GTE Southwest v. Public Util. Comm'n

• Decision Date: 15 July 1999
• Parties: (Tex.App.-Austin 1999) GTE Southwest Incorporated, Appellant v. Public Utility Commission of Texas; GE Capital Rescom; and MultiTechnology Services, L.P., Appellees NO. 03-97-00148-CV Filed:
• Court: Texas Court of Appeals

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10 S.W.3d 7 (Tex.App.-Austin 1999) GTE Southwest Incorporated, Appellant
v.
Public Utility Commission of Texas; GE Capital Rescom; and MultiTechnology Services, L.P., Appellees NO. 03-97-00148-CV COURT OF APPEALS OF TEXAS, THIRD DISTRICT, AT AUSTIN Filed: July 15, 1999
Rehearing Granted in Part and Overruled in Part February 17, 2000.

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 200TH JUDICIAL DISTRICT NO. 96-09155. HONORABLE SUZANNE COVINGTON, JUDGE PRESIDING

Reversed and Remanded

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Copyrighted Material Omitted

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Before Chief Justice Aboussie, Justices B. A. Smith and John E. Powers^*

John E. Powers, Justice (Retired).

GTE Southwest Incorporated ("GTE") sued the Public Utility Commission for judicial review of a final order issued by the Commission in a contested case. Capital Rescom and Multi-Technology Services, L.P. ("MTS") intervened in the suit to defend the order.¹ GTE appeals now from a trial-court judgment that affirms the order. We will reverse the order and the trial-court judgment, and remand the controversy to the Commission.

THE CONTROVERSY

GTE installed and owns the cables and equipment necessary to supply local-exchange telephone service to five large apartment complexes in League City, Dallas, and Irving. By agreement with the owners of the apartment complexes, GTE installed its cables up to each apartment building, that being the mutually agreed "demarcation point" where GTE's cables would connect to the owner's wiring and equipment.

Rescom and MTS are in the business of providing "shared tenant services" to such apartment buildings and other large, multi-unit premises. Shared-tenant services include climate-control and video transmissions in addition to local-exchange and long-distance voice and data transmission services. Rescom and MTS proposed to GTE that it "collapse" its multiple demarcation points (one at each building in each of the five complexes) into a single demarcation point at each complex, located as near as practicable to the property line of the complex. See 47 C.F.R. 68.3 (1996). Rescom and MTS would then purchase GTE's installed cable and equipment lying between the buildings of the complex and the new, single demarcation points, or they would pay a rental or fee for their use of that segment of GTE's property and equipment.² GTE agreed to the proposal at one apartment complex, and sold its cable and equipment lying on the "owner's side" of the new, single demarcation point located at the property line of that complex. Negotiations were unsuccessful respecting the five apartment complexes

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presently in controversy. GTE offered, however, to provide an additional demarcation point at the property line of each of those complexes-a demarcation point from which Rescom and MTS could install their own cable network to buildings within each of the five apartment complexes. Rescom and MTS declined GTE's offer on the ground that their installation of an additional cable network within the five complexes would be unnecessary, inefficient, disruptive, and too expensive.

Acting as agents for the owners of the apartment complexes, Rescom and MTS complained to the Commission that GTE had violated its tariff and GTE's "internal guidelines" by refusing to "collapse" its multiple demarcation points into a single such point; and they complained that GTE had applied its demarcation practices unreasonably and in an anti-competitive manner. After a contested-case hearing, the Commission issued a final order adjudicating the case. In its order, the Commission concluded that GTE's "untariffed practice" regarding demarcation points at multi-unit premises contravened the reasonableness and non-discrimination requirements of certain federal³ and state⁴ regulations.

The Commission therefore directed in its final order that GTE file in another Commission proceeding a proposed revision of its tariff pertaining to shared-tenant services, requiring that the revised tariff "include a reasonable and non-discriminatory practice addressing the relocation of multiple demarcation points to a single point of demarcation on multi-unit premises." In addition, the Commission required that the revised tariff include "a reasonable and non-discriminatory practice with respect to (1) the permitted use of cable and other facilities on the . . . owner's side of the single demarcation point after multiple points are collapsed and (2) the appropriate compensation for such use of cable and other facilities (e.g., lease or purchase)."

The order thus requires GTE to revise its tariff to include therein reasonable provisions under which GTE will collapse its multiple demarcation points into a single demarcation point at multi-unit premises; and the revised tariff must allow the owner of the premises to lease, purchase, or otherwise obtain the use of GTE's cables and facilities, on the "owner's side" of the new, single demarcation point, for an "appropriate compensation." The emphasized language of the order gives rise to the first issue on appeal-whether the Commission possessed the statutory power to issue such an order.

DISCUSSION AND HOLDINGS

In its first assignment of error, GTE complains that the Commission acted without

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statutory authority in requiring that GTE revise its tariff to allow for the surrender of its property for use by the property owners. We sustain the assignment of error. See Tex. Gov't Code Ann. 2001.174(2)(B) (West 1999) (reviewing court shall reverse or remand case for further proceedings if substantial rights of complaining party prejudiced because agency decision "in excess of agency's statutory authority").

The Takings Clause of the Fifth Amendment to the Constitution of the United States provides that "private property [shall not] be taken for public use without just compensation." The clause applies to state-government action through the Due Process Clause of the Fourteenth Amendment to the Constitution. See Chicago Burlington & Quincy R.R. v. Chicago, 166 U.S. 226, 234-41 (1897).

The Takings Clause consists of several elements, any one of which may be the subject of litigation: (1) the action complained of must be that of the government; (2) the action must amount to a taking; (3) the thing taken must be "private property," that is to say it must be one of the rights included in the owner's "bundle" of rights in property; and (4) and the taking must be for a "public" use. See Matthew D. Zinn, Ultra Vires Takings, 97 Mich. L. Rev. 245, 248-49 (1998). It is undisputed that GTE owns the property in question. We need refer in the present case to the second element only-whether the Commission order amounted to a taking of GTE's property-before we consider whether the order was ultra vires.

Government may supervise and control private property quite extensively, in the public interest, without effectuating thereby a taking of the property. See generally Yee v. City of Escondido, 503 U.S. 519 (1992); Mayhew v. Town of Sunnyvale, 964 S.W.2d 922 (Tex. 1998); Annotation: Supreme Court's Views as to What Constitutes "Taking" of Private Property for Public Use Without Compensation, 89 L. Ed. 2d 977 (1997). Nevertheless, government action can go "too far" so that it amounts to a taking of private property. This occurs, for example, when government (1) physically takes the property by compelling the property owner to surrender his right to exclude others from physical use of the property, See Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419, 426 (1982); (2) deprives the owner of all "economically beneficial or productive use" of his property so that the government action is tantamount to a physical taking. See Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1015 (1992); or (3) regulates property to such an extent that the reviewing court concludes that the regulation is tantamount to a physical taking based upon the court's "essentially ad hoc, factual inquiry" concerning the "character" of the governmental action, its economic impact on the property owner, and its interference with "distinct investment-backed expectations." See Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104, 124 (1978). We need not inquire as to categories two and three. We conclude the Commission's order amounts to a physical or per se taking of GTE's cables and facilities by requiring that GTE surrender its right to exclude others from physical use of its properties. See Loretto, 456 U.S. at 426 (statute prohibiting owner of rental property from interfering with installation of cable-television facilities on her property); Bell Atl. Tel. Cos. v. F.C.C., 24 F.3d 1441, 1446 (D.C. Cir. 1994) (F.C.C. order compelling public utility to make its facilities available for use by others for reasonable compensation); Gulf Power Co. v. United States, 998 F. Supp. 1386, 1395 (N.D. Fla. 1998) (statute requiring public utility to provide others nondiscriminatory access to utility's poles, ducts, conduits, and rights-of-way); cf. F.C.C. v. Florida Power Corp., 480 U.S. 245, 253-54, 107

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S.Ct. 1107, 94 L.E.2d 282 (1987) (compelled acquiescence lies at "heart of the concept of occupation" and "[t]he line which separates [Florida Power] from Loretto is the unambiguous distinction between a commercial lessee," occupying property with owner's consent, "and an interloper with a governmental license."). We turn then to whether the Commission possessed...