This is fine
FCC tells Supreme Court its fines are nonbinding unless a jury upholds penalty.
AT&T's stand at Mobile World Congress on February 27, 2023, in Barcelona, Spain. Credit: Getty Images | Joan Cros Garcia-Corbis
Supreme Court justices today expressed skepticism of AT&T and Verizon’s claim that the Federal Communications Commission’s procedure for imposing fines violated their right to a jury trial. But companies regulated by the FCC may come out ahead in the long run even if the carriers lose this case.
AT&T and Verizon, which were fined a total of $104 million for selling users’ real-time location data without consent, claim the FCC’s penalty system deprived them of the Seventh Amendment right to a jury trial. During oral arguments today, justices repeatedly pointed out that carriers could have obtained a jury trial if they chose not to pay the fines and waited for the government to begin an enforcement action in court.
But even if AT&T and Verizon lose this case, they could get a victory of sorts because the FCC and justices seem to agree that FCC fine decisions are nonbinding and require a court decision to enforce them. A government lawyer told justices that the FCC may change the language of its forfeiture orders to make it clearer that fines don’t have to be paid until after a jury trial.
“It seems like you’ve won on the law going forward, one way or the other,” Justice Brett Kavanaugh told attorney Jeffrey Wall, who represents AT&T and Verizon. “Your reply brief begins, ‘the government’s in retreat.’ That’s absolutely correct.”
In the case, the Trump administration is defending forfeiture orders issued during the Biden administration. AT&T previously convinced the US Court of Appeals for the 5th Circuit to overturn its fine, while Verizon lost in the 2nd Circuit. T-Mobile lost a similar ruling in the District of Columbia Circuit, but the Supreme Court proceedings are on the AT&T and Verizon cases only.
Nonbinding penalties
The carriers paid their fines and then challenged them in the circuit appeals courts, where judges’ panels ruled on the cases. The carriers could have obtained jury trials if they refused to pay and the government sued for collection. The 2nd Circuit appeals court said in its ruling against Verizon that this option satisfies the right to a jury trial.
Wall argued that the federal government, by calling the forfeiture orders nonbinding in court filings, effectively conceded after the Supreme Court case began that the FCC scheme violates the Seventh Amendment right to a jury trial. Wall said the forfeiture orders themselves and FCC regulations describe the fines as compulsory, not as optional.
“I don’t think they should be just able to slap a nonbinding label on the remedy and somehow avoid the entire Seventh Amendment analysis… What’s so odd to me is we’re straining to read the statute in a very unnatural way, all for purposes of avoiding a constitutional violation that the government effectively acknowledges,” he said.
Wall said that until a recent government brief in this case, “it had occurred to no one for decades that these orders are not binding. It’s not what their regulation says. it’s not what their guidance says, and it’s not a natural reading of the statute.”
“My clients need to get their money back because whatever the scheme is the government’s defending now, it doesn’t bear any resemblance to the scheme everybody understood in the lower courts,” Wall also said.
The government brief said that adopting the carriers’ argument would eliminate the FCC’s main enforcement tool. “If the FCC cannot pursue forfeitures against carriers, and no other agency can perform that role, significant rules concerning matters ranging from privacy to national security might go effectively unenforced,” it said.
US says FCC didn’t mislead carriers
Arguing for the government, Assistant to the Solicitor General Vivek Suri said the FCC did not mislead carriers. Suri pointed out that the FCC’s AT&T forfeiture order said 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 the forfeiture… That AT&T theoretically might elect to pay the forfeiture voluntarily does not diminish its statutory right to a trial de novo in federal district court.”
“We think this operates much like an indictment,” Suri said today. “It authorizes a lawsuit to go forward. It does not itself impose a final penalty. That is done only after the jury trial.” Suri also said that “Mr. Wall’s entire case is premised on the idea that the Department of Justice might never file a suit. But if that happens, then there’s no suit at common law, there’s no right to a jury trial.”
Justice Clarence Thomas observed that the FCC decision’s ordering clauses state, “it is ordered that AT&T is liable,” without a disclaimer in that section saying the order is nonbinding. Suri responded that the nonbinding nature is made clear elsewhere in the order.
“Even if you don’t agree with that, the most we’d have to do is change the language of the order,” Suri said. “I think that we would have avoided this litigation potentially if we had done so, so it might be a good idea.”
Kavanaugh said the carriers “were misled… into paying the money without realizing that [the government] would switch positions later and say, ‘oh by the way, you didn’t have to pay, you could have just waited for the charges to be brought and to get your de novo jury trial right.'”
Suri disputed this characterization, saying the FCC has taken the position that its orders are nonbinding “since the 1970s.”
In his rebuttal after Suri’s arguments, Wall said that “Mr. Suri is right that for a long time, the government has acknowledged that you can decline to pay and it would mean the government has to take you to court. But that is quite different from saying that you do not actually owe the amount that the government has assessed you.” Wall argued that this is a new position just recently taken by the government.
US: Jury trial is one of two options
Suri said that in 2003, AT&T convinced the US Court of Appeals for the DC Circuit to hear an appeal after the carrier chose to pay a fine. (Wall noted that this version of AT&T “was a different company, not the present AT&T.”)
“The FCC originally took the position that the only way to challenge an FCC forfeiture order is to decline to pay and wait for the agency to bring an enforcement action, and that’s what most people thought the scheme worked like from 1978 to 2003,” Suri said.
Suri said the 2003 version of AT&T sought the “second path” of challenging FCC actions in circuit courts and succeeded. This alternative mechanism does not “coerce people into giving up their jury rights,” Suri said.
A carrier that refuses to pay a fine would be making a choice that Congress permitted under the statutory scheme, Suri said. But one “reason that you might go to the Court of Appeals is that it’s just quicker if there are no factual issues that need to be resolved before the jury,” he said. “You’re going to end up before the Court of Appeals anyway, might as well do it as soon as possible.”
The FCC has long had trouble collecting fines issued to certain entities, particularly those charged with violating robocall laws. Lacking the power to enforce forfeiture orders on its own, the FCC relies on the Justice Department for collections.
But Wall said that “legitimate” companies always pay. The FCC issues “these forfeiture orders because they know legitimate parties pay 100 percent of the time,” he said. “If your main regulator says you are violating the law, you can’t let that hang over your head indefinitely. But to guarantee any judicial review, AT&T and Verizon have to give up the right to a jury trial. It is hard to imagine a clearer case of penalizing the exercise of a fundamental constitutional right.”
Chief justice: Carriers complain of “PR problem”
Chief Justice John Roberts said that Wall appeared to be complaining about “a PR problem,” specifically that nonpayment would harm the carriers’ reputation. “In terms of the substantive legal issue, though, you are not obligated to pay until you get a jury,” Roberts told Wall.
Such a jury trial would have been de novo, meaning it wouldn’t simply determine whether the carriers failed to pay the fines—it would also determine whether the carriers violated the law in the first place. Justice Elena Kagan said that after an agency’s determination of liability, “a court could start all over again and say that [the agency] was wrong,” and the “entire litigation of whether the agency is right can occur and that litigation can occur with a jury.”
Justice Sonia Sotomayor told Wall, “The problem with your starting proposition is [the FCC’s] findings don’t create a legal obligation. The legal obligation is created when a jury finds that you committed the act.”
Justice Ketanji Brown Jackson told the carriers’ lawyer, “Your argument is that you don’t have the right to invoke a jury trial unless the government comes after you in terms of the enforcement proceeding, and I’m really struggling with why you aren’t happy that the government is not coming after you. If the government is abandoning its claim by not seeking enforcement of it, I don’t know why you would need the right to a jury trial, and why isn’t that a good thing for you?”
Wall argued that when a company’s primary regulator “tells us we owe $100 million… you can’t sit around and do nothing.” He said an unpaid FCC fine could harm a company in future FCC proceedings.
The FCC could “use the fact that we didn’t pay and are a law-breaker when it considers character or persistent disregard of the law, statutory circumstances that the commission can consider under a host of different provisions that deal with things like licenses and spectrum,” Wall said.
SEC fine system was struck down
One question is whether the FCC ran afoul of the Supreme Court’s June 2024 ruling in Securities and Exchange Commission v. Jarkesy, which held that “when the SEC seeks civil penalties against a defendant for securities fraud, the Seventh Amendment entitles the defendant to a jury trial.”
Wall argued that the FCC’s strategy “would carve a huge hole in Jarkesy.” Agencies with schemes like the one ruled illegal in Jarkesy could simply describe their forfeiture orders as nonbinding even if regulated companies “effectively have to comply,” he said.
Suri countered that the two agencies’ enforcement powers were different, as the SEC could deduct penalties from tax refunds or garnish wages. If the SEC went after a non-payer in court, a trial “would be limited to the issue of whether you had paid the penalty,” without any “review of whether the underlying order was correct,” he said.
SEC fine decisions also resulted in interest accruing immediately, whereas interest on FCC fines only accrues after a jury makes a determination, he said. “For the FCC, the only way to get to the penalties is to file a collection suit where you do get a jury trial,” Suri said.
Jon is a Senior IT Reporter for Ars Technica. He covers the telecom industry, Federal Communications Commission rulemakings, broadband consumer affairs, court cases, and government regulation of the tech industry.
