Air Transport Ass'n of America v. Public Utilities Com'n of State of Cal.

• Decision Date: 30 November 1987
• Docket Number: Nos. 86-2885,86-2906,s. 86-2885
• Parties: AIR TRANSPORT ASSOCIATION OF AMERICA, et al., Plaintiffs-Appellees, v. PUBLIC UTILITIES COMMISSION OF the STATE OF CALIFORNIA, et al., Defendants- Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 200

833 F.2d 200

56 USLW 2332

AIR TRANSPORT ASSOCIATION OF AMERICA, et al., Plaintiffs-Appellees, v. PUBLIC UTILITIES COMMISSION OF the STATE OF CALIFORNIA, et

al., Defendants- Appellants.

Nos. 86-2885, 86-2906.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Aug. 13, 1987.

Decided Nov. 30, 1987.

Gilmore F. Diekmann, Jr. and Roxanne L. Holmes, San Francisco, Cal., for plaintiffs-appellees.

Janice E. Kerr, J. Calvin Simpson, and Peter G. Fairchild, San Francisco, Cal., for defendants-appellants.

Appeal from the United States District Court for the Northern District of California.

Before SCHROEDER, POOLE and KOZINSKI, Circuit Judges.

SCHROEDER, Circuit Judge:

This case concerns a regulation promulgated by the California Public Utilities Commission. The regulation effectively prohibits telephone customers in California from surreptitiously overhearing or recording conversations without notice to the parties to the conversation. The Commission and its Commissioners (CPUC) appeal the grant of summary judgment and declaratory relief in favor of the Air Transport Association of America and 13 airlines (ATA), and the issuance of an injunction prohibiting the CPUC from causing the termination of the airlines' telephone service or otherwise enforcing CPUC General Order 107-B (G.O. 107-B) against them.

The principal issues which we must decide in reviewing the district court's judgment are, first, whether the district court erred in holding that the CPUC lacked jurisdiction, as a matter of state law, to issue the regulation and, second, whether the district court erred in holding that G.O. 107-B violated section 202(a) of the Federal Communications Act, 47 U.S.C. Sec. 202(a), on the ground that the regulation requires discontinuance of the airlines' telephone service in an unreasonably discriminatory manner. As additional support for the result below, the ATA argues that relief is justified by general preemption of the field by both the Federal Aviation Act and the Federal Communications Act. We hold that the district court's judgment must be reversed, because we conclude that the airlines have not established any basis for the

federal courts to interfere in the operation of the state regulation.

BACKGROUND

In December 1981, the CPUC initiated a rule-making proceeding to determine whether the CPUC should adopt regulations concerning monitoring of telephone conversations by telephone customers who own their equipment. Over 71 organizations that might be interested were notified and invited to make comments on the issue. The Air Transport Association of America (ATA) participated on behalf of the airlines. After considering all comments, and denying petitions for rehearing filed by ATA, Pacific Telephone and Telegraph Company, and General Telephone Company of California, the CPUC adopted G.O. 107-B in its present form.

G.O. 107-B defines disapproved monitoring of telephone calls as the use of equipment which allows a third person to overhear or record a telephone conversation without any indication to the conversant parties that they are being overheard, or without allowing the conversant parties to communicate with the third person. A person wishing to listen in on a conversation without violating the regulation can provide notice by using a beep-tone warning device audible to all parties to the conversation or by announcing to the parties that the conversation is being monitored. The order requires utilities to file tariffs prohibiting monitoring unless notice is given to the parties to the conversation, or their consent is obtained. If a telephone company learns that a customer is monitoring conversations in violation of the tariff, the order requires the utility to discontinue service if the customer does not refrain from such monitoring within five days after notice from the utilities. The customer can file a complaint with the CPUC if discontinuance is threatened, and the customer's service will not be discontinued pending resolution of the complaint.

Rather than appealing the order adopting G.O. 107-B to the California Supreme Court, as provided by Cal.Pub.Util.Code Sec. 1756, the ATA and 13 airlines filed this suit in federal district court. According to the complaint, all but one of the airlines has a telephone reservations facility in California equipped with privately owned automatic call distribution equipment. This equipment receives calls from both within and without California. However, the equipment distributes incoming calls to reservation centers throughout the United States on the basis of reservation agent availability without regard to the place of origin of the customer's call. Thus, calls from California may be routed to reservation agents within or without California, and calls from outside California may be routed to reservations agents within or without California. Thus, the regulation reaches beyond the borders of California, and this is not disputed.

The reason that the airlines monitor conversations between their reservations agents and members of the general public is allegedly to assure that the agents give information accurately, efficiently, and courteously.

In their complaint, they sought relief on the grounds that the CPUC has exceeded its jurisdiction under California law in adopting G.O. 107-B, that G.O. 107-B violates 47 U.S.C. Sec. 202(a) in that it requires discontinuance of service in an unreasonably discriminatory manner, and that G.O. 107-B is preempted by both the Federal Communications Act, 47 U.S.C. Sec. 151, et seq., and the Federal Aviation Act, as amended by the Airline Deregulation Act of 1978, 49 U.S.C. Sec. 1305. ¹ Named as defendants were the CPUC and its Commissioners, Pacific Telephone and Telegraph Company, and General Telephone Company of California. The complaint sought declaratory relief and an injunction prohibiting enforcement of G.O. 107-B.

Shortly after the parties had filed cross-motions for summary judgment, the district court allowed the Federal Communications Commission (FCC) to file an amicus memorandum. Concerned that G.O. 107-B's interstate reach might affect matters within its jurisdiction, the FCC requested the court to stay proceedings and refer the parties to the FCC for consideration of the Federal Communications Act preemption claim. The district court stayed proceedings. ATA then filed a petition with the FCC for a declaratory ruling and expedited relief. This was eventually denied. In re Petition of Aeronautical Radio, Inc. & Air Transport Association of America, 102 FCC2d 1 (1985) (ATA Petition ). In denying this petition, as well as ATA's subsequent petition for reconsideration, ² the FCC determined that Congress had given the states authority to provide measures to protect the privacy of telephone conversations, that G.O. 107-B did not bar or restrict subscriber interconnection with the public switched network, that G.O. 107-B did not substantially affect the conduct of an efficient, nationwide telecommunications network, that G.O. 107-B would not have a significant impact on federal interconnection rights, and that access to the interstate network would not unreasonably be denied by G.O. 107-B. ATA did not appeal these determinations.

After the FCC ruling, the district court lifted the stay of the action. It then granted summary judgment in favor of the CPUC on all of ATA's federal law claims except the 47 U.S.C. Sec. 202(a) claim. The district court dismissed ATA's section 202(a) claim without prejudice because of its belief that whether the regulation constituted unreasonable discrimination in violation of that section involved a question of state law. It similarly dismissed without prejudice ATA's claim that the CPUC had exceeded its jurisdiction under state law.

ATA then filed an application for leave to file an out-of-time petition for a writ of certiorari in the California Supreme Court to obtain review of its state law claims. The California Supreme Court denied the application for leave without opinion or comment.

ATA then moved the district court to reconsider its order dismissing the section 202(a) and state law jurisdictional claim on the ground that ATA no longer had a forum in which to litigate these claims. The district court construed the motion as one under Fed.R.Civ.P. 60(b)(6) and relieved the ATA from the prior judgment.

The district court then ruled that the CPUC had exceeded its jurisdiction in adopting G.O. 107-B and that G.O. 107-B constituted "unreasonable discrimination" under 47 U.S.C. Sec. 202(a). It granted ATA summary judgment, declaratory relief and an injunction prohibiting the telephone companies, the CPUC, and the Commissioners from enforcing G.O. 107-B or "terminating, threatening to terminate, or causing other parties to terminate the telephone service of the plaintiff airlines because of their supervisory monitoring practices." It is from that ruling that the CPUC appeals.

DISCUSSION

A. Eleventh Amendment

We first consider the district court's holding that the CPUC acted in excess of its state statutory jurisdiction in promulgating G.O. 107-B. CPUC correctly contends that we must hold that the eleventh amendment prohibits the district court from exercising jurisdiction over ATA's claim that the Commission acted in excess of its state statutory jurisdiction in promulgating G.O. 107-B.

The eleventh amendment, by its terms, prohibits suits brought against a state by a citizen of another state. The Supreme Court has held that the amendment also prohibits suits against a state by citizens of the state sued. Hans v. Louisiana, 134 U.S. 1, 10 S.Ct. 504, 33 L.Ed. 842 (1890). The eleventh amendment does not bar suits against a state official for federal constitutional or statutory violations in some situations. See Ex Parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908). However, the amendment bars claims in federal court against state officials based...