Cell Phone Groups Sue FBI Over CALEA

(April 28, 1998)  Two cellular phone industry associations filed suit Monday against the FBI in U.S. District Court in Washington DC alleging that the FBI enacted a regulation pursuant to CALEA that is arbitrary and capricious.  The Plaintiffs argue that the improper regulation would force recent market entrants to bear the brunt of development costs associated with CALEA compliance, while incumbent carriers and the government would avoid expense.

The Plaintiffs are the Cellular Telecommunications Industry Association and the Personal Communications Industry Association.  These groups represent a myriad of companies which provide cellular communications, paging, and personal information services, as well as equipment and other products for the wireless communications industry.  The Defendants are the FBI, Director Louis Freeh, the Department of Justice, and Attorney General Janet Reno .

The Communications Assistance Law Enforcement Act (CALEA), 47 USC §§1001 et seq, was signed into law on October 25, 1994.  Its main purpose was to maintain the FBI's ability to eavesdrop on telephone conversations in the face of technological developments in telecommunications services.  To do this, CALEA requires telecommunications carriers to modify their equipment and services.

This compliance is costly.  However, the CALEA provides for reimbursement for some modifications.  Which modifications are entitled to reimbursement is the gist of the dispute.   While both the FBI and CALEA have been criticized by many groups on many different grounds, the Complaint in this actions is very narrowed focused.  It merely alleges that one sentence in one FBI regulation pertaining to reimbursement is illegal.

The CALEA statute authorizes reimbursement for "modifications performed by carriers in connection with equipment, facilities, and services installed or deployed on or before January 1, 1995."  And if such carriers are not reimbursed, then they are deemed to be in compliance with the statute.   See, 47 USC §1008.

The Plaintiff's claim arises out of the definition of "installed or deployed" contained in regulations promulgated by the FBI.  The FBI definition, states: "Installed or deployed means that, on a specific switching system, equipment, facilities, or services are operable and available for use by the carrier's customers."  See, 28 CFR. §100.10.

Plaintiffs contend that this definition is contrary to the statute, and arbitrary and capricious, and ask that the Court enjoin the FBI from enforcing it.

The Plaintiffs' Complaint, at ¶4, explains as follows:

... under the FBI's definition of "installed or deployed", if a carrier installed a certain switch in its network just one day after January 1, 1995, that switch would have to be fully CALEA-compliant at the carrier's own expense even though the same carrier installing the same switch type just two days earlier would be entitled to full reimbursement from the government to retrofit it. Of course, rather than ever pay for such an upgrade, the government merely shifts the cost of developing the solution for post-January 1995 installation to the carrier so that none of the cost of developing the solution for the grandfathered switch is ever borne by the government.

The Plaintiffs' Complaint, at ¶5, continues:

The above example poses significant anti-competitive concerns as well. A new entrant into the market on January 2, 1995, would have to pay for the CALEA solution for the same switch type its competitor had used in the same market before January 1, 1995. The new entrant essentially funds the entire cost of development of the CALEA solution, the government takes advantage of avoiding the development costs for the grandfathered equipment, and the incumbent carrier avoids any cost, thereby obtaining a significant competitive advantage.

Many of the Plaintiffs' constituent members, and their customers, would be hard hit by CALEA compliance costs if the FBI rule is not overturned.

The suit was filed in federal court because it involves a question of federal law.  It was filed in Washington DC, because all Defendants reside or are located there.

The Plaintiffs are being represented by Albert Gidari and Martin P. Willard of the law firm of Perkins Coie, 607 14th St. NW, Washington, DC, 20005-2011, 202-628-6600.  Willard works in the firm's Washington DC office.   Gidari is based in the Seattle office, 206-583-8688, gidaa@perkinscoie.com.