The wireless giants objected to the government’s “fine-now-trial-later” scheme, but the high court ruled that no such system existed.
WASHINGTON (CN) – Ruling against the airwaves giants, the Supreme Court handed a victory to the Federal Communications Commission on Thursday, upholding a key tool for enforcing consumer protection rules governing the airwaves.
AT&T and Verizon alleged that the agency had created a “penalty-now-trial-later” system that required the companies to pay fines before charges could be tried in federal court. But the judges ruled that such orders from the FCC were not legally binding.
“The orders at issue did not discharge the carriers’ legal obligations because, simply put, they did not create an obligation to pay,” Chief Justice John Roberts, a George W. Bush appointee, wrote in the court’s opinion. “And the orders did not reflect a final determination of any fact because, before the carriers could be forced to pay, the government was required to prove its case to a jury.”
Justice Clarence Thomas, an appointee of George HW Bush, issued a single dissent, arguing that the carriers were under the impression that the fines were enforceable and that refusing to pay deprived them of the availability of future litigation.
“Today, the court condemns AT&T and Verizon for complying with a government order that they in good faith believed to be binding, diligently maintaining their opposition to that order, and then raising that objection so effectively as to cause the government to reverse its position years later,” Thomas wrote.
AT&T and Verizon jointly face more than $100 million in penalties for selling customer data to a third party that provides a location-finding service to law enforcement officials. CARRIER asked the high court help overturn these fines by challenging the FCC’s authority to issue such orders.
Six decades ago, Congress amended the Communications Act to authorize the FCC to seek monetary forfeiture for certain violations. First, the commission issues a notice of liability, giving the recipient an opportunity to respond. The agency then issues a forfeiture order.
AT&T and Verizon said the scheme involved the same Seventh Amendment violation as the Securities and Exchange Commission’s penalty proceedings, which the judges was found illegal two years ago.
But the FCC defined forfeiture orders as no more than a regulatory prerequisite. The judges seemed to agree during oral arguments in Aprilcomparing warrants with traffic tickets or criminal indictments.
Thursday’s rulings reiterated such comparisons. Roberts described the orders as analogous to a right-to-sue or exhaustion motion, stating that they were a prerequisite to a Justice Department lawsuit because the government itself was powerless to collect any fines before trying its case before a jury.
AT&T and Verizon also argued that forfeiture orders cause reputational and practical damages. Roberts said such concerns apply to any legal proceeding.
“Filing a complaint can cause negative press,” Roberts wrote. “An indictment may also be filed against a criminal defendant. And prosecutors or prosecutors may dismiss the complaint or indictment before the case proceeds to trial. Yet this was never intended to present a Seventh Amendment problem.”
Roberts declined to express a view on AT&T and Verizon’s argument that they were tricked into paying regardless, creating an opening for the carriers to seek relief such as refunds from a lower court.
But Thomas cited those arguments as a reason the court should have stayed its hand. He said they should have allowed AT&T and Verizon the chance to proceed under the correct meaning of the law.
“Regardless of what the commission will do in the future, or what the court believes it should have done all along, we granted certiorari in cases arising from two orders the commission addressed to AT&T and Verizon in 2024,” Thomas wrote. “At that time, neither the commission nor the courts respected the boundaries that the court describes today.”
Subscribe to our free newsletters
Our weekly newsletter Closing arguments provides the latest on ongoing trials, major litigation and decisions in courts around the US and the world, while monthly Under the lights feeds legal dirt from Hollywood, sports, Big Tech and the arts.
