Jarkesy May Block FCC Enforcement Without Congressional Action

If courts rule that the U.S. Supreme Court’s SEC v Jarkesy decision means a wide swath of FCC enforcement proceedings require jury trials, the agency may not be able to pursue any enforcement without congressional authority, former FCC Office of General Counsel and Enforcement bureau veterans said Wednesday.

The FCC lacks statutory authority to commence enforcement actions with jury trials in federal court and would need Congress to give it the authority to do so, DLA Piper partner Peter Karanjia, a former FCC deputy general counsel, said during a panel discussion at Wilkinson Barker. “They're going to need a statutory fix before they can actually get people to trials,” added Wilkinson Barker partner Suzanne Tetreault, a former deputy chief of the Enforcement Bureau and former FCC deputy general counsel, added. “So we're going to be simultaneously seeing them finding out when a trial is needed and trying to get the authority to do it.”

The panel discussion was based on Karanjia's recent CTIA-sponsored white paper about Jarkesy (see 2407220048). In the paper, Karanjia argued that courts will likely rule that most FCC enforcement proceedings will fall under Jarkesy. CTIA also sponsored a similar white paper from Wiley partner and former FCC General Counsel Tom Johnson earlier this year (see 2405030066). CTIA also sponsored a recent post from former FCC General Counsel and HWG partner Christopher Wright on how FCC enforcement policies may need to change as a result of the recent SCOTUS ruling on Chevron deference. CTIA didn’t comment about why it sponsored those items.

The decision appears to require any agency enforcement proceeding that involves a monetary civil forfeiture to go before a jury, which would cover most FCC enforcement actions, Karanjia said. While the ruling allows for narrow, "public right" exceptions to the requirement for jury trials, FCC enforcement actions don’t resemble excepted proceedings like regulation of foreign commerce or administration of public lands, Karanjia said. FCC enforcement cases resemble many of the historic common law proceedings that require juries, Karanjia added. FCC enforcement actions against companies over data breaches resemble negligence claims, for example. “You could imagine a court saying, 'Well, I see a pretty clear analog to a traditional common law claim.'”

The FCC couldn’t get around the decision by pursuing nonmonetary forms of punishment against companies because it lacks the authority, Karanjia said. Entities could argue that even an FCC order admonishing a company for a violation triggers a jury trial, he said. Tetreault expects every entity responding to a notice of apparent liability saying it requires a jury trial. Depending on how lower court rulings affect its scope, Jarkesy will likely increase pressure on the FCC to negotiate for settlements, because other options are more uncertain, Tetreault said. That in turn increases leverage for enforcement targets in those negotiations.

Tetreault and Karanjia said the courts will likely reject arguments that the FCC process already allows jury trials because companies have the option to decline to pay their forfeiture, which could lead to DOJ pursuing the funds in court. The agency has made that argument previously, and Tetreault said she expects it to crop up soon in FCC proceedings against wireless companies over data breaches. The courts, Karanjia said, are likely to reject it because DOJ doesn’t pursue all forfeitures, and has a five-year statute of limitations on doing so. “That essentially means that if you're the enforcement target, you’re sort of hanging in some form of limbo, where your jury trial right hinges on some action that DOJ may or may not take. Potentially years later.”

If the FCC needs to go to Congress to seek authority to pursue cases in court, it would represent an opportunity to reform the FCC enforcement process, said HWG Chair John Nakahata, a former FCC chief of staff. Tetreault said Congress should require that the agency become more transparent and face additional oversight in its enforcement process, similar to the SEC. “I would love to see some kind of deadline on rulings,” she said. “There’s no reason for people to be in limbo for years.”