City of Memphis, Tenn. v. Southern Bell Tel. & Tel. Co.

• Decision Date: 23 April 1963
• Docket Number: No. 15110.,15110.
• Citation: 316 F.2d 535
• Parties: CITY OF MEMPHIS, TENNESSEE, Plaintiff-Appellant, v. SOUTHERN BELL TELEPHONE AND TELEGRAPH COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

316 F.2d 535 (1963)

CITY OF MEMPHIS, TENNESSEE, Plaintiff-Appellant, v. SOUTHERN BELL TELEPHONE AND TELEGRAPH COMPANY, Defendant-Appellee.

No. 15110.

United States Court of Appeals Sixth Circuit.

April 23, 1963.

Robert M. McRae, Jr., and Frank B. Gianotti, Memphis, Tenn., for appellant.

James O. Bass, Nashville, Tenn. (Roane Waring, Jr., Memphis, Tenn., T. G. Pappas, Gen. Atty., Nashville, Tenn., on the brief; John A. Boykin, Jr., Gen. Sol., Atlanta, Ga., Waring, Walker, Cox & Lewis, Memphis, Tenn., Bass, Berry & Simms, Nashville, Tenn., of counsel), for appellee.

Before: CECIL, Chief Judge, WEICK, Circuit Judge, and McALLISTER, Senior Circuit Judge.

WEICK, Circuit Judge.

The City sought, in the District Court, to enjoin the telephone company from billing its Memphis customers, pro rata, franchise payments made by it to the City as permitted by Chapter 123 of the Public Acts of Tennessee 1961 which amended Tennessee Code Annotated Section 65-405.¹

Prior to the amendment and under the franchise granted by the City to the telephone company on July 1, 1944, the telephone company paid the City as consideration for the franchise, 5% of its gross receipts from customers within the corporate limits of the City. These franchise payments were taken into account as expenses by the Public Service Commission of Tennessee in determining the reasonableness of the rates which it permitted the telephone company to charge in the entire state.

On February 21, 1962 the City enacted a new franchise ordinance which took effect on July 1, 1962 (the 1944 franchise expired June 1, 1962) and was for a period of eighteen years. Like the 1944 franchise the 1962 franchise provided for payments to the City of 5% of the receipts from Memphis customers. The telephone company accepted the Franchise and then notified the City that it was passing on to its Memphis customers, pro rata, the franchise payments made by it to the City as permitted by the statutory amendment. The franchise payments amount to about $1,250,000 annually.

The District Judge was of the view that the amended statute was plain and unambiguous and authorized the telephone company to bill its Memphis customers pro rata for said franchise payments. He granted summary judgment in favor of the telephone company and dismissed the complaint.

In its complaint, the City had alleged that the 1961 amendment authorized the passing on to customers only of additional franchise payments not previously imposed upon a utility. In this Court it urged also that the amendment applied only to cities which prior to 1961 did not charge franchise payments to a utility.

In our opinion, neither of these contentions are tenable. We think the amendment to the statute obviously had no application to existing franchises held by utilities. It is clear to us that it did apply prospectively to any franchise or other agreement entered into after the effective date of the amendment. The 1962 franchise was granted to the telephone company after the amendment became effective.

The legislative purpose in enacting the amendment was to permit franchise payments made by a utlility to be charged to its customers residing in the city where the payments were exacted and not require nonresident subscribers in the state to bear this burden through increased rates when they received none of the municipal benefits. We...