The Supreme Court heard oral argument last week on whether the Seventh Amendment's jury-trial guarantee applies when the Federal Communications Commission (FCC) imposes forfeiture penalties in administrative proceedings. As we explained in a prior alert, the government's principal defense is that the fined party can get a de novo jury trial on the underlying violation by refusing to pay the penalty because the government cannot collect without filing an enforcement action in federal district court. That argument appeared to have traction with several conservative and liberal justices, though some expressed concern that the government's characterization of the FCC orders as non-binding may have shifted during the litigation.
The argument showed a Court grappling with how to apply its decision two terms ago in Jarkesy, which held that the Securities and Exchange Commission's (SEC) use of in-house administrative proceedings to impose civil money penalties in a securities fraud case violated the Seventh Amendment. At argument, counsel for the government stressed that, unlike the SEC scheme at issue in Jarkesy, where an enforcement action in federal court to collect a penalty would not review the underlying order, under the FCC scheme, "there is a de novo jury determination of whether you violated the law in the first place." And he insisted that a carrier could lawfully decline to pay an FCC forfeiture penalty before such a court proceeding. In the government's view, the Seventh Amendment was satisfied because the carriers had no obligation to pay unless the government brought a civil suit where a de novo trial by jury would be available.
Counsel for the carriers, Jeff Wall, pushed back on that argument, stressing that the FCC had imposed more than $100 million in penalties without a jury trial through orders that the government had long treated as binding, leaving the carriers with no practical choice but to pay. But questions from some justices suggested that they were not persuaded by that argument. Chief Justice Roberts, for example, questioned whether the carriers "really just" had "a PR problem" with the forfeiture orders. Mr. Wall countered with an analogy to a parking ticket, which imposes an obligation to pay, even if the local government would still need to enforce that obligation. Chief Justice Roberts responded that even with a parking ticket, "if you don't pay, you do get a legal proceeding," a view that Justice Jackson later reiterated.
While several justices appeared open to the government's argument that Jarkesy should not extend to cases in which an agency issues a non-binding order and a de novo jury trial is available before any enforcement, some questions suggested a concern about how that principle should apply to the FCC orders in this case. Mr. Wall argued that until the government's Supreme Court briefing, "it had occurred to no one for decades that these [forfeiture] orders were not binding." Counsel for the government pushed back on that understanding and contended that the government had articulated the same interpretation throughout the litigation.
To the extent a majority of the Court believes that it would not have been clear to the carriers here that the FCC's orders were non-binding, the Court could grant relief for the carriers in this case, while still announcing a prospective interpretation of the statutory scheme that allows the FCC to issue non-binding forfeiture orders that can be collected only in a suit where a de novo jury trial is available. If the Court accepts that view, it could at least narrowly limit Jarkesy's application where agencies issue non-binding penalty orders that cannot be enforced absent a trial on the merits.
The consolidated cases are Verizon Communications Inc. v. Federal Communications Commission, No. 25-567, and Federal Communications Commission v. AT&T, No. 25-406.
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