The dispute stems from FCC enforcement actions against telecommunications giants AT&T and Verizon for violating provisions of the Telecommunications Act of 1996 requiring carriers to protect confidential customer location data. The FCC imposed substantial penalties—$57 million against AT&T and $46.9 million against Verizon—through in-house administrative proceedings where the companies could respond in writing to violation notices but were not afforded hearings or trials before receiving final forfeiture orders directing payment within 30 days.
The cases present a direct follow-up to the Supreme Court's 2024 decision in SEC v. Jarkesy, which held that Securities and Exchange Commission administrative penalties violated the Seventh Amendment. Writing for the 5th Circuit, Judge Stuart Kyle Duncan found the FCC's process similarly problematic, noting that "in this process, which was completely in-house, the Commission acted as prosecutor, jury, and judge." However, the 2nd Circuit reached the opposite conclusion regarding Verizon's case, with Judge Alison Nathan writing that "[n]othing about the Commission's proceedings … transgressed the Seventh Amendment's jury trial guarantee."
The carriers argue forcefully that the Court has never approved a "penalty-now-trial-later approach to the Seventh Amendment." AT&T and Verizon contend that the forfeiture orders "are clear that they are final commands, not tentative suggestions," pointing to language indicating the FCC has "determined" the carriers "shall be liable to the United States" and ordering payment by specific deadlines.
The circuit split creates the central question before the justices: whether the availability of a jury trial in a subsequent Department of Justice collection lawsuit satisfies the Seventh Amendment. Under current law, carriers facing forfeiture orders can either pay the fine and seek deferential appellate review, or refuse payment and potentially face a DOJ enforcement action in federal district court where jury trial rights would apply.
U.S. Solicitor General D. John Sauer defends the current system, arguing that the administrative proceeding "is not a lawsuit, much less a lawsuit seeking money damages" and that "there is no money at stake" because the FCC "cannot require a carrier to pay a single dime." Sauer emphasizes that payment obligations only arise if the DOJ brings an enforcement lawsuit and prevails, where carriers maintain full jury trial rights.
The case reached the Supreme Court following contradictory appellate decisions that highlighted the need for clarity post-Jarkesy. The 5th Circuit struck down AT&T's fine based on Seventh Amendment violations, while the 2nd Circuit upheld Verizon's penalty, creating the circuit split that typically prompts Supreme Court review in significant constitutional questions.
AT&T and Verizon raise additional constitutional concerns under the "unconstitutional conditions" doctrine, arguing that carriers face coercion because they must surrender judicial review rights to obtain jury trials. The companies assert that carriers universally pay fines rather than risk enforcement actions because "[w]hile waiting for that DOJ lawsuit that might never come, the carrier suffers serious practical and reputational harms from the final FCC order."
The FCC warns that a ruling favoring the carriers "would seriously disrupt the Commission's administration of" federal communications laws, emphasizing that "[f]orfeitures are among the FCC's most important enforcement tools" for enforcing "vital rules—such as those protecting privacy, combating robocalls, and regulating broadcasting." The agency argues these enforcement mechanisms would "go effectively unenforced" without administrative penalty authority.