Washington Court Holds Federal Law Preempts Private Rate Claims

In a published decision, the Washington state Court of Appeals recently held that individual cable subscribers could not challenge the rates they pay for basic cable through private actions in court. Parsons et al. v. Comcast of California/Colorado/Washington I, Inc., ___ P.3d ___, 2009 WL 1578815 (Wash. App. June 8, 2009). The decision rests on the settled principle that efforts to regulate cable rates through the courts are preempted under § 623(a) of the federal Communications Act, 47 U.S.C. § 543(a).

This decision reinforces cable operators’ immunity from private litigation over rates. Such challenges may of course still be brought before the Federal Communications Commission (FCC) and local franchising authorities may still bring actions to enforce franchise agreements.

Background

The plaintiffs were cable television subscribers who lived in an unincorporated part of King County, outside of Seattle. They alleged that they paid more for basic cable than did subscribers in the neighboring city of Issaquah. Subscribers in the city and the unincorporated areas received services from the same cable company operating under two separate franchising agreements with the local governments. When Issaquah annexed those areas where the plaintiffs lived, they argued they were entitled to the same rates as subscribers covered by the city-issued franchise. The plaintiffs sued in state court, asserting claims for breach of contract, unjust enrichment and violation of Washington’s Consumer Protection Act. They alleged their claims should be certified as a class action.

The cable operators asked the trial court to dismiss the plaintiffs’ state law claims on the grounds that they amounted to rate regulation and thus were preempted by § 623 of the federal Communications Act. The trial court granted the defendants’ motion.

Appeals Court decision

The Court of Appeals affirmed. The court first noted that the Act “provides and delineates within Federal legislation the authority of Federal, state and local governments to regulate cable systems.” 2009 WL 1578815 at *1 (quoting Cable Television Ass’n of N.Y., Inc. v. Finneran, 954 F.2d 91, 95 (2d Cir. 1992)). Next, the court noted that Congress’s intent regarding rate regulation was clear: “Conduct that amounts to rate regulation of basic cable television services is expressly preempted by federal law, excepting that of local authorities as delineated in the act.” Id. at *2 (citing 47 U.S.C. § 543(a) and Finneran, 954 F.2d at 97).

The court then observed that the concept of rate regulation is interpreted broadly and includes “any claims for relief that involve or are tantamount to rate regulation.” Id. Given the exclusive provisions for regulating rates under the Act, “no claim challenging the rates and fees charged by a cable provider may lie in state court.” Id. In the face of this express regulatory framework, the court held that the plaintiffs’ efforts to obtain uniform rates within a single franchise area was rate regulation and thus preempted: “However worded, any relief sought by [the plaintiffs] in their complaint requires the court to engage in prohibited rate regulation.” Id. at *3.

The court noted that the only venue for subscribers to challenge rates charged them is the FCC. Although the city might bring its own action to enforce the terms of its franchise agreement, the court held that the subscribers do not have a private right of action to enforce the franchise agreement, either directly or as third-party beneficiaries of that agreement. Id.

While the plaintiffs may ask the Washington state Supreme Court to review the decision, such review is discretionary only.