Ed. note: We updated this story with additional coverage from our sister publication, TV Technology.
In at least a partial victory for the Federal Communications Commission’s enforcement efforts, the Supreme Court of the U.S. on Thursday issued a 8–1 decision ruling against wireless carriers in their challenge to the agency’s authority to levy monetary forfeitures.
But the decision also may make it harder for the FCC to ultimately collect on those fines.
Conservative Chief Justice John Roberts wrote in the Thursday ruling that the court found “the FCC’s forfeiture proceedings fit comfortably within the court’s Seventh Amendment precedents.”
Because forfeiture orders issued by the FCC do not definitively resolve parties’ legal obligations, Roberts wrote, and because the commission’s factual findings in forfeiture proceedings are not conclusive, he said that the commision does not violate the Seventh Amendment to issue the forfeitures without the involvement of a jury.
The ruling involves penalties totaling nearly $200 million that the FCC imposed on Verizon ($47 million), AT&T ($57 million), T-Mobile ($80 million) and other wireless carriers for failing to protect their customers’ location data.
Verizon and AT&T appealed the decision arguing that the FCC’s fines violated their Seventh Amendment rights to a jury trial.
Collecting penalties
According to Venable LLP partner and former Securities & Exchange Commission General Counsel Megan Barbero — who represented the government in SEC v. Jarkesy — the decision reflects an effort by the Court to cabin — at least to some extent — the reach of its decision in the 2024 ruling.
The Court viewed the FCC’s forfeiture orders as non-binding, preliminary determinations of “suspected violations.” It stressed that these orders are essentially toothless unless the Department of Justice steps in to file a lawsuit in district court to recover the penalty.
Because the telecommunications carriers get a fresh jury trial in that federal lawsuit, the Court ruled that their Seventh Amendment rights were protected.
However, Barbero warned that the practical fallout of the decision will ultimately make it much harder for federal agencies to collect administrative penalties through their own internal processes.
“Regulated parties under analogous statutory schemes may now feel they have more license to decline to pay administrative penalties assessed by an agency and choose to instead wait for the government to marshal the resources to bring a district court proceeding, which is no small lift for the government,” Barbero said.
Chipping away
In the last two decades, SCOTUS has been steadily chipping away at the legal authority of government regulators, most notably in its 2024 ruling rejecting the doctrine of “Chevron deference,” under which courts were to defer to a regulatory agency’s expertise in interpreting federal laws where Congress’ intent was unclear, and in a second 2024 ruling in SEC v. Jarkesy.
Former Commissioner Nathan Simington had dissented from several FCC rulings that involved imposing fines, citing what he deemed an “unclear” authority for the commission to assess its forfeitures.
In the SEC case, the Court ruled 6–3 that the securities regulator must bring fraud cases seeking civil penalties to federal court instead of relying on its internal tribunals.
Based on the SEC case, both Verizon and AT&T appealed the fines, arguing the FCC was denying the defendants their right to a jury trial by issuing them.
The 2nd U.S. Circuit Court of Appeals in New York denied that argument in the Verizon case and upheld the fine but the 5th U.S. Circuit Court of Appeals in New Orleans overturned the fines against AT&T.
Following that, Verizon appealed the 2nd Circuit ruling to SCOTUS and the FCC appealed the AT&T case. The Thursday SCOTUS decision resolved the conflict between the Circuit Court judgments.
Conservative Justice Clarence Thomas issued the lone dissenting opinion, arguing that the Court was wrong in ruling that the FCC fines were “non-binding” and therefore did not violate Verizon and AT&T’s right to a jury trial.
“When the Federal Government seeks to deprive a person of property, it must go through an Article III court,” Thomas wrote, citing the SEC v. Jarkesy decision.
The full opinion is available here.
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