................................................... 16
`
`Myers v. United States, 272 U.S. 52 (1926) ...................................................................................... 2, 15
`
`New Orleans Pub. Serv., Inc. v. New Orleans, 491 U.S. 350 (1989) ...................................................... 7
`
`PPH Corp. v. Consumer Financial Protection Bureau, 881 F.3d 75 (D.C. Cir. 2018) ........................... 17
`
`Printz v. United States, 521 U.S. 898 (1997) ......................................................................................... 15
`
`Rodriguez v. Robbins, 715 F.3d 1127 (9th Cir. 2013) .......................................................................... 3
`
`Sioux City Bridge Co. v. Dakota Cty., Neb., 260 U.S. 441 (1923) ..................................................... 11
`
`Szonyi v. Barr, 942 F.3d 874 (9th Cir. 2019) ....................................................................................... 7
`
`Telecommunication’s Research & Action Center v. FCC, 750 F.2d 70 (D.C. Cir. 1984) .................. 5, 7
`
`Time Warner Entertainment Co., L.P. v. FCC, 93 F.3d 957 (D.C. Cir. 1996) ................................... 5
`
`United Church of the Med. Ctr. v. Med. Ctr. Comm’n, 689 F.2d 693 (7th Cir. 1982) ....................... 19
`
`United States v. Baker Hughes, Inc., 908 F.2d 981 (D.C. Cir. 1990) ........................................... 12, 14
`
`United States v. New York, 708 F.2d 92 (2d Cir. 1983) .................................................................... 20
`
`Valley v. Rapides Parish Sch. Bd., 118 F.3d 1047 (5th Cir. 1997) ..................................................... 19
`
`Williams v. Pennsylvania, 136 S. Ct. 1899 (2016) ................................................................................. 8
`
`Willowbrook v. Olech, 528 U.S. 562 (2000) ......................................................................................... 11
`
`Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7 (2008) ................................................... 7
`
`Withrow v. Larkin, 421 U.S. 35 (1975) ............................................................................................. 8, 9
`
`Zobel v. Williams, 457 U.S. 55 (1982) ................................................................................................. 11
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`
`
`iii
`
`
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`Case 2:20-cv-00014-DWL Document 15 Filed 01/09/20 Page 5 of 24
`
`
`
`Statutes
`
`15 U.S.C. § 18 ....................................................................................................................................... 10
`
`15 U.S.C. § 25 ................................................................................................................................. 10, 11
`
`15 U.S.C. § 41 ....................................................................................................................................... 13
`
`15 U.S.C. § 45(b) ............................................................................................................................ 10, 11
`
`15 U.S.C. § 45(c) .............................................................................................................................. 4, 11
`
`15 U.S.C. § 45(n) .................................................................................................................................. 10
`
`15 U.S.C. §§ 41-42 ................................................................................................................................. 2
`
`15 U.S.C. §§ 41-58 ................................................................................................................................. 3
`
`28 U.S.C. § 1291 .................................................................................................................................. 11
`
`28 U.S.C. § 1331 .................................................................................................................................... 3
`
`28 U.S.C. § 2680 .................................................................................................................................. 16
`
`5 U.S.C. § 1202(d) ................................................................................................................................ 14
`
`5 U.S.C. § 702 ....................................................................................................................................... 16
`
`5 U.S.C. § 7521(a), (b)(1) .................................................................................................................... 14
`
`Rules
`
`Fed. R. App. P. 3(a)(1) ........................................................................................................................ 11
`
`Fed. R. Civ. P. 52(a) ............................................................................................................................ 12
`
`Regulations
`
`16 C.F.R. § 3.1 ...................................................................................................................................... 11
`
`16 C.F.R. § 3.54 .................................................................................................................................... 11
`
`16 C.F.R. § 3.54(b)............................................................................................................................... 11
`
`
`
`iv
`
`
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`Case 2:20-cv-00014-DWL Document 15 Filed 01/09/20 Page 6 of 24
`
`
`
`16 C.F.R. §§ 3.42, 3.54 ........................................................................................................................ 10
`
`Constitutional Provisions
`
`Art. II, § 1, cl. 1 ...................................................................................................................................... 2
`
`Art. II, § 3 ............................................................................................................................................... 2
`
`U.S. CONST. amend V ........................................................................................................................ 8
`
` Other Authorities
`
`Brief of Solicitor General filed in Selia Law LLC v. Consumer Financial Protection bureau, U.S.
`
`Supreme Court No. 19-7 ................................................................................................. 16, 17
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`v
`
`
`
`Case 2:20-cv-00014-DWL Document 15 Filed 01/09/20 Page 7 of 24
`
`
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`INTRODUCTION
`
`Axon respectfully moves this Court to issue an order preliminarily enjoining the
`
`administrative hearing commenced at the Federal Trade Commission (“FTC”) which seeks
`
`to subject Axon to an unconstitutional process and forum, in violation of its Due Process
`
`and Equal Protection rights and Article II of the U.S. Constitution.
`
`Count I of the Complaint alleges that the FTC Act is facially unconstitutional. The
`
`statute violates the Due Process Clause by authorizing an administrative hearing process in
`
`which the FTC simultaneously acts as prosecutor,
`
`judge, and
`
`jury. The FTC’s
`
`Commissioners vote out a complaint that is prosecuted by FTC lawyers before an
`
`Administrative Law Judge (“ALJ”) on the FTC’s payroll, who renders a decision that is
`
`appealable back to the FTC’s Commissioners on a de novo basis. This has resulted in assured
`
`defeat for respondents like Axon. In the words of a former FTC Commissioner, the FTC
`
`enjoys a “100 percent success rate,” which is a “strong sign” of an “unhealthy and biased
`
`institutional process.” See Ex. 1A at 6.
`
`Moreover, the FTC Act violates the Equal Protection Clause by irrationally depriving
`
`a merging party subject to FTC proceedings of the structural and procedural protections it
`
`would possess in a challenge brought by the U.S. Department of Justice’s Antitrust Division
`
`(“DOJ”). As several studies have made clear, the practical effect of that differential treatment
`
`is massive: for over two decades, the FTC found liability in 100% of its proceedings, while
`
`the DOJ won closer to 50% of its federal court cases. Id. That kind of outcome-
`
`determinative arbitrariness—where the result hinges on whether the merging party happens
`
`to draw the FTC as its federal regulator through a black-box process known as
`
`“clearance”—is the antithesis of a rational basis.
`
`
`
` 1
`
`
`
`
`
`Case 2:20-cv-00014-DWL Document 15 Filed 01/09/20 Page 8 of 24
`
`
`
`Count II alleges further facial infirmities because the FTC Act vests the agency with
`
`law-enforcement authority but renders its Commissioners and ALJs unaccountable to the
`
`President by prohibiting him from removing them at will—an unconstitutional dual-layer of
`
`protection. The Constitution vests all “executive Power” in the President, Art. II, § 1, cl. 1,
`
`and charges the President alone with “tak[ing] Care that the Laws be faithfully executed,”
`
`Art. II, § 3. “[E]ssential to the execution of the laws by” the President is “his power of
`
`removing those for whom he cannot continue to be responsible.” Myers v. United States, 272
`
`U.S. 52, 117 (1926). The FTC Act, however, strips the President of that power and hence
`
`violates Article II. 15 U.S.C. §§ 41-42.
`
`
`
`Where constitutional rights are at issue, “irreparable harm is presumed,” and “‘no
`
`further showing of irreparable injury is necessary.’” Ezell v. City of Chicago, 651 F.3d 684, 699
`
`(7th Cir. 2011) (quoting 11A Wright & Miller, Federal Practice & Proc. § 2948.1 (2d ed.
`
`1995)); accord Goldie’s Bookstore, Inc. v. Superior Court, 739 F.2d 466, 472 (9th Cir. 1984). An
`
`injunction here presents no material prejudice to the FTC, which has chosen to spend 18
`
`months investigating an Axon/Vievu merger before rushing to file an administrative
`
`complaint after Axon first filed in this Court.1 Moreover, the vindication of constitutional
`
`rights is plainly in the public interest. Rodriguez v. Robbins, 715 F.3d 1127, 1146 (9th Cir.
`
`2013).
`
`
`
`
`1 Axon filed its Complaint early Friday morning, January 3, 2020, and emailed courtesy
`copies to the FTC Chairman and the Director of the FTC’s Bureau of Competition. After
`hours that same evening, FTC Staff notified Axon’s outside counsel that it had issued a
`Part 3 administrative proceeding complaint.
`
`
`
` 2
`
`
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`
`
`Case 2:20-cv-00014-DWL Document 15 Filed 01/09/20 Page 9 of 24
`
`
`
`I.
`
`ARGUMENT
`
`JURISDICTION TO HEAR
`COURT HAS
`THIS
`CONSTITUTIONAL CLAIMS.
`
`AXON’S
`
`This Court has “original jurisdiction of all civil actions arising under the Constitution,
`
`laws, or treaties of the United States.” 28 U.S.C. § 1331. Encompassed in that authority is the
`
`power to issue injunctions to prevent unconstitutional acts. See Free Enterprise Fund v. Pub. Co.
`
`Accounting Oversight Bd., 561 U.S. 477, 491 n.2 (2010). Indeed, equitable relief “has long been
`
`recognized as the proper means for preventing entities from acting unconstitutionally.”
`
`Correctional Servs. Corp. v. Malesko, 534 U.S. 61, 74 (2001); see also Bell v. Hood, 327 U.S. 678,
`
`684 (1946) (“[I]t is established practice for this Court to sustain the jurisdiction of federal
`
`courts to issue injunctions to protect rights safeguarded by the Constitution”). This Court
`
`thus possesses jurisdiction over Axon’s constitutional claims, unless the FTC Act contains
`
`“discernable intent” to divest it of jurisdiction by requiring such claims to be submitted to
`
`the agency first, then appealed to a circuit court. See Free Enter., 561 U.S. at 489. The FTC
`
`Act, 15 U.S.C. §§ 41-58, contains no indication that Congress intended any such thing.
`
`Under the three-part test enunciated in Free Enterprise, there is no indication that
`
`Axon’s claims are of a “type [that] Congress intended to be reviewed [solely] within [the
`
`FTC’s] statutory scheme.” 561 U.S. at 489. First, Axon cannot “meaningfully pursue [its]
`
`constitutional claims” outside this Court. Id. at 490. As an initial matter, the agency has no
`
`statutory or regulatory authority to adjudicate or remedy constitutional violations. The FTC
`
`Act authorizes the FTC, in relevant part, to investigate and enforce federal antitrust and
`
`consumer protection laws. 15 U.S.C. §§ 41-58. Nothing more. “[L]ike all administrative
`
`agencies,” the FTC has “no authority to entertain a facial constitutional challenge.” See Jones
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`
`
` 3
`
`
`
`
`
`Case 2:20-cv-00014-DWL Document 15 Filed 01/09/20 Page 10 of 24
`
`
`
`Bros., Inc. v. Sec’y of Labor, 898 F.3d 669, 673 (6th Cir. 2018); see also Howard v. FAA, 17 F.3d
`
`1213, 1218 (9th Cir. 1994) (challenges to constitutionality of agency regulations lie “outside
`
`the cognizance” of the administrative agency). That is especially true of the constitutional
`
`challenges brought here. Axon’s challenges arise, in large part, from the FTC Act itself. And
`
`the FTC, as an executive agency, has no power to unilaterally amend the statute. Axon
`
`therefore cannot meaningfully pursue its constitutional claims in an FTC administrative
`
`proceeding.
`
`Nor is there a judicially reviewable agency order that provides a meaningful
`
`opportunity to pursue constitutional claims outside of this Court. The FTC Act provides
`
`“only for judicial review of [a cease and desist order].” Free Enter., 561 U.S. at 490; see 15
`
`U.S.C. § 45(c).2 Axon’s Complaint makes clear that it objects to the agency’s structure and
`
`procedures as facially unconstitutional, not a specific action taken by it. Free Enter., 561 U.S.
`
`at 490. This claim will not be addressed or reflected in any “cease and desist” order issued by
`
`the FTC.3 Indeed, at the time Axon filed its Complaint, no administrative action that could
`
`produce such an order was even pending; a lawsuit before this Court was the only means by
`
`which Axon could have pursued its constitutional claims. See Free Enter., 561 U.S. at 490-91.
`
`Second, and for this same reason, Axon’s constitutional claims are “wholly collateral”
`
`to any FTC order or rule from which an appeal might be taken. Free Enter., 561 U.S. at 489.
`
`2 “Any person, partnership, or corporation required by an order of the Commission to cease
`and desist from using any method of competition or act or practice may obtain a review of
`such order in the court of appeals of the United States . . . .” Id.
`3 Because Axon is not appealing any FTC or ALJ order, the Telecommunication’s Research &
`Action Center v. FCC, 750 F.2d 70 (D.C. Cir. 1984) (“TRAC”) line of cases do not apply to
`bar Axon’s claims in this Court. See also Time Warner Entertainment Co., L.P. v. FCC, 93 F.3d
`957, 964 (D.C. Cir. 1996) (holding that a federal district court, not a federal circuit court, had
`jurisdiction to consider the constitutional challenge of analogous administrative conduct).
`
`
`
` 4
`
`
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`
`
`Case 2:20-cv-00014-DWL Document 15 Filed 01/09/20 Page 11 of 24
`
`
`
`As noted above, Axon’s Due Process claim addresses the FTC’s triple role as prosecutor,
`
`judge, and jury, as well as first line appellate panel. The Equal Protection claim addresses the
`
`materially different and irrational treatment of similarly situated companies subjected to the
`
`FTC’s administrative process versus the substantial protections afforded those in DOJ cases
`
`adjudicated in federal court. Finally, the Article II claim addresses the unlawful lack of at-will
`
`removal power by the President over both the FTC Commissioners and the ALJs. None of
`
`the foregoing issues relate to the underlying merits of the Axon/Vievu merger.4 Because
`
`Axon objects to the agency’s structure and procedures, its “general challenge [is] ‘collateral’
`
`to any [agency] orders or rules from which review may be sought.” See id.
`
`Third, the FTC lacks “competence and expertise” in relation to Axon’s constitutional
`
`claims. Free Enter., 561 U.S. at 478, 491; see also McNary v. Haitian Refugee Center, Inc., 498 U.S.
`
`479, 479 (1991) (“District Court had federal-question jurisdiction to hear respondents’
`
`constitutional and statutory challenges
`
`to
`
`[Immigration & Naturalization Service]
`
`procedures.”). The constitutional questions raised in the Complaint and that are subject to
`
`this motion, do not require “technical considerations of [FTC] policy,” and are instead
`
`questions of constitutional law, “which the courts are at no disadvantage in answering.” See
`
`Free Enter., 561 U.S. at 450.
`
`In Free Enterprise itself, a case in the same posture as this one at the time of filing, the
`
`Supreme Court concluded that district courts retained jurisdiction over a claim that the
`
`Public Company Accounting Oversight Board (“PCAOB”) was unconstitutional under
`
`
`4 This motion is not based on Count III, which requests a Declaratory Judgment that Axon’s
`acquisition of Vievu is lawful. Court III is within this Court’s jurisdiction for various reasons
`that are not addressed in this Memorandum—but anticipated to be addressed in subsequent
`motion practice before the Court.
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`
`
` 5
`
`
`
`
`
`Case 2:20-cv-00014-DWL Document 15 Filed 01/09/20 Page 12 of 24
`
`
`
`Article II, because its members were not removable at will. Id. at 498. The same conclusion
`
`applies to Axon’s claims here. Congress has not stripped jurisdiction over Axon’s suit, so
`
`this Court has a duty to “take such jurisdiction.” New Orleans Pub. Serv., Inc. v. New Orleans,
`
`491 U.S. 350, 359 (1989). “The right of a party plaintiff to choose a Federal court where
`
`there is a choice cannot be properly denied.”5 Id.
`
`II.
`
`THIS COURT SHOULD ISSUE A PRELIMINARY INJUNCTION.
`
`A motion for a preliminary injunction is governed by the multi-factor test outlined by
`
`the Supreme Court in Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7, 20 (2008),
`
`including (1) likelihood of success on the merits, (2) irreparable harm if the preliminary
`
`injunction is not granted, (3) a balance of equities favoring the plaintiff, and (4) that the
`
`injunction is in the public interest. Here, each factor supports the grant of a preliminary
`
`injunction.
`
`A.
`
`Axon Is Likely to Prevail on Count I—Its Fifth Amendment Due
`Process and Equal Protection Claims.
`1.
`
`The FTC’s Internal Administrative Process Violates the Due
`Process Clause.
`
`The irreducible minimum of Due Process is “a fair opportunity to rebut the
`
`Government’s factual assertions before a neutral decisionmaker.” Hamdi v. Rumsfeld, 542 U.S.
`
`507, 533 (2004); see U.S. CONST. amend V. “Parties whose rights are to be affected are
`
`5 Nor are there any “exhaustion” or “finality” concerns. See, e.g., TRAC, supra. Indeed, the
`Ninth Circuit has held that where the agency’s position “appears already set” and recourse to
`administrative remedies is “very likely” futile, exhaustion is not required. See Szonyi v. Barr,
`942 F.3d 874, 891 (9th Cir. 2019); El Rescate Legal Servs., Inc. v. Exec. Office of Immigration
`Review, 959 F.2d 742, 747 (9th Cir. 1991). As noted above, the FTC’s administrative process
`has been a guaranteed win for the FTC in every case—the best evidence of “futility.”
`Indeed, over the past several years at least 12 parties simply abandoned their mergers after an
`administrative complaint was filed, instead of enduring what was sure to be a futile effort on
`the merits. See Ex. 2, Declaration of Antony P. Kim, and its Ex. A chart.
`
`
`
` 6
`
`
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`
`
`Case 2:20-cv-00014-DWL Document 15 Filed 01/09/20 Page 13 of 24
`
`
`
`entitled to be heard; and in order that they may enjoy that right … an opportunity to be
`
`heard must be granted at a meaningful time and in a meaningful manner.” Id. (quoting
`
`Baldwin v. Hale, 1 Wall. 223, 233 (1864)). A “meaningful” hearing “requires a neutral and
`
`detached judge.” Id.
`
`In Williams v. Pennsylvania, 136 S. Ct. 1899 (2016), the Supreme Court held that due
`
`process prevented a judge from sitting in a case in which he previously participated as
`
`district attorney because “an unconstitutional potential for bias exists when the same person
`
`serves as both accuser and adjudicator in a case.” Id. at 1905. The same is undoubtably true
`
`in the administrative context, despite the Court’s ruling decades earlier in Withrow v. Larkin,
`
`421 U.S. 35 (1975), that a federal administrative agency does not violate due process by
`
`combining investigative and adjudicative functions “without more.” Id. at 58. But even in
`
`Withrow the Supreme Court recognized that “special facts and circumstances present in the
`
`case” may demonstrate “that the risk of unfairness is intolerably high.” Id. Thus, where an
`
`adjudicator announces its position in advance, as happened here, the risk of bias or
`
`prejudgment should be deemed “intolerably high.” Moreover, as alleged by Axon, strong
`
`evidence of a biased institutional process exists based on the FTC’s 100% win rate for more
`
`than two decades.6 (Compl. ¶ 7).
`
`
`6 A handful of decades-old circuit court cases similarly hold, like Withrow, that the
`combination of investigatory and adjudicatory functions in a single agency, such as the FTC,
`does not without more constitute a due process violation. See, e.g., Kennecott Copper Corp. v.
`FTC, 467 F.2d 67 (10th Cir. 1972); FTC v. Cinderella Career & Finishing Schs., 404 F.2d 1308
`(D.C. Cir. 1968). But, as explained above, Axon’s claim here is based on more than just the
`coincidence of investigative and adjudicative power alone. Moreover, the indicia of
`unfairness in these older cases involved such things as strongly worded allegations in
`complaints, press releases, and Commissioners mentioning cases in public interviews.
`Critically, all of those cases were issued well before the studies showing extreme bias in the
`
`
`
` 7
`
`
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`
`
`Case 2:20-cv-00014-DWL Document 15 Filed 01/09/20 Page 14 of 24
`
`
`
`Indeed, a former FTC Commissioner confirmed that once the FTC Commissioners
`
`vote out a complaint, they vindicate that position 100% of the time. See Ex. 1A, Joshua D.
`
`Wright, Section 5 Revisited: Time for the FTC to Define the Scope of Its Unfair Methods of Competition
`
`Authority at 6 (2015). As observed by Wright:
`
`in
`The FTC has voted out a number of complaints
`administrative
`adjudication
`that have been
`tried by
`administrative law judges in the past nearly twenty years. In each of
`those cases, after the administrative decision is appealed to the
`Commission, the Commission has ruled in favor of FTC staff
`and found liability. In other words, in 100 percent of cases
`where the administrative law judge ruled in favor of the
`FTC staff, the Commission affirmed liability; and in 100
`percent of the cases in which the administrative law judge
`[ ] found no liability, the Commission reversed. This is a
`strong sign of an unhealthy and biased institutional
`process.7 By way of contrast, when the antitrust decisions of
`federal district court judges are appealed to the federal courts
`of appeal, plaintiffs do not come anywhere close to a 100
`percent success rate—indeed, the win rate is much closer to 50
`percent.
`
`Id. (footnote omitted, emphasis added). See also, e.g., Ex. 1B, Andrew N. Vollmer, Accusers as
`
`Adjudicators in Agency Enforcement Proceedings, 52 U. Mich. J. L. Ref. 103, 145 (2018) (explaining
`
`that when “Commissioners have a direct, personal role in critical decisions of initiating
`
`enforcement cases by the agency they head” it “create[s] an unconstitutional potential for
`
`bias”).
`
`As the Ninth Circuit has noted, individuals who have previously weighed in on a case
`
`will “ha[ve] developed … a ‘will to win,’” i.e., to vindicate the position they have previously
`
`taken. Grolier Inc. v. FTC, 615 F.2d 1215, 1219 (9th Cir. 1980). For that reason, “Congress
`
`
`results of FTC administrative proceedings, and none considered how agency unfairness may
`be exacerbated in light of the Equal Protection problems identified here.
`7 The FTC’s win streak has continued post-2015 and remains intact today. See Ex. 2A.
`
`
`
` 8
`
`
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`
`
`Case 2:20-cv-00014-DWL Document 15 Filed 01/09/20 Page 15 of 24
`
`
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`
`intended to preclude” such individuals “from decision-making.” Id. That result is warranted
`
`here where the FTC has made clear its “will to win” by demanding an unprecedented “blank
`
`check”—well beyond divesting Vievu’s assets—to take Axon’s independently-created
`
`intellectual property either voluntarily through settlement, or forcibly through its internal
`
`administrative process. (Compl. ¶¶ 3, 33). This is exactly the kind of prejudging statement
`
`that Due Process abhors.
`
`2.
`
`The FTC’s Structure and Procedural Rules Violate the Equal
`Protection Clause.
`
`
`
`The Equal Protection Clause secures every person against intentional and arbitrary
`
`discrimination by the Government and promises e