A potential federal court circuit split is developing over the constitutionality of the enforcement authority of federal agencies such as the Federal Communications Commission (FCC).
The possible split is rooted in circuit courts’ varying interpretations of the Supreme Court’s 2024 SEC v. Jarkesy opinion. In Jarkesy, the Supreme Court held that an agency’s adjudication of an enforcement action against a defendant violates the defendant’s Seventh Amendment right to a jury trial when the action is analogous to a common law claim that would typically be resolved by an Article III court. The Supreme Court then addressed the public rights exception to the Seventh Amendment right to a jury trial, which would allow agencies (rather than courts) to adjudicate their enforcement actions. The Court found that the public rights exception applies only to matters unknown to common law that historically would have been determined by the executive and legislative branches and could be assigned to an agency for adjudication. Because the allegations against Jarkesy were for (securities) fraud, the Court found them analogous to common law fraud and of the type of action historically resolved in a court. Thus, the Court determined that the SEC violated Jarkesy’s right to a jury trial.
Post-Jarkesy, appellate courts have begun applying the Supreme Court’s decision in differing manners, at least with regard to the public rights exception. In April 2025, the Fifth Circuit Court of Appeals found in AT&T, Inc. v FCC that the FCC’s enforcement procedures violated AT&T’s Seventh Amendment right to a jury trial. The case involved whether AT&T properly protected customer data under the Communications Act. The Fifth Circuit held that the case implicated the Seventh Amendment because the underlying matter was akin to common law negligence. The court further found that the public rights exception did not apply to the FCC’s procedures, rejecting the FCC’s argument that claims against common carriers fell within this exception because they have public interest obligations. The court found that applying the exception simply because common carriers generically have public interest obligations would transform the narrow exception into one allowing Congress to bypass adjudication in Article III courts broadly. The court also found that courts have regularly adjudicated negligence claims against common carriers.
The Third Circuit Court of Appeals took a different approach to interpreting the public rights exception to the Seventh Amendment in its July 15, 2025 Axalta Coating Systems LLC v. FAA decision. This case involved a fine the FAA issued against Axalta for failing to comply with technical prescriptions for safely packaging paint for air transport. (The court did not need to analyze whether the Seventh Amendment applied, because the FAA conceded that it did; the court only needed to address the public rights exception.) The Third Circuit found that the public rights exception applied to the FAA’s enforcement action because the underlying FAA technical standards did not draw on the common law and instead provided technical prescriptions that were unknown to common law. In finding that the public rights exception applied, the court focused on the underlying technical rules at issue (for example, rules for packing paint for air transport) and not on the associated standard of care to comply with the rules (for example, reasonableness).
These decisions highlight the uncertainty surrounding whether courts will find allegations of violations of federal agency rules require a jury trial or fall within the public rights exception. As we highlighted in our previous client alert on this topic, additional cases are working their way through other appellate courts. These decisions will shed light on the breadth of a circuit split on a party’s right to a jury trial under the Seventh Amendment in response to a federal agency enforcement investigation. We also note that, on July 16, 2025, the FCC petitioned the Fifth Circuit Court of Appeals for a rehearing before the full court. And, in the Third Circuit case, one of the judges issued a concurring opinion to specifically point out the difficulties in applying the public rights test post Jarkesy and expressly hoping “that the Supreme Court will soon take this accreted jumble and order it into a rule that is coherent, consistent, and true to the Constitution’s original safeguards.”
We are continuing to monitor legal developments in this evolving area. Technology, media, and telecommunications companies that are the subject of federal agency investigations should assess whether these and other forthcoming court decisions provide leverage for settlement of FCC inquiries and enforcement actions.
