A recent decision by the United States Court of Appeals for the Fifth Circuit, vacating a significant $57 million forfeiture order against AT&T, has sent ripples through the telecommunications industry and drawn responses from the Federal Communications Commission (FCC) in other ongoing court cases. This ruling, and the subsequent reactions, highlight critical questions about agency enforcement powers, constitutional rights, and the practical challenges businesses face complying with location-based regulations in an era of heightened data privacy.

The Fifth Circuit’s Landmark Ruling in AT&T, Inc. v. FCC

At the heart of the AT&T, Inc. v. FCC case was an FCC forfeiture order fining AT&T $57 million for violating section 222 of the Telecommunications Act by mishandling customer proprietary network information (CPNI). CPNI includes information relating to a customer’s location made available to the carrier by virtue of the carrier-customer relationship. Section 222 requires carriers to protect the confidentiality of CPNI and generally only use or disclose it with customer approval or as required by law. FCC regulations mandate carriers take reasonable measures to protect against unauthorized access to CPNI. The Commission found AT&T violated these rules, specifically citing failures to enforce safeguards against unauthorized access to location information and relying on third-party aggregators rather than enforcing safeguards itself.

AT&T challenged the FCC’s in-house adjudication process, arguing it violated their constitutional rights. The Fifth Circuit, guided by the Supreme Court’s decision in SEC v. Jarkesy, agreed with AT&T, finding that the FCC’s enforcement proceeding violated the company’s right to a jury trial and its right to adjudication by an Article III court.

The court reasoned that the FCC’s process qualified as a “suit at common law” primarily because the remedy imposed—civil penalties—is a “prototypical common law remedy” designed to “punish or deter,” not restore the status quo. The court found this remedy consideration to be “all but dispositive”. Furthermore, the court concluded that an action to enforce Section 222 is analogous to common law negligence, as the FCC’s analysis focused on whether AT&T acted “reasonable” in protecting customer data.

Crucially, the Fifth Circuit rejected the FCC’s argument that a potential “back-end” trial in federal district court under Section 504(a) of the Act satisfied constitutional requirements. The court noted that the FCC had already “adjudged a carrier guilty” and levied fines before any such trial. Moreover, in a Section 504 trial, a carrier can only challenge the factual basis of the order, not its legal validity. This placed carriers like AT&T in a Catch-22: challenge legality via direct appellate review and forgo a jury trial, or refuse to pay and risk a Section 504 trial where legality cannot be challenged.

The FCC Responds in Other Circuits

Following the Fifth Circuit’s AT&T decision, the FCC notified the U.S. Courts of Appeals for the District of Columbia Circuit and the Second Circuit about the ruling in unrelated cases involving Sprint/T-Mobile and Verizon, respectively. In letters to both courts, the FCC urged them not to follow the Fifth Circuit’s decision.

The FCC’s primary counter-argument is that its monetary forfeiture proceedings do not pose a Seventh Amendment problem because Section 504(a) allows carriers the opportunity to demand a de novo jury trial before the government can recover any penalty. The FCC cites Capital Traction Co. v. Hof for the principle that an initial judgment without a full jury trial is permissible if a subsequent de novo trial is available.

The Commission explicitly disagrees with the Fifth Circuit’s holding that Section 504 trials restrict challenges to factual issues, pointing to D.C. Circuit precedent that suggests otherwise. The letter to the Second Circuit notes that the Fifth Circuit’s premise is “in doubt” and that court has not adopted such a limitation. The FCC also dismisses concerns about “real-world impacts” like reputational harm while awaiting review, suggesting alternative legal avenues exist. Finally, the FCC reiterates its stance that these cases involve “public rights, not private rights with a common-law analogue,” and thus the Seventh Amendment does not apply.

Location Data, State Laws, and “Quiet Hours”

The AT&T case, rooted in the handling of customer location data (a form of CPNI), connects directly to a significant challenge facing businesses trying to comply with state-level telemarketing laws, particularly those imposing “quiet hours.” Recent testimony regarding Oregon’s House Bill 3865A, which aims to regulate text messages and includes quiet hour restrictions, highlighted this issue.

Industry representatives, including former FCC Commissioner Michael O’Rielly and the Ecommerce Innovation Alliance (EIA), testified that complying with state-specific quiet hours (like Oregon’s proposed 7:00 p.m. end time) based on a recipient’s location is “practically impossible” for businesses operating across state lines. The reason for this impossibility? Strong privacy protections, including the FCC’s enforcement actions regarding CPNI, mean wireless carriers no longer share real-time location data with third parties. Businesses sending text messages simply cannot know a mobile subscriber’s precise real-time location.

Using area codes to determine location is also unreliable and lacks industry consensus, with the EIA’s petition specifically asking the FCC about this question pending before the Commission in light of location privacy restrictions.

This technical inability to determine real-time location creates a major compliance burden, especially when state laws apply quiet hours to messages for which consumers have already given explicit consent. Unlike the federal standard (the TCPA) which primarily targets unsolicited messages, applying such restrictions to consented messages, combined with the location problem, “opens the door to frivolous lawsuits against legitimate businesses,” creating costly burdens.

Conclusion

The Fifth Circuit’s decision in AT&T v. FCC underscores a fundamental tension between agency enforcement and constitutional rights, particularly the right to a jury trial and Article III adjudication. The FCC’s pushback in other circuits signals this is an issue that will continue to be debated in the courts. Simultaneously, the inability for businesses to access real-time location data due to federal privacy regulations, including those related to CPNI, creates significant challenges for complying with location-based state telemarketing laws like quiet hour provisions. This regulatory landscape increases the risk of what industry groups describe as “frivolous litigation” against businesses attempting to engage legitimately with consenting consumers. As the FCC and the courts grapple with agency authority and constitutional limits, businesses are left navigating a complex and sometimes contradictory set of federal and state regulations, further complicated by privacy protections that make compliance with location-specific rules technically unfeasible.