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In re Universal Service Fund Telephone Billing Practice Litigation

September 20, 2010

IN RE: UNIVERSAL SERVICE FUND TELEPHONE BILLING PRACTICE LITIGATION.
CLASS PLAINTIFFS, PLAINTIFFS, CLASS PLAINTIFFS, THOMAS F. CUMMINGS; ROGER A. GERDES; STERLING BEIMFOHR, DOING BUSINESS AS STERLING SAILS, PLAINTIFFS - APPELLEES /CROSS-APPELLANTS,
v.
AT&T CORPORATION, DEFENDANT - APPELLANT /CROSS-APPELLEE, HARRIS, WILTSHIRE & GRANNIS LLP, RESPONDENT, AND PAM HATTAWAY, FORMERLY KNOWN AS PAM HOLLOWAY; GEORGE HATTAWAY; T. J. ADAMCZYK, OBJECTORS.



APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS. (D.C. No. 2:02-MD-01468-JWL).

The opinion of the court was delivered by: Murphy, Circuit Judge

PUBLISH

Before MURPHY, HOLMES, Circuit Judges, and POLLAK,*fn1 District Judge.

I. Introduction

This multidistrict litigation involves multiple class action lawsuits arising from the billing practices of defendant AT&T Corporation. Each class of plaintiffs challenged the lawfulness of a monthly line-item charge defendant imposed on its customers to recover contributions to the federal Universal Service Fund ("USF") required by 47 U.S.C. § 254. One subclass of plaintiffs, comprising all residential long-distance customers of AT&T in California, proceeded to trial and was awarded $16,881,000 in damages. The district court remitted the verdict to $10,931,000, and awarded prejudgment interest of $5,546,958.41, for a total award of $16,477,958.41. On appeal, AT&T argues it is entitled to judgment as a matter of law or a new trial. It alternatively asserts it is entitled to a further remittitur of the jury's damages award. On cross-appeal, plaintiffs argue the district court erred in enforcing AT&T's arbitration clause against non-California residential plaintiffs and in granting partial summary judgment on AT&T's business customers' breach of contract claims. Exercising jurisdiction under 28 U.S.C. § 1291 and 9 U.S.C. § 16(a)(3), this court AFFIRMS the decisions of the district court.

II. Background

Under the Federal Communications Act of 1934 ("FCA" or "1934 Act"), telecommunications carriers were required to file with the Federal Communications Commission ("FCC") a list of tariffs showing "all charges . . . and . . . the classifications, practices, and regulations affecting such charges." 47 U.S.C. § 203(a). The 1934 Act also prohibited carriers from extending rates, terms, or conditions that differed from their filed tariffs. 47 U.S.C. § 203(c); AT&T v. Cent. Office Tel., Inc., 524 U.S. 214, 222 (1998). The goal of this "filed rate doctrine" was to ensure uniformity in the rates, terms, and conditions offered to the purchasers of telecommunications services. Cent. Office Tel., 524 U.S. at 222-23.

During the 1970s and 1980s, advances in the telecommunications industry gradually eroded the utility of the filed rate doctrine. Ting v. AT&T, 319 F.3d 1126, 1131-32 (9th Cir. 2003). The FCC's attempts to exempt certain carriers from the requirements of § 203, however, were invalidated by the Supreme Court.

MCI Telecomms. Corp. v. AT&T Corp., 512 U.S. 218, 225-29, 234 (1994) (holding § 203(b)(2) gives the FCC authority to modify the 1934 Act's tariff filing requirement, but not to eliminate it entirely).

Congress responded by enacting the Telecommunications Act of 1996 ("1996 Act"), which required the FCC to "forbear from applying" the filed rate doctrine if it determined application of the doctrine was: (1) "not necessary to ensure that the charges, practices, classifications, or regulations . . . are just and reasonable and are not unjustly or unreasonably discriminatory," (2) "not necessary for the protection of consumers," and (3) "consistent with the public interest." 47 U.S.C. § 160(a). The FCC subsequently issued a Notice of Proposed Rulemaking on March 25, 1996, to forbear from applying the tariffing requirements of § 203 of the 1934 Act. In re Policy & Rules Concerning the Interstate, Interexchange Marketplace, Notice of Proposed Rulemaking,11 FCC Rcd. 7141 (1996). Following a comment period, the FCC issued a series of detariffing orders, effective August 1, 2001, in which it forbore from enforcing § 203 against long-distance carriers. See In re Policy & Rules Concerning the Interstate, Interexchange Marketplace, Second Order on Reconsideration, 14 FCC Rcd. 6004 (1999); In re Policy & Rules Concerning the Interstate, Interexchange Marketplace, Order on Reconsideration, 12 FCC Rcd. 15,014 (1997); In re Policy & Rules Concerning the Interstate, Interexchange Marketplace, Second Report & Order, 11 FCC Rcd. 20,730 (1996).

The FCC anticipated telecommunications carriers would enter into "short, standard-form contracts" with their customers setting forth the applicable rates, terms, and conditions of service which had previously been set out in the filed tariffs. Second Report & Order, 11 FCC Rcd. 20,730, ¶ 57. The FCC emphasized carriers would continue to be subject to the substantive prohibitions against unjust, unreasonable, and discriminatory rates and terms contained in §§ 201 and 202 of the 1934 Act. Order on Reconsideration, 12 FCC Rcd. 15,014, ¶ 77. Specifically, the FCC's Order on Reconsideration stated:

In the Second Report and Order, we stated that our decision to forbear from requiring nondominant interexchange carriers to file tariffs for interstate, domestic, interexchange services will not affect our enforcement of carriers' obligations under sections 201 and 202 to charge rates, and impose practices, classifications, and regulations that are just and reasonable, and not unjustly or unreasonably discriminatory. We therefore agree with AT&T, Sprint, and WorldCom that the Communications Act continues to govern determinations as to whether rates, terms, and conditions for interstate, domestic, interexchange services are just and reasonable, and are not unjustly or unreasonably discriminatory. While the parties only sought clarification that the Communications Act governs the determination as to the lawfulness of rates, terms, and conditions, we note that the Communications Act does not govern other issues, such as contract formation and breach of contract, that arise in a detariffed environment. As stated in the Second Report and Order, consumers may have remedies under state consumer protection and contract laws as to issues regarding the legal relationship between the carrier and customer in a detariffed regime. Id. (footnotes omitted).

To meet its obligations under the detariffing orders, AT&T mailed proposed Consumer Services Agreements ("CSAs") to each of its residential customers in June 2001. The CSAs and the accompanying mailings clearly informed AT&T's residential customers they could agree to the terms of the CSA by continuing to use, and pay for, AT&T services. The CSAs provided "[y]ou agree to pay us for the Services at the prices and charges listed in the AT&T Service Guides"*fn2 and that "[y]ou must pay all taxes, fees, surcharges and other charges that we bill you for the Services." The CSAs then provided "[t]his agreement incorporates by reference the prices, charges, terms and conditions included in the AT&T Service Guides."

The Consumer Service Guide described the AT&T Universal Connectivity Charge ("UCC") as "a monthly charge to Customers to recover amounts AT&T must pay into a federal program called the Universal Service Fund."*fn3 The Consumer Service Guide then stated "[t]he Universal Connectivity Charge is equal to 9.9% of your total billed state-to-state and international charges (excluding taxes)." AT&T issued a new guide in advance of each change to the UCC rate and always charged its customers exactly the rate listed in that guide.

The CSAs also contained an arbitration clause with a class action ban. This provision stated "[t]his section provides for resolution of disputes through final and binding arbitration before a neutral arbitrator instead of in a court by a judge or jury or through a class action." It added "[n]o dispute may be joined with another lawsuit, or in an arbitration with a dispute of any other person, or resolved on a class-wide basis."

AT&T used a different approach with its business customers, with whom it entered into individually negotiated agreements. Each agreement incorporated by reference the terms of AT&T's Business Service Guide, which contained the following provision governing regulatory surcharges and miscellaneous charges:

AT&T may adjust its rates and charges or impose additional rates and charges on its Customers in order to recover amounts that it, either directly or indirectly, pays to or is required by governmental or quasi-governmental authorities to collect from others to support statutory or regulatory programs, plus associated administrative costs. Examples of such programs include, but are not limited to, the Universal Service Fund . . . .

The Business Service Guide then listed the UCC rate applicable to the business customers' interstate and international charges.

This multidistrict litigation originally involved numerous putative class action lawsuits against, inter alia, AT&T. On March 10, 2003, plaintiffs filed a second consolidated and amended class action complaint alleging, among other things, violations of federal antitrust laws, 47 U.S.C. §§ 201(b) and 202, the New York and Kansas statutory consumer protection acts, and breach of contract. As relevant to this appeal, Plaintiff Thomas Cummings, a Pennsylvania resident, sought to represent a nationwide class of AT&T's residential customers. Plaintiff Sterling Beimfohr sought to represent a nationwide class of AT&T's business customers.

In October 2002, AT&T filed a motion to dismiss or compel arbitration of various claims, including Cummings's claims. The district court granted AT&T's motion to compel arbitration of Cummings's claims, holding the FCA preempted the argument that AT&T's arbitration clause was substantively unconscionable under state law. The district court also concluded the arbitration clause was not procedurally unconscionable. The district court, however, permitted AT&T's California residential customers' breach of contract claims to proceed based on the collateral estoppel effect of Ting v. AT&T, 182 F. Supp. 2d 902 (N.D. Cal. 2002), aff'd, 319 F.3d 1126 (9th Cir. 2003).

In December 2007, AT&T moved for summary judgment on the two remaining breach of contract claims in the case: (1) a breach of contract claim brought on behalf of AT&T's California residential customers; and (2) a breach of contract claim brought on behalf of AT&T's business customers. The class period for these breach of contract claims was August 1, 2001 to March 31, 2003. The district court granted AT&T's motion as to the breach of contract claim brought on behalf of AT&T's business customers, but denied it as to the breach of contract claim brought on behalf of AT&T's California residential customers.

A jury trial ensued. The jury found in favor of the California residential customer plaintiffs on the breach of contract claim and awarded $16.881 million in damages against AT&T. Both parties filed post-trial motions. The court denied AT&T's motion for entry of judgment and for a new trial and granted in part and denied in part both AT&T's motion for a remittitur and plaintiffs' motion for prejudgment interest. The court reduced the verdict to $10,931,000, and awarded prejudgment interest of $5,546,958.41, for a total award of $16,477,958.41. The subclass of California residential customers accepted the remitted judgment, which the district court promptly entered, and AT&T filed a timely notice of appeal.

On appeal, AT&T argues it is entitled to a judgment as a matter of law on the California residential customers' breach of contract claims or to a new trial. In the alternative, AT&T argues it is entitled to further remittitur of the damages award. On cross-appeal, the plaintiffs argue the district court erred in enforcing AT&T's arbitration clause against the non-California residential plaintiffs, and that it erred in granting summary judgment on AT&T's business customers' breach of contract claims.

III. Analysis

1. Preemption

The district court's order compelling arbitration is reviewable after final judgment. 9 U.S.C. § 16(a)(3); Quinn v. CGR, 828 F.2d 1463, 1466 (10th Cir. 1987). This court reviews the order compelling arbitration de novo applying the same legal standard employed by the district court. Armijo v. Prudential Ins. Co. of Am., 72 F.3d 793, 796 (10th Cir. 1995).

The non-California residential plaintiffs argue the district court erred in concluding §§ 201 and 202 of the FCA preempt their state-law claims that the arbitration clauses in the CSAs should not be enforced due to their substantive unconscionability. Federal preemption power is derived from the Supremacy Clause in Article VI of the United States Constitution. Choate v. Champion Home Builders Co., 222 F.3d 788, 791 (10th Cir. 2000). Federal law preempts state law in three circumstances: (1) where a statute has an express preemption provision, (2) where Congress intends federal law to "occupy the field," and (3) "to the extent of any [state-law] conflict with a federal statute." Crosby v. Nat'l Foreign Trade Council, 530 U.S. 363, 372 (2000) (quotation omitted). The ultimate touchstone of the preemption analysis is congressional intent. Cipollone v. Liggett Group, Inc., 505 U.S. 504, 516 (1992). Because §§ 201 and 202 of the FCA do not contain an express preemption provision, only field and conflict preemption are at issue in this case.

a. Field Preemption

AT&T contends the uniformity principle embodied in §§ 201 and 202 of the FCA sufficiently occupies the field to preempt all state-law regulation of long-distance contracts. See Cipollone, 505 U.S. at 516 (stating field preemption occurs when "federal law so thoroughly occupies a legislative field as to make reasonable the inference that Congress left no room for the states to supplement it" (quotations omitted)). The FCC's detariffing orders, however, explicitly contemplate a role for state law in the deregulated long-distance market. See Order on Reconsideration, 12 FCC Rcd. 15,014, at ¶ 77 ("[C]onsumers may have remedies under state consumer protection and contract laws as to issues regarding the legal relationship between the carrier and customer in a detariffed regime."). Accordingly, because state law expressly supplements federal law in the regulation of interstate telecommunications carriers, field preemption does not apply. See also Ting, 319 F.3d at 1136 ("[F]ield preemption is not an issue because state law unquestionably plays a role in the regulation of long distance contracts."); Boomer v. AT&T Corp., 404, 424 (7th Cir. 2002) (indicating field preemption likely no longer applies after detariffing but not expressly resolving the issue).

b. Conflict Preemption

Plaintiffs argue the district court erred in concluding the non-California residential plaintiffs' substantive unconscionability claims were preempted because they conflict with the uniformity principle incorporated in §§ 201 and 202 of the FCA. Conflict preemption occurs "where it is impossible for a private party to comply with both state and federal requirements, or where state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." Choate, 222 F.3d at 792 (quotation omitted); see also Mount Olivet Cemetery Ass'n v. Salt Lake City, 164 F.3d 480, 489 (10th Cir. 1998) ("Conflict preemption requires that the state or local action be a material impediment to the federal action, or thwart[] the federal policy in a material way.").

There is a circuit split on whether the uniformity principle embodied in §§ 201 and 202 of the FCA has preemptive force in the wake of the FCC's detariffing orders. In Boomer, the Seventh Circuit held §§ 201 and 202 of the FCA preempt state substantive unconscionability challenges to the CSA's arbitration clause. 309 F.3d at 418. Boomer reasoned §§ 201 and 202, "read together, demonstrate a congressional intent that individual long-distance customers throughout the United States receive uniform rates, terms and conditions of service." Id. In arriving at this conclusion, Boomer noted § 203, which the FCC forbore from applying after passage of the 1996 Act, "merely served as a mechanism by which the FCC could assure compliance with the standards set forth in Sections 201 and 202," and that the goals of prohibiting and punishing unequal rates and preventing discrimination embodied in those sections survived detariffing. Id. at 421 ("[E]ven though the FCC no longer mandates the filing of tariffs, the congressional objective of providing uniform rates, terms and conditions remains, as does the federal prohibition on terms and conditions which are unjust or unreasonable."). As a result, the Seventh Circuit concluded "[a]llowing state law challenges to the validity of the terms and conditions contained in long-distance contracts . . . results in the very discrimination Congress sought to prevent" and, therefore, concluded such state law challenges were preempted. Id. at 423.

Shortly after Boomer was decided, the Ninth Circuit reached the opposite result in Ting, 319 F.3d at 1135. Ting held California's unconscionability law did not "stand[] as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress in enacting §§ 201(b) and 202(a) of the [FCA]." Id. at 1137 (quotation omitted). Unlike Boomer, Ting believed § 203 to be the "heart of the common-carrier section of the Communications Act." Id. at 1141 (quotation omitted); id. at 1142 ("[I]n authorizing the FCC to forbear from enforcing the tariff filing requirement, Congress not only removed its chosen means of enforcing §§ 201 and 202, it removed the heart of the 1934 Act." (quotations omitted)). Without § 203, Ting held the remaining provisions of the FCA lacked preemptive force because they "contain[ed] substantive standards that are enforceable only if they have an enforcement vehicle, such as the filing requirement." Id. at 1142. The Ting decision then turned to congressional intent underlying the 1996 Act, and held Congress intended a "competition based regime" in which "state law protections are no longer excluded as they once were under the express terms of the filed rate doctrine." Id. at 1143; id. at 1146 ("[W]hereas Congress previously required tariffs to ensure strict uniformity with §§ 201 and 202's standards, Congress now relies on competition to ensure a more market-oriented (and less collusive) level of compliance with §§ 201 and 202."). Ting therefore concluded there was no conflict between the remaining sections of the FCA and California's unconscionability law. Id. at 1146.*fn4

This court agrees with the Seventh Circuit's determination in Boomer that the uniformity principle embodied in §§ 201 and 202 of the FCA survived detariffing and preempts state law challenges to the reasonableness of the rates, terms, and conditions of service provided by telecommunications carriers. Section 201(b) of the FCA provides: "All charges, practices, classifications, and regulations for and in connection with such communication service, shall be just and reasonable, and any such charge, practice, classification or regulation that is unjust or unreasonable is declared to be unlawful." 47 U.S.C. § 201(b). Section 202(a) of the FCA provides:

It shall be unlawful for any common carrier to make any unjust or unreasonable discrimination in charges, practices, classifications, regulations, facilities, or services for or in connection with like communication service, directly or indirectly, by any means or device, or to make or give any undue or unreasonable preference or advantage to any particular person, class of persons, or locality, or to subject any particular person, class of persons, or locality to any undue or unreasonable prejudice or disadvantage.

47 U.S.C. § 202(a). These sections "demonstrate a congressional intent that individual long-distance customers throughout the United States receive uniform rates, terms and conditions of service." Boomer, 309 F.3d at 418; see also Cent. Office Tel., 524 U.S. at 223 ("It is that antidiscriminatory policy which lies at the heart of the common-carrier section of the Communications Act.") (quotation omitted). Applying the laws of all fifty states to AT&T's interstate long-distance service contracts would impede this Congressional objective of achieving uniformity in the rates, terms and conditions of such services. See Boomer, 309 F.3d at 418-19 (noting that allowing such challenges would result in "patchwork contracts" and "conflict[] with Section 202's prohibition on providing advantages or preferences to customers based on their 'locality'").

This conclusion is not altered by the fact that pre-detariffing cases focus predominantly on § 203's filed-rate doctrine rather than the uniformity principle embodied in §§ 201 and 202. See, e.g., Cent. Office Tel., 524 U.S. at 222-24 (focusing exclusively on the preemptive effect of § 203); MCI Telecomms. Corp. v. AT&T, 512 U.S. 218, 220, 229 (1994) (referring to the tariff-filing requirement as the "heart" and "centerpiece" of the 1934 Act); ICOM Holding, Inc. v. MCI Worldcom, Inc., 238 F.3d 219, 221-23 (2d Cir. 2001) (holding the filed-rate doctrine barred state-law claims pertaining to the price, service, provisioning, and billing of telecommunications services). Not surprisingly, cases brought after detariffing focus solely on the uniformity principle of §§ 201 and 202. See, e.g., Orloff v. FCC, 352 F.3d 415, 420 (D.C. Cir. 2003) (holding that post-detariffing, the legality of a telecommunications carrier's terms of service "depends not on the company's designation as a common carrier, but on § 202 (and § 201)").*fn5

That the uniformity principle survived detariffing is also evidenced by the language of the 1996 Act which obligated the FCC to forebear from enforcing aspects of the 1934 Act. The 1996 Act did not allow the FCC to forebear from applying provisions of the 1934 Act as it saw fit. Rather, the 1996 Act limited the FCC's forbearance authority to provisions which were "not necessary to ensure that the charges, practices, classifications, or regulations . . . are just and reasonable and are not unjustly or unreasonably discriminatory," "not necessary for the protection of consumers," and "consistent with the public interest." 47 U.S.C. § 160(a). These requirements explicitly ensured the uniformity goals of §§ 201 and 202 would remain, even in the event the FCC determined the then- existing means of achieving this uniformity, § 203's filed-rate doctrine, was no longer the preferred mechanism for accomplishing this goal. See Second Report & Order, 11 FCC Rcd. 20,730, ¶ 27 (concluding "our decision to forbear from requiring nondominant interexchange carriers to file tariffs for interstate, domestic, interexchange services will not affect such carriers obligations under Sections 201 and 202 to charge rates, and to impose practices, classifications and regulations, that are just and reasonable and not unjustly or unreasonably discriminatory"); Order on Reconsideration, 12 FCC Rcd. 15,014 , ¶ 75 (same).

The precise scope of the uniformity principle set out in §§ 201 and 202, however, is more difficult to ascertain than the scope of the filed-rate doctrine, which was "strict[ly]" applied and operated "harsh[ly] in some circumstances." Cent. Office Tel., 524 U.S. at 222-23 (quotation omitted); id. at 222 (noting that under the filed-rate doctrine, "even if a carrier intentionally misrepresents its rate and a customer relies on the misrepresentation, the carrier cannot be held to the promised rate if it conflicts with the published tariff"). For example, in Orloff, the D.C. Circuit held certain differences in rates, such as those which result from a phone carrier reaching different terms of service with similarly situated customers on the basis of market "haggling," do not run afoul of §§ 201 or 202. 352 F.3d at 421. Similarly, in Panatronic, USA v. AT&T Corp., the Ninth Circuit held a "temporary price difference" caused by a delay in imposing a UCC charge did not constitute unreasonable discrimination in violation of § 202(a). 287 F.3d 840, 844 (9th Cir. 2002) ("A difference in price is not unreasonable if there is a neutral, rational basis underlying [the disparity]." (quotation omitted)). FCC orders similarly reflect a trend towards greater tolerance of certain differences in the rates charged by telecommunications providers. See, e.g., In re Digital Cellular, Inc., 20 FCC Rcd. 8723, ¶ 15 (2005) (holding it is reasonable for a phone carrier to offer service on different terms to materially different companies); In re Bruce Gilmore, 20 FCC Rcd. 15,079, ¶ 26 (2005) (holding it is reasonable for a phone carrier to negotiate better deals with some customers than others, so long as there is no market failure that prevents customers from switching carriers if they are dissatisfied).

In light of the uncertainty regarding the scope of §§ 201 and 202 in a detariffed marketplace, AT&T filed a petition with the FCC requesting it "clarify that federal, and not state, law governs the determination as to whether a nondominant interexchange carrier's rates, terms, and conditions . . . are lawful." Order on Reconsideration, 12 FCC Rcd. 15,014, ¶ 76. In response, the FCC ordered that §§ 201 and 202 of the Communications Act "continue[d] to govern determinations as to whether rates, terms, and conditions for interstate, domestic, interexchange services are just and reasonable, and are not unjustly or unreasonably discriminatory." Id. at 15,014, ¶ 77. The FCC also concluded that "the Communications Act does not govern other issues, such as contract formation and breach of contract, that arise in a detariffed environment," and that "consumers may have remedies under state consumer protection and contract laws as to issues regarding the legal relationship between the carrier and customer in a detariffed regime." Id.

An agency's conclusion that state law is preempted is not necessarily entitled to deference. Wyeth v. Levine, 129 S.Ct. 1187, 1201 (2009) ("While agencies have no special authority to pronounce on pre-emption absent delegation by Congress, they do have a unique understanding of the statutes they administer and an attendant ability to make informed determinations about how state requirements may pose an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." (quotation omitted)); see also Geier v. American Honda Motor Co., 529 U.S. 861, 883 (2000) (according "some weight" to an agency's interpretation of the preemptive effect of a statute); Medtronic, Inc. v. Lohr, 518 U.S. 470, 505-06 (1996) (Breyer, J., concurring) ("[I]n the absence of a clear congressional command as to pre-emption, courts may infer that the relevant administrative agency possesses a degree of leeway to determine which rules, regulations, or other administrative actions will have pre-emptive effect." ). The Wyeth decision made clear "[t]he weight we accord the agency's explanation of state law's impact on the federal scheme depends on its thoroughness, consistency, and persuasiveness." 129 S.Ct. at 1201.

In applying this standard, Wyeth looked to whether the agency's preemption determination was consistent with the positions it took in the past and whether its rulemaking process was procedurally sound. Id. at 1201-03. Wyeth concluded the FDA's preemption position did not merit deference for two reasons. Id. at 1201. First, it noted the FDA's notice of proposed rulemaking was completely at odds with its finalized rule. Id. at 1201 (highlighting "[t]he agency's views on state law are inherently suspect in light of this procedural failure"). Second, the Court discredited the FDA's position on preemption because it represented a reversal of "the FDA's own longstanding position without providing a reasoned explanation, including any discussion of how state law has interfered with the FDA's regulation of drug labeling during decades of coexistence." Id.

The FCC's actions in the present case are distinguishable from the FDA's in Wyeth. This court is not aware of any procedural errors committed by the FCC in promulgating the detariffing orders, and, although the FCC's ultimate preemption position represented a departure from the one it advanced in a prior detariffing order, the FCC's ultimate position is consistent with its longstanding policy of interpreting §§ 201 and 202 of the FCA (and similarly worded provisions of the ICA) as ensuring the uniformity of rates, terms, and conditions provided by interstate telecommunications carriers. Accordingly, this court concludes the FCC's position that the FCA continues to preempt state law challenges to "the rates, terms, and conditions for interstate, domestic, interexchange services" but not others, such as "contract formation and breach of contract" merits deference. Order on Reconsideration, 12 FCC Rcd. 15,014, ¶ 77.

The FCC's notice of proposed rulemaking requested commenters to consider the effect of §§ 201 and 202 in the detariffed marketplace. 11 FCC Rcd. 7141, ¶¶ 94-96. The FCC's initial response to this question was clear: "in the absence of tariffs, consumers will be able to pursue remedies under state consumer protection and contract laws in a manner currently precluded by the 'filed-rate' doctrine." Second Report and Order, 11 FCC Rcd. 20,730, ¶ 38; see also id. ¶ 5 ("[W]hen interstate, domestic, interexchange services are completely detariffed, consumers will be able to take advantage of remedies provided by state consumer protection laws and contract law against abusive practices."); Id. ¶ 42 ("In the absence of such tariffs, consumers will not only have our complaint process, but will also be able to pursue remedies under state consumer protection and contract laws."). As noted, however, the FCC clarified its position in a subsequent order, explaining that while the terms and conditions of long-distance service contracts are still governed by the FCA, other aspects of the carriers' conduct are subject to other federal and state law. Order on Reconsideration, 12 FCC Rcd. 15,014, ¶ 77. Thus, unlike the regulation in Wyeth, there were no procedural failures during the FCC's promulgation of the detariffing orders that render the FCC's preemption position "inherently suspect." 129 S.Ct. at 1201.

The FCC's ultimate preemption position nevertheless represented a departure from the position initially taken in its Second Report and Order. The FCC's clarification, unlike the FDA's abrupt reversal in Wyeth, however, is reasonable in light of the uncertainty regarding the scope of the uniformity principle embodied in §§ 201 and 202 in the detariffed marketplace. The FCC's ultimate position is consistent with the FCA's overarching goal of prohibiting state-by-state variations in the rates, terms, and conditions of interstate telecommunications services. As noted, this uniformity goal is reflected in the language of §§ 201 and 202 of the 1934 Act as well as in the limits the 1996 Act placed on the FCC's authority to forebear from applying sections of the 1934 Act. The continuing validity of this uniformity principle is underscored by judicial and agency interpretations of §§ 201 and 202 rendered both before and after detariffing. See, e.g., Global Crossing Telecomm., Inc. v. Metrophones Telecomms., Inc., 550 U.S. 45, 55 (2007) (interpreting § 201(b)'s reasonableness requirement post-detariffing); Orloff, 352 F.3d at 420 (interpreting §§ 201 and 202 post-detariffing); Nader v. FCC, 520 F.2d 182, 201 (D.C. Cir. 1975) (interpreting § 202's non-discrimination requirement pre-detariffing); Digital Cellular, 20 FCC Rcd. 8723, ¶¶ 14-15 (interpreting §§ 201 and 202 post-detariffing); In re RCA Am. Commc'ns, Inc., 84 F.C.C.2d 353, ¶ 8 (1980) (interpreting the reasonableness requirement of § 201 pre-detariffing); see also Postal Tel.-Cable Co. v. Warren-Godwin Lumber Co., 251 U.S. 27, 31 (1919) (holding the uniformity requirements of the ICA barred state-law challenges to a provision in a telegraph company's contract). Accordingly, although detariffing ended the strict uniformity imposed by § 203's filed-rate doctrine, it did not lessen the preemptive force of the uniformity requirements that remained in §§ 201 and 202. The district court's deferral to the ...


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