Opinion ID: 2630496
Heading Depth: 1
Heading Rank: 4

Heading: federal communications act of 1934 preemption

Text: ¶ 22 Next, AT & T argues that Washington law is preempted by the Federal Communications Act of 1934(FCA) (codified as amended at 47 U.S.C. §§ 151-161, 201-231, 251-261, 301-339, 351-363). AT & T distinguishes this case from Scott because the federal act in question there was the Federal Arbitration Act (FAA), Title 9 U.S.C. Scott, 160 Wash.2d at 857-59, 161 P.3d 1000. AT & T argues that the FCA demonstrates a congressional intent that customers receive uniform terms and conditions of service and that to achieve such uniformity, it is Congress's and the Federal Communications Commission's (FCC) goal to create a federal, uniform standard for determining the validity of the rates, terms, and conditions of carriers. AT & T contends that Washington's consumer protection and contract laws are impliedly preempted by the FCA because they stand as an obstacle to the accomplishment and execution of Congress's and the FCC's purpose and objective of creating a federal, uniform standard for determining the validity of long-distance service contract rates, terms, and conditions. Br. of Appellant at 19-20. ¶ 23 Under the supremacy clause of the United States Constitution article VI, clause 2, state laws are not superseded by congressional legislation unless that is the clear and manifest purpose of Congress. Hue v. Farmboy Spray Co., 127 Wash.2d 67, 78, 896 P.2d 682 (1995); Cipollone v. Liggett Group, Inc., 505 U.S. 504, 516, 112 S.Ct. 2608, 120 L.Ed.2d 407 (1992). Preemption is a question of law we review de novo. Axess Int'l Ltd. v. Intercargo Ins. Co., 107 Wash. App. 713, 722, 30 P.3d 1 (2001) (citing Hoddevik v. Arctic Alaska Fisheries Corp., 94 Wash.App. 268, 278, 970 P.2d 828 (1999)). Conflict preemption is found where it is impossible to comply with both state and federal law or where state law stands as an obstacle to the accomplishment of the full purposes and objectives of Congress. Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 248, 104 S.Ct. 615, 78 L.Ed.2d 443 (1984) (citation omitted). The obstruction strand of conflict preemption focuses on both the objective of the federal law and the method chosen by Congress to effectuate that objective, taking into account the law's text, application, history, and interpretation. See Int'l Paper Co. v. Ouellette, 479 U.S. 481, 494, 107 S.Ct. 805, 93 L.Ed.2d 883 (1987) (state law. . . is pre-empted if it interferes with the methods by which the federal statute was designed to reach this goal); Jones v. Rath Packing Co., 430 U.S. 519, 526, 97 S.Ct. 1305, 51 L.Ed.2d 604 (1977) (courts should consider how law is applied and interpreted in addition to plain text). Thus, the question for us is whether Congress's intent or goals would truly be frustrated if AT & T were required to comply with Washington's laws regarding the formation of consumer contracts and the strong public policy of Washington's Consumer Protection Act that consumers be able to vindicate their right to be free of unfair and deceptive practices in consumer transactions. See Ting v. AT & T Corp., 319 F.3d 1126, 1136 (9th Cir.2003) and cases cited therein. See also RCW 19.86.020. ¶ 24 AT & T urges us to follow a Seventh Circuit opinion that AT & T contends is the leading case on preemption under the FCA. Boomer v. AT & T Corp., 309 F.3d 404 (7th Cir.2002). The Washington State attorney general, appearing as amicus, urges us not to follow Boomer. The attorney general argues the issue of whether the FCA preempts state consumer protection and contract laws was considered and correctly decided five years ago by the Ninth Circuit Court of Appeals in Ting, 319 F.3d 1126. The Ninth Circuit examined the FCA's text, application, history, and interpretation thoroughly before reaching its conclusion that the FCA, after detariffing, no longer preempts state laws in claims arising from the rates, terms, and conditions of a long distance carrier's customer contract. Id. at 1130-33, 1137-46. ¶ 25 Congress originally enacted the FCA in 1934, ch. 652, 48 Stat. 1064 (codified as amended at 47 U.S.C. §§ 151-161, 201-231, 251-261, 301-339, 351-363). It was passed in a monopolistic environment. Section 203(a) was intended to provide fair contracts through a tariff system. It required telecommunications carriers to file with the FCC a list of tariffs, or schedules, showing all charges . . . and . . . the classifications, practices, and regulations affecting such charges. 47 U.S.C. § 203(a). Tariffs covered not only the rates but the terms and conditions of customer contracts. The act prohibited any classification, regulations, or practice affecting such charges, except as specified in a carrier's filed tariffs. Id. § 203(2)(c). In the filed-tariff environment, consumers were, in theory, protected from unjust, unreasonable, or discriminatory rates, terms, and conditions by the FCC's prior determination that the carrier's filed rate was just and reasonable and not unreasonably or unduly discriminatory. Once a tariff was approved by the FCC, it then carried the force of law and became binding on both the consumer and the carrier. Brown v. MCI Worldcom Network Servs., Inc., 277 F.3d 1166, 1170 (9th Cir.2002) (citing Lowden v. Simonds-Shields Lonsdale Grain Co., 306 U.S. 516, 520, 59 S.Ct. 612, 83 L.Ed. 953 (1939)). Under this regime, courts frequently held that state law contract claims were barred. See, e.g., AT & T v. Cent. Office Tel., Inc., 524 U.S. 214, 228, 118 S.Ct. 1956, 141 L.Ed.2d 222 (1998); In re NOS Commc'ns, 495 F.3d 1052 (9th Cir.2007). ¶ 26 Over time, the monopolistic model fell way to deregulation and free market pressures. Under the old regime, AT & T had achieved a near monopoly in the telecommunications market, and there were many companies eager to enter the telecommunications market. Starting in the early 1980's, the FCC tried to prohibit tariff-filing by nondominant carriers (i.e., those other than AT & T) on the ground that market forces would guarantee reasonable rates without collusive pricing. In re Policy & Rules Concerning Rates for Competitive Common Carrier Servs., 99 F.C.C.2d 1020, 1028-29 (1985). Finally, in 1996, Congress fundamentally changed the communications act's scheme by adopting a national policy of opening all telecommunications markets to competition and providing a deregulatory, procompetition framework. H.R. Conf. Rep. No. 104-458, at 113 (1996), reprinted in 1996 U.S.C.C.A.N. 124. As the Ninth Circuit explained: Finally armed with the requisite congressional authorization, the FCC promptly issued a Notice of Proposed Rulemaking on March 25, 1996, to forbear from applying the tariffing requirements of § 203 of the 1934 Act. Notice of Proposed Rulemaking, 11 F.C.C.R. 7,141, 1996 WL 435466 (1996). In the Notice, the Commission tentatively concluded that tariffs were no longer necessary because market forces were sufficient to protect consumers from unjust and unreasonable rates, terms, and conditions. Id. at ¶¶ 30, 31 (concluding that removing filing requirement will promote competition and prevent collusive pricing). Following a comment period, the FCC issued an order of mandatory detariffing on October 29, 1996, see Second Report and Order, 11 F.C.C.R. 20,730, 1996 WL 633345 (1996), thus confirming that enforcement of the tariffing provision is neither necessary to ensure just and reasonable, non-discriminatory rates, nor necessary for the protection of consumers. MCI WorldCom, Inc., v. FCC, 209 F.3d 760, 763 (D.C.Cir.2000) (citing Second Report and Order, 11 F.C.C.R. 20,730, at ¶ 21, 1996 WL 633345). Ting, 319 F.3d at 1132. ¶ 27 When Congress authorized the FCC to eliminate the filing requirement, it permitted the tariff filing mechanism to be replaced by a market-based mechanism in the form of individual negotiated contracts between carriers and their customers. Id. Unlike tariff filing, however, this market-based mechanism depends in part on state law. Id. at 1133. The market-based method of achieving the act's goals of reasonableness, fairness, and nondiscrimination in carrier contracts does not require a single, federal standard but rather depends in part on state law for the protection of consumers in the deregulated and competitive marketplace. Id. ¶ 28 The Boomer court, relied upon by AT & T, failed to do a historical analysis. Boomer, 309 F.3d at 417-23. The Boomer court based its conclusion upon a textual analysis of sections 201(b) and 202(a) of the 1996 Telecommunications Act. Id. Sections 201(b) and 202(a) of the act, which survived detariffing, require that charges and practices be just and reasonable and prohibit unjust or unreasonable discrimination in charges and practices. But as pointed out by the Ninth Circuit, save for Boomer, no court has ever referred to § 201 or § 202 in declaring a carrier's tariff immune from state-law challenge. That role had always been reserved for § 203 and the filed rate doctrine. Ting, 319 F.3d at 1138 (citing Cent. Ofice, 524 U.S. at 223, 118 S.Ct. 1956). [8] ¶ 29 The FCC no longer enforces section 203's filing requirements. We agree with the Ninth Circuit that reliance on sections 201 and 202 for federal preemption is untenable. Ting, 319 F.3d at 1139. Congress unquestionably intended that consumers receive fair and reasonable rates. 47 U.S.C. § 202(a) makes it unlawful for a carrier to make any unjust or unreasonable discrimination for like communication service or to make or give any undue or unreasonable preference or advantage. But Congress also unquestionably intended that telecommunications providers compete in a free market place and that consumers would have the protection of state consumer protection laws. [9] ¶ 30 Senator Slade Gorton, then a senator from the state of Washington, succinctly summarized the goals of the FCA when he noted that the 1996 Telecommunications Act (permitting the FCC to cease enforcing section 203's tariffing requirement) would allow [s]tates to preserve and advance universal service, protect the public safety and welfare, ensure the continued quality of telecommunications service, and safeguard the rights of consumers, which are, of course, the precise goals of this Federal statute itself. 141 CONG. REC. S8206-02, S8212 (daily ed. June 13, 1995) (statement of Sen. Gorton). [10] ¶ 31 Setting aside its preemption argument, even AT & T concedes that state law now governs the formation of consumer long distance contracts. Br. of Appellant at 22-23. This is so because even the Boomer court recognized that, following detariffing, there appears to be some role for state law. Boomer, 309 F.3d at 423 (acknowledging that state law may determine whether a contract has been formed). But we find no persuasive support for Boomer's argument that the role of state contract law is somehow limited to laws governing offer and acceptance. In Marcus v. AT & T Corp., 138 F.3d 46, 54 (2d Cir.1998), the court held that the communications act does not manifest a clear congressional intent to preempt state law prohibiting deceptive business practices, false advertising, or common law fraud. In interpreting the 1996 Telecommunications Act, the FCC has repeatedly referred to the role of state law and has not done so in limiting terms. See, e.g., In re Policy & Rules Concerning the Interstate, Interexchange Marketplace, Implementation of Section 254(g) of the Commc'ns Act of 1934, 11 F.C.C.R. 20,730, 20,751, 1996 WL 633345 (1996) (Second Report and Order) (after detariffing, consumers will also be able to pursue remedies under state consumer protection and contract laws and carriers will be treated like all other businesses in unregulated markets); In re Policy & Rules Concerning the Interstate, Interexchange Marketplace, Implementation of Section 254(g) of the Commc'ns Act of 1934, 12 F.C.C.R. 15,014, 15,057, 1997 WL 473330 (1997) (Order on Reconsideration) (consumers will have remedies under state contract and consumer protection law regarding the legal relationship between carrier and consumer). ¶ 32 To summarize, in 1996, Congress made a paradigm shift from a monopolistic, tariffed-rate system to a competitive market. Congress's goal of ensuring that telecommunications carriers provide consumers with reasonable, fair, and nondiscriminatory rates, terms, and conditions in a competitive market is furthered by providing consumers the protections of state contract and consumer protection laws. AT & T seems aghast that it may have to comply with the laws of 50 different states, but that is precisely what every other company that competes in a free, competitive, and open market must do. There is nothing in the 1996 Telecommunications Act that declares preemption or dictates that all contracts must be identical or uniform. 47 U.S.C. §§ 201, 202. Nothing prevents AT & T from creating new consumer services agreements with fair and reasonable terms that are consistent with the state laws in each state or all states in which it operates. Congress contemplated concurrent authority between federal and state authorities. State and private remedies aid rather than hinder the goal of preventing unjust or unreasonable discrimination. [11] We hold that the FCA does not preempt application of Washington law as to the validity of the contract.