D.C. Circuit Judges Appear Skeptical of T-Mobile Data Fine Complaint
Questions from judges on the U.S. Court of Appeals for the D.C. Circuit appeared particularly pointed Monday, aimed at T-Mobile lawyer Helgi Walker of Gibson Dunn, as the court heard the carrier’s challenge of an $80 million FCC fine for allegedly not safeguarding data on customers' real-time location (see 2502190029). T-Mobile was also fined $12.2 million for violations by Sprint, which it later acquired.
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The 5th Circuit last month heard AT&T's argument against a $57 million fine that the commission imposed at the same time (see 2502030050). The FCC defended the fines, though current Chairman Brendan Carr opposed them as a commissioner (see (2404290044).
The FCC arrived at the fines by applying “an erroneous definition of customer proprietary network information that directly conflicted with everything it has said for the past 25 years,” Walker said. The lawyer acknowledged Carr's dissent, who said at the time that the FCC had “reached beyond its statutory authority.”
The more than $92 million in fines are in excess of a statutory cap, Walker argued. In addition, the fine violates the principle that the U.S. Supreme Court enunciated in SEC v. Jarkesy. In that case, SCOTUS found that when the SEC seeks civil penalties from defendants for securities fraud, the Seventh Amendment requires it to bring the action in court, where the defendant is entitled to a trial by jury (see 2406270063|).
Judge Florence Pan noted that if T-Mobile wanted a jury trial, it could have refused to pay the fine. But Walker said T-Mobile had to choose between paying the penalty under protest and appealing to the court or “doing nothing and being branded a delinquent debtor.”
“In this jurisdiction, you would get a hearing … of all issues, factual and legal,” Pan said. “We’re the D.C. Circuit, so if something could have happened in another circuit, why does that affect my analysis here?”
Judge Brad Garcia noted that even in the 5th Circuit, which operates under a different precedent, T-Mobile would have the right to a jury trial on factual issues. “It does seem that you still have a jury trial right there, in all the ways that matter,” he said.
“All the ways that matter include the constitutional violations, the statutory overreach, the penalty violations and the arbitrary and capricious problems that this court has before it today,” Walker replied.
Garcia said that under the FCC’s legal theory, civil penalties are what trigger the requirements for a jury trial, and reputation and other harms start with a collection action. “Why are they wrong?” he asked.
Walker said they're “wrong because in paragraph one of the T-Mobile order, the FCC ‘imposed’ a penalty on T-Mobile." The order requires that T-Mobile make payment within 30 calendar days, she said. “This wasn’t a casual suggestion.” T-Mobile had 60 days to decide whether to “forgo” an appeal to the D.C. Circuit or wait for a collection action, “where we might not have a full trial,” she said. “It’s significant because we have been told that we’ve broken law” and the FCC can use that finding “against us in other proceedings.”
Sprint and T-Mobile’s right to a jury trial wasn’t violated, said John Grimm, a lawyer representing the FCC. T-Mobile wasn’t required to pay a penalty, “which is the focus of Jarkesy, unless they first had a de novo [new] trial in district court,” he said. While the carrier decided to file a challenge in the D.C. Circuit, “that was their choice -- it was not mandated by the statute that they claim is unconstitutional.”
To get a trial, a company must waive the ability to seek review of all the commission’s legal decisions, Garcia said. “Why isn’t that a concern? It’s not exactly a free choice to go to a jury.”
The carriers want the D.C. Circuit to “essentially invalidate as unconstitutional a statute based on their concern about what a hypothetical future case in a different jurisdiction might look like,” Grimm said. The judges who will decide the case are Pan and Garcia, whom President Joe Biden appointed, and Karen Henderson, appointed by President George H.W. Bush.