District Court Says Kentucky May Collect 911 Fees From Lifeline Providers

The district court denied summary judgment to CTIA, while granting defendant Kentucky 911 Service Board’s cross-motion (case 3:2020-cv-00043). The 6th Circuit U.S. Court of Appeals declined last year to rehear judges’ ruling that the lower court erred in concluding the 2018 federal Wireless Telecom Tax and Fee Collection Fairness Act expressly conflicts with and preempts a 2020 Kentucky 911 law known as HB 208 (see 2201280059). The state law made Lifeline providers directly liable for 911 fees and barred them from passing the 70 cent monthly charge to users. Returning to the district court, CTIA argued that the state law is impliedly preempted because it conflicts with the federal statutory regime governing Lifeline.

Kentucky’s 911 law doesn’t “frustrate the full purposes and objectives of Congress,” wrote Judge Gregory Van Tatenhove. "A clear Congressional purpose to advance Universal Service does not mean ... that any state action which might potentially burden service providers is automatically deemed an obstacle."

“We remain concerned that funds intended to connect low-income Americans are being diverted for other purposes,” a CTIA spokesperson said in a statement emailed to us Tuesday. “We encourage policymakers to find solutions that ensure both 9-1-1 services and universal service get the funding they need.” CTIA continues to review the opinion, the spokesperson said.

The Kentucky 911 board has no comment because the litigation is ongoing, said Administrator Mike Sunseri. "It would be up to the CTIA to determine whether or not they intend to appeal this decision."

The judge dismissed CTIA’s warning that shifting the 911 fee to providers from end users would undermine service quality. “A service provider’s economic dilemma does not create an instance of conflict preemption,” he said. The state law "does not itself stand as an impediment to the sufficient facilitation of universal service across [Kentucky] or the nation,” the judge said. “It merely means that service providers will have to reassess the way in which they allocate resources.”

Also, the court disagreed that it would be impossible for providers to comply with both state and federal laws. CTIA had argued "that service providers providing solely Free Lifeline Only Service Plans -- in other words, service providers whose revenue solely derives from the Lifeline subsidy -- cannot possibly comply with federal law while paying Kentucky’s $0.70 fee" because they "have no alternative source of revenue that may be legally used to pay the charge,” wrote the judge: But CTIA hasn't shown or alleged that Kentucky has any wireless providers that operate on a Free Lifeline Only business model. "Thus, the ‘conundrum’ that CTIA posits as evidence of impossibility is not actually one that currently exists for any of CTIA’s members,” said Van Tatenhove. "A hypothetical presumption of what may come to be cannot support a finding of preemption at this juncture where there is no actual enmity between federal and state law.”

HB 208 doesn’t violate the equal protection clause of the 14th Amendment, the court found. CTIA argued that the state law unconstitutionally treats Lifeline providers differently from other providers by requiring only Lifeline companies to pay the 70 cents. But the judge said that “economic legislation” like HB 208 “is subject only to rational basis review,” meaning that it should be presumed valid if “the classification drawn by the statute is rationally related to a legitimate government interest.” The Kentucky law “easily passes” that test, said the judge, as "Kentucky undoubtedly has an interest in recovering its 911 service costs.”

"CTIA argues that it is not rational to put Lifeline providers at a disadvantage by placing an additional burden on them,” wrote Van Tatenhove. “But someone must bear the burden of the 911 system’s cost, and the Fairness Act proscribes end users from paying. Accordingly, Kentucky made the rational decision to impose a fee collection structure that requires Lifeline service providers operating within the Commonwealth to pay instead." The judge added, “Our nation is full of mandates that discrepantly require some to bear more economic burdens than others. Nevertheless, they do not violate equal protection.”

The Kentucky requirement doesn’t violate the 14th Amendment's due process or the 5th Amendment's takings clauses, either, said the judge. "Although Kentucky’s due process may be aligned with federal due process, it does not necessarily follow that federal due process is congruent in all means with Kentucky’s due process,” Van Tatenhove wrote. The takings claim fails because Kentucky's "fee assessment does not seize or impair an identifiable fund of money,” he said. “HB 208 does not tap into the Lifeline subsidized funds that CTIA’s members receive.”

The district court sidestepped a thorny question raised by the Kentucky board about whether certain sections of the Fairness Act and 1934 Communications Act are unconstitutional. In October, the DOJ urged the district court to reject Kentucky’s constitutional challenges to Section 1510(c)(1) of the Fairness Act and sections 254(f) and 254(i) of the Communications Act. The Kentucky 911 Service Board claimed those sections violated the 10th Amendment (see 2310170012).

“In seeking to adhere to principles of constitutional avoidance, the Court first considered whether any of the Board’s other defenses were dispositive,” the judge wrote. “Seeing as the relationship between federal law and state law in this matter has been effectually resolved, the Court finds it unnecessary, and indeed unwise, to reach the Board’s Tenth Amendment arguments.”