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ORDER 1–

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF WASHINGTON

AT SEATTLE

JARED PECK, individually and on behalf of

all the members of the class of persons

similarly situated,

Plaintiffs,

v.

CINGULAR WIRELESS, LLC, a Delaware

limited liability company, d/b/a Cingular

Wireless, et al.,

Defendants.

No. C06-343Z

ORDER

This matter comes before the Court on Defendant’s Motion to Dismiss Based on

Federal Preemption, docket no. 23. The Court, having reviewed the briefs in support of and

in opposition to these motions, hereby GRANTS Defendant’s Motion to Dismiss. 

BACKGROUND

Plaintiff Jared Peck is an individual who is a customer of Defendant Cingular

Wireless, LLC (“Cingular”), a provider of wireless cellular telephone service. (Compl.,

docket no. 4, at 1-2.) Mr. Peck filed suit in King County Superior Court on February 14,

2006, alleging that Defendant Cingular billed, charged, and collected a business and

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1 “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 shall 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 (2006).

ORDER 2–

occupation (B&O) tax surcharge in violation of RCW 82.04.500.1 (Compl. at 2.) Mr. Peck

seeks to represent a class of all current or past Washington state cellular phone customers of

Cingular from whom it collected a “State B and O Surcharge” as a line item appearing on

the customers’ bills. (Compl. at 2.) Cingular filed to remove this case to federal court on

March 13, 2006. (Notice of Removal, docket no. 1.) Mr. Peck did not oppose removal. 

Cingular now brings this Motion to Dismiss Based on Federal Preemption, docket no. 23. 

DISCUSSION

The Federal Communications Act (“FCA”), 47 U.S.C. § 332, prohibits states from

regulating the “rates” of commercial mobile telephone service, but reserves to the states

regulation of “other terms and conditions” of such service. The relevant section states:

[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. Nothing in

this subparagraph shall exempt providers of commercial mobile

services (where such services are a substitute for land line

telephone exchange service for a substantial portion of the

communications within such State) from requirements imposed

by a State commission on all providers of telecommunications

services necessary to ensure the universal availability of

telecommunications service at affordable rates.

47 U.S.C. § 332(c)(3)(A). Cingular argues that the Court should dismiss Mr. Peck’s claims

because they are a challenge to Cingular’s rates and are preempted by federal law. (Mot. to

Dismiss, docket no. 23, at 1.) Mr. Peck argues that his claims do not challenge Cingular’s

rates and are not preempted. (Pl.’s Resp. to Mot. to Dismiss, docket no. 43, at 1.) For the

reasons set forth below, the Court concludes that state regulation of line items constitutes

rate regulation and that Mr. Peck’s claims are preempted by § 332. 

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2

 In the Second Report and Order, the FCC “address[ed] a Petition for Declaratory Ruling

filed by [NASUCA] seeking to prohibit telecommunications carriers from imposing any

separate line item or surcharge on a customer’s bill that was not mandated or authorized by

federal, state, or local law.” Second Report and Order in re Truth and Billing, 20 F.C.C.R.

6448, para. 1, at 6449 (2005). 

3 Mandate has not issued in NASUCA. Petition for rehearing en banc was filed on

September 14, 2006 and is currently pending. Eleventh Circuit docket no. 05-11682-DD.

ORDER 3–

A. Section 332 Preempts State Regulation of Line items

In 2005, the Federal Communications Commission (“FCC”) issued a declaratory

ruling2

 that a state regulation curtailing a wireless carrier’s ability to structure its bills and

isolate charges into separate line items “would have a direct effect on a [wireless] carrier’s

rate structure presented to its end users and, if instituted by a state commission, would be

preempted by [§ 332(c)(3)].” Second Report and Order in re Truth and Billing, 20 F.C.C.R.

6448, para. 31, 6464 (2005) (“Second Report and Order”). However, the Eleventh Circuit

reviewed the Second Report and Order and held that “[b]ecause the regulation of line-item

billing is not rate regulation, the express language of section 332 (c)(3)(A) of the

Communications Act does not preempt state regulations that require or prohibit the use of

line items on cellular wireless bills.” Nat’l Ass’n of State Util. Consumer Advocates v. Fed.

Commc’n Comm’n, 457 F.3d 1238, 1258 (2006) (“NASUCA”).3 Because the interpretation

of rates contained in the Second Report and Order is consistent with other court rulings and

prior FCC usage of the term, this Court affords deference to the FCC interpretation of § 332. 

See Chevron U.S.A. v. Natural Res. Def. Council, 467 U.S. 837 (1984).

An agency interpretation is entitled to deference if (1) the plain language of the statute

is ambiguous or silent on the precise question at issue, and (2) the agency interpretation is

based on a permissible construction of the statute. Chevron, 467 U.S. at 842-43. “[W]here a

statute’s plain terms admit of two or more reasonable usages, the Commission’s choice of

one of them is entitled to deference.” Nat’l Cable & Telecomm. Ass’n v. Brand X Internet

Servs., 545 U.S. 967, 125 S.Ct. 2688, 2704 (2005) (citing Verizon Commc’n Inc. v. FCC,

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ORDER 4–

535 U.S. 467, 498 (2002). Shortly after Nat’l Cable, the Ninth Circuit applied Chevron to an

FCC interpretation of a different section of the FCA, and found that the FCC’s interpretation

was entitled to deference. See Metrophones Telecomms., Inc. v. Global Crossing

Telecomms., Inc., 423 F.3d 1056, 1064-70. The Ninth Circuit held that the FCC’s

interpretation was entitled to deference because “nothing in the statute clearly preclude[d]

the construction offered,” id. at 1068, and the FCC’s interpretation was “reasonable,” id. at

1070.

The FCC’s interpretation of “rates” meets the first prong of the Chevron test because

there are at least two reasonable usages of “rates” as it is used in § 332. The common

meaning of “rate” permits the FCC’s interpretation of “rate” in § 332. Dictionaries define a

“rate” as “an amount of a charge or payment . . . having relation to some other amount or

basis of calculation,” Oxford English Dictionary (2d ed. 1989), and “an amount paid or

charged for a good or service,” Black’s Law Dictionary (8th ed. 2004). The NASUCA court

held that “[s]tate regulations of line items regulate the billing practices of cellular wireless

providers, not the charges that are imposed on the consumer. The Eleventh Circuit held that

because the presentation of line items on a bill is not a ‘charge or payment’ for service, it is

an ‘other term or condition’ regulable by the states.” Id. (emphases added) (citations

omitted). However, a line item is one of the charges a wireless customer pays in order to

receive service. An ambiguity exists because “rate” could mean only the carrier’s base rate,

or it could refer to the total amount a customer pays for service.

The FCC’s interpretation of “rates” meets the second prong of the Chevron test

because it is a permissible usage of the term. The FCC concluded that “state regulations

requiring or prohibiting the use of line items . . . constitute rate regulation and are preempted

under section 332(c)(3)(A).” Id. Specifically, the FCC concluded that “rates charged” in §

332(c)(3)(A) includes regulation of line items. 20 F.C.C.R. para. 30, at 6462–63. The FCC

found that, although Congress did not define the term “rates charged” in the FCA, rate

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ORDER 5–

regulation under § 332(c)(3)(A) includes regulation of “rate levels” and “rate structures,” and

that state regulations regarding whether or not certain costs may be recovered by a separate

line item “clearly and directly affect” rate structure. Id. para. 30–31, at 6463. To illustrate

the fact that regulation of line items affects rates, the FCC explained that if states were

permitted to regulate whether or not certain costs could be recovered by a line item, a carrier

would have to tailor its rates and rate structure state-by-state. Id. para. 31, at 6464. Because

this is a plausible interpretation of “rates,” this court gives deference to the FCC

interpretation. The Eighth Circuit has agreed with the FCC’as interpretation of “rate

regulation” under § 332(c)(3)(A) and has held that state action which “has a clear and direct

effect on rates” constitutes rate regulation. Cellco Partnership v. Hatch, 431 F.3d 1077, 1083

(2005).

The Second Report and Order is consistent with previous FCC decisions. However,

“[a]gency inconsistency is not a basis for declining to analyze the agency’s interpretation

under the Chevron framework.” Nat’l Cable, 125 S.Ct. at 2699. Furthermore, an agency is

allowed to change an interpretation and explain its reasons for the change. Id. at 2699-2700. 

The FCC in its Second Report and Order gives adequate reasoning for its interpretation of

“rates.” The FCC noted that, while it had previously recognized that “state regulation of

customer billing practices fall within ‘other terms and conditions,’” the FCC had never

before addressed the more specific question of “where among section 332(c)(3)(A)’s key

terms state regulation prohibiting or requiring line items should fall.” 20 F.C.C.R. at 6464

n.90.

For the reasons stated above, the Court gives deference to the FCC’s interpretation of

§ 332 and holds that state regulation of line items is preempted by federal law.

B. Plaintiff’s Claims are Preempted by § 332

Mr. Peck’s claims are based on state law. However, “it is the substance, not merely

the form of the state claim or remedy, that determines whether it is preempted under Section

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4 While Mr. Peck states in his Response to Defendant’s Motion to Dismiss that he “claims

that Cingular engages in an unfair and deceptive practice by not adequately disclosing to

consumers that it passes on its Washington State B&O tax obligations in the form of a line

item,” Pl.’s Resp. at 4, nothing in the Complaint alleges that Cingular failed to disclose rates

or taxes it charges to consumers. 

ORDER 6–

332.” In re Wireless Consumers Alliance, Inc., 15 F.C.C.R. 17021, para. 28, at 17037

(2000). Mr. Peck claims that Cingular’s “collection” of the state B&O tax as a line item

violates Washington law. (Compl. at 3.) Nevertheless, because the collection of the tax

directly affects the rate Cingular charges, Mr. Peck’s claims are preempted by §

332(c)(3)(A).

Mr. Peck argues that his claims are not preempted because another court in this

district has previously ruled that claims under the Washington Consumer Protection Act

(“CPA”) were not preempted by the FCA. See Order on Plaintiff’s Motion for Remand,

Baxter Air v. NOS Commc’ns, Inc., Civ. No. C05-2119P (March 10, 2006). The plaintiff in

Baxter Air alleged that the defendant used “a complex and difficult-to-understand ‘call-unit’

billing method,” thereby engaging in an “unfair or deceptive business practice” in violation

of the CPA. Id. at 1. By contrast, Mr. Peck alleges that Cingular’s “billing and collecting”

of the state B&O tax as a line item on his bill violates the CPA. (Compl. at 7.) Mr. Peck

does not allege an unfair or deceptive business practice in his Complaint.4

Similarly, Mr. Peck cites Metrophones for his contention that his claims are not

preempted. Pl.’s Resp. at 8. While it is true that some of the claims in Metrophones,

including a state law breach of contract claim, were not preempted, the Ninth Circuit did not

hold that all breach of contract claims are not preempted. Rather, Metrophones held that the

plaintiff’s breach of contract claim was not preempted because it was not inconsistent with

the FCA. Metrophones, 423 F.3d at 1076. Mr. Peck’s breach of contract claim is

inconsistent with § 332 because it is based on the allegation that Cingular billed, charged,

and collected the B&O tax as a line item, an allegation that implicates Cingular’s rates. 

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ORDER 7–

CONCLUSION

Defendant’s Motion to Dismiss, docket no. 23, is GRANTED because Plaintiff Peck’s

claims are preempted by 47 U.S.C. § 332(c)(3)(A).

IT IS SO ORDERED.

DATED this 24th day of October, 2006.

AThomas S. Zilly

United States District Judge

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