Update: The 7th Amendment Right to a Jury Trial and FBAR Penalties

Key Takeaways

• A federal district court in U.S. v. Sagoo held that willful FBAR penalty assessments violated the Seventh Amendment right to a jury trial.
• The decision relied on the Fifth Circuit’s ruling in AT&T Inc. v. FCC, which the Supreme Court later reversed.
• The Supreme Court’s FCC v. AT&T decision may potentially limit Sagoo, but it does not necessarily eliminate Seventh Amendment challenges to FBAR penalties.
• A key issue is whether administrative FBAR penalty assessments prior to a jury trial violate the Seventh Amendment. 
• The decision in FCC v. AT&T may provide taxpayers with willful FBAR penalties other avenues to challenge the administrative assessments under the Seventh Amendment. 

Overview

A federal district court in North Texas significantly reshaped the FBAR litigation landscape in 2025 when it concluded that willful FBAR penalty assessments violated the Seventh Amendment right to a jury trial.  In U.S. v. Sagoo, 2025 WL 2689912 (N.D. Tex. 2025), the court held that the FBAR assessment procedures improperly allowed the government to act as “prosecutor, jury, and judge,” rendering the assessments unconstitutional.   

The government appealed the Sagoo decision to the Fifth Circuit.  See U.S. v. Sagoo, No. 25-11271 (5th Cir.) (appeal pending).  Because the district court in Sagoo relied on another Fifth Circuit decision in support of its decision, see AT&  v. FCC, 135 F.4th 230 (5th Cir. 2025), the government requested a stay of the appeal after the Supreme Court chose to review AT&T due to a circuit split on the reach of Jarkesy.  On June 4, 2026, the Supreme Court reversed the Fifth Circuit in FCC v. ATT, see 146 S. Ct. 1418, raising questions on how that decision would impact Sagoo.  This article discusses that issue.

U.S. v. Jarkesy: The Starting Point

Prior to discussing Sagoo and AT&T, it is important for the reader to understand the Supreme Court’s decision in SEC v. Jarkesy, 603 U.S. 109 (2024).  In Jarkesy, the Court held that the Seventh Amendment prohibited a government agency (there, the SEC) from imposing fraud penalties through an administrative process without making a jury trial available.  The Court emphasized that, before the government may lawfully impose penalties, the affected party must have access to a forum where a jury may decide the relevant issues associated with the penalty determination. 

AT&T v. FCC:  Post-Jarkesy Litigation

After Jarkesy, AT&T raised a Seventh Amendment challenge to the Telecommunications Act and a forfeiture order it received from the FCC.  See AT&T v. FCC, 149 F.4th 491 (5th Cir. 2025).  Under the Telecommunications Act, the FCC may issue forfeiture orders administratively—however, an aggrieved party may subsequently seek a post-administrative jury trial regarding the forfeiture order de novo.  In other words, the Telecommunications Act permits the government to initially determine a penalty against a carrier, but the carrier has an avenue to challenge the penalty determination after the forfeiture order has been issued. 

In light of the Jarkesy decision, the Fifth Circuit held that the Telecommunications Act violated the Seventh Amendment right to a jury trial.  According to the Fifth Circuit, Jarkesy prohibited the government from unilaterally determining penalties administratively without a jury trial. 

U.S. v. Sagoo: The FBAR Challenge

In Sagoo, the government sought to collect a willful FBAR penalty of roughly $1 million. According to the government’s pleadings, the taxpayer had maintained foreign accounts with balances ranging from $1.4 million to $1.7 million between 2011 and 2013 and had failed to properly file FBARs for those years. 

A primary dispute in Sagoo was whether the FBAR penalty scheme violated the Seventh Amendment in light of Jarkesy and AT&T.  The taxpayer contended that it did because the IRS could unilaterally determine the appropriateness and amount of penalties without a jury trial.  In response, the government argued that the taxpayer could receive a jury trial in the current litigation.  Notably, however, the government:  (i) agreed that the taxpayer was entitled to a jury trial for FBAR penalties under Jarkesy, and (ii) did not contend that the public-rights exception applied to FBAR penalty assessments (the public-rights exception is discussed more below). 

Based primarily on the Fifth Circuit’s AT&T decision, the district court granted the taxpayer’s motion to dismiss.  According to the court, the government’s administrative procedures to determine and assess the willful FBAR penalties violated the Seventh Amendment because the government acted as the sole decision-maker without a jury trial. 

FCC v. AT&T: The Supreme Court’s Reversal

After Sagoo, the Supreme Court granted certiorari in FCC v. AT&T to determine whether the Telecommunications Act violated the Seventh Amendment right to a jury trial.  The Court reversed the Fifth Circuit, concluding that the Telecommunication Act’s administrative forfeiture orders were constitutional. 

According to the Court, the Telecommunications Act did not violate the Seventh Amendment because the government was prohibited from taking adverse actions against a carrier (here, AT&T) until (and unless) the government filed a subsequent lawsuit to collect on the forfeiture orders.  Indeed, the Telecommunications Act prohibited the government from seizing the carrier’s assets or obtaining a lien on the carrier’s property until the lawsuit.  Moreover, the forfeiture orders themselves did not allow the government to collect interest or additional penalties; instead, the government had to seek these through a subsequent lawsuit.  Significantly, if the government filed a lawsuit, the carrier was permitted a jury trial on the penalty issues de novo without any deference to the determinations in the forfeiture orders.  Therefore, the Court reasoned that “[b]efore a regulated party can be made to pay, the jury gets the last word.” 

What Does the Supreme Court’s Decision Mean for Sagoo?

The Supreme Court’s decision in AT&T provides that the government may make penalty determinations administratively if there is a right to a jury trial later in the process.  However, the Court emphasized that the forfeiture orders in that case effectively had no impact on an aggrieved party in that the government could not make administrative levies, obtain liens, or collect penalties and interest on the forfeiture orders without a lawsuit.  Given the Supreme Court’s reasoning, taxpayers continue to have constitutional arguments associated with the willful FBAR penalty scheme. 

Unlike the Telecommunications Act, the FBAR statutory scheme specifically allows the government to take collection actions against a party prior to a lawsuit.  For example, after an administrative determination and assessment, the government may use its right to offset, effectively levying a taxpayer’s right to income tax refunds or Social Security benefits.  In addition, the FBAR statute allows the government to impose additional penalties and interest prior to a lawsuit to reduce the penalties to judgment.  Therefore, it appears taxpayers subject to willful FBAR penalties may have an avenue to distinguish the AT&T decision. 

Significantly, however, the government has also chosen to take a different litigation posture in willful FBAR penalty cases post-Sagoo.  For example, the government has now raised the public-rights exception in at least one willful FBAR penalty case, contending that the court should not address a taxpayer’s Seventh Amendment argument.  The Supreme Court has held numerous times that the Seventh Amendment does not apply to so-called “public rights,” which include statutory provisions enacted for the collection of revenue.  See, e.g., Silver Moss Props. LLC v. Comm’r, 165 T.C. 37 (2025) (section 6663 fraud penalty not subject to jury right trial in Tax Court under public-rights exception).  Sagoo did not address the potential applicability of the public-rights exception to FBAR penalties.

Given the stakes, taxpayers should expect these issues to be resolved through continued litigation in federal court. 

Conclusion

Although the AT&T decision narrowed the reach of Jarkesy, taxpayers should be mindful that the statute at issue in that case materially differs from the willful FBAR penalty provisions.  Therefore, taxpayers and tax professionals with willful FBAR penalty cases should continue to raise Jarkesy to preserve the issue until the federal courts reach a consensus on the scope of Jarkesy in these types of cases. 

If you have questions or comments about this article, please do not hesitate to contact the author at mroberts@meadowscollier.com or 214-749-2434.  You can also learn more about the author here.