Supreme Court Appears Poised to Lock in Limits on FCC Fines (1)

Telecommunications companies appeared poised to secure new restrictions on the power of the Federal Communications Commission to impose fines, after a US Supreme Court argument involving AT&T Inc. and Verizon Communications Inc.

In a 85-minute session Tuesday, the justices said concessions made by the Trump administration during the litigation would reduce the force of so-called forfeiture orders issued by the FCC. Companies have long treated those orders as demanding immediate payment, but the administration and the FCC now say businesses can await the outcome of a jury trial and won’t suffer any legal consequences in the meantime.

“It seems like you’ve won on the law going forward, one way or the other,” Justice Brett Kavanaugh told the lawyer representing AT&T and Verizon.

The court agreed to hear the case as a test of the constitutional right to a jury trial and a potential extension of a 2024 decision that cut the ability of agencies to levy fines through in-house proceedings. AT&T and Verizon are seeking a declaration that the FCC system is unconstitutional, a step the court could stop short of taking if it concludes the changes are sufficient.

AT&T and Verizon are seeking to recoup the tens of millions of dollars they paid after the FCC said they had illegally shared access to customers’ location data and failed to take adequate measures to protect against unauthorized disclosure.

Each company received an order saying that it was “liable for a monetary forfeiture” and that payment “shall be made” within 30 days. AT&T was assessed $57 million and Verizon nearly $47 million.

Both companies paid the fine and then sought review at a federal appeals court, as they are allowed to do under the 1934 Communications Act. The companies say they would have preferred a jury trial at a federal district court, but that would have meant refusing to pay and then waiting as long as five years for the Justice Department to sue to collect.

Shifting Stance

The companies’ lawyer, Jeffrey Wall, told the justices that carriers never choose to wait for a lawsuit given the practical consequences of being at odds with the FCC for such a long stretch.

“If your main regulator says that you are violating the law, you can’t let that hang over your head indefinitely,” Wall said.

Justice Department lawyer Vivek Suri on Tuesday tried to downplay the effect of the forfeiture orders, saying they don’t represent binding demands for payment. He told the justices that the FCC can’t try to collect a fine, add interest or punish a company for not immediately paying.

“We do not believe the FCC can use the orders themselves or the failure to pay until a court orders payment against a party,” he said.

Several justices said that position amounted to a shift for the government, which had previously said forfeiture orders had legal consequences for accused companies.

“You’re running as far and as fast from that idea as you possibly can,” Justice Neil Gorsuch told Suri.

Justice Clarence Thomas later said the orders didn’t appear to contain any disclaimer to say they aren’t binding. When Suri confirmed that assessment, Gorsuch quickly asked whether the government should change the wording of the orders.

“I think that we would have avoided this litigation potentially if we had done so,” Suri responded. “So it might be a good idea.”

One lingering question is whether AT&T and Verizon will be able to recoup what they paid. Kavanaugh suggested the companies were duped by the FCC — and should get their money back.

“You think you were misled into paying the money without getting the jury trial by what the government had in the orders,” Kavanaugh told Wall. “And I think that’s a serious problem.”

The court will rule by July.

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

(Updates with excerpts from argument starting in ninth paragraph.)

To contact the reporter on this story:
Greg Stohr in Washington at gstohr@bloomberg.net

To contact the editors responsible for this story:
Elizabeth Wasserman at ewasserman2@bloomberg.net

Steve Stroth

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