Boomer, Frank H. v. AT&T Corporation

In the

United States Court of Appeals

For the Seventh Circuit

No. 02-2667

FRANK H. BOOMER , ON BEHALF OF

HIMSELF AND ALL OTHERS SIMILARLY

SITUATED ,

Plaintiff-Appellee,

v.

AT&T CORPORATION , A NE W YORK

CORPORATION ,

Defendant-Appellant.

Appeal from the United States District Court

for the N orthern District of Illinois, Eastern Division.

No. 02 C 0847—John W. Darrah, Judge.

A RGUED S EPTEMBER 5, 2002 —D ECIDED O CTOBER 3, 2002*

Before COFFEY , MANION , and DI A NE P. WOOD , Circuit

Judges.

MANION , Circuit Judge. Frank Boomer filed a putative

class action lawsuit against AT&T, alleging that AT&T

overcharged its customers for contributions to the federal

Universal Services Fund. AT&T moved to compel

arbitration and to dismiss or stay the pending action,

arguing that after the Federal Communications Commission

(“FCC”) discontinued the filing of tariffs by

*

This opinion is being immediately released in

typescript. The printed version will follow.

2 No. 02-2667

telecommunication providers, AT&T had entered into a

Consumer Service Agreement (“CSA”) with Boomer which

prohibited class actions and mandated arbitration. Boomer

argued that the arbitration clause was unconscionable under

Illinois law and he sought a declaratory judgment

accordingly. The district court denied Boomer summary

judgment on his declaratory judgment claim and denied

AT&T’s motion to compel arbitration and its motion to

dismiss or stay the case. AT&T appeals, arguing that

Boomer’s state law challenge to the terms and conditions of

the CSA is preempted by the Federal Communications Act

of 1934, and Boomer is therefore bound by the CSA’s

arbitration clause. We agree and accordingly REVERSE.

I.

Prior to 2001, the Communications Act of 1934

(“Communications Act”), as amended by the

Telecommunications Act of 1996, required long distance

carriers like AT&T to set forth their charges and other terms

and conditions of service in tariffs filed with the FCC. 47

U.S.C. § 203. Under the “filed tariff doctrine,” customers

were bound by the terms of the tariff even if they had never

seen the tariff, and even if the consumers had been promised

service under different rates, terms or conditions. See AT&T

v. Central Office Telephone, Inc., 524 U.S. 214, 222 (1998).

Additionally, customers were bound by the rates, terms, and

conditions contained in the tariff unless the FCC determined

that a tariff provision violated the substantive requirements

of the Communications Act and the tariff was thereafter

modified. Id.

Over time, however, the FCC began entering orders

exempting “nondominant carriers” (defined as those lacking

market power) from the tariff-filing requirements of Section

203 of the Communications Act. But the Supreme Court

invalidated these orders, holding that the FCC lacked the

authority under the Communications Act to exempt certain

carriers from the tariff-filing requirement of Section 203.

See MCI Telecommunications Corp. v. AT&T Corp., 512 U.S.

No. 02-2667 3

218, 234 (1994). However, when Congress passed the

Telecommunications Act of 1996, it expressly gave the FCC

the authority to forbear from applying the tariff-filing

requirement if, among other things, the FCC determined

that the “enforcement of such regulation or provision is not

necessary to ensure that the charges, practices,

classifications, or regulations. . . are just and reasonable and

are not unjustly or unreasonably discriminatory.” 47 U.S.C.

§ 160(a)(1).

Armed with this new authority, the FCC issued a series of

orders providing that AT&T and other long-distance carriers

were no longer required to file tariffs. See Interstate

Interexchange Marketplace, 11 FCC Rcd. 20,730 (1996);

Interstate Interexchange Marketplace, 12 FCC Rcd. 15,014

(1997); Interstate Interexchange Marketplace, 14 FCC Rcd.

6004 (1999) (“Detariffing Orders”). Instead, the carriers

were now required to provide customers with notice of the

rates, terms, and conditions of service, and to offer

customers service under such terms and conditions. The

customers in turn could accept or reject the carrier’s offer.

The FCC anticipated that carriers would enter into such

contracts through the use of “short, standard contracts.” 11

FCC Rcd. at 20,736 (¶ 57).

After the FCC issued its detariffing orders, in June 2001

AT&T began mailing proposed Customer Service

Agreements (“CSAs”) to residential customers for their

consideration. AT&T mailed each customer three

documents: the CSA, a letter explaining why the CSA was

being sent, and a list of anticipated frequently asked

questions with explanatory responses (“CSA Mailing”). The

CSA Mailing was sent to Boomer in June 2001 in an

envelope, separate from his monthly bill. On the outside of

the envelope was typed: “ATTENTION: Important

information concerning your AT&T service enclosed.”

The letter included with the CSA Mailing explained that

AT&T was enclosing a “copy of the new AT&T Consumer

Services Agreement containing the terms and conditions for

4 No. 02-2667

our state-to-state and international consumer long distance

services,” and that “[t]his Agreement will begin to apply to

these AT&T services on August 1, 2001.” The letter also

explained that because of recent changes adopted by the

FCC, the details of the service agreement were being

provided directly to the customer. Additionally, the letter

informed customers that “[t]he Agreement also describes our

new binding arbitration process, which uses an objective

third party rather than a jury for resolving any disputes that

may arise.” The letter further informed customers that they

would “accept the terms of the Agreement simply by

continuing to use or pay for any AT&T state-to-state or

international consumer calling service.”

The CSA included with the letter expanded on these

points. On the first page of the CSA, AT&T explained in

bold and capitalized text that:

BY ENROLLING IN, USING, OR PAYING FOR THE

SERVICES, YOU AGREE TO THE PRICES,

CHARGES, TERMS AND CONDITIONS IN THIS

AGREEMENT. IF YOU DO NOT AGREE TO THESE

PRICES, CHARGES, TERMS AND CONDITIONS, DO

NOT USE THE SERVICES, AND CANCEL THE

SERVICES IMMEDIATELY BY CALLING AT&T AT

1-888-288-4099* FOR FURTHER DIRECTIONS.

Also significant for purposes of this appeal is Section 7,

entitled “dispute resolution.” That section began in bold and

capitalized text, stating:

IT IS IMPORTANT THAT YOU READ THIS ENTIRE

SECTION CAREFULLY. THIS SECTION PROVIDES

FOR RESOLUTION OF DISPUTES THROUGH

FINAL AND BINDING ARBITRATION BEFORE A

NEUTRAL ARBITRATOR INSTEAD OF IN A COURT

BY A JUDGE OR JURY OR THROUGH A CLASS

ACTION. YOU CONTINUE TO HAVE CERTAIN

RIGHTS TO OBTAIN RELIEF FROM A FEDERAL

OR STATE REGULATORY AGENCY.

No. 02-2667 5

The CSA then detailed the arbitration requirement,

providing:

a. Binding Arbitration. The arbitration process

established by this section is governed by the Federal

Arbitration Act (“FAA”), 9 U.S.C. § 1 - 16. You have the

right to take any dispute that qualifies to small claims

court rather than arbitration. All other disputes arising

out of or related to this Agreement (whether based in

contract, tort, statute, fraud, misrepresentation or any

other legal or equitable theory) must be resolved by final

and binding arbitration. This includes any dispute based

on any product, service or advertising having a connection

with this Agreement and any dispute not finally resolved

by a small claims court. The arbitration will be conducted

by one arbitrator using the procedures described by this

Section 7.

Section 7 then detailed the arbitration filing procedures

and explained that any disputes involving $10,000 or less

would be conducted in accordance with the rules of the

Consumer Arbitration Rules of the American Arbitration

Association, and claims in excess of that amount would be

resolved under the AAA’s Commercial Arbitration Rules.

The CSA further provided that consumers filing an

arbitration claim for less than $1,000 would only be required

to pay a $20 filing fee, and that AT&T would cover the

remaining costs of arbitration. AT&T later amended the

CSA to further reduce the potential arbitration expense,

providing that AT&T would pay all but a $20 filing fee for

customers with disputes up to $10,000 and all but $375 for

claims between $10,000 and $75,000.

Additionally, Section 7 of the CSA provided—once again in

bold and capitalized text—that:

NO DISPUTE MAY BE JOINED WITH ANOTHER

LAWSUIT, OR IN AN ARBITRATION WITH A

DISPUTE OF ANY OTHER PERSON, OR RESOLVED

ON A CLASS-WIDE BASIS, THE ARBITRATOR MAY

NOT AWARD DAMAGES THAT ARE BARRED BY

6 No. 02-2667

THIS AGREEMENT AND MAY NOT AWARD

PUNITIVE DAMAGES OR ATTORNEYS’ FEES

UNLESS SUCH DAMAGES OR FEES ARE

EXPRESSLY AUTHORIZED BY A STATUTE, YOU

AND AT&T BOTH WAIVE ANY CLAIMS FOR AN

AWARD OF DAMAGES THAT ARE EXCLUDED

UNDER THIS AGREEMENT.

Boomer did not contact AT&T to cancel his services, but

instead continued to use AT&T’s long distance services.

Notwithstanding the CSA’s prohibition of class actions and

its arbitration clause, Boomer filed a putative class action

against AT&T, alleging that AT&T was overbilling him for

the federal Universal Service Fee charge.1 In his amended

putative class action complaint, Boomer presented six

counts: Count I requested an accounting of the Universal

Service Fee Charge; Count II alleged a violation of the

Illinois Consumer Fraud Act and the Deceptive Business

Practices Act; Count III alleged unjust enrichment; Count IV

sought a declaratory judgment that the arbitration clause

contained in Section 7 of the CSA was unconscionable and

otherwise invalid; Count V alleged that the arbitration

clause violated the Illinois Consumer Fraud Act and the

Deceptive Business Practices Act; and Count VI alleged that

the CSA violated the Communications Act.

AT&T responded to Boomer’s suit by filing a motion to

compel arbitration and to dismiss or stay the proceedings

1

In passing the Telecommunications Act of 1996,

Congress authorized the FCC to assess a “Universal Service

Fee” on long distance carriers based on a percentage of the

carrier’s past revenues, 47 U.S.C. § 254, although carriers

may charge consumers to recover the cost of these

contributions. See 12 FCC Rcd. 8776 (¶773). The Universal

Service Fees are then used to subsidize telecommunication

services for customers in high cost areas, schools and

libraries. 47 U.S.C. § 254.

No. 02-2667 7

pursuant to the Federal Arbitration Act. In support of its

motion, AT&T submitted the declaration of Ellen Rein, the

AT&T employee who had overseen the mailing of the CSAs

to AT&T customers. Reid’s declaration authenticated the

CSA Mailing material and established that AT&T had in

fact mailed Boomer the CSA Mailing in June 2001 and that

the mailing was sent by third-class mail with forwarding

service. AT&T did not receive notice from the postal service

indicating that Boomer had not received the mailing. Her

declaration also stated that Boomer continued to be enrolled

in AT&T’s long-distance service.

Boomer for his part filed a motion for partial summary

judgment on Counts IV and V, arguing that the arbitration

clause was, as a matter of law, unconscionable and violated

the Illinois Consumer Fraud Act and the Deceptive Business

Practices Act. The district court denied Boomer’s motion for

partial summary judgment and denied AT&T’s motion to

compel arbitration and to dismiss or stay the proceedings, on

the grounds that “[g]enuine issues of material fact exist as

to the validity of the arbitration clause.” AT&T appeals. 2

II.

On appeal, AT&T argues that the district court erred in

denying its motion to compel arbitration and to dismiss or

stay Boomer’s suit pending arbitration. Boomer responded

to AT&T’s appeal by filing a motion to dismiss the appeal for

lack of jurisdiction. A motions panel of this court ordered

that Boomer’s motion to dismiss be considered by the merits

panel. Accordingly, before considering the merits of AT&T’s

2

At oral argument, AT&T agreed that this appeal

involves only Boomer’s individual claim against AT&T, and

not the putative class that Boomer sought to represent. See

Harold Washington Party v. Cook County, Illinois Democratic

Party, 984 F.2d 875, 878 (7th Cir. 1993) (if a putative class is

not certified by the district court, the plaintiff’s appeal

concerns only the plaintiff’s individual claim).

8 No. 02-2667

appeal, we first consider Boomer’s motion to dismiss this

appeal for lack of jurisdiction.

A. Motion to Dismiss for Lack of Jurisdiction

In his motion to dismiss for lack of jurisdiction, Boomer

argues that this court lacks jurisdiction to consider AT&T’s

appeal because the district court had not conclusively ruled

on the validity of the arbitration clause, but had merely

concluded that it could not resolve the issue at the summary

judgment stage. Therefore, according to Boomer, the district

court’s order is not final and appealable.

Although a decision must generally be final to be

appealable, there are several exceptions to this rule. Section

16 of the Federal Arbitration Act provides one such basis for

immediate appeal, providing: “(a) An appeal may be taken

from— (1) an order—(A) refusing a stay of any action under

section 3 of this title, (B) denying a petition under section 4

of this title to order arbitration to proceed.” 9 U.S.C.

§ 16(a)(1)(A) and (B).

In this case, the district court entered an order expressly

stating: “AT&T’s Motion to Compel Arbitration and to

Dismiss or Stay Proceedings is denied.” The court reiterated

this point in its closing sentence, noting: “For the reasons

stated above, Plaintiff’s Motion for Partial Summary

Judgment is denied. Defendant’s Motion to Compel

Arbitration and to Dismiss or Stay Proceedings is denied.”

Nonetheless, Boomer contends that this court lacks

jurisdiction over this appeal because the district court also

entered a minute order which directed the parties “to confer

and advise the Court within 10 days as to whether a

separate trial should be ordered on [the arbitration counts]

before the remaining counts of Plaintiff’s Amended

Complaint . . . .” This, according to Boomer, demonstrates

that the district court intended to revisit the question of

arbitrability and thus had not rendered a final decision on

this issue.

No. 02-2667 9

We acknowledge that the district court intended to

reconsider the question of arbitrability following further fact-

finding and possibly a trial. However, that does not defeat

this court’s jurisdiction. The plain language of Section

16(a)(1) provides for an appeal from “an order refusing a

stay” or “denying a petition to order arbitration to proceed,”

and the district court in this case expressly did both.

Applying Section 16(a)(1) in Koveleskie v. SBC Capital

Markets, Inc., 167 F.3d 361, 363 (7th Cir. 1999), we held

that a district court’s denial of a motion to compel

arbitration was immediately appealable even though the

district court had held that further discovery was needed

before it could conclusively rule on a motion to compel

arbitration. In fact, jurisdiction is even clearer in this case

than in Koveleskie, because here the district court expressly

denied AT&T’s Motion to Compel Arbitration, whereas in

Koveleskie, the district court’s order merely stated that

discovery was needed “before a decision can be reached on

the arbitration issue.” Id. at 363. Nonetheless, in

Koveleskie, we held that because “there is no doubt from the

record that the district court denied the defendant's motion

and clearly meant to foreclose arbitration,” id., an

immediate appeal could proceed under Section 16(a) of the

Arbitration Act.

Both the Third and Fourth Circuits have likewise

concluded that a denial of a motion to compel arbitration is

immediately appealable under Section 16(a)(1) of the FAA,

even if further discovery is required or the district court

intends to revisit the issue. See Snowden v. Checkpoint

Check Cashing, 290 F.3d 631, 635-36 (4th Cir. 2002);

Sandvik AB v. Advent Inter. Corp., 220 F.3d 99, 102-04 (3d

Cir. 2000). The Third Circuit’s decision in Sandvik provides

a thorough analysis of the issue and one that bears

repeating. The reason a denial of a motion to compel

arbitration is immediately appealable is because “[t]he

language of § 16 provides for appeals of orders denying

arbitration, and it makes no distinction between orders

denying arbitration and ‘final orders’ that accomplish the

10 No. 02-2667

same end.” Id. at 102. The language of Section 16(a)(1)(C)

further illustrates that point. As Sandvik explained, Section

16(a)(3) of “the FAA contains a catch-all provision regarding

any ‘final decision with respect to an arbitration that is

subject to this title,’ id. § 16(a)(3).” Id. at 103. Thus, to

interpret 16(a)(1) as Sandvik (and here Boomer) would have,

namely as applying only to “final decisions,” means “the

provision providing for appeals from denials of orders to

arbitrate [would become] surplusage in light of the more

expansive language in § 16(a)(3).” Id. Thus, “[t]he more

natural reading would therefore be to treat all orders

declining to compel arbitration as reviewable.” Id.

Moreover, the language of § 16(a)(1)(C) “reflects that

Congress decided to use the word ‘final’ in one part of the

statute, but declined to do so in the section that declares

that orders denying motions to compel arbitration are indeed

appealable.” Id. This reasoning defeats Boomer’s argument

that the district court’s order denying a motion to compel

arbitration must be final to be appealable. Additionally, the

fact that “the statute provides a list of interlocutory

arbitration-related orders that are not appealable, see id. §

16(b),” demonstrates that Congress intended what it said in

subsection 16(a)—that a denial of the motion to compel

arbitration is immediately appealable. Id. Finally, as

Sandvik noted, “jurisdiction comports with the purposes of

the FAA. Refusing [a defendant’s] appeal could circumvent

the FAA's clear purpose of enforcing binding arbitration

agreements,” by forcing the defendant to undergo a full-

blown trial before a determination as to “whether it was

legally obligated to participate in such a trial in the first

instance.” Id. at 104. For all of these reasons, we conclude

that Section 16(a) of the Arbitration Act allows for an

immediate appeal of the denial of a motion to compel

arbitration.3

3

Boomer also relies on this court’s decision in

McCaskill v. SCI Management Corp., 298 F.3d 677 (7th Cir.

(continued...)

No. 02-2667 11

Alternatively, Boomer claims that this court lacks

jurisdiction because after the district court entered its order

denying AT&T’s motion to compel arbitration, the Judicial

Panel for Multi-District Litigation entered an order

transferring Boomer’s case to the District Court of Kansas.

Initially, we note that it is questionable as to whether the

Judicial Panel’s order transferring the case to the District

Court of Kansas was effective, because that transfer order

was not filed with the District Court of Kansas until the day

after AT&T filed its notice of appeal. Under 28 U.S.C. §

1407(c), a Multi-District transfer order becomes effective

only after it is “filed in the office of the clerk of the district

court of the transferee district.” 28 U.S.C. § 1407(c).

Because AT&T filed its notice of appeal prior to the filing of

the transfer order, it would seem that the transfer order is

ineffective. See, e.g., Kusay v. United States, 62 F.3d 192,

193 (7th Cir. 1995) (“[T]he filing of a notice of appeal . . .

divests the district court of its control over those aspects of

the case involved in the appeal.”).

3

(...continued)

2002), wherein we stated that “[a]n appeal may be taken

from a ‘final decision with respect to an arbitration’, but not

from an interlocutory order staying the action or ‘compelling

arbitration’. 9 U.S.C. §§ 16(a)(3), (b)(1), (b)(3).” Id. at 678.

However, this language does not help Boomer because this

case does not involve an order “staying the action or

compelling arbitration,” but rather an order denying a

motion to compel arbitration and denying the motion to stay

the action. While the FAA prohibits interlocutory appeals of

motions compelling arbitration and granting stays, 9 U.S.C.

§ 16(b)(1), (b)(3), Section 16(a)(1) allows immediate appeals

from the denial of such motions. 9 U.S.C. § 16(a)(1).

12 No. 02-2667

However, we need not determine the validity of the

transfer order because even if a transfer order entered after

a notice of appeal is filed were valid, this court nonetheless

has jurisdiction under 28 U.S.C. § 1294(1) to hear AT&T’s

appeal from the district court’s order denying AT&T’s motion

to compel arbitration. That section provides that “appeals

from reviewable decisions of the district . . . courts shall be

taken [f]rom a district court of the United States to the court

of appeals for the circuit embracing the district.” 28 U.S.C.

§ 1294(1). In this case, the “reviewable decision” at issue

was entered by the Northern District of Illinois. Therefore,

jurisdiction is appropriate in this court. See, e.g.,

TechnoSteel, LLC v. Beers Const. Co., 271 F.3d 151, 154 (4th

Cir. 2001) (holding that the Fourth Circuit had jurisdiction

to hear an appeal from a South Carolina district court’s

order denying a motion to compel arbitration, even though

the district court also transferred the case to a Georgia

district court).

B. Motion to Compel Arbitration

Having concluded that we have jurisdiction over this

appeal, we turn to the merits. As noted, AT&T argues on

appeal that the district court erred in denying its motion to

compel arbitration because Section 7 of the CSA required

arbitration. Boomer initially contends that because the CSA

does not constitute a valid contract under Illinois law, he

never agreed to the arbitration clause. Alternatively,

Boomer argues that the arbitration clause contained in the

CSA is invalid because it is unconscionable under Illinois

law and violates the Illinois Consumer Fraud Act. AT&T

responds by arguing that because Boomer continued using

his AT&T service, he accepted the terms of the CSA,

including the arbitration provision. AT&T further contends

that the Communications Act preempts Boomer’s state law

challenges to the validity of the arbitration clause. We first

consider whether the CSA constitutes a contract, and then

address the issue of preemption.

1. Was the CSA a Contract?

No. 02-2667 13

Boomer maintains that the CSA did not constitute a valid

contract under Illinois law.4 Initially we note that while

Boomer alleged in his complaint that he did not recall

receiving the CSA mailing, on appeal he does not claim that

did not receive the CSA Mailing. Nor does he claim that he

attempted to cancel his service with AT&T. Rather, Boomer

argues that the CSA Mailing did not constitute an offer, that

his silence did not constitute an acceptance, that there was

no consideration supporting the arbitration clause, and that

AT&T committed fraud.

Boomer first claims that the CSA did not constitute an

offer because AT&T customers “would not recognize AT&T’s

mailing with the CSA as an offer to a contract.” However,

the letter accompanying the CSA clearly and explicitly

stated that “[e]nclosed is your copy of the new AT&T

Consumer Services Agreement containing the terms and

conditions for our state-to-state and international consumer

long distance services. This Agreement will begin to apply

to these AT&T services on August 1, 2001.” The cover letter

further explained that the consumer was “accept[ing] the

terms of the Agreement simply by continuing to use or pay

for any AT&T state-to-state or international consumer

calling service.” Additionally, the CSA explained in bold,

capitalized text at the beginning of the CSA that “BY

ENROLLING IN, USING, OR PAYING FOR THE

SERVICES, YOU AGREE TO THE PRICES, CHARGES,

TERMS AND CONDITIONS IN THIS AGREEMENT.”

This plain, unambiguous language makes clear that the

CSA constituted an offer. See Architectural Metal Sys., Inc.

v. Consolidated Sys., Inc., 58 F.3d 1227, 1229 (7th Cir.

4

Although AT&T argues that the Communications

Act preempts state law as to the validity of contractual terms

and conditions, AT&T and Boomer both maintain that

Illinois state law governs questions of contract formation.

Therefore for purposes of appeal we will assume that Illinois

state law determines whether a contract was formed.

14 No. 02-2667

1995), citing McCarty v. Verson Allsteel Press Co., 411

N.E.2d 936, 943 (Ill. App. 1980) (“The test for an offer is

whether it induces a reasonable belief in the recipient that

he can, by accepting, bind the sender.”). See also,

Restatement (Second) of Contracts § 24 (1981) (“An offer is

the manifestation of willingness to enter into a bargain, so

made as to justify another person in understanding that his

assent to that bargain is invited and will conclude it.”).

Next, Boomer contends that his continued use of AT&T’s

long-distance service did not constitute an acceptance of

AT&T’s offer. In support of this argument, Boomer cites

Section 69 of the Restatement (Second) of Contracts, which

provides:

(1) Where an offeree fails to reply to an offer, his silence

and inaction operate as an acceptance in the following

cases only:

(a) Where an offeree takes the benefit of offered

services with reasonable opportunity to reject them

and reason to know that they were offered with the

expectation of compensation.

Boomer argues that he did not have a reasonable

opportunity to reject the offer, and therefore his continued

use of AT&T services did not constitute an acceptance. This

argument also fails because the CSA Mailing clearly

provided a mechanism for rejecting AT&T’s offer: The cover

letter stated in bold capitalized letters that “IF YOU DO

NOT AGREE TO THESE PRICES, CHARGES, TERMS

AND CONDITIONS, DO NOT USE THE SERVICES,

AND CANCEL THE SERVICES IMMEDIATELY BY

CALLING AT&T AT 1-888-288-4099.” Thus, Boomer had

a reasonable opportunity to reject AT&T’s offer, but

nonetheless continued to use his AT&T services—services

that were offered with the clear and explicit expectation of

compensation. Under these circumstances, Boomer’s silence

constituted an acceptance. See, e.g., Hill v. Gateway 2000,

Inc., 105 F.3d 1147, 1148-49 (7th Cir. 1997) (concluding that

under Illinois law the plaintiffs’ silence constituted an accept

No. 02-2667 15

of the terms and conditions—including an arbitration

clause—set forth on a form contract included in the box

which contained the computer that the plaintiffs had ordered

from the defendant and which they accepted).5

Boomer further challenges the existence of a contract by

arguing that there was no consideration for the CSA. In

support of this argument, Boomer first points to the

following language: “[B]e assured that your AT&T service

or billing will not change under the AT&T Consumer

Services Agreement.” Boomer claims that this language

shows that he received nothing in exchange for his

5

The district court distinguished Gateway by noting

that in Gateway the Hills had admitted to receiving the form

contract, but failed to read it, whereas in this case Boomer

does not admit that he received the CSA Mailing. However,

as noted above, Boomer does not contend that he did not

receive the mailing–just that he does not remember receiving

it. Where a letter is properly addressed and mailed, there is

“a presumption that it reached its destination in usual time

and was actually received by the person to whom it was

addressed.” See Hagner v. United States, 285 U.S. 427, 430

(1932). In this case, AT&T presented proof through the

Declaration of Ellen Reid, the AT&T employee who oversaw

the mailing of the CSA to AT&T customers, verifying that

proper mailing procedures were followed. Boomer does not

present any conflicting evidence in this regard. Thus, we

must presume that Boomer received the mailing. Id. See

also Godfrey v. United States, 997 F.2d 335, 338 (7th Cir.

1993) (a presumption exists that a mailing is received where

there is “proof of procedures followed in the regular course of

operations which give rise to a strong inference that the

[correspondence] was properly addressed and mailed”). In

any event, on appeal Boomer does not claim that the CSA did

not constitute an offer because he did not receive the CSA

mailing.

16 No. 02-2667

agreement to arbitration. This argument is misplaced—in

exchange for his agreement to arbitrate, AT&T agreed to

provide continued telephone services. It is true that when

there is an existing contractual obligation, a promise to

continue performing that legal obligation lacks

consideration. But AT&T had no legal obligation to continue

providing Boomer with telephone services. Therefore,

Boomer received something of legal value—continued

service—in exchange for his promise to arbitrate.

That AT&T could have canceled Boomer’s telephone

services is actually Boomer’s second basis for claiming a lack

of consideration: Boomer asserts that because AT&T

expressly told him that if he did not agree to the terms of the

CSA, it would cancel his service, there was no “bargained-

for-exchange,” and thus no consideration. This argument

also fails, however, because, contrary to Boomer’s position,

the “bargained-for-exchange” requirement does not prohibit

the execution of form contracts presented on a take-it-or-

leave it basis. See Metro East Center for Conditioning and

Health v. Qwest Communications International, Inc., 294

F.3d 924, 926 (7th Cir. 2002) (“Yet we have held that form

contracts, offered on a take-it-or-leave-it basis, are

agreements for purposes of the Arbitration Act.”). See, e.g.,

Koveleskie v. SBC Capital Markets, Inc., 167 F.3d 361, 367

(7th Cir. 1999); Hill v. Gateway 2000, Inc., 105 F.3d 1147,

1148 (7th Cir. 1997). Rather, under general contract

principles a bargained-for exchange exists if one party’s

promise induces the other party’s promise or performance.

See Hartbarger v. SCA Services, Inc., N.E.2d 596, 604 (Ill.

App. 1990) (“A performance or return promise is bargained

for if it is sought by the promisor in exchange for his promise

and is given by the promisee in exchange for that promise.”)

(quoting Restatement (Second) of Contracts § 71 (1981)).

See also, Restatement (Second) of Contracts § 71, comment

b at 173 (1981) (“‘Bargained for.’ In the typical bargain, the

consideration and the promise bear a reciprocal relation of

motive or inducement: the consideration induces the making

of the promise and the promise induces the furnishing of the

No. 02-2667 17

consideration.”). In this case, AT&T’s promise to continue

telephone services (something it was not obligated to do)

induced Boomer’s corresponding promise (among other

things) to arbitrate, and thus there was a bargained-for

exchange and consideration. See, e.g., Metro East, 294 F.3d

at 926 (explaining that although the agreement’s provision

for arbitration may be non-negotiable, it is nonetheless an

agreement “because the person could have chosen to do

something else.”).

Next Boomer argues that AT&T committed fraud by

deemphasizing the CSA and presenting it as a non-event,

whereas in reality by so inducing customers to agree to the

CSA they waived valuable rights. Boomer, however, fails to

point to any language in the CSA Mailing or in the

accompanying CSA that was false or misleading. Moreover,

the cover letter clearly and explicitly highlighted the

differences between the CSA and the previous terms

contained in the tariff, noting that “[t]he Agreement also

describes our new binding arbitration process, . . . .” Thus,

the plain language of the CSA Mailing negates Boomer’s

claim of fraud.

In sum, the CSA Mailing constituted an offer and

Boomer’s continued use of AT&T services constituted an

acceptance. Consideration supported each party’s promises

and Boomer failed to present any evidence of fraud.

Accordingly, the CSA constituted a contract, and as such

established the terms and conditions governing AT&T’s

relationship with Boomer, one of which was an arbitration

clause. Based on this clause, AT&T moved to compel

arbitration of Boomer’s claims against it. Boomer, however,

contends that even if the CSA is a contract, the arbitration

clause should not be enforced because it is unconscionable

and violates the Illinois Consumer Fraud Act and the

Deceptive Business Practices. AT&T responds that the

Communications Act preempts Boomer’s state law

challenges to the validity of the arbitration clause. We now

turn to the question of preemption.

18 No. 02-2667

2. Preemption of the Arbitration Clause

The doctrine of preemption emanates from the

Supremacy Clause: “This Constitution, and the Laws of the

United States which shall be made in Pursuance thereof . .

. . shall be the Supreme Law of the land.” U.S. Const., Art.

VI, cl. 2. Because federal law is the supreme law of the land,

it preempts state laws that “interfere with, or are contrary

to, federal law.” Hillsborough County v. Automated Medical

Laboratories, Inc., 471 U.S. 707, 712 (1985). A federal law

may preempt a state law expressly, impliedly through the

doctrine of conflict preemption, or through the doctrine of

field (also known as complete) preemption. Gracia v. Volva

Europa Truck, N.V., 112 F.3d 291, 294 (7th Cir. 1997). With

express preemption, a federal statute explicitly provides that

it overrides state law. Id. Implied conflict preemption

occurs where “it is impossible for a private party to comply

with both state and federal requirements, . . . or where state

law stands as an obstacle to the accomplishment and

execution of the full purposes and objectives of Congress.”

Freightliner Corp. v. Myrick, 514 U.S. 280, 287 (1995)

(internal quotations omitted). Finally, field (complete)

preemption exists when “Congress . . . so completely

preempt[s] a particular area, that any civil complaint raising

that select group of claims is necessarily federal in

character.” Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58,

63-64 (1987). On appeal, AT&T argues that Boomer’s state

law challenges to the validity of the arbitration clause are

preempted either impliedly through conflict preemption or

through the doctrine of field (complete) preemption, and

therefore, AT&T maintains, the arbitration clause governs

and the district court should have granted its motion to

compel arbitration and to stay the proceedings.

a) Implied Preemption

As summarized above, implied preemption exists if it

is either impossible to comply with both state and federal

law, or if state law conflicts with a federal objective. Gracia,

112 F.3d at 294. AT&T contends that a state law challenge

No. 02-2667 19

to the validity of the arbitration clause violates Congress’s

objective in passing the Communications Act, and

specifically conflicts with the objectives of Sections 201(b)

and 202(a) of the Communications Act.

Section 201(b) of the Communications Act provides:

All charges, practices, classifications, and regulations

for and in connection with such communication

service, shall be just and reasonable, and any such

charge, practice, classification or regulation that is

unjust or unreasonable is declared to be unlawful.

47 U.S.C. § 201(b).

Section 202(a) states:

It shall be unlawful for any common carrier to make

any unjust or unreasonable discrimination in

charges, practices, classifications, regulations,

facilities, or services for or in connection with like

communication service, directly or indirectly, by any

means or device, or to make or give any undue or

unreasonable preference of advantage to any

particular person, class of persons, or locality or to

subject any particular person, class of persons, or

locality to any undue or unreasonable prejudice or

disadvantage.

47 U.S.C. § 202(a) (emphasis added).

Based on these provisions, AT&T claims that a state

law challenge to the validity of the arbitration clause is

preempted. For three main reasons, we agree. First, these

provisions, and the Communications Act in general,

demonstrate a congressional intent that customers of

individual long-distance carriers receive uniform terms and

conditions of service; however, allowing a state law challenge

to the CSA’s arbitration clause would result in customers

receiving different terms based on their locality. Second, the

incorporation of the arbitration clause in the CSA allows

AT&T to offer lower rates, and allowing state law to

20 No. 02-2667

invalidate this clause will affect the rates AT&T offers,

resulting in discriminatory rate structures. Third, Section

201 declares unlawful rates, terms and conditions which are

not just and reasonable, demonstrating Congress’s intent

that federal law govern the validity of the terms and

conditions of long-distance service contracts.

First, Sections 201 and 202, read together,

demonstrate a congressional intent that individual long-

distance customers throughout the United States receive

uniform rates, terms and conditions of service. See, e.g.,

American Telephone & Telegraph Co. v. Central Office

Telephone, Inc., 524 U.S. 214, 223 (1998) (“It is that

antidiscriminatory policy which lies at ‘the heart of the

common-carrier section of the Communications Act.’”) (citing

MCI Telecommunications Corp. v. American Telephone &

Telegraph Co., 512 U.S. 218 (1994)). Yet, a state law

challenge to the validity of the terms and conditions of a

telephone service agreement would result in the application

of fifty bodies of law, and this would inevitably lead to

customers in different states receiving different terms and

conditions. Boomer’s own lawsuit demonstrates this point,

as he not only challenges the validity of the arbitration

clause, but also the validity of the attorney’s fees provision

and the clause prohibiting class action lawsuits.6 Absent

6

While Boomer challenges the validity of the CSA’s

provision concerning the right to attorney’s fees and the

clause prohibiting the use of a class action, because we

conclude that arbitration is required, these other challenges

must be decided by the arbitrator in the first instance. Metro

East, 294 F.3d at 929. See also Larry’s United Super, Inc. v.

Werries, 253 F.3d 1083, 1086 (8th Cir. 2001) (holding that on

appeal from an order denying a motion to compel arbitration,

a court may only determine whether a dispute is subject to

arbitration; other contractual challenges must be determined

by the arbitrator). Of course in considering Boomer’s other

(continued...)

No. 02-2667 21

preemption, there is nothing to prevent similar state law

challenges to the CSA’s other terms and conditions. This

will result in patchwork contracts, because under some

states’ laws some clauses will be upheld and other

invalidated, while under other states’ laws, it may well be

the opposite. This conflicts with Section 202's prohibition on

providing advantages or preferences to customers based on

their “locality.” 47 U.S.C. § 202.

Second, a state law challenge to an arbitration clause

(or for that matter a provision prohibiting class actions) not

only affects the uniformity of that term, but it also threatens

to destroy the consistency of rates offered consumers

throughout the United States. As we recognized in Metro

East, 294 F.3d 924, arbitration offers cost-saving benefits to

telecommunication providers and “these benefits are

reflected in a lower cost of doing business that in competition

are passed along to customers.” Id. at 927. However, if in

some states arbitration clauses are stricken as

unconscionable or illegal under various states’ consumer

protection laws, whereas in other states such provisions are

validated, the overall cost savings will be reduced. AT&T

and other providers would then be faced with three

6

(...continued)

challenges, the arbitrator will be required to apply the

appropriate law, which given our holding today means that

the Communications Act preempts other state law challenges

to the validity of the terms and conditions contained in the

CSA. Cf. Metro East, 294 F.3d at 929 (“An arbitrator has no

more power to alter a tariff's rate than does a judge; and

because Central Office Telephone treats conditions and other

tariff terms as part of the rates, it may follow that an

arbitrator must take the whole tariff as he finds it, in order

to avoid any possibility of discriminatory application (that

bugbear of rate-regulation systems, and the main target of

the filed-rate doctrine).”).

22 No. 02-2667

options—increase the rates of those living in litigation (as

opposed to arbitration) states, increase everyone’s rates, or

leave rates the same. The first option results in differing

rates which violates the intent (if not the terms, see infra at

___ n.8), of the Communications Act. See AT&T v. Central

Office Telephone, Inc., 524 U.S. 214, 223 (1998) (“[T]he policy

of nondiscriminatory rates is violated when similarly

situated customers pay different rates for the same

services.”). The second and third options (the latter of which

is economically unrealistic),7 while on their face do not vary

7

It is unreasonable to assume that rates would

remain the same even if the arbitration clause were

invalidated because, as Metro East recognized, arbitration

offers cost-saving benefits to telecommunication providers

and “these benefits are reflected in a lower cost of doing

business that in competition are passed along to customers.”

Id. at 927. Realistically, then, without the arbitration

provision, AT&T and other carriers would be forced to

increase rates across the board in order to prevent

discriminatory pricing. Besides being unfair to customers

who must now pay higher rates while still subject to

arbitration clauses (held valid in their home states), this

outcome conflicts with Congress’s intent in passing the

Telecommunications Act of 1996. Specifically, in passing the

Telecommunications Act of 1996, Congress sought “to

promote competition and reduce regulation in order to secure

lower prices and higher quality services for American

telecommunications consumers . . . .” Preamble,

Telecommunications Act of 1996, Pub. L. No. 104-104, 110

State. 56 (1996). Moreover, IF the detariffing provisions of

the Telecommunications Act subject the terms of nationwide

long-distance form contracts to state law attack, the

transactional costs and litigation expenses would also

increase. Carriers would then face the continuous cost of

(continued...)

No. 02-2667 23

the rates consumers receive, nonetheless constitute

“discrimination in charges.” As the Supreme Court

recognized in Central Office, “rates . . . do not exist in

isolation,” id. at 223, and “‘discrimination in charges’ . . . can

come in the form of a lower price for an equivalent service or

in the form of an enhanced service for an equivalent price.”

Id. at 223 (quoting Competitive Telecommunications Assn. v.

FCC, 998 F.2d 1058, 1062 (D.C. Cir. 1993)). Thus, if AT&T

charges its customers the same rate, but provides different

terms and conditions for service, that too is a form of

“discrimination in charges.” Accordingly, even if AT&T

leaves its rates the same (or increases everyone’s rates),

consumers will still face discriminatory charges, as some

customers will be bound by the arbitration clause and others

will not be. Those not bound will obtain that same rate

without subjecting themselves to the terms and conditions

which made that rate possible. See Metro East, 294 F.3d at

927 (“Customers therefore are compensated through lower

rates for any net loss they may experience in arbitration.

They can’t accept the lower rates . . . while avoiding the

means that made lower rates possible.”).

Of course, Section 202(a) only prohibits “undue” or

“unreasonable” discrimination, and thus it is possible that

7

(...continued)

court challenges and the added expense of revising and

distributing modified CSAs which conform with new state

court rulings. Consumers would bear the brunt of this

through higher prices for telephone service. This too is at

odds with Congress’s intent. It also belies the FCC’s belief

that the transactional costs of detariffing would be fixed and

short-lived. See, 11 FCC Rcd. at 20,736 (¶ 57) (recognizing

that detariffing would result in some “increased

administrative costs,” but anticipating those costs to be

initial (and fixed) costs only resulting from “the shift to a

detariffed environment . . . (such as the cost of developing

short, standard contracts)”).

24 No. 02-2667

AT&T could justify its disparate charges because state law

caused the discrimination by invalidating the arbitration

clause in some states, but not others. See, e.g., Panatronic,

USA v. AT&T Corp., 287 F.3d 840, 844 (9th Cir. 2002) (“A

difference in price is not unreasonable if there is a neutral,

rational basis underlying [the disparity].”) (internal quotes

omitted). However, allowing state law to determine the

validity of the various terms and conditions agreed upon by

long-distance providers and their customers will create a

labyrinth of rates, terms and conditions and this violates

Congress’s intent in passing the Communications Act.8

Third, it is clear from Section 201(b) that Congress

intended federal law to govern the validity of the rates,

terms and conditions of long-distance service contracts. As

excerpted above, that section requires all charges and

practices related to communication service to be just and

reasonable, and it declares unlawful any unjust or

unreasonable charges or practices. 47 U.S.C. § 201(b). This

language demonstrates Congress’s intent that federal law

determine the reasonableness of the terms and conditions of

long-distance contracts. See also In re Long Distance

Telecomm. Lit., 831 F.2d 627, 631 (6th Cir. 1987) (“Section

201(b) speaks in terms of reasonableness, and the very

charge of Count I is that the defendants engaged in

unreasonable practices. This is a determination that

‘Congress has placed squarely in the hands of the [FCC]’”)

(quoting Consolidated Rail Corp. v. National Ass’n of

8

On the other hand, if the resulting discrimination

was not considered “reasonable,” then AT&T would be in

violation of Section 202(a). In that case, state law would not

just conflict with a federal objective, but it would directly

conflict with federal law because it would be impossible for

AT&T “to comply with both state and federal requirements,

. . . .” Freightliner Corp. v. Myrick, 514 U.S. at 287.

No. 02-2667 25

Recycling Indust. Inc., 449 U.S. 609, 612 (1981)).9 While

Boomer challenges the arbitration clause under the state

law doctrine of unconscionability and various state consumer

protection statutes, in essence the question is the

same—whether the term is fair and reasonable. Permitting

such state law challenges would open the door for direct

conflicts between federal and state law on the validity of

terms and conditions contained in a long-distance service

contract. For example, the FCC specifically adopted a policy

9

Section 207 of the Communications Act authorizes

“[a]ny person claiming to be damaged by any common carrier

subject to the provisions of this chapter” to file a complaint

with the FCC. 47 U.S.C. § 207. Additionally, Section 208

provides: “(a) Any person, any body politic or municipal

organization, or State commission, complaining of anything

done or omitted to be done by any common carrier subject to

this chapter, in contravention of the provisions thereof, may

apply to said Commission by petition which shall briefly state

the facts, whereupon a statement of the complaint thus made

shall be forwarded by the Commission to such common

carrier, who shall be called upon to satisfy the complaint or

to answer the same in writing within a reasonable time to be

specified by the Commission.” 47 U.S.C. § 208. Boomer could

have filed a complaint with the FCC under Section 207 or

Section 208, arguing that the arbitration clause violates

Section 201(b) because it is unjust or unreasonable. Cf. In re

Long Distance, 831 F.2d at 631 (concluding that FCC has

primary jurisdiction to determine if a term and condition of

a long-distance service contract constitute an unreasonable

practice); Metro East, 294 F.3d at 927 (holding that FCC

possesses exclusive authority to set aside an arbitration

clause contained in a filed tariff). However, Boomer did not

pursue this course of action.

26 No. 02-2667

encouraging the use of alternative dispute resolution in its

administrative procedures. 47 C.F.R. § 1.18. Also, in the

past, tariffs filed by other carriers have include arbitration

clauses and those clauses have been enforced. See Metro

East, 294 F.3d at 926-27. The FCC has also concluded that

class actions are “neither contemplated by, nor inconsistent

with” the Communications Act’s complaint remedies. Krauss

v. MCI, 14 FCC Rcd. 2770, 2775-76 (¶ 10). Yet, if Boomer

would have his way, arbitration provisions and clauses

prohibiting class actions would be illegal under state law,

even if they were considered “just and reasonable” under

federal law. The Supremacy Clause prohibits such an

outcome.

Boomer argues in response that following detariffing

federal law no longer preempts state law challenges to the

validity of contractual provisions. Specifically, Boomer

claims that because the FCC no longer requires long-

distance providers to file tariffs, 47 U.S.C. § 160, the cases

which had held that the Communications Act preempts state

law are now inapplicable. In support of his position, Boomer

cites Ting v. AT&T, 182 F.Supp. 2d 902 (N.D. Cal. 2002), a

class action suit challenging, among other things, the

validity of AT&T’s arbitration clause under California law.

The court in Ting rejected AT&T’s preemption argument

and its reliance on decisions rendered before detariffing,

concluding that “[i]n light of the clear purpose of the filed

rate doctrine, AT&T’s reliance on these cases is misplaced.”

Id. at 937.

Boomer is correct that the filed-rate doctrine and the

tariff-filing requirement demonstrated Congress’s intent to

preempt state law challenges to the terms and conditions

contained in the tariff. However, Section 203, which

required the filing of tariffs, merely served as a mechanism

by which the FCC could assure compliance with the

standards set forth in Sections 201 and 202. See MCI, 512

U.S. 230 (“[T]his Court has repeatedly stressed that rate

filing was Congress’s chosen means of preventing

unreasonableness and discrimination in charges.”). Thus,

No. 02-2667 27

the filing requirement furthered the Communications Act’s

purpose of prohibiting and punishing unequal rates and

preventing discrimination. Id. Following detariffing, those

goals remain, as do the substantive requirements of Sections

201 and 202. It is just that now Congress believes that

these goals can be met without tariffs. In fact, in

authorizing the FCC to forego the tariff-filing requirement,

Congress required the FCC to first assure itself that the

filing of a tariff was “not necessary to ensure that the

charges, practices, classifications, or regulations . . . are just

and reasonable and are not unjustly or unreasonably

discriminatory.” 47 U.S.C. § 160(a)(1). Thus, even though

the FCC no longer mandates the filing of tariffs, the

congressional objective of providing uniform rates, terms and

conditions remains, as does the federal prohibition on terms

and conditions which are unjust or unreasonable. Moreover,

following detariffing, the FCC intended customers to retain

the right to challenge the justness and reasonableness of

long-distance providers’ charges and practices under Section

208. Interstate Interexchange Marketplace, 11 FCC Rcd. at

20,730 (¶ 21). Additionally, the FCC made clear that its

decision eliminating the tariff requirement did “not affect

[the FCCs] enforcement of carriers’ obligations under

sections 201 and 202.” Interstate Interexchange Marketplace,

12 FCC Rcd. at 15,057 (¶ 77). Therefore, detariffing does

not alter the fundamental design of the Communications

Act, nor modify Congress’s objective of uniformity in terms

and conditions for all localities. Accordingly, we reject

Boomer’s argument and his reliance on Ting.10

10

Boomer also argues that Ting collaterally estops

AT&T from challenging the validity of the arbitration clause

because the court in Ting held that the arbitration clause

was unconscionable. However, for collateral estoppel to bar

subsequent litigation, among other things, the issue sought

to be precluded must be the same as involved in the prior

(continued...)

28 No. 02-2667

Boomer next contends that the FCC’s detariffing

orders support his position that federal law does not preempt

his state law challenges to the validity of the arbitration

clause. Specifically, Boomer cites to the FCC’s response to

AT&T, Sprint and WorldCom’s request that the FCC

“[c]larify that federal, and not state, law governs the

determination as to whether a nondominant interexchange

carrier’s rates, terms, and conditions . . . are lawful,” 12

FCC Rcd. at 15,057 (¶ 76), wherein the FCC stated:

10

(...continued)

case. Chicago Truck Drivers, Helpers & Warehouse Union

(Independent) Pension Fund, 125 F.3d 526, 530 (7th Cir.

1997). In Ting, the question of unconscionability involved

California law, whereas in this case it involves Illinois law,

and therefore the issues are not the same. In fact, because we

conclude that Boomer’s state law challenge to the arbitration

clause is preempted by the Communications Act, the issue of

unconscionability is not even in play. Moreover, while on

appeal Boomer perfunctorily states in a footnote that Ting

collaterally estops AT&T from arguing that the

Communications Act preempts his state law challenges to the

arbitration clause, he fails to support this position with any

legal analysis or citation. Therefore he has waived that

argument. Rekhi v. Wildwood Indust., Inc., 61 F.3d 1313,

1317 (7th Cir. 1995). Finally, even had Boomer not waived

this argument, because the issue of preemption involves a

pure question of law and because Ting is currently on appeal

to the Ninth Circuit, we would still conclude that Ting has

no preclusive effect. See, e.g., Chicago Truck Drivers, 125

F.3d at 532-33 (holding that collateral estoppel did not bar

the defendant from relitigating a pure question of law, and

noting that that is especially true “when the issue is of

general interest and has not been resolved by the highest

appellate court that can resolve it”) (internal quotation

omitted).

No. 02-2667 29

We therefore agree with AT&T, Sprint, and

WorldCom that the Communications Act continues to

govern determinations as to whether rates, terms,

and conditions for interstate, domestic, interexchange

services are just and reasonable, and are not unjustly

or unreasonably discriminatory. While the parties

only sought clarification that the Communications

Act governs the determination as to the lawfulness of

rates, terms, and conditions, we note that the

Communications Act does not govern other issues,

such as contract formation and breach of contract,

that arise in a detariffed environment. As stated in

the Second Report and Order, consumers may have

remedies under state consumer protection and

contract laws as to issues regarding the legal

relationship between the carrier and customer in a

detariffed regime.

12 FCC Rcd. at 15,057 (¶77).

Boomer focuses on the FCC’s pronouncement that “the

Communications Act does not govern other issues, such as

contract formation and breach of contract,” as well as its

statement that “consumers may have remedies under state

consumer protection and contract laws.” Boomer argues that

this language demonstrates that federal law does not

preempt his state law challenge to the validity of the

arbitration clause. That argument, however, ignores the

earlier language wherein the FCC stated that “the

Communications Act continues to govern determinations as

to whether rates, terms, and conditions . . . are just and

reasonable, and are not unjustly or unreasonably

discriminatory,” and the FCC’s statement that “the

Communications Act governs the determination as to the

lawfulness of rates, terms and conditions, . . .” Thus, while

state law may determine whether a contract has been

30 No. 02-2667

formed, federal law still governs the validity of the rates,

terms and conditions of the contract.11

Finally, Boomer cites to the historical notes to 47

U.S.C. § 152 which provide: “This Act and the amendments

made by this Act shall not be construed to modify, impair, or

supersede Federal, State, or local law unless expressly so

provided in such Act or amendments.” 47 U.S.C. § 152,

Historical Statutory Notes. Boomer contends that this

savings clause demonstrates that Congress did not intend to

preempt state law challenges to the terms and conditions of

the CSA. However, Section 152 was passed as part of the

Telecommunications Act of 1996 and by its own terms applies

only to “[t]his Act and the amendments made by this Act.”

“This Act” is the Telecommunications Act of 1996, and not

the Communications Act of 1934, of which Section 201 and

202 are part. Therefore, rather than support Boomer’s

position, the historical notes to Section 152 confirm that the

Telecommunications Act did not “modify, impair or

supersede” Sections 201 and 202, and their goals of

uniformity and non-discrimination.

In sum, in passing the Communications Act Congress

sought to ensure that consumers would receive uniform rates

and that consumers would not be discriminated against

11

In Ting, the district court concluded that under

California law the doctrine of unconscionability concerns the

formation of a contract. However, whether state law treats

unconscionability as a doctrine preventing the formation of

a contract or as a defense barring enforcement of a term of a

contract, the effect is the same—a contractual provision is

declared illegal under state law. Either way, the outcome

conflicts with the federal objective of the Communications

Act. Accordingly, even if under state law a challenge to the

validity of a term or condition of a long-distance service

contract is characterized as an issue of contract “formation,”

that state law challenge is nonetheless preempted.

No. 02-2667 31

based on their locality. Allowing state law challenges to the

validity of the terms and conditions contained in long-

distance contracts, however, results in the very

discrimination Congress sought to prevent. Moreover, the

arbitration clause serves to lower customers’ rates, and thus

an indirect result will be price discrimination, either directly

or indirectly (i.e. because customers paying the same price

receive different contractual rights). Finally, Section 201(b)

clearly demonstrates Congress’s intent that federal law

determine the fairness and reasonableness of contractual

terms, as opposed to state law principles such as

unconscionability. For all of these reasons, we conclude that

Boomer’s state law challenges to the validity of the

arbitration clause are impliedly preempted by the

Communications Act.

b) Field Preemption

In addition to arguing that Boomer’s state law

challenges to the arbitration clause are preempted because

they conflicts with the federal objective of the

Communications Act, AT&T also contends that in passing

the Communications Act, Congress completely preempted

any state law regulation of long-distance contracts. Prior to

detariffing, this court held that the Federal Communications

Act completely preempted state law challenges to the terms

and conditions contained in a filed tariff. Cahnmann v.

Sprint Corp., 133 F.3d 484, 489-90 (7th Cir. 1998). However,

following detariffing, there appears to be some role for state

law, see 12 FCC Rcd. at 15,057 (¶77), although it cannot

operate to invalidate the rates, terms or conditions of a long-

distance service contract. It would therefore seem that under

the new detariffed regime federal law no longer completely

preempts state law. But we need not resolve this issue today

as Boomer’s state law challenges to the arbitration clause are

nonetheless preempted under the doctrine of impliedly

conflict preemption. Accordingly, Boomer is bound by the

arbitration clause and his claims must be submitted to

arbitration.

32 No. 02-2667

III.

Following detariffing, AT&T mailed Boomer an offer

(in the form of the CSA) to provide long-distance services.

Boomer accepted this offer by continuing to use AT&T’s

services, and therefore the CSA constitutes a contract.

Among other things, the CSA included an arbitration clause.

While Boomer contends that that clause is unconscionable

under state law and violates the Illinois Consumer Fraud Act

and the Deceptive Business Practices Act, the

Communications Act preempts state law challenges to the

validity of contractu al provisions because the

Communications Act seeks to promote the uniformity of

rates, terms and conditions, and state law challenges to the

legality of contractual provision would destroy that objective.

Accordingly, Boomer cannot challenge the validity of the

arbitration clause under state law, and instead must submit

to arbitration. We therefore REVERSE and compel

arbitration of Boomer’s claims. The underlying proceedings

are further stayed pending the outcome of arbitration.