Space Exploration Technologies Corporation (SpaceX) is suing to dramatically reshape the National Labor Relations Board (NLRB). The company argues, citing SEC v. Jarkesy, that the department’s administrative law judges (ALJs) are unconstitutional. SpaceX was founded in 2001 founded by Elon Musk, billionaire and future leader of the planned Department of Government Efficiency. It is an industry leader in space flight and has the eventual goal of founding a Mars colony. The company gained particular prominence as President George W. Bush slashed NASA funding, and President Barack Obama largely privatized the space program.
Since 2019, the company has faced some litigation, though nowhere near as much as Tesla, in which Musk heavily invested soon after founding SpaceX. This disparity could be due to SpaceX’s smaller size and because SpaceX’s clients are largely US governmental entities rather than the public at large. However, one case cluster looms large and could reconstruct the American labor regulatory system.
Space Exploration Technologies Corporation v. NLRB et al.
The Inciting Incident
On June 15, 2022, after Musk was accused of sexual harassment, a group of SpaceX employees shared an open letter in the company’s internal chat system. They argued that SpaceX had failed to live up to its proclaimed “No Asshole” and “Zero Tolerance” policies. They called on other employees to sign on in support of their demands, namely to reprimand Musk for his behavior on Twitter and to create and uphold a policy clearly defining and enforcing appropriate workplace behavior. Following an internal investigation, SpaceX fired four employees for supposedly writing the letter and an additional four for inhibiting the investigation.
Per a SpaceX court filing, “Because the Open Letter blatantly violated company policies and caused significant disruption, SpaceX discharged four employees involved with its mass distribution, and discharged a few additional employees for lying during a subsequent leak investigation.”
The following November, the employees filed charges before the NLRB alleging they were fired for complaining about working conditions, which is protected under the National Labor Relations Act. On January 3, 2024, the agency brought a case against SpaceX before ALJ Sharon Steckler.
The Suit
The following day, SpaceX filed suit in the Southern District of Texas alleging the NLRB’s ALJs are unconstitutional. Mirroring the Fifth Circuit’s ruling in Jarkesy, the company argues the agency’s ALJs are unconstitutional on three counts. First, SpaceX says that ALJs are unconstitutional because they cannot be removed directly by the President, second, because they supposedly preclude SpaceX’s right to trial by jury under the Seventh Amendment, and third, because they allegedly violate the separation of powers. The company enlisted Morgan, Lewis & Bockius as lead counsel.
Four of the ex-employees filed a motion to intervene and transfer the case to the Central District of California, where seven of the eight worked. The NLRB supported the motion. SpaceX opposed the motion and filed an emergency motion for an injunction to halt the proceeding before ALJ Steckler.
On February 15, Judge Rolando Olvera granted the motion to transfer, and SpaceX appealed to the Fifth Circuit. A panel of, and later the en banc, Fifth Circuit denied the appeal for a writ of mandamus, but then agreed to hear an appeal of SpaceX’s denied motion for reconsideration, or in the alternative, an injunction. Per Fifth Circuit order, the case has returned to the Southern District of Texas pending a panel decision on SpaceX’s motion for an injunction; Judge Olvera has not ruled on the subject.
The NLRB filed a motion to dismiss the appeal for lack of subject matter jurisdiction, arguing, among other things that “even on [SpaceX’s] own terms, its notice of appeal is unripe because it was filed two days before the deadline [to enjoin the ALJ proceeding] Appellant created.”
In the ongoing Fifth Circuit proceeding, seven amicus briefs have been filed to date. Four amicus curiae, including the U.S. Chamber of Commerce and the Pacific Legal Foundation, have argued in SpaceX’s favor; three, including the AFL-CIO and Constitutional Accountability Center, have filed in favor of the NLRB and ex-employees. A group of law professors, in their brief, stated, “In ordinary practical-effect cases such as [Carson v. Am. Brands], the appeal arises from a district court order that takes some action that has the effect of granting, modifying, or denying an injunction, even though the district court does not characterize its action as such. Here, by contrast, [SpaceX] purports to appeal from the absence of an order on its preliminary injunction motion and asks this Court to decide that motion in the first instance.”
The Precedent
Administrative law judges, though not always titled as such, have existed in the United States since 1887 with the creation of the Interstate Commerce Commission, an agency formed to regulate shipping rates. According to Michael Asimow, instead of nationalizing the railroads like many countries in Europe, the United States elected to form a regulatory body to ensure fair prices. This model of using a single agency to set rules, investigate, prosecute, and adjudicate issues of what came to be known as “public rights” was then copied into New Deal regulatory agencies like the Securities and Exchange Commission, the NLRB, and the Occupational Safety and Health Administration (OSHA).
The creation of these agencies and their associated ALJs was a contentious process, per Asnimow, so it is no surprise that their constitutionality has been challenged in court. The preeminent precedent-setting case is Atlas Roofing Co. v. OSHA. Therein, the Burger Court unanimously ruled that Congress had the power to create administrative forums to try “public rights,” such as the public’s right to a safe workplace, even when no harm has yet occurred. These forums, the Supreme Court said, lie outside the Seventh Amendment’s reach.
In its complaint, SpaceX cites Granfinanciera, S.A. v. Nordberg, stating “not even Congress can ‘conjure away the Seventh Amendment by mandating that traditional legal claims’ proceed before ‘an administrative tribunal.’” However, the Granfinanciera decision also states, “Congress may devise novel causes of action involving public rights free from the strictures of the Seventh Amendment if it assigns their adjudication to tribunals without statutory authority to employ juries as factfinders. But it lacks the power to strip parties contesting matters of private right of their constitutional right to a trial by jury.”
In Lucia et al. v. Securities and Exchange Commission, the Roberts Court ruled 7–2 that the SEC’s ALJs are inferior officers and thus must be appointed directly by the president or other designated officers. Two months before the decision was released, the Heritage Foundation hosted a panel in which Jennifer Mascott, a law professor who presented Federalist Society YouTube videos on the topic, argued that ALJs should be directly answerable to the president. Another panelist Richard Pierce, Lyle T. Alverson Professor of Law at George Washington University, argued that the two layers of for-cause separation between the president and ALJs are key to assuring their impartiality in deciding cases.
Building on Lucia, in 2023, the Roberts Court again ruled against the SEC in Jarkesy, deciding 6–3 that the agency’s proceedings before ALJs were unconstitutional in that they violated Jarkesy’s right to trial-by-jury under the Seventh Amendment. The six conservative justices did not weigh in on the Fifth Circuit’s other arguments as to whether the president should have the power to fire ALJs at will and whether they violate separation of powers. In her dissent, Justice Sotomayor stated, “The majority’s treatment of the public-rights doctrine is not only incomplete, but is gerrymandered to produce today’s result.”
Other Matters of Note
While their litigation against the NLRB is drawing the most attention, SpaceX is also pursuing litigation against other agencies. The company sued the Department of Justice in an attempt to stop a proceeding before an ALJ over whether the company discriminates against non-citizens in hiring decisions. While SpaceX uses the same arguments as in the NLRB case, this matter has received far less fanfare, and at the moment, appears to be headed towards summary judgment.
In September, former employee Joel Soileau sued SpaceX over the company allegedly interfering in an NLRB investigation as to whether SpaceX illegally fired the plaintiff. The case was removed from state court, and the judge recently compelled arbitration.
Like many government contractors, SpaceX has been involved in litigation over the award of a contract. In one, the company sued because contracts were awarded to other space launch companies, and in another, SpaceX won the contract and was the subject of the suit.
Outside of Federal court, SpaceX has recently faced regulatory scrutiny from the Federal Aviation Administration over the company allegedly lying on the paperwork required to launch its rockets. This supposed fraud came to light after the explosive results of the Starship test flight launch.
Finally, The Carrizo Comecrudo Tribe of Texas, the South Texas Environmental Justice Network, and Save the Rio Grande Valley recently filed suit in Texas State court to stop a land swap between the state and the space company. The tribe and environmental activists allege this deal will result in untold damage to the tribe’s sacred sites and the surrounding environment.
