HWG LLP Client Alert Update: (PDF)
By Rakesh Patel, Jason Neal, and Jocelyn Aqua
On June 4, 2026, the United States Supreme Court rejected arguments from AT&T and Verizon (the Carriers) that the Federal Communications Commission’s issuance of forfeiture orders for monetary penalties violates the Seventh Amendment right to a trial by jury. Writing for the Court in an 8-1 decision, Chief Justice Roberts explained that an FCC forfeiture order issued under 47 U.S.C. § 503(b)(4) does not implicate the Seventh Amendment’s right to a trial by jury because the forfeiture order does not “create an obligation to pay” and does not “reflect the ultimate determination of any fact.” Before the government can collect on such an order, it must prove its case in federal court in a trial de novo, where the regulated party may insist that a jury decide disputed facts.
The practical result is significant for the FCC, but with some important limitations. The FCC’s existing forfeiture penalty architecture remains in place, and its familiar process of issuing forfeiture orders may continue largely unchanged for monetary penalties pursued under Section 503(b)(4). At the same time, the Court’s rejection of the Carriers’ Seventh Amendment arguments turns on the premise that forfeiture orders have limited legal effect: they do not themselves obligate payment, they do not definitively decide legal issues, and they do not deprive the recipient of the ability to contest the FCC’s factual and legal conclusions in a later enforcement action.
For companies subject to FCC oversight, the decision counsels against treating a forfeiture order by itself as the end of the road. A recipient must still evaluate business, reputational, regulatory, and litigation risks, including the possibility that DOJ will pursue collection and that nonpayment may prolong public uncertainty. But the Court’s reasoning confirms that, at least for Section 503(b)(4) monetary forfeitures, the forfeiture order itself does not finally decide the company’s legal obligation to pay. That distinction should be central to how regulated parties assess response strategy, preserve arguments, and prepare for possible litigation.
We also note that these cases arose from high-profile FCC enforcement actions over carriers’ handling of sensitive location data, and the majority opinion recounts both how cell-site location information can reveal a detailed picture of subscribers’ movements and how gaps in oversight of third-party location-based services led to misuse. That backdrop underscores that, even as the Court cabins the legal effect of forfeiture orders, the decision leaves the FCC’s ability to police location-data and other CPNI practices firmly intact.
The Court Emphasized That FCC Forfeiture Orders Do Not Themselves Obligate Payment
The majority’s decision rests on the legal effect of a forfeiture order. Although Section 503 uses mandatory-sounding words—including that the Commission may “determine,” “assess,” and “impose” a forfeiture—the Court read those terms in the context of the overall statutory scheme. In that scheme, the FCC cannot execute on a forfeiture order, seize assets, obtain a lien, impose interest for nonpayment, or otherwise collect the penalty on its own. The Commission also may not use the mere existence of an unresolved forfeiture order to the recipient’s prejudice in later FCC proceedings.
That limitation on the use of an unresolved forfeiture order raises important questions under the Debt Collection Improvement Act of 1996 (DCIA), 31 U.S.C. § 3711 et seq. The DCIA generally requires federal agencies to refer delinquent debts to the Treasury Department for collection through administrative offset, tax refund offset, and credit bureau reporting. But the Court’s holding that an FCC forfeiture order does not create an obligation to pay—and that the recipient incurs no penalties or interest for nonpayment—strongly suggests that an unpaid FCC forfeiture is not a “debt” under the DCIA unless and until a federal court orders payment in a Section 504 enforcement action. Regulated parties that decline to pay therefore appear to have a strong basis to resist FCC or Treasury use of DCIA collection mechanisms before a judicial determination of liability. The Court’s statement that the Commission “is powerless to visit any adverse consequences on a regulated party who receives a forfeiture order” reinforces that conclusion and creates a basis to challenge any Treasury referral or offset before a Section 504 judgment.
Thus, in the Court’s view, a Section 503(b)(4) forfeiture order functions more like a prerequisite to suit than a final adjudication. The order authorizes the Department of Justice to bring a civil collection action under 47 U.S.C. § 504(a), but it does not itself settle the recipient’s obligation to pay. The Court compared this type of preliminary step to other statutory conditions precedent to suit, such as the requirement that the Equal Employment Opportunity Commission issue a right-to-sue letter before a plaintiff files a discrimination suit against an employer. The Seventh Amendment, the Court held, does not require a jury at that preliminary stage.
The Court rejected the Carrier’s argument that reputational or practical consequences from a public forfeiture order are enough to trigger the Seventh Amendment. Although it acknowledged that preliminary legal proceedings may cause reputational harm, the Court reasoned that such effects do not transform a nonbinding administrative order into an adjudication of legal rights requiring a trial by jury. In other words, reputational harm may be relevant to business strategy and public communications, but it was not enough to change the constitutional analysis.
A De Novo Enforcement Action in Court Should Permit a Party to Contest All Factual and Legal Conclusions From the FCC
The decision is also important for what happens after a regulated party declines to pay. The Court described a Section 504 enforcement action as a true trial de novo. For purposes of that trial, the FCC’s factual findings “have no effect”; the case proceeds as if the Commission had not found any facts at all. The government must prove the alleged violation in court, and the jury gets the last word on disputed facts before any monetary penalty can be collected.
The Court further indicated that de novo review includes the Commission’s legal conclusions. That point is especially important after the Supreme Court foreclosed broad deference to agency interpretations of statutes (in general in Loper Bright Enterprises v. Raimondo and in enforcement proceedings in McLaughlin Chiropractic v. McKesson). A regulated party facing a Section 504 enforcement action should be able to challenge not only what happened, but also whether the FCC correctly interpreted the statute or rules, whether its theory of liability fits the governing law, and whether the alleged violation supports the amount sought.
Those observations may influence how parties litigate and evaluate settlement posture before and after receiving a notice of apparent liability or forfeiture order. The FCC’s order will remain important as a statement of the agency’s factual and legal view and as the procedural step that permits DOJ to sue, and so any implications related to the FCC’s public release of its factual findings should continue to be carefully assessed. But in a de novo enforcement action, the court is not reviewing the FCC’s work for substantial evidence or arbitrary-and-capricious error, as it would in an Administrative Procedure Act case. It is deciding the case itself. That distinction could shape discovery, expert proof, motions practice, and the presentation of both liability and penalty issues to a jury.
Important questions remain unresolved. The Court did not, for example, provide a detailed roadmap for how Section 504 enforcement actions should proceed, what role the forfeiture order would play in district court proceedings, or how courts should structure jury determinations concerning the amount of any forfeiture. Those issues may become more important if more regulated parties elect not to pay immediately and instead wait for DOJ to decide whether to bring a collection action.
Other FCC Enforcement Issues Remain Open, With Less Impact from This Decision
The Court’s decision resolved the Seventh Amendment issue presented by the split between the Fifth Circuit on one hand and the Second Circuit and D.C. Circuit on the other hand, but it did not decide every question raised by the underlying FCC enforcement actions. The Second Circuit case before the Court, and a similar case in the D.C. Circuit, had rejected challenges to the FCC’s continuing-violations theory and related issues concerning the scope of the Communications Act. The Supreme Court’s decision leaves those conclusions untouched. But if no monetary liability attaches until the government prevails in a de novo trial, the practical significance of the FCC’s views on those legal questions may be different in later collection litigation than in ordinary appellate review of agency action.
Interestingly, the Court noted that it expressed no view on the carriers’ separate argument that the language of the particular forfeiture orders at issue misled them into paying. Regulated parties receiving future forfeiture orders should therefore look closely not only at the amount assessed and the Commission’s reasoning, but also at the order’s language regarding payment, review, and the consequences of nonpayment.
Regulated parties should also recognize the limits of the decision: It addresses the FCC’s ability to issue administrative forfeiture orders seeking monetary penalties under Section 503(b)(4), but it does not necessarily answer how courts will treat other FCC tools, including equitable remedies, conduct requirements, license revocation or modification, conditions on authorizations, or the withholding of Universal Service Fund support. The constitutional and statutory analysis may differ when the agency action at issue does more than serve as a prerequisite to a later collection suit.
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HWG LLP’s cross-disciplinary telecommunications practice, privacy practice, and issues and appeals practice advise clients on federal and state legislative and regulatory proceedings, company compliance, and related litigation matters. Please contact the authors for more information. This advisory is not intended to convey legal advice. It is circulated publicly as a convenience and does not reflect or create an attorney-client relationship.