Metrophones Telecommunications, Inc. v. Global Crossing Telecommunications, Inc. ( 2005 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
METROPHONES 
TELECOMMUNICATIONS, INC., a
Washington corporation,
Plaintiff-counter-
defendant-Appellee,
v.
No. 04-35287
GLOBAL CROSSING
TELECOMMUNICATIONS, INC., a  D.C. No.
CV-03-00694
Michigan corporation,
Defendant-counter- OPINION
claimant-Appellant,
and
UNIDENTIFIED COMPANIES I THROUGH
X,
Defendants.

Appeal from the United States District Court
for the Western District of Washington
Marsha J. Pechman, District Judge, Presiding
Argued January 12, 2005, and
Resubmitted August 31, 2005
Seattle, Washington
Filed September 8, 2005
Before: Mary M. Schroeder, Chief Judge, and
Alfred T. Goodwin and Susan P. Graber, Circuit Judges.
Opinion by Judge Graber
12743
METROPHONES TELECOMM. v. GLOBAL CROSSING 12747
COUNSEL
Michael J. Shortley, III, Global Crossing North America, Inc.,
Pittsford, New York, and Daniel M. Waggoner, Davis Wright
Tremaine LLP, Seattle, Washington, for the defendant-
counter-claimant-appellant.
David J. Russell, Keller Rohrback L.L.P., Seattle, Washing-
ton, for the plaintiff-counter-defendant- appellee.
Joel Marcus, Federal Communications Commission, Wash-
ington, D.C., for the amicus curiae.
12748 METROPHONES TELECOMM. v. GLOBAL CROSSING
OPINION
GRABER, Circuit Judge:
We again are asked to decide whether a provider of pay-
phone services may sue a long distance carrier to recover
compensation that federal regulations, 47 C.F.R. §§ 64.1300-
.1340, obligate the carrier to pay. We faced that question once
before, in Greene v. Sprint Communications Co., 340 F.3d
1047, 1050-51 (9th Cir. 2003), cert. denied, 541 U.S. 988(2004), and answered “no.” This time, the circumstances have
changed materially: since our decision in Greene, which was
made without the participation of the Federal Communica-
tions Commission (“Commission” or “FCC”), the Commis-
sion has interpreted a provision of the Communications Act
that we did not address explicitly in Greene, 47 U.S.C.
§ 201(b), to allow such actions. As we explain below, we
defer to the Commission’s reasonable, authoritative interpre-
tation of that statute. See, e.g., Nat’l Cable & Telecomms.
Ass’n v. Brand X Internet Servs., 125 S. Ct. 2688, 2702-12
(2005) (“Brand X”) (deferring to the FCC’s interpretation of
a statute).
Consequently, we affirm the district court’s decision to
allow Plaintiff Metrophones Telecommunications, Inc., a pay-
phone service provider, to go forward with its claim under
§ 201(b) against Defendant Global Crossing Telecommunica-
tions, Inc., a long distance carrier. We also hold that Plaintiff
may pursue two of its three state law claims, because they are
not preempted by 47 U.S.C. § 276(c). We reverse, however,
the district court’s decision to allow Plaintiff to pursue claims
under 47 U.S.C. § 416(c) and under a third state-law theory.
METROPHONES TELECOMM. v. GLOBAL CROSSING 12749
I. BACKGROUND
A. Statutory and Regulatory Background
Before 1996, payphone service providers (“PSPs”) were
largely uncompensated for “dial-around” coinless calls—calls
in which the caller uses an access code or a “1-800” number
to place calls through a long distance carrier other than the
carrier with which the PSP has a contract. Am. Pub.
Commc’ns Council v. FCC, 215 F.3d 51, 53 (D.C. Cir. 2000).
As of 1990, PSPs were prohibited by statute from blocking
such dial-around calls, Ill. Pub. Telecomms. Ass’n v. FCC,
117 F.3d 555, 559 (D.C. Cir. 1997) (per curiam), but were
unable to secure payment for them. Therefore, in the Tele-
communications Act of 1996, Pub. L. No. 104-104, 100 Stat.
5,1 Congress directed the Commission to enact regulations
establishing “a per call compensation plan to ensure that all
payphone service providers are fairly compensated for each
and every completed intrastate and interstate call using their
payphone.” 47 U.S.C. § 276(b)(1)(A).
The Commission then adopted rules making particular car-
riers responsible for compensating PSPs for dial-around calls.
47 C.F.R. §§ 64.1300-.1340; see also Sprint Corp. v. FCC,
315 F.3d 369, 371-73 (D.C. Cir. 2003) (describing the devel-
opment of the rules); Pay Tel. Reclassification & Comp. Pro-
visions of Telecommc’ns Act of 1996, 18 F.C.C.R. 19,975
(2003) (“2003 Payphone Order”) (adopting final rules for fair
compensation of PSPs). The rules require carriers to pay PSPs
on a per-call basis at a rate agreed upon by the parties, 47
C.F.R. § 64.1300(b), and set default per-call rates that are
1
Congress directed that the Telecommunications Act of 1996 be
inserted into the Communications Act of 1934. See AT&T Corp. v. Iowa
Utils. Bd., 525 U.S. 366, 377 (1999). In this opinion, we use “Communica-
tions Act” to refer to the entire statute—i.e., Title 47, Chapter 5—and
“Telecommunications Act” when referring specifically to the 1996 Act or
to portions of the statute added in 1996.
12750 METROPHONES TELECOMM. v. GLOBAL CROSSING
mandatory in the absence of such an agreement, id.§ 64.1300(c), (d). The rules also set forth detailed compensa-
tion procedures and reporting requirements, which the parties
may modify by agreement. Id. § 64.1310.
B. Procedural History
Plaintiff filed this action in district court alleging that
Defendant had failed to pay the full amount owed for calls
placed from Plaintiff’s payphones. Originally, Plaintiff
brought its action under 47 U.S.C. § 276—the statute by
which Congress had directed the Commission to enact regula-
tions to fairly compensate PSPs. However, soon after Plaintiff
filed its action, this court held that § 276 provides no private
right of action—express or implied—to recover compensation
for payphone calls. Greene, 340 F.3d at 1053.
In the wake of Greene, Defendant moved for judgment on
the pleadings as to Plaintiff’s federal claim. The district court
agreed that Greene foreclosed Plaintiff’s original claim under
§ 276, but permitted Plaintiff to amend its complaint to assert
federal claims under 47 U.S.C. §§ 201(b) and 416(c), provi-
sions dealing with “unjust and unreasonable” practices of car-
riers and the duty to comply with FCC orders, respectively.
The court rejected Defendant’s argument that those amend-
ments would be futile because they would not survive a
motion to dismiss.
Defendant also moved for judgment on the pleadings on
Plaintiff’s state law claim for “quantum meruit,” arguing that
the claim was preempted by 47 U.S.C. § 276(c), which
expressly preempts state laws that are inconsistent with the
federal regulations. The district court denied Defendant’s
motion, concluding that the quantum meruit claim was consis-
tent with the federal regulations. For the same reason, the
court allowed Plaintiff to add two additional state law claims
for breach of implied contract and negligence.
METROPHONES TELECOMM. v. GLOBAL CROSSING 12751
The district court granted Defendant’s motion requesting an
interlocutory appeal, 28 U.S.C. § 1292(b), and we agreed to
allow the appeal.
II. STANDARDS OF REVIEW
In an interlocutory appeal, we review de novo the district
court’s denial of a motion for judgment on the pleadings. See
NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986)
(reviewing de novo the denial of a motion to dismiss for fail-
ure to state a claim); Turner v. Cook, 362 F.3d 1219, 1225
(9th Cir.) (reviewing de novo a dismissal on the pleadings),
cert. denied, 125 S. Ct. 498 (2004). The district court’s inter-
pretation of a statute is reviewed de novo, SEC v. McCarthy,
322 F.3d 650, 654 (9th Cir. 2003), as are its decisions regard-
ing preemption, Transmission Agency of N. Cal. v. Sierra
Pac. Power Co., 295 F.3d 918, 927 (9th Cir. 2002).
We review for abuse of discretion the district court’s deci-
sion to permit amendment of a complaint. Nat’l Audubon
Soc’y, Inc. v. Davis, 307 F.3d 835, 853 (9th Cir.), amended
by 312 F.3d 416 (9th Cir. 2002). An error of law is one form
of an abuse of discretion. Koon v. United States, 518 U.S. 81,
100 (1996).
III. DISCUSSION
A. Plaintiff may pursue compensation in a private action
under the FCC’s reasonable, authoritative interpretation
of 47 U.S.C. § 201(b).
1. Greene did not address 47 U.S.C. § 201(b).
We recognized in Greene that any person who suffers dam-
ages as a result of a common carrier’s violation of a “provi-
sion[ ] of this chapter”—that is, of the Communications Act,
47 United States Code, Chapter 5—may seek recovery of
12752 METROPHONES TELECOMM. v. GLOBAL CROSSING
those damages in federal court under 47 U.S.C. §§ 206 and 207.2
Greene, 340 F.3d at 1050 & n.2. Nonetheless, we held that a
common carrier’s failure to pay compensation for payphone
calls does not violate 47 U.S.C. § 276 and therefore does not
give rise to a claim under §§ 206 and 207. Id. at 1050-51. We
reasoned that, although the regulations enacted pursuant to
§ 276 require carriers to pay PSPs, the statute itself merely
requires the Commission to adopt regulations to ensure fair
compensation for PSPs. See id. Because a claim under §§ 206
and 207 requires violation of a statute, and because a carrier
does not violate § 276 directly when it fails to pay PSPs,
“there is no violation of the Act to be remedied through the
private right of action afforded by §§ 206 and 207.” Id. at 1052.3
The payphone regulations alone, we held, could not create an
enforceable obligation where none existed in the statute. Id.
at 1051 (citing Alexander v. Sandoval, 532 U.S. 275, 284-89
(2001)).
In Greene, we were not asked to decide whether a carrier’s
failure to compensate a PSP would violate provisions of the
Communications Act other than § 276, nor did we give
2
Title 47 U.S.C. § 206 provides, in relevant 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
declared to be unlawful, or shall omit to do any act, matter, or
thing in this chapter required to be done, such common carrier
shall be liable to the person or persons injured thereby for the full
amount of damages sustained in consequence of any such viola-
tion of the provisions of this chapter . . . .
Section 207, in turn, gives injured parties the right either to make com-
plaint before the Commission or to bring an action in district court. 47
U.S.C. § 207.
3
The plaintiffs in Greene sought, in the alternative, to enforce § 276
through an implied cause of action under Cort v. Ash, 422 U.S. 66 (1975).
The Greene panel’s decision not to imply a private right of action to
enforce the regulations, 340 F.3d at 1052-53, is not controlling here
because Plaintiff asserts only the statutory cause of action provided for in
§§ 206 and 207.
METROPHONES TELECOMM. v. GLOBAL CROSSING 12753
explicit consideration to any other provision of that Act.
Nonetheless, several of our statements suggest that our deci-
sion foreclosed any recovery of payphone compensation
under federal law. For example, we said:
There is no private right of action for the relief
that PSPs seek, to recover damages for [a carrier’s]
alleged failure to pay compensation for dial-around
calls as required by FCC regulations promulgated
pursuant to § 276 of the Telecommunications Act.
Id. at 1053; see also id. at 1052 (stating that failure to pay a
PSP causes “no violation of the Act”). Thus, the central ques-
tion briefed by the parties in the present appeal is whether the
broad statements in Greene preclude an action to enforce two
different sections of the Act—47 U.S.C. §§ 201(b) and 416(c)
—that we did not address in Greene. We turn first to § 201(b)
and conclude that, in view of the FCC’s reasonable, authorita-
tive interpretation of § 201(b), Greene does not prevent Plain-
tiff from bringing an action under that section.
2. The FCC’s interpretation of § 201(b) is entitled to
deference.
[1] Section 201 requires common carriers to furnish “com-
munication service upon reasonable request therefor,” 47
U.S.C. § 201(a), and further states:
All charges, practices, classifications, and regula-
tions for and in connection with such communication
service, shall be just and reasonable, and any such
charge, practice, classification, or regulation that is
unjust or unreasonable is declared to be unlawful
....
Id. § 201(b). Plaintiff asserts that Defendant’s failure to pay
it proper compensation for dial-around calls violates § 201(b)
because it is a “practice[ ] . . . in connection with . . . commu-
12754 METROPHONES TELECOMM. v. GLOBAL CROSSING
nication service” that is “unjust or unreasonable.” Signifi-
cantly, Plaintiff’s interpretation of the statute is shared by the
Commission, which stated in its 2003 Payphone Order that
[a] failure to pay in accordance with the Commis-
sion’s payphone rules . . . constitutes . . . an unjust
and unreasonable practice in violation of section
201(b) of the Act.
18 F.C.C.R. at 19,990, ¶ 32; see also APCC Servs., Inc., 20
F.C.C.R. 2073, 2085, ¶ 26 (2005) (“[A carrier’s] failure to
pay payphone compensation to [PSPs] violated section
64.1300(c) of the rules and thus section[ ] . . . 201(b) of the
Act.” (emphasis added)).4 The Commission also cited § 201,
in addition to § 276 and several other sections, as the author-
ity for its initial enactment of the payphone regulations in
1999. See Implementation of Pay Tel. Reclassification &
Comp. Provisions of Telecomms. Act of 1996, 14 F.C.C.R.
2545, 2648, ¶ 232 (1999). Under the FCC’s interpretation, the
failure to pay compensation to PSPs violates § 201(b)’s prohi-
bition of unjust or unreasonable practices and, therefore, is
actionable in federal district court pursuant to §§ 206 and 207.
a. Our implicit holding in Greene cannot trump the
FCC’s interpretation, if that interpretation is entitled
to Chevron deference.
[2] Under Chevron U.S.A., Inc. v. Natural Resources
Defense Council, Inc., 467 U.S. 837, 843-44 (1984), “am-
biguities in statutes within an agency’s jurisdiction to admin-
ister are delegations of authority to the agency to fill the
4
In both decisions, the Commission also stated that a failure to pay in
accordance with the regulations violates § 276. 2003 Payphone Order, 18
F.C.C.R. at 19,990, ¶ 32; APCC Servs., 20 F.C.C.R. at 2085, ¶ 26. We
need not address what effect, if any, this interpretation of § 276 has on our
decision in Greene, because Plaintiff has not appealed the dismissal of its
claim under § 276.
METROPHONES TELECOMM. v. GLOBAL CROSSING 12755
statutory gap in reasonable fashion.” Brand X, 125 S. Ct. at
2699. If we owe Chevron deference to the Commission’s
interpretation of § 201(b), then our own prior, contrary inter-
pretation of the statute can trump the agency’s construction
only if our decision held that its “construction follows from
the unambiguous terms of the statute and thus leaves no room
for agency discretion.” Id. at 2700.
After Brand X, there can be no doubt that Greene does not
prevent us from affording deference to the FCC’s interpreta-
tion of § 201(b), if deference is otherwise due. We did not
mention § 201(b) in Greene and thus could not have offered
an interpretation that “follows from the unambiguous terms”
of the relevant statute, Brand X, 125 S. Ct. at 2700. Thus,
even if Defendant is correct that Greene’s holding should be
interpreted to have covered § 201(b) implicitly, that implicit
holding would be insufficient to trump an agency construction
to which we owe deference. But the question remains: do we
owe deference to the FCC’s interpretation of § 201(b)?
b. The Chevron framework applies.
[3] An administrative interpretation “qualifies for Chevron
deference when it appears that Congress delegated authority
to the agency generally to make rules carrying the force of
law, and that the agency interpretation claiming deference
was promulgated in the exercise of that authority.” United
States v. Mead Corp., 533 U.S. 218, 226-27 (2001). In Brand
X, the Supreme Court afforded Chevron deference to an inter-
pretation contained in a declaratory ruling of the FCC. See
125 S. Ct. at 2699 (holding that, because the FCC is autho-
rized to promulgate binding legal rules and it “issued the
order under review in the exercise of that authority,” its inter-
pretation of the Communications Act was entitled to Chevron
deference).
We see no reason to treat the interpretation of § 201(b) in
the 2003 Payphone Order differently, despite Defendant’s
12756 METROPHONES TELECOMM. v. GLOBAL CROSSING
argument that the interpretation is entitled to no deference
because of its brevity. We rejected a similar argument in
Pacific Bell v. Cook Telecom, Inc., 197 F.3d 1236, 1242 (9th
Cir. 1999): “Although the FCC’s statements are brief and lack
elaborate analysis, those statements deliberately and unam-
biguously single out paging providers for special notice.” We
explained that the FCC order contained “a relatively detailed
and thorough attempt to explain the FCC’s decisions concern-
ing a very difficult statute” and that the statements did not
“appear to have been made in anticipation of any particular
litigation.” Id.Similarly, here, the statement in the 2003 Payphone Order
arose in the context of a complex decision about the operation
of the whole system of payphone regulation. In context, it is
apparent that the Commission considered the ability of PSPs
to recover compensation for dial-around calls in private
actions to be integral to the proper functioning of the pay-
phone compensation system.
Some background is necessary to understand why this is so.
The Commission has reversed positions several times on the
issue of which carrier should pay the PSP when more than one
carrier handles a single call. See generally 2003 Payphone
Order, 18 F.C.C.R. at 19,977-83, ¶¶ 5-17. For example, a call
may be carried from the payphone by an interexchange car-
rier, but completed to the recipient of the call by a switch-
based reseller. In one phase of the development of the rules,
interexchange carriers had to pay PSPs and then seek repay-
ment from the switch-based reseller that completed the call.
Id. at 19,981, ¶ 15; id. at 19,984, ¶ 20. However, in the final
rules adopted in the 2003 Payphone Order, the Commission
ordered switch-based resellers to pay PSPs directly. Id. at
19,986, ¶ 24.
PSPs opposed that final decision because it is easier for
them to collect payment from only one entity (i.e., the interex-
change carriers). The Commission rejected the PSPs’ position
METROPHONES TELECOMM. v. GLOBAL CROSSING 12757
in part because the PSPs could recover damages from delin-
quent carriers in private actions:
To the extent that [the PSPs’] argument is based
on ease in collecting owed debts, the D.C. Circuit
. . . found that the PSPs had remedies to recover this
debt from the delinquent carriers. A failure to pay in
accordance with the Commission’s payphone rules,
such as the rules expressly requiring such payment
that we adopt today, constitutes both a violation of
section 276 and an unjust and unreasonable practice
in violation of section 201(b) of the Act.
Id. at 19,990, ¶ 32 (footnote omitted).5 In short, in adopting
the final rules in the 2003 Payphone Order, the Commission
relied on the availability of actions for damages under §§ 206
and 207.
[4] Because it is apparent that the Commission’s interpreta-
tion of § 201(b) was connected with the broader reasoning
that led to its adoption of the final rules, we find no reason to
think that the interpretation of § 201(b) advanced in the 2003
5
The Commission was referring to a D.C. Circuit decision in which the
court upheld the Commission’s determination of the cost per payphone
call. See Am. Pub. Comm’cns Council v. FCC, 215 F.3d 51, 56 (D.C. Cir.
2000). The court there reasoned that it was reasonable to exclude uncol-
lected debt from the per-call cost because, “[a]s intervenor long distance
carriers remind us, the ‘[f]ailure to pay the required compensation is a vio-
lation of FCC rules for which the carrier is subject to damages as well as
fines and penalties.’ See 47 U.S.C. §§ 206-08, 501-03 (1994).” Id.The D.C. Circuit since has held that private actions, in fact, are not
available under the Act. APCC Servs., Inc. v. Sprint Commc’ns Co., No.
04-7034, 2005 WL 1512837, at *5-*10 (D.C. Cir. June 28, 2005) (per
curiam). For the reasons that we articulate, we disagree with the majority’s
opinion in that case and, instead, we adopt the position of the dissenting
judge: that “the Commission acted [ ]reasonably when it deemed a com-
mon carrier’s failure to pay just and reasonable compensation an unjust
and unreasonable practice.” Id. at *15 (Ginsburg, J., dissenting in part and
from the judgment).
12758 METROPHONES TELECOMM. v. GLOBAL CROSSING
Payphone Order, and supplemented by the Commission’s
amicus briefs in this case, is not the “fair and considered judg-
ment” of the agency. See Bank of Am. v. City & County of San
Francisco, 309 F.3d 551, 563 n.7 (9th Cir. 2002) (noting that
the fact that an agency’s interpretation of a statute that it
administers “comes to us in the form of an amicus brief does
not make it ‘unworthy of deference’ ” (quoting Auer v. Rob-
bins, 519 U.S. 452, 462 (1997))). Thus, we will apply the
Chevron framework to the FCC’s interpretation of § 201(b).
c. The FCC’s interpretation of § 201(b) is a reasonable
construction of an ambiguous statutory provision.
[5] Under Chevron’s two-step analysis, we first must deter-
mine whether the statute makes Congress’ intent clear; if so,
we must “give effect to the unambiguously expressed intent
of Congress.” Chevron, 467 U.S. at 842-43. If not, and the
statute is ambiguous as to the precise question at issue, “we
defer at step two to the agency’s interpretation so long as the
construction is ‘a reasonable policy choice for the agency to
make.’ ” Brand X, 125 S. Ct. at 2702 (quoting Chevron, 467
U.S. at 845).
[6] We conclude that the text of § 201(b) does not unam-
biguously answer the precise question at issue here: whether
the failure to pay a PSP is a “practice[ ] . . . in connection with
. . . communication service” that is “unjust or unreasonable.”
In determining whether Congress clearly expressed its intent
with regard to that question, we must consider § 201(b) in its
statutory context. Wilderness Soc’y v. U.S. Fish & Wildlife
Serv., 353 F.3d 1051, 1060-61 (9th Cir. 2003) (en banc).
[7] “Because ‘just,’ ‘unjust,’ ‘reasonable,’ and ‘unreason-
able’ are ambiguous statutory terms,” courts normally owe
“substantial deference to the interpretation the Commission
accords them.” See Capital Network Sys., Inc. v. FCC, 28
F.3d 201, 204 (D.C. Cir. 1994). The statutory context does not
convince us otherwise. The portion of § 201(b) at issue here
METROPHONES TELECOMM. v. GLOBAL CROSSING 12759
is among the core original provisions of the Communications
Act of 1934, which required telecommunications carriers to
file with the Commission “a list of tariffs, or ‘schedules,’
showing ‘all charges . . . and . . . the classifications, practices,
and regulations affecting such charges.’ ” Ting v. AT&T, 319
F.3d 1126, 1130 (9th Cir.) (quoting 47 U.S.C. § 203(a)), cert.
denied, 540 U.S. 811 (2003).6 The Commission may initiate
hearings at which carriers must defend their tariffs, 47 U.S.C.
§ 204; after such hearings, the Commission may “determine
and prescribe what will be the just and reasonable charge . . .
and what classification, regulation, or practice is or will be
just, fair, and reasonable,” id. § 205(a).
We first dispense with the idea that Congress clearly
intended to limit the practices that can be deemed “unjust or
unreasonable,” under § 201(b), to those that are contrary to
practices prescribed solely under the authority of § 205. To
the contrary, it appears to us that Congress has extended the
scope of § 201(b) far beyond those core original provisions.
Section 201(b) gives the Commission broad power to enact
such “rules and regulations as may be necessary in the public
interest to carry out the provisions of this Act,” including sec-
tions that were added later by the Telecommunications Act of
1996. See AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 377-
78 & n.5 (1999) (holding that the Commission’s rulemaking
authority under § 201(b) extends to the implementation of
provisions enacted in 1996). And, as we mentioned above, the
Commission cited both §§ 201 to 205 and § 276 as its author-
ity for enacting the payphone regulations. Given the reach of
6
Although the tariff-filing provisions of the Act have not changed, in
1996 Congress authorized the Commission to stop enforcing the rate-filing
requirements, which apparently it has done. See Ting, 319 F.3d at 1132(describing the Commission’s decision to “forbear from applying” the tar-
iff filing requirements of 47 U.S.C. § 203, as it was newly authorized to
do by 47 U.S.C. § 160(a)). The Commission decided that “market forces
[are] sufficient to protect consumers from unjust and unreasonable rates,
terms, and conditions” and now requires carriers to establish contracts
with consumers. Id.12760 METROPHONES TELECOMM. v. GLOBAL CROSSING
the Commission’s rulemaking authority under § 201(b), it
would be strange to hold that Congress narrowly limited the
Commission’s power to deem a practice “unjust or unreason-
able.” This is especially true now that Congress has given the
Commission the authority to waive the tariff-filing require-
ments, see supra note 6, presumably reducing the relevance
of the specific procedures provided for in §§ 203 to 205.
[8] Second, although we agree that there are statutory con-
straints on the Commission’s power to deem a practice “un-
just and unreasonable,” we do not think it clear from the
statutory context that Congress intended to limit “practices
. . . in connection with . . . communication service,” 47 U.S.C.
§ 201(b), to those that directly involve a carrier’s relationship
with its customers. Certainly, as the Supreme Court has held
in construing closely related statutes, the term “practice” must
be interpreted to be consistent with the words around it—that
is, it must be a practice connected “with the fixing of rates to
be charged and prescribing of service to be rendered.” Mo.
Pac. R. Co. v. Norwood, 283 U.S. 249, 257 (1931); see also
United States v. Pa. R.R. Co., 242 U.S. 208, 229 (1916)
(“[W]e must rather suppose its association was intended to
confine it to acts or conduct having the same purpose as its
associates.”).7 But unlike practices involving a carrier’s gen-
eral corporate governance, Cal. Indep. Sys. Operator Corp. v.
FERC, 372 F.3d 395, 400-02 (D.C. Cir. 2004), or its employ-
ment decisions, Mo. Pac., 283 U.S. at 257, the practice of pro-
viding compensation to PSPs for payphone service is not
clearly unrelated to a carrier’s telephone rates and services.
As Congress and the Commission have recognized, PSPs
must be compensated if customers are to be able to use the
7
The Supreme Court construed the term “practice” as used in the Inter-
state Commerce Act (“ICA”), from which the Communications Act was
derived. See S. Rep. No. 781, 73d Cong., 2d Sess. 4 (1934) (detailing the
provisions of the ICA from which Congress drew each section of the
Communications Act). “[D]ecisions construing the ICA are persuasive in
establishing the meaning of the Communications Act.” Conboy v. AT&T
Corp., 241 F.3d 242, 250 (2d Cir. 2001).
METROPHONES TELECOMM. v. GLOBAL CROSSING 12761
dial-around long distance service that the carrier provides.
See, e.g., 47 U.S.C. § 276(b)(1) (ordering the Commission to
prescribe regulations “[i]n order to promote competition
among [PSPs] and promote the widespread deployment of
payphone services to the benefit of the general public”). In
short, § 201(b) is ambiguous enough that unjust or unreason-
able practices can encompass a broad range of activities
related to the services provided and rates charged by a long
distance carrier. Cf. La. Pub. Serv. Comm’n v. FCC, 476 U.S.
355, 371-72 (1986) (holding that the terms “charges,” “classi-
fications,” and “practices,” as used in section 152(b) of the
Communications Act, encompass a company’s internal
accounting and depreciation practices), superseded by statute
on other grounds as stated in New York v. FCC, 267 F.3d 91,
101-02 (2d Cir. 2001). The activity deemed unjust and unrea-
sonable here does not cross the line.
Finally, we consider whether Congress, in § 276 itself,
expressed a clear intent to make private actions to recover
payphone compensation unavailable under any provision of
the Act. We conclude that it did not. It may be that § 276 does
not itself oblige carriers to pay PSPs, as we held in Greene,
340 F.3d at 1050-51, but nothing in the text of § 276 suggests
that Congress intended to prevent the obligations that other
statutes impose on carriers from being enforced as part of the
system of payphone regulation that it ordered the Commission
to design. This is not a situation in which a more general stat-
ute, § 201(b), has been interpreted to create a private right of
action where a more specific section, § 276, has been inter-
preted not to create one. Cf. Santiago Salgado v. Garcia, 384
F.3d 769, 774 (9th Cir. 2004) (noting the “elementary tenet of
statutory construction that where there is no clear indication
otherwise, a specific statute will not be controlled or nullified
by a general one” (internal quotation marks omitted)), cert.
denied, 125 S. Ct. 1670 (2005). That is, although § 276 more
specifically addresses the subject of payphone regulation, it
does not impose any obligations on carriers—and, perhaps
more importantly, does not relieve them of any obligations.
12762 METROPHONES TELECOMM. v. GLOBAL CROSSING
On the subject of a common carrier’s obligations, § 276 is
silent and cannot be considered more specific than § 201(b).
[9] In sum, we conclude that nothing in the statute clearly
precludes the construction offered by the Commission. Next,
we must determine whether that construction was a “reason-
able policy choice” or, instead, was “arbitrary, capricious, or
manifestly contrary to the statute.” Chevron, 467 U.S. at 845,
844.
Defendant argues that the Commission’s interpretation is
unreasonable because it would convert § 201(b) into a “catch-
all provision equating violations of Commission regulations
with statutory violations.” But, as the Supreme Court said in
Brand X, “[w]e need not decide whether a construction that
resulted in these consequences would be unreasonable
because we do not believe that these results follow from the
construction the Commission adopted.” 125 S. Ct. at 2708. In
other words, the Commission did not conclude that every vio-
lation of its regulations is an “unjust and unreasonable” prac-
tice, nor does its interpretation necessarily mean that a
violation of any other regulation is an “unjust and unreason-
able practice.” Instead, the Commission identified as “unjust
and unreasonable” a single practice, and we must determine
whether the agency acted reasonably with respect to that prac-
tice.
We think that it did. Without repeating our discussion
above, we reiterate that we have no reason to think that the
FCC acted unreasonably when it deemed the failure to pay
compensation to PSPs to be a “practice[ ]” in connection with
“communication service.” The Commission has “invoked
§ 201(b) in several contexts” to which the Commission’s
authority to prescribe just and reasonable charges and prac-
tices under § 205 “does not pertain” and which do not pertain
directly to a carrier-customer relationship. APCC Servs., Inc.
v. Sprint Commc’ns Co., No. 04-7034, 2005 WL 1512837, at
*15 (D.C. Cir. June 28, 2005) (per curiam) (Ginsburg, J., dis-
METROPHONES TELECOMM. v. GLOBAL CROSSING 12763
senting in part and from the judgment) (citing Ascom
Commc’ns, Inc. v. Sprint Commc’ns Co., 15 F.C.C.R. 3223,
3227 (2000) (addressing a carrier’s attempts to collect pay-
ments from a PSP for certain payphone calls); Tel. No. Porta-
bility, 18 F.C.C.R. 23697, 23709 n.76 (2003) (addressing the
FCC’s telephone number portability rules); and Core
Commc’ns, Inc. v. SBC Commc’ns Inc., 18 F.C.C.R. 7568,
7578, ¶ 25 (2003) (addressing a carrier’s failure to comply
with merger conditions)). We are “hard-pressed” to say that
the FCC acted unreasonably in determining what is “unjust
and unreasonable” under § 201(b). Id.
[10] Moreover, as we discussed above, the Commission did
not unreasonably interpret Congress’ intent in enacting § 276.
It is apparent from the 2003 Payphone Order that allowing for
private actions to recover payphone compensation is an inte-
gral part of the regulatory system that Congress ordered the
Commission to design. As the Commission further explains in
its amicus brief, foreclosing private actions under federal law
“would appear to deny payphone providers a damages remedy
anywhere,” including before the Commission. That is because
the statutory basis for relief is the same in either forum: Sec-
tion 206 makes common carriers liable in damages for viola-
tions of “this chapter” and § 207 gives injured persons a
choice of federal fora to recover those damages—the person
either may “make complaint to the Commission” or “may
bring suit for the recovery of the damages . . . in any district
court of the United States of competent jurisdiction.” As the
Commission explains:
In the absence of a damages remedy under §§ 206-
208, the Commission still might impose penalties for
violations of its rules under 47 U.S.C. § 502, but
such payments would go to the United States Trea-
sury, not to compensate payphone providers. Such
sanctions would fail to fulfill the mandate of
§ 276(b)(1)(A) that “all payphone service providers
12764 METROPHONES TELECOMM. v. GLOBAL CROSSING
are fairly compensated for each and every completed
intrastate and interstate call.”
It is, at the very least, reasonable for the FCC to conclude that
Congress would not have intended to grant PSPs an entitle-
ment to compensation and to give the Commission broad
authority to establish a mechanism to provide that compensa-
tion, but simultaneously to limit the enforcement of the statute
and implementing regulations to the imposition of civil penal-
ties. Thus, even if it is true, as we held in Greene, that Con-
gress did not create a cause of action in § 276, the
Commission reasonably interpreted § 201(b) to fill the gap.
Of course, our decision in Greene relied on policy consid-
erations that would favor the opposite conclusion. See, e.g.,
Greene, 340 F.3d at 1053 (“To imply a private right of action
runs counter to this centralization of function and to the devel-
opment of a coherent national communications policy.”). But,
as the Supreme Court recently reiterated, resolving statutory
ambiguities “involves difficult policy choices that agencies
are better equipped to make than courts.” Brand X, 125 S. Ct.
at 2699 (citing Chevron, 467 U.S. at 865-66). In that spirit, we
defer to the Commission’s reasonable, authoritative interpre-
tation of § 201(b) and hold that a private action is available
to remedy the unjust and unreasonable practice of failing to
pay PSPs according to the Commission’s regulations.8 There-
fore, we affirm the district court’s decision to grant Plaintiff
leave to amend its complaint to include a claim under that
section. However, as we explain below, we reverse the court’s
decision to allow Plaintiff to add a claim under § 416(c).
8
Our decision is consistent with Alexander v. Sandoval, 532 U.S. 275,
284 (2001), where the Court stated: “A Congress that intends the statute
to be enforced through a private cause of action intends the authoritative
interpretation of the statute to be so enforced as well.” (Emphasis added.)
METROPHONES TELECOMM. v. GLOBAL CROSSING 12765
3. The Commission’s interpretation of § 416(c) is not
entitled to deference.
The Commission joins Plaintiff in arguing that a carrier’s
obligation to compensate PSPs is enforceable as a violation of
47 U.S.C. § 416(c), a provision of the Communication Act’s
“Procedural and Administrative” subchapter, which states:
It shall be the duty of every person . . . to observe
and comply with . . . orders [of the Commission] so
long as the same shall remain in effect.
Plaintiff and the Commission assert that a failure to comply
with the payphone regulations is a violation of § 416(c) and
is therefore actionable under §§ 206 and 207.9
[11] We have interpreted the term “order,” in 47 U.S.C.
§ 401(b), to encompass rulemaking orders and regulations as
well as adjudicative orders. Hawaiian Tel. Co. v. Pub. Utils.
Comm’n, 827 F.2d 1264, 1270-72 (9th Cir. 1987). In view of
that controlling precedent, we find no fault with the Commis-
sion’s opinion that the payphone regulations are “orders”
within the meaning of § 416(c). Nonetheless, we conclude
that the Commission’s interpretation of § 416(c) is unreason-
able because it would make every pronouncement of the
Commission automatically enforceable in a private action,
contrary to the intent of Congress. It is technically true that
§ 416(c) makes a violation of any “order” of the Commission
9
Unlike the Commission’s interpretation of § 201(b), this interpretation
of § 416(c) is not found in any FCC order and comes only from the agen-
cy’s amicus briefs. We need not address whether or how the format of the
Commission’s interpretation affects the level of deference we afford it,
because we conclude that the Commission’s interpretation of § 416(c) is
contrary to the clear intent of Congress. See Wilderness Soc’y v. U.S. Fish
& Wildlife Serv., 353 F.3d 1051, 1060 (9th Cir. 2003) (en banc) (determin-
ing first whether an agency interpretation is contrary to the clear intent of
Congress and, only if it is not, reaching the question whether that interpre-
tation carries the “force of law”).
12766 METROPHONES TELECOMM. v. GLOBAL CROSSING
a violation of the statute itself and, thus, according to the
Commission, would give rise to an action under §§ 206 and
207. But to hold that §§ 206 and 207 encompass all violations
of § 416(c) would render superfluous the requirement that an
action under § 206 allege a violation of a statute. Cf. Bosley
Med. Inst., Inc. v. Kremer, 403 F.3d 672, 681 (9th Cir. 2005)
(“We try to avoid, where possible, an interpretation of a stat-
ute that renders any part of it superfluous and does not give
effect to all of the words used by Congress.” (internal quota-
tion marks omitted)). And, because nothing (or, perhaps,
everything) is prohibited by the text of § 416(c), adopting this
construction would create, automatically, a private action for
violation of any “order.” By contrast, under § 201(b), the
Commission must conclude that a practice is reasonably
related to rates and services and is substantively “unjust or
unreasonable” before a private action can exist.
In sum, we interpret the text of § 206 to mean that Con-
gress did not intend for every violation of a regulation to give
rise to a private action for damages. The Commission’s inter-
pretation of §§ 206, 207, and 416(c) is plainly contrary to that
intent. Therefore, that interpretation is due no deference, and
we reverse the district court’s decision to grant Plaintiff leave
to add a claim under § 416(c).
On the second question presented in this appeal, whether
Plaintiff’s state law claims are preempted, the Commission
takes no position. We now turn to that question.
B. Plaintiff’s state law claims for breach of implied contract
and “quantum meruit” are not preempted.
[12] “The purpose of Congress is the ultimate touchstone”
in any preemption analysis, Cipollone v. Liggett Group, Inc.,
505 U.S. 504, 516 (1992) (internal quotation marks omitted),
so we look first and foremost to Congress’ express statement
of its intent:
METROPHONES TELECOMM. v. GLOBAL CROSSING 12767
To the extent that any State requirements are
inconsistent with the Commission’s regulations, the
Commission’s regulations on such matters shall pre-
empt such State requirements.
47 U.S.C. § 276(c); see also CSX Transp., Inc. v. Easterwood,
507 U.S. 658, 664 (1993) (stating that the plain wording of an
“express pre-emption clause . . . necessarily contains the best
evidence of Congress’ pre-emptive intent”). The presence of
an express preemption provision supports an inference that
Congress did not intend to preempt matters beyond the reach
of that provision. Freightliner Corp. v. Myrick, 514 U.S. 280,
288 (1995) (citing Cipollone, 505 U.S. at 517). But an express
provision does not categorically preclude courts from apply-
ing principles of implied preemption. Id. at 288-89. Moreover,
“even when Congress declares its preemptive intent in express
language, deciding exactly what it meant to preempt often
resembles an exercise in implied preemption analysis.” 1 Lau-
rence H. Tribe, American Constitutional Law § 6-28, at 1177
(3d ed. 2000). Thus, despite our primary focus on the text of
§ 276(c), it bears mentioning that the Supreme Court has
recognized at least two types of implied pre-emption:
field pre-emption, where the scheme of federal regu-
lation is so pervasive as to make reasonable the
inference that Congress left no room for the States to
supplement it, and conflict pre-emption, where com-
pliance with both federal and state regulations is a
physical impossibility, or where state law stands as
an obstacle to the accomplishment and execution of
the full purposes and objectives of Congress.
Gade v. Nat’l Solid Wastes Mgmt. Ass’n, 505 U.S. 88, 98
(1992) (citations and internal quotation marks omitted)
(emphasis added).
Field preemption is absent here. It is true that § 276 sub-
stantially expands the Commission’s jurisdiction and gives it
12768 METROPHONES TELECOMM. v. GLOBAL CROSSING
broad authority to regulate both intrastate and interstate pay-
phone calls. See, e.g., Ill. Pub. Telecomms. Ass’n, 117 F.3d at
561-62 (holding that the Commission may regulate rates for
local coin calls). Yet, by expressly limiting federal preemp-
tion to state requirements that are inconsistent with the federal
regulations, Congress signaled its intent not to occupy the
entire field of payphone regulation. See Ishikawa v. Delta Air-
lines, Inc., 343 F.3d 1129, 1133 (9th Cir.), amended by 350
F.3d 915 (9th Cir. 2003) (“[T]he ‘express provisions for pre-
emption of some state laws,’ the inconsistent ones, ‘imply that
Congress intentionally did not preempt state law generally.’ ”
(quoting Keams v. Tempe Technical Inst., Inc., 39 F.3d 222,
225 (9th Cir. 1994))); Total TV v. Palmer Commc’ns, Inc., 69
F.3d 298, 303 (9th Cir. 1995) (holding that a provision pre-
empting inconsistent state laws was “simply a recognition that
Congress did not intend to fully occupy the field”). Our con-
clusion is reinforced by the Communication Act’s savings
clause: “Nothing in this chapter contained shall in any way
abridge or alter the remedies now existing at common law or
by statute . . . .” 47 U.S.C. § 414.10[13] Principles of implied conflict preemption, however,
are relevant to our analysis, at least insofar as they help us
interpret the scope of the express preemption provision. In
fact, our analysis of whether state requirements are “inconsis-
tent” with the federal regulations within the meaning of
§ 276(c) is substantially identical to the analysis of implied
conflict preemption: whether “state law stands as an obstacle
to the accomplishment and execution of the full purposes and
objectives of Congress,” Gade, 505 U.S. at 98 (internal quota-
tion marks omitted), or, as is more relevant in applying
§ 276(c), the purposes and objectives of the Commission.11
10
We also have held that federal regulation of telecommunications, in
general, does not completely preempt state law. Ting, 319 F.3d at 1136-
37; see id. at 1137 (“Detariffing has created a much larger role for state
law and this fact is sufficient to preclude a finding that Congress intended
completely to occupy the field, following the 1996 Act.”).
11
Only state requirements inconsistent with the Commission’s regula-
tions are preempted. 47 U.S.C. § 276(c). That fact does not absolutely pre-
METROPHONES TELECOMM. v. GLOBAL CROSSING 12769
Under both implied conflict preemption and our interpretation
of § 276(c), state law is preempted “to the extent it actually
interferes with the methods by which the federal [regulatory
scheme] was designed to reach its goal.” Ting, 319 F.3d at
1137 (internal quotation marks omitted).
Our task, then, is to discern the “full purposes and objec-
tives” of the Commission’s regulations and to determine
whether Plaintiff’s state law claims interfere, or are otherwise
inconsistent, with them.
1. The payphone regulations set defaults, but generally do
not mandate uniformity.
The Commission’s regulatory system addresses three prin-
cipal issues: (1) who must pay for which calls; (2) how much
must they pay; (3) and what procedures must be followed in
making payment. See generally 47 C.F.R. § 64.1300-.1340.
On the latter two issues, at least, the Commission’s rules are
not inflexible prescriptions. In keeping with the Commis-
sion’s trend toward market-based regulation, the rules allow
carriers and PSPs to set alternative compensation amounts and
payment methods by contract.
clude us from identifying a broader scope of implied preemption within
§ 276, but we see no cause for doing so here. Although we discern in
§ 276 a clear intent to create a comprehensive federal plan for payphone
regulation, Congress left it to the Commission to decide how to structure
the regulations and enforcement mechanisms. Congress did not express a
preference for absolute national uniformity or exclusive federal enforce-
ment, leaving those decisions to the Commission and expressly allowing
for the operation of state law if consistent with the Commission’s chosen
plan. Cf. CSX Transp., Inc. v. Easterwood, 507 U.S. 658, 664, 675 (1993)
(holding that an express provision preempting all state laws “relating to
railroad safety” was broad and would preempt state claims that cover the
same subject matter) (emphasis added). Thus, in keeping with Congress’
expressed intent, we will focus primarily on the purposes and objectives
of the Commission’s regulations.
12770 METROPHONES TELECOMM. v. GLOBAL CROSSING
On the first issue—who must pay—the Commission has
changed course several times but now has fixed a definite
rule, as we discussed above. The rules distinctly assign liabil-
ity for payment to particular classes of carriers, see 47 C.F.R.
§ 64.1300, and the Commission has sought to ensure that par-
ties are not permitted, in negotiations over payment arrange-
ments, to shift the effective liability for payment to other
carriers. See The Pay Telephone Reclassification and Com-
pensation Provisions of the Telecommunications Act of 1996,
70 Fed. Reg. 720, 721, ¶ 11 (Jan. 5, 2005) (“2005 Reconsider-
ation Order”) (“For instance, demands by PSPs that an [alter-
native compensation arrangement] contain a provision that
forces [interexchange carriers] to assume ultimate responsibil-
ity for the payphone compensation obligations of [switch-
based resellers] would undermine the Commission’s determi-
nation in the [2003 Payphone Order] that [interexchange car-
riers] are not liable for such payphone compensation.”).
By contrast, the rules expressly allow carriers and PSPs to
negotiate compensation amounts and payment methods that
differ from the defaults set by the Commission. In 47 C.F.R.
§ 64.1300(b), carriers are directed to compensate PSPs on a
per-call basis “at a rate agreed upon by the parties by con-
tract”; only in the next subsections does the rule establish
default per-call rates to be paid “[i]n the absence of an agree-
ment.” 47 C.F.R. § 64.1300(c), (d); see also id. § 64.1301(a)
(setting various default rates “[i]n the absence of a negotiated
agreement to pay a different amount”). Similarly, the rules lay
out detailed reporting and payment procedures—which are
intended to give PSPs the information they need to determine
which carrier completed, and therefore was responsible for
paying for, each call made from their payphones—but none-
theless allow parties to waive those procedures by agreeing to
“alternative compensation arrangement[s].” Id. § 64.1310(a).12
12
The Commission has asserted some control over this contracting rela-
tionship. In January 2005, the Commission amended its rule to provide
METROPHONES TELECOMM. v. GLOBAL CROSSING 12771
In short, the payphone regulations fix liability for payment
upon particular carriers, but allow the parties to negotiate
about the details of that payment. See Fair v. Sprint Payphone
Servs., Inc., 148 F. Supp. 2d 622, 626 (D.S.C. 2001) (“[T]he
FCC has left it to the parties to determine by contract the rates
at which payphone service providers are to be compensat-
ed.”). In the absence of an agreement, the regulations set a
defined price and payment procedure.
[14] The Commission’s reliance on market-based rate-
setting mechanisms is part of a broader trend in telecommuni-
cations regulation—a trend that has opened up more space for
the operation of state law. For example, in the 1996 Act, Con-
gress authorized the Commission to eliminate its longstanding
requirement that telecommunications carriers file their rates,
terms, and conditions with the FCC. Ting, 319 F.3d at 1130-
32. Now, carriers generally establish contracts with consum-
ers to govern rates, terms, and conditions, and the Commis-
sion relies principally on market competition to produce the
“just and reasonable” rates required by 47 U.S.C. § 201. Id.
at 1132. As we said in Ting:
Unlike rate filing, this market-based method depends
in part on state law for the protection of consumers
in the deregulated and competitive marketplace. This
dependence creates a compl[e]mentary role between
federal and state law under the 1996 Act.
Id. at 1141. In this environment, we cannot simply hold that
all state law claims, in general, are inconsistent with federal
regulation of telecommunications, especially where the pay-
that a PSP “may not unreasonably withhold its consent to an alternative
compensation arrangement.” 2005 Reconsideration Order, 70 Fed. Reg. at
723. Along with this amendment, the Commission published an order pro-
viding “guidance on the types of contracts that it would deem to be rea-
sonable methods of compensating PSPs.” Id. at 720.
12772 METROPHONES TELECOMM. v. GLOBAL CROSSING
phone regulations are silent as to the method of enforcement
and the role of state law. Therefore, we must look carefully
at Plaintiff’s state law claims to determine whether they com-
plement, or are inconsistent with, the federal payphone regu-
lations.
2. Plaintiff’s state law claims may go forward to the
extent that they are not inconsistent with federal
regulations.
As an initial matter, we note that a provision expressly pre-
empting certain state “requirements,” like § 276(c), can
“reach[ ] beyond positive enactments, such as statutes and
regulations, to embrace common-law duties.” Bates v. Dow
Agroscis. LLC, 125 S. Ct. 1788, 1798 (2005). To determine
whether Plaintiff’s state law claims are preempted, we must
consider the theory of each claim and determine “whether the
legal duty that is the predicate” of that claim is inconsistent
with the federal regulations. Cipollone, 505 U.S. at 523-24;
see also Ishikawa, 343 F.3d at 1132 (“[W]e cannot see how
the duty the state common law imposed . . . could be inconsis-
tent with the federal guidelines, which require the same thing
with more specificity.” (emphasis added)). Even when a state
law requirement must be equivalent to a federal regulation to
survive preemption, it is not necessary at the pleading stage
that the state requirement “be phrased in the identical lan-
guage as its corresponding [federal] requirement.” Bates, 125
S. Ct. at 1804; see also id. (noting that, at the trial stage, the
court’s jury instructions can ensure that the state claim does
not exceed its proper scope).
Plaintiff’s amended complaint asserts three claims for vio-
lation of state law: quantum meruit (or “unjust enrichment,”
as this claim was labeled in Plaintiff’s amended complaint),
breach of implied contract, and negligence. We look to Wash-
ington law and to the allegations in Plaintiff’s complaint to
flesh out the legal duty that Plaintiff seeks to enforce.13 So far
13
In so doing, we make no comment as to the merits of any of Plaintiff’s
claims. Defendant has not argued, thus far in the litigation, that any of
those claims fails to state a claim under Washington law.
METROPHONES TELECOMM. v. GLOBAL CROSSING 12773
as is apparent from the pleadings, Plaintiff’s “implied con-
tract” and “quantum meruit” or “unjust enrichment” claims
correspond to the two types of implied contracts recognized
under Washington law: contracts implied in fact and contracts
implied in law, respectively.
a. Contract Implied in Fact
A contract implied in fact is like an express contract except
that it arises not from the parties’ words, but instead from
actions or circumstances that demonstrate a mutual intention
to enter into a contract. See Heaton v. Imus, 608 P.2d 631,
632 (Wash. 1980) (“A contract implied in fact is an agree-
ment of the parties arrived at from their conduct rather than
their expressions of assent.”); Eaton v. Engelcke Mfg., Inc.,
681 P.2d 1312, 1314 (Wash. Ct. App. 1984) (“A true implied
contract, or contract implied in fact, does not describe a legal
relationship which differs from an express contract: only the
mode of proof is different.”). “[T]he legal relationship formed
does not differ whether the contract is expressed or implied in
fact.” 25 Wash. Prac., Contract Law and Practice § 1.16
(West 1998).
In its claim for breach of “implied contract,” Plaintiff char-
acterizes the interaction between itself and Defendant as con-
duct evidencing a mutual intention to enter into a contract.
Plaintiff’s theory is that, by making its payphones available to
the general public, Plaintiff impliedly offered them for the use
of Defendant’s customers at the rates established by the FCC.
Then, “[b]y accepting, transporting, and completing calls
made from Plaintiff’s payphones by Defendant[’s] customers,
Defendant[ ] impliedly accepted Plaintiff’s offer of service,”
forming a contract for payphone compensation in the exact
amount set by the FCC.
[15] This claim, insofar as it is premised on the existence
of a contract between the parties, cannot be preempted by
§ 276(c). The Commission’s regulations contemplate that
12774 METROPHONES TELECOMM. v. GLOBAL CROSSING
PSPs and carriers, in some circumstances, will agree to con-
tracts for payphone compensation with terms that differ from
those contained in the regulations. See discussion supra Part
III.B.1, pp. 12770-72. In those circumstances, state contract
law, not the federal regulations, would govern the resolution
of contract-related questions, such as whether a contract was
formed, what terms the parties agreed to, and whether the
contract was breached. See, e.g., Fair, 148 F. Supp. 2d at 626(“While federal regulations authorize the existence of pay-
phone compensation contracts, whether the specific agree-
ments at issue in the present case are illegal will be
determined by state law.”). As in the context of ratemaking,
where private contracts have replaced rigid rate prescriptions,
state contract laws provide a background that is not only con-
sistent with, but is integral to, the market-based mechanism of
the federal regulations. See Ting, 319 F.3d at 1146 (holding
that state consumer protection laws do not conflict with 47
U.S.C. §§ 201 and 202).
The state law claim is even stronger when the implied
agreement is to pay what the FCC requires. Seeking such pay-
ments cannot, by definition, be inconsistent with what the
FCC requires.
b. Contract Implied in Law
The preemption question becomes more complicated where
the premise of the claim is not an agreement between the par-
ties, but an equitable duty to pay. A contract implied in law
is not technically a contract at all, but is a “non-contractual
obligation that is treated procedurally as if it were a contract.”
25 Wash. Prac., Contract Law and Practice § 1.16. The obli-
gation to pay is imposed by law, not by the defendant’s agree-
ment to enter into a contract; it is imposed to prevent the
defendant from being unjustly enriched by services provided
in the absence of a contract for which the plaintiff deserves,
and expected, payment. Id. The plaintiff recovers in “quantum
meruit,” which is the court’s determination of the reasonable
METROPHONES TELECOMM. v. GLOBAL CROSSING 12775
value of the services provided. See Heaton, 608 P.2d at 632-
33 (describing the doctrine of “quasi contract”).
In fashioning quantum meruit relief, the court—like the
federal payphone regulations—would be setting a default
value for the services that Plaintiff provided. Plainly, an
award of quantum meruit that assigned a different default
value for payphone calls would be inconsistent with the fed-
eral regulations and therefore preempted. Recognizing this
potential problem, Defendant argues that Plaintiff’s quasi-
contract claim is preempted because a court could assign not
only a different rate of compensation, but also “payment for
calls that are not compensable and assignment of liability to
the wrong entity.”
But it is not clear that the mere possibility of an inconsis-
tent award should preempt Plaintiff’s claim as it was pleaded
in the original complaint. In its original complaint, Plaintiff
explicitly assigned a value of 24 cents per call to those
uncompensated services—the same value assigned by the fed-
eral regulation, 47 C.F.R. § 64.1300(d). In its amended com-
plaint, Plaintiff reworded the claim to seek “the reasonable
value of the economic benefits conferred on Defendant[ ],”
but Plaintiff represented in its brief and at argument before
this court that it would be seeking, under state law, exactly the
same rate of compensation for the same calls as it would be
entitled to receive under the federal regulations. Moreover, as
did the court in Precision Pay Phones v. Qwest Communica-
tions Corp., the district court here assumed that 47 C.F.R.
§ 64.1300 would control the valuation of the services in the
quantum meruit claim. See 210 F. Supp. 2d 1106, 1118 (N.D.
Cal. 2002) (stating that, “[h]ad the FCC regulation not set a
default rate, Plaintiff would be free to prove under state law
the value of the service” (emphasis added)), disapproved on
other grounds by Greene, 340 F.3d at 1051 n.4. In fact, in dis-
tinguishing its own quasi-contract counterclaim, even Defen-
dant has suggested that a claim is not preempted if it “relies
exclusively on the existence of the FCC’s regulations.” Insofar
12776 METROPHONES TELECOMM. v. GLOBAL CROSSING
as Plaintiff’s claim relies exclusively on the regulations, we
cannot say that it is “inconsistent” with the federal regula-
tions. See Bates, 125 S. Ct. at 1804 (noting that district can
instruct the jury on the relevant federal standards in order to
ensure that the state claim remains consistent with federal reg-
ulations).
A “hypothetical conflict is not a sufficient basis for pre-
emption.” Total TV, 69 F.3d at 304; see also Ishikawa, 343
F.3d at 1132 (“LabOne argues . . . that state tort law could be
inconsistent with federal regulations. LabOne, however,
makes no attempt to show that anything about the state law
applied in this case actually was inconsistent. . . . The district
court invited and the plaintiff urged that the jury use the fed-
eral requirements to evaluate whether LabOne performed its
duties with due care.”). As in those cases, the mere possibility
of inconsistent remedies is insufficient to require preemption
of all quasi-contract or “implied in law” claims.
Our answer would be different if § 276(c) gave the Com-
mission exclusive authority to regulate rates or other terms of
payphone compensation, making preemption complete.
Indeed, in situations of complete preemption it has been sug-
gested that claims for recovery in quantum meruit would be
preempted from the outset. For example, a statute providing
that “no State or local government shall have any authority to
regulate . . . the rates charged by” cellular telephone provid-
ers, 47 U.S.C. 332(c)(3)(A), has been held to preempt any
claim that would require a court to set a reasonable rate or to
assess the reasonableness of rates charged. Fedor v. Cingular
Wireless Corp., 355 F.3d 1069, 1073-74 (7th Cir. 2004) (cit-
ing In re Wireless Consumers Alliance, Inc., 15 F.C.C.R.
17,021, 17,035 (Aug. 14, 2000)); see also AT&T Corp. v.
FCC, 349 F.3d 692, 701 (D.C. Cir. 2003) (noting that the
FCC had “strongly suggest[ed] that a claim based on quantum
meruit would be preempted” by § 332(c)(3)(A) (citing Peti-
tions of Sprint PCS & AT&T Corp. for Declaratory Ruling
Regarding CMRS Access Charges, 17 F.C.C.R. 13,192,
METROPHONES TELECOMM. v. GLOBAL CROSSING 12777
13,198 n.40 (2002)). Similarly, we have held that, because the
Federal Energy Regulatory Commission has “exclusive
authority to determine the reasonableness of wholesale rates,”
a plaintiff’s claim was preempted insofar as it “require[d] the
district court, at some point, to determine the fair price of the
electricity that was delivered under the contract.” Pub. Util.
Dist. No. 1 v. IDACORP Inc., 379 F.3d 641, 647-48 (9th Cir.
2004).
[16] Those cases differed from the present case in that reg-
ulation of rates by state and local entities was absolutely
barred. Here, by contrast, only “inconsistent” state require-
ments are barred. As stated originally, Plaintiff’s quasi-
contract claim sought recovery for unjust enrichment in the
exact amount that it was entitled to be paid under the federal
regulations and, consequently, would not require the district
court to determine a reasonable price, let alone to set an “in-
consistent” price. Thus, we affirm the district court’s decision
to deny judgment on the pleadings on this claim.
c. Negligence
A negligence claim, in Washington, requires proof of a
duty, a breach of duty, a resulting injury, and proximate cause
between the breach and the injury. Hutchins v. 1001 Fourth
Ave. Assocs., 802 P.2d 1360, 1362 (Wash. 1991). Here, Plain-
tiff seeks to enforce Defendant’s duty, created by “applicable
orders and regulations” of the Commission, to track calls
placed from Plaintiff’s payphones and to provide the tracking
information to Plaintiff in order to help it pursue collection
from other responsible carriers. See, e.g., 47 C.F.R.
§ 64.1310(c)(1) (requiring each “Intermediate Carrier” to pro-
vide quarterly reports containing particular information about
“all the facilities-based long distance carriers to which the
Intermediate Carrier switched toll-free and access code calls
dialed from each of that payphone service provider’s pay-
phones”).
12778 METROPHONES TELECOMM. v. GLOBAL CROSSING
For breach of that duty, Plaintiff seeks to recover all dam-
ages caused by its inability, in the absence of the necessary
tracking information, to pursue collection from other carriers.
Granting Plaintiff’s requested relief would make Defendant
financially liable for calls other than those for which the regu-
lations make it responsible. In this circumstance, we agree
with Defendant that Plaintiff’s negligence claim is preempted.
[17] In enacting the payphone regulations, the Commis-
sion’s primary purpose was to create a system for compensa-
tion. See 47 U.S.C. § 276(b)(1)(A) (directing the Commission
to adopt a “compensation plan”). As we stated above, a pri-
mary objective—and a primary difficulty—for the Commis-
sion has been to settle confusion over which carrier is
responsible for payment when more than one carrier handles
a call. See 2003 Payphone Order, 18 F.C.C.R. at 19,976, ¶ 2
(“These rules satisfy section 276 by identifying the party lia-
ble for compensation and establishing a mechanism for PSPs
to be paid.”); APCC Servs., 20 F.C.C.R. 2084, ¶ 25 (refusing
to accept an argument that “conflicts with the Commission’s
reasoned decision to place responsibility on facilities-based
carriers only”). Here, imposing a duty that may make carriers
liable for calls for which other carriers are responsible would
be inconsistent with the Commission’s careful assignment of
liability.
[18] We do not hold that state law remedies—for example,
damages for breach of an express contract relating to pay-
phone services—would be preempted simply because they
provide recovery in amounts more than the contractual or
default per-call amount. See Bates, 125 S. Ct. at 1800-01(holding that an additional remedy does not constitute an
additional “requirement”). Here, however, where Plaintiff
seeks to impose liability under state law by shifting to Defen-
dant the payment obligations of a carrier other than Defen-
dant, we hold that its claim is inconsistent with the federal
system and therefore preempted by § 276(c). We accordingly
METROPHONES TELECOMM. v. GLOBAL CROSSING 12779
reverse the district court’s decision to grant Plaintiff leave to
amend its complaint to add a negligence claim.
3. Conclusion
The Commission’s regulations reveal an intent to create
predictability in payphone compensation, but they do not
require uniformity at the level that Defendant asserts, at least
with respect to rates and methods of payment. The regulations
contemplate that parties will enter into mutually acceptable
agreements that automatically override the Commission’s pre-
scriptions, and state contract law must have a role in regulat-
ing those agreements. Nothing in § 276 or the Commission’s
regulations precludes state common law actions to enforce
obligations identical to those set forth in the Commission’s
regulations. Because, as the Commission states in its amicus
brief, claims for compensation “involve largely factual ques-
tions” and any policy issues that do arise can be referred to
the Commission under the doctrine of primary jurisdiction,
we see little danger of inconsistent administration of federal
policy. See Precision Pay Phones, 210 F. Supp. 2d at 1119(“The federal ingredient involved here—the setting of the per
call dial-around rate in the absence of a contract—requires no
interpretation of federal law. Hence, there is no compelling
need for a federal forum to e.g. facilitate national uniformity
in the interpretation or application of federal law.” (footnote
omitted)).
Therefore, we affirm the district court’s decision to deny
judgment on the pleadings as to Plaintiff’s claim for quantum
meruit. We also affirm the court’s decision to allow Plaintiff
to add a claim for breach of contract implied in fact, but we
reverse the decision as to Plaintiff’s negligence claim, which
seeks to impose liability in a manner inconsistent with the
federal payphone regulations.
AFFIRMED in part, REVERSED in part, and
REMANDED for further proceedings consistent with this
opinion. Each party shall bear its own costs on appeal.