Peck v. Cingular Wireless, LLC

• Decision Date: 07 August 2008
• Docket Number: No. 06-36027.,06-36027.
• Citation: 535 F.3d 1053
• Parties: Jared A. PECK, individually and on behalf of all the members of the class of persons similarly situated, Plaintiff-Appellant, v. CINGULAR WIRELESS, LLC, a Delaware limited liability company doing business as Cingular Wireless; New Cingular Wireless Services, Inc., Delaware corporation doing business as ATT Wireless; New Cingular Wireless Services Purchasing Company LP, a Delaware limited partnership doing business as Cingular Wireless, New Cingular Wireless PCS LLC, a Delaware limited liability company doing business as Cingular Wireless, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

535 F.3d 1053

Jared A. PECK, individually and on behalf of all the members of the class of persons similarly situated, Plaintiff-Appellant, v. CINGULAR WIRELESS, LLC, a Delaware limited liability company doing business as Cingular Wireless; New Cingular Wireless Services, Inc., Delaware corporation doing business as ATT Wireless; New Cingular Wireless Services Purchasing Company LP, a Delaware limited partnership doing business as Cingular Wireless, New Cingular Wireless PCS LLC, a Delaware limited liability company doing business as Cingular Wireless, Defendants-Appellees.

No. 06-36027.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted April 10, 2008.

Filed August 7, 2008.

David E. Breskin, Daniel F. Johnson, John B. Crosetto, Short Cressman & Burgess PLLC, Seattle, WA, for the plaintiffs-appellants.

Scott A.W. Johnson, Kelly Twiss Noonan, Shelley M. Hall, Stokes Lawrence, P.S., Seattle, WA, for the defendants-appellees.

Christine A. Mailloux, The Utility Reform Network, San Francisco, CA; Patrick W. Pearlman, WV Public Service Commission, Charleston, WV; for The National Association of State Utility Consumer Advocates in Support of Plaintiffs-Appellants.

Michael Altschul, Senior Vice President, General Counsel, CTIA — The Wireless Association; Helgi C. Walker, William S. Consovoy, Wiley Rein LLP, Washington, DC; for CTIA — The Wireless Association as Amicus Curiae in Support of Defendants-Appellees.

Appeal from the United States District Court for the Western District of Washington; Thomas S. Zilly, District Judge, Presiding. D.C. No. CV-06-00343-TSZ.

Before: CARLOS T. BEA and MILAN D. SMITH, JR., Circuit Judges, and JOSEPH M. HOOD,^* Senior District Judge.

HOOD, Senior District Judge:

Appellant Jared A. Peck ("Appellant") appeals the district court's grant of the motion to dismiss the complaint filed by Appellees Cingular Wireless, LLC and its subsidiaries (collectively, "Cingular" or "Appellees"). We have jurisdiction pursuant to 28 U.S.C. § 1291 and vacate and remand the decision of the district court.

I. BACKGROUND

Appellant is a former employee of Cingular. During his tenure with Cingular, Appellant was provided with Cingular wireless service free of charge. Upon resigning his employment and prior to the filing of this lawsuit, Appellant purchased wireless service from Cingular. Appellant's invoice from Cingular included a 31-cent line item charge labeled "State B & O Surcharge" ("B & O Surcharge"). The Revised Code of Washington ("RCW") 82.04.220 imposes a business and occupation tax ("B & O Tax") on parties conducting business in the State of Washington. This tax is levied on the business itself:

It is not the intention of this chapter that the taxes herein levied upon persons engaging in business be construed as taxes upon the purchasers or customers, but that such taxes be levied upon, and collectible from, the person engaging in the business activities herein designated and that such taxes shall constitute a part of the operating overhead of such persons.

RCW 82.04.500. It is clear from Appellant's Cingular invoice that Cingular chose to pass this charge on to consumers through a line item charge on consumers' invoices, a fact Cingular does not contest. The B & O Surcharge was not specifically disclosed in Appellant's contract with Cingular.

Appellant initiated this class action lawsuit against Appellees in Washington state court on February 14, 2006. Appellant asserted that Appellees violated RCW 82.04.500 by passing the B & O Tax on to consumers in the form of a line item charge, the B & O Surcharge.¹ Alleging that Cingular failed to disclose the B & O Surcharge to its customers prior to their decision to purchase Cingular's service, Appellant also brought claims for breach of contract, unjust enrichment, and violation of Washington's Consumer Protection Act ("CPA"). Appellant further sought a declaration that Cingular's B & O Surcharge violates RCW 82.04.500 and an injunction prohibiting Cingular from continuing to collect the B & O Surcharge.

After removing the case to federal court, Cingular moved to dismiss the complaint based on the Federal Communications Act ("FCA"), 47 U.S.C. § 332(c)(3)(A), which prohibits state regulation of telecommunications carriers' rates, but expressly permits states to regulate carriers' "other terms and conditions of commercial mobile services." Id. The district court granted Cingular's motion to dismiss, holding that RCW 82.04.010 et seq., was preempted by the FCA to the extent that the Washington statute attempted to regulate line item charges. The district court also dismissed Appellant's state law claims of breach of contract and violation of the CPA, holding the claims were preempted by the FCA.

In so holding, the district court deferred, under Chevron, U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), to the Federal Communication Commission's ("FCC") interpretation of § 332(c)(3)(A) in Truth-IN-Billing and Billing Format, 20 F.C.C.R. 6448 (2005) ("Second Report and Order"). In the Second Report and Order, the FCC declared state laws that regulate line item billing for cellular wireless services were preempted by the FCA. Id. at 6449. The district court gave Chevron deference to the Second Report and Order notwithstanding the Eleventh Circuit's decision in National Association of State Utility Consumer Advocates v. FCC, 457 F.3d 1238, modified on reh'g 468 F.3d 1272 (11th Cir.2006) ("NASUCA"), which vacated the Second Report and Order, holding that the FCC exceeded its authority and unreasonably interpreted the FCA by declaring that line item charges on carriers' bills constitute "rates" within the meaning of the FCA.

The district court denied Appellant's motion to reconsider and Appellant timely appealed.

II. STANDARD OF REVIEW

The Court of Appeals reviews de novo a district court's dismissal of a case on federal preemption grounds. Olympic Pipe Line Co. v. City of Seattle, 437 F.3d 872, 877 n. 12 (9th Cir.2006); Williamson v. Gen. Dynamics Corp., 208 F.3d 1144, 1149 (9th Cir.2000). The Court of Appeals also reviews de novo a district court's interpretation of federal statutes. Olympic Pipe Line Co., 437 F.3d at 877 n. 12.

III. DISCUSSION

A. FCA Preempts State Regulation of "Rates"

By revising the regulation of the wireless telephone industry through the 1993 amendments to the FCA, it was Congress's intent "to establish a national regulatory policy for [wireless telephone service], not a policy that is balkanized state-by-state." In re Petition for the People of the State of California, 10 F.C.C.R. 7486, 7499 (1995) (footnote omitted). Because "[s]tate regulation can be a barrier to the development of competition in [the wireless telephone service] market, uniform national policy is necessary and in the public interest." Id. at 7499 n. 70 (quoting H.R.Rep. No. 103-213, at 480-81). To that end, the FCA provides, in pertinent part:

[N]o State or local government shall have any authority to regulate the entry of or the rates charged by any commercial mobile service or any private mobile service, except that this paragraph shall not prohibit a State from regulating the other terms and conditions of commercial mobile services.

47 U.S.C. § 332(c)(3)(A). Accordingly, while a state may not regulate a wireless carrier's rates, it may regulate the "other terms and conditions" of wireless telephone service.

As noted by the D.C. Circuit, "Section 332(c)(3)(A) leaves its key terms undefined. It never states what constitutes rate and entry regulation or what comprises other terms and conditions of wireless service." Cellular Telecomms. Indus. Ass'n v. FCC, 168 F.3d 1332, 1336 (D.C.Cir.1999). When a statute is ambiguous or leaves key terms undefined, a court must defer to the federal agency's interpretation of the statute, so long as such interpretation is reasonable. Metrophones Telecomms., Inc. v. Global Crossing Telecomms., Inc., 423 F.3d 1056, 1067 (9th Cir.2005) (citing Chevron, 467 U.S. at 845, 104 S.Ct. 2778). In its Second Report and Order, the FCC sought to clarify the term "rates," as used in § 332(c)(3)(A), by declaring that "rates" include line item charges. The FCC reasoned that § 332(c)(3)(A) prohibited states from regulating "rate structures" and "rate elements," which would include line items. 20 F.C.C.R. at 6462-67. Therefore, the FCC concluded state laws that regulate line item charges in wireless bills were pre-empted by the FCA.

Pursuant to 28 U.S.C. § 2341 et seq. (the "Hobbs Act"), the National Association of State Utility Consumer Advocates properly petitioned the Eleventh Circuit Court of Appeals to set aside the FCC's Second Report and Order. See 28 U.S.C. § 2342(1) ("The court of appeals ... has exclusive jurisdiction to enjoin, set aside, suspend (in whole or in part), or to determine the validity of all final orders of the Federal Communications Commission made reviewable by section 402(a) of title 47."). Reasoning that the FCC's interpretation of rates to include line items was contrary to Congress's intent to permit state regulation of line items, the NASUCA court held that "[t]he language of section 332(c)(3)(A) unambiguously preserved the ability of the States to regulate the use of line items in cellular wireless bills," NASUCA, 457 F.3d at 1254, and that to hold otherwise "deprives the complementary phrase `other terms and conditions' of all meaning." Id. at 1257. Consistent with these holdings, the Eleventh Circuit vacated the FCC's Second Report and Order to the extent that it interprets rates to include line items.

B. District Court's Failure to Defer to NASUCA

As this court held in MCI Telecommunications Corp. v. U.S. West Communications, 204 F.3d 1262 (9th Cir.2000):

When agency regulations are challenged in more than one court of appeals, 28 U.S.C. § 2112 requires that the panel on multidistrict litigation consolidate the...