Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 1 of 33 ETHAN P. DAVIS 1 Acting Assistant Attorney General 2 Civil Division MATTHEW J. GLOVER 3 Counsel to the Assistant Attorney General ALEXANDER K. HAAS 4 Director, Federal Programs Branch 5 JACQUELINE COLEMAN SNEAD Assistant Branch Director, Federal Programs Branch 6 JOSEPH E. BORSON (Va. Bar No. 85519) 7 KEVIN SNELL (NY Bar) Trial Attorneys 8 U.S. Department of Justice Civil Division, Federal Programs Branch 9 1100 L St. NW 10 Washington, DC 20530 Telephone: (202) 514-1944 11 Fax: (202) 616-8460 E-mail: Joseph.Borson@usdoj.gov 12 13 Attorneys for the United States 14 UNITED STATES DISTRICT COURT 15 EASTERN DISTRICT OF CALIFORNIA 16 THE UNITED STATES OF AMERICA, 17 Plaintiff, Case No. 2:18-cv-2660-JAM-DB 18 v. MEMORANDUM IN SUPPORT OF 19 MOTION FOR PRELIMINARY THE STATE OF CALIFORNIA; INJUNCTION 20 GAVIN C. NEWSOM, Governor of California, in his Official Capacity, and Judge: The Hon. John A. Mendez 21 XAVIER BECERRA, Attorney General Action Filed: Sept. 30, 2018 22 of California, in his Official Capacity, 23 Defendants. 24 25 26 27 28 Memorandum in support of motion for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 2 of 33 TABLE OF CONTENTS 1 INTRODUCTION .......................................................................................................................... 1 2 BACKGROUND ............................................................................................................................ 3 3 I. HISTORY OF FEDERAL INTERNET REGULATION ................................................... 3 4 A. Broadband Internet Access Service ........................................................................ 3 5 B. The Commission s Historic Approach to Internet Regulation ............................... 3 C. The 2015 Order ....................................................................................................... 4 6 D. The 2018 Order ....................................................................................................... 6 7 II. CALIFORNIA S INTERNET REGULATION LAW ..................................................... 10 8 III. PROCEDURAL HISTORY.............................................................................................. 13 9 LEGAL STANDARD ................................................................................................................... 13 10 ARGUMENT ................................................................................................................................ 15 11 I. THE UNITED STATES IS LIKELY TO PREVAIL ON THE MERITS. ....................... 15 A. SB-822 Conflicts With, and Thus Is Preempted By, the 2018 Order. .................. 15 12 1. The Significant Objective of the 2018 Order is to Return to a Light-Touch 13 Approach to Regulating Broadband Internet Access. ............................... 16 14 2. SB-822 s Specific Provisions Frustrate the 2018 Order s Significant Objectives. ................................................................................................ 18 15 B. SB-822 Is Preempted by the Communications Act s Assignment of Exclusive 16 Authority to Regulate Interstate Communications to the Federal Government. .. 22 17 II. THE EQUITABLE FACTORS STRONGLY MILITATE IN FAVOR OF INJUNCTIVE RELIEF. ............................................................................................................................ 24 18 CONCLUSION ............................................................................................................................. 26 19 20 21 22 23 24 25 26 27 28 Memorandum in support of motion - i - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 3 of 33 TABLE OF AUTHORITIES 1 2 Cases 3 Ark. Elec. Coop. Corp. v. Ark. Pub. Serv. Comm n, 461 U.S. 375 (1983) ................................................................................................................... 15 4 Bethlehem Steel Co. v. N.Y. State Labor Relations Bd., 5 330 U.S. 767 (1947) ............................................................................................................. 14, 16 6 Burlington Northern Santa Fe Corp. v. Anderson, 7 959 F. Supp. 1288 (D. Mt. 1997) ............................................................................................... 18 8 City of Abilene, Tex. v. FCC, 9 164 F.3d 49 (D.C. Cir. 1999) ..................................................................................................... 22 10 City of New York v. FCC, 486 U.S. 57 (1988) ..................................................................................................................... 14 11 Comcast Corp. v. FCC, 12 600 F.3d 642 (D.C. Cir. 2010) ..................................................................................................... 4 13 Crosby v. Nat l Foreign Trade Council, 14 530 U.S. 363 (2000) ............................................................................................................. 18, 23 15 Fed. Home Loan Bank Bd. v. Empie, 16 778 F.2d 1447 (10th Cir. 1985) ................................................................................................. 25 17 Fid. Fed. Sav. & Loan Ass n v. de la Cuesta, 458 U.S. 141 (1982) ................................................................................................................... 14 18 Fober v. Mgm t & Tech. Consultants, LLC, 19 886 F.3d 789 (9th Cir. 2018) ..................................................................................................... 16 20 Geier v. American Honda Motor Co., 21 529 U.S. 861 (2000) ............................................................................................................. 15, 18 22 Global Tel*Link v. FCC, 866 F.3d 397 (D.C. Cir. 2017) ................................................................................................... 22 23 24 Ivy Broadcasting Co. v. Am. Tel. & Tel. Co., 391 F.2d 486 (2d Cir. 1968) ...................................................................................................... 23 25 Louisiana Public Service Commission v. FCC, 26 476 U.S. 355 (1986) ................................................................................................................... 24 27 Mahoney v. RFE/RL, Inc., 28 47 F.3d 447 (D.C. Cir. 1995) ..................................................................................................... 14 Memorandum in support of motion - ii - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 4 of 33 Mayo v. United States, 1 319 U.S. 441 (1943) ................................................................................................................... 14 2 Minnesota Pub. Utilities Comm n v. FCC, 3 483 F.3d 570 (8th Cir. 2007) ................................................................................................. 6, 16 4 Mozilla Corp. v. FCC, 5 940 F.3d 1 (D.C. Cir. 2019) ................................................................................................ passim 6 National Cable & Telecomm. Ass n v. Brand X Internet Servs., 545 U.S. 967 (2005) ........................................................................................................... 3, 4, 16 7 Nat l Ass n of Regulatory Util. Comm rs v. FCC, 8 746 F.2d 1492 (D.C. Cir. 1984) ................................................................................................. 22 9 New Orleans Pub. Serv., Inc. v. Council of City of New Orleans, 10 491 U.S. 350 (1989) ................................................................................................................... 25 11 Nken v. Holder, 556 U.S. 418 (2009) ................................................................................................................... 13 12 13 Ray v. Atl. Richfield Co., 435 U.S. 151 (1978) ................................................................................................................... 14 14 Rice v. Santa Fe Elevator Corp., 15 331 U.S. 218 (1947) ............................................................................................................. 14, 15 16 Sol Inc. v. Whiting, 17 732 F.3d 1006 (9th Cir. 2013) ............................................................................................. 13, 14 18 Sprint Nextel Corp. v. FCC, 508 F.3d 1129 (D.C. Cir. 2007) ................................................................................................. 16 19 20 Union Telecom, LLC v. United States, 144 Fed. Cl. 477 (2019) ............................................................................................................. 22 21 United States Telecom Ass n v. FCC, 22 825 F.3d 674 (D.C. Cir. 2016) ..................................................................................................... 6 23 United States v. Alabama, 24 691 F.3d 1269 (11th Cir. 2012) ........................................................................................... 25, 26 25 United States v. Arizona, 641 F.3d 339 (9th Cir. 2011), aff d in part, rev d in part and remanded on other grounds, 567 26 U.S. 387 (2012) ................................................................................................................ 2, 14, 25 27 28 Memorandum in support of motion - iii - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 5 of 33 United States v. California, 1 314 F. Supp. 3d 1077 (E.D. Cal. 2018), aff d in part, reversed in part and remanded, 921 F.3d 2 865 (9th Cir. 2019)............................................................................................................... 25, 26 3 United States v. California, 921 F.3d 865 (9th Cir. 2019) ..................................................................................................... 25 4 5 United States v. Costanzo, 956 F.3d 1088 (9th Cir. 2020) ................................................................................................... 23 6 US West Commc ns, Inc. v. Jennings, 7 304 F.3d 950 (9th Cir. 2002) ..................................................................................................... 16 8 Verizon v. FCC, 9 740 F.3d 623 (D.C. Cir. 2014) ................................................................................................. 3, 4 10 Williamson v. Mazda Motor of Am., Inc., 562 U.S. 323 (2001) ............................................................................................................. 15, 17 11 Wilson v. A.H. Belo Corp., 12 87 F.3d 393 (9th Cir. 1996) ....................................................................................................... 16 13 Winter v. NRDC, 14 555 U.S. 7 (2008) ....................................................................................................................... 13 15 Statutes 16 28 U.S.C. § 2342(1) ................................................................................................................ 13, 16 17 47 U.S.C. § 151 ............................................................................................................................. 22 18 47 U.S.C. § 153(24) ........................................................................................................................ 3 19 47 U.S.C. § 230(b)(2) ..................................................................................................................... 3 20 47 U.S.C. § 402(a) ........................................................................................................................ 13 21 Cal. Bus. & Prof. Code § 17204 ................................................................................................... 12 22 Cal. Bus. & Prof. Code §§ 17200 ................................................................................................. 12 23 Cal. Civ. Code § 3100 ....................................................................................................... 10, 20, 23 24 Cal. Civ. Code § 3101 ............................................................................................................ passim 25 Cal. Civ. Code §§ 3100-3104 ......................................................................................................... 1 26 Cal. Gov t Code § 9600(a) ............................................................................................................ 10 27 Telecommunications Act of 1996, 28 Pub. L. No. 104-104, 110 Stat 56 ................................................................................................ 3 Memorandum in support of motion - iv - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 6 of 33 Rules 1 2 Federal Rule of Civil Procedure 65 ................................................................................................ 1 3 Regulations 4 5 47 C.F.R. § 8.1(a).................................................................................................................... 12, 21 6 Other Authorities 7 Cal. S. Comm. on Energy, Utils., & Commc ns, 8 SB 460 Analysis 1 (2018) .......................................................................................................... 10 9 Cal. S. Comm. on Judiciary, SB 822 Analysis 1 (2018) .......................................................................................... 1, 12, 13, 19 10 In re Federal-State Joint Bd. on Universal Serv., 11 13 FCC Rcd 11,501 (1998) .......................................................................................................... 4 12 Protecting & Promoting the Open Internet, GN Docket No. 14-28, Report and Order on Remand, Declaratory Ruling, and Order, 30 FCC Rcd 5601 (2015)& & & & & & .& & .passim 13 Restoring Internet Freedom, 14 Notice of Proposed Rulemaking, 32 FCC Rcd 4434 (2017) ............................................... 6, 7, 8 15 Restoring Internet Freedom, 33 FCC Rcd. 311 ¶ 1 (2018)& & & & & & & & & & ...& & .passim 16 Restoring Internet Freedom Memorandum of Understanding (Dec. 14, 2017), https://www.ftc. gov/system/files/documents/cooperation_agreements/fcc_fcc_mou_internet_freedom_order_ 17 1214_final_0.pdf .......................................................................................................................... 7 18 http://sd11.senate.ca.gov/news/20180808-california-net-neutrality-proposal-moves-forward .... 18 19 20 21 22 23 24 25 26 27 28 Memorandum in support of motion - v - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 7 of 33 1 In order to avoid ongoing, irreparable harm to the United States and its interests, the United 2 States moves this Court under Federal Rule of Civil Procedure 65 to preliminarily enjoin 3 enforcement of the California Internet Consumer Protection and Net Neutrality Act of 2018, Cal. 4 Civ. Code §§ 3100-3104, enacted through Senate Bill 822 ( SB-822 ). 5 INTRODUCTION 6 This case involves California s attempt to nullify the Federal Government s statutory and 7 regulatory scheme for interstate broadband communications by enacting previously repealed or 8 rejected rules governing the provision of broadband Internet access service. In adopting SB-822, 9 California has imposed stringent regulation on interstate broadband communications in a way that 10 directly contradicts both the Federal Communications Commission s ( FCC or  Commission ) 11 validly adopted regulatory scheme and the Congressionally enacted principle, codified in the 12 Communications Act of 1934, that the Federal Government not individual States has exclusive 13 regulatory authority over interstate communications. Pursuant to the Constitution s Supremacy 14 15 Clause, SB-822 is preempted. 16 In 2018, the FCC adopted an order that honored a historically  bipartisan commitment to 17 a free and open Internet and  reverse[d] the Commission s abrupt shift in a 2015 order  to heavy 18 handed utility-style regulation. Restoring Internet Freedom, 33 FCC Rcd. 311 ¶ 1 (2018) ( 2018 19 Order ). The FCC determined that to promote the continued vitality of the Internet, it was 20 necessary to return to a light-touch, market-based framework for regulating the provision of 21 broadband service and repeal previously established bans on certain internet management 22 practices, including blocking, throttling, and paid prioritization. E.g., 2018 Order ¶¶ 207, 239. That 23 Order was affirmed by the D.C. Circuit against a challenge brought by a number of states, 24 including California. Mozilla Corp. v. FCC, 940 F.3d 1 (D.C. Cir. 2019). Despite the 2018 Order s 25 plain objective, California enacted legislation that both  codif[ies] portions of the recently- 26 rescinded [FCC] rules, and imposes additional bright-line rules that not even  the FCC opted to 27 embrace in 2015. Cal. S. Comm. on Judiciary, SB 822 Analysis 1, 19 (2018) ( Senate Judiciary 28 Analysis ). Memorandum in support of motion - 1 - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 8 of 33 1 California s attempt to nullify federal law should fail for two separate and independent 2 reasons. First, under well-established principles of conflict preemption, a state law that conflicts 3 with the purpose or objectives of a federal regulatory scheme is preempted. SB-822 does just that. 4 The FCC sought to reduce the regulatory burdens on the provision of broadband service by 5 removing certain restrictions; yet California deliberately attempts to revert to and go beyond the 6 regulatory scheme the FCC specifically rejected. Second, California improperly attempts to assert 7 regulatory authority over an inherently interstate communications service in violation of the 8 Communications Act of 1934. That Act divides regulatory authority as follows: the states have 9 authority over intrastate communication, while the Federal Government has responsibility over 10 interstate communications. California s law fails to accord with this clear division of power. Not 11 only does it purport to regulate an inherently interstate communications service, but it affirmatively 12 adopts a definition of broadband internet access service as interstate and thus, on its face, purports 13 to regulate the entirety of the Internet. 14 15 California thereby has deliberately countermanded the FCC s decision by itself reason to 16 preliminarily enjoin SB-822.  [A]n alleged constitutional infringement will often alone as here 17  constitute irreparable harm. United States v. Arizona, 641 F.3d 339, 366 (9th Cir. 2011), aff d in 18 part, rev d in part and remanded on other grounds, 567 U.S. 387 (2012).  In such circumstances, 19 the interests of preserving the Supremacy Clause is paramount. Id. Here, due to its size and 20 substantial impact on the Internet marketplace, California effectively has dictated a broadband 21 Internet access policy for the entire Nation a task Congress placed solely within the purview of 22 the FCC. Given the nature of Internet communications, which frequently straddle multiple 23 jurisdictions, Internet Service Providers ( ISPs ) cannot apply two separate and conflicting legal 24 frameworks to Internet communications one for California and one for everywhere else. This 25 impossibility means that California s rules effectively are the only ones that matter. California s 26 nullification of federal law with the concomitant regulatory uncertainty and resulting instability 27 of the Internet marketplace it creates is not in the public s interest, not otherwise justified, and 28 thus should be enjoined. Memorandum in support of motion - 2 - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 9 of 33 1 BACKGROUND 2 I. History of Federal Internet Regulation 3 A. Broadband Internet Access Service 4 Internet users generally connect to  backbone networks   interconnected, long-haul 5 fiber-optic links and high-speed routers capable of transmitting vast amounts of data  via local 6 access providers  who operate the  last-mile transmission lines. Verizon v. FCC, 740 F.3d 623, 7 628-29 (D.C. Cir. 2014). In the early days of the Internet, most users relied on dial-up connections 8 via local telephone lines to connect. Id. at 629. Today, however, users generally access the Internet 9  through  broadband, i.e., high-speed communications technologies, such as cable modem 10 service. Id. Both  edge providers ( those who, like Amazon or Google, provide content, 11 services, and applications ) as well as  end users ( those who consume edge providers content, 12 services, and applications ) usually rely on broadband Internet access service. Id. Over the past 13 two decades, the FCC has issued a series of orders addressing the appropriate regulatory treatment 14 15 of broadband Internet access service. 16 B. The Commission s Historic Approach to Internet Regulation 17 In the Telecommunications Act of 1996 ( 1996 Act ), Congress comprehensively 18 reformed and amended the Communications Act of 1934 ( Communications Act ) to  promote 19 competition and reduce regulation so as to  secure lower prices and higher quality services for 20 American telecommunications consumers and to  encourage the rapid deployment of new 21 telecommunications technologies. Pub. L. No. 104-104 (preamble), 110 Stat. at 56. As amended, 22 the Communications Act distinguishes between lightly regulated  information services and 23 heavily regulated  telecommunications services. 47 U.S.C. § 153(24), (53); see National Cable 24 & Telecomm. Ass n v. Brand X Internet Servs., 545 U.S. 967, 973, 975-76 (2005) ( Brand X ); 25 2018 Order ¶ 9. It further established that  [i]t is the policy of the United States to  preserve the 26 vibrant and competitive free market that presently exists for the Internet and other interactive 27 computer services  including any  information service   unfettered by Federal or State 28 regulation. 47 U.S.C. § 230(b)(2), (f)(2). To this end, for much of the next two decades, the FCC Memorandum in support of motion - 3 - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 10 of 33 1  repeatedly adopted a light-touch approach to the Internet that favored discrete and targeted actions 2 over pre-emptive, sweeping regulation of Internet service providers. 2018 Order ¶ 9; see id. ¶¶ 9- 3 16. In 1998, for instance, the FCC informed Congress that Internet access service should be 4 classified as an information service, not a telecommunications service. In re Federal-State Joint 5 Bd. on Universal Serv., 13 FCC Rcd 11,501, 11,536 (1998). In 2002, consistent with that 6 conclusion, the Commission classified broadband Internet access service over cable systems as an 7  interstate information service rather than a  telecommunications service. 2018 Order ¶ 10. In 8 2005, the Supreme Court upheld that classification, concluding that it was based on a permissible 9 reading of ambiguous language in the Telecommunications Act s definitional provisions. Brand 10 X, 545 U.S. at 986-1000. The FCC later classified broadband Internet access service via other 11 modes, such as wireline facilities and power lines, as information services as well. 2018 Order 12 ¶¶ 12-13. The thriving, rapidly expanding, and ubiquitous Internet that we know today emerged in 13 this regulatory environment. 14 15 Starting in 2008, the FCC asserted certain regulatory authority over broadband Internet 16 access providers. Id. ¶¶ 14-17. With the exception of a 2010 transparency rule, which required 17 providers of broadband Internet access services to disclose their network management practices, 18 the D.C. Circuit rejected these efforts as exceeding the Commission s authority over information 19 services. See Verizon, 740 F.3d at 627; Comcast Corp. v. FCC, 600 F.3d 642 (D.C. Cir. 2010). At 20 no point during this time did the FCC seek to justify these actions by invoking its Title II authority 21 over telecommunications services. See 2018 Order ¶¶ 14-17. 22 C. The 2015 Order 23 In 2015, in a sharp departure from its historic practice, the FCC issued an order classifying, 24 for the first time, broadband Internet access service, whether fixed or mobile, as a 25 telecommunications service subject to the Commission s Title II authority. Protecting & 26 Promoting the Open Internet, GN Docket No. 14-28, Report and Order on Remand, Declaratory 27 Ruling, and Order, 30 FCC Rcd 5601 (2015) ( 2015 Order ). 28 Memorandum in support of motion - 4 - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 11 of 33 1 Relying on this authority, the FCC adopted several rules. Specifically, it banned broadband 2 Internet access service providers from engaging in the following conduct: 3 1) Blocking: A provider  shall not block lawful content, applications, services, or 4 nonharmful devices, subject to reasonable network management. Id. ¶ 15. 5 2) Throttling: A provider  shall not impair or degrade lawful Internet traffic on the 6 basis of Internet content, application, or service, or use of a non-harmful device, subject to reasonable network management. Id. ¶ 16. 7 3) Paid Prioritization: A provider  shall not engage in paid prioritization, which 8  refers to the management of a broadband provider s network to directly or 9 indirectly favor some traffic over other traffic, including through use of techniques such as traffic shaping, prioritization, resource reservation, or other 10 forms of preferential traffic management, either (a) in exchange for consideration (monetary or otherwise) from a third party, or (b) to benefit an 11 affiliated entity. Id. ¶ 18. 12 The 2015 Order also adopted an Internet conduct standard, directing that providers  shall not 13 unreasonably interfere with or unreasonably disadvantage either: 14 (i) end users ability to select, access, and use broadband Internet access service or 15 the lawful Internet content, applications, services, or devices of their choice, or (ii) 16 edge providers ability to make lawful content, applications, services, or devices available to end users. Reasonable network management shall not be considered a 17 violation of this rule. 18 Id. ¶¶ 21, 136. In addition to these new substantive rules, the 2015 Order added reporting 19 requirements to the transparency rule adopted by the FCC in 2010. Id. ¶¶ 24, 162-71. 20 The FCC declined, however, to impose  bright-line prohibitions on  other practices to 21 which some commentators objected. Id. ¶¶ 151-52. For example, the Commission refused to ban 22  zero-rating  the practice of exempting certain Internet traffic from users data  usage 23 allowances, id. ¶ 151 because some uses of this practice  could benefit consumers and 24 competition, id. ¶ 152. Similarly, the Commission did not apply bright-line rules to so-called 25 interconnection or Internet traffic exchange agreements generally, commercial arrangements 26 between ISPs and edge providers concerning Internet traffic at connections between the backbone 27 28 networks and the last-mile transmission lines (although it asserted authority to review Memorandum in support of motion - 5 - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 12 of 33 1 interconnection disputes under Title II on a case-by-case basis). Id. ¶¶ 30-31, 202-06. And the 2 Commission declined to apply the rules to separate non-Internet services sometimes referred to 3 as  specialized services  offered by a broadband provider, such as  facilities-based VoIP 4 offerings, heart monitors, or energy consumption sensors, except for narrow circumstances where 5 they could be subject to limited oversight under the Internet conduct standard. Id. ¶¶ 35, 207-13. 6 The FCC also stated that it would  exercise [its] preemption authority to preclude states 7 from imposing obligations on broadband service that are inconsistent with [its] carefully tailored 8 regulatory scheme. Id. ¶ 433. As it observed,  [c]ompetition and deregulation are valid federal 9 interests the FCC may protect through preemption of state regulation. Id. ¶ 433 n.1286 (quoting 10 Minnesota Pub. Utilities Comm n v. FCC, 483 F.3d 570, 580 (8th Cir. 2007)). 11 In 2016, a divided panel of the D.C. Circuit upheld the 2015 Order against legal challenges. 12 United States Telecom Ass n v. FCC, 825 F.3d 674 (D.C. Cir. 2016). 13 D. The 2018 Order 14 15 In May 2017, the FCC issued a proposal to overturn the 2015 Order and return to a light- 16 touch, market-based approach to regulating the provision of broadband service. Restoring Internet 17 Freedom, Notice of Proposed Rulemaking, 32 FCC Rcd 4434 (2017). Following public comment, 18 the FCC released in January 2018 its 2018 Order, which repealed the rules adopted in 2015, 19 reestablished the agency s longstanding classification of broadband Internet access service as an 20  information service, 2018 Order ¶ 20, and embraced the agency s historic practice of less 21 intrusive Internet regulation, see id. ¶ 207. In doing so, the FCC repealed the 2015 Order s bans 22 on blocking, throttling, and paid prioritization, id. ¶ 239; the Internet conduct standard, id.; 23 oversight of Internet traffic exchange agreements, id. ¶¶ 246-52; and enhancements to the 24 transparency rule, id. ¶ 225. In their place, the 2018 Order opted for a more tailored regulatory 25 approach that relied on a combination of disclosure requirements, market forces, and enforcement 26 of pre-existing antitrust and consumer protection laws. See, e.g., id. ¶¶ 140-54, 240-45. 27 First, the FCC reinstated its 2010 transparency rule, with limited modifications, but 28 eliminated the additional reporting requirements of the 2015 Order. Id. ¶¶ 215-31. The FCC Memorandum in support of motion - 6 - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 13 of 33 1 recognized that  transparency substantially reduces the possibility that ISPs will engage in harmful 2 practices, and it incentivizes quick corrective measures by providers if problematic conduct is 3 identified. Id. ¶ 209; see also id. ¶¶ 217, 237, 240-44. In addition,  [a]ppropriate disclosures can 4  help consumers make informed choices about their purchase and use of broadband Internet access 5 services. Id. ¶ 209; see also id. ¶¶ 216-18, 237. As to the 2015 Order s additional disclosure 6 requirements, the FCC concluded that they had  significantly increased the burdens imposed on 7 ISPs without providing countervailing benefits to consumers or the Commission. Id. ¶ 215. The 8 FCC s current transparency rule requires broadband Internet access service providers to  publicly 9 disclose accurate information regarding the network management practices, performance, and 10 commercial terms of its broadband Internet access services sufficient to enable consumers to make 11 informed choices regarding the purchase and use of such services and entrepreneurs and other 12 small businesses to develop, market, and maintain Internet offerings. Id. The rule also provides 13 that  [s]uch disclosure shall be made via a publicly available, easily accessible website or through 14 15 transmittal to the Commission, id., and was accompanied by nine pages of guidance specifying 16 what disclosures are and are not required, see id. ¶¶ 215 31. 17 Second, the FCC recognized that  [o]ther legal regimes particularly antitrust law and the 18 [Federal Trade Commission s (FTC)] authority under Section 5 of the FTC Act to prohibit unfair 19 and deceptive practices provide protection for broadband consumers, id. ¶ 140; see generally 20 id. ¶¶ 141-54, and that these protections are especially potent because the transparency rule 21  amplifies the power of antitrust law and the FTC Act to deter and where needed remedy behavior 22 that harms consumers, id. ¶ 244. To that end, the FCC entered into a memorandum of 23 understanding with the FTC enabling the two agencies to share information, strengthening the 24 FTC s ability to police specific unfair or deceptive practices. Restoring Internet Freedom 25 Memorandum of Understanding (Dec. 14, 2017), https://www.ftc.gov/system/files/documents/ 26 cooperation_agreements/fcc_fcc_mou_internet_freedom_order_1214_final_0.pdf. In the FCC s 27 view, these well-established authorities are better suited to address violations of net-neutrality 28 principles, in part because  antitrust and consumer protection laws . . . apply to the whole of the Memorandum in support of motion - 7 - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 14 of 33 1 Internet ecosystem, including edge providers, and draw  guidance from [an] ample body of 2 precedent from across industries, thereby avoiding  economic distortions by regulating only one 3 side of business transactions on the Internet. Id. ¶ 140. 4 As the FCC explained, this shift from the 2015 Order was necessary for several 5 independent reasons. First, based on its comprehensive review of the administrative record and its 6 policy expertise, the FCC concluded that  the costs of [the repealed] rules to innovation and 7 investment outweigh any benefits they may have, id. ¶ 4, and thus their elimination  is more 8 likely to encourage broadband investment and innovation, furthering [the] goal of making 9 broadband available to all Americans and benefitting the entire Internet ecosystem, id. ¶ 86; see 10 also id. ¶ 245 ( [T]he substantial costs [of the 2015 rules] including the costs to consumers in 11 terms of lost innovation as well as monetary costs to ISPs are not worth the possible benefits 12 (footnote omitted)). Second, the FCC found that the repealed rules were  unnecessary, id. ¶ 4, 13 because  the transparency rule . . . in combination with [market forces] and the antitrust and 14 15 consumer protection laws, obviates the need for conduct rules by achieving comparable benefits 16 at lower cost, id. ¶ 239; see id. ¶¶ 240-66. Third, apart from these policy considerations, the 17 Commission concluded that its prior approach was  legally flawed because it had  not identified 18 any sources of legal authority that could justify the comprehensive conduct rules governing ISPs 19 adopted in the [2015 Order]. Id. ¶¶ 2, 4; see id. ¶¶ 267-96. 20 The 2018 Order, like the 2015 Order, also expressly preempted  any state or local measures 21 that would effectively impose rules or requirements that [the FCC] ha[d] repealed or decided to 22 refrain from imposing in this order or that would impose more stringent requirements for any 23 aspect of broadband service that [it] address[ed] in this order. Id. ¶ 195 ( Express Preemption 24 Clause ). This includes  any so-called  economic or  public utility type regulations, including 25 common-carriage requirements akin to those found in Title II of the [Communications] Act and 26 its implementing rules, as well as other rules or requirements that [the FCC] repeal[ed] or 27 refrain[ed] from imposing in the 2018 Order. Id. (footnote omitted). However, the 2018 Order 28 took care to  not disturb or displace the states traditional role in generally policing such matters Memorandum in support of motion - 8 - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 15 of 33 1 as fraud, taxation, and general commercial dealings, and noted that  the continued applicability 2 of these general state laws is one of the considerations for why  ISP conduct regulation is 3 unnecessary. Id. ¶ 196. 4 Multiple parties challenged the 2018 Order, which took effect on June 11, 2018, by 5 petitioning for review in the D.C. Circuit. Among them was a coalition of various state and local 6 entities, the District of Columbia, and 20 States, including California. See Mozilla Corp. v. FCC, 7 Cases Nos. 18-1052 et al (D.C. Cir.). On October 1, 2019, the D.C. Circuit unanimously upheld 8 the FCC s determination to classify broadband internet access as an information service subject to 9 Title I of the Communications Act. Mozilla Corp. v. FCC, 940 F.3d 1, 18-45 (D.C. Cir. 2019). The 10 Court also found that the FCC had not acted arbitrarily and capriciously in repealing the former 11 federal conduct rules, except for three discrete issues not relevant here on which the panel 12 remanded without vacatur. Id. at 45-74.1 But a divided panel also vacated the portion of the 2018 13 Order that sought to expressly preempt state or local laws on grounds that it went  far beyond 14 15 conflict preemption. Id. at 74-86.  At bottom, the panel majority held,  the Commission lacked 16 the legal authority to categorically abolish all fifty States statutorily conferred authority to regulate 17 intrastate communications. Id. at 86. But the Court did  not consider whether the remaining 18 portions of the 2018 Order have preemptive effect under principles of conflict preemption or any 19 other implied-preemption doctrine. Id. at 85. It explained that doing so  would be wholly 20 premature  because no particular state law is at issue in this case and the Commission makes no 21 provision-specific arguments. Id. at 86. Judge Stephen F. Williams dissented from this part of the 22 Court s holding, recognizing that  the Commission here made an uncontested finding that it would 23 be  impossible to maintain the regime it had adopted under Title I in the face of inconsistent state 24 regulation, and that  Supreme Court decisions make clear that a federal agency s authority to 25 26 27 1 Specifically, the D.C. Circuit remanded without vacatur to allow for the FCC to consider and 28 explain the impact of the 2018 Order on public safety, pole-attachment regulation, and the Lifeline Program. Mozilla, 940 F.3d at 49, 59-63, 65-70. Memorandum in support of motion - 9 - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 16 of 33 1 preempt state law need not be expressly granted. Id. at 95-96 (Williams, J., concurring in part and 2 dissenting in part) (emphasis in original). 3 The time to seek certiorari of the D.C. Circuit s decision has passed, and the decision is 4 now final. 5 II. California s Internet Regulation Law 6 While California s challenge to the 2018 Order was pending before the D.C. Circuit, its 7 State Legislature passed SB-822 on August 31, 2018. California s Governor signed SB-822 into 8 law the next month, and it took effect on January 1, 2019. Cal. Gov t Code § 9600(a). As the 9 legislative history expressly acknowledges, SB-822  codif[ies] portions of the recently-rescinded 10 [FCC] rules. Senate Judiciary Analysis 1; see also Cal. S. Comm. on Energy, Utils., & Commc ns, 11 SB 460 Analysis 1 (2018) ( Senate Energy Analysis ) (noting that it  adopts the main components 12 of the net neutrality rules repealed by [the FCC] ). Like the 2018 Order, see 2018 Order ¶ 21, SB- 13 822 defines broadband Internet access service as  a mass market retail service by wire or radio 14 15 provided to customers in California that provides the capability to transmit data to, and receive 16 data, from all or substantially all Internet endpoints. SB-822 § 3100(b). And like the repealed 17 2015 Order, SB-822 renders it  unlawful for a provider of broadband Internet access service  to 18 engage in : 19 1) Blocking:  Blocking lawful content, applications, services, or nonharmful 20 devices, subject to reasonable network management. Cal. Civ. Code § 3101(a)(1); see also id. § 3101(a)(3)(B) (prohibiting charges to avoid 21 blocking). 22 2) Throttling:  Impairing or degrading lawful Internet traffic on the basis of 23 Internet content, application, or service, or use of a nonharmful device, subject to reasonable network management. Id. § 3101(a)(2); § 3100(j); see also id. 24 § 3101(a)(3)(C) (prohibiting charges to avoid throttling). 25 3) Paid Prioritization:  Engaging in paid prioritization, id. § 3101(a)(4), which 26  means the management of an Internet service provider s network to directly or indirectly favor some traffic over other traffic, including, but not limited to, 27 through the use of techniques such as traffic shaping, prioritization, resource reservation, or other forms of preferential traffic management, either (1) in 28 Memorandum in support of motion - 10 - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 17 of 33 exchange for consideration, monetary or otherwise, from a third party, or (2) to 1 benefit an affiliated entity, id. § 3100(r). 2 3 SB-822 also reinstates the 2015 Order s general Internet conduct standard by prohibiting: 4 Unreasonably interfering with, or unreasonably disadvantaging, either an end 5 user s ability to select, access, and use broadband Internet access service or the lawful Internet content, applications, services, or devices of the end user s choice, 6 or an edge provider s ability to make lawful content, applications, services, or devices available to end users. Reasonable network management shall not be a 7 violation of this paragraph. 8 Id. § 3101(a)(7). 9 And although the 2018 Order eliminated the 2015 Order s oversight of Internet traffic 10 exchange agreements,  return[ing] Internet traffic exchange to the longstanding free market 11 framework, 2018 Order ¶¶ 163-73, SB-822 appears to regulate such exchanges by prohibiting 12 ISPs from charging edge providers for delivering traffic to end users and by prohibiting any traffic- 13 exchange agreements that could be construed as having the purpose or effect of evading other 14 prohibitions, Cal. Civ. Code §§ 3101(a)(3)(A), (a)(9). 15 In addition, SB-822 categorically prohibits conduct that not even the 2015 Order reached. 16 To start, it outlaws  zero-rating  which  means exempting some Internet traffic from a 17 customer s data usage allowance, id. § 3100(t) either (1)  in exchange for consideration, 18 monetary or otherwise, from a third party, id. § 3101(a)(5), or (2) for  some Internet content, 19 20 applications, services, or devices in a category of Internet content, applications, services, or 21 devices, but not the entire category, id. § 3101(a)(6). Similarly, SB-822 bars offering or providing 22 other services  that are delivered over the same last-mile connection as the broadband Internet 23 access service if they  have the purpose or effect of evading its prohibitions or  negatively affect 24 the performance of broadband Internet access service. Id. § 3102(a). Through such measures, 25 California legislators  establish[ed] additional bright-line rules that prohibit preferential treatment 26 for some services but not others, including prohibiting ISPs from charging website fees for access 27 to users and incorporating net-neutrality protections at the point of interconnection, even though 28 in the 2015 Order,  the FCC [had] opted to adopt a case-by-case approach in these areas. Cal. Memorandum in support of motion - 11 - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 18 of 33 1 Assembly Comm. on Commc ns & Conveyance, SB 822 Analysis 9 (2018) ( Assembly 2 Analysis ). 3 SB-822 also contains a transparency rule that prohibits ISPs from  [f]ailing to publicly 4 disclose accurate information regarding the network management practices, performance, and 5 commercial terms of its broadband Internet access services sufficient for consumers to make 6 informed choices regarding use of those services and for content, application, service, and device 7 providers to develop, market, and maintain Internet offerings. Id. § 3101(a)(8). Although this 8 language resembles a portion of the FCC s transparency rule, 47 C.F.R. § 8.1(a), it conspicuously 9 omits the 2018 Order s specific guidance addressing what disclosures are and are not required, see 10 2018 Order ¶¶ 215-31. 11 SB-822 is expected to be enforced through litigation under California s Unfair Competition 12 Law, which authorizes courts to issue an injunction against and impose civil penalties of up to 13 $2,500 per violation on anyone who  engages, has engaged, or proposes to engage in unfair 14 15 competition, which is defined to  include any unlawful, unfair or fraudulent business act or 16 practice. Cal. Bus. & Prof. Code §§ 17200, 17203; see id. § 17206(a).  [B]y making the various 17 practices unlawful, SB-822  automatically provide[s] a right of action under the Unfair 18 Competition Law. Senate Judiciary Analysis 21. The California Attorney General, among others, 19 is authorized to bring such enforcement actions, Cal. Bus. & Prof. Code § 17204, and he has 20 promised that  preserving net neutrality protections for California s consumers will be  a priority 21 for his office, Senate Judiciary Analysis 22. 22 In adopting this regime, California legislators were aware that SB-822  would create a 23 patchwork of regulation that could stymie the marketplace since California would have rules that 24 are different from other states and the [F]ederal [G]overnment. Senate Energy Analysis 14. They 25 likewise were advised that,  [d]ue to the nature of the internet traffic travelling across state lines, 26 it would be ideal to have one rule to address the issue of net neutrality. Id. Nevertheless, California 27 enacted SB-822. 28 Memorandum in support of motion - 12 - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 19 of 33 1 III. Procedural History 2 The United States filed this lawsuit on September 30, 2018. Compl., ECF No. 1. It sought 3 to enjoin both preliminarily and permanently a number of SB-822 s provisions, to the extent that 4 they were explicitly preempted by the 2018 Order s Express Preemption Clause. Id. ¶ 40; Mot. 5 Prelim. Inj., ECF No. 2. The United States also averred that  SB-822 conflicts with the 2018 6 Order s affirmative federal  deregulatory policy and  deregulatory approach to Internet 7 regulation. Compl. ¶ 41. 8 Because the validity of the 2018 Order was then being challenged in the D.C. Circuit, and 9 because under the Hobbs Act, 47 U.S.C. § 402(a), 28 U.S.C. § 2342(1), the district court was 10 required to presume the validity of the 2018 Order, including the Express Preemption Clause, the 11 parties met and negotiated a stipulation and non-enforcement agreement. California agreed  not to 12 take any action to enforce, or direct the enforcement, of Senate Bill 822 in any respect, including 13 through participation in any private action seeking to enforce Senate Bill 822 until this Court 14 15 ruled on any renewed motion for preliminary injunction that was filed within 30 days after the 16 period of seeking review of the Mozilla decision had expired. Stipulation of Stay and Agreement 17 Not to Enforce, at 6, ECF No. 15. The time for filing a petition for a writ of certiorari with the U.S. 18 Supreme Court expired on July 6, 2020, and no party sought such review. The United States has 19 filed this motion for a preliminary injunction as well as an amended complaint within thirty days 20 of that deadline, thus extending California s agreement to not enforce SB-822. 21 LEGAL STANDARD 22 A preliminary injunction is warranted if the movant establishes that: (1) it is likely to 23 succeed on the merits; (2) it is likely to suffer irreparable harm absent preliminary relief; (3) the 24 balance of equities tips in its favor; and (4) a preliminary injunction is in the public interest. Valle 25 del Sol Inc. v. Whiting, 732 F.3d 1006, 1029 (9th Cir. 2013) (citing Winter v. NRDC, 555 U.S. 7, 26 20 (2008)). When the Federal Government is a party, the last two factors  merge. See Nken v. 27 Holder, 556 U.S. 418, 435 (2009). And generally, when the United States has shown a likelihood 28 Memorandum in support of motion - 13 - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 20 of 33 1 of success on the merits in a preemption challenge, the equities similarly favor an injunction. See, 2 e.g., Valle del Sol, 732 F.3d at 1029; Arizona, 641 F.3d at 366. 3 The Supremacy Clause ensures that  the activities of the Federal Government are free from 4 regulation by any state, Mayo v. United States, 319 U.S. 441, 445 (1943), and  gives force to 5  both federal statutes themselves and federal regulations that are properly adopted in accordance 6 with statutory authorization, City of New York v. FCC, 486 U.S. 57, 63 (1988); see also Mahoney 7 v. RFE/RL, Inc., 47 F.3d 447, 450 (D.C. Cir. 1995).  A pre-emptive regulation s force does not 8 depend on express congressional authorization to displace state law. Fid. Fed. Sav. & Loan Ass n 9 v. de la Cuesta, 458 U.S. 141, 154 (1982). And a federal deregulatory decision can preempt 10 contrary state law. See, e.g., Ray v. Atl. Richfield Co., 435 U.S. 151, 178 (1978) (  where failure 11 of . . . federal officials affirmatively to exercise their full authority takes on the character of a ruling 12 that no such regulation is appropriate or approved pursuant to the policy of the statute, States are 13 not permitted to use their police power to enact such a regulation ) (quoting Bethlehem Steel Co. 14 15 v. N.Y. State Labor Relations Bd., 330 U.S. 767, 774 (1947)) 16 Preemption may occur in three ways. See Arizona, 567 U.S. at 399 400. Express 17 preemption occurs when Congress  withdraw[s] specified powers from the States by enacting a 18 statute containing an express preemption provision. Id. at 399. Aside from such  express 19 preemption,  [s]tate law must also give way to federal law in at least two other circumstances. 20 Id.  First, the States are precluded from regulating conduct in a field that Congress, acting within 21 its proper authority, has determined must be regulated by its exclusive governance. Id. This form 22 of preemption, so-called  field preemption, may be found where  [t]he intent to displace state 23 law altogether can be inferred from a framework of regulation  so pervasive & that Congress left 24 no room for the States to supplement it or where there is a  federal interest & so dominant that 25 the federal system will be assumed to preclude enforcement of state laws on the same subject.  26 Id. (ellipses in original) (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947)). 27  Second, state laws are preempted when they conflict with federal law. Id.  Conflict preemption 28 includes cases in which   compliance with both federal and state regulations is a physical Memorandum in support of motion - 14 - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 21 of 33 1 impossibility, and those instances where the challenged state law  stands as an obstacle to the 2 accomplishment and execution of the full purposes and objectives of Congress.  Id. (citations 3 omitted). 4 ARGUMENT 5 I. The United States is Likely to Prevail on the Merits. 6 SB-822 is preempted for two independent reasons. First, it conflicts with the FCC s 7 longstanding, well-reasoned, and lawful choice to enact a light-touch, market-based approach to 8 regulating the provision of broadband Internet. Second, it tramples over the Communication Act s 9 explicit division of regulatory authority between states and the Federal Government by regulating 10 interstate communications. 11 A. SB-822 Conflicts With, and Thus Is Preempted By, the 2018 Order. 12 The Constitution preempts state laws that  prevent or frustrate the accomplishment of a 13 federal objective, Geier v. American Honda Motor Co., 529 U.S. 861, 873, 883-84, 886 (2000) 14 15 (holding agency s determination as to how to carry out statutory objective has preemptive effect 16 under conflict preemption principles). SB-822 does exactly that. This analysis proceeds in two 17 parts. First, the Court must determine the  significant objective of the federal regulation, 18 Williamson v. Mazda Motor of Am., Inc., 562 U.S. 323, 330 (2001), based on  the regulation s 19 history, the agency s contemporaneous explanation, and its consistently held interpretative view, 20 id. at 336. Second, the court must determine if there is a conflict between the regulation s 21 significant objective and the countervailing state law. Id. A federal policy that suggests an intent 22 to deregulate or to afford regulated parties space to shape their conduct has no less preemptive 23 effect than a decision to regulate. See, e.g., Geier, 529 U.S. at 883 (concluding that giving  auto 24 manufacturers a choice among different kinds of passive restraint devices was a significant 25 objective of the federal regulation, and that state tort law that might interfere with or constrain 26 that choice was preempted); Ark. Elec. Coop. Corp. v. Ark. Pub. Serv. Comm n, 461 U.S. 375, 383 27 (1983) ( [A] federal decision to forgo regulation in a given area may imply an authoritative federal 28 determination that the area is best left unregulated, and in that event would have as much pre- Memorandum in support of motion - 15 - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 22 of 33 1 emptive force as a decision to regulate. ); Bethlehem Steel Co. v. N.Y. State Labor Relations Bd., 2 330 U.S. 767, 774 (1947) (state regulation preempted  where failure of the federal officials 3 affirmatively to exercise their full authority takes on the character of a ruling that no such 4 regulation is appropriate); Minn. Pub. Utils. Comm n, 483 F.3d at 580 81 ( [D]eregulation is  a 5 valid federal interest[] the FCC may protect through preemption of state regulation. ). 6 Importantly, when construing the 2018 Order, the validity of the Commission s findings 7 cannot be challenged in this Court. Under the Hobbs Act, this Court must presume that such 8 findings are valid. See 28 U.S.C. § 2342(1) (The Hobbs Act vests  exclusive jurisdiction to enjoin, 9 set aside, suspend (in whole or in part) or to determine the validity of . . . all final orders of the 10 Federal Communications Commission in  [t]he court of appeals. ); see Sprint Nextel Corp. v. 11 FCC, 508 F.3d 1129, 1131 (D.C. Cir. 2007). Because the Hobbs Act provides that   parties seeking 12 to challenge the validity of FCC orders must do so through actions in the circuit courts,  Wilson 13 v. A.H. Belo Corp., 87 F.3d 393, 396 (9th Cir. 1996) (brackets omitted),  [p]roperly promulgated 14 15 FCC regulations currently in effect must be presumed valid in district court actions such as this 16 one, as district courts  lack[] jurisdiction to pass on the validity of such rules, US West Commc ns, 17 Inc. v. Jennings, 304 F.3d 950, 958 n.2 (9th Cir. 2002); accord Fober v. Mgm t & Tech. 18 Consultants, LLC, 886 F.3d 789, 792 n.2 (9th Cir. 2018). 19 1. The Significant Objective of the 2018 Order is to Return to a Light-Touch 20 Approach to Regulating Broadband Internet Access. 21 Here, reducing the regulatory burden on broadband services was the FCC s overarching 22 objective. E.g., 2018 Order ¶ 207 ( We reaffirm and honor this longstanding, bipartisan 23 commitment by adopting a light-touch framework that will preserve Internet freedom for all 24 Americans. ). The FCC exercised its lawful authority to classify broadband as an information 25 service, a category subject to far less regulation than if broadband were classified as a 26 telecommunications service, see Brand X, 545 U.S. at 980-82, 986-89; Mozilla, 940 F.3d at 18-21, 27 and  calibrated [a] federal regulatory regime based on . . . pro-competitive, deregulatory goals, 28 2018 Order. ¶ 194. The 2018 Order expressly seeks to  eliminate burdensome regulation that Memorandum in support of motion - 16 - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 23 of 33 1 stifles innovation and deters investment, and empower Americans to choose the broadband Internet 2 access service that best fits their needs. Id. ¶ 1. And the FCC concluded that its light-touch 3 approach rather than the more stringent regulation propounded by the 2015 Order was best 4 suited to encourage innovation. Id. ¶ 208 ( [W]e conclude that preexisting federal protections 5 alongside the transparency rule we adopt today are not only sufficient to protect Internet 6 freedom, but will do so more effectively and at lower social cost than the [2015 Order s] conduct 7 rule. In short, we believe the light-touch framework we adopt today will pave the way for 8 additional innovation and investment that will facilitate greater consumer access to more content, 9 services, and devices, and greater competition. ). 10 Furthermore, in repealing the 2015 rules, the FCC found that their  costs. . . to innovation 11 and investment outweigh any benefits they may have. Id. ¶ 4; see also id. ¶ 253 ( eliminating the 12 ban on paid prioritization will help spur innovation, experimentation, encourage network 13 investment, and better allocate the costs of infrastructure, likely benefitting consumers and 14 15 competition ). In other words, the objective of the 2018 Order is to restore a light-touch federal 16 approach to regulating broadband Internet access service. 17 Finally, although the D.C. Circuit vacated the 2018 Order s Express Preemption Clause, 18 the FCC made clear in a  [then-]contemporaneous explanation of its objectives, Williamson, 562 19 U.S. at 330, that preemption was necessary because  [o]ur order today establishes a calibrated 20 federal regulatory regime based on the pro-competitive, deregulatory goals of the 1996 Act. 21 Allowing state and local governments to adopt their own separate requirements, which could 22 impose far greater burdens than the federal regulatory regime, could significantly disrupt the 23 balance we strike here. 2018 Order ¶ 194.2 24 25 2 The D.C. Circuit s Mozilla ruling vacating the 2018 Order s Express Preemption Clause does not alter the fact that SB-822 is preempted here. The Mozilla panel ruled narrowly, concluding that 26 the Commission had  fail[ed] to ground its sweeping [Express Preemption Clause] which goes 27 far beyond conflict preemption in a lawful source of statutory authority. Mozilla, 940 F.3d at 74. As the panel explained, the FCC lacked  express or ancillary authority to expressly preempt 28 countervailing state laws in this area, id. at 75-76, and that it  lacked the legal authority to categorically abolish all fifty States statutorily conferred authority to regulate intrastate Memorandum in support of motion - 17 - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 24 of 33 1 Notwithstanding the FCC s clear federal objective, California s legislature made no secret 2 of its intent to override the 2018 Order and reinstate the repealed 2015 rules in a manner explicitly 3 prohibited by federal law. According to SB-822 s principal sponsor,  California can and should 4 lead the way in restoring the net neutrality protections that were repealed by Donald Trump s 5 FCC. http://sd11.senate.ca.gov/news/20180808-california-net-neutrality-proposal-moves- 6 forward. Accordingly, while the purpose of the 2018 Order was to reduce regulation of the 7 provision of broadband service, the explicit purpose of SB-822 is to do the opposite. The 8 Supremacy Clause requires that this conflict be resolved in favor of the Federal Government. 9 2. SB-822 s Specific Provisions Frustrate the 2018 Order s Significant 10 Objectives. 11 Because establishing a specific, light-touch regulatory framework was a significant 12 objective of the 2018 Order, the United States is likely to succeed in establishing that SB-822 13  stand[s] as an  obstacle to the accomplishment of that framework. See Geier, 529 U.S. at 886; 14 15 see also Crosby v. Nat l Foreign Trade Council, 530 U.S. 363, 373 (2000) ( What is a sufficient 16 obstacle is a matter of judgment, to be informed by examining the federal statute as a whole and 17 identifying its purpose and intended effects. ); see Burlington Northern Santa Fe Corp. v. 18 Anderson, 959 F. Supp. 1288, 1296 (D. Mt. 1997) ( [A]lthough hypothetically it may be possible 19 . . . for a party to comply with both state and federal requirements, state regulation of Plaintiffs 20 actions . . . would stand as an obstacle to Congress stated purpose of deregulation of rail 21 transportation. ). 22 23 24 communications, id. at 86. But, importantly, the D.C. Circuit did not decide  whether the 25 remaining portions of the 2018 Order have preemptive effect under principles of conflict preemption or any other implied-preemption doctrine, id. at 85, noting that a conflict analysis 26 depended on having  the facts of any alleged conflict before us, id. at 82. The Court left that issue 27 open for another case where  like here   the Commission makes . . . provision-specific arguments. Id. at 86 (concluding that because no such case was before the court  it would be 28 wholly premature to pass on the preemptive effect, under conflict or other recognized preemption principles of the remaining portions of the 2018 Order. ). Memorandum in support of motion - 18 - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 25 of 33 1 SB-822 resurrects the bans on blocking, throttling, and paid prioritization, as well as an 2 Internet conduct standard, that the 2015 Order created and the 2018 Order abolished. See Cal. S. 3 Comm. on Judiciary, SB 822 Analysis 1 (2018) (noting that SB-822  codif[ies] portions of the 4 recently-rescinded [FCC] rules). Indeed, the conflict is explicit, as the below table makes clear: 5 6 SB-822 2018 Order Blocking SB-822 makes it  unlawful to 2018 Order repealed  the no-blocking . . . 7  [b]lock[] lawful content, SB- rule[] because it  [was] unnecessary to 8 822 § 3101(a)(1); see also id. § prevent the harms that they were intending 3101(a)(3)(B) (ISP cannot to thwart. 2018 Order ¶ 263. 9 require consideration from provider to avoid blocking). 10 Throttling SB-822 forbids the  [i]mpairing 2018 Order repealed the  unnecessary 11 or degrading [of] lawful Internet  no-throttling rule[]. 2018 Order ¶ 263; traffic on the basis of Internet id. ¶ 323 (concluding that  replacing the 12 content, application, or service, prohibitions on blocking and throttling or use of a nonharmful device, with a transparency rule implements a 13 SB-822 § 3101(a)(2); see also lower-cost method of ensuring that threats 14 id. § 3101(a)(3)(C) (ISP cannot to Internet openness are exposed and require consideration from deterred by market forces, public 15 provider to avoid throttling). opprobrium, and enforcement of the consumer protection laws ). 16 17 Paid SB-822 makes it unlawful to The 2018 Order  decline[d] to adopt a ban Prioritization  [e]ngag[e] in paid on paid prioritization, 2018 Order ¶ 253; 18 prioritization, SB-822 see also id. ¶ 319 (concluding that banning 19 § 3101(a)(3), meaning an ISP is paid prioritization  has created uncertainty prohibited from favoring some and reduced ISP investment,  is likely to 20 traffic in exchange for prevent certain types of innovating consideration or to benefit an applications from being developed or 21 affiliated entity, id. § 3100(r). adopted, and  imposes substantial social 22 costs ). 23 24 25 26 27 28 Memorandum in support of motion - 19 - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 26 of 33 SB-822 2018 Order 1 Internet California seeks to impose a The 2018 Order eliminated a nearly 2 Conduct standard prohibiting identical  Internet Conduct Standard that Standard  unreasonably interfering with[] the FCC concluded was  vague,  created 3 or unreasonably regulatory uncertainty in the marketplace 4 disadvantaging an  end user s hindering investment and innovation, and ability to select, access, and use  not in the public interest, 2018 Order 5 broadband Internet access ¶¶ 246-52; see also 2015 Order ¶ 136 service or  the lawful Internet ( General Conduct Rule, prohibiting 6 content . . . of the end user s broadband providers from  unreasonably 7 choice, as well as an edge interfer[ing] with or unreasonably provider s ability to make such disadvantag[ing] (i) end users ability to 8 content available to end users, select, access, and use broadband Internet SB-822 § 3101(a)(7. access service or the lawful Internet 9 content, applications, services, or devices 10 of their choice, or (ii) edge providers ability to make lawful content, 11 applications, services, or devices available to end users. ). 12 13 SB-822 also imposes additional restrictions on ISPs relationships with edge providers. In 14 particular, ISPs cannot require consideration from edge providers in exchange for (A) delivering 15 Internet traffic to ISPs end users; (B) avoiding blockage of the edge provider s content; or (C) 16 avoiding impairment or degradation of the edge provider s content. SB-822 § 3101(a)(3)(A)-(C). 17 But the 2018 Order ended regulation of Internet traffic exchange, 2018 Order, ¶¶ 163-73, 18 concluding that  freeing such agreements  from burdensome government regulation, and 19 allowing market forces to discipline this emerging and competitive market is the better course, 20 id. ¶ 168. 21 SB-822 also imposes at least two more stringent requirements than even the 2015 Order. 22 23 First, the law bans  [z]ero-rating  defined as  exempting some Internet traffic from a customer s 24 data usage allowance, SB-822 § 3100(t) for certain content only, id. § 3101(6), or in exchange 25 for payment, id. § 3101(5). Even the 2015 Order declined SB-822 s categorical approach, opting 26 instead for case-by-case evaluation. See 2015 Order ¶ 152 ( [W]e will look at and assess such 27 practices under the no-unreasonable interference/disadvantage standard, based on the facts of each 28 individual case, and take action as necessary. ). And in 2018, the FCC expressly noted that a Memorandum in support of motion - 20 - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 27 of 33 1  thirteen-month investigation . . . did not identify specific evidence of harms from particular zero- 2 rating programs, 2018 Order ¶ 250, and  decided to refrain from imposing this rule, which it 3 determined  would impose more stringent requirements for broadband service, id. ¶ 195. SB- 4 822 s contrary treatment is  inconsistent with the federal deregulatory approach adopted by the 5 FCC. Id. ¶ 194. 6 Second, SB-822 has a catch-all provision that apparently targets  specialized services, 7 (such as  facilities-based VoIP offerings, heart monitors, or energy consumption sensors, 2015 8 Order ¶ 35), in addition to co-packaged pay-TV services, by preventing ISPs from offering or 9 providing other services  that are delivered over the same last-mile connection as the broadband 10 Internet access service if they  negatively affect the performance of broadband Internet access 11 service, SB-822 § 3102(a)(2), or  have the purposes or effect of evading the bright line 12  prohibitions in Section 3101, id. § 3102(a)(1). Even the 2015 Order expressly declined to apply 13 the categorical rules to specialized services. See 2015 Order ¶¶ 35, 207-13. Further, prohibiting 14 15 any specialized services or co-packaged pay-TV services perceived to  negatively affect the 16 performance of broadband Internet access service, SB-822 § 3102(a)(2), would be plainly 17 inconsistent with the 2018 Order s repeal of the Internet Conduct Standard. Again, SB-822 s more 18 stringent provisions are inconsistent with the 2018 Order s deregulatory approach. See 2018 Order 19 ¶ 194.3 20 SB-822 also conflicts with the 2018 Order s treatment of mobile broadband internet access 21 service. The 2018 Order makes clear that  broadband Internet access service, regardless of whether 22 3 Although SB-822 s transparency provision resembles a portion of the FCC s transparency 23 rule, 47 C.F.R. § 8.1(a), it does not address and does not purport to track the 2018 Order s detailed guidance specifying what disclosures are and are not required, see 2018 Order ¶¶ 215 31. 24 Accordingly, SB-822 s disclosure provision may impermissibly impose more stringent 25 requirements than the 2018 Order s transparency rule. If this disclosure provision were meant only to duplicate the federal requirements, it would be wholly unnecessary, and its imprecise and open- 26 ended language creates a substantial risk that it could instead be interpreted more broadly. To the 27 extent that provision could be applied in a manner inconsistent with the detailed guidance set forth in the 2018 Order, or could be used to reinstate the  enhanced transparency requirements that that 28 the 2018 Order specifically repealed, it likewise conflicts with the federal regulatory scheme. Memorandum in support of motion - 21 - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 28 of 33 1 offered using fixed or mobile technologies, is an information service under the Act, and that 2 mobile broadband Internet access service  should not be classified as a commercial mobile service 3 [e.g., requiring common carrier treatment] or its functional equivalent. 2018 Order ¶ 65; see also 4 id. ¶¶ 65-85. This conclusion, the Commission explained,  furthers the Act s overall intent to allow 5 information services to develop free from common carrier regulations. Id. ¶ 82. SB-822, by 6 contrast, subjects mobile broadband Internet access services to the same common carrier rules as 7 it imposes on providers of fixed broadband Internet access services. SB-822 §§ 3101(b), 3102(b). 8 Given the direct conflict between the FCC s 2018 Order and California s SB-822, the 9 Constitution dictates that SB-822 be enjoined as preempted. 10 B. SB-822 Is Preempted by the Communications Act s Assignment of Exclusive 11 Authority to Regulate Interstate Communications to the Federal 12 Government. 13 SB-822 is alternatively preempted because it violates the Communications Act s division 14 15 of federal and state regulatory authority over communications services. Congress provided the 16 FCC with exclusive responsibility for  regulating interstate and foreign commerce in 17 communication by wire and radio, 47 U.S.C. § 151, id. § 152(a), while leaving states with 18 responsibility for intrastate communications, id. § 152(b). See, e.g., City of Abilene, Tex. v. FCC, 19 164 F.3d 49, 53 (D.C. Cir. 1999) (noting  Congress s clearly expressed intent in 47 U.S.C. § 151 20 to  centraliz[e] authority . . . with respect to interstate and foreign commerce in wire and radio 21 communication in one federal agency (the Commission) ); Global Tel*Link v. FCC, 866 F.3d 22 397, 402 (D.C. Cir. 2017) ( Under [the Communications Act], the Commission regulates interstate 23 telephone communication. ); Union Telecom, LLC v. United States, 144 Fed. Cl. 477, 485 (2019) 24 ( States regulate intrastate telecommunication services, but the FCC has exclusive regulatory 25 powers of interstate and international services. ). Courts have recognized that the Communication 26 Act s commitment of interstate responsibility to the FCC preempts countervailing state acts that 27 attempt to regulate interstate communications. See, e.g., Nat l Ass n of Regulatory Util. Comm rs 28 v. FCC, 746 F.2d 1492, 1498-501 & n.6 (D.C. Cir. 1984) (finding no  doubt concerning Memorandum in support of motion - 22 - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 29 of 33 1 preemption in this case, as the FCC  regulated exclusively interstate communications which are 2 placed explicitly within the sphere of federal jurisdiction by the plain language of the 3 Communications Act ); Ivy Broadcasting Co. v. Am. Tel. & Tel. Co., 391 F.2d 486, 491 (2d Cir. 4 1968) ( questions concerning the duties, charges, and liabilities of telegraph or telephone 5 companies with respect to interstate communications services are to be governed solely by federal 6 law and [] the states are precluded from acting in this area ). That conclusion follows regardless 7 of whether the preemption is understood as a form of express preemption, with the 8 Communications Act explicitly precluding state regulation over interstate communications, or 9 field preemption, with the Communications Act embodying Congressional judgment that the field 10 of interstate communications is committed exclusively to federal jurisdiction. Cf. Crosby, 530 U.S. 11 at 373 (internal citations omitted) (noting that the bases for preemption are not  rigidly distinct 12 and  field pre-emption may be understood as a species of conflict pre-emption ). 13 The dispositive question, then, is whether SB-822 regulates interstate communications. 14 15 There can be no doubt that it does. On its face, SB-822 does not purport to limit its reach only to 16 intrastate matters; rather it defines  broadband internet access service as  a mass market retail 17 service by wire or radio provided to consumers in California that provides the capability to transmit 18 data to, and receive data, from all or substantially all Internet endpoints. SB-822 § 3100(b) 19 (emphasis added). California clearly is not home to  all or substantially all Internet endpoints. As 20 the 2018 Order recognized  it is well-settled that Internet access is a jurisdictionally interstate 21 service because a substantial portion of Internet traffic involves accessing interstate or foreign 22 websites. 2018 Order ¶ 199 (internal quotation marks and citation omitted).  Because both 23 interstate and intrastate communications can travel over the same Internet connection (and indeed 24 may do so in response to a single query from a consumer), it is impossible or impracticable for 25 ISPs to distinguish between intrastate and interstate communications over the Internet or to apply 26 different rules in each circumstance. Id. ¶ 200. Such FCC findings are consistent with Ninth 27 Circuit precedent, which  ha[s] long recognized that the Internet and the nation s vast network of 28 telephone lines are instrumentalities of and intimately related to interstate commerce. United Memorandum in support of motion - 23 - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 30 of 33 1 States v. Costanzo, 956 F.3d 1088, 1092 (9th Cir. 2020) (internal quotation marks and citation 2 omitted). 3 Even if the line between interstate and intrastate communication services were unclear (and 4 it is not), the Supreme Court has recognized that the FCC can still preempt state law  where 5 compliance with both federal and state law is in effect physically impossible, Louisiana Public 6 Service Commission v. FCC, 476 U.S. 355, 368 (1986), and that preemption should be affirmed 7  where it [is] not possible to separate the interstate and intrastate components of the asserted FCC 8 regulation, id. at 375 n.4. Here, as discussed above, the FCC has made a factual determination 9 that internet traffic cannot be disaggregated into interstate and intrastate components. Accordingly, 10 even if this Court determines that California may regulate intrastate communications in part, the 11 fact that such communications are inextricably intertwined with interstate communications 12 requires that the law be preempted. 13 II. The Equitable Factors Strongly Militate in Favor of Injunctive Relief. 14 15 The remaining preliminary-injunction factors irreparable injury, the balance of the 16 equities, and the public interest weigh strongly in favor of injunctive relief here. The enforcement 17 of SB-822 would irreparably injure both the United States and the public interest. Conversely, 18 California will suffer no cognizable harm if it is unable to thwart judicially-approved federal law, 19 as evidenced by its agreement to not enforce SB-822 to this point. 20 SB-822 negates and thus can be said to irreparably injure the Federal Government s 21 chosen regulatory choice. Indeed, that is its purpose. In the 2018 Order, the FCC expressly adopted 22 an affirmative  deregulatory policy and  deregulatory approach to Internet regulation. E.g., 2018 23 Order ¶¶ 39, 61, 194-96. The 2018 Order does not constitute an absence of regulation for States to 24 fill; it is a uniform, national regulatory framework, the metes and bounds of which were carefully 25 considered by the Commission in exercising its lawfully delegated authority. Effectuating its 26 preference for a single, national framework, the Commission sought to  eliminate burdensome 27 regulation that stifles innovation and deters investment, and empower Americans to choose the 28 broadband Internet access service that best fits their needs. 2018 Order ¶ 1; see also, e.g., ¶¶ 4, Memorandum in support of motion - 24 - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 31 of 33 1 207-08. In the face of this clear exercise of federal authority, California has tried not only to 2 reinstate the same rules the FCC repealed, but to impose new requirements that have never existed 3 at the federal level. And given that ISPs cannot realistically comply with one set of standards in 4 this area for California and another for the rest of the Nation especially when Internet 5 communications frequently cross multiple jurisdictions, and indeed, are inherently interstate the 6 effect of this state legislation would be to nullify federal law across the country. Only an injunction 7 from this Court can address that unlawful result. See, e.g., Fed. Home Loan Bank Bd. v. Empie, 8 778 F.2d 1447, 1454 (10th Cir. 1985) (affirming injunction sought by federal agency against a 9 state  statute . . . expressly forbidding something that the federal regulations expressly permit ). 10 Indeed, as the Ninth Circuit recently observed, presuming that  the United States will suffer 11 irreparable harm based on the constitutional violations, is  consistent with our . . . recognition 12 that preventing a violation of the Supremacy Clause serves the public interest. United States v. 13 California, 921 F.3d 865, 893 (9th Cir. 2019); cf. New Orleans Pub. Serv., Inc. v. Council of City 14 15 of New Orleans, 491 U.S. 350, 366-67 (1989) (suggesting that irreparable injury inherently results 16 from enforcement of preempted state law). After all,  an alleged constitutional infringement will 17 often alone constitute irreparable harm, and that is no less true when a State attempts  to violate 18 the requirements of federal law in the face of  the Supremacy Clause. Arizona, 641 F.3d at 366 19 (citations omitted). Accordingly, courts have recognized that enjoining the enforcement of 20 preempted laws is necessary to protect the United States from actions by States that undermine its 21 sovereignty. See id.; United States v. Alabama, 691 F.3d 1269, 1301 (11th Cir. 2012); United 22 States v. California, 314 F. Supp. 3d 1077, 1112 (E.D. Cal. 2018), aff d in part, reversed in part 23 and remanded, 921 F.3d 865 (9th Cir. 2019). 24 Similarly, the balance of the equities and public interest strongly favor an injunction here. 25  It is clear that it would not be equitable or in the public s interest to allow the state . . . to violate 26 the requirements of federal law ; instead,  the interest of preserving the Supremacy Clause is 27 paramount. California, 314 F. Supp. 3d at 1111 (quoting Arizona, 641 F.3d at 366). And that is 28 particularly true here given the significant public interest in maintaining the FCC s federal Memorandum in support of motion - 25 - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 32 of 33 1  deregulatory approach to Internet regulation, which it could not do if California (and others) 2 enacted measures that contradict the Commission s judgment in this area. See 2018 Order ¶¶ 39, 3 61, 194-96; see also id. ¶¶ 194, 200 (explaining that states and local governments could impose 4 far greater burden, disrupt the balance struck by 2018 Order, and interfere with the FCC s 5 regulation of interstate traffic); cf. California, 314 F. Supp. 3d at 1112 ( Frustration of federal 6 statutes and prerogatives are not in the public interest. ) (quoting Alabama, 691 F.3d at 1301)). 7 In addition to undermining the federal deregulatory scheme, allowing California and other 8 separate state and local jurisdictions  to impose separate regulatory requirements on [broadband 9 providers] would not be in the public interest because it  could inhibit broadband investment and 10 deployment and would increase costs to consumers. 2018 Order ¶ 194 n.727. Requiring 11 broadband providers to track and adhere to a patchwork of separate state and local requirements 12 in every individual jurisdiction in which they operate would  place an undue burden on the 13 provision of broadband Internet access service. Id. ¶ 195; cf. id. ¶ 127 ( Accordingly (and 14 15 unsurprisingly), most ISPs actively try to minimize the discrepancies in their terms of service, 16 network management practices, billing systems, and other policies. ). 17 CONCLUSION 18 The Court should grant the United States motion for a preliminary injunction. 19 Dated: August 5, 2020 Respectfully submitted, 20 ETHAN P. DAVIS Acting Assistant Attorney General 21 Civil Division 22 MATTHEW J. GLOVER 23 Counsel to the Assistant Attorney General 24 ALEXANDER K. HAAS 25 Director, Federal Programs Branch 26 JACQUELINE COLEMAN SNEAD Assistant Branch Director, Federal Programs Branch 27 28 Memorandum in support of motion - 26 - for preliminary injunction Case 2:18-cv-02660-JAM-DB Document 21-1 Filed 08/05/20 Page 33 of 33 /s/ Joseph E. Borson 1 JOSEPH E. BORSON (Va. Bar No. 85519) 2 KEVIN SNELL (NY Bar) Trial Attorneys 3 U.S. Department of Justice Civil Division, Federal Programs Branch 4 1100 L St. NW 5 Washington, DC 20530 Telephone: (202) 514-1944 6 Fax: (202) 616-8460 7 E-mail: Joseph.Borson@usdoj.gov 8 Attorneys for the United States 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Memorandum in support of motion - 27 - for preliminary injunction