WASHINGTON-A California appeals court on Thursday told a lower court it must deny a petition from two California mobile-phone carriers that claimed they could not be sued in state court for false advertising due to the Communications Act’s pre-emption on rate making.
“We conclude that a claim that does not directly challenge the rate, but directly challenges some other activity, such as false advertising, and seeks a remedy to limit or control that activity or seeks damages arising from the activity is not an attempt to regulate rates and is not expressly pre-empted under [the Communications Act]. … Any prospective or retrospective effect on rates is merely incidental. … Contrary to AT&T’s [Wireless Services Inc.] argument, an award of damages or restitution for false advertising that requires the court to determine the value of services provided is not rate regulation,” said Associate Justice H. Walter Croskey, in his opinion.
In addition, the appeals court awarded the plaintiffs-Marcia Spielholz, Debra Petcove and the Wireless Consumers’ Alliance-court costs to cover the appeal.
“It’s beautiful! This represents a thorough and complete analysis of the law. The court puts in simple clear language. They state the law and come to an absolute correct conclusion,” said the alliance’s Carl Hilliard.
AT&T Wireless could not immediately respond to requests for comment.
Spielholz appealed a February 1999 decision by the Superior Court of Los Angeles County that agreed with Los Angeles Cellular Telephone Co. and AT&T that monetary damages could not be awarded because to do so would amount to rate regulation and was thus prohibited by the Communications Act.
Last week’s ruling sends the case back to superior court where it can now move forward.
The court decision represents a major legal setback for the wireless industry, which expended considerable resources last year to defeat a WCA petition that sought a declaration from the Federal Communications Commission that monetary damages can be awarded by state courts for consumer fraud, false advertising and other improper business activities by commercial wireless carriers.
The FCC ruled for WCA last year, saying commercial wireless carriers are not pre-empted under federal law from paying monetary awards in state lawsuits.
That prompted the Cellular Telecommunications & Internet Association to file a petition for reconsideration. Last week, the FCC rebuffed the cellular industry’s challenge. A legal challenge to the initial FCC ruling is pending before a federal appeals court.
Accompanying the widespread embrace of wireless products and services has been the growing drum beat of consumer complaints about dropped calls, dead spots, billing, customer service, spam and wireless advertising.
The Federal Communications Commission’s pre-emption ruling, and state courts that look to it for guidance, is significant as mobile phones, pagers and other wireless devices become mass-market consumer products in a highly competitive environment watched by Wall Street analysts that puts a premium on new subscriptions and revenue.
