In a landmark decision issued on April 17, 2025, the U.S. Court of Appeals for the Fifth Circuit vacated a $57 million forfeiture order imposed by the Federal Communications Commission (FCC) against AT&T. The court held that the FCC’s in-house adjudication process violated AT&T’s constitutional rights, specifically referencing the Supreme Court’s 2024 decision in SEC v. Jarkesy.
The SEC v. Jarkesy Precedent
In SEC v. Jarkesy, the Supreme Court ruled that when the Securities and Exchange Commission (SEC) seeks civil penalties for securities fraud, defendants are entitled to a jury trial under the Seventh Amendment. The Court emphasized that such actions are “legal in nature” and resemble common law fraud, thus requiring adjudication in federal courts rather than through administrative proceedings.
Implications for FCC and Other Federal Agencies
The Fifth Circuit’s application of Jarkesy to the FCC’s enforcement mechanisms signals a broader judicial skepticism toward administrative adjudications that impose civil penalties without jury trials. Federal agencies, including the FCC, may now be compelled to:
- Reevaluate Enforcement Procedures: Agencies must assess whether their current processes align with constitutional requirements, particularly concerning the right to a jury trial.
- Shift to Federal Court Proceedings: For cases seeking civil penalties, agencies might need to initiate actions in federal courts, ensuring defendants’ rights are preserved.
- Review Delegated Powers: Agencies must scrutinize the extent of discretion granted to them by Congress, ensuring it doesn’t violate the nondelegation doctrine.
Connection to Telnyx’s $4.5 Million NAL Dispute
The FCC’s recent Notice of Apparent Liability (NAL) proposing a $4.5 million fine against Telnyx for alleged robocall violations is under intense scrutiny. Telnyx contends that the FCC’s action constitutes “regulation by enforcement,” arguing that the agency’s approach lacks transparency and due process.
The Fifth Circuit’s decision in the AT&T case bolsters Telnyx’s position, suggesting that the FCC’s in-house adjudication processes may infringe upon constitutional rights. This precedent could influence the outcome of Telnyx’s dispute and prompt the FCC to reconsider how it is approaching active and future enforcement actions and strategies. Indeed, it may even prompt FCC Chairman Carr to take the unprecedented step of rescinding the NAL in its entirety.
Conclusion
The Fifth Circuit’s ruling marks a significant shift in the judicial landscape, emphasizing the necessity for federal agencies to uphold constitutional protections in their enforcement actions. Entities subject to regulatory oversight should remain vigilant and consult legal counsel to navigate these evolving challenges.
For more information or to discuss how these developments may affect your organization, please contact your assigned Relationship Partner or reach out to Jonathan Marashlian at jsm@commlawgroup.com.
