Global Network Communications v. City of New York

• Decision Date: 08 April 2009
• Docket Number: Docket No. 07-5184-cv.
• Citation: 562 F.3d 145
• Parties: GLOBAL NETWORK COMMUNICATIONS, INC., Plaintiff-Appellant, v. CITY OF NEW YORK and City of New York Department of Information Technology and Telecommunications, Defendants-Appellees.
• Court: U.S. Court of Appeals — Second Circuit

562 F.3d 145

GLOBAL NETWORK COMMUNICATIONS, INC., Plaintiff-Appellant, v. CITY OF NEW YORK and City of New York Department of Information Technology and Telecommunications, Defendants-Appellees.

Docket No. 07-5184-cv.

United States Court of Appeals, Second Circuit.

Argued: October 16, 2008.

Decided: April 8, 2009.

Joseph P. Garland, Lifshutz & Lifshutz, P.C., New York, NY, for Plaintiff-Appellant.

Bruce Regal, Assistant Corporation Counsel (John Hogrogian, Pamela Seider Dolgow, and Diana M. Murray, Assistant Corporation Counsels, on the brief) for Michael A. Cardozo, Corporation Counsel of the City of New York, New York, NY, for Defendants-Appellees.

Before McLAUGHLIN, LEVAL, and POOLER, Circuit Judges.

LEVAL, Circuit Judge:

Plaintiff, Global Network Communications, Inc. ("Global") appeals from an order of the United States District Court for the Southern District of New York (Stanton, J.) granting summary judgment in favor of defendants, the City of New York ("City") and its Department of Information Technology and Telecommunications ("DoITT"). Global's lawsuit results from the City's denial of Global's application for a public pay telephone ("PPT") franchise on the basis of its ties to organized crime, its past history of fraud, and its debts and arrears. The district court held that the City's denial of Global's application, as well as the City's regulatory scheme for PPTs, did not violate the federal Telecommunications Act of 1996 ("TCA"), 47 U.S.C. § 253. The district court further held that the City's regulatory scheme for PPTs was not preempted by state or federal law. Finally, the court dismissed Global's claims that the City's actions violated its constitutional rights.

We agree with the district court's conclusion that the City's actions fall squarely within the safe harbor provisions of Section 253(c) of the TCA, which provide local government with the authority to manage public rights-of-way and to require fair and reasonable compensation from telecommunications providers. Global furthermore has failed to identify any federal or state law that preempts the City's actions, and its constitutional claims are without merit. Therefore, we affirm the summary judgment of the district court.

BACKGROUND

Since 1959, New York City has required a license as a precondition to the installation or operation of a PPT on city-owned and city-managed property, including sidewalks. Prior to 1995, the City did not enforce this requirement rigorously. Several telecommunications providers, including Global, installed PPTs on City sidewalks and on the sides of buildings intruding onto public rights-of-way without having obtained the required license. In 1995, however, the City passed Local Law 68, which established the regulatory scheme in effect today. That law provides that "[n]o public pay telephone shall be installed ... [on] any street or other inalienable property of the city without a permit." N.Y. City Admin. Code § 23-402. Permits are issued only to telecommunications providers who have been granted a franchise to operate PPTs by the City's DoITT. Id. § 23-403(a)(1). Local Law 68 also offered a conditional amnesty procedure whereby previously installed unlicensed PPTs could remain in operation if the owner obtained a franchise, identified its pre-existing PPTs on a registry submitted to the DoITT, and paid the City interim fees equal to $75 per PPT per year, and the Commissioner lodged no objection to the continued operation of such phones on City-owned property. N.Y. City Local Law 68, § 6(a), (d) (1995). Any company whose application for a franchise was denied by the Commissioner's decision not to approve a franchise for such owner, was obliged within 30 days either to remove its unlicensed PPTs or sell them to a company that possessed a franchise. Id. § 6(c). Local Law 68 applies only to City property; PPTs on private property are not subject to the City's regulatory scheme. See N.Y. City Admin. Code § 23-402.

On May 30, 2000, the DoITT rejected Global's initial request for a franchise on the ground that its CEO and sole shareholder, Ronald Massie, is an associate of the Bonnano organized crime family accused of loan sharking and money laundering through the company. Massie subsequently pleaded guilty to a federal indictment charging him with loan sharking, mail fraud, and bank fraud. He later testified that Global derived 20 to 30 percent of its business from locations that were chosen or secured by members of the Bonnano crime family. He admitted to using connections to the Bonnano crime family in order to secure PPT locations, and property owners reported that these individuals threatened and intimidated them into accepting the PPTs. Massie also admitted that Global had defrauded the owners of the properties on which Global had installed its PPTs out of $1.8 million in commissions.

Global challenged the franchise denial through a special proceeding pursuant to Article 78 of the New York Civil Practice Laws and Rules. On July 1, 2002, the New York Supreme Court (Gans, J.) vacated and remanded the matter to the DoITT for further proceedings because the denial implicated Global's liberty and property interests and Global therefore should be afforded "an opportunity to respond to the allegations regarding [Massie's] conviction and its relationship to the operation of the business." Global Network Commc'ns, Inc. v. Dobrin, No. 120402/00, slip op. at 9 (N.Y.Sup.Ct. July 1, 2002).

After conducting further proceedings in which Global was afforded the opportunity to respond, the DoITT again rejected Global's franchise request. In its March 11, 2005 determination, the DoITT explained:

[T]here are multiple independent bases for not proposing the award of a franchise to Global ...: (1) Global established a significant part of its business through its use of organized crime soldiers; (2) Global has defrauded property owners who authorized use of property for Global PPTs; and (3) Global has been repeatedly delinquent in the payment of registry fees and thus cannot be reliably trusted to timely pay franchise compensation and also has significant unpaid fines related to its payphone operations that remain payable to the City.

The DoITT also specifically noted that "even if Massie did divest himself more fully from Global [than merely withdrawing from day-to-day operations], the nature of the City's justifiable concerns about Global would not be adequately resolved" because of "the intimate involvement of Global itself with organized crime" and "the fact that Global has failed to timely pay fines owed to the City and has repeatedly been late in its registry payments."

Global again challenged the Commissioner's determination through an Article 78 proceeding. In a decision dated November 28, 2005, the New York Supreme Court (Feinman, J.), denied Global's petition on the merits. The court held that the DoITT had lawfully exercised its discretion in its March 11, 2005 decision and Global's due process rights had not been violated. Global Commc'ns, Inc. v. Menchini, No. 109531/05 (N.Y.Sup.Ct., Nov. 28, 2005). Global failed to perfect an appeal.

Global filed its complaint in this lawsuit on October 7, 2003, and amended its complaint on July 1, 2004, setting forth eleven causes of action. The first five claims allege that the City's PPT regulatory scheme and its denial of a PPT franchise to Global violate the TCA, 47 U.S.C. § 253. The sixth and seventh claims allege that the City's legal framework is preempted by both existing state law and federal law.¹ The remaining claims allege violations of Global's constitutional rights and seek damages, costs, and attorney fees, pursuant to 42 U.S.C. §§ 1983 and 1988.²

The district court, in a decision dated June 9, 2005, granted the defendants' motion to dismiss under Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted. Global Network Commc'ns, Inc. v. City of New York, 373 F.Supp.2d 378 (S.D.N.Y.2005). The court ruled that the City's denial of Global's application for a franchise fell within the safe harbor exception of Section 253(c) of the TCA, which provides the City with the authority to manage the public rights-of-way and require fair and reasonable compensation. It also dismissed all of Global's claims relying on preemption by state and federal law, as well as Global's claims of constitutional violations.

On appeal, this court vacated the judgment and remanded on the ground that the district court erred in "consider[ing] matters outside plaintiff's complaint" in granting a motion under Rule 12(b)(6).³ Global Network Commc'ns, Inc. v. City of New York, 458 F.3d 150, 156 (2d Cir.2006). We ruled that the district court should have converted the defendants' Rule 12(b)(6) motion into a Rule 56 motion for summary judgment and given the plaintiff an opportunity to contest the matter upon which the defendant's motion relied. Id. at 158. We also stated that "in remanding on procedural grounds, we express no opinion regarding the correctness of the trial court's rulings on the merits, and it may well be that upon a motion for summary judgment the court will reach the same conclusion as it did initially." Id. at 156.

On remand, the defendants moved for summary judgment, and the district court granted the motion. Global Network Commc'ns, Inc. v. City of New York, 507 F.Supp.2d 365 (S.D.N.Y.2007). The district court ruled that the City's denial of Global's PPT franchise "fits comfortably within [the] safe-harbor exception" of Section 253(c) of the TCA. It reasoned that inherent within the City's right to require compensation is "the reasonable expectation that its compensation will be paid accurately in full, on time, and without criminal involvement or fraud" and found that the evidence supported DoITT's determination that it could not "trust Global to pay the City's compensation in [a timely or honest] manner." Id. at 372. The court...