Blog Post

Jarkesy & the FCC’s ALJ Process

Michael O'Rielly  

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.