Summary
The Ninth Circuit reversed the district court’s denial of AT&T Mobility LLC’s motion to dismiss an FTC action challenging disclosures about AT&T’s data-throttling practices for unlimited mobile data plans. The court held that the common-carrier exemption in Section 5 of the Federal Trade Commission Act is status-based, so AT&T was excluded from the statute’s coverage as a common carrier. The court remanded for entry of an order dismissing the FTC’s claims.
Topics
Practice areas
Questions Presented
- Whether the common-carrier exemption in section 5 of the FTC Act is status-based or activity-based.
- Whether AT&T, as an entity with common-carrier status, was excluded from section 5 coverage even when the FTC's allegations concerned activity that was not classified as common-carrier activity at the time.
- Whether the district court's denial of AT&T's motion to dismiss presented a Rule 12(b)(6) statutory-authority issue rather than a Rule 12(b)(1) subject-matter-jurisdiction issue.
Holdings
- The common-carrier exemption is status-based. An entity that has the status of a common carrier subject to the Acts to regulate commerce is excluded from section 5 coverage.
- Because AT&T was a common carrier, it was excluded from section 5 coverage even as to the non-common-carrier activity alleged by the FTC. The FTC's claims could not be maintained.
- The FTC's alleged lack of statutory authority to bring claims against AT&T did not deprive the district court of subject-matter jurisdiction. AT&T's motion raised a Rule 12(b)(6) issue rather than a Rule 12(b)(1) issue.
Key quotations
“We conclude, based on the language and structure of the FTC Act, that the common carrier exception is a status-based exemption and that AT&T, as a common carrier, is not covered by section 5.” (at 1000)
“Those entities are not covered by section 5 even as to non-common carrier activities.” (at 1008)
“Because AT&T was a common carrier, it cannot be liable for the violations alleged by the FTC.” (at 1008)
Factual background
AT&T offered grandfathered unlimited mobile-data plans and, beginning in July 2011, reduced customers' data speeds for the remainder of a billing cycle after usage exceeded a specified threshold. The throttling was imposed without regard to real-time network congestion, while tiered-plan customers generally were not throttled. The FTC alleged that AT&T's disclosures inadequately informed customers about the significant speed restrictions and asserted unfair-practice and deceptive-practice claims under section 5 of the FTC Act.
Procedural history
The Northern District of California denied AT&T's motion to dismiss, holding that the common-carrier exemption applied only when an entity had common-carrier status and was engaging in common-carrier activity. The district court also rejected AT&T's argument concerning the effect of the FCC's reclassification of mobile-data service. The Ninth Circuit reversed and remanded for entry of an order dismissing the FTC's complaint.
Remand instructions
Remand for entry of an order dismissing the FTC's complaint.