Key Points
- The U.S. Supreme Court on Thursday ruled that the Federal Communications Commission has authority to issue financial penalties for rule violations.
- The decision upheld enforcement actions against AT&T and Verizon tied to consumer data privacy.
- The Court determined FCC forfeiture orders do not violate the Seventh Amendment because they are not final without judicial enforcement.
The U.S. Supreme Court has upheld the Federal Communications Commission’s (FCC) process for issuing monetary forfeiture orders, rejecting a constitutional challenge brought by AT&T and Verizon over penalties tied to customer location data practices.
In an 8-1 decision issued on Thursday, the high court ruled that the FCC does not violate the Seventh Amendment when it issues forfeiture orders without first providing companies with a jury trial. The decision resolves a split between two federal appeals courts and preserves a key enforcement mechanism used by the FCC against regulated communications companies.
The case stemmed from FCC investigations into whether AT&T and Verizon failed to adequately protect customer location data. The Commission concluded the wireless carriers violated communications laws and rules requiring them to safeguard sensitive customer information, then assessed penalties of around $57 million against AT&T and $47 million against Verizon.
Both companies paid the penalties while challenging the FCC’s enforcement process in court. AT&T prevailed before the Fifth Circuit, which vacated the Commission’s order after finding the agency’s process violated the company’s jury-trial rights. Verizon lost before the Second Circuit, which found the FCC’s order did not itself compel payment and therefore did not violate the Constitution.
The Supreme Court sided with the FCC, holding that forfeiture orders issued under the Communications Act do not conclusively determine a company’s legal obligations. The Court reasoned that an FCC forfeiture order does not automatically require payment, does not allow the Commission to collect the money on its own and does not impose additional penalties if a company refuses to pay.
Instead, if a recipient does not pay voluntarily, the FCC must refer the matter to the Department of Justice, which may file a civil collection action in federal court. That action is tried de novo, meaning the court reviews the matter anew rather than simply enforcing the Commission’s findings. In that setting, the company may seek a jury determination of disputed factual issues.
Chief Justice John Roberts wrote for the majority, concluding that the FCC’s administrative process fits within longstanding Seventh Amendment precedent because a jury trial remains available before legal rights and obligations are finally determined.
The decision also distinguishes the FCC’s forfeiture process from the Securities and Exchange Commission enforcement system struck down by the Supreme Court in SEC v. Jarkesy. In that case, the Court found the SEC’s administrative penalties violated the Seventh Amendment because they were immediately enforceable and left factual determinations with the agency. By contrast, the FCC cannot independently execute on its forfeiture orders.
Justice Clarence Thomas dissented from the majority opinion.
The ruling is significant for the FCC, which has faced questions about its enforcement authority following recent Supreme Court decisions limiting the power of federal agencies. While the decision affirms the Commission’s ability to issue forfeiture orders, it also affirms that those orders remain preliminary unless paid voluntarily or enforced through a separate court action.
While the case applied mainly to telecoms like AT&T and Verizon, it could have an impact on television and radio broadcasters with FCC-issued licenses because it leaves the legal framework for applying those penalties in place, subject to judicial review.
The Supreme Court’s order on the matter can be viewed here.
