Supreme Court Upholds Federal Communications Commission's Enforcement Authority

In its recent decision in FCC v. AT&T, the United States Supreme Court upheld the Federal Communications Commission’s enforcement authority. By an 8-1 vote, the Court rejected challenges by AT&T and Verizon that the FCC’s enforcement regime violated their right to a jury trial under the Seventh Amendment to the U.S. Constitution. The Court found that, because the Communications Act permits parties to have their day in court after an FCC forfeiture proceeding, but before they are required to pay any fine, the FCC’s enforcement regime satisfies the Seventh Amendment.

Background

The Seventh Amendment to the Constitution states: “In Suits at common law . . . the right of trial by jury shall be preserved . . .” As explained previously, in a 2024 case called Jarkesy v. SEC, the Supreme Court examined the interplay between the Seventh Amendment and federal agency in-house enforcement actions. There, the Supreme Court held that a Securities and Exchange Commission (SEC) in-house enforcement action for securities fraud violated the defendant’s Seventh Amendment right to a jury trial.

The FCC’s enforcement structure, however, differs from the SEC’s in one important aspect, namely what happens after the agency issues a Forfeiture Order. For the SEC, the agency’s findings are binding. But for the FCC, after the agency issues a Forfeiture Order, the target can either (1) pay the fine and appeal it to the appropriate federal Court of Appeals, or (2) refuse to pay the fine, forcing the FCC to refer the matter to the U.S. Department of Justice, which then brings a civil suit for a trial de novo in federal district court. This second option is not available to targets in SEC enforcement actions.

The Decision

Relying on this distinction, the Supreme Court determined that the FCC’s enforcement processes provide enforcement targets with a right to a jury trial, satisfying the Seventh Amendment. Specifically, the Court determined that the FCC’s Forfeiture Orders do not result in final determinations of either the facts or the parties’ legal obligations. Rather, the FCC, working through the Department of Justice, must prosecute a civil trial in federal court to obtain a final determination of the facts and legal liability – from a jury – before an enforcement action becomes final and binding. The Forfeiture Order itself does not create an obligation to pay. Only a jury trial does that.

Implications

Telecommunications, technology, and media companies that find themselves as targets of FCC investigations should, at all stages of an investigation, from initial investigations through notices of apparent liability and forfeiture orders, weigh their options to respond carefully. The Court’s decision makes clear that the FCC must overcome considerable hurdles, both internally within the agency and then in a federal court jury trial, before it can achieve a verdict that finds a party liable for violating the communications laws. And the FCC will rarely know the Department of Justice’s willingness to pursue a potential enforcement matter before a Forfeiture Order is issued. Even after a Forfeiture Order is adopted, non-payment may still be an option, unless the Department of Justice determines to pursue the matter in federal district court.

Although the Court’s finding that the FCC ultimately must bring an action in federal court brings greater clarity to the burdens the government faces to establish legal liability, these processes are not cost-free for the target to an investigation. It may still cost significant time and money to respond to an initial FCC letter of inquiry, to contest an FCC notice of apparent liability, and, where necessary, to participate as a defendant in a federal court trial. Weighing the costs of taking these steps against the likelihood that the FCC and Department of Justice are willing to spend the resources needed to pursue a court case will warrant careful consideration. Companies will also want to balance these costs against the possibility of engaging in settlement discussions with the agency, particularly if reputational harm is a significant concern.

Longer-Term Considerations

The Court’s decision raises a bigger-picture question – does the FCC’s enforcement regime make sense or is it ripe for Congressional reform? That is, if the FCC needs to obtain a court verdict to successfully bring an enforcement action, what is the reason for continuing to require notices of apparent liability and forfeiture orders? Would it be more efficient to permit the FCC to work directly with the Department of Justice at the front-end, or to permit the FCC to bring actions in court themselves?

If you have questions about FCC enforcement developments, please contact Jeremy Marcus in Lerman Senter’s Broadband, Spectrum, and Communications Infrastructure Practice Group.