156 F.4th 86
2d Cir.2025Background
- Verizon operated a location-based services program that sold device-location data collected via its wireless network to aggregators and third-party providers; contracts delegated notice/consent verification to those parties and an external auditor (Aegis) validated vendor-supplied consent records.
- A New York Times report revealed misuse: Securus (via intermediaries) accessed customer location data without valid consent; a sheriff accessed data by uploading irrelevant documents.
- After the report Verizon cut off Securus/3Cinteractive, paused new approvals, and later terminated the program, but continued selling location data to many providers for months.
- The FCC investigated and issued a Notice of Apparent Liability, then a forfeiture order finding Verizon violated 47 U.S.C. § 222 and 47 C.F.R. § 64.2010 for failing to reasonably safeguard customer proprietary network information (CPNI), imposing a $46.9 million penalty based on 63 continuing violations plus a 50% upward adjustment.
- Verizon paid the forfeiture and petitioned for review in the Second Circuit, challenging (1) statutory scope of § 222, (2) arbitrariness of the liability finding, (3) statutory cap on forfeiture amount, and (4) Seventh Amendment jury-trial rights.
Issues
| Issue | Plaintiff's Argument (Verizon) | Defendant's Argument (FCC/USA) | Held |
|---|---|---|---|
| Whether device-location data qualifies as CPNI under 47 U.S.C. § 222(h)(1)(A) | §222 protects only call-location data; device-location (including data-only customers) is not "location of a telecommunications service" | Device-location used/needed to provide wireless voice service and is provided "solely by virtue of the carrier-customer relationship," so it falls within §222(h)(1)(A) | Device-location data is CPNI; §222 applies. |
| Whether the FCC’s finding that Verizon failed to reasonably safeguard CPNI was arbitrary and capricious | The breaches were isolated; Verizon’s contractual and audit systems were reasonable and FCC applied a de facto strict-liability standard | FCC reasonably considered contractual delegation, auditor limitations, internal warnings, and Verizon’s delayed corrective measures; decision was supported by substantial evidence | FCC’s liability finding was not arbitrary or capricious. |
| Whether the forfeiture calculation exceeded the statutory cap (single act vs. multiple continuing violations) | Verizon had one set of flawed policies—at most a single ‘‘act or failure to act’’ capped at ~$2M | FCC has discretion to define unit of violation; each continued relationship with a third party constituted a separate continuing violation (63), within statutory delegation and reasoned agency judgment | FCC acted within its delegated authority; 63 continuing violations and the resulting forfeiture are lawful. |
| Whether Verizon’s Seventh Amendment right to a jury trial was violated by FCC proceedings under §503(b)(4) | In-house agency forfeiture without a jury trial is unconstitutional under Jarkesy-style analysis | Communications Act provides §504(a) trial de novo in federal court (including jury), and Verizon could have declined payment and demanded that trial; Verizon waived jury right by paying and seeking direct appellate review | No Seventh Amendment violation: Verizon had and waived the option for a §504(a) de novo jury trial. |
Key Cases Cited
- N.Y. State Telecomms. Ass’n, Inc. v. James, 101 F.4th 135 (2d Cir.) (context on FCC authority to regulate interstate communications)
- AT&T Corp. v. Fed. Commc’ns Comm’n, 323 F.3d 1081 (D.C. Cir. 2003) (procedural framework for FCC forfeiture review and collection actions)
- Cablevision Sys. Corp. v. Fed. Commc’ns Comm’n, 570 F.3d 83 (2d Cir. 2009) (standard of review for agency statutory and constitutional questions)
- Mizrahi v. Gonzales, 492 F.3d 156 (2d Cir. 2007) (interpretive principle on expansive meaning of "relating to")
- Prometheus Radio Project v. Fed. Commc’ns Comm’n, 592 U.S. 414 (2021) (arbitrary-and-capricious review principles for agency rulemaking/decisions)
- SEC v. Jarkesy, 603 U.S. 109 (2024) (Seventh Amendment limits on in‑house adjudication for legal claims seeking civil penalties)
- Loper Bright Enters. v. Raimondo, 603 U.S. 369 (2024) (courts' role in independently interpreting statutes delegating agency discretion)
- McLaughlin Chiropractic Assocs., Inc. v. McKesson Corp., 606 U.S. 146 (2025) (district-court review of agency statutory interpretations in enforcement proceedings)
- United States v. WIYN Radio, Inc., 614 F.2d 495 (5th Cir. 1980) (discussion of single vs. continuing violations distinction)