Teltech Systems, Incorporated v. Phil Bryan ( 2012 )

Case: 12-60027 Document: 00512078588 Page: 1 Date Filed: 12/10/2012
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
December 10, 2012
No. 12-60027 Lyle W. Cayce
Clerk
TELTECH SYSTEMS, INCORPORATED; WONDERLAND RENTALS,
INCORPORATED; MEIR COHEN,
Plaintiffs - Appellees
v.
PHIL BRYANT, in His Official Capacity as Governor of the State of
Mississippi; JIM HOOD, in His Official Capacity as Attorney General of the
State of Mississippi,
Defendants - Appellants
Appeal from the United States District Court
for the Southern District of Mississippi
Before KING, SMITH, and BARKSDALE, Circuit Judges.
RHESA HAWKINS BARKSDALE, Circuit Judge:
Defendants-Appellants Phil Bryant, Governor of Mississippi, and Jim
Hood, its Attorney General (Defendants), contest a summary judgment’s holding
the Mississippi Caller ID Anti-Spoofing Act, MISS. CODE ANN. § 77-3-805,
violates the Commerce Clause, U.S. CONST. art. I § 8, cl. 3. Also at issue is
whether the Act: (1) is conflict-preempted by the Truth in Caller ID Act of 2009,
47 U.S.C. § 227(e); and (2) comports with the First Amendment. The judgment
is upheld on a preemption basis. AFFIRMED.
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No. 12-60027
I.
“Spoofing” is misrepresenting the originating telephone caller’s
identification (caller ID) to the call recipient. The practice has both improper
and legitimate applications.
In early 2010, Mississippi enacted the Caller ID Anti-Spoofing Act (ASA).
Consistent with ASA violations’ being subject to penalties and remedies under
Title 75, Chapter 24 (Regulation of Business for Consumer Protection), MISS.
CODE ANN. § 77-3-809(2), Defendants contend the Act is to prevent fraudulent
and criminal activity and to protect consumers. Under it,
[a] person may not enter or cause to be entered false
information into a telephone caller identification
system with the intent to deceive, defraud or mislead
the recipient of a call [and a] person may not place a
call knowing that false information was entered into
the telephone caller identification system with the
intent to deceive, defraud or mislead the recipient of the
call.
MISS. CODE ANN. § 77-3-805 (emphasis added). ASA violators commit a
misdemeanor, and are subject to a fine and imprisonment. MISS. CODE ANN. § 77-
3-809(1).
Later that year, the Telephone Consumer Protection Act of 1991 (TCPA)
(codified at 47 U.S.C. § 227) was amended by the Truth in Caller ID Act of 2009
(TCIA) (codified entirely within 47 U.S.C. § 227(e)). TCIA provides:
It shall be unlawful for any person within the United
States, in connection with any telecommunications
service or [Internet protocol]-enabled voice service, to
cause any caller identification service to knowingly
transmit misleading or inaccurate caller identification
information with the intent to defraud, cause harm, or
wrongfully obtain anything of value . . . .
47 U.S.C. § 227(e)(1) (emphasis added). TCIA violators are subject to civil and
criminal liability. 47 U.S.C. § 227(e)(5). Jointly, TCIA and TCPA provide a
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private right of action, grant enforcement powers in both federal and state
governments, grant intervenor rights to the Federal Communications
Commission (FCC), and vest district courts with exclusive jurisdiction over
claims under 47 U.S.C. § 227(e)(1). 47 U.S.C. § 227(e)(6), (g)(1)-(3).
ASA is more restrictive than TCIA. On the one hand, spoofing done with
“intent to defraud, cause harm, or wrongfully obtain anything of value” (harmful
spoofing), in violation of TCIA, is also violative of ASA. On the other hand,
spoofing done without such intent, but “with the intent to deceive . . . or mislead
the recipient of the call” (non-harmful spoofing), violates only ASA.
Plaintiffs-Appellees New Jersey-based Teltech Systems, Inc. (of which
plaintiff Meir Cohen is president), and Michigan-based Wonderland Rentals, Inc.
(Plaintiffs), provide nationwide third-party spoofing services to individuals and
entities. Teltech offers its customers the SpoofCard, which operates like a long-
distance calling card and gives its holder the ability to manipulate the caller ID
displayed to the called party. Wonderland uses spoofing to conduct “mystery
shopping”, by which Wonderland representatives, posing as customers, interact
with its clients’ customer-service departments to conduct quality control and
gauge performance.
In district court, Plaintiffs challenged ASA on three bases: (1) conflict
preemption; (2) the dormant Commerce Clause; and (3) the First Amendment.
Teltech Sys., Inc. v. Barbour, 866 F. Supp. 2d 571 (S.D. Miss. 2011). Following
cross-motions for summary judgment, the district court, applying Healy v. Beer
Institute, Inc., 491 U.S. 324 (1989), held ASA violated the dormant Commerce
Clause because it had the “practical effect of regulating commerce occurring
wholly outside [Mississippi]”. Teltech Sys., 866 F. Supp. 2d at 577 (internal
citation and quotation marks omitted). On the other hand, the court held no
conflict preemption because: compliance with both statutes was not physically
impossible; and Plaintiffs failed to show ASA constituted an obstacle to the
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accomplishment of a federal objective. Id. at 574-75. The First Amendment
claim was not reached. Id. at 577 n.5.
II.
A summary judgment is reviewed de novo. E.g., In re Tex. Wyo. Drilling,
Inc., 647 F.3d 547, 550 (5th Cir. 2011). Summary judgment is proper when
“there is no genuine dispute as to any material fact and the movant is entitled
to judgment as a matter of law”. FED. R. CIV. P. 56(a). Pursuant to the cross-
motions for summary judgment, there is no genuine dispute of material fact; at
hand are only questions of law, which include statutory construction.
At issue are whether: TCIA preempts ASA; and ASA violates the dormant
Commerce Clause and the First Amendment. In that regard, Plaintiffs press the
challenges to ASA they raised in district court. Having received a favorable
judgment, and not seeking to alter or modify it, Plaintiffs were not required to
cross-appeal, even though they contest the district court’s no-preemption ruling.
Cf. Kelly v. Foti, 77 F.3d 819, 822 (5th Cir. 1996) (reversal of plaintiff-appellee’s
summary-judgment denial an impermissible alteration or modification of
judgment when plaintiff-appellee did not cross-appeal). In other words, having
prevailed in district court on their dormant Commerce Clause challenge,
Plaintiffs were not required to cross-appeal to urge here the preemption and
First Amendment claims they raised there, because ASA’s invalidation on an
alternative theory would not “enlarge the rights of the appellee or diminish the
rights of the appellant”. Borrego Springs Bank, N.A. v. Skuna River Lumber,
LLC, 564 F.3d 353, 356 (5th Cir. 2009). No authority need be cited for our being
able to review the issues raised here by Plaintiffs in the light of their having
raised them in district court.
It goes without saying that constitutional questions should be avoided if
there are independent “ground[s] upon which the case may be disposed of”.
Ashwander v. TVA, 297 U.S. 288, 347 (1936). Because we hold ASA is conflict-
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preempted by TCIA, we need not consider its validity under the dormant
Commerce Clause or First Amendment. Along that line, the district court’s
Commerce Clause holding is, of course, vacated by this opinion.
“The preemptive effect of a federal statute is a question of law” and is
reviewed de novo. Franks Inv. Co. v. Union Pac. R.R., 593 F.3d 404, 407 (5th Cir.
2010) (en banc). The burden of persuasion rests on the party asserting
preemption. AT&T Corp. v. Pub. Util. Comm’n of Tex., 373 F.3d 641, 645 (5th
Cir. 2004).
The Supremacy Clause provides that the laws of the United States “shall
be the supreme Law of the Land; . . . any Thing in the Constitution or Laws of
any State to the Contrary notwithstanding”. U.S. CONST. art. VI, cl. 2. The
Supremacy Clause mandates displacement of state law when (1) Congress
intends expressly to do so; or (2) Congress intends implicitly to do so through a
pervasive federal regulatory scheme, or the state law conflicts with the federal
law or its purposes. English v. Gen. Elec. Co., 496 U.S. 72, 78-79 (1990). Under
any preemption theory, “Congress’ intent is the ultimate touchstone”. Elam v.
Kan. City S. Ry., 635 F.3d 796, 803 (5th Cir. 2011) (internal citations and
quotations omitted).
Our inquiry begins with the presumption that federal statutes do not
supersede States’ historic police powers, unless Congress clearly and manifestly
intended to do so. Id. at 803-04. “This [pre]sumption applies with particular
force when Congress legislates in a field traditionally occupied by state law”, but
with “less force when [legislating] in a field with a history of significant federal
presence”. Id. at 804 (internal citations and quotations omitted).
Although interstate telecommunications has been an area of “significant
federal presence”, ASA is grounded instead in consumer protection, an area
traditionally reserved to the States. E.g., Castro v. Collecto, Inc., 634 F.3d 779,
784-85 (5th Cir. 2011) (Federal Communications Act permits States to regulate
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aspects of commercial mobile services, including consumer protection); Gen.
Motors Corp. v. Abrams, 897 F.2d 34, 41-42 (2d Cir. 1990) (compelling evidence
required to show Congressional intent to preempt state consumer protection
laws). Therefore, here the presumption remains in favor of no preemption.
Castro, 634 F.3d at 784.
A.
At oral argument, both sides were directed to submit supplemental
briefing for an issue raised by neither: the effect of 47 U.S.C. § 227(e)(9), which
exempts TCIA from TCPA’s savings clause. Although Plaintiffs do not explicitly
contend express preemption, we construe their response and supplemental briefs
as challenging ASA under both express and implied preemption.
“Congress may indicate pre-emptive intent through a statute’s express
language or through its structure and purpose.” Altria Grp., Inc. v. Good, 555
U.S. 70, 76 (2008) (citation omitted). Congress did not state expressly its intent
for TCIA to preempt state law. It did, however, exempt TCIA from TCPA’s
savings clause. TCIA’s concluding subsection states:
Notwithstanding any other provision of [§ 227],
subsection (f) shall not apply to [§ 227(e)] or to the
regulations under [§ 227(e)].
47 U.S.C. § 227(e)(9). Section 227(f), titled “Effect on State Law”, contains
TCPA’s savings clause and states in relevant part:
[N]othing in [§ 227] or in the regulations prescribed
under [§ 227] shall preempt any State law that imposes
more restrictive intrastate requirements or regulations
on, or which prohibits –
(A) the use of telephone facsimile machines
or other electronic devices to send
unsolicited advertisements;
(B) the use of automatic telephone dialing
systems;
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(C) the use of artificial or prerecorded voice
messages; or
(D) the making of telephone solicitations.
47 U.S.C. § 227(f)(1). As part of the originally-enacted TCPA, this subsection
largely pertains to telemarketing practices.
Our court has never interpreted TCPA’s savings clause, but other courts
have disagreed over its preemptive effect. Compare Van Bergen v. Minnesota, 59
F.3d 1541, 1547-48 (8th Cir. 1995) (no express preemption, but only an
expression of non-preemptive effect); United States v. Dish Network, LLC, 667
F. Supp. 2d 952, 963-64 (C.D. Ill. 2009) (“the [savings clause] does not preempt
state laws that . . . impose more restrictive intrastate requirements . . . or [ ]
prohibit any . . . [interstate] conduct set forth in subclauses (A) through (D)”);
with Patriotic Veterans, Inc. v. Ind., ex rel. Zoeller, 821 F. Supp. 2d 1074, 1077
(S.D. Ind. 2011) (in providing “a universe of state laws that are not preempted,
this provision, by implication, suggests that Congress intended for state laws
outside of that defined universe to be preempted” (emphasis in original));
Chamber of Commerce of the United States v. Lockyer, No. 2:05-CV-
2257MCEKJM, 2006 WL 462482, at *8 (E.D. Cal. Feb. 27, 2006) (the savings
clause preempts state laws restricting or prohibiting certain interstate
telecommunications).
The FCC has also weighed in. Mindful of States’ historic power to regulate
intrastate calls, the FCC postulated Congress intended to provide a “uniform
regulatory scheme” under which telemarketers would not be subject to
inconsistent regulations. 18 F.C.C.R. 14014, 14064 (2003). The FCC conceded
the extent of States’ authority under TCPA’s savings clause was ambiguous, but
concluded “more restrictive state efforts to regulate interstate calling would
almost certainly conflict with [its] rules” by disrupting that uniform scheme, and
by imposing significant compliance costs on those subject to TCPA. Id. at 14063-
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64. The deference owed to this interpretation, however, remains an “academic
question”. E.g., Watters v. Wachovia Bank, N.A., 550 U.S. 1, 20 (2007) (not
deciding whether agency entitled to Chevron-deference when stating its
regulations preempt state law).
At bottom, 47 U.S.C. § 227(e)(9)’s exempting TCIA from the savings clause
in § 227(f) is arguably unclear, both in purpose and in effect, concerning
spoofing. Because, as discussed infra, TCIA impliedly preempts ASA, express
preemption vel non need not be resolved.
B.
Preemption may be inferred, inter alia, “if there is an actual conflict
between state and federal law”. Altria Grp., 555 U.S. at 76-77 (internal citations
omitted). A state law is conflict-preempted when it operates as an obstacle to
the accomplishment of a federal objective, Pac. Gas & Elec. Co. v. State Energy
Res. Conservation & Dev. Comm’n, 461 U.S. 190, 204 (1983), or when federal law
authorizes expressly an activity prohibited by state law, Wells Fargo Bank of
Tex. NA v. James, 321 F.3d 488, 491 n.3 (5th Cir. 2003).
Defendants contend ASA operates harmoniously with TCIA, imposing no
obstacle to the latter’s inherent federal objectives. Citing legislative history,
they identify Congress’ intent to render harmful spoofing unlawful, while
exempting law enforcement, intelligence agencies, and court orders from TCIA’s
prohibitions. 47 U.S.C. § 227(e)(7) (“This subsection does not prohibit any
lawfully authorized investigative, protective, or intelligence activity of a law
enforcement agency of the United States, a State, or a political subdivision of a
State, or of an intelligence agency of the United States.”). This contention fails,
however, to explain how these exemptions confer authority upon States to
restrict non-harmful spoofing. Moreover, it does not respond to the crux of
Plaintiffs’ claim: the protection of non-harmful spoofing is a Congressionally-
mandated federal objective.
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Noting TCIA plainly prohibits harmful spoofing, Plaintiffs maintain
Congress authorized – indeed, intended to protect – non-harmful spoofing.
Fortifying this contention, they rely on legislative history to demonstrate
Congress differentiated between harmful and non-harmful spoofing: by limiting
47 U.S.C. § 227(e)(1)’s language to prohibit only the former, Congress bestowed
federal-objective status upon the latter. They urge, therefore, that ASA’s
prohibition on non-harmful spoofing frustrates the accomplishment of this
federal objective.
To be sure, ASA’s proscription of non-harmful spoofing at least conflicts
obliquely with TCIA’s proscription of only harmful spoofing. Therefore, the
dispositive inquiry is whether TCIA serves a minimum regulatory function, upon
which Defendants may enact stricter anti-spoofing laws; or, whether TCIA
serves a maximum regulatory function, by sheltering non-harmful spoofing from
additional state regulation. Of course, we look first to the text of the statute.
Given the earlier-discussed, arguably unclear purpose and effect of TCIA’s
exemption from TCPA’s savings clause, the legislative history informs this
inquiry. E.g., Barnes ex rel. Estate of Barnes v. Koppers, Inc., 534 F.3d 357 (5th
Cir. 2008) (resorting to legislative history to clarify congressional intent where
statute’s preemptive scope unclear).
In a Senate report, Senator Rockefeller noted spoofing’s legitimate
importance for domestic-violence victims, or for consumers who wish to provide
a temporary call-back number that differs from their actual telephone number.
S. Rep. 111-96 (2009). Accordingly, the federal effort to curtail spoofing focused
on persons intending to cause harm through fraud or criminal mischief. Id.
Both chambers of Congress drafted bills addressing spoofing: containing
language similar to the ASA, H.R. 1258 would have rendered unlawful spoofing
done with “intent to defraud or deceive” (emphasis added); S. 30 contained the
more narrow, as-enacted language, proscribing “the intent to defraud, cause
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harm, or wrongfully obtain anything of value”. Although both bills passed their
respective chambers, the Senate did not pass H.R. 1258, while the House passed
S. 30 without amendment.
In passing S. 30, House members stated expressly their intent to protect
non-harmful spoofing. 156 Cong. Rec. H8378-01 (2010). Congressman Stearns
stated: “We drafted . . . carefully to ensure that we only prohibit [spoofing]
intending to do harm . . . . [T]his bill protects those legitimate [spoofing]
practices”. Id. Congressman Engel echoed this intent: “[W]e don’t want some
legitimate reasons to use this technology to be outlawed. So it is only outlawed
when the intent is to defraud, cause harm, or wrongfully obtain anything of
value”. Id. Moreover, the FCC incorporated this intent by reference in its
implementing order. 26 F.C.C.R. 9114, 9117, 9130 (2011) (“As Congress
recognized . . . not all instances of [caller ID] manipulation are harmful, and
some may be beneficial . . . . Congress intended to balance carefully the
drawbacks of malicious caller ID spoofing against the benefits provided by
legitimate caller ID spoofing”.).
The measured language of 47 U.S.C. § 227(e)(1) reflects this calibration.
Congress could have broadened TCIA’s proscriptive reach by inserting the term
“misleading”, or words to that effect. But it did not, and because the expression
of some connotes the exclusion of others (“expressio unius est exclusio alterius”),
Congress apparently regarded some forms of spoofing worthy of protection from
more restrictive state regulation. E.g., Saxon v. Ga. Ass’n of Indep. Ins. Agents,
Inc., 399 F.2d 1010, 1013 (5th Cir. 1968) (incidental powers expressly granted
under certain conditions implicitly divested absent those conditions).
Arizona v. United States, 132 S. Ct. 2492 (2012), is illustrative. The
Immigration Reform and Control Act of 1986, 8 U.S.C. §§ 1101, et seq. (IRCA),
subjects employers who hire unauthorized aliens to criminal and civil sanctions,
but imposes no such penalties on the hired unauthorized aliens. 8 U.S.C. § 1324a;
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Arizona, 132 S. Ct. at 2504. An Arizona statute, the Support Our Law
Enforcement and Safe Neighborhoods Act, ARIZ. REV. STAT. ANN. §§ 11-1051, et
seq., went further, making it a misdemeanor for unauthorized aliens to apply for,
or solicit, work. ARIZ. REV. STAT. ANN . § 13-2928(C). Although the Arizona
statute advanced the same goal as IRCA – preventing hiring unauthorized aliens
– the Court held the Arizona statute’s enforcement scheme conflicted with the
federal regulatory system. Arizona, 132 S. Ct. at 2505. Examining the “text,
structure, and [legislative] history of IRCA”, the Court held the Arizona statute
posed an obstacle to “the careful balance struck by Congress with respect to
unauthorized employment of aliens”. Id.
TCIA’s “text, structure, and [legislative] history”, as discussed supra,
persuades us that ASA similarly upsets Congress’ considered regulatory choices.
Id. The constrained language of 47 U.S.C. § 227(e)(1) is compelling evidence of
Congress’ intent to protect non-harmful spoofing. E.g., P.R. Dep’t of Consumer
Affairs v. Isla Petroleum Corp., 485 U.S. 495, 503 (1988) (“Where . . . federal
scheme intentionally leaves a portion of the regulated field without controls,
then the pre-emptive inference can be drawn – not from federal inaction alone,
but from inaction joined with action”. (emphasis in original)). TCIA’s legislative
history removes any lingering doubt.
In the light of 47 U.S.C. § 227(e)(1)’s carefully-drafted language and
legislative history, and in spite of the presumption against preemption that
attaches to a State’s exercise of its police power, there is an inherent federal
objective in TCIA to protect non-harmful spoofing. ASA’s proscription of non-
harmful spoofing – spoofing done without “intent to defraud, cause harm, or
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wrongfully obtain anything of value” – frustrates this federal objective and is,
therefore, conflict-preempted.
III.
For the foregoing reasons, and although on a basis different from that
employed by the district court, the judgment is AFFIRMED.
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