Comcast of Or. II, Inc. v. City of Beaverton

• Decision Date: 29 June 2022
• Docket Number: Case No. 3:20-cv-1225-SI
• Citation: 609 F.Supp.3d 1136
• Parties: COMCAST OF OREGON II, INC., a Delaware corporation, Plaintiff, v. CITY OF BEAVERTON, an Oregon municipal corporation, Defendant. City of Beaverton, an Oregon municipal corporation, Counterclaim-Plaintiff, v. Comcast of Oregon II, Inc., a Delaware corporation; and Comcast Business Communications, LLC, a Pennsylvania limited liability company, Counterclaim-Defendants.
• Court: U.S. District Court — District of Oregon

609 F.Supp.3d 1136

COMCAST OF OREGON II, INC., a Delaware corporation, Plaintiff,

v.CITY OF BEAVERTON, an Oregon municipal corporation, Defendant.

City of Beaverton, an Oregon municipal corporation, Counterclaim-Plaintiff,

v.Comcast of Oregon II, Inc., a Delaware corporation; and Comcast Business Communications, LLC, a Pennsylvania limited liability company, Counterclaim-Defendants.

Case No. 3:20-cv-1225-SI

United States District Court, D. Oregon.

Signed June 29, 2022

Mark P. Trinchero, Blake J. Robinson, and Alan J. Galloway, Davis Wright Tremaine llp, 1300 SW Fifth Avenue, Suite 2400, Portland, OR 97201; David P. Murray and Matthew W. Johnson, Wilkie Farr & Gallagher llp, 1875 K Street, NW, Washington, D.C. 20006. Of Attorneys for Comcast of Oregon II, Inc. and Comcast Business Communications, LLC.

Laura Salerno Owens, David B. Markowitz, Anna M. Joyce, and Anit K. Jindal, Markowitz Herbold pc, 1455 SW Broadway, Suite 1900, Portland, OR 97201. Of Attorneys for City of Beaverton.

OPINION AND ORDER

Michael H. Simon, District Judge.

Comcast of Oregon II, Inc. (Comcast) brings this action against the City of Beaverton (City), alleging that the Cable Communications Policy Act of 1984 (Cable Act or Act) preempts the City's rights-of-way fee (ROW Fee) assessed against Comcast's provision of broadband services over the City's rights-of-way. Comcast brings a 42 U.S.C. § 1983 claim for violation of the Contract Clause of the U.S. Constitution, a claim for declaratory judgment, and two common law claims. The City asserts counterclaims against Comcast and its affiliate, Comcast Business Communications, LLC (Comcast Business) for unpaid ROW fees plus interest and for violation of the dispute resolution provision of the parties’ contract. Comcast moves for partial summary judgment on its second claim and against the City's first and second counterclaims.

The City cross-moves for summary judgment against all of Comcast's claims and in favor of the City's first and second counterclaims. For the reasons below, the Court GRANTS Comcast's motion for partial summary judgment and GRANTS IN PART AND DENIES IN PART the City's cross-motion for summary judgment.

STANDARDS

A party is entitled to summary judgment if the "movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The moving party has the burden of establishing the absence of a genuine dispute of material fact. Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The court must view the evidence in the light most favorable to the non-movant and draw all reasonable inferences in the non-movant's favor. Clicks Billiards Inc. v. Sixshooters Inc. , 251 F.3d 1252, 1257 (9th Cir. 2001). Although "[c]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge ... ruling on a motion for summary judgment," the "mere existence of a scintilla of evidence in support of the plaintiff's position [is] insufficient ...." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 252, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citation and quotation marks omitted).

When parties file cross-motions for summary judgment, the Court "evaluate[s] each motion separately, giving the nonmoving party in each instance the benefit of all reasonable inferences." ACLU of Nev. v. City of Las Vegas , 466 F.3d 784, 790-91 (9th Cir. 2006) (quotation marks and citation omitted); see also Pintos v. Pac. Creditors Ass'n , 605 F.3d 665, 674 (9th Cir. 2010) ("Cross-motions for summary judgment are evaluated separately under [the] same standard."). In evaluating the motions, "the court must consider each party's evidence, regardless under which motion the evidence is offered." Las Vegas Sands, LLC v. Nehme , 632 F.3d 526, 532 (9th Cir. 2011). "Where the non-moving party bears the burden of proof at trial, the moving party need only prove that there is an absence of evidence to support the non-moving party's case." In re Oracle Corp. Sec. Litig. , 627 F.3d 376, 387 (9th Cir. 2010). Thereafter, the non-moving party bears the burden of designating "specific facts demonstrating the existence of genuine issues for trial." Id. "This burden is not a light one." Id. The Supreme Court has directed that in such a situation, the non-moving party must do more than raise a "metaphysical doubt" as to the material facts at issue. Matsushita , 475 U.S. at 586, 106 S.Ct. 1348.

BACKGROUND

A. Statutory and Regulatory Background

Under the Cable Act, cable operators must obtain a cable franchise from a franchising authority to provide cable services over public rights-of-way. See 47 U.S.C. § 541(b)(1). In exchange for granting a franchise, a local franchising authority (LFA), such as a city or other local government body, may collect from the cable operator fees for the use of public rights-of-way. The Act limits those franchise fees to five percent of a cable operator's gross revenues from cable services. Id. § 542(b). These fees may be passed on to cable subscribers. Id. § 542(c), (e); City of Eugene v. FCC , 998 F.3d 701, 706 (6th Cir. 2021).

In March 2007, after a period of notice and comment, the FCC released an order to address what it identified as a practice by local franchising authorities of imposing unreasonable barriers to new cable operator's entry into the market. In the Matter of Implementation of Section 621(A)(1) of the Cable Communications Policy Act of 1984 as Amended by the Cable Television Consumer Protection and Competition Act of 1992 , 22 FCC Rcd. 5101 (2007) ( First Order ). In the First Order , the FCC clarified, among other things, that a local franchising authority's jurisdiction under the Cable Act extended only to the regulation of cable services over cable systems. Id. ¶ 121. The FCC stated that local franchising authorities may not require cable operators to obtain franchises to provide non-cable services over those same cable systems and may not regulate a cable operator's provision of non-cable services. Id. ¶¶ 121-122. Specifically, the FCC concluded that a "cable operator is not required to pay franchise fees on revenues from non-cable services," which includes the provision of broadband services, and that the Cable Act preempted any local law stating otherwise. Id. ¶¶ 98, 125. This prohibition of a local franchising authority's regulation of non-cable services has come to be known as the "mixed-use rule." See City of Eugene , 998 F.3d at 706. The First Order also included a further notice of proposed rulemaking, seeking comment on whether the conclusions of the First Order should apply to incumbent cable operators in addition to incoming franchisees. First Order , ¶ 5.

Various local franchising authorities filed petitions for review of the First Order under the Hobbs Act, which were consolidated in the Sixth Circuit. See All. for Cmty. Media v. FCC , 529 F.3d 763, 772 (6th Cir. 2008). The Hobbs Act provides that federal courts of appeal have "exclusive jurisdiction to enjoin, set aside, suspend (in whole or in part), or to determine the validity of ... all final orders of the Federal Communications Commission." 28 U.S.C. § 2342. To challenge the validity of an order, an aggrieved party must file a petition within 60 days after entry of the order in the appropriate court of appeals. Id. § 2344. If more than one petition is filed, the Judicial Panel on Multidistrict Litigation consolidates those petitions into one court of appeals Id. § 2112(a)(3).

Several petitioners challenged the mixed-use rule contained in the First Order on the basis that 47 U.S.C. § 542(g)(2)(D) exempted franchise fees for non-cable services from the five percent cap under § 542(b) because those non-cable services fees were only "incidental to" the awarding of a franchise.¹ See All. for Cmty. Media , 529 F.3d at 782. The Sixth Circuit rejected petitioners’ arguments and upheld the First Order as valid. Id. at 787. Affording deference to the FCC under Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc. , 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), the Sixth Circuit explained that the FCC's interpretation of the Cable Act's definition of "franchise fee" as including fees for non-cable services was reasonable. Id. at 782-83.

After further notice and comment, the FCC in November 2007 issued a second order addressing local franchising authorities’ jurisdiction under the Cable Act. See In the Matter of Implementation of Section 621(A)(1) of the Cable Communications Policy Act of 1984 as Amended by the Cable Television Consumer Protection and Competition Act of 1992 , 22 FCC Rcd. 19,633 (2007) ( Second Order ). The Second Order extended the mixed-use rule to incumbent cable operators. Id. ¶ 17 ("[W]e clarify that LFAs’ jurisdiction under Title VI over incumbents applies only to the provision of cable services over cable systems and that an LFA may not use its franchising authority to attempt to regulate non-cable services offered by incumbent video providers." (footnote omitted)). Various local franchising authorities filed petitions for reconsideration of the Second Order with the FCC. Montgomery County v. FCC , 863 F.3d 485, 488 (6th Cir. 2017). Seven years later, the FCC largely rejected those petitions for reconsideration. See Implementation of 621(a)(1) of the Cable Communications Policy Act , 30 FCC Rcd. 810 (2015).

Local franchising authorities petitioned for review of the Second Order and reconsideration order in the Sixth Circuit, challenging, among other things, the extension of the mixed-use rule to incumbent operators. Montgomery County , 863 F.3d...