States’ rights advocates are claiming victory for an appeals court decision that overturned a preliminary injunction set by a lower court that barred a state from considering a rate discrimination claim against cellular carriers. But others are saying the decision has made the interpretation of section 332 of the 1993 Omnibus Budget Reconciliation Act as ambiguous as ever.

The United States Court of Appeals for the Sixth Circuit rescinded a 1995 Columbus, Ohio, federal judge’s decision to issue a preliminary injunction that blocked the Ohio Public Utilities Commission (PUCO) from hearing a complaint brought by Cellnet of Ohio Inc., a cellular reseller, against Ameritech Cellular Services, GTE Mobilnet Inc. and New Par, which now operates as AirTouch Cellular.

Cellnet and the carriers have been in turmoil for nearly four years since the reseller filed the complaint in 1993 with the PUCO alleging that the three companies violated Ohio statutes by refusing to provide cellular service to Cellnet at the same rates, charges and conditions the carriers were charging other organizations, including those affiliated with the carriers, said court documents.

GTE and New Par challenged the authority of the PUCO arguing that federal law preempted the commission’s authority to hear the case because section 332 of OBRA does not give states authority to regulate rates charged by commercial mobile radio services and filed a motion to dismiss the complaint which the commission denied. GTE and New Par then filed suit in federal district court seeking injunctive relief to prevent the PUCO from hearing any portion of the case that dealt with rates, said court documents.

In their argument, Cellnet and the commission contended that requiring GTE and New Par to charge the same rates to all entities did not constitute rate setting, but instead a type of action the commission had jurisdiction over, said court documents. The court disagreed and granted a preliminary injunction on the rationale that GTE and New Par had established a likelihood of success of their claim.

In overturning the district court’s decision, the appeals court wrote, “On its face, the preemptive reach of section 332 is limited. The statute preempts states from regulating market entry and rates charged, but specifically allows states to regulate `other terms and conditions’ of service … Thus our inquiry must focus on whether Cellnet’s complaint requires the commission to regulate market entry or rates charged, or whether it falls into the sphere of `other terms’ and conditions,” the court continued. “We cannot conclusively determine whether the language of section 332 refers to simply setting rates or whether it refers to any type of adjustment to rates, no matter how indirect … In fact, to decide this preemption issue would require us to enter into a detailed analysis of state law, a task in which we will not engage. We thus conclude that the state law Cellnet alleges GTE Mobilnet and New Par violated does not fall within the area facially preempted by section 332 … We conclude that GTE Mobilnet and New Par will have an adequate opportunity to raise their federal preemption claims in the state proceedings.”

The issue has been remanded to the district court with instructions to dissolve the preliminary injunction against the commission and to dismiss the case, said Cellnet. The PUCO must be allowed to resolve the preemption question, said the court, and GTE and New Par would have to appeal to the Ohio State Supreme Court if they choose to appeal.

“I’m disappointed that we did not get a ruling from the Sixth Circuit on the preemption issue,” said James B. Niehaus, a Cleveland attorney with Thompson, Hine & Florey who represented GTE. “The court chose to dismiss the case on a technical legal ground and did not reach the issue that would have been helpful to everyone in the industry … All the court said was that this was a procedural matter, and it should be decided by the state court since the dispute started in the state courts. The scope of preemption under 332 is still unresolved.”

“What we wanted was to be able to bring this case at the state level in Ohio to address concerns that we raised in the complaint,” said Cellnet’s attorney Randy Hart of Han Loeser & Parks in Cleveland. “The court said the federal act did not facially pre-empt states from hearing it. This is a major victory for states’ rights activists, and allows not only us but anyone else in the state to bring claims in those states. Arguably the statute should be used to bring a complaint against a particular carrier.”

The ruling is relief for cellular resellers that have been frustrated by the lack of action on the federal level, said David Gusky, executive director of the National Wireless Resellers Association.

“From the resellers point of view, it gives them the right to go to the state [public utilities commissions] to hear complaints rather than go to the [Federal Communications Commission] which has not exactly been sensitive to their rights in the past,” he said.

Cellnet’s President Mike Tricarichi said at least seven states have filed petitions with the Federal Communications Commission to request authority over rates while Connecticut and California are studying the decision closely. The FCC has never defined what state actions are pre-empted under OBRA.

“This allows resellers to file cases in state courts alleging discrimination. We’re going to start seeing a lot of them. The FCC really has done nothing,” said Tricharichi. “It’s an intrastate issue. If I’m buying service in Ohio and providing service in Ohio, then that should be handled by the state.”


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