Supreme Court to Weigh FCC Power to Fine in New Regulatory Clash

The US Supreme Court will consider invalidating the Federal Communications Commission’s system for imposing financial penalties in a clash that could put fresh limits on the power of federal regulators.

The justices said Friday they will hear contentions from AT&T Inc. and Verizon Communications Inc. that they were deprived of their constitutional right to a jury trial when the FCC fined them more than $40 million apiece for alleged customer privacy violations.

The case gives the six-justice conservative majority a chance to extend a 2024 decision that cut the ability of agencies to levy fines without going to federal court. That ruling curbed the Securities and Exchange Commission’s use of in-house administrative law judges to handle fraud cases.

The Trump administration is defending the FCC’s adjudication system, saying it gives companies and individuals an adequate right to make their case to a jury before they have to pay any penalties. The administration is appealing a 5th US Circuit Court of Appeals decision that declared the rules unconstitutional in a case involving AT&T. Two other appeals courts have backed the FCC.

The 5th Circuit ruling “deprives the commission of one of its most important regulatory remedies and severely impairs the agency’s ability to enforce federal communications law,” US Solicitor General D. John Sauer, the administration’s top Supreme Court lawyer, argued in court papers.

The clash stems from FCC allegations that the nation’s largest wireless carriers illegally shared access to customers’ location data and didn’t take adequate measures to protect against unauthorized disclosure. In 2024 the commission imposed fines of $57 million on AT&T, $47 million on Verizon and $92 million on T-Mobile US Inc. The T-Mobile penalty included a $12 million fine against Sprint Corp., which T-Mobile acquired after the investigation began.

Courts Divided

AT&T and Verizon also urged Supreme Court review, though they asked the justices to strike down the system. AT&T said the divide among appeals courts had created “uncertainty over the legal status of commission forfeiture orders imposing massive civil penalties.”

The 1934 Communications Act offers two options for challenging fines imposed by the FCC through an administrative proceeding. Companies and individuals can pay the penalty and seek review at a federal appeals court. Alternatively, they can let the Justice Department sue to collect the money in federal district court, where the right to a jury trial applies.

In a 3-0 decision in the AT&T case, the 5th Circuit rejected the FCC’s contention that the latter option satisfied the Seventh Amendment jury-trial right.

“The commission cites no authority supporting the proposition that the constitutional guarantee of a jury trial is honored by a trial occurring after an agency has already found the facts, interpreted the law, adjudged guilt, and levied punishment,” Judge Stuart Kyle Duncan wrote for the panel.

The New York-based 2nd Circuit disagreed in the Verizon case, saying that no one has to pay a fine without a jury trial.

An FCC order “does not, by itself, compel payment,” Judge Alison Nathan wrote for the 3-0 panel. “The government needs to initiate a collection action to do that.”

In urging Supreme Court review, Verizon said companies can suffer “serious practical and reputational harms” even before they are forced to pay. Federal law gives the Justice Department five years to decide whether to pursue a collection suit.

The court will hear arguments, probably in April, and rule by July.

The cases are Federal Communications Commission v. AT&T, 25-406, and Verizon v. Federal Communications Commission, 25-567.

Photo: An AT&T store in New York. Photographer: Jeenah Moon/Bloomberg