2nd Circuit Appears Less Likely Than 5th to Overturn FCC Data Fine
Judges on the 2nd Circuit U.S. Court of Appeals appeared skeptical Tuesday of claims that Verizon had the right to a jury trial before facing a $46.9 million fine from the FCC for data violations. Judges from the ultraconservative 5th Circuit previously held that a similar fine against AT&T was unconstitutional. The 5th Circuit found that the AT&T fine violated the Seventh Amendment, which provides the right to a jury trial, and so was unconstitutional (see 2504180021).
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Verizon was entitled to a jury trial before facing the penalty, “and we agree that an after-the-fact trial doesn’t solve the problem,” said Scott Angstreich of Kellogg Hansen, who argued the case for Verizon. “An unpaid forfeiture order imposes concrete harm,” but Verizon’s only alternatives were to demand a jury trial or seek redress at the appellate level, Angstreich said.
“I have little to add to the 5th Circuit’s persuasive reasoning, which I’d encourage the court to follow,” he said.
“I understand those consequences, and they strike me as severe,” said Judge Alison Nathan. “It’s hard for me to understand exactly how they interface with” the right to a jury trial, she said. The 5th Circuit decision “doesn’t bind us, and it’s not our law.”
Senior Judge Gerard Lynch suggested that if DOJ never pursues payment of the penalty, Verizon effectively wins.
“There’s a reason repeat players don’t flout forfeiture orders,” Angstreich replied, noting the many areas that put the carrier before the FCC, including its pending buy of Frontier. “We are before the FCC constantly,” he said. “We have license applications or renewals [pending], constantly.”
“We live in a world where the FCC has said … since 1997 [that] unpaid forfeitures can be used against the party who doesn’t pay them in future proceedings,” Angstreich said.
He also questioned the logic of the FCC decision, noting that Verizon was fined after device-location information from only 11 customers was accessed without authorization by a single party, Securus (see 2502070020). “In a haystack of tens of millions of needles, we missed those 11,” he said. “We think that was a wrong decision to make."
FCC Chairman Brendan Carr, then a commissioner, and Commissioner Nathan Simington dissented on the data fines against Verizon and other carriers, though the FCC and government are defending the orders in the courts (see 2504250062). On Monday, Carr reiterated the FCC’s disagreement with the 5th Circuit decision ruling against the constitutionality of the agency’s authority to issue monetary forfeitures (see 2504280038).
“We think the 5th Circuit got this one wrong,” said Scott Noveck, who represented the FCC in the argument. “There’s no Seventh Amendment problem here because Verizon had the opportunity to request a de novo jury trial in federal district court before it could be made to pay any penalty.”
The question is whether Verizon “can’t trigger any kind of trial at all, [and] they have to wait for the government in its good time ... to choose to come after them,” Lynch said. In the meantime, the FCC would treat Verizon as “scofflaws,” he said.
Noveck said that isn’t accurate. The FCC doesn’t judge a company based on a forfeiture that hasn’t been adjudicated, he said. The “underlying facts” can play a role in FCC decisions “if there’s a question about willful and repeated conduct.”
Verizon could have done more to protect customer data, Noveck said. Verizon audited the companies that it was providing location information, “but those audits had two … obvious flaws,” he said: They “were unable to detect when a provider like Securus was just falsifying the consent records,” and Verizon “relied on self-reported data.” In addition, the carrier was unable to determine if data was being used for unauthorized uses, “which Securus was doing for four years without being detected.”