Blog Post
Jarkesy
& the FCC’s ALJ Process
Jul 17, 2024
By all accounts, the closing days of the U.S. Supreme
Court’s 2023 term resulted in a flurry of landmark decisions that will shake
the U.S. regulatory status quo—including communications policymaking—for
decades to come. While most attention is rightly being focused on Loper Bright Enterprises v. Raimondo, the
Court’s ruling in Securities And Exchange Commission v. Jarkesy should
not be overlooked. If logically extended, the Jarkesy ruling
could influence the use of Administrative Law Judges (ALJs) at the Federal
Communications Commission (FCC) or spur a new Congress to demand reforms. For
anyone caught in the FCC’s ALJ vortex, or who believes in fair processes from a
federal agency, this is good news.
Without a doubt, challenges to the administrative state can
be complex and time-consuming. Any resulting disruption can lead to less
efficiency and wasted resources, at least in the near term. Yet the Jarkesy challenge
was necessary to ensure that rights embedded in the Constitution, highlighted
by Justice Kavanaugh at oral argument and Justices Gorsuch and
Thomas in their concurring opinion, are secured for the
American people, rather than the government in all its various forms.
At its heart, the Jarkesy decision is
about the rule of law. It reinstates fundamental checks on agency procedures
and reaffirms the principles of the Bill of Rights, specifically the Seventh
Amendment. In sum, a 6-3 majority of the Court found that Mr. Jarkesy was
unconstitutionally denied his right to a trial by jury when the SEC assigned
the case to its own ALJ.
ALJs generally function as in-house courts that adjudicate
disputes, determine facts, and assess penalties for rule violations. In the
FCC’s case, while the ALJ process is used sparingly, its structure—as is the
case at other agencies—is decidedly unfair for those caught in its web. The
FCC’s ALJ is selected by the agency’s chair, is not required to follow standard
evidentiary rules, has no constraints on the timing of decisions, regularly
affirms the views of the chair (for whom he/she works), and limits success in
any appeal to the full Commission. If it started from scratch, Congress would
be hard pressed to design a construct more tilted in favor of the house and
against the accused. Even the FCC as an institution has generated doubt about
the value of the ALJ process by advancing more paper hearings that are
resolved by the full Commission, which is only slightly better.
The built-in functional imbalance of the ALJ process at the
FCC doesn’t tell the whole insidious story. The larger problem is that the very
threat of invoking an ALJ hearing is used as a tool to bludgeon parties and
dissuade them from even pursuing their legal rights. Without any time limits
for rendering decisions, the accused are likely to be left twisting in the wind
without ever seeing a hint of a final resolution, much less having the chance
to appeal. Admittedly, courts can move slowly too, but they tend to expedite
proceedings when deadlines approach and offer timelines that can assuage
financial markets. In light of its inherent untimeliness, the ALJ process often
is intended to be used as an extraction tool or kill switch when it is
triggered by the FCC. Numerous examples demonstrate this malfeasance, but one
only needs to look at its use in the Standard General (SCGI Holdings III)/Tegna application from
last year to be sufficiently outraged. In that case, the ALJ process facilitated the agency’s
desired outcome—killing a proposed acquisition—without the agency ever issuing
a final decree that could have been reviewed and challenged.
Critics likely will argue that the FCC’s failings, if any,
are a matter for Congress to resolve and unaffected by Jarkesy. The
Court anchored its ruling in the common law, that is, whether the civil
penalties sought by the SEC were comparable to those in place under common law
prior to the ratification of the Seventh Amendment’s protection of the right to
a jury trial in the late 1700s. Similarly, the Court seemed to set aside the
issue of administrative or regulatory penalties under an exception created by
precedents. But the Court dismissed the notion that use of the exception was to
be expansive, and it firmly rejected the view that “the Government need only
identify some slight advantage to the public from agency adjudication to strip
its target of the protections of the Seventh Amendment.”
In any event, there is likely a universe of FCC ALJ actions
captured by Jarkesy’s umbrella. Consider the situation in a merger
application in which the applicant is accused of lack of candor or
misrepresentation. While the applicant may be found unqualified to hold a
license or subject to penalties for violating certain rules, the party may also
be subject to penalties for a fraud-like claim, not unlike those at issue
in Jarkesy.
Arguably, some activities may be deemed beyond Jarkesy’s
bounds requiring a connection to the Seventh Amendment’s common law jury trial
entitlement. But don’t the Constitution and other statutory provisions protect
individuals facing a threat to “life, liberty, or property” by ensuring they
have, as Justice Gorsuch put it, “a jury, an independent judge, and traditional
procedures designed to ensure that anyone caught up in our judicial system
receives due process”? Thankfully, some of the Justices have provided a hint of
the law’s possible future development. Justice Thomas has issued several opinions suggesting a revision of
the public and private rights division. Likewise, Justice Gorsuch’s concurrence
in Jarkesy looked to the Fifth Amendment’s Due Process Clause
protection, opining that “public rights are a narrow class defined and limited
by history.”
Perhaps the next relevant case will allow the Court to
expand upon these lines of thinking. Nevertheless, little in Jarkesy itself
appears to resolve the FCC’s larger ALJ issues identified above. How does a
court provide due process when the FCC assigns a case to an ALJ to stall beyond
an applicant’s ability to maintain a challenge? The appropriate remedy rests
with Congress, which could time-limit the review of certain license transfer
applications or other matters assigned to an ALJ. Alternatively, it could allow
an applicant to seek court intervention after a certain period of delay.
Perhaps the cleanest option is also the most appropriate: Congress simply could
abolish the FCC’s ALJ process altogether.
In the end, the Court’s Jarkesy decision
provides a useful reminder of the requisite fairness due the American people
from their government. Hopefully, the courts or Congress will take the next
steps to apply this lesson to any remaining ALJ authority at the FCC.
Note from the Editor: The Federalist Society takes no
positions on particular legal and public policy matters. Any expressions of
opinion are those of the author. We welcome responses to the views
presented here. To join the debate, please email us at info@fedsoc.org.
