A divided D.C. Circuit panel refused Thursday to let the Federal Trade Commission subpoena Media Matters for America while the agency appeals an order blocking that probe, crediting district courts' findings of "seemingly unusual and unprecedented" facts suggesting the investigation is retaliation for reporting about Nazi content on X.

Two of the panel's three judges refused to issue an emergency stay of the lower court preliminary injunction while the FTC appeals. U.S. Circuit Judges Patricia A. Millett and Robert L. Wilkins' order repeatedly noted that on the merits, Media Matters' burden will be higher to prove "the commission indeed acted with retaliatory motive." But at this stage, they said, the FTC hasn't justified impinging on Media Matters' protected First Amendment activity with a civil investigative demand that was launched by an agency whose chair has targeted "progressives" due to alleged advertiser boycotts, and whose senior leaders had targeted left-leaning Media Matters by name before taking jobs with the FTC.

Even starting from the presumption that a government agency is acting "in good faith," the majority's unsigned opinion held that "the commission has not shown that the unique — and seemingly quite unprecedented — constellation of undisputed facts and circumstances compiled in this still-preliminary record would render erroneous the district court's tentative finding that Media Matters' protected speech likely caused issuance of the demand."

U.S. District Judge Sparkle L. Sooknanan preliminarily blocked the probe in August, agreeing that the media watchdog is likely to succeed on its First Amendment retaliation claim after finding that the Republican-controlled FTC's "expansive" civil investigative demand "is a retaliatory act" that has caused the outlet's journalists to avoid pursuing certain stories about the commission, its chair and Elon Musk, the former confidant and financial backer of President Donald Trump.

Media Matters contends the FTC included it in an investigation into advertising boycotts on disfavored platforms after the media watchdog ran an article asserting that ads on Twitter appeared next to Nazi posts following Musk's acquisition of the platform, now known as X.

"This case is about more than the Trump administration's effort to punish Media Matters. It's a critical test for whether any administration — from any political party — can bully and silence media and non-profit organizations through illegal abuses of power," Media Matters President and CEO Angelo Carusone said in a statement Thursday. "Today's ruling helps protect ours — and every American's — First Amendment rights."

Law360 received no immediate response from the FTC, which is subject to the government shutdown.

Media Matters is also facing a defamation suit from X Corp. in Texas federal court, accusing the outlet of fabricating side-by-side images to make it seem that X placed neo-Nazi or other extremist content next to various advertisers' posts.

Media Matters has successfully challenged information demands from Texas Attorney General Ken Paxton and Missouri Attorney General Andrew Bailey that were launched immediately after the article.

The D.C. Circuit majority Thursday drew heavily on the appellate court's May decision upholding a block on Paxton's probe.

As a "general rule," the opinion says, parties contesting a CID have no standing to sue unless or until the issuing agency goes to court to enforce the information demand.

"But this court has held in an analogous case that when a company challenges a 'sweeping' demand on First Amendment grounds and demonstrates actual and ongoing harm to its constitutional rights, the case is no longer 'simply about a pre-enforcement challenge to a non-self-executing [demand],'" the judges said.

It's enough, according to the majority, that Media Matters raised the same concerns here that it did in battling the state enforcer investigations. The organization had warned that reporters were hesitant to report on certain subjects, and would-be partners were pulling back from connecting with the watchdog.

"Given those existing and continuing First Amendment harms, the commission is unlikely to succeed in showing that Media Matters must suffer through them unless and until — if ever — the commission chooses to file suit to enforce the demand," the judges said, warning that holding otherwise would permit agency information demands "that suppress speech and journalism," such as demands for sources, "while simultaneously closing the courthouse doors to relief as long as the agency chooses not to take additional enforcement steps."

The FTC, which in July refused to quash its investigation into Media Matters, says the CID is just one part of a broader antitrust probe looking for groups that say they are boycotting advertising on disfavored platforms because they want to protect their brand from association with hateful, dangerous or misleading content. Accusations of censorship, especially of conservative viewpoints, have been a key animating principle of the FTC under Chair Andrew N. Ferguson — a campaign in which the U.S. Department of Justice has also been involved.

Ferguson was a central figure in Thursday's opinion, which noted his promises to go after alleged advertiser boycotts by "the radical left," including pitching himself for the FTC's top job by speaking "of his intent to target media groups and other actors in language that focuses on their viewpoints and the content of their speech."

The majority also pointed to statements by individuals who would go on to be named to top FTC posts by Ferguson. Those statements included accusing Media Matters of being the "scum of the earth."

"Courts have recognized that such circumstantial evidence, including proximity in time between the protected speech and government's adverse actions, the defendant's expression of hostility to the protected speech, and the absence of a proffered legitimate alternative explanation for the action can support a finding that protected speech caused the agency's response," the majority said.

They added that the FTC has failed to adequately explain the CID itself. The judges said the CID "linked it directly to Media Matters' speech about X's inclusion of antisemitic and hateful advertisements and Elon Musk's actions," seeking material produced from the X litigation, material on other entities that track hate speech, and information on Media Matters' basic reporting process. They also credited the lower court's decision to weigh the "sweeping demand" issued "without the statutorily required explanation of the permissible grounds for its issuance."

In his dissent, U.S. Circuit Judge Justin R. Walker argued that Ferguson was merely living up to a promise to go after censorship, citing the litigation that embroiled the Biden administration over efforts to block COVID-19 misinformation. Ferguson, according to the dissent, was merely targeting "progressives" with the implication they were transitioning to private avenues of censorship as the Biden administration ended.

In a dissent dominated by what he said are examples of how Ferguson's Biden-era predecessor, Lina Khan, targeted technology companies by name and then pursued enforcement actions against them, Judge Walker said Ferguson "never mentioned Media Matters" in a cited podcast interview or memo. That's the only evidence Media Matters cited of "any FTC decisionmaker," Judge Walker said, dismissing statements by FTC and White House officials as well as Musk as irrelevant because they have no authority over the commission. And he argued that the 2025 CID was too far removed from the 2023 Media Matters article that didn't mention the FTC or Ferguson.

"In an ironic twist on Ferguson's campaign against censorship, my colleagues argue that his statements help prove that the FTC violated the free speech clause when it issued a civil investigative demand to Media Matters," Judge Walker said.

Judge Walker's dissent will likely play an important role as the case moves forward, according to David B. Schwartz, an antitrust partner at Bryan Cave Leighton Paisner LLP, who predicted that the FTC will seek U.S. Supreme Court intervention.

"Judge Walker's dissent presented a clear view of the opposing side of the case, and I expect it to be persuasive if and when the FTC appeals the denial of a stay to the Supreme Court," Schwartz said in an email.

Circuit Judges Patricia A. Millett, Robert L. Wilkins and Justin R. Walker sat on the panel for the D.C. Circuit.

Media Matters is represented by Stephen P. Anthony, Ryan K. Quillian, Dana A. Remus, Kuntal V. Cholera, Brenden J. Cline, Brigid P. Larkin and Alezeh Z. Rauf of Covington & Burling LLP, and Justin A. Nelson, Matthew Behncke, Alexandra Foulkes Grafton and Katherine M. Peaslee of Susman Godfrey LLP.

The FTC is represented in-house by H. Thomas Byron III, Stephen T. Fairchild and Geoffrey Green.

The case is Media Matters for America v. Federal Trade Commission et al., case number 1:25-cv-01959, in the U.S. District Court for the District of Columbia. The appeal is Media Matters for America v. FTC, case number 25-5302, in the U.S. Court of Appeals for the District of Columbia Circuit.