New Jersey Payphone Ass'n v. Town of West New York
| Decision Date | 26 July 2002 |
| Docket Number | No. 01-1917.,01-1917. |
| Citation | 299 F.3d 235 |
| Parties | NEW JERSEY PAYPHONE ASSOCIATION, INC, a not for profit corporation organized under the laws of New Jersey, v. TOWN OF WEST NEW YORK, Appellant. |
| Court | U.S. Court of Appeals — Third Circuit |
Joseph R. Mariniello, (argued), Mariniello & Mariniello, P.C., Fort Lee, N.J., for appellant.
Jeffrey A. Donner, (argued), Stryker Tams & Dill, LLP, Newark, N.J., for appellee.
BEFORE: ALITO, RENDELL, and HALL,1 Circuit Judges.
The Town of West New York appeals the District Court's grant of summary judgment finding an ordinance of the town preempted by Section 253 of the Telecommunications Act of 1996, codified at 47 U.S.C. § 253. The ordinance permits the town to grant an exclusive franchise to one or two pay telephone providers to provide telephone service on public rights of way. The franchise is to be awarded pursuant to a formal auction process and is to be based on several criteria, primarily the amount of compensation offered to the town by the bidder. The town denies that the ordinance has the effect of prohibiting pay telephone providers from providing pay telephone service in violation of 47 U.S.C. § 253(a). It also claims in the alternative that it falls within the Section 253(c) safe harbor protecting municipal regulation of public rights of way from the preemptive effect of Section 253(a). We affirm the ruling of the District Court.
The District Court had original subject matter jurisdiction pursuant to 28 U.S.C. § 1331. This Court has jurisdiction pursuant to 28 U.S.C. § 1291. Although the appeal was not initially timely, the District Court granted an extension of time to file pursuant to Fed.R.App.P. 4(a)(5). That extension has not been appealed and this appeal is within the extended time period granted by the District Court.
This appeal concerns the lawfulness of an ordinance adopted on February 16, 2000 by the Town of West New York, New Jersey (the "Town") regulating the placement of pay telephones in public rights of way. Plaintiff-Appellee, the New Jersey Payphone Association (the "Payphone Association") is a not-for-profit organization whose members operate payphones in the Town. The Payphone Association challenged the Town's Ordinance 26/99 (the "Ordinance") on a number of grounds, alleging that it violates Section 253 of the Telecommunications Act of 1996 (the "TCA"), 47 U.S.C. § 253; New Jersey statutory law; and the United States and New Jersey Constitutions.
Citing the need to control the placement of pay telephones on public rights of way in order to ensure the safe passage of vehicular and pedestrian traffic and promote an aesthetically pleasing environment, the Ordinance requires prospective payphone operators to obtain a local permit for each pay telephone specifying its exact location. Historically, any service provider could obtain such a permit subject to payment of a small fee and satisfaction of certain minimum requirements as to the maintenance, location, and specifications of their payphones. In the current Ordinance, however, Section Three specifies:
The Town reserves the right to award a Contract for replacement or operation of [payphones] in the public right-of-way of the Town and on Town owned property. If the Town exercises such rights no other permits or renewals for the operation of [payphones] shall be issued and any previously installed [payphones] shall be removed from the public right-of-way within thirty days.
Pursuant to Section Three of the Ordinance, the town issued a document entitled "Franchise for Public Pay Telephones throughout the Town of West New York" (the "Franchise Notice"), inviting bids for contracts to provide payphones. J.A. at 76-111. The Franchise Notice informs bidders that the Town has been split into two zones for bidding purposes with a separate auction for each zone. Bidders are required to install between 75 and 100 payphones for each zone at locations to be determined by the Director of Public Safety in consultation with the successful bidder. The Franchise Notice also provides that the Town is to be compensated based on a percentage of revenue generated by the payphones. In addition, bidders must demonstrate the ability to provide a security deposit of $250 per proposed telephone, or at least $18,750.
The Franchise Notice also sets out the criteria used by the Town in evaluating bids. The Town is to evaluate bids based on a list of seven factors including: the experience of the applicant, the ability of the applicant to maintain the pay telephones, the efficiency of the public service to be provided, the willingness of the applicant to provide telephones in historically under-served residential areas lacking private telephones, the applicant's history of maintaining payphones within the Town, and the cost of calls to the public. Also on the list of evaluation criteria is the amount of compensation offered to the Town by the applicant. The purchasing agent for the Town forthrightly testified by affidavit that he considered compensation to the Town to be the most important factor in evaluating bids. J.A. at 138-139.
As it happened, the initial attempt to auction service for the two zones ended without any awards. Three companies submitted proposals. The purchasing agent testified that the three bids were largely equivalent except for the compensation offered to the Town and the per-call cost to the public. He determined that differences in billing methods between the bidding companies in light of inadequate bid specifications on the treatment of long distance service created difficulties in evaluating the bids. Accordingly, he recommended that all bids be rejected and the specifications redrawn in order to conduct the auction anew. After initiation of this suit, the parties agreed to take no further action pending determination of the lawfulness of the Ordinance and Franchise Notice.
The District Court issued an opinion granting summary judgment for the Payphone Association and denying the Town's cross-motion for summary judgment on the basis that Section Three of the Ordinance was preempted by 47 U.S.C. § 253. New Jersey Payphone v. Town of West New York, 130 F.Supp.2d 631 (D.N.J. 2001). It specifically found the grant of an exclusive franchise preempted by Section 253 and separately found the selection criteria used in awarding such franchises also violated this section. In addition to granting summary judgment, the District Court permanently enjoined the Town from enforcing Section Three of the Ordinance and the Franchise Notice, including making any award of an exclusive franchise for providing pay telephone service in the Town based on the amount of compensation paid. Because the District Court found that federal preemption fully resolved the dispute, it declined to reach alternative constitutional and state law claims raised by the Payphone Association. Preemption of Section Three of the Ordinance and the Franchise Notice by Section 253 of the TCA is correspondingly the sole issue raised on appeal.2
Section 253 of Title 47 of the United States Code provides in relevant part:
(a) In general
No State or local statute or regulation, or other State or local legal requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service.
(b) State regulatory authority
Nothing in this section shall affect the ability of a State to impose, on a competitively neutral basis and consistent with section 254 of this section, requirements necessary to preserve and advance universal service, protect the public safety and welfare, ensure the continued quality of telecommunications services, and safeguard the rights of consumers.
(c) State and local government authority Nothing in this section affects the authority of a State or local government to manage the public rights of way or to require fair and reasonable compensation from telecommunications providers, on a competitively neutral and nondiscriminatory basis, for use of public rights of way on a nondiscriminatory basis, if the compensation required is publicly disclosed by such government.
(d) Preemption
If, after notice and an opportunity for public comment, the Commission determines that a State or local government has permitted or imposed any statute, regulation, or legal requirement that violates subsection (a) or (b) of this section, the Commission shall preempt the enforcement of such statute, regulation, or legal requirement to the extent necessary to correct such violation or inconsistency.
Subpart (a) expressly preempts any state or local law inconsistent with its prohibition. As indicated by their opening text, subparts (b) and (c) are structurally savings clauses, excepting the listed local and state functions from the preemptive effect of subpart (a). Cablevision of Boston Inc. v. Public Improvement Comm'n, 184 F.3d 88, 98 (1st Cir.1999). At the same time, the division between (b) and (c) defines the boundaries of each body's retained regulatory authority, with states permitted to regulate broadly with respect to public safety and other issues, and local governments limited to powers delegated by their states and management of their rights of way. In re TCI Cablevision, 12 F.C.C.R. 21396, ¶ 102-104, 109 (Sept. 19, 1997). In the case of a dispute over a local regulation of rights of way, once the party seeking preemption sustains its burden of showing that a local municipality has violated Section 253(a) by formally or effectively prohibiting entry into the payphone market, the burden of proving that the regulation comes within the safe harbor in Section 253(c) falls on the defendant municipality. In re Petition of the State of Minnesota, 14 F.C.C.R. 21697, n. 26 (1999).
This much is clear: Section 253 is quite inartfully drafted and has created...
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