Supreme Court arguments make it clear that FCC fines are "nonbinding"

The carriers paid their fines and then challenged them in the circuit appeals courts, where judges’ panels ruled on the cases. The carriers could have obtained jury trials if they refused to pay and the government sued for collection. The 2nd Circuit appeals court said in its ruling against Verizon that this option satisfies the right to a jury trial. Wall argued that the federal government, by calling the forfeiture orders nonbinding in court filings, effectively conceded after the Supreme Court case began that the FCC scheme violates the Seventh Amendment right to a jury trial. Wall said the forfeiture orders themselves and FCC regulations describe the fines as compulsory, not as optional. “I don’t think they should be just able to slap a nonbinding label on the remedy and somehow avoid the entire Seventh Amendment analysis… What’s so odd to me is we’re straining to read the statute in a very unnatural way, all for purposes of avoiding a constitutional violation that the government effectively acknowledges,” he said. Wall said that until a recent government brief in this case, “it had occurred to no one for decades that these orders are not binding. It’s not what their regulation says. it’s not what their guidance says, and it’s not a natural reading of the statute.” “My clients need to get their money back because whatever the scheme is the government’s defending now, it doesn’t bear any resemblance to the scheme everybody understood in the lower courts,” Wall also said. The government brief said that adopting the carriers’ argument would eliminate the FCC’s main enforcement tool. “If the FCC cannot pursue forfeitures against carriers, and no other agency can perform that role, significant rules concerning matters ranging from privacy to national security might go effectively unenforced,” it said. Arguing for the government, Assistant to the Solicitor General Vivek Suri said the FCC did not mislead carriers. Suri pointed out that the FCC’s AT&T forfeiture order said that “after the Commission issues a forfeiture order, AT&T is entitled to a trial de novo in federal district court before it can be required to pay the forfeiture… That AT&T theoretically might elect to pay the forfeiture voluntarily does not diminish its statutory right to a trial de novo in federal district court.” “We think this operates much like an indictment,” Suri said today. “It authorizes a lawsuit to go forward. It does not itself impose a final penalty. That is done only after the jury trial.” Suri also said that “Mr. Wall’s entire case is premised on the idea that the Department of Justice might never file a suit. But if that happens, then there’s no suit at common law, there’s no right to a jury trial.” Justice Clarence Thomas observed that the FCC decision’s ordering clauses state, “it is ordered that AT&T is liable,” without a disclaimer in that section saying the order is nonbinding. Suri responded that the nonbinding nature is made clear elsewhere in the order. “Even if you don’t agree with that, the most we’d have to do is change the language of the order,” Suri said. “I think that we would have avoided this litigation potentially if we had done so, so it might be a good idea.” Kavanaugh said the carriers “were misled… into paying the money without realizing that [the government] would switch positions later and say, ‘oh by the way, you didn’t have to pay, you could have just waited for the charges to be brought and to get your de novo jury trial right.'” Suri disputed this characterization, saying the FCC has taken the position that its orders are nonbinding “since the 1970s.” In his rebuttal after Suri’s arguments, Wall said that “Mr. Suri is right that for a long time, the government has acknowledged that you can decline to pay and it would mean the government has to take you to court. But that is quite different from saying that you do not actually owe the amount that the government has assessed you.” Wall argued that this is a new position just recently taken by the government. The FCC has long had trouble collecting fines issued to certain entities, particularly those charged with violating robocall laws. Lacking the power to enforce forfeiture orders on its own, the FCC relies on the Justice Department for collections. But Wall said that “legitimate” companies always pay. The FCC issues “these forfeiture orders because they know legitimate parties pay 100 percent of the time,” he said. “If your main regulator says you are violating the law, you can’t let that hang over your head indefinitely. But to guarantee any judicial review, AT&T and Verizon have to give up the right to a jury trial. It is hard to imagine a clearer case of penalizing the exercise of a fundamental constitutional right.” Chief Justice John Roberts said that Wall appeared to be complaining about “a PR problem,” specifically that nonpayment would harm the carriers’ reputation. “In terms of the substantive legal issue, though, you are not obligated to pay until you get a jury,” Roberts told Wall. Such a jury trial would have been de novo, meaning it wouldn’t simply determine whether the carriers failed to pay the fines—it would also determine whether the carriers violated the law in the first place. Justice Elena Kagan said that after an agency’s determination of liability, “a court could start all over again and say that [the agency] was wrong,” and the “entire litigation of whether the agency is right can occur and that litigation can occur with a jury.” Justice Sonia Sotomayor told Wall, “The problem with your starting proposition is [the FCC’s] findings don’t create a legal obligation. The legal obligation is created when a jury finds that you committed the act.” Justice Ketanji Brown Jackson told the carriers’ lawyer, “Your argument is that you don’t have the right to invoke a jury trial unless the government comes after you in terms of the enforcement proceeding, and I’m really struggling with why you aren’t happy that the government is not coming after you. If the government is abandoning its claim by not seeking enforcement of it, I don’t know why you would need the right to a jury trial, and why isn’t that a good thing for you?” Wall argued that when a company’s primary regulator “tells us we owe $100 million… you can’t sit around and do nothing.” He said an unpaid FCC fine could harm a company in future FCC proceedings. The FCC could “use the fact that we didn’t pay and are a law-breaker when it considers character or persistent disregard of the law, statutory circumstances that the commission can consider under a host of different provisions that deal with things like licenses and spectrum,” Wall said. One question is whether the FCC ran afoul of the Supreme Court’s June 2024 ruling in Securities and Exchange Commission v. Jarkesy, which held that “when the SEC seeks civil penalties against a defendant for securities fraud, the Seventh Amendment entitles the defendant to a jury trial.” Wall argued that the FCC’s strategy “would carve a huge hole in Jarkesy.” Agencies with schemes like the one ruled illegal in Jarkesy could simply describe their forfeiture orders as nonbinding even if regulated companies “effectively have to comply,” he said. Suri countered that the two agencies’ enforcement powers were different, as the SEC could deduct penalties from tax refunds or garnish wages. If the SEC went after a non-payer in court, a trial “would be limited to the issue of whether you had paid the penalty,” without any “review of whether the underlying order was correct,” he said. SEC fine decisions also resulted in interest accruing immediately, whereas interest on FCC fines only accrues after a jury makes a determination, he said. “For the FCC, the only way to get to the penalties is to file a collection suit where you do get a jury trial,” Suri said.