telesaurus v. power, petition rehearing, 9th circuit- void license can't cause fcc preemption

8/7/2019 Telesaurus v. Power, Petition Rehearing, 9th Circuit- void license can't cause FCC preemption

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IN THEUNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUITCase No. 09-15446

TELESAURUS VPC, LLC, a Delaware Limited Liability Company,Plaintiff-Appellant,

VS.

RANDY POWER, an individual; PATRICIA A. POWER, an individual;RADIOLINK CORPORATION,

Defendants-Appellees,vs.

INDUSTRIAL TELECOMMUNICATIONS ASSOCIATION, INC., a VirginiaCorporation; EWA, INC., a Virginia Corporation, DBA Enterprise Wireless

Alliance,

Third-party-defendants.

On Appeal From The U.S. District CourtDistrict of Arizona (Phoenix Division)

CASE NO. O7-CV-01 3 1 I-NVW

APPELLANT TELESAURUS VPC'S REQUEST FORPANEL REHEARING, OR IN THE ALTERNATIVE

REHEARING EN BANC

NOSSAMAN LLPPATRTCK J. RICHARD (SBN 13t046)prichard @ nossaman. colnTAMIR DAMARItclamari @ nossaman. com50 Califomia Street, Thirty-Fourth Floor

S an Francisco, Californ ia 9 41 1 I -41 07

Telephone: (415) 398-3600

Facsimile: (415) 398-2438

Attorneys for AppellantTELESAURUS VPC, LLC.

Case: 09-15446 10/29/2010 Page: 1 of 53 ID: 7527972 DktEntry: 35

SkyTel Note:

Plantiff Telesaurus is one o

supporters (by outright cha

table donations) to SkybridSpectrum Foundation.

The court denied this petiti

with no comment.

Telesaurus will be submitti

this to the US Supreme Coa petitoin for writ of certiora

or about April 2011.

The Ninth Circuit essential

held that a FCC license thawas issued by mistate (and

Telesaurus asserts by by fcan grant federal premptio

immunity to the party that h

the defective license from law claims of fraud, conver

interference with prospectieconomic advantage, etc.

Evetually, SkyTel and its

supporting LLCs believes t

courts will get this and relaissues right.

If they do not, that will

effectively gut the rights

Congress reserved in theCommunications Act to all

court action to police serioviolations of state and fede

law by FCC licenses: That

flip side of Congress's

substantial de-regulation in1996 Telecom Reform ActFederal de-reglation calls f

access to courts for remedunlawful actions beyond th

scope of the regulation.

Defendatns such as in this

case, and MCLM, PSI andothers in other cases broug

SkyTel entities, assert that

FCC licenses grant them Fpreemption immunity from

prosecuttion in court-- whil

before the FCC they arguetheir acts cannot be challe

at least not subject to anyserious challenge including

evidentiary hearings.

This makes a mockery of Flicensing and due process

law.



I.INTROpUCTTON ANp STATEMENT PURSUANT TO FRAP 3s(bx1)

Appellant Telesaurus VPC LLC ("Telesaurus") requests panel rehearing or

in the alternative rehearing en banc. Telesaurus seeks review of this Court's

determination in its opinion dated October 8, 2010r (the "Opinion") that

Telesaurus's state law claims against appellees Randy Power, Patricia Power and

Radiolink Corporation (collectively "Radiolink") are preempted by the Federal

Communications Act, at 47 USC $332(cX3XA).'

Federal Rule of Appellate Procedure 40(a)(2) authorizes panel

reconsideration where a panel has overlooked or misapprehended a point of law or

fact. As described below, there are factual and legal errors in the Opinion

which appear to have formed the basis for this Court's preemption finding. To

summarize:

First, the Opinion's preemption conclusion was informed by its incorrect

threshold determination that Radiolink operated "under a valid FCC

license," with respect to the VPC frequencies at issue in this case (the "VPC

Frequencies"). In actuality, the record reflects that Radiolink's purported

rights to the VPC Frequencies were void ab initío, and thus "defective" and

' This opinion is attached hereto as Exhibit I.

2 In light of the Opinion's reversal of the trial court's dismissal of Telesaurus'sclaims under 41 U.S.C. $$206-207, Petitioner does not address the scope of the

Opinion in that regard, other than as it may impact the Court's decision as tofederal preemption.




invalid from the start, afact which the FCC itself recognized in the

administrative proceedings which preceded this lawsuit.

Second, the Opinion incorrectly characterizes Telesaurus's state-law claims

as amounting to a "collateral challenge" of the FCC's grant of a license to

Radiolink. In fact, there is nothing about Telesaurus's claims which

challenges an FCC determination. To the contrary, Telesaurus's claims are

based, in part, upon the FCC's determination that "the Radiolink application

should not have been granted to the extent that it requested VPC

frequencies," and that "the grant of a license [to Radiolink] was defective to

the extent that it included authorization to use VPC frequencies." ER 0084-

0085.

Third, the Opinion incorrectly determined that adjudication of Telesaurus's

claims would be "equivalent to second-guessing the FCC's issuance of the

license." Id., at 17024. This legal conclusion is not consonant with $332

preemption jurisprudence from this Court and other Federal Circuits.3

'The Court also assumes that $332(cX3Xa)'s admonition "no State or localgovernment shall have any authority to regulate the entry of or the rates charged by

any commercial mobile service or any private mobile service" (emphasis added)restricts the authority of a fudetøl court sitting in diversity to adjudicate a state-lawclaim. For the reasons discussed below, Telesaurus respectfully submits that thisbroad view of $332 preemption is not consonant with precedent from the UnitedStates Supreme Court. Nonetheless, given the other errors in the Opinion'spreemption analysis, the Court need not resolve this collateral issue in order thegrant the relief requested herein.




Telesaurus respectfully submits that rehearing and reversal by the panel with

respect to the preemption issue is warranted in view of these errors.

Concurrently, Telesaurus requests en banc review and reversal with respect

to the panel's preemption determination. FRAP 35(a) authorizes en banc review

where "the panel decision conflicts with a decision of the United States Supreme

Court or of the court to which the petition is addressed" or where "the proceeding

involves one or more questions of exceptional importance [including] an issue on

which the panel decision conflicts with the authoritative decisions of other United

States Courts of Appeals that have addressed the issue." For the reasons discussed

below, the framework utilized by the panel in reaching its preemption

determination conflicts with the decisions of this Court and those of the U.S.

Supreme Court. See Altria Group, Inc. v. Good, 129 S. Ct. 538, 543 (2008); Wyeth

v. Levine,129 S. Ct. 1187,ll95 (2009); Cipollone v. Liggett Group, 505 U.S. 504,

5I8, 522-23 (1992); Shroyer v. New Cingular Wireless Services,606 F.3d 658 (9th

Cir. 2010). Likewise, the panel's conclusion that Telesaurus's claims are

preempted (as purportedly comprising an indirect regulation of "market entry")

conflicts with decisions from both the FCC and other Federal Circuits as to the

scope of $332 preemptio n. See In Re Wireless Consumers Alliance, Inc.,15 FCC

Rcd 17021, 11026-34 (2000); Pinney v. Nokia,402F.3d 430,450 (4th Cir. 2005);

GTE 18 Mobilnet Ohio v. Johnson,Ill F.3d 469,479 (6'h Cir. 1997); Smith v.,




GTE,236F.3d1292 (11th Cir.2001); Marcus v. AT&T Corp.,138 F.3d 46,53- 55

(2d Cir.1998); Fedor v. Cingular Wireless, 355 F.3d 1069 (7th Cir. 2004).

In the alternative, in the event the Court is disinclined to definitively hold

that Telesaurus's state-law claims are cognizable, it should nonetheless: (i) vacate

the trial court's dismissal on preemption grounds; (ii) remand this case to permit

the parties to obtain further FCC guidance (in the form of a declaratory ruling)

with respect to the preemption issue; and (iii) stay further adjudication of the

preemption issue, pending further FCC guidance on this matter.

II. ARGUMENT

The issue here is whether the issuance of a federal telecommunications

license bars subsequent state law causes of action against the licensee, under

circumstances where: (i) the defendant licensee is alleged by the plaintiff to have

wrongfully procured the license by virtue of false certifications under oath that the

subject frequencies were not already licensed; and (ii) the rights conferred by the

license have been subsequently nullified by the issuing federal agency as defective

and invalid at all times. Telesaurus maintains that the answer to this question is:

"No." The panel's answer to this question was, in effect: "Yes. Due to $332

preemption."

The gravamen of this Court's preemption determination is found on page

17024 of its Opinion:




[A]t all times relevant to Telesaurus's complaint Radiolink operatedunder a valid FCC license granting it the authority to use thosefrequencies. Although the FCC subsequently modified the license todelete the VPC Frequencies, Telesaurus's tort claims amount to a

collateral challenge to the validity of the license initially granted to

Radiolink by the FCC . . . Because an adjudication of Telesaurus'stort claims would be necessarily equivalent to second-guessing theFCC's issuance of a license, they are expressly preempted under themarket entry prong of $ 332(cX3).

For the reasons described below, this determination is erroneous in several

crucial respects.

A. Radiolink Did Not Have a Risht to the VPC Frequencies Under AValid FCC License

The panel's threshold determination that Radiolink "operated under a valid

FCC license" with respect to the VPC Frequencies is incorrect. The record clearly

reflects that Radiolink never had a valid license right to the VPC Frequencies. To

the contrary, as alleged in Telesaurus's Amended Complaint, in a March 4,2004

Order, the FCC stated: (i) "the Radiolink application should not have been granted

to the extent that it requested VPC frequencies . . . the subject channels were not

available for assignment to Radiolink when the application was granted because

they were previously assigned to Havens fthe predecessor of Telesaurus];" and (ii)

"the grant of a license[to

Radiolink] was defectiveto

the extent thatit included

authonzation to use VPC frequencies." (emphasis added). ER 0084-0085. The

FCC's determination that "the Radiolink application should not have been

granted," and that "the grant of a license [to Radiolink] was defective"




demonstrates its recognition that, as to the VPC Frequencies, Radiolink's license

was void ab initio. In other words, this case cannot be classified in the same

category as those in which a licensee has a valid license right which is later

forfeited due to subsequenr misconduct by the licensee.a

This distinction between a valid license right to available frequencies which

is subsequently revoked due to a licensee's violations of FCC law, and a

wrongfully-procured license for unavailable (e.g., already licensed) frequencies,

which is later deemed to have been defective and invalidfrom

its inception, is not

academic. The panel's incorrect determination that Radiolink "operated under a

valid FCC license" informed the remainder of its analysis. The principal issue here

is whether Telesaurus's claims sought to "second-guess" an FCC license

determination. As discussed infra, this is a practical assessment which examines

whether Telesaurus's claims may impinge upon or contradict rights granted to an

FCC licensee. The risk of such a conflict is greatly diminished where license

rights have been revoked, and virtually non-existent where the issuing agency has

ítself determined that the rights should not have been applied for or granted in the

first place. Even those courts which have dismissed claims on $332(cX3XA)

grounds have recognized this fact. See, e.9., TPS Utilicom Servs. v. AT&T Corp.,

o For example, a failure of a licensee to comply with FCC law or the terms

of a licenr" -uy1"ad to imposition of forfeiture, including revocation. See 4lU.S.C. $312 (aX3), (a)(4)and s03(bxlXA).




223F. Supp. 2d. 1089, 1109 n. 19 (C.D. Ca.2002) ("If TPS brought the unfair

practices and tortious interference claims . . . after a determination that a party had

wrongfully participated in an FCC license auction, such claims might escape FCA

preemption").

B. Telesaurus's Claims Do Not Collaterallv Challenge A License

Issuance

For similar reasons, the panel was incorrect when it determined that

Telesaurus's claims "collaterally challenge" a Radiolink license. Once the FCC

determined that the VPC Frequencies should not have been licensed to Radiolink,

there was simply nothing left for Telesaurus to "challenge" before the FCC.

Telesaurus's claims, far from collaterally "challenging" an FCC determination, are

actually based (in part) upon the FCC's determination that Radiolink had no right

to the VPC Frequencies in the first place.s

While the analysis above should be dispositive, if the court finds that any

question remains as to whether Telesaurus's claims are a "collateral challenge to

the validity of the license," this is not the type of issue which is resolvable on the

pleadings. When issues relating to preclusion involve factual matters that require

developmentof

the record, they are particularly unsuitable for resolution via

t Other undisputed facts in the record which support Telesaurus's claims

relate to the circumstances surrounding Radiolink's wrongful procurement of the

VPC Frequencies, including the fact that Radiolink applied for these frequencies

(falsely certifying under oath that they were available) soon after it was outbid by

Havens during the FCC auction for such frequencies.




Federal Rule 12(bX6). See e.g., Stein v. Braum Investment and Development, Inc.,

244 Fed. Appx. 816, 818 19th Cir. 2001) (sua sponr¿ dismissal on collateral

estoppel and res judicata grounds reversed where the trial court record was

insufficiently developed to demonstrate that the plaintiffs had a full and fair

opportunity to litigate their discrimination claim in a prior unlawful detainer

proceeding); Intermodal Rail Employees Assoc. v. Burlington Northern and Santa

Fe Railway Co.,2000 U.S. App. LEXIS 963 *16-18 (9'h Cir. 2000) (dismissal

inappropriatewhere the

evidence, argument and discovery

inthe putatively

preclusive claim and the putatively precluded claim were not necessarily identical);

Whatey v. Rhydman,887 F.2d 976,978-79 (9'h Cir. 1989) (trial court dismissal on

res judìcata and collateral estoppel grounds reversed where factual issues existed

as to whether the allegedly preclusive settlement agreement was signed under

duress).

In this case, it is undisputed that the FCC's grant of the VPC Frequencies on

a Radiolink license did not directly or expressly address whether the state-law

claims asserted by Telesaurus against Radiolink were preempted. Indeed,

Telesaurus was not even a party to the proceedings pursuant to which this license

grant was made. As such, there is, at a minimum, a factuøl question as to whether,

and to what extent, the FCC's erroneous and "defective" grant of the VPC

Frequencies to Radiolink, relying on Radiolink's false license application

10




statements under oath, has any preemptive effect on Telesaurus's state-law claims.

Telesaurus should have had the opportunity to develop the record on this issue

before the trial court.ó

C. Telesaurus's Claims Do Not "Second-Guess" The FCC'sIssuance of a License

The gravamen of the panel's preemption decision is its determination that

Telesaurus's claims are "equivalent to second-guessing the FCC's issuance of the

license." As a result of this determination, the panel concludes "because

Telesaurus's state tort claims rest on the allegation that Radiolink's FCC-licensed

operation of certain frequencies was wrongful or unlawful, they are expressly

preempted under the market entry prong of $ 332(cX3XA)." Id., at 11024.

Telesaurus respectfully submits that the panel's assessment of the

circumstances under which a state-law claim constitutes preempted "second-

guessing" is based upon an effoneous factual assumption; i.e., its presumption that

the VPC frequency grant to Radiolink was valid in the first instance. It also

appears to be based upon an unduly broad construction of ç33zpreemption which

is inconsistent with the "presumption against preemption" described in Cippolone

6 Moreover, as discussed infra, to the extent there is any ambiguity in therecord with respect to the preemptive effect of the FCC's granting the VPCFrequencies to Radiolink, the trial court should have declined to adjudicate themotion to dismiss under the doctrine of primary jurisdiction, to permit the partiesto seek the guidance of the FCC on the preemption issue. The trial court chose notto do so.

11




(at page 523). In effect, the panel has held that the issuance of an FCC license is

immunity from state-law suit, even under circumstances where (as here) the license

right is subsequently deemed a nullity by the issuing agency, as a result of the

licensee's false certifications under penalties of perjury as to the availability of

such frequencies. Petitioner respectfully submits that there is no legal basis for

such a broad immunity.

Preemption jurisprudence consistently holds that there is an "assumption that

the historicpolice powers

of the States [are] not tobe superseded by the Federal

Act unless that was the clear and manifest purpose of Congress." Altria Group,

Inc. v. Good, 129 S. Ct. 538, 543 (2008). In light of the "presumption against

preemption" "Congress' intent to preempt must be clear and manifest to preempt

state law in a field traditionally occupied by the states." Wyeth v. Levine,129 S. Ct.

1181,1195 (2009); Cipollone v. Ligget Group,505 U.S. 504,518,522-23 (1992):

see also Altria Group, 129 S. Ct. at 543; ("[V/]hen the text of a pre-emption clause

is susceptible of more than one plausible reading, courts ordinarily 'accept the

reading that disfavors pre-emption"') (quoting Bates v. Dow Agrosciences LLC,

544 U.S. 431 (2005). This "presumption against preemption" has also been

specifically applied within a *332 preemption context. Pínney,402F.3d at n.4

(presumption against preemption applicable to telecommunications-related claims

because "[s]tates continue to have considerable authority in the wireless

T2




telecommunications area," and because "[t]he presumption against preemption is

even stronger against preemption of state remedies, like tort recoveries, when no

federal remedy exists.").7

Furthermore, the U.S. Supreme Court has made clear that where a

federal statute prohibits state "regulation," it "most naturally refers to positive

enactments by those [egislative or regulatory] bodies, not to common-law

damages actions." Cipollone, 505 U.S. at 519. The Court made the same point in

Sprietsma v. Mercury Marine,537 U.S. 5L, 62-63 (2002), where it held that the

express preemption clause of the Federal Boat Safety Act pre-empted only positive

enactments. If "law," the Court noted "were read broadly so as to include the

common law, it might also be interpreted to include regulations, which would

7Consistent with this narrow view of

preemption, the President on May 20,

2009 issued a 'Memorandum for the Heads of Executive Departments and

Agencies," explaining "the general policy of my Administration that preemption ofState law by eiecutive departments and agencies should be undertaken only withfull consideration of the legitimate prerogatives of the States and with a sufficientlegal basis for preemption." This Memorandum stated: (i) "agencies should notinclude in regulatory preambles statements that the . . . agency intends to preempt

State law through the regulation except where preemption provisions are also

included in the codified regulation" (ii) "agencies should not include preemptionprovisions in codified regulations except where such provisions would be justified

under legal principles governing preemption." (iii) "agencies should reviewregulations issued within the past 10 years that contain statements in regulatorypreambles or codified provisions intended by the . . . agency to preempt State law,in order to decide whether such statements or provisions are justified underapplicable legal principles governing preemption." See http://www.whitehouse.sov/the-

II A I I A Q L I

pless-office/presiden tial-memorandurn-re gardin g-preemption

t3




render the express reference to 'regulation' in the pre-emption clause superfluous."

Id. at 63. The Court further explained that limiting the preemption clause to

positive law "does not produce anomalous results. It would have been perfectly

rational for Congress not to pre-empt common-law claims, which-unlike most

administrative and legislative regulations necessarily perform an important

remedial role in compensating ... victims ." Id. at 64. (emphasis added).

As noted above, $332(cX3)(A) states that "no State or local government

shall have any authority to regulatethe entry of or the rates charged by any

commercial mobile service or any private mobile service." Congress' use of the

phrase "authority to regulate," instead of a broader term -- such as "enacting or

enforcing any law, rule, regulation, standard, or other provision having the force

and effect of law," which is used in the Airline Deregulation Act of 1978 ("ADA")

(49 U.S.C. Appx. 1305(aXl)), or "all laws, decisions, rules, regulations, or other

State action having the effect of law, of any State," which is used in the Employee

Rerirement Income Security Act of 1974, (29 U.S.C. S 1144(a), (cXl)) -- evinces

its intent only to preempt states and local governments from prescribing rates and

entry rules. Indeed, the Supreme Court observed as much when construing the

ADA's preemption provisionin Morales v. Trans World Airlines, Inc.,504U.S.

374 (1992), in which the Court noted that, if Congress had wanted a more limited

scope of preemption in connection with the ADA, "it would have forbidden the

t4




States to 'regulate rates, routes, and services,"' Morales,504 U.S. at 385. This

narrow preemption language identified in Morqles is precisely the language which

is used in $332(cX3XA). Thus, $332(cX3XA) is best read as having

superseded only enactments by state legislatures or administrative agencies that

mandate particular rates or entry rules.

In any event, within the particular context of FCC licensees, numerous

courts (including this Court), have recognized that damages can be awarded

against an FCC licensee for fraud and other state-law torts without running afoul of

9332(cX3)(A) prohibition upon state-law "regulation of rates." Thus, in Shroyer v.

New Cingular Wireless Services,606 F.3d 658 (9th Cir. 2010), this Court held that

claims by a cellular customer against a service provider for failing to provide

adequate coverage were not preempted. In doing so, the Court emphasized the

distinction between claims that directly affect rates or market entry (which are

preempted), and claims which simply relate to rates or market entry (which are not

preempted):

New Cingular argues that Shroyer's claims are preempted by 47

U.S.C. $332(cX3XA) because the claims challenge the quality and

rates of service . . . We reject this contention with regard to Shroyer's

breachof

contract claim and his misrepresentation claim. In the main,Shroyer is challenging New Cingular's rates and quality of service

only insofar as they are contrary to the ones to which he hadcontractual rights or were misrepresented; he is not askíng the courtto rule on the reasonableness of a particular rate, and the quatity ofservice is an issue only as it relates to, or was misrepresented as

satisfying, the contract on which he sues. The claims are state law

15




claims that do not tread on the FCC's exclusive power to regulate rates

and market entry.

Id., at 661-63 (emphasis added).8

Likewise, the FCC held In Re Wireless Consumers Alliance, Inc., 15 FCC

Rcd 17021, 17026-34 (2000), that (i) $ 332 generally does not preempt the award

of monetary damages based on state tort claims; (ii) state courts are not, as a

general matter, prevented by $332 from awarding damages to customers based on

violations of state consumer fraud laws; and (iii) tort laws have the function of

compensating victims, which distinguishes them from the direct forms of

regulation entrusted to the FCC. Id. at 17034; see also In re: Southwestern Bell

Mobite Systems, Inc., 14 FCC Rcd 19898 *26 (1999) ("We do not agree . . . that

state . . .consumer fraud laws relating to the disclosure of rates and rate practices

have generally been preempted . . . The legislative history of section 332 clanfies

8 This distinction has also been utilized by state courts evaluating ç332issues. See Spielholzv. Superior Court,86 Cal. App. 1366,1374-15 (2001) ("4claim that does not directly challenge the rate but directly challenges some other

activity, such a false advertising, and ... seeks damages arising from the activity is

not an attempt to regulate rates and is not expressly preempted under Section

332(c)(3)(A).") (emphasis added). Spielholz further held that "A judicial act

constitutes rate regulation only if its príncipal purpose and direct effect are to

control rates." Id. at 1314 (emphasis added); see also Pacific Bell Wireless, LLC v.

PUC,l40 CaL App. 4th718,734 (2006) (holding that a public utilitycommission's fine against a wireless phone company was not preempted by $ 332,

noting that "[t]he principal purpose and direct effect of the penalties imposed bythe Commission are to prevent misrepresentations by Cingular and to compensate

... wireless customers ... The effect of these penalties on Cingular's rates is

incidental, and the Commission's decisions are therefore not preempted.")

16




that billing information, practices and disputes - all of which might be regulated by

state contractor consumer fraud laws - fall within 'other terms and conditions'

which states are allowed to regulate.").e

Although the case law discussing the preemptive effect of $332(c)(3)(A)'s

"market entry" provision is less well-developed, the published case law that exists

does not support the panel's preemption determination in this case. The seminal

"market entry" case is Fedor v. Cíngular Wireles¡ 355 F.3d 1069 (7th Cir. 2004),

in which the plaintiff alleged that delayed charges by Cingular appeared on his

bills, making his monthly charges inaccurate. Id. at 1070-1071. Cingular argued

that the plaintiffs' complaint was barred by Section332's "market entry" provision

because, if successful, the plaintiff's claims would "necessarily require" Cingular

to alter its infrastructure by building cellular towers in areas that it did not already

have them. Id. at 1014. According to Cingular, this kind of fundamental change in

Cingular's infrastructure would have affected Cingular's actual, physical entry into

e Accord Pinney v. Nokia, 402F.3d 430, 450 (4th Cir. 2005) ("there issimply no evidence that Congress intended ... to preempt completely state lawclaims that are based on a wireless service provider's sale and promotion ofwireless telephones."); GTE 18 Mobitnet Ohio v. Johnson,lll F.3d 469,479 (6th

Cir.1991) (The language of $ 332(cX3XA) "does not compel the conclusion that ...the states may no longer adjudicate individual cases involving specific allegationsof anti-competitive or discriminatory conduct."); Smith v., GTE, 236 tr.3d 1292(1lth Cir. 2001) (customer claims stemming from allegedly exorbitant telephoneleasing charges not completely preempted); Marcus v. AT&T Corp., 138 F.3d 46,53- 55 (2d Cir. 1998) (claims alleging fraudulent billing practices not completelypreempted).

17




the telecommunications market. Id. The Seventh Circuit disagreed, however,

holding that this stretched the allegations in the complaint "beyond recognition."

Id. According to the Court, this was "an accounting problem, not an infrastructure

problem," and, if the plaintiff succeeded, Cingular would be required only to adjust

its accounting practices. Id. Put differently, the Court determined that the

plaintiff's claim did "not relate to the construction or placement of towers at all."

rd.

Telesaurus respectfully submits that the logic of the foregoingauthorities

mandates the conclusion that Telesaurus's claims are not preempted. While

Telesaurus's claims may "relate" to market entry in some oblique sense, their

underlying purpose is unrelated to market entrt, and their adjudication will not

affect market entry (let alone, directly so). As discussed, the FCC has already

determined that the license grant of VPC Frequencies to Radiolink should not have

occurred and was defective, and that, to this extent, Radiolink did not properly

have "entry" into the wireless telecommunications market.l0 There is no

conceivable sense in which an adjudication of Telesaurus's claims will disturb this

conclusion. To be clear: Telesaurus' claims do not directly or indirectly challenge

t0 Telesaurus respectfully submits that however broad the scope of $332"market entry" preemption might be, it cannot reasonably be construed as

immunizing breaches by licensees of their duty of candor to the FCC in order to

obtain frequencies under false pretenses. Such a result would undermine, rather

than further, the Federal Communications Act's goal of effectively regulating the

telecommunications market, and promoting fair competition in that market.

18




any FCC law or decision under which the VPC Frequencies were issued to

Radiolink (neither the FCC rules and procedures involved, nor the FCC's mistaken

1icensegrant).Moreover,theseclaimsdonotdirectlyorindirectlyseektomodify

wireless infrastructure. What Telesaurus is seeking to adjudicate is not the initial

grant of the VPC Frequencies to Radiolink, but rather the damages sustained as a

result of Radiolink procuring and using for its unjust enrichment Telesaurus's

frequencies via false pretenses (after losing the competition for them in the subject

FCC auction).

When conducting its preemption analysis, this Court should not view the

FCC's granting of a license to Radiolink in the first instance as ipso facto

immunity. While this fact surely has some relevance to the preemption calculus, it

is not the end of the inquiry. The inquiry can only be properly completed upon an

examination of the entirety of the administrative record, including the FCC's

determinationsthat..theRadiolinkapplicationshou1dnothavebeengrantedtothe

extent that it requested VPC frequencies" and that "the grant of a license [to

Radiolinkl was defective." (emphasis added) There are enoffnous legal and

practical differences between state law claims asserted against FCC licensees who

hold licenses that the FCC has not revoked (indicating that the license has been and

remains valid), compared to similar claims against erstwhile licensees whose

license rights have been found "defective" and invalid at all times by the FCC, and

79




thus revoked. In the former instance, preemption concems are potentially

implicated because the adjudicating court is required to make a "soup*to-nuts"

determination regarding the licensee's entitlement to the licensed frequencies, an

adjudication which may potentially impinge upon the FCC's exclusive authority to

regulate market entry. In the latter case, by contrast, the licensee's disqualification

ab initio for the frequencies has already been conclusively established by the FCC

itself. As such, in this second circumstance, the adjudicating court need only

assessthe ancillary

issueof

whether the licensee acted tortiously by procuring and

profiting from frequency spectrum to which it was never entitled. This assessment

is unrelated to lawful market entry, nor is there any likelihood that this assessment

will undercut a prior FCC determination.

1. An Invalidated License. Like an Invalidated Patent. Should Not be

Accorded Preemptive Effect

While there does not appear to be any published cases evaluating $332

preemption issues within the context of defective and ínvalidatedFcc licenses,

courts are routinely required to adjudicate analogous issues in the patent context.

These courts have held that aparty can assert a state-law claim against a patent

licensee arising out of the wrongful procurement ofa patent, where it is alleged

that the patent was procured by fraud or in bad faith. The seminal case on the issue

is The Dow Chemical Co. v. Exxon Corp., 139 F'.3d I4l0 (Fed. Cir. 1998), in

which the plaintiff (Dow) asserted state-law unfair competition claims against the

20




defendant (Exxon), arising out of Exxon's inequitable conduct in procuring patents

from the U.S. Patent and Trademark Office.rr The trial court concluded that

Dow's state-law claims were preempted by federal patent law. On appeal, the

Federal, Circuit reversed, holding:

[A] state law claim is not preempted by the federal patent law, even ifit requires the state court to adjudicate a question of federal patent

law, provided the . . . cause of action includes additional elements not

found in the federal patent law cause of action. . . The state law cause

of action at issue here does not present an obstacle to the executionand accomplishment of the patent laws. . . While it is true that . . . the

state court would be required to make a determination of an issue ofpatent law in reaching its judgment on the underlying tort, thisdetermination would only be ancillary to its central purpose . . . The

instant case. . . concerns an allegation of bad faith enforcement of a

reputedly unenforceable patent. . . the tortfeasor here allegedly knew

that its patent was unenforceable when it engaged in marketmisconduct. . . lthus] [t]he tort claim at issue here is not premised

upon bad-faith misconduct in the PTO, but rather is premised upon

bad-faith misconduct in the marketplace. . . A state has every right toprotect its citizens and residents in their contractual relations from acts

of wrongful interference . . . by any party, including a patentee. . .

Any award of damages, then, would be based on local conduct that the

state has a right to regulate; proof of acts before the PTO in such a

trial are merely evidence of the patentee's bad-faith.

Id., at l4l3-18.

See also, BriteSmile, Inc. v. Discus Dental, Inc., 2005 U.S. Dist. LEXIS 30855

*16-17 (N.D.Ca. November

18,2005)

("[I]f the patentee knows that the patent is

11 Specifically, Dow alleged that Exxon obtained the patent by falselyclaiming that its polymers were superior to the prior art, while withholding its

knowledge of a group of polymers which reputedly could achieve the same or

better results than the Exxon polymers and which allegedly anticipated the claims

in Exxon's patent. Id. at 1412.

21




invalid, [or] unenforceable . . . and it represents to the marketplace that competitor

is infringing the patent, a clear case of bad-faith representations is made out . . .

Here, Discus alleges . . .that BrightSmile threatened Discus' customers with patent

litigation based on a patent BrightSmile admitted to this court had errors in the

prosecution [that] had affected the ability to enforce the . . . patent . . . Thus,

Discus alleges that BrightSmile represented to Discus' customers that Discus is

infringing a patent BrightSmile knows is invalid, unenforceable or not infringed.

Therefore,the Court finds Discus suffîciently alleges bad-faith conduct by

BrightSmile to avoid preemption this procedural stage "); GMP Technologies, LLC

v. Zicam, LLC,2009 U.S. Dist. LEXIS 115523 *10 (N.D. Il1. December 9,2009);

Dimension One Spas, Inc. v. Coverplay, 1nc.,2008 U.S. Dist. LEXIS 69526 *48-58

(S.D. Ca. September 5, 2008) ("Dimension One asserts state law claims . . . based

on the premise that Coverplay's US Patent . . . is invalid and that Coverplay

knowingly promoted an invalid patent so as to unfairly compete and interfere with

Dimension One's business of licensing . . . Dimension One intends to show that the

invalidity of the 599 Patent was so obvious that fdefendant's] knowledge of the

invalidity when he made the allegedly tortious statements could be inferred . . .

Based on the foregoing, Dimension One has raised a genuine issue of fact fas to]

whether the 599 Patent is valid. This fact is material because invalidity is the basis

for Dimension One's intended showing that ldefendant] knew at the time of the . ..

22




allegedly tortious statements to Dimension One's licensees and potential licensees

that the 599 patent is invalid."); Landmark Graphics Corp. v. Seismic Micro

Technology, lnc.,410 F. Supp. 2d.751,759 (S.D. Tex.2007) ("SMT's unfair

competition counterclaim alleges that Landmark has sought to enforce the 570

Patent against SMT with knowledge that the patent is unenforceable due to

inequitable conduct. This counterclaim does not rest entirely on actions before the

PTO but alleges 'marketplace misconduct.'. . . The motion to dismiss the state law

unfair competition counterclaim is denied.").

These cases should inform this Court's decision. Indeed, their logic applies

with even greater force to this case. Unlike the foregoing cases, in which the

adjudicating courts were concededly required to resolve "ancillary" issues of

patent law, the District Court in the case sub judice need not have adjudicated any

FCC licensing issues. The issue in this case, as in the above-cited authorities, is

whether the putative tortfeasor asserted a federally-conferred right in bad faith

which it knew it could not assert. As in the case of Dow Chemical, the allegations

contained in the four corners of Telesaurus' complaint are premised upon "bad-

faith misconduct in the marketplace," and proof of acts before the FCC at trial, if

any, would simply be evidence of Radiolink's bad-faith.l2

'' Outside of a preemption context, the U.S. Supreme Court has recognizedthat an action is cognizable against apafiy for abusing a federally-conferred right.For example, under the so-called "sham exception" to the Noerr-Pennington

23




2. In the Alternative, Remand is Proper to Permit the Parties to Seek a

Declarator]¡ Ruling from the FCC

Finally, in the alternative, if this Court is disinclined to definitively hold that

Telesaurus's state-law claims are cognizable, it should direct the trial court, under

the doctrine of primary jurisdiction, to: (i) vacate its grant of Radiolink's motion to

dismiss, to permit the parties to request guidance from the FCC (in the form of a

declaratory ruling) as to the scope of preemption; and (ii) stay further adjudication

of the preemption issue, pending further FCC guidance on this matter.

The doctrine of primary jurisdiction permits both trial courts and appellate

courts to stay the adjudication of cases, in order to permit an administrative agency

to address a legal issue within its unique expertise. See e.g., Syntek Semiconductor

Co. Ltd. v. Microchip Technology, \nc.,307 F.2d775 (9'h Cir. 2002) (vacating trial

doctrine, apafiy can be liable under antitrust law for misusing the federal

administrative process. Thus, in Californía Motor Transport Co. v. TruckingUnlimited,404 U.S. 508 (1971), the Supreme Court held that a concerted actionby petitioners to institute state and federal proceedings to defeat applications byrespondent to acquire operating rights was potentially actionable under the ClaytonAct. The Court noted that where "the alleged conspiracy is a mere sham to coverwhat is actually nothing more than an attempt to interfere directly with the business

relationships of a competitor," application of the Sherman Act is justified. Id., at

51 1. The Court concluded "the machinery of the agencies . . . was effectivelyclosed to respondents, and petitioners indeed became the regulators of the grants of

rights, transfers and registrations to respondents - thereby depleting anddiminishing the value of the businesses of respondents." Id. As a result, "abuse ofthose processes produced an illegal result." Id., at 513. The Court furtherdetermined that "actions of that kind cannot acquire immunity" and that "if the end

result is unlawful, it matters not that the means used in violation may be lawful."Id., at 513, 515.

24




court grant of summary judgment and remanding with instructions to stay

copyright action pursuant to the primary jurisdiction doctrine, to allow the parties

to seek guidance from the Register of Copyrights as to whether a copyright

registration was invalid); U.S. v. Henri, 828 F.2d 526, 528 n.3 (9'h Cir. 1987); see

also Ass'n of Int'l Automobile Manufacturers, Inc. v. Commissioner,

Massachusetts Dept. of Environmental Protection,196F.3d302 (1" Cir. 1999);

Fontan-De-Maldonado v. Lineas Aerèas Costarrícenses,936F.2d 630 (1't Cir.

l99l)(vacating

trial courtgrant

ofsummary judgment and remanding with

instructions to stay action to permit appellant to challenge tariff before the

Department of Transportation). The Federal Communications Commission is

expressly vested with the authority to resolve issues within its expertise via

declaratory rulings. See 5 U.S.C. $55a(e) ("The agency, with like effect as in the

case of other orders, and in its sound discretion, may issue a declaratory order to

terminate a controversy or remove uncertainty"); 47 C.F.R. $ 1.2 ("The

Commission may, in accordance with section 5(d) of the Administrative Procedure

Act, on motion or on its own motion issue a declaratory ruling terminating a

controversy or removing uncertainty."). The FCC has utilized this authority in the

past to make determinations with respect to the FCA's preemptive effect over state

law claims. In fact, the FCC's determination in In Re Wireless Consumers

25




Alliance, Inc., supra, was precipitated by just such a request for a declaratory

ruling in the case of Spiethtozv. Superior Court, 86 Cal. App. 4'h 1366 (2001).

Indeed, the unique aspects of this case may render it particularly suitable for

a remand with instruction to the trial court to stay proceedings and thereby allow

the parties to obtain FCC input as to the applicability of preemption to this matter

(particularly, since the Court has already chosen to remand in any event). First,

this case appears to be unique among ç332 preemption cases to the extent it

involves actions undertaken by the defendant under a void ab initío license (which,

as discussed, makes this case analogous to cases involving wrongfully prosecuted

patents in which courts have found that preemption does not bar state-law claims).

The FCC, as the body which granted the VPC Frequencies to Radiolink, the body

which ultimately revoked them, and the body uniquely qualified to address the

scope of $332 preemption, may be in a singular position to assess the extent to

which the revocation of the VPC Frequencies relates to the preemption issue.

Moreover, unlike virtually all of the preemption authorities cited in the

Court's Opinion, this case involves preemption based exclusively upon the $332

"market entry" provision.t' While the Court concludes in its Opinion that the logic

of these authorities (in particular, the logic in the In re Wireless decision) applies

t' See Opinion, atpage 17021(noting that neithet Shroyer, rLot In re

Wireless, involved the "market entry" prohibition of $332).

26




equally to cases involving purported market entry preemption,l* the FCC (which,

after all, was the body which decided In re Wireless) may take a different view. On

this additional basis, a remand with instructions to the trial court to stay

proceedings to allow the parties to obtain FCC input as to the applicability of

preemption may be approPriate.

III. CONCLUSION

For each of the foregoing reasons, Telesaurus respectfully requests that this

matter be reheard by the panel oÍen banc, that the Opinion be vacated to the extent

it held Telesaurus's state-law claims to be preemptedby 47 U.S.C. $332 and that

the judgment of the trial court with respect to preemption be reversed. In the

alternative, the Court should vacate the trial court's dismissal to permit the parties,

under the doctrine of primary jurisdiction, to seek further FCC guidance with

respect to the preemption issue.

Dated: October 29, 2010

NOSSAMAN LLP

PATRICK J. RICHARD (SBN 131046)prichard @ nossaman.comTAMIR [email protected] California Street, Thirty-Fourth Floor

lsl

to Opinion, at pages t1021-22.

21




San Francisco, California 941 I 1 -41 07

Telephone: (415) 398-3600Facsimile: (al5) 398-2438

Attorneys for Appellant

TELESAURUS VPC, LLC

28




CERTIFICATE OF COMPLIANCE WITH CIRCUIT RULE 40-1(a)

Pursuant to Circuit Rule 40-1(a), Appellant, Telesaurus, VPC, LLC, reports

to the Court that the brief is proportionately spaced, utilizing 14 point Times New

Roman typeface and containing 6,487 words, as indicated by the computenzed

word count of counsel's word processing system.

Dated: October 29,2010 NOSSAMAN LLP

/s/Patrick J. Richard


TELESAURUS VPC, LLC.

By:

29




CERTIFICATE OF SERVICE

I hereby certify that on October 29,2010,I electronically filed the foregoing

with the Clerk of the Court for the United States Court of Appeals for the Ninth

Circuit by using the appellate CMFÆCF system.

I certify that all participants in the case are registered CMÆCF users and

that service will be accomplished by the appellate CMIECF system.

Dated: October 29,2010 NOSSAMAN LLP

By: lslPatrick J. Richard


TELESAURUS VPC, LLC.

30




PROOF OF SERVICE

The undersigned declares :

I am employed in the County of San Francisco, State of California. I am

over the age of 18 and am not a party to the within action; my business address is

c/o Nossaman LLP, 50 California Street, Thirty-Fourth Floor, San Francisco,

California 941 I I -41 07 .

On October 29,2010,I served the foregoing APPELLANTTELESAURUS VPC, LLC'S REQUEST FOR PANEL REHEARING AND

REHEARING EN BANC on parties to the within action as follows:

(By U.S. Mail) On the same date, at my said place of business, a true copy

thereof enclosed in a sealed envelope, addressed as shown on the attached

service list was placed for collection and mailing following the usual

business practice of my said employer. I am readily familiar with my said

employer's business practice for collection and processing of correspondence

for mailing with the United States Postal Service, and, pursuant to that

practice, the correspondence would be deposited with the United States

Postal Service, with postage thereon fully prepaid, on the same date at San

Francisco, C alifornia.

32




Counsel forDefendants/AppelleesRoger L. Cohen Esq.

Michelle C. Lombino, Esq.

Jaburg & Wilk

3200 North Central Avenue,Suite 2000Phoenix, AZ 85012Phone (602) 248-1000Fax (602) 248-0522E-Mail: rlc @jaburswilk.corn

Counsel for 3'd-Partv-Defendant/AppelleesAaron C. Schepler Esq.

Greenberg Traurig, LLP2315 E. Camelback Rd.

Suite 700Phoenix, AZ 85016Phone (602) 445-8000Fax (602) 445-8100E-Mail: scheplera@ gtlaw.com

Jessica Libbey

252660_1.DOC JJ




EXHIBIT 1

DocumentS




Case: 09-15446 10/08/2010 Page: 1 of 21 lD: 7501854 DktËntry: 30-1

FOR PUBLICATION

UNITED STATES COURT OF APPEALSFOR THE NINTH CIRCUIT

Tsr-Eseunus VPC, LLC, a

Delaware Limited LiabilityCompany,

PlaintiffAppellant,

V.

Rexov PowER, an individual;Parrucre A. PowEn, an individual;

Raoror-nr CoRroRenoN,D efen d ant s -App e I I e es,

V.

It rousrRrer. TBlBcovn¡txIcATIoNSAssocrerroN, INC., a Virginiacorporation; EWA, INC., a

Virginia corporation, dlblaEnterprise Wireless Alliance,

Thir d P ar ty - D efen dant - App e I I e es.

No. 09-15446

D.C. No.

2:01-cv-0l3tt-NVW

OPINION

Appeal from the United States District Courtfor the District of ArizonaNeil V. Wake, District Judge, Presiding

Argued and SubmiuedFebruary 11, 2010-San Francisco, California

Filed October 8, 2010

Before: John T. Noonan, Marsha S. Berzon and

Sandra S. Ikuta, Circuit Judges.

Opinion by Judge Ikuta

17003




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Tples¡.unus v. PowER 17007

COUNSEL

Pakick J. fuchard, Nossaman LLP, San Francisco, California,for the appellant.

Kathi Mann Sandweiss and Roger L. Cohen, Jaburg & V/ilk,P.C., Phoenix, Arizona, for the appellees.

OPINION

IKUTA, Circuit Judge:

In this appeal, we hold that the complaint filed by Tele-saurus VPC, LLC ("Telesaurus") against Radiolink Corpora-tion ("Radiolink") did not allege facts sufftcient to establishthat Radiolink is a "common carrier" subject to suit under theFederal Communications Act of 1934 ("FCA"), 47 U.S.C.

$$ 206-07. We therefore affirm the district court's dismissal




Case:09-15446 1Ut8t2010 Page: 3 of 21 lD: 7501854 DktËntry: 30-1

17008 Telesnunus v. PowBR

of Telesaurus's FCA claims, but conclude that the district

court erred in denying Telesaurus leave to amend. We alsohold that Telesaurus's claims under Arizona law for conver-sion, unjust enrichment, and intentional interference with pro-spective economic advantage are expressly preempted by

$ 332(c)(3)(A) of the FCA, which preempts state regulation ofmarket eîW. Id. $ 332(cX3XA) We therefore affirm the dis-missal of Telesaurus's state-law claims.

I

Both Telesaurus and Radiolink provide mobile radio ser-

vices to customers. In 1999, Telesaurus's predecessor in inter-est, Warren Havens, bid in a competitive auction and obtainedlicenses for five VHF Public Coast radio frequencies (the"VPC Frequencies")1 in Phoenix, Af'zona. Radiolink also par-ticipated in this auction, but lost to Havens's higher bid.Havens subsequently assigned his interest in the frequenciesto Telesaurus.2

Three months after Telesaurus obtained the VPC Frequen-cies, Radiolink submitted an application to the Federal Com-munications Commission ("FCC") for various frequenciesincluding the VPC Frequencies. As required by FCC rules,

Radiolink's application included a report from the IndustrialTelecommunications Association ("ITA"), one of the FCC'sauthorized frequency coordinators, which stated that the VPCFrequencies were available at no charge on a first-come, first-served basis. See generally 47 C.F.R. $ 90.175. Telesaurusalleges that Radiolink knew these representations to be false.

The FCC subsequently granted a mobile service license to

IVHF Public Coast frequencies, or "VPC frequencies," are a set of radiofrequencies in the 160 MHZ range that the FCC has reserved for wirelessradio services.

zFor convenience, we refer to both Havens and Telesaurus as "Tele-saurus."




Case: û9-15446 1010812010 Page: 4 of 21 ID: 7501854 DktEntry: 30-1

Tsles¡,r;nus v. Powpn 17009

Radiolink to use the VPC Frequencies. The license included

the notation: "Regulatory Status: PMRS," indicating thatRadiolink was operating a private land mobile radio service.Radiolink used these frequencies to operate its two-waymobile radio business, through which it provided customerswith wireless communications in the greater Phoenix area.

These operations continued until at least 2005.

After being informed by potential business partners thatRadiolink was using the VPC Frequencies, Telesaurusreported Radiolink's use to the FCC. The FCC initiated pro-ceedings sua sponte to consider whether it should modiff

Radiolink's license. In a March 4,2004 memorandum opinionand order, the FCC concluded that it should not have grantedRadiolink the VPC Frequencies, and proposed to modiffRadiolink's license to remove those frequencies. The FCCnoted that "a proposed modification under the circumstancespresented would promote the public interest, convenience,and necessity because the subject channels were not availablefor assignment to Radiolink when the application was grantedbecause they were previously assigned" to Telesaurus.

Radiolink moved for reconsideration, arguing that the coor-dination error resulted not from any fault on the part of

Radiolink, but rather from a mistake made by the FCC and itscertified frequency coordinator, ITA, which erred in selectingthe frequencies for Radiolink's application. Telesaurus filedan opposition to Radiolink's motion, arguing that Radiolink'sclaim of innocence in the selection of the VPC Frequencieswas not credible and that Radiolink was improperly pressur-ing Telesaurus to relinquish the VPC Frequencies. Telesaurusurged the FCC to investigate these issues and impose sanc-tions on Radiolink.

After issuing its March 4, 2004 order, the FCC directedITA to f,rnd replacement frequencies for Radiolink, and then

on December 21, 2004 granted Radiolink a license to usereplacement frequencies recommended by the ITA. On July 7,




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17010 Tnleseunus v. PoweR

2005, the FCC issued a final modification order deleting the

VPC Frequencies from Radiolink's license. The FCC con-cluded that "it is in the public interest to modifu Radiolink'slicense to delete" the VPC Frequencies, because "the frequen-cies were not available" for private land mobile radio licens-ing, and should be made available for Telesaurus's use. Inaddition, the FCC noted that Radiolink had already obtainedreplacement channels, "which will minimize the impact ofthis action on Radiolink's operations." The FCC did not men-

tion Telesaurus's request for further investigation or sanc-

tions.

Two years later, Telesaurus filed suit in federal districtcourt, alleging that Radiolink violated provisions of the FCA,47 U.S.C. $$ 301,308,309,312(a) and 503(b),'and in addi-tion was liable for conversion, unjust enrichment, and inten-tional interference with prospective economic advantageunder Anzona law.

Radiolink sought to dismiss the complaint for failure to

state a claim. See FBo. R. Cry. P. 12(bX6). In response toTelesaurus's federal claims, Radiolink argued that the FCAprovides a private cause of action only against "common car-

riers," 47 U.S.C. $$ 206-207,not against private mobile ser-

vice providers such as Radiolink. Second, it argued thatTelesaurus could not bring a claim for violation of $$ 301,

308, 309, 3I2(a) and 503(b) of the FCA, because those provi-sions impose duties only on the FCC, not on licensees. Withrespect to Telesaurus's state claims, Radiolink sought dis-missal on the grounds that Telesaurus had no property rightin the VPC Frequencies or, in the alternative, that the claims

3In brie¡ 47 U.S.C. $ 301 prohibits radio transmission without a license;

47 U.S.C. $ 308 sets forth the requirements for obtaining a license; 47

U.S.C. $ 309 describes the FCC's procedure for granting a license; 47

U.S.C. $ 312(a) outlines administrative sanctionsand procedures for the

revocation of a license; and47 U.S.C. $ 503(b) sets forth penalties for vio-lations of the conditions of a license or provisions of the FCA.




Case: 09-15446 10ß812010 Page: 6 of 21 lD: 7501854 DktEntry: 30-1

Teleseunus v. Powen 17011

were either expressly or impliedly preempted by

$ 332(cX3)(A) of the FCA, 47 U.S.C. $ 332(c)(3)(A).4

The district court dismissed Telesaurus's complaint withprejudice, denying Telesaurus's motion for leave to amend.Reasoning that the FCC's designation of Radiolink as a pri-vate land mobile radio service on its license was subject todeference under Chevron U.S.A., Inc. v. NRDC, Inc.,46l U.S.837, 842-43 (1984), the district court held that Radiolink wasnot a common carrier as a matter of law. The court fuitherheld that Radiolink's state-law claims were expressly pre-empted under $ 332(cX3)(A) of the FCA. Telesaurus timely

appealed.

u

We review de novo the dismissal of a complaint for failureto state a claim. Alarco Pay Television, Ltd. v. Gen. Instru-ment Corp., 69 F.3d 381,384-85 (9th Cir. 1995). For pur-poses of our review, we begin "by identiffing pleadings that,because they are no more than conclusions, are not entitled tothe assumption of truth." Ashcroft v. Iqbal, I29 S. Ct. 1937,1950 (2009). We disregard "[t]hreadbare recitals of the ele-

aln relevant part, $ 332(c)(3)(A) states:

Notwithstanding sections 152(b) and 221þ) of this title, no Stateor local government shall have any authority to regulate the entryof or the rates charged by any commercial mobile service or anyprivate mobile service, except that this paragraph shall not pro-hibit a State from regulating the other terms and conditions ofcommercial mobile services. Nothing in this subparagraph shallexempt providers of commercial mobile services (where such ser-vices are a substitute for land line telephone exchange service fora substantial portion of the communications within such State)

from requirements imposed by a State commission on all provid-ers of telecommunications services necessary to ensure the uni-versal availability of telecommunications service at affordable

rates.

,¡d $ 332(cX3XA).




Case:09-15446 1010A2A10 Page: 7 of 21 lD: 7501854 DktEntry: 30-1

17012 Ter-sslunus v. PownR

ments of a cause of action, supported by mere conclusory

statements Id. at 1949. After eliminating such unsup-ported legal conclusions, we identiff "well-pleaded factualallegations," which we assume to be true, "and then determinewhether they plausibly give rise to an entitlement to relief."Id. at 1950. "To survive a motion to dismiss, a complaint mustcontain sufficient factual matter, accepted as true, to state a

claim to relief that is plausible on its face;" that is, plaintiffmust "plead[ ] factual content that allows the court to drawthe reasonable inference that the defendant is liable for the

misconduct alleged." Id. at 1949 (intemal quotation marksomitted); see Evanns v. AT&T Corp., 229 F.3d 837, 839 (9th

Cir. 2000).

We review the denial of leave to amend a complaint forabuse of discretion. Metzler Inv. GMBH v. Corinthian Colls-,

Inc., 540 F.3d 1049, 1072 (9th Cir. 2008). A district courtmay deny a plaintiff leave to amend if it determines that "alle-gation of other facts consistent with the challenged pleading

could not possibly cure the deficieîc!," Schreiber Distrib.Co. v. Serv-Well Furniture Co.,806F.2d 1393,1401 (9th Cir.1986), or if the plaintiff had several opportunities to amend itscomplaint and repeatedly failed to cure deficiencies, Fomanv. Davis,371 U.S. 178, 182 (1962).

III

We first consider whether the district court erred by dis-missing Telesaurus's federal claims under $$ 206 and207 ofthe FCA, which provide a cause of action against "commoncarriers." As relevant here, $ 206 allows a party to bring an

action for damages against "common carriers" who violateprovisions of the FCA by their acts or omissions. 41 U.S.C.

$ 206.u Section 207 provides that a person claiming to be

ssection 206 provides, in pertinent part:

In case any common carrier shall do, or cause or permit to be

done, any act, matter, or thing in this chapter prohibited or




Case: 09-15446 10/08/2010 Page: B of21 lD: 7501854 DktÊntry. 30-1

TeLesRunus v. Pownn 17013

damaged by a common carrier may bring a complaint either

before the FCC itself or as a civil suit in district court, "butsuch person shall not have the right to pursue both such reme-dies." Id. 5 207.6

[1] Radiolink argued, and the district court agreed, that itis not a "common carrier" for purposes of $ $ 206 and 207 . lnevaluating this argument, we begin with the language of the

statute. Greyhound Corp. v. Mt. Hood Stages, [nc.,437 U.S.

322, 330 (T978); see McCarthy v. Bronson, 500 U.S. 136, 139

(1991). The FCA's general definition of "common carrier"appears in $ 153(10), which defines the term as: "any person

engaged as a common carrier for hire, in interstate or foreigncommunication by wire or radio or interstate or foreign radiotransmission of energy . . . |' 47 U.S.C. $ 153(10). Despitethis general definition, a mobile service such as Radiolink is

a common carrier only if it meets the more specific definitionof "common carrief' set forth in $ 332(c)(1). This section pro-vides that "[a] person engaged in the provision of a servicethat is a commercial mobile service shall, insofar as such per-son is so engaged, be treated as a common carrier" for pur-poses of the FCA. Id. $ 332(cXlXA). Any mobile service

declared to be unlawful, or shall omit to do any act, matter, or

thing in this chapter required to be done, such common carriershall be liable to the person or persons injured thereby for the fullamount of damages sustained in consequence of any such viola-tion of the provisions of this chapter, together with a reasonable

counsel or attorney's fee . . . .

rd. ç206Gsection 207 provides:

Any person claiming to be damaged by any common carrier sub-ject to the provisions of this chapter may either make complaintto the Commission as hereinafter provided for, or may bring suitfor the recovery of the damages for which sttch common carriermay be liable under the provisions of this chapter, in any districtcourt of the United States of competent jurisdiction; but such per-

son shall not have the right to pursue both such remedies.

rd.5207.




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1'10t4 Tpr-esnuRus v. PowrR

"that is not a commercial mobile service or the functionalequivalent of a commercial mobile service" is defined as a

"private mobile service," and therefore not a common carrierfor purposes of the FCA.? 1d $$ 332(c)(2), (dX3); see In reImplementation of Sections 3Q,Q and 332 of the Communica-tions Act Regulatory Treatment of Mobile Services: Second

Report and Order, 9 F.C.C.R. I4ll, 1425-1454 (Mat- 7,

1994) (FCC regulations further defining these terms). The

FCA defines "commercial mobile service" as "any mobileservice . . . that is provided for prof,rt and makes intercon-nected service available (A) to the public or (B) to such

classes of eligible users as to be effectively available to a sub-

stantial portion of the public, as specif,red by regulation by theCommission ." 47 U.S.C. $ 332(d)(1). "Interconnectedservice," in turn, is defined as "service that is interconnectedwith the public switched network . . . or service for which a

request for interconnection is pending . . . ." 47 U.S.C.

$ 332(dX2). In sum, a mobile service provider such as

Radiolink qualifies as a "common carrier" under the FCAonly to the extent it is "engaged in the provision of a service"that is: (1) for profît; (2) interconnected (or pending intercon-nection) with the public switched network; and (3) availableto the public or other specified users. Id $$ 332(d)(l)-(2).

We thus consider whether Telesaurus's complaint allegesfacts sufficient to establish that Radiolink is a common car-

rier. The complaint alleges: "Radiolink as a common carrier,knowingly violated 47 U.S.C. $$ 308 and 309, and other sec-

tionfs of] the Communications Act"; that Radiolink "used the

Converted Frequencies for commercial, common-carrier (as

def,rned by the FCC) two-way radio service involving charg-

TSection 332(dX3) provides:

the term "private mobile service" means any mobile service (as

defined in section 153 of this title) that is not a commercialmobile service or the functional equivalent of a commercial

mobile service, as specified by regulation by the Commission.

47 U.S.C. $ 332(dX3).




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Telss¡unus v. PoweR 17015

ing various customers for use of mountain-top and other highradio repeater sites to provide wireless communications in thegreater Phoenix region"; and that Radiolink "carried on thisfor-prof,rt common carrierf ] wireless service" for many years.

[2] We do not assume the truth of the complaint's barelegal conclusion that Radiolink is a common carrier, Iqbal,129 S. Ct. at 1950, but instead consider whether the com-plaint's well-pleaded facts are sufficient to state a claim. Tele-saurus's complaint plausibly alleges that Radiolink is a for-profit endeavor, thus satisffing one of the elements requiredto meet the definition of a common carrier. See 47 U.S.C.

$ 332(dxl)-(2). But the complaint does not adequately allegethat Radiolink's service is interconnected or pending intercon-nection, as defined in $ 332(d)(2), or that it is provided to thepublic or the other users specified in $ 332(d)(l). Id. As such,we lack "sufficient factual matter, accepted as true" to estab-lish that Radiolink is a common carrier. Iqbal, I29 S.Ct. at1949.

Telesaurus argues that Radiolink must be deemed to be a

common carrier because it was using the VPC Frequencies,which the FCC designated for use only by commercial mobileservices. We reject this tautology. As explained above, the

definition of "commercial mobile services" does not tum onthe nature of the frequencies being used, but rather onwhether the service being provided meets certain cnteria. See

47 U.S.C. $ 332(dX1)-(2); see also S.W. Bell Tel. Co. v. FCC,19 F.3d 1475, 1481 (D.C. Cir. 1994) ("'Whether an entity ina given case is to be considered a common carrier or a privatecanier turns on the particular practice under surveillance.").

[3] Because a private cause of action under $$ 206 and 207may be brought only against a "common carrier," and because

Telesaurus has failed to make a plausible allegation thatRadiolink is such a carrier, we agree with the district courtthat Telesaurus has failed to state a claim under the FCA. 47u.s.c. $$ 206-07.




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t70t6 Tu.EsnuRus v. PoweR

Given this conclusion, we turn to Telesaurus's argument

that the district court erred in denying it leave to amend itscomplaint. As noted above, the district court concluded thatthe "Regulatory Status: PMRS" notation on Radiolink'slicense was a determination by the FCC, entitled to deferenceunder Chevron,467 U.S. at 843, that Radiolink was not a

common carrier for purposes of Telesaurus's suit. UnderChevron, we defer to an agency's construction of the statuteit administers if "the statute is silent or ambiguous withrespect to the specific issue," and the agency's interpretation"is based on a permissible construction of the statute." See id.Moreover, even if an agency's decision does not qualiff for

Chevron deference, we still give "considerable weight" to the"well-reasoned views of the agencies implementing a stafute,"in proportion to "the degree of the agency's care, its consis-tency, formality, and relative experhress, and to the persua-siveness of the agency's position." United States v. MeadCorp.,533 U.S. 218, 227-28, 234-235 (2001) (citing Skid-more v. swift & co.,323 u.s. 134, 139-40 (1944)) (footnotesand internal quotation marks omitted).

[4] In this case, however, the parties have not identified,and we are not aware of, any authority indicating that theFCC's notation on Radiolink's license constitutes an interpre-

tation entitled to Chevron deference. And, given the absenceof any reasoned analysis by the FCC explaining the "PMRS"notation, we cannot give it significant weight under Mead andSkidmore. See Mead,533 U.S. at 228; Skidmore,323 U.S. at140. Indeed, it is far from clear that the bare notation "PMRS"on Radiolink's license, without more, even represents theFCC's considered judgment that Radiolink is a "privatemobile service" for purposes of Telesaurus's suit. See 47U.S.C. $ 332(cX2), (dX3). Furthermore, "common carrier"status depends upon the services Radiolink is providing to itscustomers, an inquiry not necessarily identical to the questionof regulatory status noted on a license. Id. $ 332(dX1)-(2); see

S.W. Bell, 19 F.3d at 1481. In light of these considerations,the notation on Radiolink's license lacks any " 'power to per-




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TrleseuRus v. PowBn 17017

suade,'" Mead,533 U.S. at229 (quoting Skidmore,323 U.S.

at 140), and therefore is not entitled to deference.

[5] The district court thus erred in holding that the"PMRS" notation on Radiolink's license compelled the con-clusion that, as a matter of law, Radiolink was not a commoncarrier for purposes of Telesaurus's suit. Because the districtcourt's basis for denying leave to amend was incorrect, andRadiolink has not identified any other reason that amendmentwould be futile, we conclude that the district court abused itsdiscretion by denying Telesaurus leave to amend. See Schrei-ber, 806 F .2d at 1402; Bonanno v. Thomas,309 F .2d 320, 322

(9th Cir. 1962).8

IV

Telesaurus also appeals from the dismissal of its state tortclaims for conversion, unjust enrichment, and intentionalinterference with prosp ective economic adv antage. Telesaurusalleges that Radiolink knew that Telesaurus alone was right-fully licensed to use the VPC Frequencies, but submitted a

license application to the FCC that falsely charactenzed thefrequencies as available. According to Telesaurus, Radiolink

subsequently used the VPC Frequencies wrongfully and inviolation of Telesaurus's rights. As a result, Telesaurusalleges that it lost specific economic opportunities andincurred damages. Telesaurus argues that the district courterred in holding that the FCA expressly or implicitly preemptsthese claims.

sBecause we affirm the dismissal of Telesaurus's complaint on thisground, we do not reach Radiolink's argument that no private right ofaction under 47 U.S.C. $$ 206 and207 is available for breach of 47 U.S.C.$$ 301, 308, 309, 312(a) and 503(c)(l). The district court will have theopportunity to address Radiolink's argument on this issue if Telesaurus is

able to amend its pleadings to make a plausible allegation that Radiolinkis a common carrier.




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t7018 TeLsseunus v. Powrn

A

"The purpose of Congress is the ultimate touchstone of pre-

emption analysis." Cipollone v. Liggett Group, lnc.,505 U.S.504, 516 (1992) (plurality opinion) (internal quotation marksomitted). Because "Congress may indicate pre-emptive intentthrough a statute's express language or through its structureand purpose," Altria Group, Inc. v. Good,129 S.Ct. 538,543(2008), we first look to the text of the FCA to determinewhether Congress explicitly preempted Radiolink's commonlaw claims. See generally Metrophones Telecom., Inc. v.

Gloòat Crossing Telecom., Lnc.,423 F.3d 1056, 1071-72 (gth

Cir. 2005).

[6] The express preemption provision of the FCA relevantto mobile services, $ 332(cX3)(A), states in relevant part that"no State or local government shall have any authority to reg-ulate the entry of or the rates charged by any commercialmobile service or any private mobile service, except that thisparagraph shall not prohibit a State from regulating the otherterms and conditions of commercial mobile services." 47U.S.C. $ 332(cX3)(A). Under this section, a state enactment

may be preempted either because: (1) the enactment regulates

the rates charged by a mobile service; or(2) because the

enactment regulates the market entry of any such service.

The FCC has interpreted the scope of this preemption pro-vision in In re Wireless Consumers Alliance, (nc.,1.5 F.C.C.R.17021, 17026-35 (2000), an interpretation that we adopted inShroyer v. New Cingular llireless Services, Inc. See 606 F.3d658, 662 &. n.2, 663 (gth Cir. 2010).' In In re Wireless, the

eln the course of discussing In re Wireless's determination that certaln

state tort claims were not preempted by $ 332(c)(3), Shroyer noted that"[b]ecause the FCC is authorized to issue binding legal rules, an order

issued under that authority is entitled to Chevrondeference." See Shroyer,

606 F.3d at 662 n.2. Shroyer did not address the Supreme Court's recent

statement that it does not give Chevron deference to "an agency's conclu'




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TelssnuRus v. Powen 17019

FCC considered a petition seeking a declaratory ruling that

$ 332(c)(3)(A) precluded state courts from awarding mone-tary relief against commercial mobile radio service providers

for a range of state tort and contract actions. 15 F.C.C.R. at

IT02L Commenters argued that such actions were preempted

because the adjudication of monetary damage claims wouldper se "require[ ] the [state] court to regulate rates" in contra-vention of $ 332(c)(3xl) Id. at 17024-25.

In a thorough and well-reasoned opinion, the FCC rejected

this per se approach, adopting instead a case-by-case analysis

for preemption of state tort actions under $ 332(c)(3)(I). Id.

at 17022. First, the FCC determined that'Judicial action canconstitute state regulatory action for purposes of Section

332," and thus may be expressly preempted under that provi-sion. See 15 F.C.C.R. at 17027 (emphasis added). The FCC

explained that "[t]his conclusion comports with the Supreme

Court's determination that a judicial decision can constitute

state action, as well as with the determinations of the Supreme

Court and other courts that, like legislative or administrativeaction, judicial action constitutes a form of state regulation."Id. at 17027 & nn.39-40 (citing, inter alia, Shelley v. Kraemer,334 U.S. I (1948) and BMll of N. Am., Inc. v. Gore,517 U.S.

ssg, 572 n.l7 (1996)).

Second, the FCC determined that although "[s]ection 332

does not generally preempt the award of monetary damages

by state courts based on state tort and contract claims," it

sion that state law is pre-empted," but rather accords weight to the "agen-

cy's explanation of state law's impact on the federal scheme" based on "its

thoroughness, consistency, and persuasiveness." Wyeth v. Levine, 129

S.Ct. I 187, 1201 (2009) (citing Mead, 533 U.S. at 234-35; Skidmore,323U.S. at 140). In considering In re lhireless's interpretation of $ 332(c)(3),

however, application of either the Skidmore factors or Chevron deference

would yield the same result. Therefore, we need not address the question

whether some or all of the FCC's analysis in In re llireless is entitled to

Skidmore rather than Chevron deference.




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r7020 Tnr-psRuRus v. Powpn

"bars state regulation of, and thus lawsuits regulating, the

entry of or the rates or rate structures of fmobile service] pro-viders." Id. at 11026, 17028. As relevant to the rate preemp-

tion alleged in In re Wireless, the FCC held that if "the awardof monetary damages [is] necessarily equivalent to rate regu-lation," or required a court to "rule on the reasonableness of[a] . . . carrier's charges," it is preempted. Id. at 17028, 17035.The FCC emphasized that "whether a specific fclaim] is pro-hibited by Section 332 wlll depend on the specific details ofthe award and the facts and ôircumstances of a particularcase." Id. at 17040.

Shroyer adopted In re Wirel¿ss'sinterpretation

of $332(c)

along with its analytical framework. See 606 F.3d at 662-63.ln Shroyer, a plaintiff filed a class action against a wirelessservice provider, alleging that his cell-phone service had been

"severely degraded" following the merger of his service pro-vider with another. Id. at 661. The plaintiff sought a declara-tory judgment as well as damages for alleged breach ofcontract, fraud, and unfair competition. Id. The service pro-vider argued that the plaintiffs claims were preempted by

$ 332(cX3)(A) because the claims "challenge[d] the qualityand rates of service, and those areas are reserved exclusivelyto the FCC." Id. (citing 47 U.S.C. $ 332(cX3XA)).

In considering the parties' preemption arguments, we firstfollowed the FCC's conclusion that $ 332(c)(3)'s preemptionof state regulation applies to judicial action. See id. at 662;Peck v. Cingular Wireless, LLC, 535 F.3d 1053, 1058 (9th

Cir. 2008) (applying express preemption analysis under

$ 332(cX3)(A) to a class action complaint alleging violationof a Washington statute); see also Pinney v. Nokia Inc., 402

F.3d 430, 455-56 (4th Cir. 2005); Bastien v. AT&T IlirelessServs., lnc.,205 F.3d 983,959 (7th Cir.2000), distinguishedon other grounds by Shroyer, 606 F.3d at 662-63. Second, weadopted In re Wireless's holding that not all common law

damages actions will fall within the express scope of$ 332(cX3)(/t). Shroyer, 606 F.3d at 662-63. As in In re




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TelesnuRus v. PoweR 17021

Wireless, we reasoned that $ 332(c)(3)(A) preempts damage

claims only if the court, in adjudicating the plaintiff s claim,would have to engage in a regulatory analysis of the "reason-ableness" of a particular rate, id.; see AT8¿T Corp. v. FCC,349 F.3d 692,702 (D.C. Cir. 2003), or, said otherwise, wouldbe "called upon to substitute its judgment for the agency's onthe reasonableness of a tate," Nader v. Allegheny Airlines,Inc., 426 U.S. 290, 299 (1976). Because plaintiffs contractand misrepresentation claims in Shroyer did not "ask[] thecourt to rule on the reasonableness of a particular rate," weconcluded that the claims were not preempted. Shroyer,606F.3d at 661. Contrariwise, we held that "[e]lements ofShroyer's unfair competition claim" were preempted because

they "depend[ed] on the assessment of the public benefit ofthe merger." Id. at 663; see id. at 666. We concluded that

$ 332(c)(3)(A) precluded any reexamination of the mergerissue, a regulatory determination already made by the FCC.Id. at 663.

[7] Neither Shroyer nor In re ílireless articulated a corre-sponding test for preemption under the "market entry" prongof $ 332(c)(3XA) However, the logic of these cases providessubstantial guidance. See Shroyer, 606 F.3d at 662-63; In reIí/ireless, 15 F.C.C.R. at 17034. Just as $ 332(cX3XA) pre-

empts claims that require a court to substitute its judgment forthe agency's with respect to the reasonableness of a particularrate, $ 332(cX3XA) also preempts claims that require a courtto substitute its judgment for the agency's with regard to a

market-entry decision. Cf Shroyer, 606 F.3d at 66I-63; In reWireless, 15 F.C.C.R. at 17035; see also Pinney, 402 F.3d at456. ln other words, $ 332(c)(3XA) preempts a state tortaction that would require a court to engage in an assessment

or reexamination of the FCC's regulatory determinationregarding a mobile service's entry into the market.

[8] Licensing has long been recognized as the FCC's core

tool in the regulation of market entry. See generally 47 U.S.C.$ 301; Red Lion Broadcasting Co. v. FCC,395 U.S. 361,376,




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n022 Trleseunus v. Pow¡R

379-80 (1969). Accordingly, section 332 of the FCA outlines

the FCC's duty to manage the spectrum available to mobileservices through a licensing system. 47 U.S.C. $ 332. Suchlicensing directly involves agency determinations of publicinterest, safety, eff,tciency, and adequate competition, allinquiries specially within the expertise of the FCC. Id.

$ 332(a)(1)-(4); see td. $ 301 (noting the express purpose ofthe FCA: "to maintain the control of the United States overall the channels of radio transmission; and to provide for theuse of such channels, but not the ownership thereof, by per-sons for limited periods of time, under licenses granted byFederal authority ."). Accordingly, $ 332(c)(3)(A) pre-empts state tort actions that require a court "to substitute its

judgment for the agency's" with regard to a licensing deci-sion. Nader, 426 U.S. at 299.

B

We apply these principles to Radiolink's contention thatTelesaurus's common law claims for conversion, unjustenrichment, and intentional interference with prospective eco-nomic advantage are preempted under either the "rates" or"market entry" prongs of $ 332(c)(3XA).

Under Arizona law, conversion "is an intentional exerciseof dominion or control over a chattel which so seriously inter-feres with the right of another to control it that the actor mayjustly be required to pay the other the full value of the chat-telJ' Miller v. Hehlen, 104 P.3d 193,203 (Anz. App. 2005)(internal quotation marks omitted). The elements of unjustenrichment are "(1) an enrichment; (2) an impoverishment;(3) a connection between the enrichment and the impoverish-ment; (4) absence of justif,rcation for the enrichment and theimpoverishment[;] and (5) an absence of a remedy providedby law." Cmty. Guardian Bank v. Hamlin,898 P.2d 1005,

1008 (Ariz. App. 1995). Finally, to establish a claim for tor-

tious interference with prospective economic advantage, Tele-saurus must prove "the existence of a valid contractual




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Tel¡seuRus v. Pownn t7023

relationship or business expectancy; the interferer's knowl-edge of the relationship or expectancy; intentional interfer-ence inducing or causing a breach or termination of therelationship or expectancy; and resultant damage to the parlywhose relationship or expectancy has been disrupted." Wal-lace v. Casa Grande Union High Sch. Dist. No. 82 Bd. ofGovernors,909 P.2d 486, 494 (Ariz. App. 1995). To state aclaim, Telesaurus must establish that the interference wasimproper, as determined under a seven-factor test that Ari-zona courts have adopted from the Restatement of Torts. BarJ Bar Cattle Co. v. Pace,763 P.2d 545, 547-48 (Ariz. App.1e88).

[9] Tuming first to $ 332(c)(3)(A)'s preemption of stateauthority to regulate rates, Radiolink argues that Telesaurus'sclaims are preempted because they "implicitly seek to set avalue on the frequencies at issue, using state-law principles tousurp the rate setting function that is the exclusive provinceof the FCC." We disagree. This case involves a suit broughtby one mobile-service provider against another, alleging dam-ages to its business interests from allegedly improper use ofcertain frequencies. Although a court adjudicating Tele-saurus's state-law claims would have to determine whetherTelesaurus was damaged by Radiolink's use of the VPC Fre-

quencies, and the extent of any such damage, this determina-tion would not require the court to pass judgment on thereasonableness of Radiolink's charges in order to providecompensation for Telesaurus's alleged injury. In re Wireless,15 F.C.C.R. at 17035. At most, it might be "appropriate for[the court] to take the [rate] into consideration in calculatingdamages." 1d. Such consideration of a rate as a fact informingdamages calculations does not infringe on the FCC's area ofexclusive authority to regulate the rates applicable to mobileservice providers. Because a court considering Telesaurus'sstate tort actions would not have to engage in a regulatoryanalysis of the reasonableness of a particular rate, or to "sub-

stitute its judgment for the agency's on the reasonableness ofarate," Nader,426U.S. at299, we conclude that Telesaurus's




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17024 Teleseunus v. Powen

damages claims are not expressly preempted as attempts to

regulate a rate.47 U.S.C. $ 332(cX3XA).

[10] Turning next to $ 332(c)(3)(A)'s preemption of stateauthority to regulate market entry, Radiolink argues thatbecause Telesaurus's state tort claims rest on the allegationthat Radiolink's FCC-licensed operation of certain frequen-cies was "wrongful" or "unlawful," they are expressly pre-empted under the market entry prong of $ 332(c)(3)(A). W"agree. Each of Telesaurus's state-law claims requires adjudi-cation of whether Radiolink's use of the VPC Frequencieswas improper, and, if so, whether Telesaurus suffered damage

from such allegedly wrongful use. Under the facts of thiscase, such allegations would require the court to substitute itsjudgment for the FCC's with regard to a licensing decision,a core determination regarding market entry.

[11] Although Telesaurus alleges that Radiolink's opera-tion of the VPC Frequencies was wrongful, at all times rele-vant to Telesaurus's complaint Radiolink operated under a

valid FCC license granting it the authority to use those fre-quencies. Although the FCC subsequently modified thelicense to delete the VPC Frequencies, Telesaurus's tortclaims

amount to a collateralchallenge to

the validity ofthe

license initially granted to Radiolink by the FCC. As westated in Shroyer, state tort law may not be used to reexamineor reassess the FCC's determinations. ,S¿e Shroyer,606 F.3dat 663. Indeed, here, there is an irreconcilable conflictbetween the FCC's exclusive licensing authority, i.e. itspower to regulate market entry, and Telesaurus's allegationsthat Radiolink "wrongfully" or "unlawfully" operated underits FCC license. See Nader, 426 U.S. at 299; 47 U.S.C.

$ 332(c)(3)(A). Because an adjudication of Telesaurus's tortclaims would be necessarily equivalent to second-guessingthe FCC's issuance of a license, they are expressly preempted

under the market entry prong of $ 332(c)(3)(A). 47 U.S.C.$ 332(c)(3)(A).




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Ter-esRunus v. Powpn 17025

[12] Telesaurus argues that even if a court's adjudication

of its tort claims would require reconsideration of the FCC'slicensing determination, its state tort claims are saved frompreemption under 47 U.S.C. $ 414, the FCA's savings clause.This section provides that nothing in the FCA's provisionsgoverning wire or radio communication "shall in any wayabridge or alter the remedies now existing at common law orby statute," but rather "are in addition to such remedies." Id.$ 414.'0 The FCC addressed and rejected a substantially iden-tical claim in In re Wireless, reasoning that "[u]nder acceptedprinciples of statutory construction . . . the savings clause can-not preserve state law causes of action or remedies that con-

travene expressprovisions

ofthe Telecommunications Act."

15 F.C.C.R. at 17040. We agree. As the Supreme Court has

explained, the savings clause of the Communications Act,ç 414, preserves only those rights that are "not inconsistent"with statutory requirements elsewhere in the FCA. Am. Tel. &Tel. Co. v. Cent. Office Tel., Inc., 524 U.S. 214, 221-28(1998). Accordingly, the Supreme Court concluded that thesavings clause could not be construed to preserve "a commonlaw right, the continued existence of which would be abso-lutely inconsistent with the provisions of the act. In otherwords, the act cannot be held to destroy itself." Id. at 228(internal modifications omitted) (citing Tex. & Pac. R. Co. v.

Abilene Cotton Oil Co.,204 U.S. 426, 446 (1907)). Indeed, toread $ 414 expansively would "abrogate the very federal reg-ulation of mobile telephone providers that the [FCA] intendedto create." Bastien, 205 F.3d at 987. Section 332(c)(3)(A)does not as a general matter preempt state tort and contractactions, thus ensuring that S 414 has effect. See In re NOSCommc's, 495 F.3d 1052, 1058 (9th Cir.2007) ("[S]ection414 evidences Congressional intent to allow some state lawclaims to proceed.") (discussing Marcus v. AT&T Corp., T38

losection$ 414 provides:

Nothing in this chapter contained shall in any way abridge oralter the remedies now existing at common law or by statute, butthe provisions of this chapter are ìn addition to such remedies.




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17026 TeLrs¡uRus v. PoweR

F.3d 46,54 (2d Cir. 1998)). Nevertheless, actions that have

the effect of regulating rates and market entry are expresslypreempted by $ 332(cX3XA) and thus beyond the scope ofç 4r4.

[13] Telesaurus's state-law claims, in effect, call upon thecourt to deem "wrongful" actions that the FCC, under itslicensing authority, expressly authorized. Section332(c)(3)(A) prohibits us from substituting our judgement forthat of the agency's under the guise of a state-law tort claim.See Shroyer,606 F.3d at 662-63. We therefore conclude thatTelesaurus's claims are expressly preempted, and affirm their

dismissal.V

We conclude that the district court properly dismissed Tele-sarus's claims under the FCA, but erred in denying leave toamend. See 47 U.S.C. $$ 206-07. We affirm the dismissal ofTelesaurus's claims under Anzona law for conversion, unjustenrichment, and intentional interference with prospective eco-nomic advantage, because such claims are expressly pre-empted by section $ 332(c)(3)(A) of the FCA. Id.$ 332(cX3XA).

AFFIRMED IN PART & REVERSED IN PART;REMANDED.


telesaurus v. power, petition rehearing, 9th circuit- void license can't cause fcc preemption

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