TCG Detroit v. Dearborn

RECOMMENDED FOR FULL-TEXT PUBLICATION 16 TCG Detroit v. City Nos. 98-2034/2035 Pursuant to Sixth Circuit Rule 206 of Dearborn, et al. ELECTRONIC CITATION: 2000 FED App. 0081P (6th Cir.) File Name: 00a0081p.06

______________________________________________ CONCURRING IN PART, DISSENTING IN PART UNITED STATES COURT OF APPEALS ______________________________________________ FOR THE SIXTH CIRCUIT _________________ RALPH B. GUY, JR., Circuit Judge, concurring in part and dissenting in part. I concur fully in the decision to affirm ; summary judgment in favor of Ameritech. If the court is Plaintiff-Appellant (98-2034),  correct that there is an implied private right of action, then I TCG DETROIT,

Plaintiff (98-2035),  concur in the court’s analysis with respect to the appeal of  TCG. However, for the reasons set forth in the concurrence  by Judge Noonan in Cablevision of Boston, Inc. v. Public Nos. 98-2034/2035

 Improvements Commission, 184 F.3d 88, 107-09 (1st Cir. > v.  1999), I believe there is no private right of action.

 Defendant-Appellee  CITY OF DEARBORN,

(98-2034),Third-Party  Plaintiff-Appellant   (98-2035),     AMERITECH MICHIGAN,

Third-Party  INCORPORATED,

Defendant-Appellee   (98-2035).  1 Appeal from the United States District Court for the Eastern District of Michigan at Detroit. No. 96-74338—Lawrence P. Zatkoff, Chief District Judge. Argued: November 5, 1999 Decided and Filed: March 7, 2000

2 TCG Detroit v. City Nos. 98-2034/2035 Nos. 98-2034/2035 TCG Detroit v. City 15 of Dearborn, et al. of Dearborn, et al.

Before: GUY and BOGGS, Circuit* Judges; and HOOD, constitutional revisions, although the law under which the District Judge. earlier contracts had been made was changed thereby as to future contracts. The district court found Public Acts 129 and _________________ 264 to be sufficiently similar to apply case law concerning Public Act 264 (governing utility companies) to Act 129 COUNSEL (governing Michigan Bell). It found support for this approach in the fact that the Michigan Attorney General, reasoning in ARGUED: David F. Graham, SIDLEY & AUSTIN, just this way, had advised the Village of Roseville in 1957 Chicago, Illinois, for TCG Detroit. William Malone, that its attempt to impose a franchise fee on Ameritech was MILLER & VAN EATON, Washington, D.C., for City of invalid given the latter’s existing state franchise. Dearborn. Joseph A. Fink, DICKINSON, WRIGHT, MOON, VAN DUSEN & FREEMAN, Lansing, Michigan, for The district court properly looked to Michigan law for the Ameritech Michigan, Inc. ON BRIEF: Charles H. Polzin, interpretation of the retroactivity of constitutional revisions to HILL, LEWIS, ADAMS, GOODRICH & TAIT, Birmingham, pre-existing contracts, and found no support for the City’s Michigan, Roderick S. Coy, CLARK HILL, Okemos, position. It correctly granted summary judgment to Michigan, Richard C. Marsh, CLARK HILL, Detroit, Ameritech. Michigan, for TCG Detroit. William Malone, MILLER & VAN EATON, Washington, D.C., Debra C. Walling, V Dearborn, Michigan, for City of Dearborn. Joseph A. Fink, John M. Dempsey, DICKINSON, WRIGHT, MOON, VAN For the foregoing reasons the judgments of the district court DUSEN & FREEMAN, Lansing, Michigan, Michael A. in each case are AFFIRMED. Holmes, Detroit, Michigan, for Ameritech Michigan, Inc. David E. Marvin, FRASER, TREBILCOCK, DAVIS & FOSTER, Lansing, Michigan, Gary L. Field, Harvey J. Messing, James A. Ault, LOOMIS, EWERT, PARSLEY, DAVIS & GOTTING, Lansing, Michigan, Michael J. Lichtenstein, SWIDLER, BERLIN, SHEREFF & FREIDMAN, Washington, D.C., David A. Handzo, Deanne E. Maynard, JENNER & BLOCK, Washington, D.C., for Amici Curiae. BOGGS, J., delivered the opinion of the court, in which HOOD, D. J., joined. GUY, J. (p. 16), delivered a separate opinion concurring in part and dissenting in part.

* The Honorable Joseph M. Hood, United States District Judge for the Eastern District of Kentucky, sitting by designation.

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require its own consent to the establishment of a telephone _________________ system within the city: “Under this statute the sole authority of the municipality is the proper exercise of the police power, OPINION inherent in it, to protect the public . . . . It has no authority to _________________ impose other conditions.” Michigan Tel. Co. v. City of Benton, 121 Mich. 512, 80 N.W. 386 (1899). BOGGS, Circuit Judge. TCG Detroit (“TCG”), a telecommunications provider, appeals the district court’s The City argues that Act 129 was abrogated by revisions to grant of summary judgment to the City of Dearborn (“the the Michigan Constitution, adopted in 1908, of which Article City”) on the issue of whether the City’s requirement that VIII § 28 provided: TCG pay the City a certain franchise fee for the privilege of laying fibre-optic telecommunications cable within its limits, No person, partnership, association or corporation pursuant to a city ordinance, violates the Federal operating a public utility shall have the right to the use of Telecommunications Act of 1996 (“the Act”), 47 U.S.C. the highways, streets, alleys or other public places of any § 253. TCG had also alleged that the City’s requirement city, village or township for wires, poles, pipes, tracks or constituted a violation of 42 U.S.C. § 1983. The district court conduits, without the consent of the duly constituted had earlier dismissed without prejudice TCG’s state claim, authorities of such city, village or township; nor to which had alleged a violation of the Michigan transact a local business therein without first obtaining a Telecommunications Act of 1995, invoking 28 U.S.C. franchise therefor from such city, village or township. § 1367(c). It adhered to that ruling, refusing to reinstate that The right of all cities, villages and townships to the claim “based on a concern of jury confusion over the differing reasonable control of their streets, alleys and public standards applicable to the federal and state claims.” TCG places is hereby reserved to such cities, villages and Detroit v. City of Dearborn, 977 F. Supp. 836, 841 (E.D. townships. Mich. 1997). This provision was retained in all substantial respects by the In the course of its dispute with TCG, the City also Michigan Constitution of 1963, Art. VII § 29. Ameritech demanded a franchise fee from an existing provider, contends that the revisions of 1908 do not apply retroactively. Ameritech Michigan (“Ameritech”), resulting in a suit which has been consolidated with TCG’s case. The City claimed There have been similar lawsuits involving utility that the Act gave it authority to charge such a fee. The district companies organized under Michigan Public Act 264, the court granted summary judgment to Ameritech on the grounds counterpart for utilities to Public Act 129 governing that the Michigan law under which Ameritech was telecommunications companies. In such suits, the Michigan incorporated, and its original franchise granted, prohibits the Supreme Court has taken a position similar to what is urged local imposition of franchise fees on providers who had by Ameritech in this case, and the district court applied the already been granted a franchise by the State of Michigan. Michigan Supreme Court’s reasoning here. See City of The City appeals. Lansing v. Michigan Power Co., 183 Mich. 400, 150 N.W. 250 (1914); Village of Constantine v. Michigan Gas & Elec. I Co., 296 Mich. 719, 296 N.W. 847 (1941). Both cases held that pre-existing franchise rights were not affected by the In 1994, TCG made an agreement with Detroit Edison to lay fibre-optic telecommunications cable in the latter’s

4 TCG Detroit v. City Nos. 98-2034/2035 Nos. 98-2034/2035 TCG Detroit v. City 13 of Dearborn, et al. of Dearborn, et al.

existing electrical conduit rights-of-way. The cable was to be also correctly rejected TCG’s argument that the fee owned by Detroit Edison and in part leased back to TCG for constituted an impermissible barrier to entry in violation of its use in providing telecommunications services. TCG had §253(a). laid almost eight miles of a proposed total of twenty-seven miles of cable when the City, advised of the agreement by Therefore, the district court’s dismissal of TCG’s suit on Detroit Edison, objected and demanded a franchise fee before motion by the City for summary judgment was proper. work could proceed further. IV TCG and the City began negotiations (during which the City passed an ordinance authorizing it to collect the fees in In its original incarnation as Michigan State Telephone question) and, by June 29, 1995, had reached a tentative Company, Ameritech had sought and been granted a franchise agreement, memorialized in the City’s proposal of that date to from the state upon its incorporation, in 1904, pursuant to TCG. This provided for the payment by TCG of 4% of its Michigan Public Act 129 (“Act 129”), a law passed in 1883 gross revenues, on top of a $50,000 one-time fee and up to to provide for the organization of telephone service $2,500 in reimbursement of the City’s administrative costs. companies. The provision of Act 129 relevant to the case at TCG’s regional counsel accepted this proposal in principle, bar reads as follows: suggesting amendments (among them, a provision that any agreement would be modified to reflect future changes in Every such corporation shall have power to construct and federal and state laws), in a letter dated September 22, 1995. maintain lines of wire or other material, for use in the transmission of telephonic messages along, over, across, Meanwhile, legislation that would become the Act was or under any public places, streets and highways, and introduced in Congress in May 1995. The Act was passed in across or under any of the waters in this state, with all 1996, to become effective in February 1998. Believing that necessary erections and fixtures therefor: Provided, That this legislation foreclosed the City’s right to require the the same shall not injuriously interfere with other public franchise fee, TCG backed away from the agreement as it had uses of the said places, streets, and highways, and the stood, and in a series of letters to the City between January navigation of said waters; to construct, provide, and and March 1996 attempted to obtain a permit without furnish instruments, devices, and facilities for use in the payment of the fees previously discussed. Continuing talks transmission of such messages, and to construct, with the City failed to resolve the issue, whereupon TCG maintain, and operate telephone exchanges and stations, brought suit in September 1996. and generally to conduct and carry on the business of providing and supervising communication by telephone, In addition to alleging that the City was violating the Act, and also the business of furnishing messenger service in TCG alleged discrimination against it and in favor of cities and towns. Ameritech, which was not being required to pay any franchise fee. Thereupon, the City demanded a fee of Ameritech, which Public Act 129, 1883. refused, prompting the City to implead it as a third-party defendant. The district court noted that the only limitation in Act 129 was the implied authority of a municipality to regulate in the interest of the general welfare, as the Michigan Supreme Court held when the City of Benton Harbor attempted to

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the same, and that only the totality of the circumstances could On cross motions for summary judgment by all parties, the illuminate whether a fee is “fair and reasonable.” City prevailed against TCG, the district court ruling that a fair and reasonable franchise fee was permitted by the Act and The court found the fee in question to be both fair and that TCG’s near-agreement on the terms demanded showed reasonable, considering the amount of use contemplated that TCG itself had considered the City’s proposed fees (twenty-seven miles), the amount that other providers would “reasonable.” Ameritech, however, convinced the district be willing to pay (three others had agreed to similar fees), and court that state law, under which Ameritech’s predecessor, the fact that TCG had agreed in earlier negotiations to a fee3 Michigan State Telephone Company, had first negotiated its almost identical to what it was now challenging as unfair. franchise in 1904, precluded any local authority from altering The court’s examination of this question was thorough and its the franchise’s terms. The City had argued, unsuccessfully, reasoning sound. that the 1908 amendments to Michigan’s constitution, expanding municipal authority over rights-of-way, could be TCG also complains that since the City did not charge applied to a pre-existing chartered company. Ameritech a franchise fee, doing so in TCG’s case is discriminatory, a violation of both the Act, 47 U.S.C. The district court noted that the case is one of first § 253(c), and, in consequence, of 42 U.S.C. § 1983. But, as impression in this Circuit, this court never having had the district court pointed out, the City did seek to charge such occasion to consider the implications of the Act’s “fair and a fee, resulting in the third-party suit against Ameritech also reasonable compensation” provision. Since the district before this court. court’s ruling, this court has had occasion to consider a case in which the Act is, at least in part, implicated. See Michigan The fact that Ameritech prevailed before the district court Bell Tel. Co. v. Climax Tel. Co., 186 F.3d 726 (6th Cir. 1999), in its contention that state law prohibits the City from amended, No. 98-1315, 2000 WL 29984, 2000 Fed. App. subjecting it to the franchise fee charged others does not mean 0025A (6th Cir. Jan. 18, 2000). However, the instant case that the City is thereby discriminating in Ameritech’s favor. requires us for the first time to construe § 253 of the Act. We Possibly, if Ameritech thus enjoys a state-mandated freedom hold that the district court correctly construed § 253, and did from such fees, its competitive position is strengthened, and not err in its other rulings. it might be able, in theory, to undercut its competition; if it did so, the result might be a barrier to entry by newcomers. II But this would be a different issue, and TCG has not alleged that this has occurred. The immediately relevant subsections of the pertinent section of the Act are: Since the district court found the fee to be fair and reasonable, and its imposition to be neither discriminatory in § 253. Removal of barriers to entry intent nor, in and of itself, anti-competitive in effect, the court (a) In general No State or local statute or regulation, or other State or 3 local legal requirement, may prohibit or have the effect The amounts in question are the same; various subordinate provisions remaining to be settled when negotiations broke down do not of prohibiting the ability of any entity to provide any appear to have been made part of the City’s final position, the details of interstate or intrastate telecommunications service. which are, moreover, unclear.

6 TCG Detroit v. City Nos. 98-2034/2035 Nos. 98-2034/2035 TCG Detroit v. City 11 of Dearborn, et al. of Dearborn, et al.

(b) State regulatory authority Accordingly, we hold that the Michigan district court Nothing in this section shall affect the ability of a State correctly decided in TCG that § 253(c) of the Act authorizes to impose, on a competitively neutral basis and consistent a private right of action in federal court for with section 254 of this section, requirements necessary telecommunications providers aggrieved by a municipality’s to preserve and advance universal service, protect the allegedly discriminatory or allegedly unfair and unreasonable public safety and welfare, ensure the continued quality of rates. telecommunications services, and safeguard the rights of consumers. III

(c) State and local government authority TCG attempts to characterize the City’s ordinance as a Nothing in this section affects the authority of a State prohibition, itself prohibited by 47 U.S.C. § 253(a). or local government to manage the public rights-of-way Appellant’s Brief at 18-19. TCG then describes the fee or to require fair and reasonable compensation from required to obtain the franchise as an afterthought, which telecommunications providers, on a competitively neutral conditionally lifts that prohibited prohibition. This is and nondiscriminatory basis, for use of public rights-of- sophistry. The provider must apply for a franchise; the City way on a nondiscriminatory basis, if the compensation assesses a franchise fee; no fee paid, no franchise given. That required is publicly disclosed by such government. cannot “be described as a prohibition [within the meaning of section 253(a)].” Id. at 19 (quoting AT&T Communications (d) Preemption of the Southwest, Inc. v. City of Austin, 975 F. Supp. 928, 939 If, after notice and an opportunity for public comment, (W.D. Tex 1997)). The issue here is not, as in AT&T the Commission determines that a State or local Communications, a municipality’s withholding of consent to government has permitted or imposed any statute, a franchise application, something the City never regulation, or legal requirement that violates subsection contemplated vis à vis TCG, but rather TCG’s challenge to a (a) or (b) of this section, the Commission shall preempt fee that the Act would appear, on its face, explicitly to permit, the enforcement of such statute, regulation, or legal if “fair and reasonable” and “competitively neutral and non- requirement to the extent necessary to correct such discriminatory.” violation or inconsistency. The question then is whether the fee assessed by the City is 47 U.S.C. § 253(a)-(d). “fair and reasonable compensation,” within the meaning of the Act. In concluding that it is, the district court first Before considering the issues presented in this case, examined, and rejected, TCG’s contention that this phrase, however, this court must be assured that it has jurisdiction. which is not defined in the Act, should be given the same The district court raised the question of whether TCG has meaning as the words “just and reasonable” in the Pole standing to sue under the Act, and held that § 253 implies a Attachment Act, 47 U.S.C. § 224 (which applies to cable private right of action for those claiming barrier-to-entry television providers’ use of utilities’ poles). The latter defines injury. See TCG Detroit v. City of Dearborn, 977 F. Supp. at “just and reasonable” in terms of recovery of additional costs 839. But other district courts have held otherwise. See, e.g., borne by the utility in providing pole attachments. The court GST Tucson Lightwave, Inc. v. City of Tucson, 950 F. Supp. noted that Congress did not choose to insert a comparable 968, 970-71 (D. Ariz. 1996) (holding no private right of definition in the Act, that “costs” and “compensation” are not

10 TCG Detroit v. City Nos. 98-2034/2035 Nos. 98-2034/2035 TCG Detroit v. City 7 of Dearborn, et al. of Dearborn, et al.

To be sure, since Cort v. Ash, the Supreme Court has action, express or implied, for § 253 injuries); accord AT&T become more restrained in its willingness to find an implied Communications v. Austin, Tex., 975 F. Supp. 928, 936 (W.D. private right of action. See Touche Ross & Co. v. Redington, Tex. 1997).1 442 U.S. 560, 578 (1979) (adopting a “stricter standard” of “congressional intent”). But a majority of the Court has not Although the City does not contest as error the district gone so far as to hold that Cort v. Ash has been “effectively court’s holding that § 253 confers an implied private right of overruled” (see Thompson v. Thompson, 484 U.S. 174, 188 action, it is incumbent on us to address this issue, since the (1988) (Scalia, J., concurring in the judgment)). Rather, the question of TCG’s standing implicates the United States Court has required some affirmative evidence of Constitution’s Article III case-or-controversy requirement, congressional intent, in “the language and focus of the statute, which must be satisfied for a federal court to hear the case. its legislative history, and its purpose.” Touche Ross, 442 See Juidice v. Vail, 430 U.S. 327, 331-32 (1977) (“Although U.S. at 575-76. In this case, in addition to the fact that such raised by neither of the parties, we are first required to a right plainly serves the purpose of the legislative scheme, examine the standing of appellees, as a matter of the case-or- the language of the Act seems clearly to suggest that Congress controversy requirement associated with Article III . . . .”). If intended that a private right of action be available. Section this requirement of Article III is not satisfied, jurisdiction is 255, mandating access by persons with disabilities, expressly lacking. See In re GF Corp., Nos. 92-3583, 92-3585, 1993 provides that there shall be no private right of action to WL 239062, at *2 (6th Cir. June 30, 1993) (unpublished enforce that section’s requirements. See 47 U.S.C. § 255(f). opinion). Where jurisdiction is lacking, the court must on its The resulting implication is that the neighboring section own motion dismiss the case. Fed. R. Civ. P. 12(h)(3).2 253(c) concerning the assessment of fair, reasonable, and competitively neutral franchise fees, from which such limiting language is conspicuously absent, does confer such a right. 1 In AT&T Communications v. Austin, the Texas district court nevertheless granted AT&T an injunction against the enforcement of an We recognize that Judge Noonan, concurring in the result Austin ordinance that, the company argued, violated both § 253(a) and (c) in Cablevision, was convinced, in large part by §§ 252(e)(6), of the Act by requiring municipal consent to its providing 258(b), and 274(e), that the Act is always explicit when it telecommunications services. In doing so, the court found its jurisdiction contemplates a private right of action. But these subsections in the Supremacy Clause, ruling that the Act preempted local regulatory authority, and that AT&T could challenge such authority on those refer to legal remedies in the alternative, over and above grounds; although it agreed with the Arizona court in GST Tucson procedures or remedies available from the Commission or Lightwave, and AT&T also conceded, that the Act confers no private right from state commissions. The subsection of § 253 authorizing of action, the Texas district court also found neither exclusive nor primary Commission action, § 253(d), pointedly omits reference to jurisdiction in the FCC. 975 F. Supp. at 937-39. The same approach was violations of § 253(c). Thus, we believe it is incorrect to say followed in another Texas case. See AT&T Communications, Inc. v. City that reading a private right of action into § 253(c) “runs of Dallas, 8 F. Supp. 2d 582 (1998). We are not, however, persuaded that such a jurisdictional analysis provides a proper basis for proceeding. counter to the statutory scheme of § 253 itself.” 184 F.3d at 108. A violation of § 253(c) might well not involve violating 2 The First Circuit has said that a court can avoid this issue, in the § 253(a); unfair or unreasonable fees need not rise to the level context of a § 253 claim, but its discussion first confuses whether a of erecting a barrier to entry, while only the latter violation plaintiff has standing to sue, i.e. whether a private right of action exists (a authorizes the Commission to act pursuant to § 253(d). jurisdictional question), with whether a plaintiff states a cause of action upon which relief can be granted (a non-jurisdictional one), and then misstates the relation between statutory and Article III standing. See

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In this case, as in GST Tucson, a telecommunications Section 257, “Market entry barriers proceeding,” is devoted provider claims that a municipality has violated § 253(c), and entirely to mandating FCC identification and review of “entry damaged the provider, by setting rates for different providers barriers for entrepreneurs and other small businesses in the that are competitively biased and discriminatory, and by provision and ownership of telecommunications services and charging it unfair and unreasonable rates. As the court in GST information services . . . .” 47 U.S.C. § 257(a). This would Tucson noted, there is no express authority in this section for seem on its face to strengthen the view that the FCC has a private right of action. See 950 F. Supp. at 969. The exclusive jurisdiction over violations of § 253(a). As the question is then whether such a right is implied. The Arizona district court commented, “[e]nforcement of § 253 is disagreement between that court, and the Michigan district provided for in § 253(d) and § 257, further indicating an court in TCG, concerns the meaning of § 253's language as absence of congressional intent that a private right of action well as the statute’s broader structure. be implied.” GST Tucson, 950 F. Supp. at 970. The subsections of § 253 quoted above raise several However, the district court whose judgment we review here questions. Does (d) provide for exclusive jurisdiction of the quotes to telling effect the Senate debate on § 253(d), as that FCC in violations of (a) and (b), or is a private right of action subsection is intended to relate to the safe harbor of also implied? Does (d)’s omission of (c) mean that a private subsection (c). During the debate, Senator Gorton explained: right of action, instead of FCC jurisdiction, applies to violations of (c)? Or is (c) omitted from (d) because it merely There is no preemption . . . for subsection (c) which is provides a safe harbor for municipalities, such that, to be entitled, “Local Government Authority,” and which is the actionable, a violation of (c) must be a violation of (a), subject subsection which preserves to local governments control (perhaps solely) to FCC enforcement under (d)? over their public rights of way. It accepts the proposition . . . that these local powers should be retained locally, that any challenge to them take place in the Federal district court in that locality and that the Federal Cablevision of Boston, Inc. v. Public Improvement Comm’n, 184 F.3d 88, Communications Commission not be able to preempt 100 n.9 (1st Cir. 1999). Article III standing may indeed be lacking where such actions. statutory standing exists, and the First Circuit correctly cites Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992), for this proposition. 977 F. Supp. at 840 (quoting 141 Cong. Rec. S 8213 (June 13, It is an entirely different thing, however, to assert that a plaintiff has 1995) (emphasis added by the district court)). Article III standing, and that this provides jurisdiction, where a statute deprives that very plaintiff of standing to sue. Lujan cannot be turned on Moreover, we are persuaded by the district court’s careful its head in this manner. In any event, the Supreme Court held in Merrill discussion, which need not be duplicated here, of the Supreme Dow Pharmaceuticals, Inc. v. Thompson that “when Congress has determined that there should be no private, federal cause of action . . . [a Court’s four-factor test in Cort v. Ash, 422 U.S. 68, 78 claimed] violation does not state a claim ‘arising under the Constitution, (1975), which provides guidance in determining whether a laws, or treaties of the United States.’” 478 U.S. 804, 817 (1986). See Congressional statute creates an implied private right of also Erwin Chemerinsky, Federal Jurisdiction 285 (3d ed. 1999) (“A action. See TCG, 977 F. Supp. at 839-41. This is a test to great many federal laws do not create private causes of action . . . . After which the Arizona court referred in GST Tucson, but which it Merrill Dow, none of these statutes can be the basis of federal question jurisdiction.”); Walls v. Waste Resource Corp., 761 F.2d 311, 314-16 (6th failed to apply. See 950 F. Supp. at 970. Cir. 1985) (affirming dismissal, for lack of subject matter jurisdiction, of a complaint resting on a non-existent private right of action).