Nat'l Lifeline Ass'n v. Batjer

• Decision Date: 31 January 2023
• Docket Number: 21-15969
• Parties: NATIONAL LIFELINE ASSOCIATION, Plaintiff-Appellee, v. MARYBEL BATJER, in her official capacity as a commissioner of the California Public Utilities Commission; et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

NATIONAL LIFELINE ASSOCIATION, Plaintiff-Appellee,
v.
MARYBEL BATJER, in her official capacity as a commissioner of the California Public Utilities Commission; et al., Defendants-Appellants.

No. 21-15969

United States Court of Appeals, Ninth Circuit

January 31, 2023

NOT FOR PUBLICATION

Argued and Submitted May 13, 2022 San Francisco, California

Appeal from the United States District Court for the Northern District of California Maxine M. Chesney, District Judge, Presiding D.C. No. 3:20-cv-08312-MMC

Before: MURGUIA, Chief Judge, BUMATAY, Circuit Judge, and BAKER, ^[**] International Trade Judge.

MEMORANDUM ^[*]

The California Public Utilities Commission ("CPUC") administers the California LifeLine Program-a state universal service program intended to ensure

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access to affordable communication services (like cell-phone services) for low-income Californians. California LifeLine subsidizes costs for participating wireless carriers, which include members of the National LifeLine Association ("NLA"), an industry trade association and the Plaintiff in this case. In 2020, the CPUC implemented a new rule that California LifeLine members were precluded from charging low-income customers a co-pay for two affordable wireless plans. NLA sued certain CPUC Commissioners (the Defendants), arguing that the inability to charge a co-pay meant that the rule was preempted by federal law. After NLA moved for judgment on the pleadings, the district court agreed and issued a permanent injunction enjoining the CPUC from enforcing certain changes to California LifeLine. The Defendants appealed.

We have jurisdiction under 28 U.S.C. § 1291 and reverse the district court's order granting NLA's motion for judgment on the pleadings.

Congress charged the Federal Communications Commission ("FCC") with advancing "universal service": making high-quality communication services available nationwide "at just, reasonable, and affordable rates," and offering these services to "low-income consumers." 47 U.S.C. § 254(b)(1), (b)(3); see 47 U.S.C. § 151. Under this system, the FCC runs a federal universal service fund that provides subsidies to service providers offering affordable plans to low-income consumers. See 47 C.F.R. §§ 54.401, 54.403(a). Likewise, states can establish

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their own universal service funds, so long as these state programs do not conflict with FCC rules or the FCC's universal service program, see 47 U.S.C. § 254(f), and are not preempted by the Communications Act of 1934, see 47 U.S.C. § 332(c)(3)(A).

California LifeLine is one such state universal service program that subsidizes service providers to deliver high-quality communication services at affordable rates to low-income citizens. See Cal. Pub. Util. Code § 871.7(a). The California legislature has authorized the CPUC to oversee California LifeLine, including setting subsidy amounts and establishing eligibility requirements for participating members. Id. § 873. In 2020, after Governor Gavin Newsom proclaimed a State of Emergency in response to the COVID-19 pandemic, the CPUC commenced a rulemaking process to determine whether to adjust California LifeLine's subsidy amounts and eligibility criteria to "meet [California LifeLine participants] distance learning, telehealth and other essential needs."

In October 2020, after soliciting feedback from service providers, including NLA, the CPUC increased mobile service plan requirements without a corresponding increase in the subsidy amount. The CPUC thereby created four tiered wireless plans that participating service providers could offer, including the two affordable plans at issue here: (Tier 1) a "Basic Plan" of unlimited voice/text and 4 GB of broadband with a $12.85 subsidy; and (Tier 2) a "Standard Plan" of

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unlimited voice/texts and 6 GB of broadband with a $14.85 subsidy. Under the CPUC's rule, to be eligible for a subsidy, a wireless service provider would need to provide either the Basic Plan or the Standard Plan without a co-pay (the "2020 Rule").^[1] Providers, however, could charge a co-pay for the other two plans (Tiers 3 &4) conditioned on the CPUC's approval that the co-pays were affordable. The CPUC adopted this rule for one year, running from December 1, 2020, through November 30, 2021. During the rulemaking process, NLA protested that the subsidies would not cover the cost of the plans if they could not charge co-pays. The CPUC nonetheless adopted the 2020 Rule.

NLA sued the Defendants, seeking: (i) a declaratory judgment that the 2020 Rule is preempted by § 332(c)(3)(A) of the Communications Act; and (ii) a permanent injunction enjoining the Defendants from enforcing the 2020 Rule. After NLA moved for judgment on the pleadings, the district court granted NLA's motion, concluding that the rule was preempted, and enjoined the Defendants from enforcing the 2020 Rule.

1. Rule 12(c) of the Federal Rules of Civil Procedure allows a party to move for judgment on the pleadings "[a]fter the pleadings are closed-but early enough not to delay trial." Fed.R.Civ.P. 12(c). "A judgment on the pleadings is properly granted when, taking all the allegations in the non-moving party's

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pleadings as true, the moving party is entitled to judgment as a matter of law." Fajardo v. Cnty. of Los Angeles, 179 F.3d 698, 699 (9th Cir. 1999). Because NLA moved for judgment on the pleadings, this court looks to the allegations in the Defendants' pleadings, here their answer. See id. An order granting a motion for judgment on the pleadings is reviewed de novo. Fleming v. Pickard, 581 F.3d 922, 925 (9th Cir. 2009). Questions of law, including preemption, are also reviewed de novo. Toumajian v. Frailey, 135 F.3d 648, 652 (9th Cir. 1998).

2. The Defendants argue that NLA does not have standing. An association has standing to bring suit on behalf of its members when: (1) "its members would otherwise have standing to sue in their own right," (2) "the interests it seeks to protect are germane to the organization's purposes," and (3) "neither the claim asserted, nor the relief requested, requires the participation of individual members in the lawsuit." Nat'l Fam. Farm Coal. v. EPA, 966 F.3d 893, 908 (9th Cir. 2020). The parties only dispute whether NLA has satisfied the first prong. A NLA member has standing if it can show an "injury in fact," causation, and redressability. Lujan v. Defs. of Wildlife, 504 U.S. 555, 560-61 (1992).

As a preliminary matter, "a plaintiff is presumed to have constitutional standing to seek injunctive relief when it is the direct object of regulatory action challenged as unlawful ...." Los Angeles Haven Hospice, Inc. v. Sebelius, 638 F.3d 644, 655 (9th Cir. 2011) (citing Lujan, 504 U.S. at 561-62). Here, NLA

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alleges, and the Defendants do not meaningfully dispute, that some of its members participate in California LifeLine and therefore are the object of the 2020 Rule.^[2]Even if being the object of the 2020 Rule is insufficient to establish standing, NLA alleged in its complaint and substantiated with exhibits, that two of its members submitted advice letters to the CPUC seeking to charge their California LifeLine customers copays despite the 2020 Rule. However, the CPUC rejected these proposals. Therefore, at least some of NLA members' pricing plans were impacted by the 2020 Rule. Similarly, NLA alleges, and the Defendants do not deny, that before the 2020 Rule, some NLA members were offering 3 GB plans at no cost to subscribers in exchange for California LifeLine's $14.85 subsidy. Under the 2020 Rule, however, providers are required to offer 6 GB of data in exchange for the same $14.85...