The federal agency responsible for policing the nation’s airwaves and telecommunications companies relies on hefty fines to enforce rules designed to protect consumer privacy, combat robocalls and regulate broadcasting.
In recent years that agency, the Federal Communications Commission, has imposed millions of dollars in penalties against two major cellphone carriers, Verizon and AT&T, to punish the companies for what it says is their failure to protect customer data.
The companies contend that those fines have violated their rights because they were assessed without the companies facing a trial in front of a jury. They sued, in a case that will be heard by the Supreme Court on Tuesday.
The case is a challenge to the power of administrative agencies, long a target of the conservative legal moment. It comes two years after the court rejected the Securities and Exchange Commission’s use of in-house tribunals without juries to enforce rules against securities fraud and impose penalties on the financial industry.
In that case, the conservative majority on the Supreme Court said the practice violated the right to a jury trial guaranteed by the Seventh Amendment.
In the F.C.C. case before the court on Tuesday, the Trump administration is defending the agency’s use of fines, calling them one of “most important and frequently used enforcement tools.”
D. John Sauer, the solicitor general, told the justices in a court filing that eliminating the F.C.C.’s ability to assess civil penalties would “risk opening a significant gap in federal oversight.” If the F.C.C. cannot pursue penalties, he argued, then “significant rules concerning matters ranging from privacy to national security might go effectively unenforced.”
The court’s ruling, which is expected in late June or early July, could have implications for at least five other federal agencies that assess similar civil penalties before holding a jury trial. Among the regulations enforced through such penalties: the Energy Department’s oversight of nuclear-safety rules; the Health and Human Services Department’s requirements for employee health benefits plans; and oversight by the U.S. Fish and Wildlife Service.
The fines at the heart of the case, levied in 2018 and 2019, amounted to more than $57 million against AT&T and more than $48 million against Verizon for what the F.C.C. alleged were data breaches.
Until 2019, the companies tracked cellphone users’ locations and sold the data to other companies, which then used the information to provide services like roadside assistance. The F.C.C. found that the companies’ practices compromised highly sensitive location information for tens of millions of consumers.
The New York Times reported in 2018, for instance, that a Missouri sheriff had exploited the service to obtain unauthorized access to the data of hundreds of customers, including a local judge.
Soon after, the F.C.C. issued notices saying that the carriers had repeatedly and willfully violated rules requiring them to take reasonable steps to protect the confidentiality of customers’ location information.
The Trump administration argued in court filings that the F.C.C. orders were in fact nonbinding and that there was a path for the companies to get their case in front of a jury should they choose it.
That is different from the circumstances in the Supreme Court’s 2024 case in Securities and Exchange Commission v. Jarkesy, the administration said. In that case, the S.E.C. previously could enforce penalties in-house without the possibility of a jury trial in federal court.
The companies disagree. They say they are required to pay the fines, which are assessed by executive branch officials who serve as prosecutor, fact-finder and adjudicator. The F.C.C. proceedings, they say, determine that the carriers “shall be liable” and order the payment of millions of dollars in penalties, issuing a deadline for companies to comply.
If a company refuses to pay, the Justice Department can then file a lawsuit against it, which would then be considered by a jury. But the companies told the court in a filing that if a carrier wanted to achieve that outcome “it must defy the F.C.C.’s order and refuse to pay.” The companies would then experience “serious practical and reputational harms,” their lawyers argued.
AT&T paid and appealed to the U.S. Court of Appeals for the Fifth Circuit, which ruled in its favor, saying the Communications Act of 1934 violated the company’s right to a jury trial.
The possibility of a trial after the agency has “already found the facts, adjudged guilt and levied punishment” does not meet the guarantees of the Seventh Amendment, according to the Fifth Circuit.
Verizon also paid and appealed to the U.S. Court of Appeals for the Second Circuit, which rejected its challenge because the court concluded that Verizon could have gotten a jury trial by declining to pay.
