Verizon Makes Jarkesy Argument in Seeking SCOTUS Review of Data Fine
The U.S. Supreme Court appears more likely than not to grant cert to Verizon in its challenge of a September decision by the U.S. Court of Appeals for the 2nd Circuit upholding a $46.9 million fine against the carrier for violating FCC data rules (see 2509100019), experts said. They also agreed that SCOTUS is often difficult to predict. In August, the D.C. Circuit upheld a similar fine against T-Mobile (see 2508150044), while the 5th Circuit earlier rejected a fine imposed on AT&T (see 2504180001).
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The case addresses an issue raised in SEC v. Jarkesy, which found that when the SEC seeks civil penalties against a defendant for securities fraud, the Seventh Amendment entitles the defendant to a jury trial, and the agency must bring the action in federal court.
The 5th Circuit’s decision in favor of AT&T cited Jarkesy, while the other two panels dismissed those claims. “There is no Seventh Amendment problem here, because Verizon could have gotten” a jury trial, said the 2nd Circuit decision by Judge Alison Nathan. “The remedial structure” of the Communications Act also “differs significantly from the securities statutes that the Supreme Court considered in Jarkesy,” she wrote.
Kristian Stout, innovation policy director for the International Center for Law & Economics, said the circuit split “is a classic posture for an issue to entice SCOTUS to take the appeal, particularly given [that] the jurisprudence underlying that split needs to clarify a recent change from SCOTUS itself.”
The circuit split “opens up the road” to SCOTUS review but doesn’t mean the court will grant cert, said Recon Analytics’ Roger Entner. The court could also send the case back to the 2nd Circuit for further review, he said. Two lawyers familiar with the case agreed it's impossible to predict with certainty what cases SCOTUS will hear.
Free State Foundation President Randolph May said SCOTUS is likely to take the case. “This Supreme Court is willing, if not anxious, to take up issues of fundamental importance that concern the proper role of administrative agencies in our tripartite system of government,” he said in an email. “That’s what the Verizon case, primarily involving the Seventh Amendment right to a jury trial, is all about.”
In its appeal, Verizon framed the case as raising issues related to Jarkesy. In that decision, SCOTUS “reasoned that civil monetary penalties designed to punish or deter a wrongdoer -- rather than to restore the status quo -- are a classic remedy at common law, and a defendant is generally entitled to a jury trial before such remedy is imposed,” Verizon said.
The FCC “scheme at issue here mirrors the SEC scheme rejected in Jarkesy in every material respect,” the carrier argued. The FCC ordered Verizon to pay “a forfeiture penalty based on the alleged failure to safeguard customer data ... There can be no doubt that the remedy is punitive and thus legal, and that the underlying cause of action is akin to common-law negligence. So this should have been an easy case under Jarkesy.”
The 2nd Circuit didn’t suggest -- “and it is unclear whether the government still contends -- that the FCC’s action for forfeiture penalties here falls outside the Seventh Amendment,” Verizon said. “Instead, the court’s defense of the FCC’s penalty scheme rests on the argument that a jury trial in a potential after-the-fact collection action can rehabilitate a deficient administrative order adjudicating liability, calculating damages, and compelling payment within 30 days.” The petition argued that “as a matter of history, precedent, and common sense, the Seventh Amendment is not so easily avoided.”