City v. Bellsouth Telecommunications Inc.

• Decision Date: 26 July 2010
• Docket Number: Civil Action No. 09-151
• Parties: NEW ORLEANS CITY v. BELLSOUTH TELECOMMUNICATIONS, INC.
• Court: U.S. District Court — Eastern District of Louisiana

728 F.Supp.2d 834

NEW ORLEANS CITY
v.
BELLSOUTH TELECOMMUNICATIONS, INC.

Civil Action No. 09-151.

United States District Court,
E.D. Louisiana.

July 26, 2010.

728 F.Supp.2d 839

William David Aaron, Jr., Dewayne Larry Williams, Renee F. Smith, Goins Aaron, APLC, Brenda M. Breaux, Nannette V. Jolivette, City Attorney's Office, Carl A. Butler, Michael L. Fantaci, Patricia Schuster Leblanc, Leblanc Butler, LLC, Metairie, LA, Rose Hager, Kathleen L. Debruhl & Associates, New Orleans, LA, for New Orleans City.

R. Patrick Vance, Edward H. Bergin, Tarak Anada, Jones Walker, Carmen Shindala Ditta, AT & T Services, Inc., New Orleans, LA, for BellSouth Telecommunications, Inc.

ORDER & REASONS

ELDON E. FALLON, District Judge.

Before the Court are the following motions filed in the above captioned matter:

(1) Defendant BellSouth Telecommunications, Inc.'s ("BellSouth") Motion for Partial Summary Judgment on Claims in the Original Complaint (Rec. Doc. No. 47);

(2) BellSouth's Motion for Partial Summary Judgment on Plaintiff City of New Orleans' First Amended Complaint (Rec. Doc. No. 49);

(3) BellSouth's Motion to Exclude Testimony of Plaintiff's Expert Dr. Bryce Ward (Rec. Doc. No. 48);

(4) Plaintiff City of New Orleans' ("City") Motion for Summary Judgment (Rec. Doc. No. 50).

The Court received briefing on these Motions and heard from the parties on oral argument. The Court now rules on these Motions as follows.

I. BACKGROUND

This case arises out of the alleged failure on the part of BellSouth to compensate the City under certain ordinances, agreements, and law, for BellSouth's use of the City's rights-of-way since 2007 to provide telecommunications services to its customers. New Orleans City Council ("Council") intervened in the action as the party governing the issuance of franchise ordinances and rights-of-way. This case stems from a lengthy history of agreements and disputes between the parties which is discussed as follows.

In 1879, the Council issued ordinance No. 4906 adopting an agreement entered into by the City and BellSouth ¹ which authorized BellSouth to provide telephone service in New Orleans ("1879 Franchise Ordinance"). See Def.'s Ex. 1. Specifically, the 1879 Franchise Ordinance provides that BellSouth is authorized,

[T]o construct and maintain a line or lines of telegraphs through the streets of this city, the line or lines to be constructed along such streets, at such points and in such manner as to the kind and position of the telegraph poles, the height of the wires above the streets, and in all other particulars, as the Administrator of the Department of Improvements of this city may direct; provided, however, that the said company shall connect their wires with the Mayor's office, chief of police office and fire alarm telegraph office, and place and keep telephones therein, free of charge to the city, so that the said telephones may be used in connection with all wires

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under the control of said company. See id.
The Ordinance further provides "all the acts and doings of said company under this ordinance shall be subject to any ordinance or ordinances that may hereafter be passed by the City Council." See id.

Thereafter, in 1880, the Louisiana legislature passed Act 124 which granted corporations formed "for the purpose of transmitting intelligence by magnetic telegraph or telephone or other system of transmitting intelligence, the equivalent thereof which may be hereafter invented or discovered" to "construct maintain such telegraph, telephone or other lines necessary to transmit intelligence along all State, parish or public roads or public works." See Def.'s Ex. 2. Act 124 permitted these lines "along the streets of any city, with the consent of the council or trustees thereof." See id.

Then, in 1883, the Council passed an ordinance requiring BellSouth ² to pay a fee to maintain or erect telephone poles in a certain area within in New Orleans. BellSouth did not pay the required fees, and the City sued to enjoin BellSouth from using these poles to transmit telephone and telegraph services until payment was rendered. This case reached the Louisiana Supreme Court in City of New Orleans v. Great Southern Telephone & Telegraph Co., 3 So. 533 (La.1888) (" Great Southern "). The Court, relying upon the language of the 1879 Franchise Ordinance and Act 124, concluded that BellSouth and the City had entered into "an irrevocable contract" which "the city is powerless to set [ ] aside or to interpolate new or more onerous considerations therein." Great Southern, 3 So. at 535. The Court further concluded that the 1879 Franchise Ordinance remained in "full force and effect" and did not grant the Council or the City "power to repeal, destroy, or alter it in any of its essential features and considerations" through subsequent ordinances. Id. Accordingly, BellSouth was thereafter permitted to erect and maintain its telephone poles free of charge within New Orleans.

In 1906, in response to an inquiry of the Council as to whether BellSouth ³ would be willing to pay the City a sum per annum for its use of the City's streets, BellSouth submitted an offer in writing to the Council indicating its willingness to do so under certain circumstances. See Def.'s Ex. 3. BellSouth stated that, in consideration of the great benefit it has received under the 1879 Franchise Ordinance, it would pay to the City "three (3) per cent of its gross receipts from rentals paid by telephone subscribers for rental of telephones in the City of New Orleans, so long as [BellSouth] is alone operating in the city." See id. BellSouth clarified that this sum could not and would not be for its current rights granted under the 1879 Franchise Ordinance. See id. The Council moved to accept BellSouth's offer to pay the City three percent of its gross receipts of rentals, but denied BellSouth's request that the City grant no other privileges for the use of streets in connection with the telephone business ("1906 Agreement"). See id.

In 1916, BellSouth sent a letter to the Commissioner of Public Property confirming a prior conversation between these parties, the Mayor and a judge, during which BellSouth agreed "to furnish the City telephone service at the rates fixed by the Louisiana Railroad Commission less

728 F.Supp.2d 841

thirty three and one-third per cent discount" ("1916 Agreement"). See Def.'s Ex. 4. The letter also provided, "[i]n addition to the three free telephones which [BellSouth] furnishes to the City under its franchise obligation, [BellSouth] agrees to give the City of New Orleans twenty-five additional telephones, free of charge." See id.

In 1960, the City and BellSouth ⁴ entered into a settlement agreement to resolve a pending lawsuit ("1960 Settlement Agreement"). See Def.'s Ex. 6, ¶ 1.4. Pursuant to this agreement, BellSouth agreed to pay a lump sum of $1,250,000.00 plus 2% of each the gross receipts from basic telephone rentals, gross basic charges for teletypewriter local service, and gross basic charges for local private line services. See id.

In 1984, in conjunction with negotiations regarding the effects of divestiture ⁵ as it related to the 1916 Agreement, BellSouth ⁶ submitted a written proposal to the City for approval ("1984 Concession Agreement"). See Def.'s Ex. 5. The proposal by BellSouth provided for a lump sum payment of $417,285.18 in exchange for the equipment portion of the concession in the 1916 Agreement, and a cap of $31,407.21 monthly for the lines and service portion of the 1916 Agreement. See id. The 1984 Concession Agreement also provided that its terms would affect only the terms of the 1916 Agreement and no other obligations or rights between the parties. See id.

In 1993, the City and BellSouth entered into a settlement agreement to resolve certain disputes arising from the number of previous agreements and ordinances, most of which are discussed above ("1993 Settlement Agreement"). See Def.'s Ex. 6. In this agreement, BellSouth agreed to pay a $4,950,000.00 lump sum to the City, representing the payments required under the 2% provisions of the 1960 Settlement Agreement. See id. Additionally, this agreement recognized the validity of the 1906 Agreement and the obligation of BellSouth to continue its payments thereunder. See id.

In 1996, the Council issued an Ordinance of General Applicability ("OGA") which enacted the Wireline Telecommunications Franchise Act for the occupancy of the City's rights-of-way for the purpose of communicating data, information, intelligence, signals, voice, and/or video. See Def.'s Ex. 7. The OGA provides uniform procedures for the occupancy, installation, maintenance, repair, and/or operation of wireline telecommunications and wireless communication systems in the public rights-of-way of the City, and the establishment of fair consideration or competition to be paid by providers of these systems. See id. The OGA further provides that companies operating pursuant to pre-existing franchises "shall remain subject to all existing provisions of such," but also provides that if these franchises are renewed, they will be governed by the OGA. See id. Additionally, the OGA provides for a specific method of compensation for "existing Franchises and permits and privileges which are subject to an Ordinance of General Application." See id.

728 F.Supp.2d 842

In 1998, the parties entered into a settlement agreement which directed BellSouth to pay $2.5 million to the City for outstanding payments under the provision of the 1906 Agreement requiring BellSouth to pay 3% of gross receipts from telephone rentals ("1998 Settlement Agreement"). See Def.'s Ex. 8.

In 2000, the City sued BellSouth for failure to pay the City the full amounts due under the 1906 Agreement. In 2001, the City and BellSouth entered into a settlement agreement ("2001 Settlement Agreement") resolving this dispute. See Def.'s Ex. 9. The 2001 Settlement Agreement recognized the validity of the 1879 Franchise Ordinance as...