COMCAST CABLE OF PLANO v. City of Plano

• Decision Date: 24 June 2010
• Docket Number: No. 05-09-00754-CV.,05-09-00754-CV.
• Citation: 315 S.W.3d 673
• Parties: COMCAST CABLE OF PLANO, INC., Appellant, v. CITY OF PLANO, Texas, Appellee.
• Court: Texas Court of Appeals

315 S.W.3d 673

COMCAST CABLE OF PLANO, INC., Appellant, v. CITY OF PLANO, Texas, Appellee.

No. 05-09-00754-CV.

Court of Appeals of Texas, Dallas.

June 24, 2010.

COPYRIGHT MATERIAL OMITTED

Elizann Carroll, Richard Law Group, Dallas, TX, Robert G. Scott, Davis, Wright, Tremaine, LLP, Washington, DC, for Appellant.

William David Dunn, Sheryl Kao, Gardere, Wynne, Sewell, LLP, Dallas, TX, Stacy R. Obenhaus, Houston, TX, for Appellee.

Before Justices FITZGERALD, MURPHY, and MYERS.

OPINION

Opinion By Justice FITZGERALD.

The City of Plano sued Comcast Cable of Plano, Inc. for franchise fees allegedly due under a franchise agreement. Comcast moved for summary judgment based on federal preemption. The trial court denied Comcast's motion, and it subsequently granted the parties' joint motion to permit an interlocutory appeal of its summary-judgment ruling. The parties have agreed to a single issue on appeal:

Does the Federal Communications Act, 47 U.S.C. §§ 542(b) and 556(c), preempt the City's claim that its July 11, 1983 Franchise Agreement with Comcast entitled the City to receive a fee equal to five percent of Comcast's annual revenues attributable to the provision of cable modem service (high speed access to the Internet) within the confines of the City?

We conclude that federal law preempts the City's claim based on the Franchise Agreement, so we reverse the order denying Comcast's motion for summary judgment, render judgment that the City take nothing on its claim for breach of the Agreement, and remand for further proceedings on the City's remaining claims consistent with this opinion.

I. BACKGROUND

A. Facts

In June 2002, Comcast acquired the cable system in the City of Plano from AT & T Broadband, and it assumed AT & T's rights and obligations under an existing Franchise Agreement with the City. The Agreement is also a City ordinance, ordinance 83-7-8, which the City originally adopted in 1983. The City approved AT & T's assignment of the Agreement to Comcast in June 2002, and Comcast owned and operated the cable system from June 2002 to the end of July 2006. Comcast assigned its rights in the Agreement to Time Warner Cable effective August 1, 2006.

The Agreement authorizes the grantee to use public rights of way to operate and maintain a "cable communications system" for the sale of cable services to City residents. The Agreement defines "cable communications system" as a system for, among other things, the distribution of "audio, video and other forms of electronic or electrical signals." The grantee under the Agreement must pay the City a franchise fee "equal to five percent (5%) of Grantee's gross annual revenue from all sources attributable to the operations of the Grantee within the confines of the City of Plano." The Agreement defines "gross revenue" as all consideration received by the grantee "arising from or attributable to the sale or exchange of cable communications services by Grantee within the City or in any way derived from the operation of its system," excluding taxes collected by the grantee on behalf of a governmental unit.

When Comcast stepped into AT & T's shoes in June 2002, AT & T had already begun to offer its customers cable modem service—i.e., internet access—through its cable communications system, in addition to traditional cable television service. AT & T paid the 5% franchise fee on its cable-modem-service revenues until March 2002. It stopped paying the fee on those revenues after the FCC released a "Declaratory Ruling and Notice of Proposed Rulemaking" on March 15, 2002. AT & T took the position that the Federal Communications Act of 1934, as interpreted by the FCC, made it illegal for the City to charge any franchise fee on revenues AT & T derived from the provision of cable modem services. The City disagreed and demanded that AT & T pay franchise fees on its cable-modem-service revenues. AT & T refused to pay, and Comcast continued AT & T's policy of refusing to pay franchise fees on cable-modem-service revenues after it took over the franchise in June 2002. The record reflects that Comcast collected almost $56 million in gross revenue from providing cable modem services within the City on which it has not paid any franchise fees.

B. Procedural history

The City sued Comcast in February 2003, alleging breach of the Agreement and alternatively breach of implied contract, quantum meruit, unjust enrichment, and trespass. The case was abated for several years. After the abatement ended, Comcast moved for summary judgment on the entire case based on federal preemption under the Communications Act. The trial court denied the motion. The parties then filed a joint motion for an order authorizing an interlocutory appeal of the summary-judgment order. The trial court granted that motion and stayed all proceedings in the case pending the outcome of the appeal. Comcast timely filed its notice of appeal. The parties' agreed issue on appeal represents a controlling question of law as to which there is a substantial ground for difference of opinion, and our resolution of it may materially advance the ultimate termination of this litigation, so we have jurisdiction pursuant to section 51.014(d) of the civil practice and remedies code. See generally State Fair of Tex. v. Iron Mountain Info. Mgmt., Inc., 299 S.W.3d 261 (Tex.App.-Dallas 2009, no pet.) (dismissing appeal for failure to comply with section 51.014(d)).

II. STANDARD OF REVIEW

We review an appealable order denying a motion for summary judgment de novo. Gaylord Broad. Co., L.P. v. Francis, 7 S.W.3d 279, 283 (Tex.App.-Dallas 1999, pet. denied). Federal preemption is an affirmative defense. Whitten v. Vehicle Removal Corp., 56 S.W.3d 293, 298 (Tex. App.-Dallas 2001, pet. denied). A party seeking summary judgment based on an affirmative defense must prove that defense with conclusive evidence. Dallas Cent. Appraisal Dist. v. Mission Aire IV, L.P., 279 S.W.3d 471, 474 (Tex.App.-Dallas 2009, pet. denied). "A matter is conclusively established if ordinary minds could not differ as to the conclusion to be drawn from the evidence." W.H.V., Inc. v. Assocs. Hous. Fin., LLC, 43 S.W.3d 83, 87 (Tex.App.-Dallas 2001, pet. denied). In conducting our review, we must take evidence favorable to the nonmovant as true, and we must indulge every reasonable inference and resolve every doubt in favor of the nonmovant. Smith v. Deneve, 285 S.W.3d 904, 909 (Tex.App.-Dallas 2009, no pet.).

Statutory construction is a legal issue reviewed de novo. City of Rockwall v. Hughes, 246 S.W.3d 621, 625 (Tex.2008).

III. ANALYSIS

Comcast argues that federal law forbids municipalities from charging cable-system operators a franchise fee for furnishing cable modem services through a cable system, and that the Agreement conflicts with that federal law to the extent it requires payment of such a fee. We agree.

A. Background: Preemption and the federal regulatory scheme

1. The law of preemption

The Texas Supreme Court summarized the principles of federal preemption in BIC Pen Corp. v. Carter, 251 S.W.3d 500 (Tex.2008). When a state law conflicts with a federal law, it is preempted and has no effect. Preemption can be express or implied. Express preemption occurs when a federal law expressly preempts state law. Implied preemption occurs when a federal law's scope indicates that Congress intended for federal law or regulations to occupy the field exclusively. Implied preemption also occurs when a state law actually conflicts with a federal law or regulation, either because (1) it is impossible for a private party to comply with both state and federal law, or (2) the state law obstructs the accomplishment and execution of Congress's full purposes and objectives. Id. at 504. This case involves conflict preemption.

A preemption analysis is an inquiry into congressional intent. See Delta Air Lines, Inc. v. Black, 116 S.W.3d 745, 748 (Tex.2003). We assume that Congress did not intend to supersede the historic police powers of the states unless its intent to do so is clear and manifest. Whitten, 56 S.W.3d at 300. To ascertain Congress's intent, we look first to its chosen language. Morales v. Trans World Airlines, Inc., 504 U.S. 374, 383, 112 S.Ct. 2031, 119 L.Ed.2d 157 (1992). We assume that the ordinary meaning of the language accurately expresses the legislative purpose. Id. We also consider the structure and purpose of the statute as a whole, as revealed by both the statutory text and our "reasoned understanding of the way in which Congress intended the statute and its surrounding regulatory scheme to affect business, consumers, and the law." Medtronic, Inc. v. Lohr, 518 U.S. 470, 486, 116 S.Ct. 2240, 135 L.Ed.2d 700 (1996); see also Delta Air Lines, Inc., 116 S.W.3d at 748 ("Congressional intent is discerned primarily from the statute's language and structure."). This case involves the congressional intent underlying an amendment to a preexisting statute, so we must also be mindful that when "Congress acts to amend a statute, we presume it intends its amendment to have real and substantial effect." Pierce County, Wash. v. Guillen, 537 U.S. 129, 145, 123 S.Ct. 720, 154 L.Ed.2d 610 (2003) (internal quotations omitted).

2. The federal regulatory scheme

Several courts have already described the historical development of the federal regulatory scheme in question. See, e.g., City of Chicago v. Comcast Cable Holdings, L.L.C., 231 Ill.2d 399, 326 Ill.Dec. 620, 900 N.E.2d 256, 259-60 (2008); City of Minneapolis v. Time Warner Cable, Inc., No. Civ.05-994 ADM/AJB, 2005 WL 3036645, at *1 (D.Minn. Nov. 10, 2005). The first step in that development was the FCC's 1972 order capping cable television franchise fees at 5%, based on the agency's concern that local authorities were in effect imposing excessive taxes on cable subscribers. Comcast Cable Holdings, L.L.C., 900 N.E.2d at 259. Congress enacted that 5% cap as a statute in § 622 of the Cable Communications...