Data Fines Appear Headed to SCOTUS After 2nd Circuit Upholds FCC's Verizon Order
The U.S. Court of Appeals for the 2nd Circuit on Wednesday upheld a $46.9 million fine against Verizon for violating FCC data rules in a decision that could trigger the U.S. Supreme Court to take the case, given the current split in the circuits (see 2509100019). 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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There's “a clear circuit split on a constitutional issue relating to the role of administrative agencies in our regime characterized by a separation of powers,” emailed Free State Foundation President Randolph May. It takes only four votes for the court to grant certiorari, but “five to win on the merits, and I think it will be a close question.”
Judge Alison Nathan wrote in Wednesday's opinion that “the customer data at issue plainly qualifies as customer proprietary network information, triggering the Communication Act’s privacy protections.” A three-judge panel heard the case in April (see 2504290060).
In Verizon’s view, customer proprietary network information “essentially covers only customers’ call-location data, not their device-location data,” Nathan wrote. It would also “be perverse to grant greater statutory privacy protection to device-location data collected only for use by Verizon than to the same data collected for disclosure to third parties.”
The order “both soundly imposed liability and remained within the strictures of the penalty cap,” Nathan said. “Nothing about the Commission’s proceedings, moreover, transgressed the Seventh Amendment’s jury trial.” The 5th Circuit cited SCOTUS’ 2024 decision 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.
“There is no Seventh Amendment problem here, because Verizon could have gotten such a trial,” the 2nd Circuit panel said. “The remedial structure of the Communications Act differs significantly from the securities statutes that the Supreme Court considered in Jarkesy.”
The court also dismissed claims that the FCC fine was much higher than allowed under the law. Although Verizon and its supporters “are correct that determining Verizon’s total number of violations involves a question of statutory interpretation, they misidentify the relevant question.” The Communications Act doesn’t “specifically articulate what qualifies as a ‘single act or failure to act.’ Rather, the Act gives the Commission ‘the discretion’ to determine when to issue a forfeiture penalty against a carrier.”
In a circuit split, it’s “inevitable that this goes to the Supreme Court,” said Recon Analytics' Roger Entner.
Kristian Stout, innovation policy director for the International Center for Law & Economics, agreed that SCOTUS review is likely. “What’s especially notable is that two appellate courts have found the FCC’s process consistent with the Seventh Amendment, even after Jarkesy,” he said. “That suggests momentum behind the FCC’s position, but it also sets up exactly the kind of doctrinal conflict the court is inclined to resolve.”