Telesaurus v. Power, Petition Rehearing, 9th Circuit - Void License Can't Cause FCC Preemption

Case: 09-15446 10/29/2010 Page: 1 of 53 ID: 7527972 DktEntry: 35
SkyTel Note:
Plantiff Telesaurus is one of the

IN THE supporters (by outright chari-
UNITED STATES COURT OF APPEALS table donations) to Skybridge
Spectrum Foundation.
FOR THE NINTH CIRCUIT
Case No. 09-15446 The court denied this petition
with no comment.
TELESAURUS VPC, LLC, a Delaware Limited Liability Company, Telesaurus will be submitting
this to the US Supreme Court in
Plaintiff-Appellant, a petitoin for writ of certiorari in
VS.
or about April 2011.
The Ninth Circuit essentially

RANDY POWER, anindividual; PATRICIA A. POWER, an individual; held that a FCC license that
RADIOLINK CORPORATION, was issued by mistate (and
Telesaurus asserts by by fraud)
Defendants-Appellees, can grant federal premption
vs. immunity to the party that held
the defective license from state
law claims of fraud, conversion,
INDUSTRIAL TELECOMMUNICATIONS ASSOCIATION, INC., a Virginia interference with prospective
Corporation; EWA, INC., a Virginia Corporation, DBA Enterprise Wireless economic advantage, etc.
Alliance,
Evetually, SkyTel and its
Third-party-defendants. supporting LLCs believes the
courts will get this and related
issues right.
On Appeal From The U.S. District Court
District of Arizona (Phoenix Division) If they do not, that will
CASE NO. O7-CV-01 3 1 I-NVW effectively gut the rights
Congress reserved in the
Communications Act to allow
court action to police serious
APPELLANT TELESAURUS VPC'S REQUEST FOR violations of state and federal
PANEL REHEARING, OR IN THE ALTERNATIVE law by FCC licenses: That is the
REHEARING EN BANC flip side of Congress's
substantial de-regulation in the
1996 Telecom Reform Act.
Federal de-reglation calls for
NOSSAMAN LLP access to courts for remedies to
unlawful actions beyond the
PATRTCK J. RICHARD (SBN 13t046)
scope of the regulation.
prichard @ nossaman. coln
TAMIR DAMARI Defendatns such as in this
tclamari @ nossaman. com case, and MCLM, PSI and
others in other cases brought by
50 Califomia Street, Thirty-Fourth Floor SkyTel entities, assert that their
S an Francisco, Californ ia 9 41 1 I -41 07 FCC licenses grant them FCC
Telephone: (415) 398-3600 preemption immunity from any
prosecuttion in court-- while
Facsimile: (415) 398-2438 before the FCC they argue that
their acts cannot be challenged,
Attorneys for Appellant at least not subject to any
TELESAURUS VPC, LLC. serious challenge including
evidentiary hearings.
This makes a mockery of FCC

licensing and due process of
law.
I.INTROpUCTTON ANp STATEMENT PURSUANT TO FRAP 3s(bx1)
Appellant Telesaurus VPC LLC ("Telesaurus") requests panel rehearing or
in the alternative rehearing en banc. Telesaurus seeks review of this Court's
determination in its opinion dated October 8, 2010r (the "Opinion") that
Telesaurus's state law claims against appellees Randy Power, Patricia Power and
Radiolink Corporation (collectively "Radiolink") are preempted by the Federal
Communications Act, at 47 USC $332(cX3XA).'
Federal Rule of Appellate Procedure 40(a)(2) authorizes panel
reconsideration where a panel has overlooked or misapprehended a point of law or
fact. As described below, there are factual and legal errors in the Opinion
which appear to have formed the basis for this Court's preemption finding. To
summarize:
First, the Opinion's preemption conclusion was informed by its incorrect
threshold determination that Radiolink operated "under a valid FCC
license," with respect to the VPC frequencies at issue in this case (the "VPC
Frequencies"). In actuality, the record reflects that Radiolink's purported
rights to the VPC Frequencies were void ab initío, and thus "defective" and
' This opinion is attached hereto as Exhibit I.

2 In light of the Opinion's reversal of the trial court's dismissal of Telesaurus's
claims under 41 U.S.C. $$206-207, Petitioner does not address the scope of the
Opinion in that regard, other than as it may impact the Court's decision as to
federal preemption.
invalid from the start, afact which the FCC itself recognized in the
administrative proceedings which preceded this lawsuit.
Second, the Opinion incorrectly characterizes Telesaurus's state-law claims
as amounting to a "collateral challenge" of the FCC's grant of a license to
Radiolink. In fact, there is nothing about Telesaurus's claims which
challenges an FCC determination. To the contrary, Telesaurus's claims are
based, in part, upon the FCC's determination that "the Radiolink application
should not have been granted to the extent that it requested VPC
frequencies," and that "the grant of a license [to Radiolink] was defective to
the extent that it included authorization to use VPC frequencies." ER 0084-
0085.
Third, the Opinion incorrectly determined that adjudication of Telesaurus's
claims would be "equivalent to second-guessing the FCC's issuance of the
license." Id., at 17024. This legal conclusion is not consonant with $332
preemption jurisprudence from this Court and other Federal Circuits.3
'The Court also assumes that $332(cX3Xa)'s admonition "no State or local
government shall have any authority to regulate the entry of or the rates charged by
any commercial mobile service or any private mobile service" (emphasis added)
restricts the authority of a fudetøl court sitting in diversity to adjudicate a state-law
claim. For the reasons discussed below, Telesaurus respectfully submits that this
broad view of $332 preemption is not consonant with precedent from the United
States Supreme Court. Nonetheless, given the other errors in the Opinion's
preemption analysis, the Court need not resolve this collateral issue in order the
grant the relief requested herein.
Telesaurus respectfully submits that rehearing and reversal by the panel with
respect to the preemption issue is warranted in view of these errors.
Concurrently, Telesaurus requests en banc review and reversal with respect
to the panel's preemption determination. FRAP 35(a) authorizes en banc review
where "the panel decision conflicts with a decision of the United States Supreme
Court or of the court to which the petition is addressed" or where "the proceeding
involves one or more questions of exceptional importance [including] an issue on
which the panel decision conflicts with the authoritative decisions of other United
States Courts of Appeals that have addressed the issue." For the reasons discussed
below, the framework utilized by the panel in reaching its preemption
determination conflicts with the decisions of this Court and those of the U.S.
Supreme Court. See Altria Group, Inc. v. Good, 129 S. Ct. 538, 543 (2008); Wyeth
v. Levine,129 S. Ct. 1187,ll95 (2009); Cipollone v. Liggett Group, 505 U.S. 504,
5I8, 522-23 (1992); Shroyer v. New Cingular Wireless Services,606 F.3d 658 (9th
Cir. 2010). Likewise, the panel's conclusion that Telesaurus's claims are
preempted (as purportedly comprising an indirect regulation of "market entry")
conflicts with decisions from both the FCC and other Federal Circuits as to the
scope of $332 preemptio n. See In Re Wireless Consumers Alliance, Inc.,15 FCC
Rcd 17021, 11026-34 (2000); Pinney v. Nokia,402F.3d 430,450 (4th Cir. 2005);
GTE 18 Mobilnet Ohio v. Johnson,Ill F.3d 469,479 (6'h Cir. 1997); Smith v.,
GTE,236F.3d1292 (11th Cir.2001); Marcus v. AT&T Corp.,138 F.3d 46,53- 55
(2d Cir.1998); Fedor v. Cingular Wireless, 355 F.3d 1069 (7th Cir. 2004).
In the alternative, in the event the Court is disinclined to definitively hold
that Telesaurus's state-law claims are cognizable, it should nonetheless: (i) vacate
the trial court's dismissal on preemption grounds; (ii) remand this case to permit
the parties to obtain further FCC guidance (in the form of a declaratory ruling)
with respect to the preemption issue; and (iii) stay further adjudication of the
preemption issue, pending further FCC guidance on this matter.
II. ARGUMENT
The issue here is whether the issuance of a federal telecommunications
license bars subsequent state law causes of action against the licensee, under
circumstances where: (i) the defendant licensee is alleged by the plaintiff to have
wrongfully procured the license by virtue of false certifications under oath that the
subject frequencies were not already licensed; and (ii) the rights conferred by the
license have been subsequently nullified by the issuing federal agency as defective
and invalid at all times. Telesaurus maintains that the answer to this question is:
"No." The panel's answer to this question was, in effect: "Yes. Due to $332
preemption."
The gravamen of this Court's preemption determination is found on page
17024 of its Opinion:

[A]t all times relevant to Telesaurus's complaint Radiolink operated

under a valid FCC license granting it the authority to use those
frequencies. Although the FCC subsequently modified the license to
delete the VPC Frequencies, Telesaurus's tort claims amount to a
collateral challenge to the validity of the license initially granted to
Radiolink by the FCC . . . Because an adjudication of Telesaurus's
tort claims would be necessarily equivalent to second-guessing the
FCC's issuance of a license, they are expressly preempted under the
market entry prong of $ 332(cX3).
For the reasons described below, this determination is erroneous in several
crucial respects.
A. Radiolink Did Not Have a Risht to the VPC Frequencies Under A

Valid FCC License
The panel's threshold determination that Radiolink "operated under a valid
FCC license" with respect to the VPC Frequencies is incorrect. The record clearly
reflects that Radiolink never had a valid license right to the VPC Frequencies. To
the contrary, as alleged in Telesaurus's Amended Complaint, in a March 4,2004
Order, the FCC stated: (i) "the Radiolink application should not have been granted
to the extent that it requested VPC frequencies . . . the subject channels were not
available for assignment to Radiolink when the application was granted because
they were previously assigned to Havens fthe predecessor of Telesaurus];" and (ii)
"the grant of a license [to Radiolink] was defective to the extent that it included
authonzation to use VPC frequencies." (emphasis added). ER 0084-0085. The
FCC's determination that "the Radiolink application should not have been
granted," and that "the grant of a license [to Radiolink] was defective"
demonstrates its recognition that, as to the VPC Frequencies, Radiolink's license
was void ab initio. In other words, this case cannot be classified in the same
category as those in which a licensee has a valid license right which is later
forfeited due to subsequenr misconduct by the licensee.a
This distinction between a valid license right to available frequencies which
is subsequently revoked due to a licensee's violations of FCC law, and a

wrongfully-procured license for unavailable (e.g., already licensed) frequencies,
which is later deemed to have been defective and invalid from its inception, is not
academic. The panel's incorrect determination that Radiolink "operated under a
valid FCC license" informed the remainder of its analysis. The principal issue here
is whether Telesaurus's claims sought to "second-guess" an FCC license

determination. As discussed infra, this is a practical assessment which examines
whether Telesaurus's claims may impinge upon or contradict rights granted to an
FCC licensee. The risk of such a conflict is greatly diminished where license
rights have been revoked, and virtually non-existent where the issuing agency has
ítself determined that the rights should not have been applied for or granted in the
first place. Even those courts which have dismissed claims on $332(cX3XA)
grounds have recognized this fact. See, e.9., TPS Utilicom Servs. v. AT&T Corp.,
o
For example, a failure of a licensee to comply with FCC law or the terms
of a licenr" -uy1"ad to imposition of forfeiture, including revocation. See 4l
U.S.C. $312 (aX3), (a)(4)and s03(bxlXA).
223F. Supp. 2d. 1089, 1109 n. 19 (C.D. Ca.2002) ("If TPS brought the unfair
practices and tortious interference claims . . . after a determination that a party had
wrongfully participated in an FCC license auction, such claims might escape FCA
preemption").
B. Telesaurus's Claims Do Not Collaterallv Challenge A License

Issuance
For similar reasons, the panel was incorrect when it determined that
Telesaurus's claims "collaterally challenge" a Radiolink license. Once the FCC
determined that the VPC Frequencies should not have been licensed to Radiolink,
there was simply nothing left for Telesaurus to "challenge" before the FCC.
Telesaurus's claims, far from collaterally "challenging" an FCC determination, are
actually based (in part) upon the FCC's determination that Radiolink had no right
to the VPC Frequencies in the first place.s
While the analysis above should be dispositive, if the court finds that any
question remains as to whether Telesaurus's claims are a "collateral challenge to
the validity of the license," this is not the type of issue which is resolvable on the
pleadings. When issues relating to preclusion involve factual matters that require
development of the record, they are particularly unsuitable for resolution via
t Other undisputed facts in the record which support Telesaurus's claims

relate to the circumstances surrounding Radiolink's wrongful procurement of the
VPC Frequencies, including the fact that Radiolink applied for these frequencies
(falsely certifying under oath that they were available) soon after it was outbid by
Havens during the FCC auction for such frequencies.
Federal Rule 12(bX6). See e.g., Stein v. Braum Investment and Development, Inc.,
244 Fed. Appx. 816, 818 19th Cir. 2001) (sua sponr¿ dismissal on collateral
estoppel and res judicata grounds reversed where the trial court record was
insufficiently developed to demonstrate that the plaintiffs had a full and fair
opportunity to litigate their discrimination claim in a prior unlawful detainer
proceeding); Intermodal Rail Employees Assoc. v. Burlington Northern and Santa
Fe Railway Co.,2000 U.S. App. LEXIS 963 *16-18 (9'h Cir. 2000) (dismissal
inappropriate where the evidence, argument and discovery in the putatively

preclusive claim and the putatively precluded claim were not necessarily identical);
Whatey v. Rhydman,887 F.2d 976,978-79 (9'h Cir. 1989) (trial court dismissal on
res judìcata and collateral estoppel grounds reversed where factual issues existed
as to whether the allegedly preclusive settlement agreement was signed under
duress).
In this case, it is undisputed that the FCC's grant of the VPC Frequencies on
a Radiolink license did not directly or expressly address whether the state-law
claims asserted by Telesaurus against Radiolink were preempted. Indeed,
Telesaurus was not even a party to the proceedings pursuant to which this license
grant was made. As such, there is, at a minimum, a factuøl question as to whether,
and to what extent, the FCC's erroneous and "defective" grant of the VPC
Frequencies to Radiolink, relying on Radiolink's false license application
10
statements under oath, has any preemptive effect on Telesaurus's state-law claims.
Telesaurus should have had the opportunity to develop the record on this issue
before the trial court.ó
C. Telesaurus's Claims Do Not "Second-Guess" The FCC's

Issuance of a License
The gravamen of the panel's preemption decision is its determination that
Telesaurus's claims are "equivalent to second-guessing the FCC's issuance of the
license." As a result of this determination, the panel concludes "because
Telesaurus's state tort claims rest on the allegation that Radiolink's FCC-licensed
operation of certain frequencies was wrongful or unlawful, they are expressly
preempted under the market entry prong of $ 332(cX3XA)." Id., at 11024.
Telesaurus respectfully submits that the panel's assessment of the
circumstances under which a state-law claim constitutes preempted "second-
guessing" is based upon an effoneous factual assumption; i.e., its presumption that
the VPC frequency grant to Radiolink was valid in the first instance. It also
appears to be based upon an unduly broad construction of ç33zpreemption which
is inconsistent with the "presumption against preemption" described in Cippolone
6
Moreover, as discussed infra, to the extent there is any ambiguity in the
record with respect to the preemptive effect of the FCC's granting the VPC
Frequencies to Radiolink, the trial court should have declined to adjudicate the
motion to dismiss under the doctrine of primary jurisdiction, to permit the parties
to seek the guidance of the FCC on the preemption issue. The trial court chose not
to do so.
11
(at page 523). In effect, the panel has held that the issuance of an FCC license is
immunity from state-law suit, even under circumstances where (as here) the license
right is subsequently deemed a nullity by the issuing agency, as a result of the
licensee's false certifications under penalties of perjury as to the availability of
such frequencies. Petitioner respectfully submits that there is no legal basis for
such a broad immunity.
Preemption jurisprudence consistently holds that there is an "assumption that
the historic police powers of the States [are] not to be superseded by the Federal
Act unless that was the clear and manifest purpose of Congress." Altria Group,
Inc. v. Good, 129 S. Ct. 538, 543 (2008). In light of the "presumption against
preemption" "Congress' intent to preempt must be clear and manifest to preempt
state law in a field traditionally occupied by the states." Wyeth v. Levine,129 S. Ct.
1181,1195 (2009); Cipollone v. Ligget Group,505 U.S. 504,518,522-23 (1992):
see also Altria Group, 129 S. Ct. at 543; ("[V/]hen the text of a pre-emption clause
is susceptible of more than one plausible reading, courts ordinarily 'accept the
reading that disfavors pre-emption"') (quoting Bates v. Dow Agrosciences LLC,
544 U.S. 431 (2005). This "presumption against preemption" has also been
specifically applied within a *332 preemption context. Pínney,402F.3d at n.4
(presumption against preemption applicable to telecommunications-related claims
because "[s]tates continue to have considerable authority in the wireless
T2
telecommunications area," and because "[t]he presumption against preemption is
even stronger against preemption of state remedies, like tort recoveries, when no
federal remedy exists.").7
Furthermore, the U.S. Supreme Court has made clear that where a
federal statute prohibits state "regulation," it "most naturally refers to positive
enactments by those [egislative or regulatory] bodies, not to common-law
damages actions." Cipollone, 505 U.S. at 519. The Court made the same point in
Sprietsma v. Mercury Marine,537 U.S. 5L, 62-63 (2002), where it held that the
express preemption clause of the Federal Boat Safety Act pre-empted only positive
enactments. If "law," the Court noted "were read broadly so as to include the
common law, it might also be interpreted to include regulations, which would
7 Consistent with this narrow view of preemption, the President on May 20,
2009 issued a 'Memorandum for the Heads of Executive Departments and
Agencies," explaining "the general policy of my Administration that preemption of
State law by eiecutive departments and agencies should be undertaken only with
full consideration of the legitimate prerogatives of the States and with a sufficient
legal basis for preemption." This Memorandum stated: (i) "agencies should not
include in regulatory preambles statements that the . . . agency intends to preempt
State law through the regulation except where preemption provisions are also
included in the codified regulation" (ii) "agencies should not include preemption
provisions in codified regulations except where such provisions would be justified
under legal principles governing preemption." (iii) "agencies should review
regulations issued within the past 10 years that contain statements in regulatory
preambles or codified provisions intended by the . . . agency to preempt State law,
in order to decide whether such statements or provisions are justified under
applicable legal principles governing preemption." See http://www.whitehouse.sov/the-
II A I I A Q L I
pless-office/presiden tial-memorandurn-re gardin g-preemption
t3
render the express reference to 'regulation' in the pre-emption clause superfluous."
Id. at 63. The Court further explained that limiting the preemption clause to
positive law "does not produce anomalous results. It would have been perfectly
rational for Congress not to pre-empt common-law claims, which-unlike most
administrative and legislative regulations necessarily perform an important
remedial role in compensating ... victims ." Id. at 64. (emphasis added).
As noted above, $332(cX3)(A) states that "no State or local government
shall have any authority to regulate the entry of or the rates charged by any
commercial mobile service or any private mobile service." Congress' use of the
phrase "authority to regulate," instead of a broader term -- such as "enacting or
enforcing any law, rule, regulation, standard, or other provision having the force
and effect of law," which is used in the Airline Deregulation Act of 1978 ("ADA")
(49 U.S.C. Appx. 1305(aXl)), or "all laws, decisions, rules, regulations, or other
State action having the effect of law, of any State," which is used in the Employee
Rerirement Income Security Act of 1974, (29 U.S.C. S 1144(a), (cXl)) -- evinces
its intent only to preempt states and local governments from prescribing rates and
entry rules. Indeed, the Supreme Court observed as much when construing the
ADA's preemption provisionin Morales v. Trans World Airlines, Inc.,504U.S.
374 (1992), in which the Court noted that, if Congress had wanted a more limited
scope of preemption in connection with the ADA, "it would have forbidden the
t4
States to 'regulate rates, routes, and services,"' Morales,504 U.S. at 385. This
narrow preemption language identified in Morqles is precisely the language which
is used in $332(cX3XA). Thus, $332(cX3XA) is best read as having
superseded only enactments by state legislatures or administrative agencies that
mandate particular rates or entry rules.
In any event, within the particular context of FCC licensees, numerous
courts (including this Court), have recognized that damages can be awarded
against an FCC licensee for fraud and other state-law torts without running afoul of
9332(cX3)(A) prohibition upon state-law "regulation of rates." Thus, in Shroyer v.
New Cingular Wireless Services,606 F.3d 658 (9th Cir. 2010), this Court held that
claims by a cellular customer against a service provider for failing to provide
adequate coverage were not preempted. In doing so, the Court emphasized the
distinction between claims that directly affect rates or market entry (which are
preempted), and claims which simply relate to rates or market entry (which are not
preempted):
New Cingular argues that Shroyer's claims are preempted by 47

U.S.C. $332(cX3XA) because the claims challenge the quality and
rates of service . . . We reject this contention with regard to Shroyer's
breach of contract claim and his misrepresentation claim. In the main,
Shroyer is challenging New Cingular's rates and quality of service
only insofar as they are contrary to the ones to which he had
contractual rights or were misrepresented; he is not askíng the court
to rule on the reasonableness of a particular rate, and the quatity of
service is an issue only as it relates to, or was misrepresented as
satisfying, the contract on which he sues. The claims are state law
15
claims that do not tread on the FCC's exclusive power to regulate rates
and market entry.
Id., at 661-63 (emphasis added).8
Likewise, the FCC held In Re Wireless Consumers Alliance, Inc., 15 FCC
Rcd 17021, 17026-34 (2000), that (i) $ 332 generally does not preempt the award
of monetary damages based on state tort claims; (ii) state courts are not, as a
general matter, prevented by $332 from awarding damages to customers based on
violations of state consumer fraud laws; and (iii) tort laws have the function of
compensating victims, which distinguishes them from the direct forms of
regulation entrusted to the FCC. Id. at 17034; see also In re: Southwestern Bell
Mobite Systems, Inc., 14 FCC Rcd 19898 *26 (1999) ("We do not agree . . . that
state . . .consumer fraud laws relating to the disclosure of rates and rate practices
have generally been preempted . . . The legislative history of section 332 clanfies
8
This distinction has also been utilized by state courts evaluating ç332
issues. See Spielholzv. Superior Court,86 Cal. App. 1366,1374-15 (2001) ("4
claim that does not directly challenge the rate but directly challenges some other
activity, such a false advertising, and ... seeks damages arising from the activity is
not an attempt to regulate rates and is not expressly preempted under Section
332(c)(3)(A).") (emphasis added). Spielholz further held that "A judicial act
constitutes rate regulation only if its príncipal purpose and direct effect are to
control rates." Id. at 1314 (emphasis added); see also Pacific Bell Wireless, LLC v.
PUC,l40 CaL App. 4th718,734 (2006) (holding that a public utility
commission's fine against a wireless phone company was not preempted by $ 332,
noting that "[t]he principal purpose and direct effect of the penalties imposed by
the Commission are to prevent misrepresentations by Cingular and to compensate
... wireless customers ... The effect of these penalties on Cingular's rates is
incidental, and the Commission's decisions are therefore not preempted.")
16
that billing information, practices and disputes - all of which might be regulated by
state contractor consumer fraud laws - fall within 'other terms and conditions'
which states are allowed to regulate.").e
Although the case law discussing the preemptive effect of $332(c)(3)(A)'s
"market entry" provision is less well-developed, the published case law that exists
does not support the panel's preemption determination in this case. The seminal
"market entry" case is Fedor v. Cíngular Wireles¡ 355 F.3d 1069 (7th Cir. 2004),
in which the plaintiff alleged that delayed charges by Cingular appeared on his
bills, making his monthly charges inaccurate. Id. at 1070-1071. Cingular argued
that the plaintiffs' complaint was barred by Section332's "market entry" provision
because, if successful, the plaintiff's claims would "necessarily require" Cingular
to alter its infrastructure by building cellular towers in areas that it did not already
have them. Id. at 1014. According to Cingular, this kind of fundamental change in
Cingular's infrastructure would have affected Cingular's actual, physical entry into
e
Accord Pinney v. Nokia, 402F.3d 430, 450 (4th Cir. 2005) ("there is
simply no evidence that Congress intended ... to preempt completely state law
claims that are based on a wireless service provider's sale and promotion of
wireless telephones."); GTE 18 Mobitnet Ohio v. Johnson,lll F.3d 469,479 (6th
Cir.1991) (The language of $ 332(cX3XA) "does not compel the conclusion that ...
the states may no longer adjudicate individual cases involving specific allegations
of anti-competitive or discriminatory conduct."); Smith v., GTE, 236 tr.3d 1292
(1lth Cir. 2001) (customer claims stemming from allegedly exorbitant telephone
leasing charges not completely preempted); Marcus v. AT&T Corp., 138 F.3d 46,
53- 55 (2d Cir. 1998) (claims alleging fraudulent billing practices not completely
preempted).
17
the telecommunications market. Id. The Seventh Circuit disagreed, however,
holding that this stretched the allegations in the complaint "beyond recognition."
Id. According to the Court, this was "an accounting problem, not an infrastructure
problem," and, if the plaintiff succeeded, Cingular would be required only to adjust
its accounting practices. Id. Put differently, the Court determined that the
plaintiff's claim did "not relate to the construction or placement of towers at all."
rd.
Telesaurus respectfully submits that the logic of the foregoing authorities
mandates the conclusion that Telesaurus's claims are not preempted. While
Telesaurus's claims may "relate" to market entry in some oblique sense, their
underlying purpose is unrelated to market entrt, and their adjudication will not
affect market entry (let alone, directly so). As discussed, the FCC has already
determined that the license grant of VPC Frequencies to Radiolink should not have
occurred and was defective, and that, to this extent, Radiolink did not properly
have "entry" into the wireless telecommunications market.l0 There is no
conceivable sense in which an adjudication of Telesaurus's claims will disturb this
conclusion. To be clear: Telesaurus' claims do not directly or indirectly challenge
t0
Telesaurus respectfully submits that however broad the scope of $332
"market entry" preemption might be, it cannot reasonably be construed as
immunizing breaches by licensees of their duty of candor to the FCC in order to
obtain frequencies under false pretenses. Such a result would undermine, rather
than further, the Federal Communications Act's goal of effectively regulating the
telecommunications market, and promoting fair competition in that market.
18
any FCC law or decision under which the VPC Frequencies were issued to
Radiolink (neither the FCC rules and procedures involved, nor the FCC's mistaken
1icensegrant).Moreover,theseclaimsdonotdirectlyorindirectlyseektomodify
wireless infrastructure. What Telesaurus is seeking to adjudicate is not the initial
grant of the VPC Frequencies to Radiolink, but rather the damages sustained as a
result of Radiolink procuring and using for its unjust enrichment Telesaurus's
frequencies via false pretenses (after losing the competition for them in the subject
FCC auction).
When conducting its preemption analysis, this Court should not view the
FCC's granting of a license to Radiolink in the first instance as ipso facto
immunity. While this fact surely has some relevance to the preemption calculus, it
is not the end of the inquiry. The inquiry can only be properly completed upon an
examination of the entirety of the administrative record, including the FCC's
determinationsthat..theRadiolinkapplicationshou1dnothavebeengrantedtothe
extent that it requested VPC frequencies" and that "the grant of a license [to
Radiolinkl was defective." (emphasis added) There are enoffnous legal and
practical differences between state law claims asserted against FCC licensees who
hold licenses that the FCC has not revoked (indicating that the license has been and
remains valid), compared to similar claims against erstwhile licensees whose
license rights have been found "defective" and invalid at all times by the FCC, and
79
thus revoked. In the former instance, preemption concems are potentially
implicated because the adjudicating court is required to make a "soup*to-nuts"
determination regarding the licensee's entitlement to the licensed frequencies, an
adjudication which may potentially impinge upon the FCC's exclusive authority to
regulate market entry. In the latter case, by contrast, the licensee's disqualification
ab initio for the frequencies has already been conclusively established by the FCC
itself. As such, in this second circumstance, the adjudicating court need only
assess the ancillary issue of whether the licensee acted tortiously by procuring and
profiting from frequency spectrum to which it was never entitled. This assessment
is unrelated to lawful market entry, nor is there any likelihood that this assessment
will undercut a prior FCC determination.
Like an Invalidated Patent. Should Not be

1. An Invalidated License.
Accorded Preemptive Effect
While there does not appear to be any published cases evaluating $332
preemption issues within the context of defective and ínvalidatedFcc licenses,
courts are routinely required to adjudicate analogous issues in the patent context.
These courts have held that aparty can assert a state-law claim against a patent
licensee arising out of the wrongful procurement of a patent, where it is alleged
that the patent was procured by fraud or in bad faith. The seminal case on the issue
is The Dow Chemical Co. v. Exxon Corp., 139 F'.3d I4l0 (Fed. Cir. 1998), in
which the plaintiff (Dow) asserted state-law unfair competition claims against the
20
defendant (Exxon), arising out of Exxon's inequitable conduct in procuring patents
from the U.S. Patent and Trademark Office.rr The trial court concluded that
Dow's state-law claims were preempted by federal patent law. On appeal, the
Federal, Circuit reversed, holding:
[A] state law claim is not preempted by the federal patent law, even if
it requires the state court to adjudicate a question of federal patent
law, provided the . . . cause of action includes additional elements not
found in the federal patent law cause of action. . . The state law cause
of action at issue here does not present an obstacle to the execution
and accomplishment of the patent laws. . . While it is true that . . . the
state court would be required to make a determination of an issue of
patent law in reaching its judgment on the underlying tort, this
determination would only be ancillary to its central purpose . . . The
instant case. . . concerns an allegation of bad faith enforcement of a
reputedly unenforceable patent. . . the tortfeasor here allegedly knew
that its patent was unenforceable when it engaged in market
misconduct. . . lthus] [t]he tort claim at issue here is not premised
upon bad-faith misconduct in the PTO, but rather is premised upon
bad-faith misconduct in the marketplace. . . A state has every right to
protect its citizens and residents in their contractual relations from acts
of wrongful interference . . . by any party, including a patentee. . .
Any award of damages, then, would be based on local conduct that the
state has a right to regulate; proof of acts before the PTO in such a
trial are merely evidence of the patentee's bad-faith.
Id., at l4l3-18.
See also, BriteSmile, Inc. v. Discus Dental, Inc., 2005 U.S. Dist. LEXIS 30855
*16-17 (N.D. Ca. November 18, 2005) ("[I]f the patentee knows that the patent is
11
Specifically, Dow alleged that Exxon obtained the patent by falsely
claiming that its polymers were superior to the prior art, while withholding its
knowledge of a group of polymers which reputedly could achieve the same or
better results than the Exxon polymers and which allegedly anticipated the claims
in Exxon's patent. Id. at 1412.
21
invalid, [or] unenforceable . . . and it represents to the marketplace that competitor
is infringing the patent, a clear case of bad-faith representations is made out . . .
Here, Discus alleges . . .that BrightSmile threatened Discus' customers with patent
litigation based on a patent BrightSmile admitted to this court had errors in the
prosecution [that] had affected the ability to enforce the . . . patent . . . Thus,
Discus alleges that BrightSmile represented to Discus' customers that Discus is
infringing a patent BrightSmile knows is invalid, unenforceable or not infringed.
Therefore, the Court finds Discus suffîciently alleges bad-faith conduct by
BrightSmile to avoid preemption this procedural stage "); GMP Technologies, LLC
v. Zicam, LLC,2009 U.S. Dist. LEXIS 115523 *10 (N.D. Il1. December 9,2009);
Dimension One Spas, Inc. v. Coverplay, 1nc.,2008 U.S. Dist. LEXIS 69526 *48-58
(S.D. Ca. September 5, 2008) ("Dimension One asserts state law claims . . . based
on the premise that Coverplay's US Patent . . . is invalid and that Coverplay
knowingly promoted an invalid patent so as to unfairly compete and interfere with
Dimension One's business of licensing . . . Dimension One intends to show that the
invalidity of the 599 Patent was so obvious that fdefendant's] knowledge of the
invalidity when he made the allegedly tortious statements could be inferred . . .
Based on the foregoing, Dimension One has raised a genuine issue of fact fas to]
whether the 599 Patent is valid. This fact is material because invalidity is the basis
for Dimension One's intended showing that ldefendant] knew at the time of the . ..
22
allegedly tortious statements to Dimension One's licensees and potential licensees
that the 599 patent is invalid."); Landmark Graphics Corp. v. Seismic Micro
Technology, lnc.,410 F. Supp. 2d.751,759 (S.D. Tex.2007) ("SMT's unfair
competition counterclaim alleges that Landmark has sought to enforce the 570
Patent against SMT with knowledge that the patent is unenforceable due to
inequitable conduct. This counterclaim does not rest entirely on actions before the
PTO but alleges 'marketplace misconduct.'. . . The motion to dismiss the state law
unfair competition counterclaim is denied.").
These cases should inform this Court's decision. Indeed, their logic applies
with even greater force to this case. Unlike the foregoing cases, in which the
adjudicating courts were concededly required to resolve "ancillary" issues of
patent law, the District Court in the case sub judice need not have adjudicated any
FCC licensing issues. The issue in this case, as in the above-cited authorities, is
whether the putative tortfeasor asserted a federally-conferred right in bad faith
which it knew it could not assert. As in the case of Dow Chemical, the allegations
contained in the four corners of Telesaurus' complaint are premised upon "bad-
faith misconduct in the marketplace," and proof of acts before the FCC at trial, if
any, would simply be evidence of Radiolink's bad-faith.l2
'' Outside of a preemption context, the U.S. Supreme Court has recognized
that an action is cognizable against apafiy for abusing a federally-conferred right.
For example, under the so-called "sham exception" to the Noerr-Pennington
23
2. In the Alternative, Remand is Proper to Permit the Parties to Seek a

Declarator]¡ Ruling from the FCC
Finally, in the alternative, if this Court is disinclined to definitively hold that
Telesaurus's state-law claims are cognizable, it should direct the trial court, under
the doctrine of primary jurisdiction, to: (i) vacate its grant of Radiolink's motion to
dismiss, to permit the parties to request guidance from the FCC (in the form of a
declaratory ruling) as to the scope of preemption; and (ii) stay further adjudication
of the preemption issue, pending further FCC guidance on this matter.
The doctrine of primary jurisdiction permits both trial courts and appellate
courts to stay the adjudication of cases, in order to permit an administrative agency
to address a legal issue within its unique expertise. See e.g., Syntek Semiconductor
Co. Ltd. v. Microchip Technology, \nc.,307 F.2d775 (9'h Cir. 2002) (vacating trial
doctrine, apafiy can be liable under antitrust law for misusing the federal
administrative process. Thus, in Californía Motor Transport Co. v. Trucking
Unlimited,404 U.S. 508 (1971), the Supreme Court held that a concerted action
by petitioners to institute state and federal proceedings to defeat applications by
respondent to acquire operating rights was potentially actionable under the Clayton
Act. The Court noted that where "the alleged conspiracy is a mere sham to cover
what is actually nothing more than an attempt to interfere directly with the business
relationships of a competitor," application of the Sherman Act is justified. Id., at
51 1. The Court concluded "the machinery of the agencies . . . was effectively
closed to respondents, and petitioners indeed became the regulators of the grants of
rights, transfers and registrations to respondents - thereby depleting and
diminishing the value of the businesses of respondents." Id. As a result, "abuse of
those processes produced an illegal result." Id., at 513. The Court further
determined that "actions of that kind cannot acquire immunity" and that "if the end
result is unlawful, it matters not that the means used in violation may be lawful."
Id., at 513, 515.
24
court grant of summary judgment and remanding with instructions to stay
copyright action pursuant to the primary jurisdiction doctrine, to allow the parties
to seek guidance from the Register of Copyrights as to whether a copyright
registration was invalid); U.S. v. Henri, 828 F.2d 526, 528 n.3 (9'h Cir. 1987); see
also Ass'n of Int'l Automobile Manufacturers, Inc. v. Commissioner,
Massachusetts Dept. of Environmental Protection,196F.3d302 (1" Cir. 1999);
Fontan-De-Maldonado v. Lineas Aerèas Costarrícenses,936F.2d 630 (1't Cir.
l99l) (vacating trial court grant of summary judgment and remanding with
instructions to stay action to permit appellant to challenge tariff before the
Department of Transportation). The Federal Communications Commission is
expressly vested with the authority to resolve issues within its expertise via
declaratory rulings. See 5 U.S.C. $55a(e) ("The agency, with like effect as in the
case of other orders, and in its sound discretion, may issue a declaratory order to
terminate a controversy or remove uncertainty"); 47 C.F.R. $ 1.2 ("The
Commission may, in accordance with section 5(d) of the Administrative Procedure
Act, on motion or on its own motion issue a declaratory ruling terminating a
controversy or removing uncertainty."). The FCC has utilized this authority in the
past to make determinations with respect to the FCA's preemptive effect over state
law claims. In fact, the FCC's determination in In Re Wireless Consumers
25
Alliance, Inc., supra, was precipitated by just such a request for a declaratory
ruling in the case of Spiethtozv. Superior Court, 86 Cal. App. 4'h 1366 (2001).
Indeed, the unique aspects of this case may render it particularly suitable for
a remand with instruction to the trial court to stay proceedings and thereby allow
the parties to obtain FCC input as to the applicability of preemption to this matter
(particularly, since the Court has already chosen to remand in any event). First,
this case appears to be unique among ç332 preemption cases to the extent it
involves actions undertaken by the defendant under a void ab initío license (which,
as discussed, makes this case analogous to cases involving wrongfully prosecuted
patents in which courts have found that preemption does not bar state-law claims).
The FCC, as the body which granted the VPC Frequencies to Radiolink, the body
which ultimately revoked them, and the body uniquely qualified to address the
scope of $332 preemption, may be in a singular position to assess the extent to
which the revocation of the VPC Frequencies relates to the preemption issue.
Moreover, unlike virtually all of the preemption authorities cited in the
Court's Opinion, this case involves preemption based exclusively upon the $332
"market entry" provision.t' While the Court concludes in its Opinion that the logic
of these authorities (in particular, the logic in the In re Wireless decision) applies
t' See Opinion, atpage 17021(noting that neithet Shroyer, rLot In re

Wireless, involved the "market entry" prohibition of $332).
26
equally to cases involving purported market entry preemption,l* the FCC (which,
after all, was the body which decided In re Wireless) may take a different view. On
this additional basis, a remand with instructions to the trial court to stay
proceedings to allow the parties to obtain FCC input as to the applicability of
preemption may be approPriate.
III. CONCLUSION
For each of the foregoing reasons, Telesaurus respectfully requests that this
matter be reheard by the panel oÍ en banc, that the Opinion be vacated to the extent
it held Telesaurus's state-law claims to be preemptedby 47 U.S.C. $332 and that
the judgment of the trial court with respect to preemption be reversed. In the
alternative, the Court should vacate the trial court's dismissal to permit the parties,
under the doctrine of primary jurisdiction, to seek further FCC guidance with
respect to the preemption issue.
Dated: October 29, 2010
NOSSAMAN LLP
lsl
PATRICK J. RICHARD (SBN 131046)
prichard @ nossaman.com
TAMIR DAMARI
tdamari@nossaman.com
50 California Street, Thirty-Fourth Floor
to
Opinion, at pages t1021-22.
21
San Francisco, California 941 I 1 -41 07

Telephone: (415) 398-3600
Facsimile: (al5) 398-2438
Attorneys for Appellant
TELESAURUS VPC, LLC
28
CERTIFICATE OF COMPLIANCE WITH CIRCUIT RULE 40-1(a)
Pursuant to Circuit Rule 40-1(a), Appellant, Telesaurus, VPC, LLC, reports
to the Court that the brief is proportionately spaced, utilizing 14 point Times New
Roman typeface and containing 6,487 words, as indicated by the computenzed
word count of counsel's word processing system.
Dated: October 29,2010 NOSSAMAN LLP
By: /s/
Patrick J. Richard
TELESAURUS VPC, LLC.
29
CERTIFICATE OF SERVICE
I hereby certify that on October 29,2010,I electronically filed the foregoing
with the Clerk of the Court for the United States Court of Appeals for the Ninth
Circuit by using the appellate CMFÆCF system.
I certify that all participants in the case are registered CMÆCF users and
that service will be accomplished by the appellate CMIECF system.
Dated: October 29,2010 NOSSAMAN LLP
By: lsl
Patrick J. Richard
TELESAURUS VPC, LLC.
30
PROOF OF SERVICE
The undersigned declares :
I am employed in the County of San Francisco, State of California. I am
over the age of 18 and am not a party to the within action; my business address is
c/o Nossaman LLP, 50 California Street, Thirty-Fourth Floor, San Francisco,
California 941 I I -41 07 .
On October 29,2010,I served the foregoing APPELLANT
TELESAURUS VPC, LLC'S REQUEST FOR PANEL REHEARING AND
REHEARING EN BANC on parties to the within action as follows:
(By U.S. Mail) On the same date, at my said place of business, a true copy
thereof enclosed in a sealed envelope, addressed as shown on the attached
service list was placed for collection and mailing following the usual
business practice of my said employer. I am readily familiar with my said
employer's business practice for collection and processing of correspondence
for mailing with the United States Postal Service, and, pursuant to that
practice, the correspondence would be deposited with the United States
Postal Service, with postage thereon fully prepaid, on the same date at San
Francisco, C alifornia.
32
Counsel for Counsel for 3'd-Partv-

Defendants/Appellees Defendant/Appellees
Roger L. Cohen Esq. Aaron C. Schepler Esq.
Michelle C. Lombino, Esq. Greenberg Traurig, LLP
Jaburg & Wilk 2315 E. Camelback Rd.
3200 North Central Avenue, Suite 700
Suite 2000 Phoenix, AZ 85016
Phoenix, AZ 85012 Phone (602) 445-8000
Phone (602) 248-1000 Fax (602) 445-8100
Fax (602) 248-0522 E-Mail: scheplera@ gtlaw.com
E-Mail: rlc @jaburswilk.corn
Jessica Libbey
252660_1.DOC JJ
EXHIBIT 1
DocumentS
Case: 09-15446 10/08/2010 Page: 1 of 21 lD: 7501854 DktËntry: 30-1
FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
Tsr-Eseunus VPC, LLC, a

Delaware Limited Liability
Company,
PlaintiffAppellant,
V.
Rexov PowER, an individual; No. 09-15446

Parrucre A. PowEn, an individual;
D.C. No.
Raoror-nr CoRroRenoN, 2:01-cv-0l3tt-
D efen d ant s - App e I I e es,
NVW
V.
OPINION
It rousrRrer. TBlBcovn¡txIcATIoNS
AssocrerroN, INC., a Virginia
corporation; EWA, INC., a
Virginia corporation, dlbla
Enterprise Wireless Alliance,
Thir d - P ar ty - D efen d ant - App e I I e es.
Appeal from the United States District Court

for the District of Arizona
Neil V. Wake, District Judge, Presiding
Argued and Submiued

February 11, 2010-San Francisco, California
Filed October 8, 2010
Before: John T. Noonan, Marsha S. Berzon and

Sandra S. Ikuta, Circuit Judges.
Opinion by Judge Ikuta
17003
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Tples¡.unus v. PowER 17007
COUNSEL
Pakick J. fuchard, Nossaman LLP, San Francisco, California,

for the appellant.
Kathi Mann Sandweiss and Roger L. Cohen, Jaburg & V/ilk,

P.C., Phoenix, Arizona, for the appellees.
OPINION
IKUTA, Circuit Judge:
In this appeal, we hold that the complaint filed by Tele-

saurus VPC, LLC ("Telesaurus") against Radiolink Corpora-
tion ("Radiolink") did not allege facts sufftcient to establish
that Radiolink is a "common carrier" subject to suit under the
Federal Communications Act of 1934 ("FCA"), 47 U.S.C.
$$ 206-07. We therefore affirm the district court's dismissal
Case:09-15446 1Ut8t2010 Page: 3 of 21 lD: 7501854 DktËntry: 30-1
17008 Telesnunus v. PowBR
of Telesaurus's FCA claims, but conclude that the district

court erred in denying Telesaurus leave to amend. We also
hold that Telesaurus's claims under Arizona law for conver-
sion, unjust enrichment, and intentional interference with pro-
spective economic advantage are expressly preempted by
$ 332(c)(3)(A) of the FCA, which preempts state regulation of
market eîW. Id. $ 332(cX3XA) We therefore affirm the dis-
missal of Telesaurus's state-law claims.
I
Both Telesaurus and Radiolink provide mobile radio ser-
vices to customers. In 1999, Telesaurus's predecessor in inter-
est, Warren Havens, bid in a competitive auction and obtained
licenses for five VHF Public Coast radio frequencies (the
"VPC Frequencies")1 in Phoenix, Af'zona. Radiolink also par-
ticipated in this auction, but lost to Havens's higher bid.
Havens subsequently assigned his interest in the frequencies
to Telesaurus.2
Three months after Telesaurus obtained the VPC Frequen-

cies, Radiolink submitted an application to the Federal Com-
munications Commission ("FCC") for various frequencies
including the VPC Frequencies. As required by FCC rules,
Radiolink's application included a report from the Industrial
Telecommunications Association ("ITA"), one of the FCC's
authorized frequency coordinators, which stated that the VPC
Frequencies were available at no charge on a first-come, first-
served basis. See generally 47 C.F.R. $ 90.175. Telesaurus
alleges that Radiolink knew these representations to be false.
The FCC subsequently granted a mobile service license to
IVHF Public Coast frequencies, or "VPC frequencies," are a set of radio

frequencies in the 160 MHZ range that the FCC has reserved for wireless
radio services.
zFor convenience, we refer to both Havens and Telesaurus as "Tele-
saurus."
Case: û9-15446 1010812010 Page: 4 of 21 ID: 7501854 DktEntry: 30-1
Tsles¡,r;nus v. Powpn 17009
Radiolink to use the VPC Frequencies. The license included

the notation: "Regulatory Status: PMRS," indicating that
Radiolink was operating a private land mobile radio service.
Radiolink used these frequencies to operate its two-way
mobile radio business, through which it provided customers
with wireless communications in the greater Phoenix area.
These operations continued until at least 2005.
After being informed by potential business partners that

Radiolink was using the VPC Frequencies, Telesaurus
reported Radiolink's use to the FCC. The FCC initiated pro-
ceedings sua sponte to consider whether it should modiff
Radiolink's license. In a March 4,2004 memorandum opinion
and order, the FCC concluded that it should not have granted
Radiolink the VPC Frequencies, and proposed to modiff
Radiolink's license to remove those frequencies. The FCC
noted that "a proposed modification under the circumstances
presented would promote the public interest, convenience,
and necessity because the subject channels were not available
for assignment to Radiolink when the application was granted
because they were previously assigned" to Telesaurus.
Radiolink moved for reconsideration, arguing that the coor-

dination error resulted not from any fault on the part of
Radiolink, but rather from a mistake made by the FCC and its
certified frequency coordinator, ITA, which erred in selecting
the frequencies for Radiolink's application. Telesaurus filed
an opposition to Radiolink's motion, arguing that Radiolink's
claim of innocence in the selection of the VPC Frequencies
was not credible and that Radiolink was improperly pressur-
ing Telesaurus to relinquish the VPC Frequencies. Telesaurus
urged the FCC to investigate these issues and impose sanc-
tions on Radiolink.
After issuing its March 4, 2004 order, the FCC directed

ITA to f,rnd replacement frequencies for Radiolink, and then
on December 21, 2004 granted Radiolink a license to use
replacement frequencies recommended by the ITA. On July 7,
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17010 Tnleseunus v. PoweR
2005, the FCC issued a final modification order deleting the

VPC Frequencies from Radiolink's license. The FCC con-
cluded that "it is in the public interest to modifu Radiolink's
license to delete" the VPC Frequencies, because "the frequen-
cies were not available" for private land mobile radio licens-
ing, and should be made available for Telesaurus's use. In
addition, the FCC noted that Radiolink had already obtained
replacement channels, "which will minimize the impact of
this action on Radiolink's operations." The FCC did not men-
tion Telesaurus's request for further investigation or sanc-
tions.
Two years later, Telesaurus filed suit in federal district

court, alleging that Radiolink violated provisions of the FCA,
47 U.S.C. $$ 301,308,309,312(a) and 503(b),'and in addi-
tion was liable for conversion, unjust enrichment, and inten-
tional interference with prospective economic advantage
under Anzona law.
Radiolink sought to dismiss the complaint for failure to

state a claim. See FBo. R. Cry. P. 12(bX6). In response to
Telesaurus's federal claims, Radiolink argued that the FCA
provides a private cause of action only against "common car-
riers," 47 U.S.C. $$ 206-207, not against private mobile ser-
vice providers such as Radiolink. Second, it argued that
Telesaurus could not bring a claim for violation of $$ 301,
308, 309, 3I2(a) and 503(b) of the FCA, because those provi-
sions impose duties only on the FCC, not on licensees. With
respect to Telesaurus's state claims, Radiolink sought dis-
missal on the grounds that Telesaurus had no property right
in the VPC Frequencies or, in the alternative, that the claims
3In
brie¡ 47 U.S.C. $ 301 prohibits radio transmission without a license;
47 U.S.C. $ 308 sets forth the requirements for obtaining a license; 47
U.S.C. $ 309 describes the FCC's procedure for granting a license; 47
U.S.C. $ 312(a) outlines administrative sanctions and procedures for the
revocation of a license; and47 U.S.C. $ 503(b) sets forth penalties for vio-
lations of the conditions of a license or provisions of the FCA.
Case: 09-15446 10ß812010 Page: 6 of 21 lD: 7501854 DktEntry: 30-1
Teleseunus v. Powen 17011
were either expressly or impliedly preempted by

$ 332(cX3)(A) of the FCA, 47 U.S.C. $ 332(c)(3)(A).4
The district court dismissed Telesaurus's complaint with

prejudice, denying Telesaurus's motion for leave to amend.
Reasoning that the FCC's designation of Radiolink as a pri-
vate land mobile radio service on its license was subject to
deference under Chevron U.S.A., Inc. v. NRDC, Inc.,46l U.S.
837, 842-43 (1984), the district court held that Radiolink was
not a common carrier as a matter of law. The court fuither
held that Radiolink's state-law claims were expressly pre-
empted under $ 332(cX3)(A) of the FCA. Telesaurus timely
appealed.
u
We review de novo the dismissal of a complaint for failure
to state a claim. Alarco Pay Television, Ltd. v. Gen. Instru-
ment Corp., 69 F.3d 381,384-85 (9th Cir. 1995). For pur-
poses of our review, we begin "by identiffing pleadings that,
because they are no more than conclusions, are not entitled to
the assumption of truth." Ashcroft v. Iqbal, I29 S. Ct. 1937,
1950 (2009). We disregard "[t]hreadbare recitals of the ele-
aln relevant part, 332(c)(3)(A) states:

$
Notwithstanding sections 152(b) and 221þ) of this title, no State
or local government shall have any authority to regulate the entry
of or the rates charged by any commercial mobile service or any
private mobile service, except that this paragraph shall not pro-
hibit a State from regulating the other terms and conditions of
commercial mobile services. Nothing in this subparagraph shall
exempt providers of commercial mobile services (where such ser-
vices are a substitute for land line telephone exchange service for
a substantial portion of the communications within such State)
from requirements imposed by a State commission on all provid-
ers of telecommunications services necessary to ensure the uni-
of telecommunications service at affordable
versal availability
rates.
,¡d $ 332(cX3XA).
Case:09-15446 1010A2A10 Page: 7 of 21 lD: 7501854 DktEntry: 30-1
17012 Ter-sslunus v. PownR
ments of a cause of action, supported by mere conclusory

statements Id. at 1949. After eliminating such unsup-
ported legal conclusions, we identiff "well-pleaded factual
allegations," which we assume to be true, "and then determine
whether they plausibly give rise to an entitlement to relief."
Id. at 1950. "To survive a motion to dismiss, a complaint must
contain sufficient factual matter, accepted as true, to state a
claim to relief that is plausible on its face;" that is, plaintiff
must "plead[ ] factual content that allows the court to draw
the reasonable inference that the defendant is liable for the
misconduct alleged." Id. at 1949 (intemal quotation marks
omitted); see Evanns v. AT&T Corp., 229 F.3d 837, 839 (9th
Cir. 2000).
We review the denial of leave to amend a complaint for

abuse of discretion. Metzler Inv. GMBH v. Corinthian Colls-,
Inc., 540 F.3d 1049, 1072 (9th Cir. 2008). A district court
may deny a plaintiff leave to amend if it determines that "alle-
gation of other facts consistent with the challenged pleading
could not possibly cure the deficieîc!," Schreiber Distrib.
Co. v. Serv-Well Furniture Co.,806F.2d 1393,1401 (9th Cir.
1986), or if the plaintiff had several opportunities to amend its
complaint and repeatedly failed to cure deficiencies, Foman
v. Davis,371 U.S. 178, 182 (1962).
III
We first consider whether the district court erred by dis-
missing Telesaurus's federal claims under $$ 206 and207 of
the FCA, which provide a cause of action against "common
carriers." As relevant here, $ 206 allows a party to bring an
action for damages against "common carriers" who violate
provisions of the FCA by their acts or omissions. 41 U.S.C.
$ 206.u Section 207 provides that a person claiming to be
ssection 206 provides, in pertinent part:
Incase any common carrier shall do, or cause or permit to be

done, any act, matter, or thing in this chapter prohibited or
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TeLesRunus v. Pownn 17013
damaged by a common carrier may bring a complaint either

before the FCC itself or as a civil suit in district court, "but
such person shall not have the right to pursue both such reme-
dies." Id. 5 207.6
[1] Radiolink argued, and the district court agreed, that it

is not a "common carrier" for purposes of $ $ 206 and 207 . ln
evaluating this argument, we begin with the language of the
statute. Greyhound Corp. v. Mt. Hood Stages, [nc.,437 U.S.
322, 330 (T978); see McCarthy v. Bronson, 500 U.S. 136, 139
(1991). The FCA's general definition of "common carrier"
appears in $ 153(10), which defines the term as: "any person
engaged as a common carrier for hire, in interstate or foreign
communication by wire or radio or interstate or foreign radio
transmission of energy . . . |' 47 U.S.C. $ 153(10). Despite
this general definition, a mobile service such as Radiolink is
a common carrier only if it meets the more specific definition
of "common carrief' set forth in $ 332(c)(1). This section pro-
vides that "[a] person engaged in the provision of a service
that is a commercial mobile service shall, insofar as such per-
son is so engaged, be treated as a common carrier" for pur-
poses of the FCA. Id. $ 332(cXlXA). Any mobile service
declared to be unlawful, or shall omit to do any act, matter, or

thing in this chapter required to be done, such common 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, together with a reasonable
counsel or attorney's fee . . . .
rd. ç206
Gsection 207 provides:
Any person claiming to be damaged by any common carrier sub-

ject to the provisions of this chapter may either make complaint
to the Commission as hereinafter provided for, or may bring suit
for the recovery of the damages for which sttch common carrier
may be liable under the provisions of this chapter, in any district
court of the United States of competent jurisdiction; but such per-
son shall not have the right to pursue both such remedies.
rd.5207.
Case: A945446 10/0812010 Page. 9 of 21 tD: 7501854 DktEntry: 30-1
1'10t4 Tpr-esnuRus v. PowrR

"that is not a commercial mobile service or the functional
equivalent of a commercial mobile service" is defined as a
"private mobile service," and therefore not a common carrier
for purposes of the FCA.? 1d $$ 332(c)(2), (dX3); see In re
Implementation of Sections 3Q,Q and 332 of the Communica-
tions Act Regulatory Treatment of Mobile Services: Second
Report and Order, 9 F.C.C.R. I4ll, 1425-1454 (Mat- 7,
1994) (FCC regulations further defining these terms). The
FCA defines "commercial mobile service" as "any mobile
service . . . that is provided for prof,rt and makes intercon-
nected service available (A) to the public or (B) to such
classes of eligible users as to be effectively available to a sub-
stantial portion of the public, as specif,red by regulation by the
Commission ." 47 U.S.C. $ 332(d)(1). "Interconnected
service," in turn, is defined as "service that is interconnected
with the public switched network . . . or service for which a
request for interconnection is pending . . . ." 47 U.S.C.
$ 332(dX2). In sum, a mobile service provider such as
Radiolink qualifies as a "common carrier" under the FCA
only to the extent it is "engaged in the provision of a service"
that is: (1) for profît; (2) interconnected (or pending intercon-
nection) with the public switched network; and (3) available
to the public or other specified users. Id $$ 332(d)(l)-(2).
We thus consider whether Telesaurus's complaint alleges

facts sufficient to establish that Radiolink is a common car-
rier. The complaint alleges: "Radiolink as a common carrier,
knowingly violated 47 U.S.C. $$ 308 and 309, and other sec-
tionfs of] the Communications Act"; that Radiolink "used the
Converted Frequencies for commercial, common-carrier (as
def,rned by the FCC) two-way radio service involving charg-
TSection 332(dX3) provides:
the term "private mobile service" means any mobile service (as
defined in section 153 of this title) that is not a commercial
mobile service or the functional equivalent of a commercial
mobile service, as specified by regulation by the Commission.
47 U.S.C. $ 332(dX3).
Case: 09-15446 1010812A10 Page: lAof 21 lD: 7501854 DktEntry: 30-1
Telss¡unus v. PoweR 17015
ing various customers for use of mountain-top and other high

radio repeater sites to provide wireless communications in the
greater Phoenix region"; and that Radiolink "carried on this
for-prof,rt common carrierf ] wireless service" for many years.
[2] We do not assume the truth of the complaint's bare

legal conclusion that Radiolink is a common carrier, Iqbal,
129 S. Ct. at 1950, but instead consider whether the com-
plaint's well-pleaded facts are sufficient to state a claim. Tele-
saurus's complaint plausibly alleges that Radiolink is a for-
profit endeavor, thus satisffing one of the elements required
to meet the definition of a common carrier. See 47 U.S.C.
$ 332(dxl)-(2). But the complaint does not adequately allege
that Radiolink's service is interconnected or pending intercon-
nection, as defined in $ 332(d)(2), or that it is provided to the
public or the other users specified in $ 332(d)(l). Id. As such,
we lack "sufficient factual matter, accepted as true" to estab-
lish that Radiolink is a common carrier. Iqbal, I29 S.Ct. at
1949.
Telesaurus argues that Radiolink must be deemed to be a

common carrier because it was using the VPC Frequencies,
which the FCC designated for use only by commercial mobile
services. We reject this tautology. As explained above, the
definition of "commercial mobile services" does not tum on
the nature of the frequencies being used, but rather on
whether the service being provided meets certain cnteria. See
47 U.S.C. $ 332(dX1)-(2); see also S.W. Bell Tel. Co. v. FCC,
19 F.3d 1475, 1481 (D.C. Cir. 1994) ("'Whether an entity in
a given case is to be considered a common carrier or a private
canier turns on the particular practice under surveillance.").
[3] Because a private cause of action under $$ 206 and 207

may be brought only against a "common carrier," and because
Telesaurus has failed to make a plausible allegation that
Radiolink is such a carrier, we agree with the district court
that Telesaurus has failed to state a claim under the FCA. 47
u.s.c. $$ 206-07.
Case: 09-15446 lAlABnU} Page: 11 of 21 lD: 7501854 DktEntry: 30-1
t70t6 Tu.EsnuRus v. PoweR
Given this conclusion, we turn to Telesaurus's argument

that the district court erred in denying it leave to amend its
complaint. As noted above, the district court concluded that
the "Regulatory Status: PMRS" notation on Radiolink's
license was a determination by the FCC, entitled to deference
under Chevron,467 U.S. at 843, that Radiolink was not a
common carrier for purposes of Telesaurus's suit. Under
Chevron, we defer to an agency's construction of the statute
it administers if "the statute is silent or ambiguous with
respect to the specific issue," and the agency's interpretation
"is based on a permissible construction of the statute." See id.
Moreover, even if an agency's decision does not qualiff for
Chevron deference, we still give "considerable weight" to the
"well-reasoned views of the agencies implementing a stafute,"
in proportion to "the degree of the agency's care, its consis-
tency, formality, and relative experhress, and to the persua-
siveness of the agency's position." United States v. Mead
Corp.,533 U.S. 218, 227-28, 234-235 (2001) (citing Skid-
more v. swift & co.,323 u.s. 134, 139-40 (1944)) (footnotes
and internal quotation marks omitted).
[4] In this case, however, the parties have not identified,

and we are not aware of, any authority indicating that the
FCC's notation on Radiolink's license constitutes an interpre-
tation entitled to Chevron deference. And, given the absence
of any reasoned analysis by the FCC explaining the "PMRS"
notation, we cannot give it significant weight under Mead and
Skidmore. See Mead,533 U.S. at 228; Skidmore,323 U.S. at
140. Indeed, it is far from clear that the bare notation "PMRS"
on Radiolink's license, without more, even represents the
FCC's considered judgment that Radiolink is a "private
mobile service" for purposes of Telesaurus's suit. See 47
U.S.C. $ 332(cX2), (dX3). Furthermore, "common carrier"
status depends upon the services Radiolink is providing to its
customers, an inquiry not necessarily identical to the question
of regulatory status noted on a license. Id. $ 332(dX1)-(2); see
S.W. Bell, 19 F.3d at 1481. In light of these considerations,
the notation on Radiolink's license lacks any " 'power to per-
Case: 09-15446 10l0Bl2A1A Page: 12 ot 21 lD: 7501854 DktEntry. 30-1
TrleseuRus v. PowBn 17017
suade,'" Mead,533 U.S. at229 (quoting Skidmore,323 U.S.

at 140), and therefore is not entitled to deference.
[5] The district court thus erred in holding that the

"PMRS" notation on Radiolink's license compelled the con-
clusion that, as a matter of law, Radiolink was not a common
carrier for purposes of Telesaurus's suit. Because the district
court's basis for denying leave to amend was incorrect, and
Radiolink has not identified any other reason that amendment
would be futile, we conclude that the district court abused its
discretion by denying Telesaurus leave to amend. See Schrei-
ber, 806 F .2d at 1402; Bonanno v. Thomas,309 F .2d 320, 322
(9th Cir. 1962).8
IV
Telesaurus also appeals from the dismissal of its state tort
claims for conversion, unjust enrichment, and intentional
interference with prosp ective economic adv antage. Telesaurus
alleges that Radiolink knew that Telesaurus alone was right-
fully licensed to use the VPC Frequencies, but submitted a
license application to the FCC that falsely charactenzed the
frequencies as available. According to Telesaurus, Radiolink
subsequently used the VPC Frequencies wrongfully and in
violation of Telesaurus's rights. As a result, Telesaurus
alleges that it lost specific economic opportunities and
incurred damages. Telesaurus argues that the district court
erred in holding that the FCA expressly or implicitly preempts
these claims.
sBecause
we affirm the dismissal of Telesaurus's complaint on this
ground, we do not reach Radiolink's argument that no private right of
action under 47 U.S.C. $$ 206 and207 is available for breach of 47 U.S.C.
$$ 301, 308, 309, 312(a) and 503(c)(l). The district court will have the
opportunity to address Radiolink's argument on this issue if Telesaurus is
able to amend its pleadings to make a plausible allegation that Radiolink
is a common carrier.
Case:09-15446 1010812A10 Page: 13 of 21 lD: 7501854 DktEntry: 30-1
t7018 TeLsseunus v. Powrn
"The purpose of Congress is the ultimate touchstone of pre-

emption analysis." Cipollone v. Liggett Group, lnc.,505 U.S.
504, 516 (1992) (plurality opinion) (internal quotation marks
omitted). Because "Congress may indicate pre-emptive intent
through a statute's express language or through its structure
and purpose," Altria Group, Inc. v. Good,129 S.Ct. 538,543
(2008), we first look to the text of the FCA to determine
whether Congress explicitly preempted Radiolink's common
law claims. See generally Metrophones Telecom., Inc. v.
Gloòat Crossing Telecom., Lnc.,423 F.3d 1056, 1071-72 (gth
Cir. 2005).
[6] The express preemption provision of the FCA relevant

to mobile services, $ 332(cX3)(A), states in relevant part that
"no State or local government shall have any authority to reg-
ulate the entry of or the rates charged by any commercial
mobile service or any private mobile service, except that this
paragraph shall not prohibit a State from regulating the other
terms and conditions of commercial mobile services." 47
U.S.C. $ 332(cX3)(A). Under this section, a state enactment
may be preempted either because: (1) the enactment regulates
the rates charged by a mobile service; or (2) because the
enactment regulates the market entry of any such service.
The FCC has interpreted the scope of this preemption pro-

vision in In re Wireless Consumers Alliance, (nc.,1.5 F.C.C.R.
17021, 17026-35 (2000), an interpretation that we adopted in
Shroyer v. New Cingular llireless Services, Inc. See 606 F.3d
658, 662 &. n.2, 663 (gth Cir. 2010).' In In re Wireless, the
eln the course of discussing In re Wireless's determination that certaln

state tort claims were not preempted by $ 332(c)(3), Shroyer noted that
"[b]ecause the FCC is authorized to issue binding legal rules, an order
issued under that authority is entitled to Chevron deference." See Shroyer,
606 F.3d at 662 n.2. Shroyer did not address the Supreme Court's recent
statement that it does not give Chevron deference to "an agency's conclu'
Case: 09-15446 1010812010 Page: 14of 21 lD: 7501854 DktEntry: 30-'1
TelssnuRus v. Powen 17019
FCC considered a petition seeking a declaratory ruling that

$ 332(c)(3)(A) precluded state courts from awarding mone-
tary relief against commercial mobile radio service providers
for a range of state tort and contract actions. 15 F.C.C.R. at
IT02L Commenters argued that such actions were preempted
because the adjudication of monetary damage claims would
per se "require[ ] the [state] court to regulate rates" in contra-
vention of $ 332(c)(3xl) Id. at 17024-25.
In a thorough and well-reasoned opinion, the FCC rejected

this per se approach, adopting instead a case-by-case analysis
for preemption of state tort actions under $ 332(c)(3)(I). Id.
at 17022. First, the FCC determined that'Judicial action can
constitute state regulatory action for purposes of Section
332," and thus may be expressly preempted under that provi-
sion. See 15 F.C.C.R. at 17027 (emphasis added). The FCC
explained that "[t]his conclusion comports with the Supreme
Court's determination that a judicial decision can constitute
state action, as well as with the determinations of the Supreme
Court and other courts that, like legislative or administrative
action, judicial action constitutes a form of state regulation."
Id. at 17027 & nn.39-40 (citing, inter alia, Shelley v. Kraemer,
334 U.S. I (1948) and BMll of N. Am., Inc. v. Gore,517 U.S.
ssg, 572 n.l7 (1996)).
Second, the FCC determined that although "[s]ection 332

does not generally preempt the award of monetary damages
by state courts based on state tort and contract claims," it
sion that state law is pre-empted," but rather accords weight to the "agen-
cy's explanation of state law's impact on the federal scheme" based on "its
thoroughness, consistency, and persuasiveness." Wyeth v. Levine, 129
S.Ct. I 187, 1201 (2009) (citing Mead, 533 U.S. at 234-35; Skidmore,323
U.S. at 140). In considering In re lhireless's interpretation of $ 332(c)(3),
however, application of either the Skidmore factors or Chevron deference
would yield the same result. Therefore, we need not address the question
whether some or all of the FCC's analysis in In re llireless is entitled to
Skidmore rather than Chevron deference.
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r7020 Tnr-psRuRus v. Powpn

"bars state regulation of, and thus lawsuits regulating, the
entry of or the rates or rate structures of fmobile service] pro-
viders." Id. at 11026, 17028. As relevant to the rate preemp-
tion alleged in In re Wireless, the FCC held that if "the award
of monetary damages [is] necessarily equivalent to rate regu-
lation," or required a court to "rule on the reasonableness of
[a] . . . carrier's charges," it is preempted. Id. at 17028, 17035.
The FCC emphasized that "whether a specific fclaim] is pro-
hibited by Section 332 wlll depend on the specific details of
the award and the facts and ôircumstances of a particular
case." Id. at 17040.
Shroyer adopted In re Wirel¿ss's interpretation of $ 332(c)

along with its analytical framework. See 606 F.3d at 662-63.
ln Shroyer, a plaintiff filed a class action against a wireless
service provider, alleging that his cell-phone service had been
"severely degraded" following the merger of his service pro-
vider with another. Id. at 661. The plaintiff sought a declara-
tory judgment as well as damages for alleged breach of
contract, fraud, and unfair competition. Id. The service pro-
vider argued that the plaintiffs claims were preempted by
$ 332(cX3)(A) because the claims "challenge[d] the quality
and rates of service, and those areas are reserved exclusively
to the FCC." Id. (citing 47 U.S.C. $ 332(cX3XA)).
In considering the parties' preemption arguments, we first

followed the FCC's conclusion that $ 332(c)(3)'s preemption
of state regulation applies to judicial action. See id. at 662;
Peck v. Cingular Wireless, LLC, 535 F.3d 1053, 1058 (9th
Cir. 2008) (applying express preemption analysis under
$ 332(cX3)(A) to a class action complaint alleging violation
of a Washington statute); see also Pinney v. Nokia Inc., 402
F.3d 430, 455-56 (4th Cir. 2005); Bastien v. AT&T Ilireless
Servs., lnc.,205 F.3d 983,959 (7th Cir.2000), distinguished
on other grounds by Shroyer, 606 F.3d at 662-63. Second, we
adopted In re Wireless's holding that not all common law
damages actions will fall within the express scope of
$ 332(cX3)(/t). Shroyer, 606 F.3d at 662-63. As in In re
Case: 09-15446 1010812A10 Page: 16of 21 tD: 75û1854 DktEntry: 30-1
TelesnuRus v. PoweR 17021
Wireless, we reasoned that $ 332(c)(3)(A) preempts damage

claims only if the court, in adjudicating the plaintiff s claim,
would have to engage in a regulatory analysis of the "reason-
ableness" of a particular rate, id.; see AT8¿T Corp. v. FCC,
349 F.3d 692,702 (D.C. Cir. 2003), or, said otherwise, would
be "called upon to substitute its judgment for the agency's on
the reasonableness of a tate," Nader v. Allegheny Airlines,
Inc., 426 U.S. 290, 299 (1976). Because plaintiffs contract
and misrepresentation claims in Shroyer did not "ask[] the
court to rule on the reasonableness of a particular rate," we
concluded that the claims were not preempted. Shroyer,606
F.3d at 661. Contrariwise, we held that "[e]lements of
Shroyer's unfair competition claim" were preempted because
they "depend[ed] on the assessment of the public benefit of
the merger." Id. at 663; see id. at 666. We concluded that
$ 332(c)(3)(A) precluded any reexamination of the merger
issue, a regulatory determination already made by the FCC.
Id. at 663.
[7] Neither Shroyer nor In re ílireless articulated a corre-

sponding test for preemption under the "market entry" prong
of $ 332(c)(3XA) However, the logic of these cases provides
substantial guidance. See Shroyer, 606 F.3d at 662-63; In re
Ií/ireless, 15 F.C.C.R. at 17034. Just as $ 332(cX3XA) pre-
empts claims that require a court to substitute its judgment for
the agency's with respect to the reasonableness of a particular
rate, $ 332(cX3XA) also preempts claims that require a court
to substitute its judgment for the agency's with regard to a
market-entry decision. Cf Shroyer, 606 F.3d at 66I-63; In re
Wireless, 15 F.C.C.R. at 17035; see also Pinney, 402 F.3d at
456. ln other words, $ 332(c)(3XA) preempts a state tort
action that would require a court to engage in an assessment
or reexamination of the FCC's regulatory determination
regarding a mobile service's entry into the market.
[8] Licensing has long been recognized as the FCC's core

tool in the regulation of market entry. See generally 47 U.S.C.
$ 301; Red Lion Broadcasting Co. v. FCC,395 U.S. 361,376,
Case: 09-15446 1010812A10 Page: 17 of 21 tD: 7501854 DktEntry: 30-1
n022 Trleseunus v. Pow¡R

379-80 (1969). Accordingly, section 332 of the FCA outlines
the FCC's duty to manage the spectrum available to mobile
services through a licensing system. 47 U.S.C. $ 332. Such
licensing directly involves agency determinations of public
interest, safety, eff,tciency, and adequate competition, all
inquiries specially within the expertise of the FCC. Id.
$ 332(a)(1)-(4); see td. $ 301 (noting the express purpose of
the FCA: "to maintain the control of the United States over
all the channels of radio transmission; and to provide for the
use of such channels, but not the ownership thereof, by per-
sons for limited periods of time, under licenses granted by
Federal authority ."). Accordingly, $ 332(c)(3)(A) pre-
empts state tort actions that require a court "to substitute its
judgment for the agency's" with regard to a licensing deci-
sion. Nader, 426 U.S. at 299.
We apply these principles to Radiolink's contention that

Telesaurus's common law claims for conversion, unjust
enrichment, and intentional interference with prospective eco-
nomic advantage are preempted under either the "rates" or
"market entry" prongs of $ 332(c)(3XA).
Under Arizona law, conversion "is an intentional exercise

of dominion or control over a chattel which so seriously inter-
feres with the right of another to control it that the actor may
justly be required to pay the other the full value of the chat-
telJ' Miller v. Hehlen, 104 P.3d 193,203 (Anz. App. 2005)
(internal quotation marks omitted). The elements of unjust
enrichment are "(1) an enrichment; (2) an impoverishment;
(3) a connection between the enrichment and the impoverish-
ment; (4) absence of justif,rcation for the enrichment and the
impoverishment[;] and (5) an absence of a remedy provided
by law." Cmty. Guardian Bank v. Hamlin,898 P.2d 1005,
1008 (Ariz. App. 1995). Finally, to establish a claim for tor-
tious interference with prospective economic advantage, Tele-
saurus must prove "the existence of a valid contractual
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Tel¡seuRus v. Pownn t7023

relationship or business expectancy; the interferer's knowl-
edge of the relationship or expectancy; intentional interfer-
ence inducing or causing a breach or termination of the
relationship or expectancy; and resultant damage to the parly
whose relationship or expectancy has been disrupted." Wal-
lace v. Casa Grande Union High Sch. Dist. No. 82 Bd. of
Governors,909 P.2d 486, 494 (Ariz. App. 1995). To state a
claim, Telesaurus must establish that the interference was
improper, as determined under a seven-factor test that Ari-
zona courts have adopted from the Restatement of Torts. Bar
J Bar Cattle Co. v. Pace,763 P.2d 545, 547-48 (Ariz. App.
1e88).
[9] Tuming first to $ 332(c)(3)(A)'s preemption of state

authority to regulate rates, Radiolink argues that Telesaurus's
claims are preempted because they "implicitly seek to set a
value on the frequencies at issue, using state-law principles to
usurp the rate setting function that is the exclusive province
of the FCC." We disagree. This case involves a suit brought
by one mobile-service provider against another, alleging dam-
ages to its business interests from allegedly improper use of
certain frequencies. Although a court adjudicating Tele-
saurus's state-law claims would have to determine whether
Telesaurus was damaged by Radiolink's use of the VPC Fre-
quencies, and the extent of any such damage, this determina-
tion would not require the court to pass judgment on the
reasonableness of Radiolink's charges in order to provide
compensation for Telesaurus's alleged injury. In re Wireless,
15 F.C.C.R. at 17035. At most, it might be "appropriate for
[the court] to take the [rate] into consideration in calculating
damages." 1d. Such consideration of a rate as a fact informing
damages calculations does not infringe on the FCC's area of
exclusive authority to regulate the rates applicable to mobile
service providers. Because a court considering Telesaurus's
state tort actions would not have to engage in a regulatory
analysis of the reasonableness of a particular rate, or to "sub-
stitute its judgment for the agency's on the reasonableness of
arate," Nader,426U.S. at299, we conclude that Telesaurus's
Case:09-15446 ßlABl2O10 Page: 19 of 21
tD: 7501854 DktEntry. 30-1
17024 Teleseunus v. Powen
damages claims are not expressly preempted as attempts to

regulate a rate.47 U.S.C. $ 332(cX3XA).
[10] Turning next to $ 332(c)(3)(A)'s preemption of state

authority to regulate market entry, Radiolink argues that
because Telesaurus's state tort claims rest on the allegation
that Radiolink's FCC-licensed operation of certain frequen-
cies was "wrongful" or "unlawful," they are expressly pre-
empted under the market entry prong of $ 332(c)(3)(A). W"
agree. Each of Telesaurus's state-law claims requires adjudi-
cation of whether Radiolink's use of the VPC Frequencies
was improper, and, if so, whether Telesaurus suffered damage
from such allegedly wrongful use. Under the facts of this
case, such allegations would require the court to substitute its
judgment for the FCC's with regard to a licensing decision,
a core determination regarding market entry.
[11] Although Telesaurus alleges that Radiolink's opera-

tion of the VPC Frequencies was wrongful, at all times rele-
vant to Telesaurus's complaint Radiolink operated under a
valid FCC license granting it the authority to use those fre-
quencies. Although the FCC subsequently modified the
license to delete the VPC Frequencies, Telesaurus's tort
claims amount to a collateral challenge to the validity of the
license initially granted to Radiolink by the FCC. As we
stated in Shroyer, state tort law may not be used to reexamine
or reassess the FCC's determinations. ,S¿e Shroyer,606 F.3d
at 663. Indeed, here, there is an irreconcilable conflict
between the FCC's exclusive licensing authority, i.e. its
power to regulate market entry, and Telesaurus's allegations
that Radiolink "wrongfully" or "unlawfully" operated under
its FCC license. See Nader, 426 U.S. at 299; 47 U.S.C.
$ 332(c)(3)(A). Because an adjudication of Telesaurus's tort
claims would be necessarily equivalent to second-guessing
the FCC's issuance of a license, they are expressly preempted
under the market entry prong of $ 332(c)(3)(A). 47 U.S.C.
$ 332(c)(3)(A).
Case: 09-15446 101t812010 Page: 2A ol21 lD: 7501854 DktEntry: 30-1
Ter-esRunus v. Powpn 17025
[12] Telesaurus argues that even if a court's adjudication

of its tort claims would require reconsideration of the FCC's
licensing determination, its state tort claims are saved from
preemption under 47 U.S.C. $ 414, the FCA's savings clause.
This section provides that nothing in the FCA's provisions
governing wire or radio communication "shall in any way
abridge or alter the remedies now existing at common law or
by statute," but rather "are in addition to such remedies." Id.
$ 414.'0 The FCC addressed and rejected a substantially iden-
tical claim in In re Wireless, reasoning that "[u]nder accepted
principles of statutory construction . . . the savings clause can-
not preserve state law causes of action or remedies that con-
travene express provisions of the Telecommunications Act."
15 F.C.C.R. at 17040. We agree. As the Supreme Court has
explained, the savings clause of the Communications Act,
ç 414, preserves only those rights that are "not inconsistent"
with statutory requirements elsewhere in the FCA. Am. Tel. &
Tel. Co. v. Cent. Office Tel., Inc., 524 U.S. 214, 221-28
(1998). Accordingly, the Supreme Court concluded that the
savings clause could not be construed to preserve "a common
law right, the continued existence of which would be abso-
lutely inconsistent with the provisions of the act. In other
words, the act cannot be held to destroy itself." Id. at 228
(internal modifications omitted) (citing Tex. & Pac. R. Co. v.
Abilene Cotton Oil Co.,204 U.S. 426, 446 (1907)). Indeed, to
read $ 414 expansively would "abrogate the very federal reg-
ulation of mobile telephone providers that the [FCA] intended
to create." Bastien, 205 F.3d at 987. Section 332(c)(3)(A)
does not as a general matter preempt state tort and contract
actions, thus ensuring that S 414 has effect. See In re NOS
Commc's, 495 F.3d 1052, 1058 (9th Cir.2007) ("[S]ection
414 evidences Congressional intent to allow some state law
claims to proceed.") (discussing Marcus v. AT&T Corp., T38
losection
$ 414 provides:
Nothing in this chapter contained shall in any way abridge or
alter the remedies now existing at common law or by statute, but
the provisions of this chapter are ìn addition to such remedies.
Case:09-15446 rcl}Blz}1} Page: 21 of 21 lD: 7501854 DktEntry: 30-1
17026 TeLrs¡uRus v. PoweR
F.3d 46,54 (2d Cir. 1998)). Nevertheless, actions that have

the effect of regulating rates and market entry are expressly
preempted by $ 332(cX3XA) and thus beyond the scope of
ç 4r4.
[13] Telesaurus's state-law claims, in effect, call upon the

court to deem "wrongful" actions that the FCC, under its
licensing authority, expressly authorized. Section
332(c)(3)(A) prohibits us from substituting our judgement for
that of the agency's under the guise of a state-law tort claim.
See Shroyer,606 F.3d at 662-63. We therefore conclude that
Telesaurus's claims are expressly preempted, and affirm their
dismissal.
We conclude that the district court properly dismissed Tele-

sarus's claims under the FCA, but erred in denying leave to
amend. See 47 U.S.C. $$ 206-07. We affirm the dismissal of
Telesaurus's claims under Anzona law for conversion, unjust
enrichment, and intentional interference with prospective eco-
nomic advantage, because such claims are expressly pre-
empted by section $ 332(c)(3)(A) of the FCA. Id.
$ 332(cX3XA).
AFFIRMED IN PART & REVERSED IN PART;

REMANDED.

Telesaurus v. Power, Petition Rehearing, 9th Circuit - Void License Can't Cause FCC Preemption

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Telesaurus v. Power, Petition Rehearing, 9th Circuit - Void License Can't Cause FCC Preemption

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

Plantiff Telesaurus is one of the

The Ninth Circuit essentially

This makes a mockery of FCC

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

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

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

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

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

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

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

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

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

threshold determination that Radiolink operated "under a valid FCC

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

' This opinion is attached hereto as Exhibit I.

administrative proceedings which preceded this lawsuit.

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

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

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

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

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

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

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

preemption jurisprudence from this Court and other Federal Circuits.3

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

Concurrently, Telesaurus requests en banc review and reversal with respect

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

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

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

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

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

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

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

preemption issue, pending further FCC guidance on this matter.

The issue here is whether the issuance of a federal telecommunications

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

17024 of its Opinion:

[A]t all times relevant to Telesaurus's complaint Radiolink operated

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

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

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

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

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

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

forfeited due to subsequenr misconduct by the licensee.a

This distinction between a valid license right to available frequencies which

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

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

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

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

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

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

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

to the VPC Frequencies in the first place.s

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

opportunity to litigate their discrimination claim in a prior unlawful detainer

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

inappropriate where the evidence, argument and discovery in the putatively

as to whether the allegedly preclusive settlement agreement was signed under

claims asserted by Telesaurus against Radiolink were preempted. Indeed,

before the trial court.ó

C. Telesaurus's Claims Do Not "Second-Guess" The FCC's