By John Kruzel and Andrew Chung
WASHINGTON, April 21 (Reuters) - The U.S. Supreme Court is set on Tuesday to hear a dispute involving fines imposed by the Federal Communications Commission on major U.S. wireless carriers for their alleged failure to safeguard customer data in the latest case to reach the justices challenging the powers of a U.S. regulatory agency.
The legal fight concerns whether the FCC's assessment of tens of millions of dollars in penalties against carriers such as Verizon Communications
and AT&T - before the companies had their day in court - exceeded the agency's authority under the U.S. Constitution.
Republican President Donald Trump's administration is defending the FCC's in-house financial penalty system.
The dispute marked the latest case to test whether a federal agency's internal enforcement arrangement violates provisions of the Constitution ensuring a defendant's right to a jury trial after the Supreme Court in 2024 curbed the power of in-house proceedings at the Securities and Exchange Commission.
The FCC case stems from nearly $200 million in fines that the agency imposed in 2024 against wireless carriers after concluding that the companies had unlawfully sold access to customer location data to third parties without securing users' consent.
The penalties included an $80 million fine to T-Mobile; a $12 million fine to Sprint, which T-Mobile acquired in 2020; a $57 million fine to AT&T; and a nearly $47 million fine to Verizon Communications.
Verizon and AT&T paid the fines. The companies also filed court challenges that eventually led to a split among federal appellate courts over the legality of the FCC's in-house procedure for imposing the penalties, known as forfeiture orders.
The New York-based 2nd U.S. Circuit Court of Appeals upheld the FCC's fine against Verizon. The Constitution permits the FCC to provide an initial penalty assessment as long as an accused party can challenge the government's collection efforts in court, the 2nd Circuit ruled, prompting Verizon's appeal to the Supreme Court.
In AT&T's case, the New Orleans-based 5th U.S. Circuit Court of Appeals ruled that the FCC's initial assessment of wrongdoing and a fine deprived the company of its constitutional right to a jury trial. That ruling prompted the FCC to appeal to the Supreme Court.
In the government's defense of the FCC's in-house system, Justice Department lawyers argued on behalf of Trump's administration that the agency's assessments are not binding. If the government were to bring an enforcement action in court, it would allow the companies to make their case before a jury, the lawyers argued in court papers.
The wireless carriers, for their part, said that the FCC's system impermissibly moves in-house proceedings that belong in court, depriving the companies of their right to a jury trial. The FCC's initial assessments, they added, inflict reputational harm before the accused have had their day in court.
The Supreme Court, which has a 6-3 conservative majority, has taken a narrow view of federal agency power in several major decisions in recent years.
The court in its 2024 SEC ruling rejected as unconstitutional that agency's in-house enforcement of laws protecting investors against securities fraud. The 6-3 ruling, powered by the court's conservatives, said that agency proceedings seeking penalties for fraud that are handled by the SEC itself instead of in federal court violate the Constitution's Seventh Amendment right to a jury trial.
In a victory for the FCC, the Supreme Court in a 6-3 ruling last year endorsed the way the agency funds its multi-billion-dollar program designed to expand phone and broadband internet access to low-income Americans and other beneficiaries.
(Reporting by John Kruzel; Editing by Will Dunham)
