throbber
FOR PUBLICATION
`
`UNITED STATES COURT OF APPEALS
`FOR THE NINTH CIRCUIT
`
`ACA CONNECTS – AMERICA’S
`COMMUNICATIONS ASSOCIATION,
`FKA American Cable Association;
`CTIA – THE WIRELESS
`ASSOCIATION; NCTA – THE
`INTERNET & TELEVISION
`ASSOCIATION; USTELECOM – THE
`BROADBAND ASSOCIATION,
`Plaintiffs-Appellants,
`
`No. 21-15430
`
`D.C. No.
`2:18-cv-02684-
`JAM-DB
`
`OPINION
`
`v.
`
`ROB BONTA, in his official capacity
`as Attorney General of California,
`Defendant-Appellee.
`
`Appeal from the United States District Court
`for the Eastern District of California
`John A. Mendez, District Judge, Presiding
`
`Argued and Submitted September 14, 2021
`San Francisco, California
`
`Filed January 28, 2022
`
`

`

`2
`
`ACA CONNECTS V. BONTA
`
`Before: J. Clifford Wallace, Mary M. Schroeder, and
`Danielle J. Forrest, Circuit Judges.
`
`Opinion by Judge Schroeder;
`Concurrence by Judge Wallace
`
`SUMMARY*
`
`Preliminary Injunction / Preemption
`
`The panel affirmed the district court’s order denying
`plaintiffs’ motion for a preliminary injunction against
`enforcement of the California Internet Consumer Protection
`and Net Neutrality Act of 2018, or SB-822.
`
`the Federal Communications
`In a 2018 order,
`Commission decided to stop treating broadband internet
`services as “telecommunications services” subject
`to
`relatively comprehensive, common-carrier
`regulation
`pursuant to Title II of the Communications Act, and to
`classify them instead under Title I as lightly regulated
`“information services,” which had the result of terminating
`federal net neutrality rules. A group of industry trade
`associations representing communications service providers
`sought an injunction to prevent the California Attorney
`General from enforcing SB-822, which in essence, codified
`the rescinded federal net neutrality rules, but limited its
`application to broadband internet services provided to
`customers in California. The district court concluded there
`
`* This summary constitutes no part of the opinion of the court. It has
`been prepared by court staff for the convenience of the reader.
`
`

`

`ACA CONNECTS V. BONTA
`
`3
`
`was no federal preemption because the FCC lacked the
`requisite regulatory authority.
`
`In Mozilla Corp. v. F.C.C., 940 F.3d 1 (D.C. Cir. 2019),
`the D.C. Circuit upheld the FCC’s 2018 reclassification
`decision but struck down an accompanying order preempting
`state net neutrality rules. The panel rejected the service
`providers’ contention
`that SB-822 nevertheless was
`preempted because it conflicted with the policy underlying
`the FCC’s reclassification decision and conflicted with the
`Communications Act and its limitations on federal regulation.
`The panel also rejected the service providers’ contention that
`SB-822 was preempted because federal law occupies the field
`of interstate services.
`
`Guided by the D.C. Circuit’s decision in Mozilla, the
`panel held that only the invocation of federal regulatory
`authority can preempt state regulatory authority. The panel
`held that, by classifying broadband internet services as
`information services, the FCC no longer had the authority to
`regulate in the same manner that it did when these services
`were classified as telecommunications services. The FCC,
`therefore, could not preempt state action, like SB-822, that
`protects net neutrality. The panel held that SB-822 did not
`conflict with the Communications Act itself, which only
`limits the FCC’s regulatory authority. The panel held that the
`service providers’ field preemption argument was foreclosed
`by case law and various provisions of the Communications
`Act.
`
`Concurring, Judge Wallace wrote separately to express
`his concern that in some cases, parties appeal orders granting
`or denying motions for preliminary injunctions in the
`misguided belief they can ascertain the views of the appellate
`
`

`

`ACA CONNECTS V. BONTA
`
`ourt on the merits of the litigation, and this often leads to
`unnecessary cost, delay and inefficient use of judicial
`resources.
`
`4 c
`
`COUNSEL
`
`Scott H. Angstreich (argued), Leslie V. Pope, and Alex A.
`Parkinson, Kellogg Hansen Todd Figel & Frederick PLLC,
`Washington, D.C., for Plaintiffs-Appellants CTIA – The
`Wireless Association and USTelecom – The Broadband
`Association.
`
`Matthew A. Brill, James Tomberlin, Matthew T. Murchison,
`and Ryan S. Baasch, Latham & Watkins LLP, Washington,
`D.C., for Plaintiff-Appellant NCTA – The Internet &
`Television Association.
`
`Jeffrey A. Lamken, MoloLamken LLP, Washington, D.C.,
`for Plaintiff-Appellant ACA Connects – America’s
`Communications Association.
`
`P. Patty Li (argued), Sarah E. Kurtz, and John D. Echeverria,
`Deputy Attorneys General; Paul Stein and Heather B.
`Hoesterey, Supervising Deputy Attorneys General; Joshua
`Patashnik, Deputy Solicitor General; Thomas S. Patterson,
`Senior Assistant Attorney General; Rob Bonta, Attorney
`General; Attorney General’s Office, San Francisco,
`California; for Defendant-Appellee.
`
`Corbin K. Barthold, Berin Szóka, and James Dunstan,
`TechFreedom, Washington, D.C., for Amicus Curiae
`TechFreedom.
`
`

`

`ACA CONNECTS V. BONTA
`
`5
`
`Jeffrey M. Harris, Bryan Weir, and Tiffany H. Bates,
`Consovoy McCarthy PLLC, Arlington, Virginia; Tara
`S. Morrissey and Paul V. Lettow, U.S Chamber Litigation
`Center; for Amici Curiae Chamber of Commerce of the
`United States of America, California Chamber of
`Commerce, Small Business & Entrepreneurship Council,
`Telecommunications
`Industry Association, and
`CALinnovates.
`
`Brian R. Hardy and Kathleen A. Wilde, Marquis Aurbach
`Coffing, Las Vegas, Nevada, for Amicus Curiae International
`Center for Law & Economics.
`
`Christopher S. Yoo, University of Pennsylvania Carey Law
`School Transnational Legal Clinic, Philadelphia,
`Pennsylvania, pro se Amicus Curiae.
`
`Kevin K. Russell, Goldstein & Russell PC, Bethesda,
`Maryland, for Amici Curiae Professors of Communications
`Law, and Media Democracy Fund.
`
`Corynne McSherry and Kit Walsh, Electronic Frontier
`Foundation, San Francisco, California; Jacob A. Snow,
`ACLU Foundation of Northern California, San Francisco,
`California; Melissa Goodman and Zoe McKinney, ACLU
`Foundation of Southern California, Los Angeles, California;
`Andrew Jay Schwartzman, Benton Institute for Broadband &
`Society, Washington, D.C.; for Amici Curiae Electronic
`Frontier Foundation, ACLU Foundation of Northern
`California, ACLU Foundation of Southern California, Access
`Humboldt, Benton Institute for Broadband & Society, Clean
`Money Campaign, Fight for the Future, Greenling Institute,
`iFixit Inc., Media Justice, National Hispanic Media Coalition,
`
`

`

`ACA CONNECTS V. BONTA
`
`6 O
`
`akland Privacy, Reddit Inc., Turn—The Utility Reform
`Network, and Writers Guild of America, West, Inc.
`
`Letitia James, Attorney General; Barbara D. Underwood,
`Solicitor General; Steven C. Wu, Deputy Solicitor General;
`Office of the Attorney General, New York, New York;
`William Tong, Attorney General, Hartford, Connecticut;
`Kathleen Jennings, Attorney General, Wilmington, Delaware;
`Clare E. Connors, Attorney General, Honolulu, Hawai‘i;
`Kwame Raoul, Attorney General, Chicago, Illinois; Aaron M.
`Frey, Attorney General, Augusta, Maine; Brian E. Frosh,
`Attorney General, Baltimore, Maryland; Maura Healey,
`Attorney General, Boston, Massachusetts; Dana Nessel,
`Attorney General, Lansing, Michigan; Keith Ellison,
`Attorney General, Saint Paul, Minnesota; Gurbir S. Grewal,
`Attorney General, Trenton, New Jersey; Hector Balderas,
`Attorney General, Santa Fe, New Mexico; Ellen F.
`Rosenblum, Attorney General, Salem, Oregon; Josh Shapiro,
`Attorney General, Harrisburg, Pennsylvania; Peter F.
`Neronha, Providence, Rhode Island; Thomas J. Donovan Jr.,
`Attorney General, Montpelier, Vermont; Robert W. Ferguson,
`Attorney General, Olympia, Washington; Joshua Kaul,
`Attorney General, Madison, Wisconsin; Karl A. Racine,
`Attorney General, Washington, D.C.; for Amici Curiae States
`of New York, Connecticut, Delaware, Hawai‘i, Illinois,
`Maine, Maryland, Massachusetts, Michigan, Minnesota, New
`Jersey, New Mexico, Oregon, Pennsylvania, Rhode Island,
`Vermont, Washington, Wisconsin, and District of Columbia.
`
`James R. Williams, County Counsel; Greta S. Hansen, Chief
`Assistant County Counsel; Raphael N. Rajendra and Meredith
`A. Johnson, Deputy County Counsel; Office of the County
`Counsel, San Jose, California; for Amici Curiae County of
`Santa Clara and Six Additional Local Governments.
`
`

`

`ACA CONNECTS V. BONTA
`
`7
`
`Phillip R. Malone, Juelsgaard Intellectual Property and
`Innovation Clinic, Mills Legal Clinic at Stanford Law School,
`Stanford, California; Michael J. Burstein, New York, New
`York; for Amici Curiae Internet Law Professors.
`
`Thomas H. Vidal, Pryor Cashman LLP, Los Angeles,
`California, for Amici Curiae Access Now, Mozilla Corp.,
`Public Knowledge, New America’s Open Technology
`Institute, and Free Press.
`
`OPINION
`
`SCHROEDER, Circuit Judge:
`
`Overview
`
`For the broadband internet industry, the critical regulatory
`issues that have emerged so far in this century concern access
`to the internet: what entities have access, on what terms, and
`to what extent access should be regulated. The administrative
`enthusiasm of the Federal Communications Commission
`(“FCC”) has seemingly ebbed and flowed with the political
`tides, culminating most recently in its 2018 decision to stop
`treating broadband services as “telecommunications services”
`subject
`to
`relatively comprehensive, common-carrier
`regulation pursuant to Title II of the Communications Act,
`and to classify them instead under Title I as lightly regulated
`“information services.” In the Matter of Restoring Internet
`Freedom, 33 FCC Rcd. 311 (2018) (“2018 Order”).
`
`This 2018 Order had the significant result of terminating
`federal regulation intended to protect equal access to the
`internet, popularly known as “net neutrality” rules. This in
`
`

`

`ACA CONNECTS V. BONTA
`
`8 t
`
`urn has raised immediate questions about the extent of states’
`authority in the field. In this appeal, we consider the
`broadband industry’s contention that, when the FCC
`reclassified broadband services under Title I, thereby
`abandoning its regulatory authority with respect to net
`neutrality, California was preempted from stepping into the
`breach to enact its own net neutrality protections.
`
`Plaintiffs-Appellants are a group of industry trade
`associations representing communications service providers
`(“service providers”) who sought an injunction to prevent the
`California Attorney General from enforcing the California
`Internet Consumer Protection and Net Neutrality Act of 2018
`(“SB-822”). Cal. Stats. 2018, ch. 976. This state law, in
`essence, codified the rescinded federal net neutrality rules,
`but limits its application to broadband internet services
`provided to customers in California. The district court ruled
`in favor of California and denied the service providers’
`request for a preliminary injunction to block enforcement of
`the statute. The district court concluded there was no
`preemption because the FCC lacked the requisite regulatory
`authority.
`
`The district court’s decision was in line with the D.C.
`Circuit’s recent holding in Mozilla Corp. v. F.C.C., 940 F.3d
`1 (D.C. Cir. 2019) (“Mozilla”). The court in Mozilla
`reviewed the validity of the FCC’s 2018 reclassification
`decision and an accompanying order preempting state net
`neutrality rules. The court upheld the reclassification, but
`struck down the preemption order. Id. at 18. The critical
`issue with respect to preemption was whether the FCC
`retained the statutory authority to adopt federal net neutrality
`rules after its decision to reclassify broadband internet
`services under Title I of the Communications Act. The D.C.
`
`

`

`ACA CONNECTS V. BONTA
`
`9
`
`Circuit held that, under Title I, the FCC did not have the
`authority to regulate broadband services in this manner, and
`because federal regulatory authority is a prerequisite to
`preemption, the FCC could not expressly preempt the states.
`See id. at 74–76.
`
`The service providers here nevertheless contend that the
`California statute is preempted on the basis of both conflict
`and field preemption. They argue first that SB-822 is
`preempted because it conflicts with the policy underlying the
`FCC’s reclassification decision; that policy was to eliminate
`all net neutrality regulation of broadband services, not to
`replace federal regulations with what could become a
`checkerboard of state regulations. The service providers
`additionally contend that SB-822 is preempted because it
`conflicts with the Communications Act itself and its
`limitations on federal regulation. They argue as well that
`even if there is no preemption by virtue of any identifiable
`conflict, federal law occupies the field of interstate services
`and therefore preempts state laws regulating intrastate
`services that intrude upon the field of interstate services.
`
`We conclude the district court correctly denied the
`preliminary injunction. This is because only the invocation
`of federal regulatory authority can preempt state regulatory
`authority. As the D.C. Circuit held in Mozilla, by classifying
`broadband internet services as information services, the FCC
`no longer has the authority to regulate in the same manner
`that
`it had when these services were classified as
`telecommunications services. See id. at 75–76. The agency,
`therefore, cannot preempt state action, like SB-822, that
`protects net neutrality. See id. at 18. Without the authority
`to preempt, it does not much matter whether SB-822 conflicts
`with
`the
`federal policy objectives underlying
`the
`
`

`

`10
`
`ACA CONNECTS V. BONTA
`
`reclassification decision. And SB-822 does not conflict with
`the Communications Act itself, which only limits the FCC’s
`regulatory authority. As to the service providers’ field
`preemption argument, Supreme Court authority, the case law
`of this circuit, and various provisions of the Communications
`Act itself all foreclose that argument.
`
`The stakes in this case are high for the industry and
`consumers. We have been aided in our study of the issues
`with briefs submitted by a multitude of amici curiae,
`including state and local governments, trade associations,
`advocacy groups, and law professors. In order to adequately
`explain the background of this case and the legal issues
`before us, we first provide a brief introduction to the concept
`of net neutrality and the recent history of FCC regulations
`pertaining to it.
`
`An Introduction to Net Neutrality
`
`At its most fundamental level, the internet is a global
`network of interconnected cables providing the physical
`infrastructure that connects computers. Data travels along
`these cables from the computer seeking information to the
`computer that houses the information and back. To be
`considered broadband internet, data must download to a
`consumer’s device at relatively high speeds. See, e.g., Chris
`Woodford, The Internet, EXPLAINTHATSTUFF! (July 6, 2021),
`https://www.explainthatstuff.com/internet.html; Dave
`Johnson, A Beginner’s Guide to Broadband Internet, the Most
`Popular Type of Internet in the US, INSIDER (April 2, 2021),
`https://www.businessinsider.com/what-is-broadband-internet.
`
`Many of the plaintiffs-appellants in this case are
`broadband internet service providers, operating the cables that
`
`

`

`ACA CONNECTS V. BONTA
`
`11
`
`take information from the global cable networks to the
`relevant computer. If the cables forming the internet were a
`highway, data would be the cars driving along that highway,
`and the internet service providers would build and maintain
`the exit ramps from the highway to consumers’ homes and
`businesses. Accordingly, consumers must subscribe to a
`broadband internet service provider in order to connect to
`high-speed internet.
`
`These broadband internet service providers control access
`to the internet. They can do so on the basis of the content of
`the information or the identity of the information’s creator.
`This power of control has revenue creating potential.
`Providers have exercised that power in different ways, such
`as by blocking access altogether, slowing certain customer’s
`access to the internet—commonly termed “throttling”—or
`prioritizing access to some content over others. The power to
`control access can therefore open the door for anti-
`competitive, discriminatory behavior that could disadvantage
`important segments of society. For illustration, the FCC has
`found that service providers engage in anti-competitive
`behavior when they block access to services that compete
`with their own. See, e.g., Madison River Communications,
`LLC, Consent Decree, 20 FCC Rcd. 4295 (2005) (finding that
`a service provider blocked ports on its network that were used
`by competing services, resulting in a consent decree and
`fine).
`
`Any federal authority to regulate the exercise of that
`control and safeguard equal access to the internet rests with
`the FCC. That agency regulates broadband internet services
`under the Communications Act, 47 U.S.C. § 151 et seq, and
`the amendments to the Act made by the Telecommunications
`Act of 1996, Pub. L. No. 104-104, 110 Stat. 56. Under the
`
`

`

`12
`
`ACA CONNECTS V. BONTA
`
`Communications Act, the FCC has the authority to classify
`broadband internet services as either a “telecommunications
`service” under Title II of the Act, 47 U.S.C. §§ 201–222, or
`an “information service” under Title I, 47 U.S.C. §§ 151–155.
`
`The classification decision is key because it dictates the
`scope of the FCC’s regulatory authority. The FCC has
`express, expansive authority
`to
`regulate Title
`II
`telecommunications services, but only a more limited
`“ancillary authority” with respect to Title I information
`services. Nat’l Cable & Telecomms. Ass’n v. Brand X
`Internet Servs., 545 U.S. 967, 975–76 (2005) (“Brand X”).
`Pursuant to Title I, the FCC can only impose regulations
`ancillary or necessary to the effective performance of the
`FCC’s specific statutory responsibilities. See id.; see also
`People of State of California v. F.C.C., 905 F.2d 1217, 1240
`n.35 (9th Cir. 1990) (“California I”); 47 U.S.C. §§ 151–155.
`If classified under
`the broad authority of Title II,
`telecommunications services are treated as common carriers,
`which triggers a multitude of statutory restrictions and
`requirements. Brand X, 545 U.S. at 975–76; California I,
`905 F.2d at 1240 n.35; 47 U.S.C. §§ 201–222.
`
`Under Title II, the FCC can regulate broadband internet
`services to ensure what has come to be known as “net
`neutrality,” by adopting regulations making it illegal for
`service providers to engage in blocking, throttling, and
`prioritization for payment or to benefit an affiliate. See U.S.
`Telecom Ass’n v. F.C.C., 825 F.3d 674, 689 (D.C. Cir. 2016)
`(upholding In the Matter of Protecting and Promoting the
`Open Internet, 30 FCC Rcd. 5601 (2015) (“2015 Order”)).
`Such regulation imposes costs that critics have argued would
`threaten to stifle investment and innovation, 2018 Order ¶¶ 2,
`4, and which supporters have contended are required to
`
`

`

`ACA CONNECTS V. BONTA
`
`13
`
`ensure open internet access along with broadband investment
`and deployment, 2015 Order, ¶¶ 8, 11.
`
`The upshot of the controversy is that net neutrality rules
`have had an off-again, on-again history. Prior to 2015, the
`FCC classified broadband internet as an information service
`under Title I, and the agency’s efforts to impose net neutrality
`rules were repeatedly struck down as outside the regulatory
`authority of that Title. See, e.g., Comcast Corp. v. F.C.C.,
`600 F.3d 642, 644 (D.C. Cir. 2010); Verizon v. F.C.C.,
`740 F.3d 623, 628 (D.C. Cir. 2014). In 2015, the FCC
`reclassified broadband as a Title II, telecommunications
`service and adopted net neutrality rules which the D.C.
`Circuit upheld. U.S. Telecom Ass’n, 825 F.3d at 689, 733.
`
`Six months after that decision, however, a new
`administration took office and brought with it different
`attitudes towards net neutrality. In 2018, the FCC reverted to
`the Title I classification and rescinded the net neutrality rules,
`a decision that ultimately gave rise to this litigation. 2018
`Order ¶¶ 2, 4, 65. The FCC reasoned that the net neutrality
`rules were too expensive and that the costs of the rules
`outweighed their benefits. Id. at ¶¶ 2, 4. Instead, the FCC
`adopted a “Transparency Rule” calling for broadband service
`providers to disclose practices that block, throttle, or
`prioritize internet traffic for payment or to benefit an affiliate.
`See 2018 Order ¶¶ 3, 215–231. These actions benefitted
`internet service providers, at least in part because the
`Transparency Rule lowered their compliance costs. See, e.g.,
`David Shepardson, U.S. Defends FCC’s Repeal of Net
`Neutrality Rules, Reuters, Oct. 12, 2018.
`
`At the same time, in an effort to preclude state action, the
`FCC announced a “Preemption Directive,” which purported
`
`

`

`14
`
`ACA CONNECTS V. BONTA
`
`to preempt “any state or local requirements that are
`inconsistent with the federal deregulatory approach,” 2018
`Order ¶ 194, including “any state or local measures that
`would effectively impose rules or requirements that [the
`Order] repealed,” 2018 Order ¶ 195. The Preemption
`Directive also benefitted the service providers because it was
`aimed at preventing state regulations that would impose
`additional compliance costs.
`
`In Mozilla, various states and consumer groups
`challenged the Reclassification Order and accompanying
`Preemption Directive.
` The D.C. Circuit upheld the
`reclassification, considering itself bound by the Supreme
`Court’s decision in Brand X, 545 U.S. at 19. Mozilla,
`940 F.3d. at 18–19. Because the Supreme Court had made it
`clear in Brand X that the Communications Act affords the
`FCC the discretion to classify broadband services, the D.C.
`Circuit upheld the classification under Title I as reasonable.
`See id. at 18–20, 87.
`
`in Mozilla nevertheless expressed
`judges
`Two
`considerable reservations about their holding, because the
`nature of broadband services had changed substantially since
`Brand X was decided. See id. at 18–20; see also id. at 86–87
`(Millett, J. concurring); Id. at 94–95 (Wilkins, J. concurring).
`Judge Millett explained in her concurrence that, at the time
`Brand X was decided, consumers used service providers
`chiefly to gain access to information services like domain
`name services and caching. See id. at 87. Today, these
`information services no longer occupy the same significance
`that they once did. See id. While the judges felt their hands
`were tied by Brand X, they suggested that it is no longer
`accurate to rely on domain name services and caching to
`
`

`

`ACA CONNECTS V. BONTA
`
`15
`
`determine the legal status of broadband services. See id.
`at 88–90, 94–95.
`
`Although it upheld the reclassification to Title I, the court
`in Mozilla vacated the Preemption Directive. Id. at 74. The
`court explained that the FCC may only preempt state law, as
`the Preemption Directive purported to do, if the agency is
`acting within the scope of its congressionally delegated
`authority to regulate. Id. at 74–75 (citing Louisiana Pub.
`Serv. Comm’n v. F.C.C., 476 U.S. 355, 374 (1986)
`(“Louisiana”)). By reclassifying broadband as a Title I
`information service, the FCC stripped itself of the requisite
`regulatory authority and, accordingly, of the preemptive
`authority to displace state laws. See id. at 74–76.
`
`Background of this Litigation
`
`In the immediate wake of the FCC’s 2018 decision, but
`before the D.C. Circuit’s Mozilla decision, California adopted
`SB-822. This state law does what the Preemption Directive
`was intended to prevent: it essentially codifies the FCC’s
`2015 net neutrality rules, Compare Cal. Civ. Code
`§ 3101(a)(1)–(2), (4), (7)(A) with 2015 Order ¶¶ 15–16, 18,
`21, although it applies only to broadband internet services
`provided to customers in California. Cal. Civ. Code
`§ 3100(b), (k). Additionally, SB-822 contains a disclosure
`measure similar to the FCC’s 2018 Transparency Rule.
`Compare Cal. Civ. Code § 3101(a)(8) with 47 C.F.R. § 8.1(a).
`
`California was one of the many plaintiffs in the Mozilla
`litigation challenging the FCC’s 2018 decision. See Mozilla,
`940 F.3d at 13, 17. Before the D.C. Circuit could decide that
`case, the service providers filed this action in the District
`Court for the Eastern District of California, challenging SB-
`
`

`

`16
`
`ACA CONNECTS V. BONTA
`
`822. They requested declaratory and injunctive relief,
`including a preliminary injunction preventing California from
`enforcing SB-822. The United States filed a separate action
`alleging similar claims. The two cases were later combined.
`By agreement of the parties, this litigation was stayed during
`the pendency of Mozilla.
`
`In 2019, the D.C. Circuit issued its opinion in Mozilla
`vacating the Preemption Directive. See Mozilla, 940 F.3d at
`74–76. The D.C. Circuit held that the FCC could not preempt
`the states from regulating broadband services because, after
`reclassification, the FCC did not have the underlying
`authority to regulate broadband, and therefore could not
`preempt states from doing so. See id. at 18, 74–76. The
`Mozilla decision is important to our decision here. Not only
`did the parties agree to stay this case while Mozilla was
`pending, but none of the parties now challenge the
`correctness or finality of the D.C. Circuit’s opinion.
`Following the conclusion of the Mozilla litigation in October
`2019, and after the 2020 election resulted in a new
`administration, the United States withdrew as a plaintiff in
`this case.
`
`After hearing extensive argument on the effect of the
`Mozilla decision, the district court, in a ruling from the bench,
`denied a preliminary injunction to block enforcement of the
`California statute. The court explained its decision with
`reasoning similar to that underlying the D.C. Circuit’s
`decision in Mozilla which had vacated the Preemption
`Directive. The district court held that the FCC, after the
`reclassification decision, lacked the regulatory authority to
`preempt SB-822.
`
`

`

`ACA CONNECTS V. BONTA
`
`17
`
`This appeal followed. To succeed in obtaining a
`preliminary injunction, the service providers must establish
`that they are likely to succeed on the merits, they are likely to
`suffer irreparable harm in the absence of preliminary relief,
`the balance of the equities supports the motion for a
`preliminary injunction, and an injunction is in the public
`interest. Stormans, Inc. v. Selecky, 586 F.3d 1109, 1127 (9th
`Cir. 2009) (citing Winter v. N.R.D.C., Inc., 555 U.S. 7, 20
`(2008). If the service providers fail to demonstrate that they
`are likely to succeed on the merits, this court need not
`consider the remaining factors. See DISH Network Corp. v.
`F.C.C., 653 F.3d 771, 776–77 (9th Cir. 2011).
`
`On the merits, the service providers do not dispute that,
`under Title I, the FCC now lacks the regulatory authority to
`promulgate net neutrality rules. Their principal contentions
`are that the California statute is nevertheless preempted
`because it conflicts with both the purpose underlying the
`FCC’s reclassification decision and with the Communications
`Act itself. They also argue that the FCC occupies the entire
`field of interstate communications services to the exclusion
`of the states. We are guided by the D.C. Circuit’s decision in
`Mozilla as to the scope of the FCC’s regulatory and
`preemptive authority after the 2018 reclassification.
`
`I. The California Statute Does Not Conflict With the
`FCC’s Reclassification of Broadband Services
`Under Title I
`
`Resolution of the question of conflict preemption in this
`case involves a straightforward application of federal
`preemption principles. The service providers argue that the
`FCC’s 2018 reclassification of broadband services as Title I
`information services, which eliminated the federal net
`
`

`

`18
`
`ACA CONNECTS V. BONTA
`
`neutrality rules promulgated under Title II, preempts state net
`neutrality rules. They essentially contend that the state
`regulation conflicts with the absence of federal regulation. A
`fundamental principle of preemption, however, is that an
`absence of federal regulation may preempt state law only if
`the federal agency has the statutory authority to regulate in
`the first place. Louisiana, 476 U.S. at 374. The D.C. Circuit
`applied this principle when it vacated the FCC’s Preemption
`Directive, as it recognized that the FCC does not have the
`authority to adopt federal net neutrality rules and is therefore
`unable to preempt such state regulation. See Mozilla, 940
`F.3d at 74–76. Neither party challenges the validity or
`finality of Mozilla, so we look to the D.C. Circuit’s analysis
`to guide our own.
`
`Underlying the Mozilla decision are principles laid down
`by the Supreme Court relating to an agency’s regulatory and
`preemptive authority. When a federal agency pursues a
`policy of non-regulation, as the FCC was doing in its 2018
`Order, the Supreme Court has recognized that the agency can
`preempt the states from exercising regulatory authority only
`when the agency has chosen not to exercise its full authority.
`See Ray v. Atlantic Richfield Co., 435 U.S. 151, 178 (1978).
`
`the Secretary of
`In Ray, Congress had granted
`Transportation broad authority to regulate the “vessel size and
`speed limitations” of tankers traveling in Puget Sound. Id.
`at 174. The Secretary chose not to ban large tankers although
`it had the authority to do so. Id. at 174–75. The Supreme
`Court held that, because the Secretary had the authority to
`ban large tankers, its decision not to implement such a ban
`preempted the states from doing so. Id. at 178.
`
`

`

`ACA CONNECTS V. BONTA
`
`19
`
`The service providers in this case urge us to rely on Ray.
`What happened in Ray, however, is not what happened here.
`By reclassifying broadband services under Title I, the FCC
`gave up its authority to regulate broadband services as
`common carriers and hence surrendered the authority it had
`to adopt federal net neutrality rules.
`
`This case is thus more like the situation in Louisiana
`where the Court held that a federal agency may not preempt
`state regulation when the agency itself does not have
`regulatory authority. See 476 U.S. at 374. At issue in
`Louisiana was whether state regulation of intrastate
`depreciation rates was preempted where Congress had not
`given the federal agency authority to regulate those rates. See
`id. at 358–59. The FCC in Louisiana, to further its national
`policy of increasing competition in the telephone services
`industry, attempted to preempt state regulators who refused
`to accept this national policy. Id. Accordingly, the FCC
`issued two orders that changed depreciation practices
`affecting telephone company facilities, asserting that these
`orders would preclude state regulators from using their own
`depreciation procedures for intrastate rate-making purposes.
`Id. at 360–62. But the Supreme Court explained that the
`Communications Act expressly denies the FCC the power to
`preempt state regulation of intrastate rates. Id. at 373.
`Accordingly, the Supreme Court held that the FCC could not
`preempt state regulation. See id. at 374–75. Without the
`power to act, a federal agency can not preempt. Id. at 374.
`We conclude that principle applies here. The FCC can not
`preempt SB-822 because it gave up its full regulatory
`authority by reclassifying broadband as a Title I information
`service.
`
`

`

`20
`
`ACA CONNECTS V. BONTA
`
`This is in accord with the D.C. Circuit’s decision in
`Mozilla. It followed the principles articulated in Ray and
`Louisiana when it vacated the FCC’s “Preemption Directive”
`that accompanied the “Reclassification Order.”
` The
`Preemption Directive had declared as preempted “any state or
`local requirements that are inconsistent with [the Order’s]
`deregulatory approach,” 2018 Order ¶ 194, including “any
`state or local measures that would effectively impose rules or
`requirements that [the Reclassification Order] repealed,”
`2018 Order ¶ 195. But unlike the situation in Ray where the
`federal agency retained its regulatory authority and the state
`was preempted, 435 U.S. at 178, the Preemption Directive did
`not rest on any regulatory authority. By reclassifying
`broadband as an information service, the FCC surrendered its
`authority to regulate with respect to net neutrality. And just
`as in Louisiana, where a federal agency was unable to
`preempt state law without the authority to regulate, 476 U.S.
`at 374–75, the Preemption Directive exceeded the FCC’s
`Title I statutory authority to regulate broadband and,
`therefore, exceeded its authority to preempt state regulation.
`See Mozilla, 940 F.3d at 74–76.
`
`The service providers try to avoid the effect of
`reclassification to Title I by arguing that the decision was not
`an abdication of authority but an exercise of discretion under
`the statute as
`to
`the appropriate classification of
`communications services. The service providers are correct
`that the 2018 decision was an exercise of sta

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