Iowa Telephone Ass'n v. City of Hawarden

• Decision Date: 17 February 1999
• Docket Number: No. 97-83,97-83
• Citation: 589 N.W.2d 245
• Parties: IOWA TELEPHONE ASSOCIATION, Appellant, v. CITY OF HAWARDEN, Appellee.
• Court: Iowa Supreme Court

Page 245

589 N.W.2d 245

IOWA TELEPHONE ASSOCIATION, Appellant, v. CITY OF HAWARDEN, Appellee.

No. 97-83.

Supreme Court of Iowa.

Feb. 17, 1999.

Robert F. Holz, Jr. and Steven L. Nelson of Davis, Brown, Koehn, Shors & Roberts, P.C., Des Moines, for appellant.

Ivan T. Webber, Paul D. Burns and Elizabeth A. Grob of Ahlers, Cooney, Dorweiler, Haynie, Smith & Allbee, P.C., Des Moines, for appellee.

William F. Sueppel of Meardon, Sueppel, Downer & Hayes, P.L.C., Iowa City, and Dennis Dietz, Iowa League of Cities, Des Moines, for amicus curiae Iowa League of Cities.

Gordon Greta, Ankeny, for amicus curiae Iowa Association of Municipal Utilities.

Philip E. Stoffregen of Dickinson, Mackaman, Tyler & Hagen, P.C., Des Moines, for amicus curiae MCI WorldCom, Inc.

James L. Abshier, Sioux City, for amicus curiae City of Sioux City.

Fred L. Dorr of Wasker, Dorr, Wimmer & Marcouiller, P.C., Des Moines, for amicus curiae North West Rural Electric Cooperative.

Mark C. Thomas, Coon Rapids, for amici curiae Cities of Coon Rapids, Iowa, and Laurens, Iowa.

Scott G. Buchanan of Buchanan, Bibler, Buchanan, Handsaker & Gabor, Algona, for amicus curiae Algona Municipal Utilities.

John C. Larsen of Redfern, Mason, Dieter, Larsen & Moore, P.L.C., Cedar Falls, for amicus curiae Municipal Communications Utility of the City of Cedar Falls.

David J. Lynch of Dickinson, Mackaman, Tyler & Hagen, P.C., Des Moines, for amici curiae Cities of Sanborn, Hartley, Paullina, and Primghar, and the Community Cable Television Agency of O'Brien County.

David J. Lynch of Dickinson, Mackaman, Tyler & Hagen, P.C., Des Moines, and James Baller, Sean A. Stokes, and Lana Meller of The Baller Law Group, P.C., Washington, D.C., for amicus curiae American Public Power Association.

Considered en banc.

TERNUS, Justice.

Appellee, the City of Hawarden, intends to provide land-line local telephone service to customers located within and outside of its municipal corporate limits. Appellant, Iowa Telephone Association (ITA), sought a declaratory ruling that the City was prohibited by statute from providing such service. See Iowa Code §§ 23A.2 (prohibiting government competition with private enterprise with certain exceptions), 384.81 (requiring cities that operate a city utility to do so in accordance with the provisions of the city code of Iowa) (1995). The City's motion to dismiss ITA's petition on the basis ITA's sole remedy was quo warranto was denied. On the parties' cross-motions for summary judgment, the district court held that any state law inhibiting the City's ability to offer telephone service was preempted by the Telecommunications Act of 1996. See Telecommunications Act of 1996 § 101(a), 47 U.S.C. § 253 (1996). Accordingly, the court denied ITA's motion for summary judgment, granted the City's motion for summary judgment, and dismissed the case. ITA appealed and the City cross-appealed.

On October 21, 1998, this court filed an opinion affirming the district court's ruling on the City's motion to dismiss, but reversing the court's rulings on the parties' motions for summary judgment. In response to a petition for rehearing filed by the City, that opinion, which was not published, was withdrawn. We concluded that we had overlooked an argument made by the City in the district court, namely, that 47 U.S.C. § 541(b)(3)(B) prevented the State from prohibiting a cable television operator, such as the City's utility, from also operating a telephone system. In rehearing the issues on this appeal, we now conclude that the district court's summary judgment ruling should be affirmed on the basis of § 541(b)(3)(B) preemption. Consequently, we affirm the district court's rulings on the parties' motions for summary judgment, as well as the district court's denial of the City's motion to dismiss.

I. Background Facts and Proceedings.

On October 18, 1994, voters in the City of Hawarden approved a measure allowing the City to establish a municipal cable communications system as a city utility. Thereafter, the city council adopted an ordinance to establish such a utility, identifying as two of several goals the provision of cable television service and telephone service. In March 1996, the City filed an application with the Iowa Utilities Board seeking a certificate of convenience and necessity for its telephone system or a declaratory ruling that a certificate was not needed. The Board ruled it had no jurisdiction to consider the City's application because the regulation of municipally-owned utilities providing telephone service was not within its statutory power.

ITA is an incorporated association whose members are companies that provide land-line local telephone service to customers in the State of Iowa, including the City of Hawarden. In April 1996, ITA filed this action challenging the City utility's power to operate a telephone system. ITA sought a declaratory judgment that Iowa Code section 23A.2 prohibits a municipal utility from competing with private industry in the offering of telephone services. In a later amendment, ITA alleged that Iowa Code section 384.81 prohibits a municipality from operating any city utility other than as defined in Iowa Code section 362.2(6), and that this latter statute does not include a telephone system within the definition of a city utility. The City initially filed a motion to dismiss in which it claimed ITA's exclusive remedy was quo warranto. This motion was denied by the district court.

Both parties then filed motions for summary judgment. ITA asked the court to rule that the City was prohibited by state law from providing telephone service. The City asked the court to dismiss ITA's petition for four reasons: (1) federal law preempts any state law that would prohibit a municipality from operating a telephone system; (2) the definition of "city utility" contained in section 362.2(6) includes telephone systems; (3) section 23A.2(1)(a) does not prohibit city utilities from providing telephone service; and (4) ITA's exclusive remedy was quo warranto. As noted above, the district court denied ITA's motion for summary judgment and granted the City's motion, concluding that state law, to the extent it would prohibit the City from operating a telephone system, was preempted by 47 U.S.C. § 253, the general preemption provision of the Telecommunications Act of 1996. ITA appealed the court's summary judgment ruling and the City filed a cross-appeal, challenging the district court's denial of its motion to dismiss.

On appeal, ITA argues (1) the district court erred in granting the City's motion for summary judgment because federal law does not preempt state law, and (2) the district court erred in denying ITA's summary judgment motion because section 23A.2(1)(a) prohibits the City from providing telephone service, and section 384.81 restricts a city utility to those functions listed in section 362.2(6), functions that do not include the provision of telephone service. The City takes a contrary position and, in addition, contends that the district court should have dismissed ITA's declaratory judgment action because ITA's exclusive remedy is quo warranto.

In addition to these issues, the City has raised a mootness claim in a motion to dismiss the appeal filed with this court. The City claims that the present controversy is moot because, it argues, a recently-enacted state law authorizes municipally-owned utilities to provide "local exchange services," namely, local telephone service. See 1997 Iowa Acts ch. 81 (codified at Iowa Code §§ 476.1B(1), .1B(3), .29(16), .96(3) (Supp.1997)).

II. Is this Appeal Moot Because State Law Now Expressly Authorizes Municipalities to Provide Telephone Service?

Before we discuss the issues raised on the appeal and cross-appeal, we address the City's motion to dismiss the appeal on grounds of mootness. We have recently set forth the applicable principles governing our consideration of a mootness claim:

"In general, an action is moot if it no longer presents a justiciable controversy because the issues involved have become academic or nonexistent." "[O]ur test of mootness is whether an opinion would be of force or effect in the underlying controversy." In other words, will our decision in this case "have any practical legal effect upon an existing controversy"?

Iowa Mut. Ins. Co. v. McCarthy, 572 N.W.2d 537, 540 (Iowa 1997) (citations omitted). If the City is correct that state law now expressly authorizes municipalities to offer telephone service, then the issues litigated below become academic. Therefore, we must decide whether the new law cited by the City permits it to provide telephone service.

House File 596, signed into law in April 1997, amended several sections of Iowa Code chapter 476-Public Utility Regulation. See 1997 Iowa Acts ch. 81. The title of the act summarizes its provisions: "AN ACT authorizing the utilities board to issue certificates of public convenience and necessity to municipal telecommunications utilities, regulating certain municipal utilities as competitive local exchange service providers, and including effective date and retroactive applicability provisions." Id. There is no mention that the act authorizes city utilities to provide telephone services. See Holiday Inns Franchising, Inc. v. Branstad, 537 N.W.2d 724, 728 (Iowa 1995) (stating court may consider act's preamble in ascertaining legislative intent).

The substantive provisions of the act amended chapter 476 to provide that "a municipally owned utility providing local exchange services is not subject to regulation by the [utilities] board ... except for regulatory action pertaining to enforcement" of several specified Code sections. 1997 Iowa Acts ch. 81, § 2 (codified at Iowa Code § 476.1B(3) (Supp.1997)). Chapter 476's definition of "competitive local exchange service provider" was also amended to include "a municipal utility." Id. § 4 (codified at Iowa Code § 476.96(3) (Supp.1997)). The...