Supreme Court Questions Whether FCC Penalty Orders Violate Seventh Amendment Jury Trial Right

The dispute stems from in-house agency proceedings where the FCC concluded that AT&T and Verizon violated a provision of the Telecommunications Act of 1996 requiring carriers to protect confidential customer location data. The agency issued forfeiture orders assessing $57 million in penalties against AT&T and $46.9 million against Verizon, directing payment within 30 days without a hearing or trial.

Under the Communications Act, carriers can pay the fine and seek deferential review in a federal appeals court, or refuse to pay and face an enforcement lawsuit by the Department of Justice within five years. In such a district court suit, the carrier would be entitled to a jury trial.

Both companies opted for federal court, arguing that imposing the fine in an in-house proceeding violated their Seventh Amendment right to a jury trial. The U.S. Court of Appeals for the 5th Circuit agreed with AT&T and threw out the fine, while the U.S. Court of Appeals for the 2nd Circuit upheld the fine assessed against Verizon.

Representing the carriers, Jeffrey Wall emphasized that the FCC imposed more than $100 million in civil penalties without giving them any way to obtain a jury trial. He characterized this as a straightforward violation of the Seventh Amendment and argued that the forfeiture orders violated the unconstitutional conditions doctrine by coercing payment to avoid negative implications of an outstanding unpaid penalty.

Vivek Suri, the assistant to the U.S. solicitor general arguing on behalf of the FCC, stressed that the forfeiture orders are not binding. He noted that unlike in SEC v. Jarkesy, where the SEC had its own tools to recover penalties, the FCC can only collect by filing an enforcement suit where a jury trial is available.

Several justices seemed to agree with the government's suggestion that the forfeiture orders are nonbinding and therefore do not implicate the Seventh Amendment. Chief Justice John Roberts wondered whether the orders merely created a public relations problem and suggested that carriers are not obligated to pay until they get a jury.

Justices Amy Coney Barrett and Ketanji Brown Jackson echoed this thinking, querying whether the Seventh Amendment is involved if the order is just a statutory prerequisite for a DOJ lawsuit where a jury trial will occur.

The potential consequences of the orders appeared to concern several conservative justices, including Justice Neil Gorsuch, who pressed Suri about repercussions for failure to pay. Suri assured the justices that facts in a penalty order do not carry special weight in future proceedings and can be tried again if relevant.

In his rebuttal, Wall warned that construing the orders as nonbinding while allowing the government to use the facts would create a domino problem. He urged the Court to hold that the scheme violates the Seventh Amendment or, at minimum, that the orders should not be worth more than the paper they are printed on.

A decision in FCC v. AT&T is expected by late June or early July.