Supreme Court leans toward backing FCC fines against Verizon, AT&T

After concessions from the government about its limits, the Supreme Court appeared open to backing the Federal Communication Commission’s (FCC) setup for imposing massive fines at oral arguments on Tuesday.

The justices are reviewing more than $100 million in combined penalties against Verizon and AT&T over their use of customers’ location data. The companies say the process violated their 7th Amendment jury trial right.

But the FCC stresses its forfeiture orders aren’t binding. If a company doesn’t want to pay, it can ultimately still go to a judge and jury by forcing the agency to file a collection lawsuit.

“If the government has maintained the argument that it did below, you would have a good point,” Justice Clarence Thomas told the companies at the onset of the argument, “but the government seems to have walked away from that argument.”

The contours of the Supreme Court’s ruling remain unclear, but the shift left the companies urging the justices to still issue an opinion ensuring that FCC forfeiture orders don’t hang over their heads.

“Let’s remake it where it is not even a paper tiger, it’s truly just a piece of paper,” said Jeffrey Wall, their lawyer who leads law firm Sullivan & Cromwell’s Supreme Court practice.

Wall is also one of President Trump’s personal lawyers, working on appealing his New York criminal conviction. He previously served as Trump’s acting solicitor general.

The battle stems from the FCC’s fines against Verizon and AT&T for illegally sharing access to customers’ location data. The investigation was spurred by reports that a Missouri sheriff was ultimately able to get access to some of the data through a third party.

When the FCC finds a violation, it first issues a notice, and the company can respond. Next, the agency issues its forfeiture order. And then, a company can force the FCC to sue.

But Wall warned the companies suffer enormous consequences by virtue of simply being deemed a law-breaker by their main regulator. They can’t “sit around and do nothing,” he said.

“I wonder if, though, at the end of the day, you’re really just talking about a PR problem, right?” Chief Justice John Roberts pushed back. “You’re just saying there are big letters, the language said we did something bad, and that’s so everybody has to pay, so they don’t get, you know, bad PR.” 

“And I’m just wondering, in terms of the substantive legal issue, though, you are not obligated to pay until you get a jury.”

The case comes on the heels of the Supreme Court’s almost two-year-old decision invalidating the Securities and Exchange Commission’s (SEC) in-house civil fraud enforcement system for violating the constitutional jury trial right.

The government contends the FCC’s setup is distinguishable, so it can still survive.

Vivek Suri, arguing on behalf of the Justice Department on Tuesday, noted the SEC could deduct its penalties from someone’s tax refund or garnish their wages. 

“And, of course, there’s no path to a jury trial if it does that,” Suri said. “For the FCC, however, the only way it can get to the penalties is to file this collection suit where you do get a jury trial.” 

Justice Amy Coney Barrett likened the commission’s setup to an ordinary plea deal in criminal cases. 

“You have a choice. You can roll the dice and go and have a jury trial; otherwise, I’ll give you a sweetheart deal and you can forget all that,” Barrett said. 

“Well, that’s the same kind of choice in some ways that the carriers are facing here,” she added.