Ut. Div. of Consumer Protection v. Flagship Capital dba Integrated Credit Solutions

2005 UT 76
This opinion is subject to revision before final
publication in the Pacific Reporter.
IN THE SUPREME COURT OF THE STATE OF UTAH
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Utah Division of Consumer 	No. 20040172
Protection,
Plaintiff and Appellant,
v.
Flagship Capital dba Integrated 	F I L E D
Credit Solutions,
Defendant and Appellee. 	November 8, 2005
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Third District, Salt Lake
The Honorable Stephen L. Henriod
No. 030901239
Attorneys: 	Mark L. Shurtleff, Att’y Gen., Jeffrey S. Buckner,
Asst. Att’y Gen., Salt Lake City, for plaintiff
Richard D. Burbidge, J. Ryan Mitchell, Jefferson W.
Gross, Salt Lake City, William E. Raney, Kansas City,
MO, for defendant
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NEHRING, Justice:
¶1 	The Utah Division of Consumer Protection brought an
enforcement proceeding against Flagship Capital, a telemarketing
company, for failure to comply with sanctions imposed when
Flagship violated Utah law. 	The district court dismissed the
case citing a lack of subject matter jurisdiction because it
determined that certain provisions of the Utah Telephone and
Facsimile Solicitation Act, Utah Code Ann. §§ 13-25a-101 to -107
(2001), and the Utah Telephone Fraud Prevention Act, Utah Code
Ann. §§ 13-26-1 to -11 (Supp. 2004), are preempted by the federal
Telephone Consumer Protection Act, 47 U.S.C. § 227 (1991). 	The
Division appealed the district court’s dismissal. 	We reverse.

1 The call was placed through a related company called
Integrated Credit Solutions and was made on behalf of Lighthouse
Credit Foundation, a non-profit credit counseling and debt
management organization.
No. 20040172 	2
BACKGROUND
¶2 	Flagship Capital, a Florida based telemarketing
company, placed an unsolicited telephone call to a Utah
resident. 1 	The Utah Division of Consumer Protection issued an
administrative citation against Flagship for violation of the
Utah Telephone and Facsimile Solicitation Act, Utah Code Ann. §§
13-25a-101 to -107 (2001), and the Telephone Fraud Prevention
Act, Utah Code Ann. § 13-26-3 (Supp. 2003) (collectively, “the
Utah laws”). 	The Division’s citation stated that Flagship was in
violation of Utah law because it used an automated dialer to
place the call, in violation of Utah Code section 13-25a-103(1),
and also because Flagship failed to register as a telephone
soliciting business, as required by Utah Code section 13-26-3.
Flagship challenged the citation. 	In an enforcement hearing, the
Division ruled that Flagship violated the Utah laws, and that the
laws were not preempted by the federal Telephone Consumer
Protection Act (“TCPA”), 47 U.S.C. § 227 (1991). 	The Division
fined Flagship $2,000 and enjoined Flagship to comply with the
registration requirement.
¶3 	Flagship appealed the Division’s order to the Utah
Department of Commerce, claiming again that the federal TCPA
preempts the Utah laws. 	The Department of Commerce determined
that the question of preemption is a matter of constitutional law
which must be decided by the courts and was therefore outside the
scope of the Division’s review. 	The Department upheld all of the
Division’s conclusions unrelated to preemption and ordered
Flagship to register and pay the fine.
¶4 	When Flagship failed to comply with the Department’s
order, the Division filed a civil complaint in the district court
seeking enforcement of the Department’s order. 	Flagship moved to
dismiss the enforcement proceeding, again claiming that the Utah
laws were preempted by the TCPA, and contending that the district
court therefore did not have subject matter jurisdiction over the
case. 	The district court agreed with Flagship and dismissed the
case for lack of subject matter jurisdiction based on federal
preemption. 	The Division appealed. 	We reverse.

3 	No. 20040172
ANALYSIS
¶5 	The Division challenges the district court’s dismissal
on three grounds: 	(1) that preemption does not deprive a state
court of subject matter jurisdiction to enforce the Department’s
determination that Flagship was in violation of state law; (2)
that Flagship waived its preemption defense because it did not
pursue judicial review; and (3) that Flagship is barred by res
judicata from asserting a preemption defense because that issue
was already decided by the Department. 	Flagship presents a
fourth issue on cross-appeal: 	that the appeal is moot because
the legislature has modified the relevant laws in such a way that
Flagship is now exempt from them. 	Before addressing any of the
Division’s claims, we first analyze whether the district court
erred in finding that the Utah laws were preempted. 	Since we
find that they were not preempted, there is no need to address
the Division’s other claims. 	Finally, we address Flagship’s
mootness claim.
I. 	FEDERAL PREEMPTION
¶6 	The primary issue before us is whether the district
court erred in determining that it did not have subject matter
jurisdiction over the enforcement proceeding between the Division
and Flagship. 	Whether a district court has subject matter
jurisdiction is a question of law which we review for
correctness. 	Hous. Auth. v. Snyder, 2002 UT 28, ¶ 10, 44 P.3d
724.
¶7 	State courts generally have subject matter jurisdiction
over cases arising under federal law. 	However, an action filed
in a state court might be removed to federal court if it involves
a federal question that “aris[es] under the Constitution, laws,
or treaties of the United States.” 	Metro. Life Ins. Co. v.
Taylor, 481 U.S. 58, 63-64 (1987); see 28 U.S.C. § 1441(b)
(authorizing any claim that arises under federal law to be
removed to federal court). 	To determine whether a cause of
action brought in state court is eligible for removal to federal
court, the United States Supreme Court has established the “well-
pleaded complaint rule,” in which “a cause of action arises under
federal law only when the plaintiff’s well-pleaded complaint
raises issues of federal law.” 	Metro. Life, 481 U.S. at 63-64.
¶8 	There is, however, an exception to the well-pleaded
complaint rule. 	A cause of action arising under state law might
be removed to federal court “when a federal statute wholly
displaces the state-law cause of action through complete
preemption.” 	Beneficial Nat’l Bank v. Anderson, 539 U.S. 1, 8

No. 20040172 	4
(2003). 	This exception is necessary because “[w]hen the federal
statute completely pre-empts the state-law cause of action, a
claim, which comes within the scope of that cause of action, even
if pleaded in terms of state law, is in reality based on federal
law.” 	Id.
¶9 	The district court invoked this exception to determine
that it lacked subject matter jurisdiction over the Division’s
case. 	The district court’s ruling was premised on its underlying
conclusion that Utah Code sections 13-25a-103(1) and 13-26-3
(Supp. 2003) are preempted by the federal Telephone Consumer
Protection Act, 47 U.S.C. § 227 (1991).
¶10 	Although the parties elected to not appeal the question
of preemption, we must nevertheless address it. 	If we conclude
that the Utah laws are preempted by the TCPA, we must go on to
address the question of whether Utah courts may nevertheless
exercise jurisdiction over Flagship’s alleged violations of the
TCPA. 	If we conclude that the Utah laws are not preempted by the
TCPA, then the state court clearly retains jurisdiction and we
need not address the question further.
¶11 	The United States Supreme Court has identified two
types of preemption: express and implied. 	English v. Gen. Elec.
Co., 496 U.S. 72, 78-79 (1990). 	Express preemption, often
referred to as “complete preemption,” exists where a federal
statute states an intent to preempt state law. 	Id. 	By contrast,
the Supreme Court has “recognized that a federal statute
implicitly overrides state law either when the scope of a statute
indicates that Congress intended federal law to occupy a field
exclusively, or when state law is in actual conflict with federal
law.” 	Freightliner Corp. v. Myrick, 514 U.S. 280, 287 (1995)
(citations omitted). 	These scenarios of implied preemption have
acquired their own labels and have become known as “field
preemption” and “conflict preemption,” respectively. 	For reasons
we explain below, we conclude that Flagship can look to none of
these preemption doctrines, not complete preemption, nor field
preemption, nor conflict preemption, to support its assertion
that the TCPA preempts Utah law.
A. 	Complete Preemption
¶12 	The United States Supreme Court has found complete
preemption in only two circumstances: 	certain causes of action
under the Labor Management Relations Act of 1947, 29 U.S.C. §
185, Avco Corp. v. Machinists, 390 U.S. 557 (1968), and the
Employee Retirement Income Security Act of 1974 (ERISA), 29
U.S.C. §§ 1001-1461, Metro. Life Ins. Co. v. Taylor, 481 U.S. 58

5 	No. 20040172
(1987). 	In each of these cases, “the federal statute at issue
provided the exclusive cause of action for the claim asserted and
also set forth procedures and remedies governing that cause of
action.” 	Beneficial Nat’l Bank v. Anderson, 539 U.S. 1, 8
(2003). 	The preemptive power of those statutes was described as
“unusually ‘powerful,’” because they provided an express federal
remedy for plaintiffs’ claims to the exclusion of state remedies.
For example, ERISA section 514, now codified at 29 U.S.C. § 1144,
clearly states that “the provisions of this title and title IV
shall supersede any and all State laws insofar as they may now or
hereafter relate to any employee benefit plan.”
¶13 	While the message of complete preemption is delivered
in a clear congressional voice, Congress remained mute on the
subject of the federal TCPA’s preemption of state law in the
context of interstate phone calls. 	Because the TCPA does not
meet the requirements necessary to show express preemption, we
conclude that the TCPA does not completely preempt the Utah laws.
¶14 	This does not, of course, conclude the preemption
inquiry. 	We next consider the more complex question of whether
the TCPA impliedly preempts the Utah laws, either by conflict or
by showing an intent to “occupy the field.”
B. 	Implied Field Preemption
¶15 	Generally, the presence of implied field preemption
does not result in exclusive federal jurisdiction. 	Even if a
federal statute preempts the state cause of action through field
preemption, the case can be brought in state court. 	Field
preemption empowers a party to remove the action to federal
court. 	However, Flagship insists that in this case field
preemption has clear jurisdictional consequences. 	The TCPA
assigns exclusive jurisdiction to the federal district courts in
cases brought by states or their representatives. 	47 U.S.C. §
227(f)(2). 	Therefore, Flagship claims that if the TCPA displaces
Utah statutes through field preemption the district court would
be stripped of jurisdiction.
¶16 	The key element of an implied field preemption analysis
is congressional intent. 	The United States Supreme Court has
explained:
[I]n the absence of explicit statutory
language, state law is pre-empted where it
regulates conduct in a field that Congress
intended the Federal Government to occupy
exclusively. 	Such an intent may be inferred
from a “scheme of federal regulation . . . so

2 Both the Utah laws and the TCPA define automatic telephone
dialing systems as systems capable of storing or generating phone
numbers and then calling those numbers. 	47 U.S.C. § 227(a)(1);
Utah Code Ann. § 13-25a-102(2).
No. 20040172 	6
pervasive as to make reasonable the inference
that Congress left no room for the States to
supplement it,” or where an Act of Congress
“touches a field in which federal interest is
so dominant that the federal system will be
assumed to preclude enforcement of state laws
on the same subject.”
English v. Gen. Elec. Co., 496 U.S. 72, 79 (1990) (citations
omitted). 	To summarize the Supreme Court in English, there are
two ways in which congressional intent can be inferred: 	(1) the
scheme of federal regulation must be so pervasive as to show
Congress left no room for supplementation by states, or (2) the
act concerns a field in which the federal interest dominates
irrespective of the pervasiveness of regulatory schemes.
¶17 	As the facts of this case reveal, Congress did not
craft the TCPA as an all-pervasive regulatory scheme. 	Flagship
violated the Utah statutes by using an automated dialer to place
a call to a residence and by failing to register in Utah as a
telephone solicitation business. 	Under the TCPA, it is illegal
to place a call to a residence using an artificial or prerecorded
voice. 	47 U.S.C. § 227(b)(1)(B). 	However, the subsection
governing calls to residences does not, unlike the Utah laws,
expressly prohibit the use of automatic telephone dialing
systems. 2 	The TCPA specifically proscribes the use of automatic
telephone dialing systems in other instances, such as to an
emergency phone line, hospital room, pager, cell phone, or
simultaneous use of multiple lines of a multi-line business. 	47
U.S.C. § 227(b)(1)(A), (D). 	The Utah law, however, is more
comprehensive, prohibiting the use of an automated telephone
dialing system in any instance, including, as here, to a
residence. 	Thus it is apparent that Congress has left some room
to the states to exercise legislative discretion to further
protect its citizens from solicitation by automatic dialers.
¶18 	The second way to infer congressional intent is if the
act concerns a field in which federal interests dominate. 	While
it is unquestioned that telemarketing is national, in fact
global, in its scope, this confluence of commerce and technology,
despite its power to inspire widespread annoyance and worse,
throughout our nation, has not necessarily thereby created an
exclusive federal interest. 	The Supreme Court has stated that

7 	No. 20040172
“every subject that merits congressional legislation is, by
definition, a subject of national concern. 	That cannot mean,
however, that every federal statute ousts all related state law.”
Hillsborough County v. Automated Labs., Inc., 471 U.S. 707, 716
(1985). 	An apt analogy is the regulation of interstate highways.
There, the interstate nature of the field is so undisputable that
the subject has the word “interstate” in its name. 	However, this
does not mean that federal interests dominate in the regulation
of this interstate system. 	Instead, most of the regulation of
the highways is left to the individual states to regulate through
their police power to protect their citizens’ health, welfare,
and safety. 	Interstate telemarketing fits a similar niche. 	Like
interstate highways, there is a federal interest, as illustrated
by the TCPA, to define the basic parameters within which
interstate telemarketing may occur. 	Within those walls, however,
the states are left with discretion to determine whether the
welfare of their citizens requires greater protection and to act
on that determination.
¶19 	Furthermore, when exercising the police power, Congress
legislates in a realm jealously guarded by the states, one that
if easily ousted by implied congressional acts would erode
fundamental notions of federalism. 	In such an instance, the
Supreme Court has established a demanding burden for showing
congressional intent, insisting that it must be easily
recognizable:
Although this Court has not hesitated to draw
an inference of field pre-emption where it is
supported by the federal statutory and
regulatory schemes, it has emphasized: “Where
. . . the field which congress [sic] is said
to have pre-empted” includes areas that have
“been traditionally occupied by the States,”
congressional intent to supersede state laws
must be “‘clear and manifest.’”
English, 496 U.S. at 79 (quoting Jones v. Rath Packing Co., 430
U.S. 519, 525 (1977)). 	Rath specifically states that the police
power is such an area traditionally occupied by the states,
therefore requiring clear and manifest preemptive language. 	430
U.S. at 525.
¶20 	Where the police power is at issue, there is a
presumption that the regulations can constitutionally coexist,
with a resulting burden of proof placed on the party claiming
preemption. 	Hillsborough County, 471 U.S. at 716. 	We conclude
that Flagship has failed to establish that the TCPA clearly
intended to preempt state laws concerning interstate telephone

3 This is in contrast to some other forms of mass
advertising, most notably advertising through e-mail. 	E-mail
solicitors have argued that varying state regulations make it
virtually impossible to comply with all the regulations because
it is usually impossible for them to know into which state an e-
mail will be sent. 	That, however, is not true here, where the
destination state can be discerned by merely identifying the
(continued...)
No. 20040172 	8
calls. 	Thus, we determine that Congress did not intend to
“occupy the field” such that the Utah laws are preempted.
C. 	Implied Conflict Preemption
¶21 	We next consider whether the federal TCPA and the Utah
laws are so incompatible as to render the Utah laws preempted by
conflict preemption:
[S]tate law is pre-empted to the extent that
it actually conflicts with federal law.
Thus, the Court has found pre-emption 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.”
English, 496 U.S. at 79 (citations omitted).
¶22 	Close examination of the Utah laws shows that they are
not in conflict with the TCPA, nor do they stand as an obstacle
to the accomplishment and full objective of federal law. 	We see
no reason why telemarketing companies would be unable to comply
with both the Utah laws and the federal statutes. 	This intention
of the Utah legislature is made clear by Utah Code section 13-
25a-103(4), which reads: 	“A person may not make or authorize a
telephone solicitation in violation of Title 47 U.S.C. 227.” 	The
telemarketing standards set by our legislature are stricter than,
but do not directly conflict with, the federal standards. 	A
telemarketer who complies with the Utah standards will have
little difficulty complying with the federal standards.
Moreover, the record does not reflect that a national
telemarketer would confront any substantial hardship by being
required to determine which of its calls reach the telephones of
Utah residents. 	Therefore, the Utah law does not force a
telemarketer to conform its nationwide practices with Utah
standards in order to prevent an inadvertent violation. 3 	The

3 (...continued)
phone number’s area code.
9 	No. 20040172
telemarketer can simply identify those calls that would be made
to Utah and choose to not make those calls or to conform those
calls to the Utah regulations. 	That the TCPA creates a uniform
nationwide minimum set of prohibited telemarketing activities
does not mean that Utah’s heightened standard for companies
wishing to make phone calls to this state conflicts with the
federal scheme.
¶23 	Having concluded that the TCPA does not preempt the
Utah laws either expressly or impliedly, we need not address the
question of whether preemption is a jurisdictional question.
Rather, because the Utah laws are independently valid, the
district court had subject matter jurisdiction over this case.
II. 	MOOTNESS
¶24 	Finally, Flagship argues that this case is moot because
the Utah laws have been amended to exclude charities. 	We reject
this argument because it was not raised below, and was thus not
properly preserved. 	Even had this argument been preserved,
mootness would not be a factor because charities were not exempt
at the time Flagship was cited. 	The exemption for charities was
enacted in 2003 after the citation issued but was short-lived,
being repealed less than a year later. 	Utah Code Ann. § 13-25a-
103(2)(c) (2003) (repealed 2004).
CONCLUSION
¶25 	Although the issue was not directly raised before us,
we conclude that the district court erred in determining that
Utah Code sections 13-25a-103(1) and 13-26-3 were preempted by
the federal TCPA. 	Accordingly, we also conclude that the
district court had subject matter jurisdiction over the case.
Due to this conclusion, we need not address the Division’s
arguments concerning res judicata and waiver, and we reject
Flagship’s argument that the case is now moot.
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¶26 	Chief Justice Durham, Associate Chief Justice Wilkins,
Justice Durrant, and Justice Parrish concur in Justice Nehring’s
opinion.