Gray Proctor was quoted in a Law360 article titled “Justices' FCC Review Could Reshape IRS Penalty Disputes.”
The Supreme Court has granted certiorari in a pair of consolidated cases addressing whether the recent decision in SEC v. Jarkesy applies to penalties imposed on AT&T and Verizon by the FCC. At issue is whether the Seventh Amendment guarantees the companies a jury trial before the FCC declares that they have violated statutory consumer privacy requirements and become liable for a penalty.
With the Government apparently conceding that Jarkesy guarantees a jury trial at some point in the proceedings, “[i]t's the timing aspect" that’s at issue in AT&T and Verizon, Gray said. "Have we had the kind of ‘adjudication’ that requires the jury process” after the FCC determines a penalty, “or has nothing happened until the FCC goes to district court and tries to collect it" in the trial de novo?
The FCC penalty regime is markedly different from tax and tax penalty enforcement. The penalties AT&T and Verizon face must be sued for and collected in de novo proceedings in the district court, without prepayment. When taxes or penalties are assessed, on the other hand, the resulting liability can be collected immediately, using a whole host of summary enforcement tools.
The Fifth Circuit is considering United States v. Sagoo, No. 25-11271, where the trial court relied heavily on the AT&T opinion currently under review to hold that Jarkesy requires a pre-assessment jury trial for federal bank account report (“FBAR”) penalties. As in AT&T and Verizon, in Sagoo, the Government conceded that Jarkesy guaranteed a jury trial at some point. But FBAR penalties can be collected summarily through administrative offset under 31 USC § 3716 without the involvement of a judge or jury. It is not clear that a defeat in AT&T should lead to a reversal in Sagoo as well, because assessment of an FBAR penalty is more clearly an adjudication of constitutional magnitude.
Kostelanetz attorneys Megan Brackney, Victor Suthammanont, and Gray Proctor have suggested that it may be the Due Process Clause that guarantees that Jarkesy’s jury trial should come before tax penalties are assessed. The article is entitled “Does Due Process Require More Than Refund Jurisdiction Over TaxPromoter Penalties?”
You can read the complete “Justices' FCC Review Could Reshape IRS Penalty Disputes" article here.
About Gray
Gray is an experienced and accomplished appellate advocate in civil and criminal cases. He also maintains a trial support practice focusing on dispositive motions and other key issues likely to lead to an appeal.