Best Payphones, Inc. v. Dobrin

• Citation: 410 F.Supp.3d 457
• Decision Date: 27 September 2019
• Docket Number: 01-CV-8506 (LDH) (ST),03-CV-0192 (LDH) (ST),01-CV-3934 (LDH) (ST)
• Parties: BEST PAYPHONES, INC., Plaintiff, v. Allan DOBRIN, former Department of Information Technology and Telecommunications (DoITT) Commissioner, Bruce Regal, former DoITT Acting Deputy Commissioner, Stanley Shor, DoITT Assistant Commissioner, Agostino Cangemi, DoITT Deputy Commissioner, Debra Samuelson, DoITT Deputy General Counsel, and the City of New York, Defendants.
• Court: U.S. District Court — Eastern District of New York

410 F.Supp.3d 457

BEST PAYPHONES, INC., Plaintiff,

v.Allan DOBRIN, former Department of Information Technology and Telecommunications (DoITT) Commissioner, Bruce Regal, former DoITT Acting Deputy Commissioner, Stanley Shor, DoITT Assistant Commissioner, Agostino Cangemi, DoITT Deputy Commissioner, Debra Samuelson, DoITT Deputy General Counsel, and the City of New York, Defendants.

01-CV-3934 (LDH) (ST)

01-CV-8506 (LDH) (ST)

03-CV-0192 (LDH) (ST)

United States District Court, E.D. New York.

Signed September 27, 2019

Filed October 4, 2019

MEMORANDUM AND ORDER

LaSHANN DeARCY HALL, United States District Judge:

Plaintiff Best Payphones, Inc. filed these three consolidated actions against the City of New York (the "City"), Allan Dobrin, Bruce Regal, Stanley Short, Agostino Cangemi, and Debra Samuelson alleging First Amendment retaliation and unconstitutional conditions, violations of the Equal Protection Clause, and a conspiracy in violation of 42 U.S.C. § 1983, arising from the City's regulation of pay phones.¹ Plaintiff commenced the first of these actions by complaint filed June 7, 2001 (ECF No. 1, No. 01-CV-3934), and the operative third amended complaint was filed on August 20, 2010 (ECF No. 261, No. 03-CV-192.) ("TAC"). On July 29, 2015, Judge Gleeson referred the parties' anticipated cross-motions for summary judgment to Magistrate Judge Scanlon for a report and recommendation. On March 10, 2016, these cases were reassigned to this Court and, on April 7, 2016, the Court referred the anticipated summary-judgment motions to Magistrate Judge Tiscione for a report and recommendation.

On September 13, 2018, Magistrate Judge Tiscione issued a report and recommendation ("R & R"), wherein he recommended that the Court grant summary judgment in favor of Defendants and against Plaintiff with three exceptions. (R & R, ECF No. 534.) First , he recommended that Plaintiff's First Amendment retaliation claim arising from Defendants' purported removal of Plaintiff's pay phones, issuance of fines against Plaintiff, and refusal to accept Plaintiff's franchise agreement be permitted to proceed to trial. (Id. at 1.) Second , he recommended that Plaintiff's unlawful-condition claim be permitted to proceed to trial. (Id. ) Third , Magistrate Judge Tiscione recommended denying Defendants' request for summary judgment with respect to Plaintiff's Monell claim, except as to Plaintiff's First Amendment retaliation claim against the City. (Id. at 2.)

Both parties filed lengthy objections.² Indeed, even a non-party filed an objection.³ Plaintiff objected that: (1) it was entitled to summary judgment on its unconstitutional-condition claim; (2) Magistrate Judge Tiscione improperly applied a public concern balancing test to its First Amendment claims; (3) even assuming the public concern balancing test applied, Plaintiff had adduced evidence that its conduct involved matters of public concern; (4) Magistrate Judge Tiscione erred in recommending dismissal of its Equal Protection claim; (5) Magistrate Judge Tiscione erred in recommending dismissal of its Monell claim; and (6) Magistrate Judge Tiscione erred by finding that certain of Defendants actions did not constitute retaliatory animus. (Best Payphones, Inc.'s Obj. R & R Issued by Mag. Judge Tiscione, Docket No. 534 Filed Sept. 13, 2018, ECF No. 540.) Defendants objected that: (1) Plaintiff's unconstitutional-condition claim was no longer a part of the case; (2) res judicata should have applied based on Plaintiff's July 2000 Article 78 proceeding; (3) Plaintiff failed to present sufficient evidence of retaliatory motive to support its First Amendment retaliation claim; (4) Plaintiff's First Amendment retaliation claims failed to satisfy the public-concern balancing test; and (5) Plaintiff failed to adduce sufficient evidence to support any claim for compensatory damages. (Municipal Defs.' Mem. Supp. R. 72 Obj. ("Defs.' Obj.") at 2-8, ECF No. 542.)

The Court reviews any portion of the R & R that has been objected to de novo. See Fed. R. Civ. P. 72(b)(3) ; 28 U.S.C. § 636(b)(1)(C). As to the balance, "the district court need only satisfy itself that there is no clear error on the face of the record." Estate of Ellington ex rel. Ellington v. Harbrew Imps. Ltd. , 812 F. Supp. 2d 186, 189 (E.D.N.Y. 2011) (quoting Urena v. New York , 160 F. Supp. 2d 606, 609-10 (S.D.N.Y. 2001) (internal quotation marks and citations omitted)).

BACKGROUND⁴

I. The Legislative and Regulatory Backdrop

In September 1995, the New York City Council enacted Local Law 68, establishing new regulations for pay phones. (R & R at 5.) Local Law 68 required entities wishing to install and operate pay phones to obtain franchises and permits. (Id. ) Because many pay phone owners had previously operated without such franchises and permits, Local Law 68 provided for an interim registry program to grandfather-in existing pay phone operators. (Id. at 5-6.) To register pursuant to the interim program, a pay phone owner was required to submit a list of its pay phones to the Department of Information Technology and Telecommunications ("DoITT") and to pay a fee. (Id. at 6.) The owner could continue operating those pay phones until he or she obtained the necessary franchise and permits, so long as the DoITT Commissioner did not object. (Id. ) A grandfathered-in right to operate could be terminated where: (1) the owner failed to respond to the DoITT Commissioner's solicitation; (2) the DoITT Commissioner determined not to award a franchise to the owner; or (3) the Franchise Concession Review Committee (the "FCRC") decided not to approve a proposed franchise agreement for the owner. (Id. ) Complicating the City's regulation of pay phones, in 1996, Congress enacted the Telecommunications Act (the "TCA"), which provided that state and local governments could not prohibit an entity from providing a telecommunications service with the exception that they could "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." See 47 U.S.C. §§ 253(a), (c).

II. Plaintiff's Application for a Franchise Agreement

Plaintiff owned unauthorized pay phones at the time that Local Law 68 was enacted. (R & R at 6-7.) Pursuant to Local Law 68, Plaintiff paid the requisite fees and submitted its registration forms, identifying 839 active pay phones. (Id. at 7.) On June 19, 1998, DoITT provided Plaintiff with a draft franchise agreement. (Id. ) On July 2, 1999, DoITT mailed a final draft of the franchise agreement to Plaintiff, noting that it was prepared to recommend that FCRC approve the final draft. (Id. ) DoITT also enclosed an acceptance letter which required a countersignature. (Id. ) Plaintiff's owner, Michael Chaite, signed the agreement on July 12, 1999, but included the following disclaimer: "I ... am prepared to sign the final agreement prepared by DoITT provided that all the provisions of said final agreement conform to all City, State and Federal laws. All rights reserved." (Id. ; Letter from Plaintiff to DoITT, ECF No. 485-3 at 105.)

On August 11, 1999, the FCRC approved the final format of the franchise agreement (the "FA") and approved DoITT to enter into such agreements with a number of companies, including Plaintiff. (R & R at 7.) The FA required operators of curb-line pay phones to pay ten percent of gross revenues, with operators of building-line pay phones to pay a flat fee, both subject to adjustment. (Id. ) Plaintiff received a final form of the FA and closing documents on August 13, 1999. (Id. at 8.) Plaintiff was required to execute the FA and submit the required closing documents by October 15, 1999.⁵ (Id. ) During the fall of 1999, Plaintiff and representatives of DoITT exchanged a number of letters, discussing the deadline applicable to the FA and Plaintiff's interest in selling his pay phones to a different operator. (Id. at 8-9.) By early 2000, Plaintiff had not executed the FA. (Id. at 9.) On January 13, 2000, DoITT informed Plaintiff that because it had not executed the FA or submitted the necessary closing documents, Plaintiff's request for a franchise would not be approved. (Id. at 10-11.) DoITT further stated that Plaintiff had until March 13, 2000, to: (1) enter into an agreement to sell its pay phones to a franchised pay phone owner; (2) remove its pay phones; or (3) enter into the FA and submit the required documentation. (Id. at 11.) DoITT warned Plaintiff that if it failed to comply with one of these alternatives, Plaintiff's pay phones would be subject to removal. (Id. )

Following continued discussions between Plaintiff and the City, on March 13, 2000, an attorney for Plaintiff contacted the City to raise several of Plaintiff's objections to the FA and DoITT's process. (Id. at 12.) The parties met on March 20, 2000. (Id. at 12.) During the meeting, Plaintiff argued that the City was not charging fees in a competitively neutral manner and that the franchise fees were not "fair and reasonable" as required by the TCA. (See id. at 13-15.) In a letter provided to the City during the meeting, Plaintiff notified the City that Plaintiff had identified an interested buyer for its business and requested that DoITT provide documentation and information to permit an orderly sale. (Id. at 15.)

The City never responded to Plaintiff's requests from the March 20, 2000 meeting. (Id. at 16.) Instead, between May 8 and 10, 2000, the City removed twenty-three of Plaintiff's pay phones and issued notices of violations charging $23,000 in fines. (Id. ) A representative of the City indicated that the City had taken this action to provoke Plaintiff to comply with Local Law 68. (Id. )

On May 10, 2000, Plaintiff delivered to the City certain closing documents and an executed FA. (Id. ) Plaintiff had annotated the agreement to state that its execution was "under duress caused by the City's actions in removing its...