The U.S. Supreme Court issued a ruling on the 5th, rejecting an appeal by AT&T Inc and Verizon Communications to overturn massive fines for illegally selling customers' real-time location data. The Court ruled that the Federal Communications Commission's administrative penalty process did not violate the constitutional right to a jury trial afforded to corporations.
Resolving a Circuit Split
Last year, AT&T Inc successfully persuaded the U.S. Court of Appeals for the Fifth Circuit to overturn its fine, while Verizon faced defeat in the Second Circuit. The Supreme Court took up the case to resolve this split among the appellate courts. In today's decision, the Court voted 8-1 to reverse the Fifth Circuit's ruling, with Justice Clarence Thomas dissenting.
The Fines and the Legal Challenge
In 2024, the FCC imposed a total of $104 million in penalties on AT&T Inc and Verizon for violations uncovered in 2018. After paying the fines, the telecom carriers challenged them in the circuit courts of appeals, where panels of judges heard the cases. The carriers argued that this mechanism deprived them of their Seventh Amendment right to a jury trial.
The Majority Opinion's Rationale
However, in a majority opinion authored by Chief Justice John Roberts, the Supreme Court accepted the FCC's argument that the carriers could have obtained a jury trial if they had refused to pay the fine and the government had attempted to collect it forcibly. The carriers had a choice: pay the fine and appeal to the circuit court, or not pay and wait for the government to initiate a collection proceeding, which would ultimately lead to a jury trial for each carrier. Roberts wrote that the FCC's forfeiture process "fits comfortably" within the Supreme Court's Seventh Amendment precedents. "The orders at issue do not definitively resolve the carriers' legal obligations; put simply, they do not themselves create a payment obligation. Nor do the orders represent a final adjudication of any fact, because before the carriers can be forced to pay the government must prove its case to a jury."
Judicial Skepticism During Arguments
During oral arguments, the justices expressed skepticism of AT&T Inc and Verizon's claims and seemed to agree that the FCC's fine decisions were not legally binding until enforced by a court. Justice Brett Kavanaugh characterized the case as a legal victory for the carriers because the government conceded its orders were not binding without a jury trial. "It seems like you've won on the law going forward no matter what," Kavanaugh told the lawyer representing the carriers.
Carriers Accused of Trying to Evade Responsibility
John Bergmayer, Legal Director of the advocacy group Public Knowledge, stated that today's ruling was crucial for defending the FCC's ability to investigate and propose penalties enforceable in court. "The Supreme Court got it right this time," Bergmayer said in a statement. "AT&T Inc and Verizon sold access to customer location data and then failed to stop bounty hunters and even a rogue sheriff from using it to track users who had no idea they were being followed. The FCC investigated, found the carriers liable, and proposed penalties—and the carriers were always free to challenge those penalties in court." Bergmayer said the carriers "tried to evade all responsibility by claiming the FCC's established process deprived them of a jury trial," but the Supreme Court affirmed this was not the case. "This decision ensures the FCC can do the job Congress gave it. An agency that can't investigate carriers and propose penalties loses one of its most effective tools to protect consumers and enforce the law," he said.
Textual and Practical Arguments Rejected
The Supreme Court wrote today that AT&T Inc and Verizon "argued that the FCC's forfeiture orders inflict reputational and practical harms that give them a right to a jury trial." "They insist the Seventh Amendment applies to such harms 'even absent a monetary component.' This argument is difficult to square with the text of the Seventh Amendment, which applies only to 'Suits at common law, where the value in controversy shall exceed twenty dollars.'" Beyond what the Court called the carriers' legally "textually unworkable" theory, the justices also said the risk of reputational harm does not "exact too high a price for the exercise of the jury right." The ruling stated that reputational harm can befall either party at the preliminary stages of a legal proceeding, "and that has never been thought to raise a Seventh Amendment problem." During arguments, the carriers' lawyer stated that "legitimate parties" always pay the fines and that "for decades no one realized these orders were non-binding."
FCC's Powerlessness Without Court Backing
The Court wrote: "The carriers refuse to take yes for an answer, insisting they must actually pay. They point to [Section 503 of the Communications Act] using words that sound mandatory—the Commission 'shall determine' if a forfeiture is proper, 'assess' the 'amount' of such a penalty, and 'impose' it." But the Court said these words themselves "tell us little about whether an order issued under Section 503(b)(4) definitively resolves the carriers' rights and obligations." The Court stated that when these statutory phrases are read in the proper context of the overall statutory scheme, it is clear the FCC "can do nothing to adversely affect a regulated party who receives a forfeiture order."
Distinguishing a Precedent Case
The carriers' lawsuit relied on the Supreme Court's June 2024 ruling in Securities and Exchange Commission v. Jarkesy, which found the SEC's fine-levying mechanism violated the right to a jury trial. In today's ruling, the Supreme Court said: "Jarkesy proves our point." The Court stated that in Jarkesy, "we held the Securities and Exchange Commission could not use its in-house administrative proceedings to impose civil penalties. Those penalties are immediately enforceable; the SEC can garnish a recipient's wages or offset a tax refund. And if the SEC is forced to resort to judicial enforcement, no jury is available—at least as to the underlying legal violation." In contrast, government lawyers seeking payment of an FCC fine must prove to a jury in a trial de novo that the company violated the law. The Supreme Court stated: "So far as a Section 504 trial—the only way the government can collect a penalty—is concerned, it is as if the Commission never found any facts at all. A jury has the final say before a regulated party is forced to pay."
The Lone Dissenting Opinion
In his dissent, Justice Thomas noted that the FCC "adjudicated the matter itself" rather than initiating a court case against the carriers. Thomas argued that the FCC, in its penalty orders, insisted "it could impose these penalties without involving an Article III court," but changed its position during subsequent litigation. "The Commission now agrees that if AT&T and Verizon refuse to pay, they will be entitled to a brand-new jury trial in an Article III court," Thomas wrote. Thomas stated the majority "adopts the government's newly minted story that, under the statute, the Commission's self-styled 'orders' are merely nonbinding notices that regulated parties may freely ignore." Thomas endorsed this interpretation and said it "should govern future proceedings to bring the Commission's enforcement practices in line with the Constitution." But for this case involving AT&T Inc and Verizon, Thomas argued the FCC did not abide by the limits described in today's Supreme Court ruling. "If AT&T and Verizon do not pay, they risk immediate statutory penalties for ignoring the Commission's forfeiture orders," Thomas wrote. "The order-review proceedings on which our jurisdiction rests do not treat these orders as requests for voluntary payment but as 'final orders.'" Thomas wrote: "AT&T and Verizon did what courts normally encourage: They paid under protest and sued for a refund. Today, the Court punishes AT&T and Verizon for dutifully complying with government orders they reasonably believed to be mandatory, preserving their objection to the orders, and arguing their case so effectively in litigation that they persuaded the government to change its position years later."
A Government Concession on Wording
During oral arguments, Assistant to the Solicitor General Vivek Suri, arguing for the government, described the fine orders as closer to an indictment than a final penalty. He noted that the FCC's forfeiture order against AT&T Inc stated that "after the Commission issues a forfeiture order, AT&T is entitled to a trial de novo in federal district court before it can be required to pay a forfeiture penalty." Nonetheless, Suri suggested that if the FCC had more clearly indicated the non-binding nature of the orders in the section containing the order's terms, the government might have avoided this litigation altogether. He said: "At most, we would have needed to change the wording of the order."
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