The Supreme Court has sided with the Federal Communications Commission in a high-stakes regulatory case, ruling that the agency’s power to impose fines on phone carriers is consistent with the Constitution. The decision in Federal Communications Commission v. AT&T provides a narrow victory for administrative adjudication, but it sidesteps the broader constitutional questions that have divided lower courts.
A Technical Win for the FCC
The dispute began after the FCC issued massive forfeiture orders against AT&T and Verizon for mishandling customer cell phone data. The companies paid the penalties and then sued, arguing that the administrative process violated their Seventh Amendment right to a jury trial.
Two years ago, the Supreme Court delivered a blow to agency power in SEC v. Jarkesy, ruling that agencies cannot adjudicate certain private rights without involving a federal court. That decision raised alarms about the future of administrative enforcement.
The justices in the AT&T case accepted the Trump Administration’s argument that the Communications Act preserves the right to a jury trial through a specific procedural mechanism. Under the statute, a carrier is not forced to accept the agency’s finding. They can simply refuse to pay the fine. The government must then file a suit in federal court to collect the penalty, where it must prove the case de novo. This means the government must prove a violation from scratch, without relying on the administrative findings made earlier.
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The Court noted that while a forfeiture order may harm a company’s reputation, such harm is not unique to administrative proceedings. Most preliminary decisions made by agencies carry consequences, and the statute provided a clear outlet for judicial review.
Justice Clarence Thomas was the only dissenter. He agreed with the majority on the statutory interpretation but argued that applying the Court’s reading of the law retroactively was unfair. Lower courts and the parties involved had not previously understood the Act to guarantee a de novo trial before the AT&T decision.
The Public Rights Exception
The case highlighted the difficulty of handling the “public rights” exception to the Constitution’s Article III. This exception allows agencies to adjudicate certain claims without involving a federal court, as long as the subject matter is “essentially commercial” or “public.”
Before the Jarkesy ruling, most regulatory cases fell comfortably within this exception. That ruling constricted the category of public rights, forcing courts to look for claims that closely resemble those available in common law when the Constitution was ratified. This distinction has proven tricky for judges to apply to complex modern regulations.
In AT&T, the Court avoided the public rights analysis entirely. It assumed the claim was private and subject to a jury trial, but pointed to the statutory language that allowed the carriers to force the government into a full federal court proceeding.
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What This Means for Other Agencies
While the ruling protects the FCC’s administrative power, it relies heavily on the unique structure of the Communications Act. Most regulatory statutes do not provide for a de novo trial. Instead, when an agency imposes a penalty, the loser typically appeals to a federal court that must only determine if the agency’s factual findings are supported by substantial evidence.
Under that standard, the government does not have to prove the case from scratch. An agency can rely on its own administrative record to secure a penalty. Because the statute in AT&T worked differently, the Supreme Court was able to save the FCC’s enforcement scheme without validating the agency’s adjudicative process more broadly.
If the Supreme Court wants to achieve stability in this area of regulatory law, it must soon clarify the contours of the public rights exception. The justices have signaled they will take up a new case next term involving the Department of Labor. That case will address whether the agency can adjudicate its own claims for back wages against employers who underpay immigrant workers.
The upcoming hearing offers the Court a chance to define the limits of agency power and resolve the confusion that has followed the Jarkesy decision.
