Supreme Court Upholds FCC’s Authority to Issue Non-Final Forfeiture Orders Without a Jury Trial
Case Name and Number: FCC. v. AT&T, Inc., No. 25–406
Introduction: Today, the Supreme Court held that the Federal Communications Commission (FCC) may issue forfeiture orders under 47 U.S.C. § 503(b) without a jury trial, because such orders do not definitively resolve the parties’ legal obligations and the FCC’s factual findings are not conclusive and indeed subject to de novo review in subsequent enforcement proceedings.
Background: The Communications Act authorizes the FCC to seek monetary forfeitures for violations of the communications laws. See 47 U. S. C. § 503(b). The FCC can seek such forfeitures through an informal proceeding in which the FCC issues a notice of apparent liability, reviews the recipient’s response, and then issues an order determining whether the recipient is liable and, if so, “assess[ing]” a penalty. Id. § 503(b)(1), (b)(2)(E), (b)(4). The recipient of such a forfeiture order may either seek review in the court of appeals under the Hobbs Act, see 28 U.S.C. § 2342(1), or do nothing and wait for the FCC to seek to recover the forfeiture penalty in a suit brought by the DOJ. The statute provides that such an enforcement action “shall be a trial de novo.” Id. § 504(a).
In these consolidated cases, the FCC investigated communications carriers AT&T and Verizon for mishandling customer location data and then assessed penalties of roughly $57 million against AT&T and $47 million against Verizon. The carriers paid the penalties and filed petitions for review in the courts of appeals, arguing that requiring forfeiture without the opportunity for a jury trial violates the Seventh Amendment. The Fifth Circuit agreed with ATT’s challenge and vacated the FCC’s order. The Second Circuit disagreed and came to the opposite result in Verizon’s case.
Issue: Whether the FCC’s statutory scheme for issuing forfeiture orders violates the Seventh Amendment right to a jury trial.
Court’s Holding: In an opinion authored by Chief Justice Roberts, the Supreme Court held that the FCC’s issuance of a forfeiture order does not violate the Seventh Amendment, because those orders “do not definitively resolve the parties’ legal obligations, and the FCC’s factual findings in its forfeiture proceedings are not conclusive.”
The Court explained that the Seventh Amendment requires juries to make ultimate determinations of issues of fact before legal rights and obligations are conclusively determined. It does not, however, “prescribe at what stage” a jury trial must occur.
The Court held that the statutory procedure here is constitutionally permissible because it did not settle the carriers’ legal obligations by requiring them to pay the forfeiture penalties. Rather, the government would have to prove its case to a jury before any payment obligation could arise. The Court explained that the FCC has no authority to execute on a forfeiture order, no penalties or interest accrue in the event of nonpayment, and the FCC cannot hold the existence of a forfeiture order against a regulated party unless the forfeiture has been paid or a court has ordered payment. See 47 U.S.C. § 504(c). And, the Court recognized, the FCC’s factual findings have no effect in a later enforcement action by the Department of Justice: because such an action requires a “trial de novo,” id. § 504(a), it is “as if the Commission never found any facts at all.”
The Court distinguished its previous decision in SEC v. Jarkesy, which held that the SEC could not impose civil penalties through in-house administrative proceedings because no jury was available. Unlike the FCC’s forfeiture orders, the SEC’s penalties were immediately enforceable through wage garnishment or tax return deductions and there was no later opportunity for a jury to determine the relevant facts if the SEC resorted to judicial enforcement.
The Court expressed “no view” on whether a regulated entity must first pay the forfeiture before it may obtain review in the court of appeals under the Hobbs Act—the premise on which the parties had litigated the case. The Court also declined to address the carriers’ argument that the specific forfeiture orders at issue misled them into paying and that a refund is therefore appropriate.
The Court’s decision thus upheld the statutory enforcement structure based entirely on the very limited effect of the forfeiture orders that the FCC is empowered to issue. It concluded that an agency may, consistent with the Seventh Amendment, determine liability and assess a penalty without a jury, so long as any obligation to pay comes into effect only after a de novo trial before a jury in a subsequent enforcement proceeding.
Justice Thomas dissented. He argued that the majority’s decision punishes AT&T and Verizon “for complying with a government order that they in good faith believed was obligatory,” noting that the FCC’s own orders stated that payment “shall be made” within thirty days and that the FCC had taken the position that its authority to impose such penalties was “beyond the ambit of the Seventh Amendment.”
Read the opinion here.