Motion to Dismiss

Cingular's motion to dismiss argues that the Commission must dismiss the OII for lack of subject matter jurisdiction. In essence, Cingular contends that federal law preempts this Commission from investigating the marketing and customer service practices Cingular employs in selling wireless service in California, and that even if such an examination is not federally preempted, the Commission may not investigate those practices under the state law theories charged in the OII. We review these arguments below.

Federal Law Does Not Preempt the Field of Wireless Regulation

The controlling legal authority is the Omnibus Budget Reconciliation Act of 1993 (1993 Budget Act), which amended § 332(c)(3)(A) of the Communications Act of 1934 regarding regulation of Commercial Mobile Service (also known as Commercial Mobile Radio Service or CMRS), which includes the "wireless" or "cellular" service that Cingular provides in California. The OII quotes the 1993 law, in relevant part, and we repeat the quotation here:

. . . no state or local government shall have any authority to regulate the entries of or the rates charged by any Commercial Mobile Service or any Private Mobile Service, except this paragraph shall not prohibit a state from regulating the other terms and conditions of Commercial Mobile Service. (OII at 11, citing 47 USC § 332(c)(3)(A) (Emphasis added)).

As discussed in the OII, the Commission has exercised its jurisdiction to regulate various "other terms and conditions" of wireless service on a number of occasions since enactment of the 1993 Budget Act.⁸ Though no appellate court has held so, Cingular appears to suggest that the Commission's prior efforts have overreached, and it argues that the Commission overreaches now.

Cingular's motion largely ignores the 1993 Budget Act's explicit recognition of the continued, permissible sphere of state regulation or the supporting legislative history,⁹ which explains that "other terms and conditions" includes the several consumer protections enumerated therein as well as other "consumer protection matters". Likewise, Cingular gives mere passing acknowledgment to several important cases which recognize the state interests in consumer protection inherent in 47 USC § 332(c)(3)(A).

The Federal Communications Commission (FCC), in its recent order in Wireless Consumers Alliance, held "that Section 332 does not generally preempt the award of monetary damages by state courts based on state consumer protection, tort, or contract claims".¹⁰ Previously, in SBMS Ruling, the FCC determined that though states may not prescribe the charges for CMRS services or the rate structures for those services, 47 USC § 332(c)(3)(A) does not exempt the CMRS industry from the neutral application of state contractual or consumer fraud laws.¹¹

Wireless Consumers Alliance contains an instructive discussion of both the comments of parties to the FCC proceeding and of extant case law, in which courts had both upheld and rejected similar preemption arguments. Notably, the FCC stated:

In short, we reject arguments by CMRS carriers that non-disclosure and consumer fraud claims are in fact disguised attacks on the reasonableness of the rate charged for the service. [Citation omitted] A carrier may charge whatever price it wishes and provide the level of service it wishes, as long as it does not misrepresent either the price or the quality of service. Conversely, a carrier that is charging a "reasonable rate" for its services may still be subject to damages for a non-disclosure or false advertising claim under applicable state law if it misrepresents what those rates are or how they will apply, or if it fails to inform consumers of other material terms, conditions or limitations of the service it is providing. We thus do not agree with those commenters who allege that, for consumer protection claims, any damage award or damage calculation, including any refund or rebate, is necessarily a ruling on the reasonableness of the price or the functional equivalent of a retroactive rate adjustment. [Citation omitted] (Wireless Consumers Alliance at ¶ 29 (Emphasis added).)

Cingular's motion, which characterizes the OII as a thinly veiled attempt by this Commission, in clear violation of the 1993 Budget Act, to regulate both wireless rates and the conditions of entry, plainly misconstrues the nature of the OII. Cingular relies on three cases, one from the 7^th Circuit and two others from federal district courts in Texas and Michigan, the latter apparently unreported. None of these cases persuades us that we must dismiss this OII.

Two of the cases, the 7^th Circuit's Bastien¹² and the district court's Bryceland¹³ (from the Northern District of Texas), concern the propriety of federal removal jurisdiction. In the course of determining whether the respective complaint raises a federal question that supports removal of the action from state to federal court, each court examines whether the allegations in the complaint (e.g. consumer fraud in the provision of wireless services) actually constitute an impermissible state law attack on defendant's rates or terms of market entry. While the Bastien and Bryceland courts each find that the respective complaint, as pleaded, challenges rates and terms of entry rather than consumer protection matters, these decisions reach different conclusions on removal jurisdiction-the Bastien court upholding removal and dismissing the action, and the Bryceland court, after recognizing Bastien but applying a three-part removal test not discussed by the 7^th Circuit, remanding the action to the state court.

In the third case Cingular relies upon, Aubrey (from the Eastern District of Michigan), the district court resolved a judgment on the pleadings in favor of defendant, a wireless carrier.¹⁴ The Aubrey court's decision follows Bastien on the basis that the pleadings at issue, which (unlike this OII) sought the construction of additional cellular towers and other infrastructure to improve service, did not in fact raise consumer protection concerns.

Finally we observe that Cingular's motion does not discuss Spielholz, the recent California Court of Appeals decision on the case that gave rise to Wireless Consumers Alliance, and Cingular's reply argues that Spielholz was wrongly decided.¹⁵ After carefully considering Wireless Consumers Alliance, Bastien, and other authority, the Spielholz court reversed the trial court, which had granted defendant's motion to strike allegations for monetary relief for consumer fraud in the provision of wireless services.

The Spielholz court distinguished preempted claims, those that directly challenge a rate and seek prospective or retrospective remedies to control the rate, from those that are not preempted, such as "a claim that directly challenges some other activity, such as false advertising, and requires a determination of the value of service provided in order to award monetary relief..."¹⁶

We find Cingular's federal preemption arguments to be unpersuasive. The OII raises the kind of consumer protection matters that federal law permits the states to adjudicate. The OII neither expressly or impliedly seeks to regulate wireless rates or terms of entry. Cingular fails to establish otherwise, and we deny the motion to dismiss.

State Law Theories

Cingular challenges the Commission's authority to commence an investigation of a utility's compliance with §§ 451, 702, and 2896 and to order penalties or reparations under 701, 734, 1702, and 2107 for any violations found. Cingular also challenges the OII's reference to consumer protection statutes found in California's Civil, Commercial, and Business & Professions Codes.

With respect to the Commission's authority under the Public Utilities Code, we will not belabor the matter. Cingular fails to establish the cited statutes are too vague to support an investigation into past utility behavior, on the one hand, or that they merely permit the Commission to fashion prospective relief, on the other. Neither does Cingular establish that the Commission is barred from assessing a penalty against a utility without first applying to a superior court. Numerous Commission decisions on these issues hold otherwise.¹⁷

Cingular next challenges the OII's Ordering Paragraph 1(d) and 1(e) because it references consumer protection laws that are codified, not in the Public Utilities Code, but in other California Codes. Specifically, Ordering Paragraph 1(d) refers to the Song-Beverly Consumer Warranty Act (Civ. Code §§ 1792-1792.4), the Consumer Legal Remedies Act (Civ. Code §§ 1770) and Com. Code §§ 2314-2316. Ordering Paragraph 1(e) refers to Bus. & Prof. Code § 17200 et seq. and § 17500 et seq, as well as Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45(a). The premise for these references is the Commission's 1995 decision in Re: Regulation of Cellular Radiotelephone Utilities, which permits wireless carriers operating in California to "bundle" sales of equipment, such as telephones, with sales of service as long as they comply with "all applicable California and federal consumer protection ... laws."¹⁸

Cingular argues that these references are tantamount to an attempt by this Commission to exceed its regulatory jurisdiction by stepping into the shoes of the superior courts or, with respect to the Federal Trade Commission Act, a federal regulatory agency. Cingular plainly misreads these Ordering Paragraphs. We need not reach Cingular's arguments that we lack jurisdiction to enforce these statutes because, at a minimum, we may look to cases decided under them for guidance on the kinds of activities that have constituted consumer protection violations. Cingular provides no authority to the contrary. The parties' post-hearing briefs are the proper place to argue the correct use of these statutes in assessing evidence and fashioning appropriate relief, if any.

Cingular fails to establish that we must dismiss the OII.