MetroPCS California, LLC v. Batjer

Background

MetroPCS challenged the California Public Utilities Commission’s (CPUC’s) 2017 and 2018 resolutions governing state universal-service surcharges on prepaid wireless carriers. The Ninth Circuit had previously reversed the district court’s ruling that the resolutions were facially preempted by federal law and remanded the case for examination of whether the resolutions were preempted as applied to MetroPCS.

Federal preemption means that federal law displaces or overrides a conflicting state requirement. The Ninth Circuit instructed that MetroPCS could prevail by showing that applying the resolutions to it caused double assessments or another unfair competitive disadvantage that conflicted with the federal policy of competitive neutrality. The parties filed cross-motions for summary judgment, which asks whether the evidence shows that no material factual dispute requires a trial.

As-Applied Preemption and Revenue Allocation

The court agreed with MetroPCS that double assessment was not the only possible way to prove as-applied preemption. MetroPCS could also show preemption by demonstrating that the CPUC’s resolutions subjected it to the same surcharge rate as a comparable postpaid provider but applied that rate to a higher share of surchargeable revenue, or by showing that the resolutions assessed broadband-data revenue.

The court nevertheless found factual disputes that prevented summary judgment. MetroPCS relied on its own method for allocating bundled-plan revenue among voice, data, and text services. Although MetroPCS argued that its method was reasonable and supported by objective data and generally accepted accounting practices, the CPUC disputed that method and argued that it overstated broadband-data revenue while understating surchargeable voice revenue. The court concluded that it could not decide as a matter of law whether MetroPCS’s allocation method was reasonable.

The court denied the parties’ motions on MetroPCS’s as-applied challenge. It also denied the parties’ motions on MetroPCS’s standalone challenge to the CPUC’s methodology for calculating the 2017 and 2018 intrastate allocation factors, holding that the methodology could be evaluated only in connection with whether it imposed an impermissible surcharge on MetroPCS’s revenue.

MTS Increment

MetroPCS challenged the “MTS Increment,” an administrative fee imposed on prepaid carriers, arguing that it caused a double assessment and disadvantaged prepaid carriers. The court held that MetroPCS had raised this challenge for the first time in its second summary-judgment motion. Because the complaints and earlier motion had not given the CPUC notice of the specific challenge, the court declined to consider it and granted summary judgment in favor of the CPUC on this issue.

Mobile Telephony Sourcing Act

MetroPCS also argued that the CPUC’s resolutions were preempted by the Mobile Telephony Sourcing Act. The court held that the Act’s exception for fees related to obligations under Section 254 of the Communications Act applied to the state universal-service surcharges at issue. The court therefore granted summary judgment in favor of the CPUC on this issue.

Disposition and Further Proceedings

The court granted in part and denied in part the cross-motions for summary judgment. It set a further case-management conference for October 21, 2021, to discuss possible appointment of a special master, scheduling a bench trial, and other proceedings. The order provided notice of an intent to appoint a special master; it did not state that one had already been appointed.