Teltech Sys., Inc. v. Bryant

• Decision Date: 10 December 2012
• Docket Number: No. 12–60027.,12–60027.
• Citation: 702 F.3d 232
• Parties: TELTECH SYSTEMS, INCORPORATED; Wonderland Rentals, Incorporated; Meir Cohen, Plaintiffs–Appellees, v. Phil BRYANT, in His Official Capacity as Governor of the State of Mississippi; Jim Hood, in His Official Capacity as Attorney General of the State of Mississippi, Defendants–Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

702 F.3d 232

TELTECH SYSTEMS, INCORPORATED; Wonderland Rentals, Incorporated; Meir Cohen, Plaintiffs–Appellees,

v.Phil BRYANT, in His Official Capacity as Governor of the State of Mississippi; Jim Hood, in His Official Capacity as Attorney General of the State of Mississippi, Defendants–Appellants.

No. 12–60027.

United States Court of Appeals, Fifth Circuit.

Dec. 10, 2012.

Mark C. Del Bianco (argued), Law Office of Mark C. Del Bianco, Kensington, MD, D. Todd Smith, Smith Law Group, P.C., Austin, TX, for Plaintiffs–Appellees.

Justin Lee Matheny (argued), Jackson, MS, for Defendants–Appellants.

Appeal from the United States District Court for the Southern District of Mississippi.

Before KING, SMITH and BARKSDALE, Circuit Judges.

RHESA HAWKINS BARKSDALE, Circuit Judge:

Defendants–Appellants Phil Bryant, Governor of Mississippi, and Jim Hood, its Attorney General (Defendants), contest a summary judgment's holding the Mississippi Caller ID Anti–Spoofing Act, Miss.Code Ann. § 77–3–805, violates the Commerce Clause, U.S. Const. art. I § 8, cl. 3. Also at issue is whether the Act: (1) is conflict-preempted by the Truth in Caller ID Act of 2009, 47 U.S.C. § 227(e); and (2) comports with the First Amendment. The judgment is upheld on a preemption basis. AFFIRMED.

I.

“Spoofing” is misrepresenting the originating telephone caller's identification (caller ID) to the call recipient. The practice has both improper and legitimate applications.

In early 2010, Mississippi enacted the Caller ID Anti–Spoofing Act (ASA). Consistent with ASA violations' being subject to penalties and remedies under Title 75, Chapter 24 (Regulation of Business for Consumer Protection),Miss.Code Ann. § 77–3–809(2), Defendants contend the Act is to prevent fraudulent and criminal activity and to protect consumers. Under it,

[a] person may not enter or cause to be entered false information into a telephone caller identification system with the intent to deceive, defraud or mislead the recipient of a call [and a] person may not place a call knowing that false information was entered into the telephone caller identification system with the intent to deceive, defraud or mislead the recipient of the call.

Miss.Code Ann. § 77–3–805 (emphasis added). ASA violators commit a misdemeanor, and are subject to a fine and imprisonment. Miss.Code Ann. § 77–3–809(1).

Later that year, the Telephone Consumer Protection Act of 1991 (TCPA) (codified at 47 U.S.C. § 227) was amended by the Truth in Caller ID Act of 2009 (TCIA) (codified entirely within 47 U.S.C. § 227(e)). TCIA provides:

It shall be unlawful for any person within the United States, in connection with any telecommunications service or [Internet protocol]-enabled voice service, to cause any caller identification service to knowingly transmit misleading or inaccurate caller identification information with the intent to defraud, cause harm, or wrongfully obtain anything of value ....

47 U.S.C. § 227(e)(1) (emphasis added). TCIA violators are subject to civil and criminal liability. 47 U.S.C. § 227(e)(5). Jointly, TCIA and TCPA provide a private right of action, grant enforcement powers in both federal and state governments, grant intervenor rights to the Federal Communications Commission (FCC), and vest district courts with exclusive jurisdiction over claims under 47 U.S.C. § 227(e)(1). 47 U.S.C. § 227(e)(6), (g)(1)–(3).

ASA is more restrictive than TCIA. On the one hand, spoofing done with “intent to defraud, cause harm, or wrongfully obtain anything of value” (harmful spoofing), in violation of TCIA, is also violative of ASA. On the other hand, spoofing done without such intent, but “with the intent to deceive ... or mislead the recipient of the call” (non-harmful spoofing), violates only ASA.

Plaintiffs–Appellees New Jersey-based Teltech Systems, Inc. (of which plaintiff Meir Cohen is president), and Michigan-based Wonderland Rentals, Inc. (Plaintiffs), provide nationwide third-party spoofing services to individuals and entities. Teltech offers its customers the SpoofCard, which operates like a long-distance calling card and gives its holder the ability to manipulate the caller ID displayed to the called party. Wonderland uses spoofing to conduct “mystery shopping”, by which Wonderland representatives, posing as customers, interact with its clients' customer-service departments to conduct quality control and gauge performance.

In district court, Plaintiffs challenged ASA on three bases: (1) conflict preemption; (2) the dormant Commerce Clause; and (3) the First Amendment. TelTech Sys., Inc. v. Barbour, 866 F.Supp.2d 571 (S.D.Miss.2011). Following cross-motions for summary judgment, the district court, applying Healy v. Beer Institute, Inc., 491 U.S. 324, 109 S.Ct. 2491, 105 L.Ed.2d 275 (1989), held ASA violated the dormant Commerce Clause because it had the “practical effect of regulating commerce occurring wholly outside [Mississippi]”. TelTech Sys., 866 F.Supp.2d at 577 (internal citation and quotation marks omitted). On the other hand, the court held no conflict preemption because: compliance with both statutes was not physically impossible; and Plaintiffs failed to show ASA constituted an obstacle to the accomplishment of a federal objective. Id. at 574–75. The First Amendment claim was not reached. Id. at 577 n. 5.

II.

A summary judgment is reviewed de novo. E.g., In re Tex. Wyo. Drilling, Inc., 647 F.3d 547, 550 (5th Cir.2011). Summary judgment is proper when “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law”. Fed.R.Civ.P. 56(a). Pursuant to the cross-motions for summary judgment, there is no genuine dispute of material fact; at hand are only questions of law, which include statutory construction.

At issue are whether: TCIA preempts ASA; and ASA violates the dormant Commerce Clause and the First Amendment. In that regard, Plaintiffs press the challenges to ASA they raised in district court. Having received a favorable judgment, and not seeking to alter or modify it, Plaintiffs were not required to cross-appeal, even though they contest the district court's no-preemption ruling. Cf. Kelly v. Foti, 77 F.3d 819, 822 (5th Cir.1996) (reversal of plaintiff-appellee's summary-judgment denial an impermissible alteration or modification of judgment when plaintiff-appellee did not cross-appeal). In other words, having prevailed in district court on their dormant Commerce Clause challenge, Plaintiffs were not required to cross-appeal to urge here the preemption and First Amendment claims they raised there, because ASA's invalidation on an alternative theory would not “enlarge the rights of the appellee or diminish the rights of the appellant”. Borrego Springs Bank, N.A. v. Skuna River Lumber, LLC, 564 F.3d 353, 356 (5th Cir.2009). No authority need be cited for our being able to review the issues raised here by Plaintiffs in the light of their having raised them in district court.

It goes without saying that constitutional questions should be avoided if there are independent “ground[s] upon which the case may be disposed of”. Ashwander v. TVA, 297 U.S. 288, 347, 56 S.Ct. 466, 80 L.Ed. 688 (1936). Because we hold ASA is conflict-preempted by TCIA, we need not consider its validity under the dormant Commerce Clause or First Amendment. Along that line, the district court's Commerce Clause holding is, of course, vacated by this opinion.

“The preemptive effect of a federal statute is a question of law” and is reviewed de novo. Franks Inv. Co. v. Union Pac. R.R., 593 F.3d 404, 407 (5th Cir.2010) (en banc). The burden of persuasion rests on the party asserting preemption. AT&T Corp. v. Pub. Util. Comm'n of Tex., 373 F.3d 641, 645 (5th Cir.2004).

The Supremacy Clause provides that the laws of the United States “shall be the supreme Law of the Land; ... any Thing in the Constitution or Laws of any State to the Contrary notwithstanding”. U.S. Const. art. VI, cl. 2. The Supremacy Clause mandates displacement of state law when (1) Congress intends expressly to do so; or (2) Congress intends implicitly to do so through a pervasive federal regulatory scheme, or the state law conflicts with the federal law or its purposes. English v. Gen. Elec. Co., 496 U.S. 72, 78–79, 110 S.Ct. 2270, 110 L.Ed.2d 65 (1990). Under any preemption theory, “Congress' intent is the ultimate touchstone”. Elam v. Kan. City S. Ry., 635 F.3d 796, 803 (5th Cir.2011) (internal citations and quotations omitted).

Our inquiry begins with the presumption that federal statutes do not supersede States' historic police powers, unless Congress clearly and manifestly intended to do so. Id. at 803–04. “This [pre]sumption applies with particular force when Congress legislates in a field traditionally occupied by state law”, but with “less force when [legislating] in a field with a history of significant federal presence”. Id. at 804 (internal citations and quotations omitted).

Although interstate telecommunications has been an area of “significant federal presence”, ASA is grounded instead in consumer protection, an area traditionally reserved to the States. E.g., Castro v. Collecto, Inc., 634 F.3d 779, 784–85 (5th Cir.2011) (Federal Communications Act permits States to regulate aspects of commercial mobile services, including consumer protection); Gen. Motors Corp. v. Abrams, 897 F.2d 34, 41–42 (2d Cir.1990) (compelling evidence required to show Congressional intent to preempt state consumer protection laws). Therefore, here the presumption remains in favor of no preemption. Castro, 634 F.3d at 784.

A.

At oral argument, both sides were directed to submit supplemental briefing for an issue raised by neither: the effect of 47 U.S.C. § 227(e)(9), which exempts TCIA from TCPA's savings clause. Although Plaintiffs do not explicitly contend express preemption, we construe their response and supplemental briefs as challenging ASA under both express and implied preemption.

“Congress may indicate...