Overview
On November 24, 2025, a federal district court judge for the Middle District of North Carolina denied American Efficient's motion for a preliminary injunction preventing the Federal Energy Regulatory Commission (FERC) from holding the company liable for nearly $1 billion, including over $700 million in civil penalties. The case, American Efficient LLC v. FERC,1 addresses whether FERC's process for assessing and enforcing penalties for alleged violations of the Federal Power Act (FPA) conflicts with the Seventh Amendment and Article III of the Constitution. On a motion for preliminary injunction, the district court ruled2 that this enforcement framework likely does not violate the company's constitutional right to a jury trial, because the statute allows for de novo judicial review before any penalty can be enforced against the company, including de novo review by the court of any facts found by the agency. The district court case now proceeds toward a final ruling on the merits of American Efficient's constitutional claims.3 The administrative proceeding before FERC, which was not stayed during the district court litigation, also continues. The next step is for the Commission to issue its order deciding whether to impose civil penalties or other remedies against American Efficient.
Though not the final say on the matter, for now, the district court's ruling means that FERC enforcement proceedings under the FPA can move forward under the current procedural framework, reducing litigation risk to the agency.4 Notably, the district court rejected American Efficient's argument that its constitutional rights are effectively undermined by first having to undergo a lengthy administrative proceeding before the opportunity for a jury trial arises. While the court's ruling on this issue appears supported by analogous precedents, it is not binding on other courts. In light of recent decisions from the Supreme Court that have tended to narrow agency authority, it is possible other courts might be more receptive to similar arguments. And as discussed further below, the district court did not address American Efficient's additional constitutional challenge to FERC's structure as an independent agency, an issue that will almost certainly be impacted by litigation involving a recently terminated Federal Trade Commission (FTC) Commissioner that is currently before the Supreme Court.
Case Background
American Efficient is a distributed energy efficiency resources aggregator that participated in capacity auctions in PJM and MISO. Following a three-year investigation, in December 2024, FERC issued an Order to Show Cause, alleging that American Efficient engaged in market manipulation and violated the terms of the PJM and MISO tariffs and directing the company to show cause why it should not be liable for $722 million in civil penalties and disgorgement of over $250 million in unjust profits.
In response to the Order, American Efficient filed a complaint and concurrent motion for preliminary injunction, alleging that FERC's Order and the proceedings against American Efficient violate the Seventh Amendment and Article III of the Constitution.
SEC v. Jarkesy and Jury Trial Rights in Enforcement Actions for Civil Penalties
American Efficient argued that FERC's enforcement proceedings run afoul of the U.S. Supreme Court's June 2024 ruling in SEC v. Jarkesy.5Jarkesy, which we previously discussed here,6 held that the SEC's adjudication of enforcement actions before in-house administrative law judges (ALJs) violated Jarkesy's right to a jury trial and separation-of-powers principles. Key to the reasoning in Jarkesy was that securities fraud enforcement actions resemble traditional common law claims (fraud), and that the civil penalties the SEC sought to impose were punitive in nature, a type of remedy traditionally available only in courts of law (as opposed to equity or admiralty courts). Jarkesy held that the Constitution prohibits Congress and agencies from forcing defendants to submit to adjudication of this kind of case outside of the Article III courts and without the opportunity for a trial by jury.
American Efficient argued that FERC's enforcement proceedings are substantially similar to the SEC's proceedings in Jarkesy, and that assessment of a civil penalty in proceedings before the agency would violate American Efficient's right to a jury trial.
While the district court agreed that FERC enforcement actions implicate the right to a trial by jury,7 it ruled that FERC's procedures are critically distinct from those in Jarkesy and satisfy constitutional requirements. As provided by statute,8 when FERC seeks to assess a civil penalty for alleged violations under the Federal Power Act (FPA),9 it must provide notice to the subject of that penalty, who may then choose whether to proceed to an initial adjudication before an ALJ, or instead elect an "accelerated" proceeding directly before the Commission. Under the latter option, if FERC ultimately imposes a penalty, the subject can force FERC to initiate litigation in federal district court to enforce the penalty. FERC's decision assessing the civil penalty is then subject to full de novo judicial review, including fact-finding by the court and a trial by jury. The court held these procedures sufficient to satisfy American Efficient's right to a jury trial under the Seventh Amendment.
American Efficient argued that these procedures were not constitutionally sufficient, because in order to get a jury trial, the company first had to participate in costly and time-consuming agency proceedings, wait until FERC issues a civil penalty order, and then wait further for FERC to initiate judicial proceedings to enforce that order—a process that can potentially take years. The District Court rejected that argument, citing recent precedents from the FCC context and reasoning that because no final legal rights are determined or payments awarded before the district court litigation takes place, there is no violation of the company's Seventh Amendment rights.
Lingering Question About FERC's Structure as an Independent Agency
Though not addressed by the court's ruling on the preliminary injunction, American Efficient's complaint also challenges the structure of FERC itself, arguing that statutory removal protections for FERC Commissioners violate the separation of powers and Article II of the Constitution. This claim parallels recent litigation involving the Trump administration's terminations of heads of other independent agencies without cause, and the continued vitality (or not) of the Supreme Court's 1935 decision in Humphrey's Executor, which Steptoe has previously written about here.10 In Humphrey's Executor, the Supreme Court affirmed limits on the President's power to remove Commissioners of the FTC, which Congress established as an independent agency.
Like the FTC, FERC is structured as an independent agency: by law, its Commissioners serve staggered, five-year terms, and no more than three Commissioners may belong to a single political party. The President's termination of former FTC Commissioner Rebecca Slaughter is currently being challenged before the Supreme Court in Trump v. Slaughter. Whether Humphrey's Executor remains good law is squarely at issue in that case, as Steptoe has previously discussed here.11 Proponents of maintaining the independent structure of agencies such as FERC argue that it provides a measure of insulation from day-to-day political pressures and fosters stability and continuity.12 The scope of the Supreme Court's decision in Trump v. Slaughter could have significant implications for FERC's continued status as an independent agency. Oral argument in the case took place on December 8, 2025.
1No. 1:25-cv-68 (M.D.N.C. Nov. 24, 2025).
2Because of the procedural posture of the case (disposition of American Efficient's motion for a preliminary injunction), the court's ruling addressed only whether American Efficient was likely to succeed on its claim, and technically is not a final and conclusive decision on the merits of the constitutional argument.
3American Efficient may also seek to immediately appeal the district court's denial of its motion for preliminary injunction.
4But see footnote 9 below, regarding the contrasting outlook for enforcement in the Natural Gas Act (NGA) context, where procedures are different and more vulnerable to constitutional challenge.
5 603 U.S. 109 (2024).
6Client Alert: Fifth Circuit Says Nay to SEC ALJs: Implications for FERC, Daniel A. Mullen, Steptoe LLP (June 8, 2022), https://www.steptoe.com/en/news-publications/fifth-circuit-says-nay-to-sec-aljs-implications-for-ferc.html; see also Client Alert: FERC May Face Uphill Battle for Top Enforcement Priorities in 2023, Daniel A. Mullen, Karen Bruni & Michelle Castaline, Steptoe LLP (Nov. 29, 2022), https://www.steptoe.com/en/news-publications/ferc-may-face-uphill-battle-for-top-enforcement-priorities-in-2023.html.
7Like the securities fraud claim in Jarkesy, the District Court found that FERC's market manipulation claims resemble a traditional common law action for fraud, and that FERC's civil penalties are a punitive remedy traditionally available only in courts of law. The court also rejected an intervenor's argument that FERC's claim for tariff violations was a creature of the regulatory regime that had no common law analog and fell within the limited “public rights” exception to the jury trial right discussed in Jarkesy. Instead, the court found that the alleged tariff violations resemble traditional common law actions for breach of contract.
816 U.S.C. § 823b(d)(1)-(3); 16 U.S.C. § 825o-1(b).
9American Efficient involved alleged violations of the FPA. Enforcement proceedings for violations of the NGA operate under a different statutory framework, and FERC has previously taken the position that in light of the statute's silence, de novo judicial review is not available in such proceedings. Statement of Administrative Policy Regarding the Process for Assessing Civil Penalties, 117 FERC ¶ 61,317, at PP 6-7 (2006). This issue came to a head in post-Jarkesy litigation in a long-running NGA enforcement proceeding in Total Gas & Power North America, Inc., 188 FERC ¶ 61,197 at PP 5-6 (2024). There, FERC issued an order holding the proceedings in abeyance, declaring that FERC would not subject Total to any penalties on the basis of administrative proceedings before an ALJ and stating that FERC would be assessing its enforcement procedures in light of Jarkesy. (FERC subsequently settled the case for a fraction of the penalty amount in its original Order to Show Cause.) We are not aware of any pronouncement to date by the Commission regarding changes to enforcement procedures under the NGA to comply with Jarkesy, and it is possible new legislation would be required to enact any such changes.
10Client Alert: The Fed Can Stay, but the Rest of You Have To Go: Why a Temporary Supreme Court Decision Might Signal the End Is Near for Independent Agencies, Shaun Boedicker, David Marcou, Daniel A. Mullen & William M. Keyser, Steptoe LLP (May 29, 2025), https://www.steptoe.com/en/news-publications/the-fed-can-stay-but-the-rest-of-you-have-to-go-why-a-temporary-supreme-court-decision-might-signal-the-end-is-near-for-independent-agencies.html; see also Client Alert, UPDATE: Constitutionality of FTC's Structure Faces Greatest Threat Yet, Eric Berman, Daniel Blynn & Lee Berger, Steptoe LLP (Feb. 19, 2025) https://www.steptoe.com/en/news-publications/update-constitutionality-of-ftcs-structure-faces-greatest-threat-yet.html.
11And Then There Were Two…: Holyoak Departure Leaves FTC with Two Commissioners, Eric Berman & Daniel Blynn, Steptoe LLP (Nov. 20, 2025), https://www.steptoe.com/en/news-publications/and-then-there-were-two.html.
12For example, an amicus brief submitted by a bipartisan group of former FERC Commissioners in the Trump v. Slaughter litigation argues that FERC's independent structure fosters continuity, bipartisanship, and predictability at the Commission that is highly valuable to industry participants.
