Court Opinion

ID: 3052505
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:42:45.641375+00
Date Added: 2024-06-11T12:38:52.960977
License: Public Domain

FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

JARED A. PECK, individually and         
on behalf of all the members of
the class of persons similarly
situated,
                 Plaintiff-Appellant,
                  v.
CINGULAR WIRELESS, LLC, a
Delaware limited liability company
doing business as Cingular                   No. 06-36027
Wireless; NEW CINGULAR WIRELESS
SERVICES, INC., Delaware                       D.C. No.
                                            CV-06-00343-TSZ
corporation doing business as ATT
                                               OPINION
Wirless; NEW CINGULAR WIRELESS
SERVICES PURCHASING COMPANY LP,
a Delaware limited partnership
doing business as Cingular
Wireless, NEW CINGULAR WIRELESS
PCS LLC, a Delaware limited
liability company doing business
as Cingular Wireless,
              Defendants-Appellees.
                                        
        Appeal from the United States District Court
          for the Western District of Washington
         Thomas S. Zilly, District Judge, Presiding

                   Argued and Submitted
            April 10, 2008—Seattle, Washington

                    Filed August 7, 2008

                             9991
9992                PECK v. CINGULAR WIRELESS
       Before: Carlos T. Bea and Milan D. Smith, Jr.,
Circuit Judges, and Joseph M. Hood,* Senior District Judge.

                    Opinion by Judge Hood

   *The Honorable Joseph M. Hood, Senior United States District Judge
for the Eastern District of Kentucky, sitting by designation.
9994             PECK v. CINGULAR WIRELESS

                        COUNSEL

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

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

Christine A. Mailloux, The Utility Reform Network, San
Francisco, California; Patrick W. Pearlman, WV Public Ser-
vice Commission, Charleston, West Virginia; for The
                  PECK v. CINGULAR WIRELESS                  9995
National Association of State Utility Consumer Advocates in
Support of Plaintiffs-Appellants.

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

                          OPINION

HOOD, Senior District Judge:

   Appellant Jared A. Peck (“Appellant”) appeals the district
court’s grant of the motion to dismiss the complaint filed by
Appellees Cingular Wireless, LLC and its subsidiaries (col-
lectively, “Cingular” or “Appellees”). We have jurisdiction
pursuant to 28 U.S.C. § 1291 and vacate and remand the deci-
sion of the district court.

                    I.   BACKGROUND

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

    It is not the intention of this chapter that the taxes
    herein levied upon persons engaging in business be
9996                 PECK v. CINGULAR WIRELESS
     construed as taxes upon the purchasers or customers,
     but that such taxes be levied upon, and collectible
     from, the person engaging in the business activities
     herein designated and that such taxes shall constitute
     a part of the operating overhead of such persons.

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

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

   After removing the case to federal court, Cingular moved
   1
     The Washington Supreme Court has since considered the question of
whether RCW 82.04.500 prohibits businesses from passing the B&O Tax
on to consumers. Nelson v. Appleway Chevrolet, Inc., 157 P.3d 847
(Wash. 2007) (en banc). In Appleway Chevrolet, Washington’s highest
court ruled that the B&O Tax could be passed on the consumers in the
form of a line item charge, but only if disclosed and negotiated as an ele-
ment of the final price. “[I]t is lawful for Appleway to disclose a B & O
charge to Nelson during the course of negotiating a purchase price or later
identify any claimed element of overhead. However, Appleway may not
add a B & O charge as one of several fees and taxes after Appleway and
Nelson negotiated and agreed upon a final purchase price.” Id. at 851
(emphasis in original).
                     PECK v. CINGULAR WIRELESS             9997
to dismiss the complaint based on the Federal Communica-
tions Act (“FCA”), 47 U.S.C. § 332(c)(3)(A), which prohibits
state regulation of telecommunications carriers’ rates, but
expressly permits states to regulate carriers’ “other terms and
conditions of commercial mobile services.” Id. The district
court granted Cingular’s motion to dismiss, holding that RCW
82.04.010 et seq., was preempted by the FCA to the extent
that the Washington statute attempted to regulate line item
charges. The district court also dismissed Appellant’s state
law claims of breach of contract and violation of the CPA,
holding the claims were preempted by the FCA.

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

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

               II.    STANDARD OF REVIEW

  The Court of Appeals reviews de novo a district court’s dis-
missal of a case on federal preemption grounds. Olympic Pipe
Line Co. v. City of Seattle, 437 F.3d 872, 877 n.12 (9th Cir.
9998               PECK v. CINGULAR WIRELESS
2006); Williamson v. Gen. Dynamics Corp., 208 F.3d 1144,
1149 (9th Cir. 2000). The Court of Appeals also reviews de
novo a district court’s interpretation of federal statutes. Olym-
pic Pipe Line Co., 437 F.3d at 877 n.12.

                      III.   DISCUSSION

A.     FCA Preempts State Regulation of “Rates”

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

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

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

   [2] As noted by the D.C. Circuit, “Section 332(c)(3)(A)
leaves its key terms undefined. It never states what constitutes
rate and entry regulation or what comprises other terms and
conditions of wireless service.” Cellular Telecomms. Indus.
Ass’n v. FCC, 168 F.3d 1332, 1336 (D.C. Cir. 1999). When
a statute is ambiguous or leaves key terms undefined, a court
                   PECK v. CINGULAR WIRELESS                 9999
must defer to the federal agency’s interpretation of the statute,
so long as such interpretation is reasonable. Metrophones
Telecomms., Inc. v. Global Crossing Telecomms., Inc., 423
F.3d 1056, 1067 (9th Cir. 2005) (citing Chevron, 467 U.S. at
845). In its Second Report and Order, the FCC sought to clar-
ify the term “rates,” as used in § 332(c)(3)(A), by declaring
that “rates” include line item charges. The FCC reasoned that
§ 332(c)(3)(A) prohibited states from regulating “rate struc-
tures” and “rate elements,” which would include line items.
20 F.C.C.R. at 6462-67. Therefore, the FCC concluded state
laws that regulate line item charges in wireless bills were pre-
empted by the FCA.

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

B.   District Court’s Failure to Defer to NASUCA

  [4] As this court held in MCI Telecommunications Corp. v.
U.S. West Communications, 204 F.3d 1262 (9th Cir. 2000):
10000              PECK v. CINGULAR WIRELESS
    When agency regulations are challenged in more
    than one court of appeals, 28 U.S.C. § 2112 requires
    that the panel on multidistrict litigation consolidate
    the petitions and assign them to a single circuit. The
    panel assigned the challenges to the FCC regulations
    to the Eighth Circuit, which thereby became, and
    remains, “the sole forum for addressing . . . the
    validity of the FCC’s rules.”

Id. at 1267 (quoting GTE South Inc. v. Morrison, 199 F.3d
733 (4th Cir. 1999) (emphasis added)).

   [5] The FCC’s Second Report and Order was challenged in
both the Second and Eleventh Circuits. The Judicial Panel on
Multidistrict Litigation consolidated challenges to the Second
Report and Order in the Eleventh Circuit. Much like the
Eighth Circuit’s decision cited in MCI Telecommunications,
the Eleventh Circuit’s decision regarding the validity of the
Second Report and Order is binding outside of the Eleventh
Circuit. Such a result is consistent with this and other Cir-
cuits’ application of the Hobbs Act. In Wilson v. A.H. Belo
Corp., 87 F.3d 393, 396-97 (9th Cir. 1996), this court dis-
cussed the statutory framework for determining the validity of
an FCC order and determined that “together, [47 U.S.C.
§ 402(a) and 28 U.S.C. § 2342(1)] vest the courts of appeals
with exclusive jurisdiction to review the validity of FCC rul-
ings.” Id. In discussing the exclusivity of its jurisdiction, the
D.C. Circuit wrote: “[W]ith regard to final FCC actions, a
statute which vests jurisdiction in a particular court cuts off
original jurisdiction in other courts in all cases covered by that
statute.” Telecomms. Research & Action Ctr. v. FCC, 750
F.2d 70, 77 (D.C. Cir. 1984) (footnote omitted).

   [6] The Hobbs Act provides a framework for determining
the validity of final FCC orders, a framework that grants
exclusive jurisdiction to the circuit courts. See 28 U.S.C.
§ 2341 et seq. While the district court may not have agreed
with the Eleventh Circuit’s analysis in NASUCA, according to
                     PECK v. CINGULAR WIRELESS                    10001
the framework for reviewing an FCC decision, the district
court was bound by the NASUCA court’s determination that
the Second Report and Order was invalid. Accordingly, as a
result of the vacatur of the Second Report and Order, there is
no FCC ruling on the issue of whether “rates” include line
item charges.

C.    The FCA Does Not Preempt RCW 82.04.500

   [7] In the absence of an agency interpretation of the statute,
we examine section 332(c)(3)(A) as we would any other stat-
ute. We agree with the Eleventh Circuit’s determination in
NASUCA that section 332(c)(3)(A)’s use of the term “rates”
does not comprehend how line items are displayed or pres-
ented on wireless consumers’ bills. As the court noted in
NASUCA, “[t]he prohibition or requirement of a line item
affects the presentation of the charge on the user’s bill, but it
does not affect the amount that a user is charged for service.”
457 F.3d at 1254. In this case, as the Washington Supreme
Court noted in Appleway Chevrolet, RCW 82.04.500 does not
purport to dictate how much businesses may charge for their
goods or services. Cingular remains free to charge its custom-
ers as much, or as little, as the market will bear. 157 P.3d at
850 n.5.

   [8] Rather, RCW 82.04.500, as interpreted in Appleway
Chevrolet, simply structures the contract’s negotiation and
disclosure, mandating that businesses quote all prices inclu-
sive of Washington’s B&O Tax. Under RCW 82.04.500, busi-
nesses are allowed to itemize the B&O Tax and pass the B&O
Tax to the consumer, so long as the tax is disclosed to the
consumer “during the course of negotiating a purchase price.”
Appleway Chevrolet, 157 P.3d at 851 (emphasis in original).
RCW 82.04.500 therefore acts as a consumer protection stat-
ute, regulating the method of disclosure, rather than the rea-
sonableness or propriety of the underlying rate.2 The
  2
  Contrary to the claims of Cingular and amicus curiae CTIA—The
Wireless Association, we are skeptical that requiring businesses to quote
10002                 PECK v. CINGULAR WIRELESS
legislative history of section 332(c)(3)(A) confirms that Con-
gress did not intend the FCA to preclude the states from
adopting measures like RCW 82.04.500, but rather considered
them “other terms and conditions” that are expressly excluded
from section 332(c)(3)(A)’s preemption of rates. See H.R.
Rep. No. 103-111, at 261 (1993), reprinted in 1993
U.S.C.C.A.N. 378, 588 (explaining that “ ‘terms and condi-
tions’ . . . include such matters as customer billing
information and practices and billing disputes and other con-
sumer protection matters” (emphasis added)).

   [9] We hold, therefore, that the FCA does not preempt state
claims brought pursuant to RCW 82.04.500.

                        IV.     CONCLUSION

   Having concluded that there is no federal preemption of
Appellant’s state law claims, this court is of the opinion that
the matter should be vacated and remanded to the district
court for a determination of whether it has subject matter
jurisdiction over Appellant’s claims.

   VACATED AND REMANDED.

prices on a tax-inclusive basis will necessarily mislead or conceal from
consumers the effect of the state’s tax on their rates. Cingular remains free
to disclose, during negotiation or on customers’ bills, how much of the
purchase price is attributable to the B&O Tax. It simply “may not add a
B & O charge as one of several fees and taxes after [it and its customers]
negotiated and agreed upon a final purchase price.” Appleway Chevrolet,
157 P.3d at 851.