Antitrust Law Daily Wrap Up, PRIVACY—5th Cir.: FCC’s location data-sharing forfeiture order against AT&T vacated, (Apr 21, 2025)

By Lynn Stanton, TR Daily

The order had imposed an over $57 million fine for violating the customer proprietary network information protections.

The U.S. Court of Appeals for the Fifth Circuit (New Orleans) has vacated the FCC’s 2024 forfeiture order fining AT&T, Inc., more than $57 million for violating the customer proprietary network information protections in section 222 of the Communications Act by “illegally sharing access to customers’ location information without consent and without taking reasonable measures to protect that information against unauthorized disclosure.” In a unanimous decision by a three-judge panel, the Fifth Circuit cited last year’s Supreme Court decision in Securities and Exchange Commission v. Jarkesy, which held that an SEC in-house enforcement action deprived parties of their Seventh Amendment right to a jury trial and that the SEC case “did not fall within the ‘public rights’ exception, which would let Congress assign certain matters to an agency instead of an Article III court,” the Fifth Circuit noted (AT&T, Inc., v. Federal Communications Commission and United States of America, No. 24-60223, slip op. at 8 (5th Cir. April 17, 2025)).

Then FCC Commissioner Brendan Carr, now Chairman of the agency, and Commissioner Nathan Simington dissented from the FCC’s forfeiture order against AT&T, as well as similar orders against the other major wireless carriers. T-Mobile US, Inc., has challenged the orders issued to it and Sprint Corp., which T-Mobile acquired, before the U.S. Court of Appeals for the District of Columbia Circuit. Verizon Communications, Inc., has challenged the order issued to it before the U.S. Court of Appeals for the Second Circuit (New York).

FCC Commissioner Nathan Simington has consistently dissented from FCC forfeiture orders since the Supreme Court ruling in Jarkesy.

The Fifth Circuit panel, in an opinion authored by Circuit Judge Stuart Kyle Duncan, noted that “[w]hile nothing is wrong in principle with providing location-based services, the Commission took issue with how AT&T protected its customers’ location data. To implement location-based services, AT&T contracted with ‘location aggregators,’ who collected customers’ location data. The aggregators, in turn, sold this data to service providers like Life Alert or AAA,” slip op. at 5.

“Beginning in May 2018, several news articles reported problems with AT&T’s (and other carriers’) location-based services programs. Put simply, it became clear-that some service providers were misusing or failing to protect customer location data. After learning about this, AT&T promptly terminated those providers’ access to the data. And by March 2019, AT&T stopped providing location data to all aggregators for use by any location-based service provider,” the court added, slip op. at 6.

Based on the news reports, the FCC’s Enforcement Bureau began the investigation that led to the forfeiture orders against the major wireless carriers.

The court found that the forfeiture order’s civil penalties were “the prototypical common law remedy,” which is the “more important consideration” in deciding the “threshold question” of whether the enforcement proceeding was “‘legal in nature,’ as opposed to one sounding in the realm of equity or admiralty,” slip op. at 9, quoting from Jarkesy.

As for the second consideration in deciding whether the proceeding was legal in nature, the Fifth Circuit disagreed with the FCC’s argument that “an action to enforce section 222 does not bear a ‘close relationship’ to any common law cause of action and that, as a result, the Seventh Amendment does not apply,” slip op. at 10.

“As AT&T argues, the section 222 action is analogous to common law negligence. The action punishes carriers for failing to take reasonable measures to protect customers’ personal data,” the court said, slip op. at 10.

“To be sure, the relationship between the section 222 action and a common law analogue is not as obvious as it was in Jarkesy. But ambiguity on this second consideration points us back to the ‘more important’ first consideration—remedy. Jarkesy, 603 U.S. at 123. As noted, section 222 imposes the archetypal common law remedy of money damages, which is ‘all but dispositive’ of the Seventh Amendment issue. Ibid.,” the Fifth Circuit said, slip op. at 12-13.

The court also rejected the FCC’s defense under the “public rights” exception.

“This narrow exception to Article III applies only to matters that ‘historically could have been determined exclusively by [the executive and legislative] branches.’ Id. [Jarkesy] at 128 (quoting Stern, 564 U.S. at 493). While the Supreme Court has not ‘definitively explained’ what divides public from private rights, it has pointed to ‘historic categories of adjudications’ occurring outside Article III. Id. at 131, 130. Examples include revenue collection, foreign commerce, immigration, tariffs, tribal relations, public lands, public benefits, and patents,” Judge Duncan wrote, slip op. at 13.

The FCC’s argument that “its enforcement action falls within the public rights exception because it involves common carriers …. would blow a hole in what is meant to be a narrow exception to Article III. Myriad enterprises might be said to implicate the ‘public interest,’” Judge Duncan wrote, slip op. at 14, adding that the common carrier doctrine was also “deeply rooted in common law,” slip op. at 15. Nor do the cases cited by the FCC “show that the public rights exception generally applies to common carriers,” he added, slip op. at 16.

The court also rejected the FCC’s argument that the Department of Justice could sue a carrier for failure to timely pay a forfeiture, thus giving the carrier “everything promised by the Seventh Amendment and Article III. We disagree. To begin with, by the time DOJ sues (if it does), the Commission would have already adjudged a carrier guilty of violating section 222 and levied fines. … The Commission cites no authority supporting the proposition that the constitutional guarantee of a jury trial is honored by a trial occurring after an agency has already found the facts, interpreted the law, adjudged guilt, and levied punishment.,” slip op. at 18-19.

“But put all that aside for a moment and consider another glaring problem. In a section 504 trial, a defendant cannot challenge a forfeiture order’s legal conclusions. As our court has explained, in a section 504(a) action, the district court is ‘limited to considering the factual basis for the agency action’ but not petitioner’s ‘legal arguments.’ Stevens, 691 F.3d at 622. So, even assuming an after-the-fact jury trial could potentially satisfy the demands of the Constitution, the one provided here amputates the carrier’s ability to challenge the legality of the forfeiture order,” it added, slip op. at 19.

“True, AT&T could challenge the Commission’s legal conclusions by doing what it did in this case—paying the forfeiture and seeking direct appellate review. See 47 U.S.C. § 402(a); see also AT&T Corp., 323 F.3d at 1084. But that only underscores the dilemma in which AT&T finds itself. If AT&T wants an Article III court to review the forfeiture order’s legality, it has to give up a jury trial. If it wants a jury trial, it has to defy a multi-million dollar penalty, wait for DOJ to sue, and, even then, relinquish its ability to challenge the order’s legality,” the court said, slip op. at 20.

Judge Duncan was joined in the opinion by Circuit Judge Cory Todd Wilson. Circuit Judge Catharina Hayes concurred in the judgment only but did not issue a concurring opinion.

In a statement responding to the court’s action, an AT&T spokesperson said, “We appreciate the Court’s careful review, and we agree with its constitutional conclusion that the FCC cannot assess hefty punitive fines without also providing the fundamental right to a jury trial.”

Also in a statement, CTIA said, “The court rightfully ruled that the FCC’s current enforcement processes do not ensure the Constitutional guarantees of due process and a jury trial. The decision highlights that the FCC and Congress should swiftly re-examine and modernize its enforcement processes.”

Companies: AT&T, Inc.

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