In re Petition of Cricket Wireless, LLC

259 Md.App. 44

302 A.3d 1062

In the MATTER OF the Petition of CRICKET WIRELESS, LLC, and AT&T, Inc.

No. 416, September Term, 2022

Appellate Court of Maryland.

September 5, 2023

Argued by: Joshua N. Auerbach ( Brian Frosh, Atty. Gen. of Maryland, Philip D. Ziperman, on the brief), Baltimore, MD, for Appellant.

Argued by: Amanda S. Berman of Crowell & Moring, LLP ( Hugh J. Marbury of Cozen O'Connor, on the brief), Washington, DC, for Appellee.

Panel: Kehoe, Leahy, James A. Kenney, III (Senior Judge, Specially Assigned), JJ. ^{** , ***}

Kenney, J.

This appeal involves an administrative action initiated in 2020 by the Consumer Protection Division of the Office of the Attorney General ("the Division" or "CPD") ¹ against Cricket Wireless, LLC ("Cricket") and AT&T, Inc. (collectively the "Companies"). The Division alleged that, between July 2013 and April 2015, the Companies had engaged in unfair and deceptive trade practices in violation of the Consumer Protection Act ("CPA") by offering cellular phones for sale to Maryland consumers without disclosing that those phones would no longer operate after the Companies’ planned decommissioning of Cricket's "CDMA" wireless network following the merger of the Companies in March 2014. Each party filed a motion for summary decision as to the allegations contained in the Division's statement of charges, and the matter was delegated to the Office of Administrative Hearings ("OAH") for the purpose of issuing proposed findings of fact and conclusions of law as to the parties’ respective motions. Following a hearing, the OAH issued its proposed findings, and, after the parties filed exceptions to the OAH's proposed findings, the matter was referred back to the CPD for a ruling on the parties’ exceptions and a final decision on the merits.

Md. Code, State Government ("SG") § 10-205 (authorizing the CPD to delegate a contested case to the OAH for proposed findings of fact and conclusions of law); SG § 10-220 (requiring the CPD to review the OAH's proposed findings and conclusions and to issue a final order).

In its final order, the CPD found that Cricket, prior to the Companies’ merger in 2014, had violated the CPA by selling cellular devices that operated only on Cricket's CDMA network without informing consumers about the planned decommissioning of that network and that, following the merger, the Companies had violated the CPA by failing to make clear and conspicuous disclosures informing consumers that Cricket's "CDMA-only" devices would no longer operate upon the planned decommissioning of Cricket's CDMA network. The CPD ordered the Companies to (1) "cease and desist" from engaging in practices violative of the CPA and, more specifically, from offering or selling cellular devices under circumstances similar to those that led to the instant action; (2) to pay restitution to certain consumers who had purchased CDMA-only devices between June 2013 and April 2015; and (3) to pay a civil penalty totaling $3,250,000.00.

The Companies filed a petition for judicial review of the CPD's final order in the Circuit Court for Baltimore City. Following a hearing, that court entered an order reversing the CPD's finding that the Companies had violated the CPA prior to the merger. The circuit court also found that the CPD had failed to give the Companies an opportunity to present evidence on the issue of penalties and remedies and remanded to the CPD for an evidentiary hearing on those issues. The court affirmed all of the CPD's other relevant findings including its finding that the Companies had violated the CPA following the merger.

The Division noted an appeal of the circuit court's order, and the Companies noted a cross-appeal. For the purposes of this opinion, we have rephrased and reordered the questions presented as follows:

1. Were all of the Division's CPA claims against the Companies barred by the one-year statute of limitations set forth in § 5-107 of the Courts and Judicial Proceedings Article ("CJP") of the Maryland Code?

2. Did Cricket's pre-merger actions give rise to a viable CPA claim and, if so, was the claim preempted by federal antitrust law?

3. Did the CPD based on substantial evidence reasonably determine that the Companies’ post-merger disclosures violated the CPA?

4. Did the circuit court err in refusing to vacate the CPD's cease-and-desist order as moot and/or overbroad?

5. Did the circuit court err in reversing the CPD's determination of remedies and ordering a remand for an evidentiary hearing on the issue?

As to question 1, we hold that the statute of limitations set forth in CJP § 5-107 is not applicable in the instant case. As to question 2, we hold that Cricket's pre-merger actions did give rise to a viable CPA claim that was not preempted by federal antitrust law. As to question 3, we hold that the CPD's determination regarding the Companies’ post-merger disclosures was reasonable and supported by substantial evidence. As to question 4, we hold that the circuit court did not err in refusing to vacate the CPD's cease-and-desist order. As to question 5, we hold that the circuit court erred in reversing the CPD's decision regarding remedies and ordering a remand for an evidentiary hearing. Accordingly, we affirm in part and reverse in part the circuit court's judgment.

BACKGROUND

In 2009, both Cricket and AT&T were offering and selling cellular phones and services to Maryland consumers. Many of the phones Cricket was selling were operable only on Cricket's CDMA network (the "CDMA-only phones"). AT&T's devices operated on AT&T's Global System for Mobiles ("GSM") and Long-Term Evolution ("LTE") networks.

AT&T announced a plan to acquire Cricket by way of a merger with Cricket's parent company, Leap Wireless International, Inc. ("Leap") on July 12, 2013. The post-merger plan was for AT&T to continue operating Cricket's phones that were not CDMA-only phones, through AT&T's GSM network, and to decommission Cricket's CDMA network. With the decommissioning of the network, a CDMA-only phone purchased from Cricket would be inoperable and have to be replaced with one that was operable on AT&T's GSM network. Relevant to this appeal, the decommissioning plan was not made known to the public.

The Companies submitted an application to the Federal Communications Commission ("FCC") for approval of the merger in August 2013. While approval was pending, Cricket continued selling CDMA-only phones to Maryland consumers without informing them of the plan to decommission Cricket's CDMA network if the merger was approved. By March 18, 2014, when the FCC approved the merger, Cricket had sold at least 50,000 CDMA-only phones to Maryland consumers without informing them of the plan to decommission the CDMA network.

For approximately two months following FCC approval of the merger, Cricket and its agents continued selling CDMA-only phones, approximately 1,500 in total, to Maryland consumers. Unlike the pre-merger sales, the post-merger sales came with disclosures regarding the decommissioning of the CDMA network. Those disclosures included affixing stickers announcing the plan to retail phone boxes and in-store price cards. A disclosure was also provided through websites and customer service agents.

The Division's CPA Action

On June 9, 2020, the Division filed with the CPD a statement of charges against the Companies alleging that they had violated the CPA in the sale of CDMA-only phones following the announcement of the merger. Under the CPA, a merchant "may not engage in any unfair, abusive, or deceptive trade practice" in the sale of consumer goods. Md. Code, Commercial Law ("CL") § 13-303. The act defines unfair, abusive, or deceptive trade practices to include any "[f]ailure to state a material fact if the failure deceives or tends to deceive[.]" CL § 13-301(3). The CPD is authorized by the CPA to receive and investigate complaints under the CPA, to initiate its own investigation of any unfair or deceptive trade practices, and to issue a cease-and-desist order upon a finding that a particular practice is unfair or deceptive. CL § 13-204. If, in pursuing a cease-and-desist order, the CPD finds that an alleged violator engaged in unfair or deceptive trade practices, the CPD may also award restitution and impose civil penalties. CL §§ 13-403, 13-410.

In the instant case, the Division alleged that Cricket had engaged in deceptive trade practices by selling CDMA-only phones without adequately informing consumers about the plan to decommission the CDMA network. The Division asked that the Companies be ordered to "cease and desist from engaging in deceptive trade practices[,]" to pay restitution to aggrieved customers, and to pay a civil penalty.

Motions for Summary Decision

Because the salient facts surrounding the statement of charges were not in dispute, both parties moved for summary decision pursuant to section 28.02.01.12 of the Code of Maryland Regulations ("COMAR"). Under that section, a party may move for summary decision "on the ground that there is no genuine dispute as to any material fact and the party is entitled to judgment as a matter of law." COMAR 28.02.01.12D(1). Pursuant to COMAR 02.01.02.04, the Division delegated the matter to the OAH, with express instructions that it review the matter and issue proposed findings of fact and proposed conclusions of law with "final findings of fact and conclusions of law, determining the appropriate relief, and entering a final order" to be done by the CPD.

OAH Hearing and Proposed Findings

At the hearing before the OAH, the Division argued that Cricket's failure to disclose the plan to decommission its CDMA network prior to the merger was an omission of a material fact that deceived or misled consumers in violation of the CPA. The Division also argued that the Companies’ post-merger disclosures of the decommissioning were inadequate.

The Companies argued that all of the Division's claims were barred by the one-year statute of limitations set forth in CJP...