The Supreme Court on Thursday rejected a challenge by AT&T and Verizon to the constitutionality of the process that the Federal Communications Commission uses to impose sanctions for violations of federal telecommunications laws. By a vote of 8-1, with only Justice Clarence Thomas dissenting, the justices agreed with the FCC in FCC v. AT&T that the process – under which the agency can issue an order finding a company liable and instructing it to pay a penalty – does not violate the right to a jury trial guaranteed by the Seventh Amendment.
The challenge came after the FCC issued orders assessing penalties of $57 million against AT&T and $47 million against Verizon for mishandling confidential customer location data. At that point, the companies had two options. They could ask a federal appeals court to review the FCC’s order, using a deferential standard. Or they could wait to see whether the FCC asked the Department of Justice to bring a lawsuit against them to enforce the penalties. Both companies chose the first avenue and argued (among other things) in the courts of appeals that the FCC’s enforcement procedures violated the Seventh Amendment.
The U.S. Court of Appeals for the 5th Circuit agreed with AT&T and threw out the FCC’s order, while the U.S. Court of Appeals for the 2nd Circuit ruled against Verizon. The Supreme Court chose early this year to weigh in, and on Thursday it issued a ruling in favor of the FCC.
In a 14-page opinion, Chief Justice John Roberts explained that the Seventh Amendment “‘preserves’ the right to trial by jury in ‘Suits at common law’” and “applies in all proceedings, whatever their ‘peculiar form,’ in which ‘legal rights’ are to be ‘settled.’” However, Roberts continued, the Seventh Amendment does not indicate when the trial by jury must occur. Rather, he wrote, the Constitution “requires only that, before legal rights and obligations are conclusively ‘ascertained and determined,’ a party has the chance to insist that a jury make the ‘ultimate determination of issues of fact.’”
Following these principles, Roberts said, the Supreme Court has upheld determinations that may be reviewed later in a jury trial, with the jury taking a fresh look at the facts of the case. The proceedings that the companies are challenging, Roberts wrote, “fit comfortably within these precedents.” The FCC’s orders did not require the companies to pay the penalties and therefore did not resolve the companies’ legal obligations, he stressed. Moreover, he added, before the government could require the companies to pay those penalties, it would have to bring a lawsuit in a federal court and “prove its case to a jury.” “At day’s end,” Roberts concluded, “a forfeiture order … is simply the Commission’s own determination. Its only legal effect is to enable the Department of Justice to file a suit to recover for the carriers’ suspected violations.”
Roberts also rejected the companies’ argument that they should be entitled to a jury before the orders are entered because those orders “cause reputational and practical harms.” He pointed to the text of the Seventh Amendment, stating that it “applies only to suits ‘where the value in controversy shall exceed twenty dollars’” – and not to cases in which there is no financial harm at issue. But in any event, Roberts added, although any litigant’s reputation could conceivably be harmed “in the preliminary stage of a legal proceeding,” such as the filing of a complaint against them “trigger[ing] negative press,” “this has never been thought to pose a Seventh Amendment problem.”
Roberts similarly rebuffed the companies’ contention that the FCC’s enforcement procedures violated the unconstitutional conditions doctrine, the idea that “the Government may not effectively deny constitutional rights by making it too costly to exercise them.” The companies had suggested that under the current scheme, they faced two unpalatable choices: pay the penalty and go to the court of appeals, which will review the FCC’s determination under a deferential standard; or refuse to pay the penalty and wait to see whether the DOJ will file an enforcement action, where they could have a jury consider their cases. In the court’s view, the unconstitutional conditions doctrine was “a poor fit for this case,” because the companies’ Seventh Amendment right to a jury trial does not attach until the Department of Justice brings an enforcement action, which it “is not required to pursue.” As a result, Roberts reasoned, the companies’ right to a trial by jury may never “attach in the first place.” “The carriers’ argument is thus something like a criminal defendant arguing that his right to trial by jury is infringed when the prosecutor decides to dismiss the indictment before trial.”
In his seven-page dissent, Thomas agreed with the majority that if the FCC’s orders are not binding, and if the government would have to make its case from scratch if the DOJ brings a lawsuit to enforce an order, the rule that the court articulates in its opinion on Thursday “should govern future proceedings.” But he argued that it was a different story when the FCC issued the orders at the center of this case to AT&T and Verizon in 2024. “If AT&T and Verizon ignored the orders and the Government brought an enforcement action,” he suggested, those lawsuits would not have resembled the ones that the FCC now promises. Instead, he said, courts declined to provide such trials, and “[m]any did not allow challenges to the Commission’s legal determinations, even on appeal, no matter how erroneous they were.” In fact, he observed, “when AT&T and Verizon paid their penalties, no carrier had ever received a jury trial” in this kind of enforcement action. Thomas also questioned whether the companies would have actually known that they were not required to pay over $100 million in penalties.
“Today,” Thomas concluded, “the Court punishes AT&T and Verizon for complying with a government order that they in good faith believed was obligatory, diligently preserving their objection to that order, and then litigating that objection so effectively as to cause the Government to change its position years later. I respectfully dissent.”
