* This opinion is being im mediately re leased in typescript. The printed ver sion will follow. 

### In the 

# United Sta

tes Co urt of Appeals

Fo r the Se venth C ircuit

No. 02-266 7

F RANK H. B OOMER , ON BEHAL F OF
HIMSELF AND ALL OTHERS S IMI LARLY
SI TUATED , Plaintiff-Appellee

,

v.

AT&T C ORPORATI ON , A N EW Y ORK
CORPORAT ION , Defendant-Appel lant.

Appeal from the Unit ed States Distri ct Court for the N orther n District of Illinois, Eastern Division. No. 02 C 0847— John W . Darrah
, Judge.

A RGUED S EPTEMBER 5, 2002 —D ECIDED O CTOBER 3, 2002 *

Before C OFFEY , M ANI ON , and D IAN E P. W OOD , Circuit Judges.

M ANI ON , Circ uit J

udge. Frank Boomer filed a puta ti ve cl ass action l awsuit against A T&T, alleging that AT& T

overc harge d its cus tome rs for contri buti ons to t he f

ede ral Uni vers al Services F und. AT&T moved to compel arbitration

and to dismiss or st ay the pendin g acti on, arguing that after the Federal Commu nication s Commission (“FCC”) disc ont inued th e fil ing of tariffs b y2 No. 02-2667

telecom mun ication

provid ers, AT&T had entered into a Consu me r Service Agre ement (“ CSA”) with Boomer wh ich prohibi ted class actions and mandated arbitr ation. Boomer arguedthat the arbitr ation cl ause was un con scionable under I l linois law and he s ought a decl aratory judgment

accor din gly. The district court de nied Boome r summary judgment on his declar atory jud gment claim and denied AT&T’s motion to c ompel arbitr ation and its motion to dismiss or s tay the c ase. A T& T appe als , arguin g that Boomer’s state law challenge to the te rms and cond itionsof the CSA ispreempte d by the Fede ral Comm unication s Act of 1934, and Boomer is therefor e bound by the CSA ’ s arbitration clause. We agree and accordingly REVERSE.

I.
Prior to 200 1, the Commun icatio ns Ac t of 1934 (“Communic ations Act”), as amended by th e Telecommuni cations Act of 1996, requi re d long distan ce carriers like AT&T to set forth th eir c harges and other terms and conditions o f s ervi ce in tar if fs fi led wit h th e FCC . 47 U.S.C. § 203. Un der the “f ile d tari ff d octrine,”cus tomers

were boundby the terms of the tariff even if they had never

seen the tarif

f, and even

if the consume rs had been pr omised service under

dif fere nt rate s, ter ms or

cond iti ons. See AT&T

v. Central Office Telephon e, Inc. , 524 U. S. 214, 222 (19 98). Addi tional ly, customers w ere bound by the rates, terms, and conditions contained

in thetariff

unless the FCC dete rmined that a tariff provis ion viol ated the substanti ve require ments of the Communications Ac t and the tariff was thereafter modi fied

. Id.
Over time, ho weve r, the FCC bega n entering orders exempting

“nondomin ant carri ers” (d efined as those l acking market power) from the tar iff- filing require ments of Section 203 of the Comm unication s Act. But the Supr eme Cour t invalid ated these

ord ers, hold

ing t ha t the FCC lac ked the authority

under the Communi cations Act to exe mpt certa in carriers from the ta riff-filin g requ ir emen t of Sec tio n 203. See MCI Telecom munications Co rp. v. AT& T Corp.

, 512 U.S.No. 02-2667 3

218, 234 (1994). However, when C on gress p assed the Telecommuni cations Act of 1 996, it expressly gave the FCC the auth orit y to forbear f rom applying the tari ff-fi ling
requ iremen t if, among other things, the

FCC deter mined that the “enforcement of such r egulation or

provis ion is

not necessary to ensure that the charges, practice s, classifications, or r egulations. . . are just and reasonable and

are not unjustly or unreasonably discriminatory.” 47 U.S.C. § 160(a)( 1).

Armed with thi s new authori ty, the FCC is sued a ser ies of orders providing tha t AT&T a nd other long -distance carriers

were no longer required to fil e tariff s. Se e Interstate I nte rexc hange

Marketplace , 11 FCC Rcd. 20,7 30 (199 6); Interstate

Interexchang e Marketplace , 12 FC C Rc d. 15 ,01 4 (1997); Int ersta te Interexchang e Marketplace , 14 F CC Rcd. 6004 (1999) (

“Detari ffi ng O rder s”). Inste ad, the carriers

we re now requir ed to provide cu stomers wi th notice

of the

r ates, terms, and conditions of servic e, and to offe r customer s ser vice und er suc h terms and conditions. The cust omers in turn could accept or reject th e carrier’s offer. The FCC ant icip ated that ca rriers would ente r into such contracts

through the use of

“shor t, stan dard

cont racts .” 11 FCC Rcd. at 20,7 36 (¶ 57).
After the FCC issued its detariff ing orders, in

June 2001 AT&T began mailing pr oposed C us tomer Se rvic e Agreements (“CSAs”) to r eside ntial custo mers for their

con si deration. AT&T mailed each cus tomer three documents: the CSA, a le tte r ex pl aining wh y the CSA was beingsen t, an d a list of antici pated fr equently asked questionswith expl anatory respo nses (“C SA Mailing”). The CSA Mailing wa s sent to Boo mer in June 200 1 in a n envelope, separ ate fr om hi s monthly bill. On the ou tside of the envel ope was

typed : “

ATTENT IO N: Important informati on conce rning your AT&T servi

ce encl osed.”

The letter includ ed with the CSA Mail

ing explai nedthat AT&T was en clo sing a “cop y of the new A T&T Consumer Services Agreement c ontaining the terms and conditions f or4 No. 02-2667

ourstat e-t o-s tate and int ern atio nal consumer

long distance servi ces, ” and tha t “[t]his Agre ement w ill begin to apply to these AT&T s ervi ces on Aug ust 1, 2 001.” The letter also explained

that because of recen t cha nges adopted by the FCC, the det ai ls of the servi ce agreement wer e being
p r ovided directly to the c ustomer. A dditi onally, the l etter informe d customers that “[t]he A greement also des cribes our

new bin di ng ar

bitr atio n proce ss, whi ch u sesan objecti ve third party rather

than a jury for

resol vingany disp utes that
may arise.” The letter further infor med custo mers that they would “acce pt the

terms of th e Agr eemen t si mply by continuing to us e or pay fo r any AT&T state- to-state or internati onal cons umer call ing service.”

The CSA included w i th the letter expanded on these points. On the first pa ge of the CSA, AT&T expl ain ed in bold and c apitaliz ed text that:

BY ENROLLINGIN, USING, OR PAYING FO R THE S ER VICES, YOU AGREE T O THE P RICES, CHARGE S, TERMS AND CO NDIT IONS I N THIS AGREEMENT. IF YOUDO NOT AGREE T O THESE PRI CES, CHARGE S, T ERMS AND CONDITIONS, DO N OT US E THE SERVICES, AND CANCEL THE SERVIC ES IMMEDIATELYBY CALLING AT&T AT 1-8 88- 288 -40 99* F OR FU RTHER DIR ECTIO NS.

Also significant for pur poses of thi s ap peal

is Sec tio n 7, entitled “disp ute resolution.” That se ction bega n in bold and capitaliz ed text, stating:
IT IS IMPORTA NT THAT YOU RE AD THIS E NTIRE SECTION CAREFU LLY. T HIS SECTION PROV IDES FOR RESOLUTION OF DISPUTES THROUGH FINA L AND BI NDIN G ARBI TRATI ON BEF ORE A NEUTR AL ARBITR ATO R INSTEAD OF IN A COURT BY A J UDGE OR JU RY OR THRO UGH A C LASS ACTION. YOU CONTINU E TO HAVE CERTAIN RIGHTS TO OB TAIN RELI EF FR OM A FE DERAL OR STATE REGULATORY AGENCY.No. 02-2667 5

The CSA t hen detailed the arbitrati on requir ement, provi din g:

a. Binding Arbitrat ion. The arbitration process established

by this sectionis gove rne d by the Fe der al Arbitrati on Act

(“FA A”) , 9 U .S.C . § 1 - 16

. You have the right to ta ke a ny di sput e that qu alif ies to small cl aims

cou rt ra ther than arbitration. Al l other disp utes aris ing out of o r r elat ed t o th is Agr eeme nt ( whet her ba sed i n contr act, tort, statute, f raud, mis repres entation or any other legal

orequita ble the ory) mus t be r eso lve d by f inal and bindin g arbitra tion. Th is includes any di spute based

on any product , service or adverti sing having a connection with this

Agreement

and any dispute not fina lly resol ved by a small c laims c ourt. The arbitration wil l be cond ucted by one arb itrator usin g the procedu res described by this Secti on 7.
Section 7 then detail ed the arb itration filing proce dures and expl ained

that any d is putes involving $10,0 00 or less would be conduc ted in ac cordanc e w i th the rul es of the Consumer

Arbitrati on Rules

of the Amer

ican Ar bitration Associ ation, and

cl aims in exc essof that am ount woul d be resolved unde r the

AAA’ s Comm e rci al Arbitration Rules. The CSA further pr ovide d th at co nsu mer s f il ing an arbitration

claim for less tha n $1, 000 would only be require d to pay a $20 f

iling fee

, an d that AT&T woul d cover the remaining

costs of arb itratio n. AT&T later amended the CSA to furth er reduce the p otent ialar bitration exp ense, provid ing that AT& T wou ld

pay a ll but a $20 f

iling fe e for customers

withdisp utes up to $10,000 and all but $375 for clai ms betwe en $10,000 and $75,000.

Addi tional ly, Section 7 o f the CSA prov ided—once a gain in bold and c apitaliz ed text—that:

N O DISPUTE MAY BE JO INED WIT H ANOTHE R LAWSUIT, OR IN AN ARBITR ATION WI TH A DISPUTE OF A NY OTHER PERS ON, O R RESO LVED ON A CLASS-WIDE BASIS, THE AR BITR ATORMAY NOT AWARD DAMAG ES THAT ARE BAR RED BY6 No. 02-2667

1 In pas sin g the

Te leco mmunica

t ions Act of 1996
, Congre ss authorize d theFCC to assess a “U nive rsa l Se rvi ce Fee” on long distance car riers based on a percentage of the carri er’s past r even ue s, 4 7 U.S. C. § 254, altho ugh c arriers
may chargecon sumers to recover the cost of these contr ibuti ons. See 12 FCC Rcd. 8776 (¶773). The Universal Ser vice F ees are then us ed to s ubsidiz e te lecommunicat ion services for customers in high cost area

s, schools and libr ari es. 47 U.S.C. § 25 4. THIS AGREEMENT AND MAY NOT A WARD PUNI TIVE DAMAGES OR ATTOR NEYS’ F EES UNLESS SUC H DAMAG ES OR F EES AR E E XPR ESSLY AUTHORIZED BY A STATUTE, YOU AND AT&T B OTH WA IVE A NY CLAIMS FOR A N AW ARD OF DAMAGES THAT ARE EXCLUD E D UNDER THIS AGREEMENT.

Boomer did not contact A

T&T to cancel

his s ervices , but ins tead continued to use AT&T’s lon g distance s ervices. Notwithstand

ing the CSA

’s prohibitio n of

class actions and its arbitra tion clause, Boomer filed a pu tativ e cl ass act ion against AT&T, all eging that AT&T was over billi ng him for the fed eral

Univer sal Servi ce Fee char ge. 1 In his amended
p utati ve class action co mplaint, Boomer prese nted six counts: Co unt I requ est ed an acc ounting

of the U niv ers al Service Fee Ch arge; C ount IIalle ged a violati on of the Illinois Co nsu mer Fraud Act and the Deceptive Business Practices

Act; Count III alleged

unjust enr

ichment; Count

IV sought a declar atory judgment that the arbitration claus e contained

in Section 7 of th e C SA wa s unconscionable and otherwise inv al i d; Count V alleged that th e arbitration clause vio lat ed the Illinois Con sumer Fraud Act and th e Decep tive Busine ss Practices Ac t; and CountVI al leg ed t hat the CSA viol ated the Communications A ct.
AT&T respon ded to Bo o mer’s suit by fi ling a moti on to compel arbitration

and to di smiss or stay the p roce edin gsNo. 02-2667 7

2 At oral ar

gument, AT&T

agree d that this ap pea l involves only Boomer ’s individual claim against AT&T, a nd not the put ative cl ass that Boom ersought to r epr esent. See Harold Washington Party v. Cook Coun ty, Illin ois Democratic Party
, 984 F.2d 875, 878 (7t h Cir. 1993) (if a putative class is not certif

ied by the district court, the plaintiff’s appeal

conc erns only t he plai ntiff ’s indi vidu al cla im). pu rsuant to the Feder al Arbitr ation Act. In suppor t of its motion, AT&T s ubmitted the d eclaratio n of Ellen Rei n, the AT&T emp loy ee wh o had overseen th e mailin g of the CSAs to A T&T cu stomers. R eid’s declar ation authenti cated the CSA Mailing ma terial an d estab li shed th at AT&T had in fact mailed

Boo mer theCSA

Mai li ng i n Jun e 2001 and that the mailing w as sent b y third-class ma il with forw ar ding servic e. AT&T did not rece ive notice from the post al service indic atingt hat Boom er had not received the maili ng. Her declar ation also stated that Boomer c ontinued to be enrol led in A T&T’slong- dis tance servi ce.
Boomer for his part filed a mo tion for partia l summary judgment on Counts IV and V, argui ng that the arbitration clause was, as a matte r of law, un conscionab le and viol ated the Illin ois Cons umer Fraud A ct and the Deceptive Business Practices

Act. Thedistrict court d enied B oomer’s motion for
par tial summar

y judgme nt and

deni ed AT& T’ s m otion to compel arbitration

and to dismiss or s tay the proceedings, on the gro und s th at “[ g]en uin e is sue s of mater ial fac t exi st as to the validity of the arbitration clause.” AT&T appeals. 2

II.
On appeal, AT& T argu es that the district court e rred in denying its moti on to compe l arbitr ation a nd to di smiss or stay Boomer’s suit p ending arbitration. Bo omer respon ded to AT& T’s app eal by fi li ng a mo tio n todi smi ss the app eal for lack of juri sdic tion. A motions panel of this cou rt ordered that Boomer’s motion to dismiss be consi dered by the merits panel. Accor dingly, bef ore cons idering the merits of AT&T’s8 No. 02-2667
appeal, we first consider Boo mer’s motio n to dismiss this appeal for

lack of jurisd iction

. A. Motion to Dismiss for Lack of Jurisdiction

In his motion to dismiss for l ack of jurisd iction , Boomer
argues that th is court l acks juri sdic tionto consider AT&T ’s
app eal because the d

istrict cour

t had not co nclusi

vely rule d

on the validity of the arb itration cla use, bu t had mere ly concl uded

that it coul d not res olve the i ssue at thesumma ry judgment stage. Therefor e, accord ing to Boomer , the district court’ s order

is not final and

appealable.

Alt hough a dec is ion mus t gen eral

ly be fi nal to be appealable, there are several exc eptions to thi s ru le. Section 16 of the Fede ral Arbitration Ac t provid es one su ch basis for immediateappeal , providi ng: “(a) An ap peal may be taken from

— (1) an order—(A) refusing a stay of any actio n under section 3 o f this title, (B) denyi ng a petiti on under sectio n 4 of this title to order arbitration to proc eed.” 9 U.S. C

. § 16(a)( 1)(A) and ( B).

In this c ase, the di stric t court e ntered an order ex pressly stati ng: “AT&T’s Mot io n to Compel Arbitrati on and to Dismiss or St ay Proc eedi ngs is de nied.” The court r eiterated this point in its c losing sentence, n oting: “F or th e reasons statedabov e, Plain tiff’ s Motion for Pa rtial Summ ary Judgment is denied. Defe ndan t’s Motion to Compel Arbit ration

and to Dis miss or

Stay Proceedings is d enied

. ” Nonetheless, Boomer c onten ds t hat this court lacks jurisd iction over this app eal because the district court also entered a minute order w hich directed the par ties “to c onfer and advise the Court with in 10 days a s to whet her a separat e trial should be order ed on [the arbitration counts] before the rema ining count s of Plaintif f’s Amended Complaint

. . . . ” This , accord

ing to Boomer , demonstr ates that the district court i ntended to revisi t the questio n of arbitra bil ity a nd thus h ad not rend ered a final deci sion on this i ssue.No. 02-2667 9

We acknow led ge that the di stric t court intended to

rec onside r the questio n of arbitr ability fol lowing fu rther f

actfinding and poss ibly a tria l. How ever , tha t doe s no t de feat this court’ s juris dicti on. The plai n language of Sec tion 16(a) (1) provid es for an appea l fr om “ an ord er r efus ing a stay” or“denying a p etition to order arbitration

to pro ceed ,” and the dis trict court i n this c ase express ly did both. Apply ing

Section 16(a)(1) in Koveleskie v. SBC Capit a l Markets, Inc

. , 167 F. 3d 36 1, 36 3 (7th Cir. 199 9), we held that a dist rict c ourt’s denial o f a motion to compel arbitration

was immedi ately appealable even thou gh th e d istrict court h ad held that further disc overy was need e d before it could concl usively r ule on a moti on to compe l arbitration. In fact, jurisdi ction is even clearer in this case than in Koveleskie , beca use here the district court expre ssly denied AT&T’s M otion to Co mpel Ar bitrati on, w hereas in Koveleskie
, the district cour t’s orde r me rel

y sta ted that discovery was nee ded “befo re a decis ion can be r eached on the arbitration

issue.” Id

. at 36 3. Nonet heless, in Koveleskie
, we held tha t beca use “the re is no doubt fr om the

rec ord that the district court de nied the defen dant's motion and clearl

y meant to foreclose arbitration,” id. , an immedi at e appeal c ould p roceed under Section 16(a) of the Arbitrati on Act.

Both the Third and Fourth Circuits have likewise concl uded

that a denial of a motion to compel arbitra tion is immediatel

y appealable und er Secti on 16(a)(1) of the FAA,

even if further di scovery is r equi red or the district court intends to re visit the i ssue

. See Snowden v. Checkpoin t Check Cashi ng , 290 F. 3d 631, 6 35-36 (4 th Cir. 2002); Sandvik AB v. Advent Inter. Corp.

, 220 F.3d 99, 102- 04 (3d Cir. 2000). The Third Circuit’s d ecision in Sandvik provid es

a tho r ough a nalysis of th e issue and on e that bears
repe ating. The reason a denial o f a motion to compel arbitration

is imm edi ately app eala b le i s because “[

t]he language

of § 16 prov ides for app eals of ord ers den ying arbitration, and it makes no d istinc tion bet ween orde rs denying arbitration

and ‘final orde rs’ that ac compli sh the10 No. 02-2667

3 Boomer

also r elie s onthi s court’s decision in McCaski ll v. SCI

Mana geme ntCorp. , 298 F.3 d 677 (7th Cir. (continue d...) same end.” Id. at 102. The language of Section 16 (a)(1)(C) further ill ustrates that p oint. As Sandvik explained , Section 16(a) (3) of “the FAA containsa catch-all provis ion regard

ing
any ‘fin al de cision with respect to an a rbitrat ion that is subje ct to this tit le,’ i d. § 16(a)(3).” Id. at 103. Thus, to interp ret 16(a )(1) as Sa ndvik (and he re Boomer) would have,

na mely as ap pl yin g onl y to “ fi nal dec is ion s,” mean s “th e provis ionprovid in g for app eals fr om denial s of or ders to arbitrate [woul d bec ome] s urpl usage i n li gh t of the more
expans ive language in § 16(a )(3). ” Id. Thus, “[t ]he more natu ral reading w ould therefo re be to t reat a ll orders declining

to compel arbitration as reviewable.” Id. Moreove r, the language of § 16 (a)(1)(C) “refl ects that Congress decided to use the word ‘f inal’ in one p art of the statute, but declined to do s o in the s ection th at declare s that order s denyin g motions to compel arbitration

are ind eed appeal able.” Id. This reason ing defea ts Boome r’s argument that the district court’s o rder denying a motio n to compel arbitration

mus t be f

inal to be appealable. Additi onally, the fact that “the statute p rovides a list of inte r locutory arbitra tion-relat ed orders that are no t appe alable, see i d. § 16(b),” demonstrates that Congress in tend ed w hat it said in subsecti on 16(a) —that a de nial

of the motion to c ompel arbitration

is i mmedi ately ap pealabl e. Id. Fin ally, as Sandvik noted, “juri sdic tion comp orts with the pur poses of the FAA. Refusing [a defendant’s] appeal c ould c ircumvent the FAA's c lear pur

pose of enforci

ng bindin g arbitration
agreeme nts,” by forcing the defe ndant to undergo a fullblown trial before a determin ati on asto “ whet her it was legally obli ga ted to participate in such a trial in the first inst ance.” Id. at 104. For all of these rea sons, we conclude that Sec tio n 16( a) of the Arbi trat ion Act all ows for

an immediateappeal of the denial o f a motion to compel arbitration. 3No. 02-2667 11

3 (...contin

ued) 2 002), w herein we stat ed that “[a]n appeal may be ta ken from a ‘final deci sion

with re spe ct to an a

rbitration’, but

not from an interloc utory order staying the action or ‘compelling arbitration’. 9 U .S.C. §§ 16(a)(3), (b)(1), (b)(3) .” Id. at 678. However, t his language does not help Boomer be cause this

case does no t involv e an order

“sta ying th e actio n or compelling

arbitration,” but rather a n order de nying a motion to compel arbitration a nd denying the motion to stay the action. While t he FAA prohi bits in terloc utory appea ls of motions compelling arbitration and granting stays, 9 U.S.C. § 16(b)(1 ), (b) (3), Section 16(a)( 1) allows immediate appe als from the den ial o f such moti ons. 9 U .S.C. § 16( a)( 1). Alternati

ve ly, Boomer claims that this court lacks jurisd iction because after

the distr

ict co urt enter ed itsorder denying AT&T’s mo tion to com pel arbitra t ion , the Jud ic ial Panel fo r M ulti-Di stric t Litigation entered an o rder transferring Boomer’s case to the District Court of Kansas. I ni tiall y, we note that it is questi onable as to whether the Judici al Panel’s orde r transferring the case t o the District Court of Kansas was ef fective, bec ause that transf er ord er

was not filed with th e District Court of K ansas unt il theday afterA T&T fi led its notic e of ap peal. Und er 28 U .S.C. § 1407 (c), a Multi-Di strict tr ansfe r or der becomes effe ctiv e only after it is “file d in th e office of the clerk of t he district court of the tr ansferee d istr i ct.” 28 U.S.C. § 14 07(c). Because AT& T filed

its not ic e of

app eal prior to the fi ling of the transfer orde r, it would seem tha t the tra nsfer order is inef fect ive

. See , e.g., Kusay v. United S tates , 62 F.3 d 192, 193 (7th C ir. 1995) (“[ T]he f iling of a notic e of ap peal

. . . divests the district c ourt of its control over thoseaspects of the c ase i nvolve d in

the ap peal. ”).12 No. 02-2667

Howev er, we nee d not dete rmine the validity o f the transfer order because even i

f a transfe r orde r entered after a notice of appeal is fil ed were valid, this court nonetheless has jurisdiction unde r 28 U.S. C. § 12 94(1 ) to hear AT &T’s
app eal from the dis trict court’ s order denying AT&T’s motion to com pel

arbitrat ion . That

sec tion provides t hat “a ppeals from revi ewable deci sions of the d istrict . . . cou rts shal

l be taken [f]r om a distr

ict co urt of

the United States to th e court of appeals f

or the ci rcuit embracing the

di stric t.” 2 8 U.S.C. § 1294(1). In this c ase, the “ review able deci sion” at i ssue

was ent ere d by

the Northern Distri

ct of Illinoi s. Theref

ore, jurisd iction is ap prop riate

in this cour

t. See, e .g. , TechnoSteel, LLC v. Beer s Const . Co. , 271 F. 3d151, 154(4th Cir . 2001) (ho ld ing

that the Fourth C ircui

t had juri sdic tion to hear an appeal

from a Sout h Carolina district court’s order denying a motio n to c ompel

arbit ratio n, even

though the district court also t ransferr ed t he case to a Georg ia dis trict cou rt).

B. Motion to Compel Arbitration Havingconcluded tha t we ha ve jurisdictio n over this appeal, we turn to th e merits . As noted , AT&T argues on appeal th at the district court erred in denying its mo tion to compel arbitration because Section 7 of the CS A required arbitration. Boomer initiall y contends

that because the C SA does not constit ute a valid c ontract und er Ill inois law, he

neveragreed to the arbitrati o n cl ause. Alte rnati vely, Boomer argues that the

arbitration

clause contained

in the CSA is i nvalid bec ause it i s uncons cionable u nder Il linois lawand viol ates the Illi nois Consum er Fraud Act . AT&T responds by arguing that because Boomer continu ed usi ng his AT&T service, he acc epte d the terms of the CSA, incl uding

the arbitra tion provision . AT&T furt her conten ds that the Communic ations Ac t preempts Boo mer ’s stat e la w challen ges to the valid ity of the arbitration clause. We first consid er whether the CSA cons titutes a c ontract, and then address the iss ue of pr eemption.

1. W as theCSA a Contra ct ?No. 02-2667 13

4 Althou g h AT&T argues that the Communications Act preempts state law as

to the vali dity of contra

ctual ter ms

an d conditions, AT&T a nd Boomer both maintain that Illinois stat e l aw governs questions of contract formation. Therefore for purp oses of appeal we will as sume that Illinois state law determin es wh ether a contract was

formed. Boomer maintains th at the CSA did not constitut e a va lid cont ract unde r Ill

inoi s law. 4 Initial

ly we note that whil e Boomer alleged in his com plaint tha t he did not reca ll receiving the CSA mail ing, on app eal he does not claim that did not rece ive the CSA Maili ng. Nor does he cl aim that he attempted

to cancel his service w ith AT&T. Rather, Boomer
argues that the CSA M ailing did not con stitute

an of fer , tha t his silence di d no t co nst itu te an acc ept ance , tha t the re w as

no consi deration

suppor ting the arbitration

cl ause , and

that AT&T c ommitt ed f

raud.

Boomer first cl aims th at th e CS A di d no t co nst itu te an offer because AT&T customers “would not recognize AT &T’s mailing with the CS

A as an offe r to a contr act .” Howe ver, the letter accom panying the CSA clea rly and ex plicitly statedthat “[e]nclosed is your copy of the ne w AT&T Consumer

Service s Agreement c ontaining the terms and conditions for our

stat e-t o-s tate and int ern atio nal consumer long dista nce services. Th is Agreeme nt will begin to apply to these AT&T s ervices on August 1, 2001.” The cover l etter further explained

that the cons um er was “accep t[ing] th e ter ms o f th e Agr eeme nt s imp ly by continuing to use or pay for any AT&T state-to-sta te or international consu m er cal lingse rvice.” Addition ally, th e CSA expla ined in bold, capitali zedtext

at th e beginni ng of theCSA

that “B Y ENROLLINGIN, USING, OR PAYING FO R THE SERVIC ES, YOU AGREE T O THE P RICE S, CHARG ES, TERMS AND CO NDIT IONS IN T HIS A GRE EMENT. ” This plain, unambiguous language makes clear th at the CSA constitutedan off

er. See A rchi tec tura l Me tal Sys., Inc.

v. Consolidated S

ys., Inc. , 58 F .3d 12 27, 122 9 (7th Cir.14 No. 02-2667

1995 ), cit ing McCar ty v. Ver son All steel Press Co. , 411 N.E .2d 936, 9 43 (Ill. App. 1980) (“Th e test for an off er is whether it ind uces a reason able b elief in therecip ien t tha t he can, by ac cept ing, bind th e sen der. ”). See also
, Restatement (Sec ond) of Contracts§ 24 (19 81) (“A n offer is the manifes tation of willingnes s to enter into a bargain, so made as to justify anothe r person in understa nding tha t his assent to that ba rgain is invited and will conclude it.”). Next, Boomer c ontends th at his co ntinued use of AT&T’s long-dista nce servic e did not cons titute an acceptanc e of AT&T’s offer . In supp ort of thi s argument, Boomer cites Section 69 of

the Restat ement (S econd) of Cont racts, w hich provides: (1) Where an of

feree fails to reply to a n offer, his silence and ina cti on o per ate as an ac cep tan ce in th e foll owing

cases only: (a) Whe re a n of

fer ee ta k es t he benefit of offer ed servic es with reaso nable oppor tunity to r eject them and reason to know that they were of fered wi th the expectation of compen sation.

Boomer argues that he d

i d not hav e a reaso nable opportu nityto reject the offer, a nd therefore his c ontinued

use of A T&T s ervi

cesdi d no t co nst itu te an acce ptanc e. This argument also fails bec ause the CSA Mailing clea rly provid ed a mechanism for r ejecting AT&T’s of

fer: The c over letter stated in

bold cap italize d letter s th at “ IF YOU DO NOT AGREE TO THESE PRICES, CHARGES, TER MS A ND C ONDI TION S, DO N OT USE THE SER VICES, AND CANCEL T HE SERVI CES IMME DIAT ELY BY CALLING AT&T AT 1-888-288-4099. ” Thus , Bo omer had

a reasona ble opportu nit y t o reject AT& T’s off er, but nonetheless continu ed to use his AT& T servic es—servi ces that were off

ered with t h e clear and explicit expectation of compensati on. Under these circumst ances, Bo omer’s silence constitu ted an acc eptanc e. See , e. g., H ill v. Ga tew ay 20 00, Inc.
, 105 F.3d

1147, 1148-4 9 (7t h Cir. 19 97) (c onc lud ing that under Illinois law th e plaintiffs’ silence con stituted a n acceptNo. 02-2667 15

5 The distric t cou rt disti nguish ed Gateway by noting that in Gateway theHills had admitted to r eceiving the form contract, but f

aile d to read it, wh ereas in this case Boo mer does not adm it that he received the CSA M ailing . However,

as n oted above, Boomer doe s not contend that he did no t receive the mailing–ju st that he does not r emember receiving it. Where a letter is properl y addre sse d and mail ed, there is “a presump tion t hat it reac hed its destina tion in usual time and was a

ctually r

eceiv ed by t he pe rson to who m it was addr ess ed.” See H

agne r v. U

nited S tates , 2 85 U.S. 427, 430 (1 932 ). In this cas e, AT &T prese nted pr oof throug

h the Declar ation of Ell en Reid, the AT&T employee who oversaw the mailin gof the CSA to A T&T customers , verifying that
proper m ailing proced ures wer e followed. Boomer does not
presen t any conflicting evid ence in this regard. Thus, we must pre sume

that Boomer r ece ive d the

maili ng. Id. See also Godfre

y v. Unit ed Sta tes , 997 F.2 d 335, 33 8 (7th Cir. 1993) (a presumption ex

ists that a

maili ng is receiv ed where there is “p roof of pr

ocedure s follow ed in the r egular course of operations whic h give rise to a s trong inference that the [correspon de nce] was properly addressed and mailed”). In
anyeve nt, onappeal Boomer doe s not claim that the CSA did not cons tit ute an

offer becaus e he did not receiv e the CSA mailing. of the t erms and c onditi ons—inc ludin g an arbitration clause—s et forth on

a form co ntract in cluded in the box which contain ed t he c ompu ter that thepl aintif

fs had order ed from the defendant and which they accepted). 5

Boomer further challenges t he e xis tenc e of a co ntr act b y arguing that th ere was

no co nsid erati on fo r the CSA. In support of this argu ment, Boomer fir st poi nts to the following language: “[B] e assured that you r A T&T serv ice

or bi lli ng will n ot change und er the AT&T C onsumer Services Agreement.” Boo mer c laims that th is l anguage showsthat

he rec eived not hing in exch ange for his16 No. 02-2667

agreement to arbitra tion. Th is argume nt is misplaced— in exchan ge for hi s agreement to ar bitr ate, AT&T agreed to provide contin ued telephon e servic es. It is true that when there is an existing contractu al o bli gation, a promi se to continue performin g that legal o bligat ion lack s consid eration. But AT&T had no leg al obligation to continue provid ing Boomer with teleph one se rvices . Therefor e, Boomer recei ved somethi ng of legal value—conti nued servic e—in exchange f or his promis e to arbitrate.

ThatAT&T coul d have cancel ed Boom er’s telephon e servic es is actually Boomer’s second ba sis for claiming a lack of con si der at i on: Boom er asserts t hat b ecause AT &T expressly told him tha t if he did not agree to the terms of the CSA, it would cance l his service, the re was no “ barg ainedfor- exchan ge,” and thus no consideration. This a rgument also fails , however, becaus e, contrary to Boomer’ s posi tion, the “bargained-f

or-exchange” r equirement does not prohib it the execution

of fo rm contra cts presente d on a tak e-it-orleave it bas is. See Metro Ea st Cente r for Conditi oning and Health v. Qwest Co mmuni cations Internatio nal, Inc. , 294 F.3d 9 24, 926 (7th Cir. 200 2) (“Yet w e have held that fo rm cont racts , offered on a t ake-it-or-le ave-it basis, a re agreements for

purpo ses of th e Arbi

trati on Ac t.”). See, e .g., Koveleski e v. SBC Capital Markets, Inc. , 167 F. 3d 361, 367 (7th Cir . 1999); Hill v. Gatew ay 200 0, Inc. , 105 F.3d 1147, 1148 (7th Cir . 1997). Rather, under general c on tra ct principles

a barg ained-for ex change exists if one pa rty’s promise induc es the other party’s p romise o r perf ormance. See Hartbarger v. SCA Services, Inc.
, N.E.2d 5 96, 604 (Ill. App. 1990) (“A p erformanc e or return promis e is bargaine d for if it is sought b y the prom isor in exchange for his promise and is give n by

the promi see in e xchange for that promi se.”) (quoting Restat ement (S econd) of Cont ract s § 7 1 (1981 )). See also , Restatement (Second) of Contracts § 71, comment b at 173 (198 1) (“‘Barg ained for.’ In the typi cal bargain, the consid eration

and thepr omi se be ar a reci procal relatio n of motive or ind ucement: the c onsider ation ind uces the making of the promi se and the p romise induces the furni shing of theNo. 02-2667 17

co n sideration.”). In this case, AT&T’s promis e to conti nue telephone

servic es (something it was n ot ob lig ated to do) induc ed Boomer’s

corre sponding promis e (among other thin gs) to arbitrate, and thus ther e was a bargained-f or exchan ge and cons ider ation. See, e .g. , Metro East , 294 F. 3d at 926 (exp lain ing th at altho ugh the agreement’s provis ion for arbitrat ion

may benon-n egot iabl e, i t is non ethe les s an agreement “because the p erson coul d have cho sen to do something else.”).

Next Boo mer argu es t hat A

T&T c ommitted

fr aud by deemphasi zing

the CSA and presenting it as a non-event, wher eas in re ali ty by

so ind ucing customer s to agree to th e CSA they waived valuable rights. Boomer, however , failsto point to any language in the CSA Mailing or in the accompanying

CSA that was false or misleading . Moreove r, the cover l etter cl early and explic itly hi ghlighted the diff erencesbetween the C SA and th e pr eviou s ter ms contained

in thetari ff, noting that “[t]he Agreement also desc ribes

our n ew bind

ing ar bitrat ion p roce ss, . . . .” Thus, the pla i n langua ge of the CSA Mailing ne gate s Boomer’s clai m of f

raud.

In sum, the CSA Ma i ling c onstituted an offer

and Boomer’s contin ued

use of A T&T s ervi

cescon stitute d an acceptance. Consi deration suppor ted each p arty’s promises and Boomer fa iled t o pr esent a ny eviden ce of fraud. Acc ordingly, theCSA con stitute d a c ontr ac t, and a s such established

the term s an d conditions gov erning AT &T’s relationsh ip with Boomer , one of whic h was an arbitrati on clause. Based on this cl ause, AT&T moved to c ompel arbitration

of Bo omer’ s cl aims against it. Boomer, howev er, contends

that even if the CSA i s a contrac t, the arbitration clause should

not be en forc ed becau se it is unconsciona ble and violates th e Illi no is C onsumer Fr aud Act and the Decep tive Busine s s Pra ctices . AT&T res ponds th at the Communicati ons Act pre e mpts Boo mer ’s stat e la w challen ges to the valid ity of the

arbitration

clause. We now turn to the question of preemption.18 No. 02-2667
2. Preemption of the Arbitratio n Clause

The doc trin e of p reemp tion ema nate s from th e Suprema cy Clause: “ This Constitu tion, and th e Laws of the Uni ted St ates whi

ch s hall be made in Pur suanc e ther eof .

.

. . shall be the Supr eme Law of the l and.” U.S. Cons t., Art. VI, cl. 2. Bec ause

fed eral law is thesup rem e la w of the land, it pr eemp ts s tate lawsthat “interfere w ith, or are contrary to, fed eral

law.” Hillsboroug h County v. Automated Medical Laborato ries, Inc. , 471 U .S. 70 7, 712 (1985) . A f ede ral law
may pre emp t a state law expre ssly, i mplied ly through the doctrine of conf

lict p ree mption, or

through the doctrine of field (alsoknown

as co mple te) p reemp tion. Grac ia v. Volv a Europa Truck, N.V.
, 112 F.3d 291, 294 (7th Cir. 1997). With
express pr eemp tio n, a f ede ral stat ute expl

ic itl y pr ovi desthat it override s state l aw. Id. Implie d conf lict preempti on occurs where “ it is impossible for a private pa rty to com ply with both state and

federal requirements, . . . or wher e state lawstands as an obstacle to the a cco mplis hment and execution

of the full purpose s and obje ctiv es of Congr ess.” Freight li nerCorp. v. Myrick , 514 U .S. 28 0, 287 ( 1995) (i nternal

quotati ons o mitted

). Fi nall y, fie ld (c omplete) preempti on exists whe n “Cong ress . . . so co mpletel y preempt[s] a par

tic ular are a, th at any civil

complai nt raising t hat select group of cla ims is necessarily federa l i n character.” Metropolitan Life Ins. Co. v. Taylor , 481 U .S. 58
, 63-64 (1987). On appeal, A T&T argues that

Boomer’s

state lawchalle nges to the vali dity of the arbitrati on cl ause a re preempted ei ther imp liedl y through co nflict preemption or throu gh the doctr

ine of f ield (compl ete) pre emption, and therefor e, AT&T maintains, the arbitrati on clause governs and the district cour

t should have granted its m o tion to compel arbitration and to stay the proceedings. a) Implie d Preemption

As summa rized abo ve, implied pree mption ex ists if it is eith er i mposs ible

to co mply wi th bot h st ate an d f ede ral law, or if stat e la w co nflic ts wi

th a f ede ral objecti ve. Gracia

, 112 F.3d at 294. AT&T c ontend s that a state l aw challengeNo. 02-2667 19

to the validity o f th e arbitra tion clause v iolates Co ngress’s objecti ve in passin g th e Communic ations Ac t, and
spec ifically confl ic ts wi th th e obje cti

ves of S ect ion s 201(

b) and 202(a) of th e Commu nic ations Act. Section 201(b) of the Communications Act provides:

All charges, p ractic es, clas sifi cations, and regul ati ons for and in connect ion with such c ommunicatio n servic e, shall be just and reas onable, and any su ch charge, practice, class ification or reg ulation t hat is unjus t or u nreas onable is d ecl ared to be unlawfu l. 47 U.S.C. § 20 1(b).
Secti on 202(a) states :
It shall be unlawful for any common carrier

to make
any unjus t or u nreas onable dis cri mi nati on in charges, practices, cla ssif ications, regulations, f acilities, or services for or in conne ction with li k e communic ation servic e, directly or ind irectl y, by any

means or devi ce, or to make or give a ny und ue or

unreaso nable prefer ence of ad vantage to any
par tic ular

person, class of pe rsons, or locali ty or to subje ct any particular person, class o f per sons, or localityto any undue o r unreaso nable prejud ice or disadvantage.
47 U.S.C . § 202(a) (emp hasis added ).

Based on these provisions, AT&T claimsthat a state lawchal lenge

to the va lidity of the a rbitrat ion clause is preempted. For three main reasons, we agree. First, these provisions, and the Co mmunica tions Act in ge neral, dem onstrate a congress ional inten t that customers o f ind ivi dual long- dis tance carr

ier s re cei

ve unif orm te rms and conditions of s ervi ce; ho wever, allo wing a s tate law chal lenge to the CSA’s

arbitration

clause wou ld r esult in custom ers receiving diff

erentterms ba sed on their locali ty. Second, the incorporation

of the arb it r ation clau se i n the C SA allows AT&T to offer lower r ates, and all owing state l aw to20 No. 02-2667

6 While Bo omer ch allenges the validity of the C SA’s provis ion conc ern ing the r ight to a

ttorne y’s fe es a

nd the clause pro hibi ting the use of a class action, becaus e we concludethat arbitrat ion is required, these other ch allenges must be de cided by the arbitrator in the first ins tanc e. Metro East
, 294

F.3 d at 9 29. See also Larry’s United Super, Inc. v. Werries
, 253 F .3d 108 3, 108 6 (8th Cir. 2 001) (holdin g that o n appeal from an order de nying a motion to compel arbitration,

a court may only d etermine whether a dispute is s ubject to arbitration; other c ontrac tual c hallen ges must be determi ned by the arb itrato r). Of course in cons idering Boom er’s oth er (continue d...) invalid ate this

clau se will af

fect the r ates AT& T o ffers, resulting in di scr

imi nator

y rat e s tructur es. Thir d, Secti on 201 declar es unlawful

rates, terms

and cond

itionswhich are not jus t and reasonable , demonstr ating Congres s’s i ntent that federal law govern the va li dity of the terms and cond iti ons o f lo ng-di stanc e ser vice cont racts

. First, Sections 2 01 a nd 202 , read tog ether, demonstratea con gres sion al intent th at ind ivid ual l ongdistance cus tomers

thro ughout

the U nited

Statesrec eive uniform rates, terms

and cond

itio ns of ser vice

. See, e .g., American Tele

phone & Tel egra

ph Co . v. Ce ntral Office Telephone, Inc. , 52 4 U.S . 214, 2 23 (199 8) (“It i s th at antidiscrimina tory p olic y which lies at ‘th e heart of th e

common-carrier

sectio n of the C ommunicatio ns Act.’ ”) (ci ting MCI Telecommu nications Corp. v . American Te lephone & Telegraph Co. , 512 U .S. 21 8 (1994)). Yet , a st ate l aw chal lenge

to the va li dity o f the terms and conditions of a telephone

service agreem ent wou ld result in the ap plic ation of fif ty bodi es of

law, and

this would inevi tably le ad to customers in di

fferent states rec eiving di fferent terms and conditions. Bo omer’s own lawsuit dem onstrat es this point,

as he not onl

y challen ges the valid ity of the arbitration clause, but also the va lidity of the a ttorney ’s fees p rovisi on and the clause prohibiting class action l awsuits. 6 AbsentNo. 02-2667 21

6 (...contin

ued) chal lenges
, the a rbitrator w ill be requir

ed to a pply the appropriate

law, which

given our holding today means that the Communications Act preempts other state

lawchall enges to the validity of the t erms and condi

tion s contain ed in the CSA. Cf. Metro East , 294 F.3d at 929 (“ An arbitrator has no

more power to alter a tariff's r ate than does

a judge; and because Centr

al Of fice Telephone

treats cond itio ns and ot her tariff ter ms as part of the rate s, it may follow that an arbitrator must take the whole tariff a s he find s it, in order to avoid any possibility of discr iminatory application (that bugbear of rat e-r egulat ion systems, a nd the main tar

get of the file d-r ate

doctr ine ).” ). preempti on, there is noth ing to prev ent similar st ate l aw challen ges to the CSA’ s other te rms and c on d itions. This will r esult in p atchwor k contract s, bec ause u nder some states’ laws som e clauseswill be upheld and other invalida ted, whi le u nde r other stat es ’ l aws, it m ay well be the opposi

te. This c onfli cts with Section 202'sprohi bition on provid ing advantages or pr eferenc es to customer s based on thei r “l ocal ity. ” 47 U .S.C . § 202

. Second, a state law chall enge to an arbitration clause (or for that m atte r a provision prohi biting class actions) not only affectsthe unif

ormity of that term, but it also threaten s to destroy t he consisten cy of rate s offered consum ers throughout

the United States. As we recogni zed in Metr o East
, 294 F.3d 924, arbitration off ers cos t-saving benefi

ts to telecommunication

providers and “t hese ben efits are reflected in a lower

cost of doing b usiness tha t in competition

are passed along to customer s.” Id. at 92 7. Howe ver, if in

some states a rbitrat io n clause s are str icken a s unconsciona ble or ille gal und er va rious states’ c onsumer protection laws, whereas in other states

such p rovisi ons are vali dat ed, the ove rall cos t savi ngs will be

red uced . AT& T and other provide rs would then be face d w ith three22 No. 02-2667

7 It is unre ason able to as sume that rates would remainthe same even i f the arbi tratio n clau se were invali dated b eca

use, as Metro East re cogni zed
, arbitration offers cost

- saving benefits t o telecom municat ion providers and “the se benef

its are r eflecte d in a l ower cost of doi ng business that in co mpetitio n are passe d along to cu stomer s.” Id. at 927. Realisti cally, then , without t h e arbitration provis ion, AT&T and other carri ers woul d be forc ed to increase rates acro ss the boa rd in order t o prev ent discriminatory pricing. Besides be ing unfair to cu st omers who must now pay hi gher rates whi le still su

bject to arb itration

clauses (held va lid in their home sta tes), this
outco me conflic ts with Congre ss’s intent i n passi ng the Telecommuni cations Act o f 1996. Sp eci fic ally, in pass ing the Telecommuni cati ons Act of 1996, Congres s sought “to promote competition and reduce regulat ion in order to secure lower pr ic es an d hi gh er q uali ty se rvi cesfor

Amer ic an telecommunications consu m ers . . . .” Preamble, Telecommuni cations Act o f 1996, Pub. L. No. 104-10 4, 110 State. 56 (1996). Moreover , IF the detariffing p rovisi ons of the Telecomm unication s Act subj ect the te rms of nat ionwide long-dista nce form contra cts to state law attack, the tran sac tio nal

costs an d litigation expenses would also incre ase. Ca rrier s would then face th e contin uous cos t of (continue d...) options—increase therate s of tho se l ivi ng i n li

tiga tio n (a s opposed to arbitration) states, increase everyo ne’s rates, or leave ratesthe s ame. T he firs t option results in di fferi ng rates which vi olates the intent (if not th e term s, see infraat

___ n.8), of the

Communications A

ct. See A T&T v. Central Office Telephone, Inc. , 524 U.S. 214 , 223 (199 8) (“[T]h e policy of nondiscriminatory rates is vi olated w hen similarly situated customers pa y different ra tes for th e same services.”). The secon d and third options (the latter of which is economically unrealistic), 7 while on their face do not va ryNo. 02-2667 23

7 (...contin

ued)
court challe nges and the ad ded expen se of r evising and distr ibuting mod i fied C SAs whic h confor m with new state court rulings. Consumers w ould bea r the brunt of this throu gh higher prices for telephone service. This too is at odds with Congr ess’s intent. It als o belies th e FCC’s beli ef that the tran sactiona l costs of deta riffing would be fixed and short-li ved. See , 11 FC C Rc d. at 20,736 (¶ 57) (re cognizi ng that detarif

fing woul d resul

t i n some “inc reased admin istr ative cos ts,”but antic ip atin g tho se c ost s to be initial (and fi

xed) cos ts on ly resulting fro m “the shif t to a detariff ed envir onment . . . (suc h as the cos t of devel oping short, stan dard

cont racts)”). the rates con sumers r eceive, non e thel ess con stitute “disc riminati on in charges. ” As the Supre me Court recogniz ed in Central Office , “rate s . . . do not e xist in isol ation, ” id. at 223, and “‘disc rimination in charges ’ . . . ca n

come in the form of a lower price for an equivalent s ervice o r in the for m of

an enhanc ed se rvic e for an equi valent price.” Id. at 223 (quoting Competi tive Tel ecommunications Ass n. v. FCC

, 998 F.2 d 1058, 1 062 (D.C. Cir. 1993)). Thus, if AT&T charges its custome rs thesame rate, but pro vides d iffer ent termsand condit i ons for servic e, that too isa form of “discriminatio n in charges .” Accordingly , even if AT &T leaves its r ates the s ame ( or increases everyone’s rates),

c onsumers wil l st ill

face dis cri minato ry ch arges, a s som e customers will bebound by the arbitration clause and othe rs will n ot be. Those not bound will obtain that same rate withoutsubjecting th emselves to the ter ms and cond itions which made

that rate p ossi

ble. See Metro East , 294 F. 3dat 927 (“Customer s theref ore are c ompensated through l ow er rates for any ne t loss they may ex perience in arbitration

. They can’ t acce pt the lower rates

. . . while avoiding the means t hat made

lower ratesposs ible .”).
Of cours e, Section

202(a) only pr ohibits “undu e” or “un r easonable” di scr

imi nati on, a nd thus it is pos si ble that24 No. 02-2667

8 On the oth er hand, if the r esulti ng dis criminat ion

was not cons ide red “reasonable,” then AT& T would be in violation

of Secti on 202( a). I n that case, state law woul d not just conflict with a federal o b jective, but it would directly confl ict with fe de ral law be cause it would be impossib le for AT&T “to comply with both state an d federal requirements, . . . .” Freightli ner Corp. v . Myrick , 514 U.S. a t 28 7. AT&T coul d justif

y its di sparate char ges because st ate law caused the disc rimination

by inval

idating t he arbitration clause in some states, but not others

. See, e .g. , Panatronic, USA v. AT&T

Corp ., 287 F.3d 840, 844 (9th Cir. 2002) (“A difference in price is not unreasonable if there is a neutral, rationa l basis underl

ying [thedisp arity].”) ( internal quotes omitted). However, allowing state l aw to determi ne the validity of the various

terms and conditions agreed upo n by long-di stanc e pr oviders and their

customer s will

create a labyrinth

of rates, terms and c on dit ions and this vio lates Congress’ s intent in pass ing the Communications Act. 8
Third, it is cl ear from Section 201(b) that Congress intended

fed eral law to go vern the validity of the rates, terms and conditions of long-di stance service contracts. As excerpted

abov e, that sectio n requir es all charges and practic es r elated to c ommunicatio n servic e to be just and reasonable, and

it dec lar es unl awful any unjust or

unreaso nable char ges or prac tice s. 47 U .S.C. § 201(b). This language

demonstrates Congress’s i nte nt th at fe der al l aw determin e the reasonableness of the ter ms and con dition s of long- di stan ce contracts. See also In re Long Distance Telecomm. Lit. , 831 F. 2d 627, 631 (6th Cir . 1987) (“Section 20 1(b) speaks in term s of reasona bleness, and the v ery charg e of Count I is that the defendants en gag ed in

unreaso nable practi ces. Thi s is a d eterminatio n tha t ‘Congress has p laced

square ly i n the hands of the [FCC ]’”) (quoting Consolidated Rail Corp. v. National As s’n ofNo. 02-2667 25

9 Section

207 of th e Comm unic ation s Act aut horizes “[a]ny pers on claiming

to be d amaged by any co mmon carrier subject to the

provis ions of

this chapter” to file a complaint with the FCC. 47

U.S.C. § 207. Additionally, Section 20 8 provides: “(a) Any pers on, any body politic or municipal organization, or

State commission, complaining of anything done or omi tted to be done by an y common carrier s

ubject to this chapter, in

contra venti on of the provisions thereof, may apply to said Commission by petition w hich shall briefly state the facts, w

here upon a s tateme nt of

the compla

int thus made shall be f

orwa rde d by t he C ommi s sion to such common carrier , who shall be called upon to satis fy the

complaint or to answ er the same in wr iting withina re asonab le time to be specif ied by th e Co mmiss ion.” 47 U .S.C. § 208. Boomer could have filed a compla int with the F CC unde r Sect ion 207 or Section 208, argu ing tha t the arbi tratio n clau se viola tes Section 201(b) because it is

unjust o runr eas onabl e. Cf. In re Long Di stan ce , 831 F.2d at 63 1 (concluding that FCC has prima ry jurisdiction to dete rmine if a te rm and condition

of

a long-d istanc e service c on tract constitute an unreasona

ble pract ice); Me tro East , 294 F.3d at 92 7 (holding that FCC
possesses e xc lusive

authori ty to se t aside an ar bitrat ion clause contained in

a file d tari ff). H owever, Boome r did n ot pursue this course

of action. Recycl ing

Indust. I nc. , 449 U.S. 609, 6 12 (198 1 )). 9 While Boomer cha l len ges the arbitr ation cl ause under the state lawdoctrine of uncon sci onab ility and various s tate consumer protection statutes, i n essenc e the questi on is th e same—whether

the term is fair and re asonable. Permit ting such state la w challeng es would open the door for direct confli cts betwe en f

ede ral and stat e la w on the val idi ty o f termsand condit ion s containe d in a long-dista nce service contract. For example, the FCC specifically adopted a policy26 No. 02-2667
encouragin g the use of alternative d

ispute resolu tionin its admin istr ative pr oce dur es. 47 C.F.R. § 1.18. Also, i n the past, tariff

s fil ed by other

carri ers have in clude arbitration cl au s es and th ose c lause s have be en enf orce d. See Metro East
, 294 F.3 d at 926-2 7. The FCC has als o co nclude d th at class actions are “neither contempl ated by, nor inc onsistent with” the C ommuni catio ns Ac t’s c ompl aint r emedi es. Kraus s

v. MCI , 14 FCC R cd. 2 770, 2775-76 (¶ 10). Yet, i f Boomer would have his way, arbitr ation provisions and claus es pr ohibit ing

clas s actions wo uld

be illegal

unde r stat e law,

even if they wer e consi dered “ just a nd r easonable” under fed eral law. The Sup rem acy C laus e prohi bits such an outcome.
Boomer argu es in re spo nsethat foll owing

detarif fing fed eral law no longer preempts s tat e law chall enges to the validit y of contr actual pr ovisions . Speci ficall y, Boomer clai ms that because the FC C no longer req u ire s lo ngdistance pro vide rs to

fil e tari ffs , 47 U.S.C

. § 160, the cases which had held that the Communications A ct pree mpts state laware now inap plic able. In supp ort of hi s posi tion, Boomer cites Ting

v. AT&T

, 182 F.Supp . 2d 902 ( N.D. Cal . 2002), a cl as s ac tion sui

t challe nging, among other things, the validity of AT&T’s arbitra tion clause u nder California law. The court in Ting

rejec ted A

T&T’spre empti on argu me nt and its reliance on decision s rende red befor e detar iff ing, concl uding

tha t “[i]n light of

the cle ar purp ose of the file d rate doctrine, AT&T’s relianc e on these c ases is m isp laced .” Id. at 937.
Boomer is corre ct that the f

iled- rate doctr

ine and the tariff- filing require ment demonstr ated Congres s’s i ntent to preempt state l aw cha llenges to the terms and condi tions contained

in the t ariff . Howev er, Section 203 , which required the fil ing of tariffs, merely served as a mechanism by which the FC C could assure c omplianc e with the standards set forth

in Sections 201 and

202. See MCI

, 512 U.S. 2 30 (“[T]hisCourt has repeatedl y stresse d that rate filing was Congress ’s cho sen means of prev enting unreasonableness and d isc rimination

in charges .” ) . Thus,No. 02-2667 27

10 Boomer also a

r gues t hat Ting

collaterally estops AT&T from challenging the validity of th e arbitration clause because the

co urt in Ting held that the arbitratio n clause

was unco nscio nable. However, for collateral e stoppel to bar subseq uent li tigati on, am ong ot her things , theissue sought to be prec luded must

be the same as inv

olved i n the prior (continue d...) the fil ing requirement fur

thered the Communi cations Act’s
purpose of pr ohibitin g and puni shing unequal rates and preventin g dis cri minati on. Id. Following detariffing, those goals remain, as do the substantive r equirementsof Sections 2 01 and 202. It

is jus t tha t no w Con gres s bel iev es t hat these goa ls can be m et witho ut tariffs. In fact, in authorizi ng the FCC to for ego the tariff -filing requirement, Congress require d the FCC to first assur e itself that the filing of a tarif

f was “not nec essary to en sure t hat the charges, practi ces, cl assifications, or regulatio ns . . . are just

a ndreasonable and

are not unjus tly or unr easona bl y disc riminator

y.” 47 U.S.C. § 16 0(a)(1). Thus, even th ough the FCC no lo nger mandates the filing of tarif

fs, the

con gres si onal

objective of p rovid ing unif orm rates, ter ms and conditions remains, asdoes the feder al prohi bition on ter ms and conditions which are unju st or unrea sonab le. Moreov er, following detar

iff ing, the FCC intended custo mers to ret ain the right to challen ge the j ustn ess and r easonableness of long-dista nce provid ers’ charges and p ractic es under Section 208. Interstate Interex change Marketplace
, 11 FC C Rcd. at 20,730 (¶ 21). Add

itionall y, the FCC made c lear that its decis ionelimi nating the tari ff requi remen t di d “not affe ct [the FCCs] enf

orcement of carrie rs’ obligations un der sect i ons 201 and 202.” Interstate Interex change Marketplace
, 12 FCC Rc d . at 15,057 (¶ 77). Therefore, d etariffing does not alt er the f

und ament al design o f the Communi cations Act, nor modify

Congr ess’ s objec tive of unifor mity i n ter ms and cond

iti ons f or al l lo calities . Acc ordingly, w e r eject Boomer’sargument and hi s reli ance on Ting

. 1028 No. 02-2667

10 (...contin

ued)

case. Chica

go T ruck Drive rs, H

elper s & W areh o use U

nion (Independent) Pensi on Fund , 125 F.3 d 526, 53 0 (7th Cir. 1997). In Ting , the qu estion o f unco nscio nabil ity inv olved California

law, whereas in this case it in volves Illinois

law, and therefore the is sues are not the same. In fact, be cause we concludethat B oomer’s state law cha lleng e to th e arbit ration clause is preempte d bytheCommunication s Act, the is sue of unconscionability is not even in play. Moreove r, while on appeal Boomer perfunctor ily states in a fo otnote that Ting collaterally estops A T&T from ar guing t hat the Communications Act preempts his state law challe nges to the arbitrat ion cl ause, h e fails to suppo rt this pos itionwith any legalanal

ysi s or citation. Therefore he has waive d that argument. Rekh i v. Wil dwood Indust., Inc. , 61 F.3d 1313, 1317 (7th Cir. 1995). Fina lly, even had Bo omer no t waived this arg umen t, b ecau se the issue of preemption involves a
pure quest ion of

law and b ecause Ting

is curre ntly on appeal to the Nin

th Circui

t, we wou ld s till conclude that Ting has

no pre clusi

ve effec t. See , e.g., Ch icago Truck Drivers , 125 F.3d at 532-33(holding that c ol lateral e stoppel did not bar the defendant fr om relit igating a pure question of law, and noting tha t that is

espe cially tr

ue “w hen the issue is of
general i nteres t and has not been resolved by the highest appellat e cour t that ca n re solve

it”) (inte

rnal quotation omitte d). Boomer next contend s that the FCC’ s detariffing orders suppor

t his p osition

that feder al law doesnot preempt his state law challenges to th e validity of the arbitra tion clause. Specifi ca lly, Boomer cites to the FCC’s

respon se to AT&T, Sprint and Worl dCom’s r eque s t that the FCC “[c]larify that f eder al, a nd not state, law governs the determin ation as to wh ether a nond ominan t int erexc hange carrier’s rates , t e rms , and con di tio ns . . . ar e la wful ,” 12 FCC Rcd. a t 15, 057 (¶ 76), wherein th e FCC sta ted:No. 02-2667 29

We the refor e agree with A T&T, Sprint, and WorldC om that the Communications A ct conti n ues to gove rn determi nations as to whether r ates, ter ms , and co nditio ns for interstate, domestic , inter exchang e servic es are just and reaso nable , and are not unju stly

or unreason ably discr i minatory. Whi le the p arties only sought clarificati on that the Communi cations Act gove rns

thedet erm ination

as to the lawfulne ss of rate s, terms, and conditions, we no te that th e Communicati on s Act does not govern other issues, such as contrac t formation and breach of

contract, that arise in a detariffed environment. As stated in the Secon d Rep ort a nd Or der
, cons umers may have remedies

under s tate consumer prote ctio n and contract laws as to i ssues r egarding th e le gal relationsh ip between the carr ier and customer in a detariff ed regime.
12 FCC Rc d. at 15,057 ( ¶77).

B oomerfocuse s on the FCC ’s pronouncement that “th e Communicati ons Act does not g overn ot her is su es, suc h as contract fo rm ation and breac h of contract,” as well as its stat emen t tha t “consumer s may have remedi es under state

consumer

pro tecti on and

cont ract l aws.” Boo mer argu es t hat this langua ge demonstr ates that feder al law doesnot preempt his state l aw challenge to the valid

ity of the arbitration

clau se. T hat a rgument, however, i gnores the earlier language wherei n the FCC stated that “the Commun ications Act continues to govern det erm ination s as to whethe r rate s, ter ms, and conditions . . . are just and reasonable, and are no t unjust ly or unrea sonab ly dis cri minato ry,” and the FCC’ s statement that “the Communicati ons Act governs the deter mination as t o the lawfulness of r ates, te rms an d co ndi tions
, . . .” Thus, wh ile state law may deter mine w hether a contract has been30 No. 02-2667

11 In Ting , the district court concluded that und e r California

law the doctrine

of unconsci onabilit

y concer ns the forma tion of a c ontract. However , whether state law trea ts unconscionability as a doctrine prev entin g the formation

of

a contra ct or as a defen se ba

rring enf

orceme nt of a term o f

a contract, the effect is t he same—a contractual provision is decla red illegalunde r s tate law. Eith er

way, the

outcome conflicts with the federal objective of the Communications Act. Accord ingly, even if und erstate law a challenge to the validityo f

a term or

condition of a l ong- dist ance se rvi ce contr act is charac terized as an issue of contr act “ forma

tion, ” that st ate la

w challe nge i s none

thele ss preempte d. formed, federal law still g overns the validity of the rates, terms and c onditi ons of the contract. 11

Fina lly, Boomer c ites to th e histor ical no tes to 4 7 U.S.C. § 152 which pr ovide: “Thi s Act and

the amendments made by this Ac t shall not be constr ued to modify, impair , or supersede Fed eral, State, or local law unless expressly so provid ed in such A ct o r ame ndm ents .” 47 U .S.C . § 152

, His tor ic al Stat utory Not es. Boome r contends tha t this saving s clause demonstrates that Congress

did not intend

to preempt state law chall enges to the ter ms and cond itionsof the CSA . Ho wever , Sec tio n 152 wa s p asse d as part of the Telecommuni cations Act of 1 996 and

by its own ter ms appli es only t o “[t]h is A

ct and the amen dments

made by this Act.” “T hi s Act” is

the Teleco mmunication s Act of 1996, and not the Communic ations Ac t of 1934, of which Section 201 and 20 2 are part. Therefore, rather th an support Bo omer’ s positi on, the his torical notes to Section 152 confi rm that the Telecommun ica tions Act di d not “modi fy, impair

or supers ede” Sections 2 01 and 202, and their goal s of unifor mity and non- disc riminati on.
In sum, in p assing the Communications Act Congress sought to ensure th at consum ers would r eceive uni form rates and that

cons umers would not be discriminated againstNo. 02-2667 31

based on their

locali ty. Allowing stat e la w challe nges to the validity of the terms and co ndi tions cont ained

in l ongdistance c ontracts, however, results in the very disc riminati on Congress sought to p revent. Mor eover, the arbitration

clause serves to

lower customer s’ rates , and thus

an indirect result will be pric e disc riminati on, either directly

or indir ec tly (i.e. b ecause cust omers pay ing the sa me price

rece ive dif

fere nt co ntrac tual r

ights). Finally, Sec tio n 201( b) cl ear ly d emon str ates Con gres s’s int ent that fed eral

law determin e thefai rne ss a n d rea son able nes s of contrac tual terms, a s opp ose d to stat e la w pr

inc ip les such as

unco nscionability. For all of these rea son s, we con cl ude

that Boome r’s state law challenges to th e validity of th e arbitration

clause ar e impl iedly p reempted by the Commun ications A

ct. b) Field Pree mption

In additi on to arguing that B o omer’s stat e la w challen ges to the a rbitrat io n cla use are preempted because they conf

lic ts wi th the fede ral obj ect ive of th e Communicati ons Act, AT&T also contends that i n passi ng the Commu nica tions Act, Congress comple tely pree mpted
any state l aw regul ation of l ong-d istan ce c ontrac ts. Prior to detariff ing, this court held that the Federal

Communic ations Act comp letely p reempted state law chall enges to the terms and conditions cont ained in a fi led tarif f. Cahn mann v

. Sprint Corp. , 133 F.3d 4 84, 489 -90 (7 th Cir. 19 98). Howeve r, following det ari ffing, t her e app ears to be some rol e for

state law, see 12 FCC Rcd . a t 15,057 (¶77), although it cann ot operate to invali date the rates, terms or conditions of a longdistance servic e contrac t. It would the refore seem that under the new deta riffed regime fede ral law no longer comple tely preempts

state l aw. But

we n eed not res olv e th is is suetod ay

as Boomer’s

state law challenges to th e arbitration clause are

non ethel ess preempted un der the doctrine of impliedly conflict pr eemp tio n. A cc ord ing ly, Boom er i s bo u nd by the

a rbitration

clause and his claims must be submitt ed t o arbitr ation.32 No. 02-2667

III. Following d etariffing, AT&T mailed Boomer an of

fer ( in the f orm of the CSA) to provide long-dis tance services. Boomer accepted t his offer by con tinuing to use AT&T’s services, and theref

ore the CSA

constitut es a contract. Amongother things, the CSA included an arbitration c lause. While Boomer cont ends that that cla use is unconsciona ble under stat e la w and viol ates the Illinois Consumer Fraud Act and th e Decepti ve Busines s Practic es Act, th e Communicati ons Act preempts s ta te law chall enges to the validity o f contractu al provis ions becaus e th e Communicati ons Act seek s to pr omote the u ni formity of rates, terms and conditions, and state law challenges to th e legality of contractu al provi sion

would d estroy that objecti ve. Acc ordingly, Boomer c annot chall en ge the valid ity of the arbitration

clause under

state law, and instead must submit to a rbitration . We theref ore REVE RSE and co mpel arbitration of Boomer’s claims. The un derl ying p roce edin gs are furth er stayed p ending the outcome of

arbitration

.