American Tel. & Tel. Co. v. Village of Arlington Heights

• Decision Date: 26 August 1993
• Docket Number: No. 72315,72315
• Citation: 620 N.E.2d 1040,189 Ill.Dec. 723,156 Ill.2d 399
• Parties: , 189 Ill.Dec. 723, 73 Rad. Reg. 2d (P & F) 1330 AMERICAN TELEPHONE AND TELEGRAPH COMPANY et al., Appellees, v. The VILLAGE OF ARLINGTON HEIGHTS, et al., Appellants.
• Court: Illinois Supreme Court

Page 1040

620 N.E.2d 1040

156 Ill.2d 399, 189 Ill.Dec. 723, 73

Rad. Reg. 2d (P & F) 1330

AMERICAN TELEPHONE AND TELEGRAPH COMPANY et al., Appellees, v. The VILLAGE OF ARLINGTON HEIGHTS, et al., Appellants.

No. 72315.

Supreme Court of Illinois.

Aug. 26, 1993.

Rehearing Denied Oct. 4, 1993.

Jack M. Siegel, Altheimer & Gray, Chicago, for appellants.

Howard J. Trienens, Gerald A. Ambrose, J. Andrew Schlickman, Michelle M. Cain and John A. Heller, Sidley & Austin, and Thomas R. Phillips, O. Carey Epps, Dennis S. Pines and Timothy L. Porter, Chicago, for appellees.

Kelly R. Welsh, Corp. Counsel, and Susan S. Sher, Acting Corp. Counsel, Chicago (Lawrence Rosenthal, Benna Ruth Solomon and Lynn Kristine Mitchell, of counsel), for intervenor-appellant City of Chicago.

Beth Anne Janicki, Springfield, for amicus curiae Ill. Municipal League.

Seymour Simon, Thomas F. Geselbracht and John E. Mitchell, of Rudnick & Wolfe, Chicago, for amicus curiae Western Union ATS, Inc.

Kevin M. Forde, Ltd., Chicago (Kevin M. Forde and Katrina Veerhusen, of counsel), for amicus curiae Ill. Telephone Assoc.

Boyd J. Springer and Thomas P. McNulty, Jones, Day, Reavis & Pogue, Chicago, for amicus curiae Ill. Chapter, Nat. Assoc. of Water Companies.

Herbert D. Hill, Asst. Corp. Counsel, of Evanston, for amicus curiae City of Evanston.

Mark C. Goldenberg, City Atty., Granite City, for amicus curiae City of Granite City.

John P. Kelliher, Chicago, for amicus curiae Ill. Commerce Com'n.

Erwin W. Jentsch, Michael R. Gehrman and William A. Cogley, Elgin, for amicus curiae City of Elgin.

Robert J. Alfton, Minneapolis, MN, Joseph I. Mulligan, Morris & Quinn, Boston, MA, Robert J. Mangler, Klein, Thorpe & Jenkins, Chicago, Joseph N. De Raismes, Boulder, CO, Frank B. Gummey III, Daytona Beach, FL, Benjamin L. Brown, Michael P. Moss and Donna Clemons-Sacks, Washington, DC, Analeslie Muncy, Fielding, Barrett & Taylor, Fort Worth, TX, David Caylor, City Atty., El Paso, TX, Frederick S. Dean, City Atty., Tucson, AZ, James H. Epps III, City Atty., Johnson City, TN, Neal M. Janey, City Sol., Baltimore, MD, Iris J. Jones, City Atty., Prairie View, Small, Craig & Werkenthin, Austin, TX, Victor J. Kaleta, City Atty., Pasadena, CA, William J. Kearns, Township Sol., Willingboro, NJ, Patricia A. Lynch, City Atty., Reno, NV, Robert J. Watson, City Atty., Overland Park, KS, and John J. Zimmermann, Park Ridge, for amicus curiae Nat. Institute of Municipal Law Officers.

Justice HEIPLE delivered the opinion of the court:

The question presented by this case is whether municipal governments can extort toll charges or franchise fees for the crossing of public ways. They cannot. The factual context of this case is that AT In transversing the 85-mile cable route following the railroad right-of-way, the cable must pass under more than 140 travelled public ways subject to the jurisdiction of five counties, six townships, 13 cities and villages, plus the Illinois Department of Transportation, the Corps of Engineers and the Illinois Toll Authority. Five cities and villages in the path of this cable will not permit street crossings unless AT & T agrees to so-called franchise agreements or tolls which AT & T refused to pay. Various demands were made upon AT & T, including a percentage of gross revenues and $2.50 per foot of cable within the municipalities regardless of whether the cable was crossing the street or located entirely on CNW's property. It is to be noted that none of the municipalities object to the installation of the cable per se. They simply want to collect a toll for it.

& T is laying an underground fiber optic cable along an 85-mile line in northern Illinois between Glenview and Rockford. The line is being laid along railroad right-of-way of the Chicago and North Western Transportation Company (CNW) pursuant to an easement granted by CNW. The cable is designed to carry only long distance telephone communications. Additionally, telecommunications traffic can enter or leave the cable only at AT & T's terminal points in Glenview, Rockford, and Rolling Meadows.

In an action by the telephone company, the trial court initially entered a preliminary injunction in favor of the telephone company allowing the installation of the fiber optic cable without a franchise agreement. The appellate court, on an interlocutory appeal taken by the municipalities, affirmed the granting of the preliminary injunction, and the cause was subsequently returned to the trial court for a ruling on the permanent injunction. A permanent injunction barring the municipalities' interference with the installation of the fiber optic cable was entered by the trial court and the municipalities again appealed. The appellate court concluded that municipalities do not have an absolute right to require a franchise agreement as a prerequisite to a telephone company's utilization of the public streets. (216 Ill.App.3d 474, 160 Ill.Dec. 30, 576 N.E.2d 984.) We allowed the municipalities' petition for leave to appeal and, in a split decision, reversed the appellate court. A majority of this court held that the municipalities have the right to prohibit AT & T from crossing public streets without a franchise agreement, and that the franchise agreement could require AT & T to pay rent for the crossing of the streets. Thereafter, AT & T's petition for rehearing was allowed (134 Ill.2d R. 367), and the case was reargued. Today we rule that municipalities do not have a proprietary interest in the public streets and may not raise revenue by coercing telephone companies into franchise agreements.

FACTS

The detailed factual background of this case is as follows. Plaintiffs, American Telephone and Telegraph Company, and AT & T Communications of Illinois, Inc. (hereinafter collectively referred to as AT & T), were laying an underground 85-mile long fiber optic cable between Glenview and Rockford, Illinois. The cable, pursuant to an easement granted to AT & T by the Chicago and North Western Transportation Company, was being installed below ground along the side of a railroad roadbed. The cable was located exclusively on CNW's private property except at points where the railroad roadbed intersected with public streets.

More than 140 streets, roads, and highways cross the Glenview/Rockford cable route, and except for the municipalities of Arlington Heights, Palatine, Barrington, Lake Barrington, and Crystal Lake, AT & T was able to receive the appropriate undercrossing permits for either no charge or by paying an administrative fee. AT & T was informed that the Northwest Municipal Conference would negotiate franchise agreements between AT & T and the defendant municipalities. Initially, the Northwest Municipal Conference proposed that AT & T enter into a franchise agreement similar to an existing agreement between AT & T and the City of Chicago. This The Northwest Municipal Conference offered an alternative proposal requiring AT & T to pay each of the defendant municipalities $2.50 per foot of cable installed within the municipality. This proposal made it immaterial whether the cable was undercrossing public streets or located on CNW's private property. AT & T also rejected this proposal and responded with its own offer of $1 per foot of cable located on the public right-of-way and paying an administrative fee of $5,000 per year. This proposal was rejected and an agreement was not reached.

[189 Ill.Dec. 726] agreement provided for the paying of 2% of AT & T's gross revenues derived from long-distance calls originating in the City of Chicago, or a minimum payment of $5 million per year. AT & T refused to accept this proposal.

In 1987, AT & T submitted permit applications to the defendant municipalities seeking permission to install the fiber optic cable beneath the street crossings. The Village of Lake Barrington initially granted a permit, but it was revoked prior to the installation of the fiber optic cable. The other defendant municipalities refused to issue the permits. The rationale for denying AT & T's permit application was based upon the fact that a franchise agreement had not been entered into. However, none of the municipal ordinances required a permit applicant to enter into a franchise agreement in order to obtain a permit.

On August 11, 1987, AT & T mailed notices to the villages of Arlington Heights, Barrington and Palatine in an effort to invoke the eminent domain authority of telephone companies as specified in section 4 of the Telephone Company Act (Ill.Rev.Stat.1987, ch. 134, par. 20). The notices gave the villages 10 days' notice that AT & T intended to begin constructing its fiber optic cable under various streets intersecting with the CNW railroad. A similar letter was mailed to the City of Crystal Lake on September 11, 1987. AT & T commenced work in the villages of Arlington Heights and Palatine. However, since permits had not been issued and a franchise agreement had not been entered into, the municipalities ordered AT & T to stop work.

AT & T filed a complaint against the defendant municipalities and sought a preliminary injunction to prevent their future interference in the installation of the fiber optic cable under the streets. During the injunction hearings, defendants maintained that "[r]equiring payment of a fee as a condition for use of * * * property by a commercial enterprise is a legitimate means of raising revenue." Defendants also took the position that AT & T had "no right whatsoever" to undercross their streets, and that they have an "absolute right to exclude" AT & T from any use of public streets except on such terms as they may demand.

On November 2, 1987, the trial court entered an interlocutory order granting a preliminary injunction in favor of AT & T which allowed them to "construct, maintain, lay, alter, bore or locate and use its fiber optic cable along, upon, under, and across any highway, street, road, or alley under the control or...