On November 2, 2021, less than five weeks before the planned turn-up of Verizon Wireless’s and AT&T Mobility’s 5G wireless services using their lower C-Band spectrum license blocks, the FAA issued an alert to the aviation industry finding that the potential interference from lower C-Band wireless services to aircraft altimeter functioning presented a significant potential aviation safety risk. The FAA alert raised the specter of a massive grounding for an indefinite period of flights scheduled to land at U.S. airports located in areas where AT&T Mobility and Verizon Wireless were scheduled to turn-up their 5G terrestrial broadband services, until the aviation industry could undertake a comprehensive radio altimeter testing program and, if necessary, repair, retrofit, or replace any faulty altimeters that lacked the ability to filter frequency signals generated by C-Band wireless services operating in a spectrum band hundreds of MHz below the radio altimeter frequency band.
What happened next was a series of events that involved both our legal and political spheres and, by many accounts, presents a textbook example of the consequences of government dysfunction. Shortly after the FAA issued its November 2021 alert, and faced with the prospect of being painted as the parties responsible for the wholesale grounding of commercial flight landings in the United States during the peak late Fall/early Winter holiday season, Verizon Wireless and AT&T Mobility agreed—despite having invested almost $80 billion to obtain their C-Band licenses and meet the preconditions for launching their lower C-Band wireless services on December 5, 2021—to delay their scheduled turn-up of their C-Band wireless services by a month, to January 5, 2022. The airline industry argued that this accommodation was insufficient, and the FAA began issuing additional notices and directives requiring the testing of aircraft altimeters and restricting aircraft landings at U.S. airports until the safety issues were addressed. As the dispute continued to escalate and garner media headlines, Verizon Wireless and AT&T Mobility made additional commitments in late December 2021, including a commitment to not turn up their 5G broadband services using their lower C-Band license blocks for an additional six months, until July 5, 2022, around the landing zone areas of approximately fifty U.S. airports. The purpose of this commitment was to permit the aviation industry to undertake real-world testing of its radio altimeters and repair, retrofit, or replace altimeters that failed to filter out C-Band frequency signals, and to enable the FAA to clear those altimeters for normal aviation operations in areas where C-Band licensees are providing 5G terrestrial broadband services. The FAA and the aviation industry had not previously undertaken these testing and remediation activities, despite being on notice for more than four years that the FCC was examining the use of C-Band spectrum for terrestrial broadband services use and despite being aware for more than twenty months of the FCC’s publicly-issued rules detailing the terms, conditions, and schedule for the FCC’s issuance of C-Band spectrum block licenses to terrestrial broadband service providers and for the licensees’ turn-up of their service offerings.
Notwithstanding these commitments by the C-Band licensees to delay full turn-up of their licensed terrestrial services, the parties remained at an impasse and, on December 30, 2021, almost twenty-two months after the FCC issued its C-Band Order, A4A filed with the FCC an emergency petition for stay of that Order, asking the FCC to further delay the FCC licensees’ deployment of their C-Band-based 5G services at 135 airport locations throughout the United States. On December 31, 2021, AT&T Wireless and Verizon Mobility, along with the wireless services provider trade group, CTIA—the Wireless Association, filed with the FCC their opposition to A4A’s emergency stay petition. On January 2, 2022, AT&T Mobility and Verizon Wireless voluntarily agreed to more restrictions on turning up their C-Band services in their licensed 3.7–3.8 GHz spectrum blocks for the following sixth months at numerous airports throughout the United States. On January 4, 2022, without waiting for the FCC to act on its December 30 emergency stay petition, A4A withdrew that petition. On that same day, at the request of the White House and the Department of Transportation (DOT), AT&T Mobility and Verizon Wireless agreed to further delay their initial turn-up of their 5G services using their C-Band licenses at any location for an additional two weeks, to January 19, 2022. Nevertheless, A4A continued to publicly dispute the sufficiency of the C-Band license holders’ service restriction commitments and engaged in an extensive lobbying campaign with the executive and legislative branches of the federal government to enhance those voluntary restrictions and further delay at numerous locations the wireless carriers’ turn-up of their C-Band-based 5G services.
For the next few weeks, the FCC, AT&T Mobility, Verizon Wireless, the FAA, and members of the Biden administration (principally the DOT Secretary and his staff) sought to resolve the impasse over the wireless carriers’ turn-up of their 5G services. On January 18, 2022, the DOT announced an agreed framework among the interested parties and federal agencies for delaying the wireless carriers’ 5G services turn-up at certain U.S. airport locations and resolving the potential altimeter interference issues. From late January 2022 until July 5, 2022, as the aviation industry began engaging in real-world testing of radio altimeters’ filtering performance and further exchanged data with the communications industry, the FAA began clearing aircraft for normal operations at the affected airports and also began reducing the number of airports at which flight operations were restricted due to C-Band-related aircraft safety concerns. However, as of July 2022, the aviation industry and FAA were still conducting their radio altimeter testing, repair, and safety clearance programs. At the FAA’s and the aviation industry’s request, in late June 2022 the C-Band licensees agreed to delay the turn-up of their 5G wireless services at certain U.S. airports for an additional year, until July 5, 2023.
Turning to judicial developments, the time period covered by this report saw the federal appellate courts issue a number of decisions impacting the communications industry in such areas as the First Amendment, Supremacy Clause preemption, interpretation of federal statutes, interpretation of state common law doctrines, and federal administrative law/administrative review act principles. We provide below summaries of what, in our analysis, appear to be the most significant of these appellate court decisions.
B. Judicial Developments
1. NetChoice, LLC v. Attorney General, State of Florida, 34 F.4th 1196 (11th Cir. May 23, 2022)
In NetChoice, a panel of the Eleventh Circuit unanimously affirmed a lower court decision preliminarily enjoining Florida’s 2021 statute S.B. 7072, which attempted to regulate the activities of most online social-media platforms doing business in Florida. S.B. 7072 regulated these privately owned companies in three major ways: first, it imposed restrictions on those companies’ content moderation practices (i.e., what content those companies chose to make available to users of their platforms and the manner in which they made such content available); second, it imposed disclosure obligations on those companies with respect to their editorial standards and practices, their rule changes, their users’ view counts, their provision of free advertising to political candidates, and their reasons for deplatforming, censoring, or shadow-banning any user; and, third, it imposed a requirement that such companies allow any deplatformed user to access all of the user’s information, content, material, and data for at least sixty days after the user receives notice of deplatforming. With respect to the first of these three areas that S.B. 7072 regulated, the Florida law established prohibitions on deplatforming political candidates, on deprioritizing or shadow-banning content posted by or about political candidates, and on deplatforming or shadow-banning a “journalistic enterprise” based on the content of the enterprise’s publication.
According to the Florida Governor’s office, the Florida legislature enacted S.B. 7072 to address what it perceived was an editorial bias by large social-media companies like Facebook, Twitter, Google, YouTube, and TikTok in favor of “liberal” political candidates and “liberal” political causes and against “conservative” political candidates and “conservative” political causes. S.B. 7072 itself was more measured in its findings, asserting that privately owned social-media platforms played an important role in preserving First Amendment protections for all Floridians and that those platforms should be treated like common carriers.
The plaintiffs/appellees—several trade groups that represent social-media platform companies along with other Internet-based and technology-based companies—filed a motion with the federal district court for the Northern District of Florida seeking to preliminarily enjoin Florida’s enforcement of S.B. 7072. In their preliminary injunction papers, plaintiffs asserted that they satisfied each of the elements required to obtain preliminary injunctive relief: a likelihood of success on the merits, the irreparable harm they would suffer absent such relief, and the lack of harm to the public interest (if not the affirmative promotion of the public interest) that the requested preliminary injunctive relief would provide.
On the likelihood of success on the merits element, the plaintiffs argued that S.B. 7072 was unconstitutional on two grounds. First, it violated plaintiffs’ First Amendment rights; and second, its principal provisions were preempted by Section 230 of the Communications Act of 1934, as amended. Section 230, which Congress enacted as part of the Telecommunications Act of 1996, is a so-called “Good Samaritan” safe harbor that provides that “no provider or user of any interactive computer service shall be held liable on account of . . . any action voluntarily taken in good faith to restrict access to or availability of material that the provider or user considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such material is constitutionally protected.”
The district court found that the plaintiffs satisfied their burden on each of these elements and granted the plaintiffs’ motion. Regarding the likelihood of success on the merits element, the district court held that Section 230 likely preempted the provisions of S.B. 7072 that imposed liability on social-media platform companies for their decisions to remove or deprioritize content, and further held that the Florida law was subject to strict First Amendment scrutiny because it restricted the social-media platforms’ exercise of “editorial judgment,” entirely for a viewpoint-based purpose—to combat the perceived liberal “big tech” bias of those social-media platforms. After applying strict scrutiny analysis to the Florida law’s provisions, the district court held that the law could not survive such an analysis because (i) the social-media platforms’ practices were expressive activity, or speech, protected by the First Amendment; (ii) the State did not have a legitimate interest in “leveling the playing field” for speech; (iii) the law’s provisions were not narrowly tailored; and (iv) the State had not argued that the law’s provisions satisfied the strict scrutiny test (as the State had instead argued that the law’s provisions should not be subject to any First Amendment scrutiny). The district court further found that the law’s provisions likely could not survive intermediate scrutiny either, because the law’s provisions seemed designed not to achieve any governmental interest but to impose the maximum available burden on the social-media platforms that it sought to regulate.
In its appeal to the Eleventh Circuit, the State focused most of its arguments on the district court’s First Amendment analysis. In particular, the State argued that S.B. 7072 did not implicate, let alone violate, the First Amendment because the social-media platforms to which S.B. 7072 applied were not engaged in protected speech. Rather, according to the State, the only thing that the content-related provisions of S.B. 7072 required social-media platforms to do was to “host” third-parties’ speech, which the State argued was permissible under two Supreme Court decisions, Pruneyard Shopping Center v. Robins, 447 U.S. 74 (1980), and Rumsfeld v. Forum for Academic and Institutional Rights, Inc., 547 U.S. 47 (2006). Alternatively, the State argued that S.B. 7072 did not trigger First Amendment scrutiny because it merely reflected the State’s permissible decision to classify and treat social-media platforms as common carriers.
The Eleventh Circuit panel did not reach the merits of the district court’s preemption analysis, because it concluded that its First Amendment analysis was sufficient to dispose of the State’s appeal. The panel rejected the State’s First Amendment-related arguments—namely, that S.B. 7072 did not implicate the First Amendment. The panel instead largely agreed with the plaintiffs’ arguments that the social-media platform activities that S.B. 7072 sought to restrict are expressive activity or “speech” and, in particular, are editorial judgments that are protected by the First Amendment under a long line of Supreme Court decisions, including Miami Herald Publishing Co. v. Tornillo, 418 U.S. 241 (1974), Pacific Gas & Electric Co. v. Public Utilities Commission of California, 475 U.S. 1 (1986), Turner Broadcasting Systems, Inc. v. FCC, 512 U.S. 622 (1994), and Hurley v. Irish-American Gay, Lesbian & Bisexual Group of Boston, 515 U.S. 557 (1995). Accordingly, the panel held that S.B. 7072 triggered First Amendment scrutiny because it restricted social-media platforms’ exercise of editorial judgment and required them to make certain disclosures, that strict scrutiny applied to some of the Florida law’s content moderation restrictions while intermediate scrutiny applied to others, that it was substantially likely that the Florida law’s content-moderation restrictions would not survive even intermediate scrutiny, and that it was substantially likely that some, but not all, of the Florida law’s mandated disclosure provisions would not survive intermediate scrutiny.
In conducting its analysis, the panel concluded that social-media platform companies, even though they published very little of their own content other than terms of use, and instead served as a curator and moderator of the content of others, were more akin to newspapers, broadcasters, and other media outlets in terms of their expressive activities or speech than to common carriers such as traditional public utilities, transportation service providers, or telecommunications carriers. According to the panel, “When a platform selectively removes what it perceives to be incendiary political rhetoric, pornographic content, or public-health misinformation, it conveys a message and thereby engages in ‘speech’ within the meaning of the First Amendment.” The panel explained that this conclusion was supported not only by the Tornillo line of Supreme Court cases regarding the exercise of editorial judgment, but also by a separate line of Eleventh Circuit cases addressing what constitutes inherently expressive conduct. The panel then explained its reasons for concluding that the Pruneyard and Rumsfeld cases did not support the State’s assertion that S.B. 7072 did not implicate the First Amendment, as well as its reasons for rejecting the State’s assertion that social-media companies inherently were, or alternatively could be classified by the Florida legislature as, common carriers. At bottom, the panel rejected the State’s common carrier arguments on the ground that, despite their market power and the important role they played in public discourse, the social-media platform companies were not “dumb pipes” that indiscriminately serve the public.
On September 16, 2022, a panel of the Fifth Circuit issued its opinion in NetChoice et al. v. Paxton, upholding the state of Texas’ social media platform regulation legislation against the same type of First Amendment claims asserted by plaintiffs in the Eleventh Circuit case. The Fifth Circuit panel specifically disagreed with the Eleventh Circuit’s analysis on three key legal issues, creating a clear circuit split on those issues. Specifically, the Fifth Circuit panel disagreed with the Eleventh Circuit’s conclusion that the Supreme Court has recognized “editorial discretion” as an independent category of First Amendment-protected expression, disagreed with the Eleventh Circuit’s conclusion that social media platforms’ censorship activities are akin to the “editorial judgment” mentioned in Supreme Court doctrine, and disagreed with the Eleventh Circuit that the common carrier doctrine does not support imposing nondiscrimination obligations on social media platforms. All parties to the Eleventh Circuit case have filed petitions for a writ of certiorari with the United States Supreme Court.
2. Huawei Technologies v. FCC, 2 F.4th 421 (5th Cir. June 18, 2021)
On June 18, 2021, the Fifth Circuit issued its opinion in Huawei Technologies USA, Inc. v. FCC (Huawei), affirming the FCC’s January 3, 2020 rule (USF Rule) and accompanying order (collectively USF Order) barring telecommunications carriers/telecommunications network owners from using FCC subsidies provided under the FCC’s universal service programs to purchase, maintain, or improve any equipment or services from suppliers determined by the FCC to be national security threats and placed by the FCC on its so-called “Covered List.” The FCC’s USF Order placed two Chinese suppliers and their subsidiaries, parents, and affiliates on its Covered List: Huawei and ZTE Corporation.
In its appeal to the Fifth Circuit, Huawei challenged two aspects of the FCC’s USF Order: the USF Rule itself and the FCC’s designation of Huawei under the USF Rule as a national security threat. Huawei attacked these parts of the USF Order on multiple grounds, both statutory and constitutional. First, Huawei asserted that the USF Order exceeded the FCC’s authority under the Chevron deference standard applied to federal administrative agency orders. Second, Huawei asserted that the USF Order was arbitrary, capricious, and an abuse of discretion under the Administrative Procedure Act (APA). Third, Huawei asserted that the FCC violated the federal statutory notice-and-comment requirements of the APA (specifically, 5 U.S.C. § 553) in adopting the USF Order. Fourth, Huawei argued that the USF Order was unlawfully vague and standardless under the APA, as well as impermissibly retroactive in violation of the Constitution and the APA. Fifth, Huawei asserted that the USF Order violated the Constitution’s Appointments Clause and statutory and constitutional due process protections. Sixth, Huawei asserted as a catch-all that the USF Order was otherwise contrary to law. The Fifth Circuit rejected all of Huawei’s claims and affirmed the USF Order.
The Fifth Circuit began its Huawei opinion by providing an overview of the history of the USF Order and the process that the FCC adopted in the USF Order to designate Huawei (or any other company) as a national security threat. The FCC’s designation process involves a series of preliminary steps under which the FCC’s Public Safety and Homeland Security Bureau (PSHSB) first makes an initial designation of a supplier as a national security threat, which initial designation is followed by a comment-and-hearing period before the FCC makes a final designation as to whether the supplier should be placed on the FCC’s Covered List as a national security threat. When the FCC released the USF Order in January 2020, the PSHSB had placed only an initial designation on Huawei and ZTE as national security threats; the FCC did not make a final designation to that effect until December 11, 2020.
Before turning to the substance of Huawei’s claims, the Fifth Circuit addressed some preliminary ripeness issues. Huawei had argued that both the USF Rule and the PSHSB’s initial designation of Huawei as a national security threat under the USF Rule (as well as the FCC’s final designation of Huawei as a national security threat under that rule) were unlawful. The FCC countered that neither Huawei’s challenge to its initial designation nor Huawei’s challenge to the USF Rule itself were ripe because Huawei’s asserted injuries of financial and reputational harm flowing from its exclusion from federal USF programs would not materialize unless the FCC issued a final designation of Huawei as a national security threat. The Fifth Circuit agreed with the FCC that the FCC’s initial designation of Huawei was not ripe for review, because Huawei failed to show that such initial designation was the “consummation” of the FCC’s decisional process. Accordingly, the Fifth Circuit found that Huawei failed to satisfy the first prong of the Fifth Circuit’s two-prong finality test for challenging federal administrative agency orders, and dismissed for lack of jurisdiction Huawei’s claims challenging the FCC’s initial designation of Huawei as a national security threat. However, the Fifth Circuit also found that the FCC could not assert that Huawei’s challenge to the USF Rule itself was unripe, because the FCC had made that rule conclusively effective against Huawei when the FCC issued its final designation in December 2020 that Huawei was a national security threat.
The Fifth Circuit then addressed each of Huawei’s statutory and constitutional challenges to the USF Rule itself and rejected each of those challenges. With respect to the FCC’s statutory authority, the Fifth Circuit found that the provisions of Sections 201 and 254 of the Communications Act upon which the FCC relied for its legal authority to promulgate the USF Rule were ambiguous as to whether Congress granted the FCC authority to bar suppliers deemed national security threats from receiving financial support under the FCC’s USF programs. Nevertheless, under Chevron deference principles, and in particular under the Chevron “step two” analysis, the Fifth Circuit found that the FCC’s promulgation of the USF Rule reflected a reasonable interpretation of those statutory provisions. In reaching that conclusion, the Fifth Circuit rejected the FCC’s position that Chevron required the Court to defer to the FCC’s construction of those statutory provisions unless the statute specifically withheld from the FCC the authority to adopt the rule in question—here the USF Rule—as well as the FCC’s related argument that, so long as the FCC did not violate an express statutory command, the statute provided the FCC with authority to use the universal service mechanism to achieve policy objectives contained elsewhere in the Communications Act. But the Fifth Circuit likewise rejected Huawei’s claim that, because the statutory provisions upon which the FCC relied do not expressly grant to the FCC the authority to make national security determinations in allocating USF funds, those statutory provisions unambiguously withhold such authority from the FCC. The Fifth Circuit found that, when viewed as a whole, the “public interest” and “quality services” provisions of Section 254 of the Communications Act, combined with the FCC’s Section 201 authority, were sufficiently broad and supple to reasonably conclude that those statutory provisions provided the FCC with the power to analyze, and address through its USF funding authority, national security threats to U.S.-based communications networks. Relatedly, the Fifth Circuit rejected Huawei’s arguments that (i) the FCC’s lack of relevant national security expertise precludes the conclusion that Congress would have delegated such significant authority through modest, general statutory terms, (ii) the USF Rule conflicts with other provisions of the Communications Act that vest national security judgments exclusively in the President, and (iii) Congress’s enactment of the Secure Networks Act after the FCC promulgated its USF Rule demonstrates that Congress could not have intended to grant the FCC the authority the FCC asserts in the USF Rule. As a bottom line, the Fifth Circuit concluded that, although Huawei’s argument was in some respects powerful insofar as Congress presumably did not intend to delegate to the FCC the power to make broad, independent national security judgments, the FCC’s USF Rule had a materially narrower scope because it was directly tied to threats to U.S.-based communications networks, which is an area within which the FCC has exercised authority and made judgments for decades, through processes that enable the FCC to be informed by other agencies who are expert on national security issues and to be deferential to those other agencies’ views.
After rejecting Huawei’s arguments relating to the FCC’s authority to adopt the USF Rule, the Fifth Circuit addressed what it characterized as Huawei’s substantive challenges to the rule. The Fifth Circuit first rejected Huawei’s assertion that the FCC’s Notice of Proposed Rulemaking that led to the USF Rule provided Huawei with inadequate notice of the FCC’s proposed rule changes in violation of Section 553 of the APA (5 U.S.C. § 553). The Fifth Circuit instead found that the NPRM fairly acquainted Huawei with the subject and issues to be addressed in the rulemaking, and in fact enabled Huawei to anticipate and comment on those aspects of the USF Rule that Huawei claimed were not properly noticed. The Fifth Circuit then rejected Huawei’s assertion that the FCC acted arbitrarily and capriciously in adopting the USF Rule, concluding instead that the FCC “acted within a zone of reasonableness” in considering the relevant evidence and legal arguments in performing its cost-benefit analysis of the USF Rule, and in rejecting proposals to adopt a narrower “equipment-based” approach to its ban on the use of USF funding rather than the “company-based” approach that the FCC adopted. The Fifth Circuit also rejected Huawei’s assertion that the USF Rule facially violated the APA because its designation process was too vague and standardless and did not give meaningful guidance to affected companies. Lastly, the Fifth Circuit rejected Huawei’s claim that the USF Rule violated Huawei’s constitutional due process rights because the rule allegedly did not provide adequate process to affected companies prior to their initial designation by the PSHSB as national security threats, which Huawei referred to as its “pre-deprivation due process rights.” The Fifth Circuit disagreed with Huawei, concluding that the USF Rule’sinitial designation process did not constitute a “deprivation” because the only potential harm associated with such an initial designation was reputational, which the Fifth Circuit found was not a tangible interest under federal law for purposes of conducting a constitutional due process analysis. Instead, the Fifth Circuit agreed with the FCC that the USF Rule’s initial designation process was the very mechanism that provided Huawei (and other affected companies) with pre-deprivation due process, by providing the affected company with notice of the evidence in the record and the FCC’s consideration of that evidence leading to the initial designation, and inviting the affected company to be heard on the sufficiency of the evidence in the record as well as on any countervailing evidence.
3. City of Eugene, Oregon v. FCC, 998 F.3d 701 (6th Cir. May 26, 2021)
In 2019, the City of Eugene, Oregon and a number of other entities filed petitions in the Third, Ninth, and D.C. Circuits for review of the FCC’s Third Order interpreting Title VI of the Communications Act of 1934 (“the Act”). The Ninth Circuit subsequently granted the FCC’s motion to transfer and consolidate the cases in the Sixth Circuit. The Third Order interpreted Title VI of the Act insofar as it regulates franchising agreements required for a cable operator to function in the desired jurisdiction. The Act identifies certain cable-related exaction costs that are borne by the cable operator, but franchise authorities often require additional noncash exactions of cable services in their franchise agreements. When not a required exaction by the Act, these noncash exactions are considered “franchise fees” and must be limited in value (combined with all cash fees) to five percent of a cable operator’s gross revenues for cable services.
Beyond the franchise agreement, the City of Eugene legislated to impose a seven-percent licensing fee on broadband services (which the Act defines as Title I “information services” and not Title VI “cable services”) provided by cable operators. The FCC determined in the Third Order that a fee on cable operators for broadband services was inconsistent with the Act on two grounds: (1) the fee was a franchise fee—and therefore subject to the five percent cap—because it was imposed based on a provider’s status as a cable operator, and (2) the city was improperly using its legislative powers to circumvent regulation prohibited by the Act.
The Sixth Circuit was not persuaded by the FCC’s first conclusion, because franchise fees are based on the cable provider’s provision of cable services and not merely their status as a cable provider. Thus, where the cable provider is providing information services and not cable services, a regulation of the former is not a franchise fee as regulated by the Act.
The Act, however, generally prohibits franchising authorities from regulating the programming or information services of the cable operator when they are not a common carrier. Therefore, a franchising authority such as the City of Eugene would be prohibited from regulating “information services” by imposing licensing fees on broadband services. The city imposed this licensing fee on all cable providers, which the court found was incompatible with the Act’s restrictions over information services regulation. Because the city was not acting as a franchising authority, but using its legislative power to impose a fee that would otherwise be prohibited, the action was wholly preempted by the Act.
Petitioners further claimed the FCC’s decision in the Third Order to extend the Act’s franchising requirements to state franchisors (in addition to local franchising authorities) was arbitrary and capricious. The court rejected this claim and affirmed the FCC’s interpretation, finding that no statutory basis existed for excluding state entities from franchising requirements.
Finally, petitioners challenged the FCC’s determination regarding the requisite grounds for suit by a cable provider. The court found that no party had standing to make this challenge and that the issue was therefore not justiciable.
Petitioners filed with the court a petition for rehearing en banc, which the Sixth Circuit denied, and the Supreme Court denied certiorari.
4. Preemption Challenge to California Net Neutrality Law— ACA Connects v. Bonta, 24 F.4th 1233 (9th Cir. Jan. 28, 2022)
On January 28, 2022, a panel of the Ninth Circuit Court of Appeals issued its opinion in ACA Connects v. Bonta (Bonta), rejecting an interlocutory appeal by four major telecommunications trade associations (ACA Connects—America’s Communications Association, f/k/a the American Cable Association; CTIA—The Wireless Association; NCTA— The Internet & Television Association; and USTelecom—The Broadband Association) whose members include most, if not all, of the country’s Internet Service Providers (ISPs). The four trade associations (plaintiffs) originally had filed their lawsuit with the federal district court for the Eastern District of California, seeking to preliminarily and permanently enjoin, on Supremacy Clause/preemption grounds, the state of California’s enforcement of the California Internet Consumer Protection and Net Neutrality Act of 2018 (SB-822). SB-822, in essence, codified the federal “net neutrality” rules that the FCC had enacted in 2015 and then rescinded in 2018, but SB-822 limited its application to broadband Internet access services provided to customers in California. The federal district court, relying largely on the D.C. Circuit’s analysis in Mozilla Corp. v. FCC, 940 F.3d 1 (D.C. Cir. 2019) (Mozilla), denied plaintiffs’ motion for preliminary injunction. The federal district court did so after concluding that plaintiffs were unlikely to succeed on the merits of their preemption claim because the FCC, by reclassifying broadband Internet access services as “information services” subject to Title I of the federal Communications Act rather than “telecommunications services” subject to Title II of the federal Communications Act, not only removed those services from the FCC’s preemptive authority but also removed those services from the preemptive scope of the Communications Act itself, whether viewed through the lens of conflict preemption principles or viewed through the lens of field preemption principles. Plaintiffs obtained a stay from the district court and filed their interlocutory appeal with the Ninth Circuit.
In rejecting the plaintiffs’ interlocutory appeal, the Ninth Circuit panel largely hewed to the analysis of the D.C. Circuit in Mozilla, in which the D.C. Circuit upheld the FCC’s 2018 decision to classify broadband Internet access services as information services rather than telecommunications services, but then reversed the FCC’s attempt to expressly preempt states from enacting legislation conflicting with the FCC’s decision not to regulate broadband Internet access services as telecommunications services.
The Ninth Circuit panel began its analysis by framing its inquiry as one to “consider the broadband industry’s contention that, when the FCC reclassified broadband services under Title I, thereby abandoning its regulatory authority with respect to net neutrality, California was preempted from stepping into the breach to enact its own net neutrality protections.” Against this frame, the panel described Mozilla’ssalient holding—which the panel adopted as its own—as being that, under Title I of the Communications Act, the FCC lacked the authority to regulate broadband services through the imposition of net neutrality rules and therefore, “because federal regulatory authority is a prerequisite to preemption, the FCC could not expressly preempt the states.”
As the district court below it had done, the Ninth Circuit panel had little trouble expanding its conclusion that the FCC lacked express preemptive authority over state regulation of information services to embrace a conclusion that (1) no implied preemption of such state regulation arose from the policies underlying the FCC’s decision not to regulate broadband Internet access services as telecommunications services and (2) no express or implied preemption of such state regulation arose from the structure or language or policies underlying the Communications Act itself. The panel summarized its reasoning as follows:
As the D.C. Circuit held in Mozilla, by classifying broadband internet services as information services, the FCC no longer has the authority to regulate in the same manner that it had when those services were classified as telecommunications services. The [FCC], therefore, cannot preempt state action, like SB-822, that protects net neutrality. Without the authority to preempt, it does not much matter whether SB-822 conflicts with the federal policy objectives underlying the [FCC’s] reclassification decision. And SB-822 does not conflict with the Communications Act itself, which only limits the FCC’s authority. As to the service providers’ field preemption argument, Supreme Court authority, the case law of this circuit, and various provisions of the Communications Act itself all foreclose that argument.
Although the panel’s decision claims to follow the preemption analysis found in Mozilla and in the Supreme Court’s decision in Louisiana v. FCC,476 U.S. 355 (1986), it is not without its curiosities and potential vulnerabilities. For example, because the plaintiffs’ principal conflict preemption argument was that SB-822 conflicted with the FCC’s “policy decision” to classify broadband Internet access service as an information service subject to Title I of the Communications Act in order to reduce or eliminate the regulatory burdens and costs that would apply to that service if the FCC chose to classify it as a telecommunications service subject to Title II, the panel accepted the plaintiffs’ assertion (and concluded that Mozilla had held) that the Communications Act afforded the FCC with broad discretionary authority to classify broadband Internet access service as either an information service or a telecommunications service. The existence of such presumed discretionary FCC authority appears to be the linchpin of the panel’s preemption analysis. But it is far from clear that, when Congress added the definitions of “information service” and “telecommunications service” to the Communications Act as part of its enactment of the Telecommunications Act of 1996, Congress intended those statutory definitions to be interchangeable and dependent on the FCC’s regulatory preferences. Not only does such a presumed intent not flow naturally from the language of the Communications Act itself, it appears at odds with the legislative history behind Congress’s addition of those statutory definitions, which Congress added to codify the FCC’s prior regulatory establishment of an “enhanced service” as a type of service distinct from a telecommunications service.
Similarly, the panel’s decision to reject plaintiffs’ additional conflict preemption claim that SB-822 conflicts with Section 153(51) of the Communications Act (which provides the definition of a “telecommunications carrier” for purposes of the Act) and Section 332(c)(2) of the Communications Act (which defines and distinguishes between commercial mobile service and private mobile service) arguably ignores the overall structure and purpose of the Communications Act and of Congress’s 1996 amendments to that Act. According to the panel, those definitions only limit the scope of the FCC’s authority and say nothing about state authority to regulate such services—a conclusion that Mozilla also had drawn, and which the panel characterized as “well-reasoned.” As further support for its rejection of plaintiffs’ statutory conflict preemption claim, the panel also pointed to the Savings Provision of the Telecommunications Act of 1996 (Section 601(c)(1) of the 1996 Act), which the panel read to establish that none of Congress’s 1996 amendments to the Communications Act have a preemptive effect unless those amendments expressly so provide. But the panel’s reading of the Savings Provision is arguably too expansive, insofar as that provision appears to address existing state law at the time the 1996 Act was passed, not new state statutory enactments occurring after the 1996 Act’s passage. And the panel’s analysis of Sections 153(51) and 332(c)(2) is difficult to square with existing implied preemption jurisprudence, because it arguably reads out of existence the accepted legal principle of implied preemption based on a statute’s overall structure and purpose—a concept that other courts interpreting Congress’s 1996 amendments to the Communications Act have acknowledged.
The panel’s analysis and rejection of plaintiffs’ field preemption arguments also is not watertight. The panel concluded that SB-822’s limitation of its scope to broadband Internet access services “provided to customers in California” and to Internet service providers that “provide broadband Internet access service to an individual . . . or other customer in California” establishes that SB-822 “does not have the practical effect of regulating wholly interstate conduct.” In reaching this conclusion, the panel relied not on any factual record, but on a 2014 Ninth Circuit decision (GLAAD v. Cable News Network, Inc., 742 F.3d 414 (9th Cir. 2014)) that did not involve broadband Internet access services or SB-822 (but according to the panel, involved an analogous California statute).The panel then concluded that, even if SB-822 “touches on” interstate communications, Congress left ample space for state laws to supplement the federal scheme in the field of interstate broadband services, citing the existence of state laws in such areas as consumer privacy, policing fraud, taxation, general commercial dealings, and enforcing fair business practices. But this analysis ignores at least four important points that render it factually and legally vulnerable: (i) factually, the interstate or intrastate nature of a communications service cannot be determined solely from the location of the customer initiating or receiving the communication; (ii) federal law already classifies broadband Internet access services as being jurisdictionally interstate, not intrastate, services; (iii) the test for field preemption is not whether state regulation has “the practical effect of regulating wholly interstate conduct”; and (iv) the regulation of certain business practices by providers of interstate services is not the same thing as the regulation of the interstate services themselves.
An altogether separate curiosity in the case is that one of the panelists, Judge Wallace, filed a concurring opinion in which he emphasized that the panel was “solely reviewing a denial of a preliminary injunction” and therefore “can express no view on issues arising after a trial dealing with a permanent injunction.” Judge Wallace’s apparent motivation for his concurrence was to chastise the parties (and the district court below) for not proceeding to a trial or adjudication on the merits of the plaintiffs’ claims and request for a permanent injunction, because “appealing from a grant or denial of a preliminary injunction to obtain an appellate court’s view of the merits often leads to ‘unnecessary delay to the parties and inefficient use of judicial resources’” and “generally provides ‘little guidance’ because ‘of the limited scope of our review of the law’ and ‘because the fully developed factual record may be materially different from that initially before the district court.’”But because plaintiffs’ claims turned entirely on preemption principles, it is unclear whether forgoing an interlocutory appeal and instead proceeding directly to trial would have been a better choice for the parties or for the judiciary.
Plaintiffs filed with the Ninth Circuit a petition for rehearing en banc, which the Ninth Circuit denied.
