Court Rules that the Commission's RF Rules Preempt State Law Claims

On October 29, the U.S. District Court for the Northern District of California ruled that the FCC's radio frequency (RF) emissions regulations preempt disclosure-related tort and consumer fraud claims. In Cohen v. Apple, District Judge William Alsup issued an order on summary judgment that dismissed putative class action claims that Apple marketed iPhones for use on or in close proximity to the body but failed to disclose that such use would allegedly expose consumers to RF radiation levels above federal standards and also failed to disclose the alleged risks from that exposure. 

According to a statement filed with the District Court by FCC General Counsel Thomas Johnson: "if plaintiffs were to prevail in that challenge, they would undermine the FCC's efforts to create and implement a uniform and reliable process for certifying that cell phones comply with RF limits." 

Applying preemption precedents such as Geier v. American Honda Motor Company (2000), the District Court agreed with the Commission:

The equipment-authorization regime represents a "deliberate choice" to establish uniform technical standards embodying a careful balance between safety and efficiency. If successful, plaintiffs' claims could set the stage for a patchwork of state-required testing procedures, increasing the burden on manufacturers and thereby upsetting the efficiency that the uniform standards and testing procedures provide. Geier, 529 U.S. [861] at 879–81; Buckman [Co. v. Plaintiffs' Legal Comm., 531 U.S. [341] at 353 [(2001)]. As it stated, "[l]awsuits like this one would needlessly disrupt the Commission's certification process and improperly impede the marketing of cell phones that the FCC has found to be safe" (FCC Statement at 16). Even though plaintiffs' state-law claims "attempt[ ] to achieve one of the same goals as federal law" — namely, safety — the enforcement of the equipment-authorization regime by state tort suits such as plaintiffs' would upset the balance struck by the regulations and must fall aside. Arizona [v. U.S.], 567 U.S. [387] at 406 [(2012)]. 

The District Court was unpersuaded that plaintiffs' claims that the iPhones exceeded the Commission's safety standards and thereby avoided any conflict with federal objectives. As the District Court observed: "The Commission is amply empowered to investigate complaints and petitions calling into question the continued compliance of certified devices with its technical standards." And the court noted that the FCC Lab investigated the Chicago Tribune story about supposed iPhone noncompliance with the Commission's RF standards that prompted the putative class action lawsuit. Wrote the court: 

 

The FCC Lab tested commercially-available iPhones as well as a model iPhone provided by Apple, and each demonstrated compliance when tested at the test separation distances used in their original certification filing (not at two millimeters, as the Tribune additionally had) and consistent with OED's parameters. The Lab found no evidence of violations of the technical standards. Apple’s iPhones have thus demonstrated compliance with its exposure limits not once but twice (Dkt. No. 104-11). Allowing a federal jury to now second-guess the agency determinations would interfere with the balance struck in the equipment-authorization program. The federal regulations must displace plaintiffs' claims. 

 

Additionally, the District Court pointed out that plaintiffs and would-be plaintiffs are not left without remedies: "Aside from enforcement bureau actions as described, which are triggered by complaints or petitions filed with the Commission, plaintiffs may also challenge agency rulemaking directly." The court referred to the pending legal challenge to the Commission's 2019 RF Order, which is pending at the D.C. Circuit in Environmental Health Trust v. FCC.

 

The District Court's ruling appears sound and consistent with preemption precedents. My blog post from September 21 discussed a decision by the Northern District of California that the City of Berkeley's ordinance overwarned against the dangers of RF emissions and is preempted by FCC regulation. 

 

Cohen v. Apple provides a useful example of a court applying the Supreme Court's decision in Geier to conflicting state law claims. In his September 2020 Perspectives from FSF Scholars paper "Day of Reckoning Approaches for California Net Neutrality Law," Professor and Free State Foundation Board of Academic Advisors Member Daniel Lyons discusses Geier and conflict preemption in the context of the legal challenge to California's net neutrality regulation law in U.S. v. California – a case now pending before the Eastern District of California. 

Cable a La Carte Class Action Dies Another Death in Court

In October I blogged about the U.S. Court of Appeals for the 9th Circuit's ruling in Brantley v. NBC Universal, upholding the case's dismissal. The 9th Circuit panel later withdrew its opinion. But on March 30, the 9th Circuit issued a new opinion in Brantley, again affirming dismissal of the class action's Sherman Act antitrust claims.

My October blog post gives further background on the case. Here are a few relevant excerpts from the 9th Circuit's opinion on reconsideration:

First, it is clear that the complaint does not allege the types of injuries to competition that are typically alleged to flow from tying arrangements. The complaint does not allege that Programmers' practice of selling "must-have" and low-demand channels in packages excludes other sellers of low-demand channels from the market, or that this practice raises barriers to entry into the programming market. Nor do the plaintiffs allege that the tying arrangement here causes consumers to forego the purchase of substitutes for the tied product…Nothing in the complaint indicates that the arrangement between the Programmers and Distributors forces Distributors or consumers to forego the purchase of alternative low-demand channels…Indeed, Plaintiffs disavow any intent to allege that the practices engaged in by Programmers and Distributors foreclosed rivals from entering or participating in the upstream or downstream markets…Nor does the complaint allege that the tying arrangements pose a threat to competition because they facilitate horizontal collusion...

Businesses may choose the manner in which they do business absent an injury to competition…Therefore, the mere allegations that Programmers have chosen to limit the ability of Distributors to offer Programmers' channels for sale individually does not state a cognizable injury to competition...

Here, Plaintiffs have not alleged that the contracts between Programmers and Distributors forced either Distributors or consumers to forego the purchase of other low-demand channels (a result analogous to the competitive injury in Loew's), but only that consumers could not purchase programs a la carte and they did not want all of the channels they were required to buy from Distributors. "[C]ompelling the purchase of unwanted products" is not itself an injury to competition...

But the plaintiffs here have not alleged in their complaint how competition (rather than consumers) is injured by the widespread practice of packaging low- and high-demand channels. The complaint did not allege that Programmers' sale of cable channels in packages has any effect on other programmers' efforts to produce competitive programming channels or on Distributors' competition as to cost and quality of service. Nor is there any allegation that any programmer's decision to offer its channels only in packages constrained other programmers from offering their channels individually if that practice was competitively advantageous. In sum, the complaint does not include any allegation of injury to competition, as opposed to injuries to the plaintiffs...

Indeed, because Plaintiffs' complaint alleges that the restraints at issue in this case were imposed by Programmers, not Distributors, Leegin suggests that any competitive threat is diminished...

If my earlier blog post spoke to soon about the demise of cable a la carte regulation-by-litigation, the chances of Brantley being resuscitated through a contrary ruling by the 9th Circuit en banc or by the U.S. Supreme Court are extremely remote.

Supreme Court Terminates Review of Early Termination Fees Case

Do early termination fees (ETFs) included in wireless service contracts fall under the category of wireless "rates" or under "other terms and conditions"? That's the question that was presented to the U.S. Supreme Court in Sprint v. Ayyad, a class-action lawsuit involving California customers charged ETFs for terminating their wireless service contracts. But the Supreme Court took a pass on answering that question, issuing an order denying certiorari on November 7.

The case was an appeal of a decision by the California Court of Appeals that held that, at least under the facts of the case, non-prorated ETFs charged by Sprint were not intended to be an element of the rates charged by the carrier for service but were instead intended as a liquidated damages clause to reduce churn. The California Appeals Court applied a presumption against preemption and found that, as a liquidated damages clause, the ETFs constituted "other terms and conditions" subject to California common-law remedies. As one may recall, in 1993 Congress amended the Communications Act by providing in Section 332(c)(3)(A) that states are preempted from regulating the entry of or rates charged by wireless carriers while states can continue to regulate other terms and conditions of wireless services.

The class action plaintiffs' attorneys were confident enough in their position in Sprint v. Ayyad that they waived their right to respond to Sprint's petition to the Supreme Court. However, there are weighty arguments to me made on both sides. Without addressing them in detail, it's worth recognizing that the handful of trial courts across the country that have considered the question of whether Section 332(c)(3)(A) have reached contrary conclusions. Even the California Court of Appeals acknowledged that:

It is certainly possible that elimination of ETF's may indirectly affect Sprint's rates to the extent that Sprint incurs costs in pursuing alternative remedies for contractual breach or that it would reserve for losses attributable to a potentially higher level of customer defaults. Sprint would presumably factor actual or projected lost revenue into its rate structure.

By declining to hear Sprint v. Ayyad, lower courts will likely continue to make contrary rulings as to whether or under what circumstances federal law preempts ETFs. And for its part, even the California Court of Appeals' decision left standing may offer lower courts little guidance due to the facts of that case. As a general matter, wireless carriers now universally include grace periods and prorated ETFs in their wireless services contracts.

The Supreme Court's order denying review might have been influenced by pending petitions seeking an FCC declaratory ruling that ETFs are "rates charged" under federal law. However, as the California Appeals Court noted in its ruling, "[i]t appears safe to say that any action by the FCC on this issue is not imminent."

Supreme Court Sends Spurious Cell Phone Suits Packing

On October 3, the U.S. Supreme Court declined to review the Third Circuit's decision in Farina v. Nokia (2011). By denying to hear the case, the Supreme Court leaves standing the Third Circuit's rejection of various state law-based claims raised against wireless manufacturers and carriers. Farina v. Nokia is multi-state class action lawsuit based on allegations that wireless devices contain unsafe levels of radiation. The Third Circuit ruled that the FCC's regulations of radio frequency (RF) radiation levels in wireless devices preempt the state law claims. Those state claims conflict with the purposes of the FCC's regulations in ensuring an efficient nationwide wireless service subject to uniform standards and the agency's balancing of those concerns with public health and safety.

As I mentioned in a July blog post, the evidence continues to contradict the far-fetched claims of those who say that cell phones operating within the FCC's current RF standards are somehow unsafe. But as Farina v. Nokia reaffirms, the FCC is the proper place to bring those types of concerns, not state courts or city councils.