Liberty v. Municipality of Caguas

• Decision Date: 09 August 2005
• Docket Number: No. 04-1597.,No. 04-2136.,No. 04-2137.,04-1597.,04-2136.,04-2137.
• Citation: 417 F.3d 216
• Parties: LIBERTY CABLEVISION OF PUERTO RICO, INC., Plaintiff, Appellee, v. MUNICIPALITY OF CAGUAS, Defendant, Appellant, William Miranda-Marin, Mayor of the Municipality of Caguas; Telecommunications Regulatory Board of Puerto Rico, Defendants. Liberty Cablevision of Puerto Rico, Inc., Plaintiff, Appellant, v. Telecommunications Regulatory Board of Puerto Rico, Defendant, Appellant, Municipality of Barceloneta; Municipality of Las Piedras, Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

417 F.3d 216

LIBERTY CABLEVISION OF PUERTO RICO, INC., Plaintiff, Appellee, v. MUNICIPALITY OF CAGUAS, Defendant, Appellant, William Miranda-Marin, Mayor of the Municipality of Caguas; Telecommunications Regulatory Board of Puerto Rico, Defendants.

Liberty Cablevision of Puerto Rico, Inc., Plaintiff, Appellant, v. Telecommunications Regulatory Board of Puerto Rico, Defendant, Appellant, Municipality of Barceloneta; Municipality of Las Piedras, Defendants, Appellees.

No. 04-1597.

No. 04-2136.

No. 04-2137.

United States Court of Appeals, First Circuit.

Heard February 11, 2005.

Decided August 9, 2005.

Eyck O. Lugo-Rivera, with whom Humberto Guzmán-Rodríguez, Eliseo Roques and Martínez Odell & Calabria, were on brief, for Municipality of Caguas.

Orlando Fernández, with whom Orlando Fernández Law Offices, was on brief, for Liberty Cablevision of Puerto Rico, Inc.

Robert F. Reklaitis, with whom Leslie Paul Machado and Nixon Peabody LLP, were on brief, for Telecommunications Regulatory Board of Puerto Rico.

Luis F. Colón-González, with whom Colón González Law Firm, was on brief, for the Municipality of Barceloneta.

Enrique R. Siaca, with whom Quiñones & Sánchez, P.S.C., was on brief, for amicus curiae Centennial Puerto Rico Cable TV Corp.

Before TORRUELLA, Circuit Judge, STAHL, Senior Circuit Judge, and OBERDORFER,^* Senior District Judge.

TORRUELLA, Circuit Judge.

These consolidated and conflicting cases present a novel question: whether municipal ordinances which assess gross revenue fees on cable providers for use of the municipalities' "rights-of-way" — when similar fees are already assessed by the state "local franchising authority" in accordance with the Cable Communications Policy Act of 1984, 47 U.S.C. § 521, et seq. (1984) ("Cable Act") — conflict with the federal statute and are therefore preempted. We answer in the affirmative, and accordingly reverse and remand the Barceloneta case and affirm the Caguas case.

I

This appeal stems from two separate cases brought by Liberty CableVision of Puerto Rico — one against the municipality of Caguas, the other against the municipalities of Barceloneta and Las Piedras — challenging ordinances which impose a 5% annual fee on Liberty's gross revenues for use of the municipalities' rights-of-way. The Telecommunications Regulatory Board of Puerto Rico ("Board") — which assesses franchise fees for use of these rights-of-way, 27 P.R. Laws Ann. § 269h, and which has been designated by the Puerto Rico Legislative Assembly as the local franchising authority in accordance with the Cable Act, id. — was named as co-defendant in these suits. In essence, Liberty argued that the Cable Act necessarily preempts these ordinances because its use of rights-of-way are already accounted for in the franchise fee paid to the Board — which, as the state's designated local franchising authority under the Cable Act — is the lawful entity to assess such fees.

On March 10, 2004, the district court in the Caguas case entered summary judgment for Liberty. Liberty Cablevision of Puerto Rico, Inc. v. Municipality of Caguas, No. 02-2429 (D.P.R. Mar. 10, 2004). The court held that because Liberty "already pays five percent of its yearly revenues to the Board, which is the maximum allowed by the Cable Act, Caguas cannot impose the additional fee mandated by the ordinance. Therefore, the [o]rdinance is preempted by the Cable Act as applied to Liberty as a cable operator." Id. at 17 (footnote omitted). The court also found the fee unjustifiable under § 253 of the Telecommunications Act of 1996, despite Liberty's provision of cable modem service, because the Federal Communications Commission ("FCC") determined that cable modem service was not "telecommunications service" under the Communications Act, and because cable modem uses the same transmission lines as cable television and thus imposes no extra burden on Caguas.¹ Id. at 17-18.

On July 2, 2004, the district court in the Barceloneta case² arrived at the opposite conclusion: "Municipalities must be compensated for the use of their rights of way . . . ." Liberty Cablevision of Puerto Rico v. Municipality of Barceloneta, 326 F.Supp.2d 236, 240 (D.P.R.2004). In so holding, the court found that these municipalities are "owners" of the rights-of-way, and must be compensated as such, while the franchise fee paid to the Board solely encompasses "access." Id. at 239. The court pointed out that unlike most United States jurisdictions where the municipality is both the franchisor and "owner" of the rights-of-way, in Puerto Rico, the "Board is the franchisor, but a different entity, the Municipality, is the owner of the rights of way being utilized." Id. at 238. Thus, the court ordered Liberty to pay the Board a franchise fee of 1.5% of the gross revenues it derives from all municipalities, and, in addition, pay Barceloneta and Las Piedras 1% of the gross revenues from services it derives from those municipalities.³ Id. at 240. The court also recognized that the municipalities would be able to state a federal takings claim for Liberty's use of their rights-of-way once they had exhausted the state remedy of an "inverse condemnation action." Id. at 242.

This appeal follows. For the sake of simplicity — given the parties' dual roles as both appellants and appellees, and given their myriad claims — we organize the issues as follows: (1) whether the Cable Act preempts these municipal ordinances; (2) whether the municipal fees are nonetheless justified under § 253 of the Telecommunications Act of 1996 due to Liberty's provision of cable modem service; and (3) whether the municipalities are entitled to just compensation for the alleged constitutional takings. As always, we review these abstract issues of law de novo. See, e.g., Global Naps, Inc. v. Verizon New England, Inc., 396 F.3d 16, 23 (1st Cir.2005).

II

A. Preemption

In 1984, Congress enacted the Cable Act, 47 U.S.C. § 521 (amending the Communications Act of 1934, 47 U.S.C. § 151 et seq.), to establish a national framework for regulating cable television. See F.C.C. v. Beach Communications, Inc., 508 U.S. 307, 309, 113 S.Ct. 2096, 124 L.Ed.2d 211 (1993). The Act sought to "`encourage the growth and development of cable systems and ... [to] assure that cable systems are responsive to the needs and interests of the local community.'" Id. (quoting § 601(2), 47 U.S.C. § 512(2)). That is, Congress, in enacting the Cable Act, "was concerned both with relieving the cable industry from unnecessary, burdensome regulation and with ensuring that cable systems remain responsive to the needs of the public." American Civil Liberties Union v. F.C.C., 823 F.2d 1554, 1559 (D.C.Cir.1987).

To these ends, the Act empowered the "franchising authority" — which is defined as "any governmental entity empowered by Federal, State, or local law to grant a franchise," 47 U.S.C. § 522(10) — to impose a maximum of 5% of gross revenues as "franchise fees," 47 U.S.C. § 542(b).

Franchise fees include "any tax, fee, or assessment of any kind imposed by a franchising authority or governmental entity on a cable operator or cable subscriber, or both, solely because of their status as such." 47 U.S.C. § 542(g)(1). The term, however, specifically excludes any "tax, fee, or assessment of general applicability (including any such tax, fee, or assessment imposed on both utilities and cable operators or their services but not including a tax, fee or assessment which is unduly discriminatory against cable operators or cable subscribers)." 47 U.S.C. § 542(g)(2)(A). Franchise fees may be passed directly to customers, 47 C.F.R. § 76.922 (2002), and itemized on the customers' bills, 47 U.S.C. § 542(c).

The award of a franchise allows a cable operator to use, among others, the public rights-of-way. 47 U.S.C. § 541(a)(2) ("[a]ny franchise shall be construed to authorize the construction of a cable system over public rights-of-way"). "[A]ny provision of law of any State, political subdivision, or agency thereof . . . which is inconsistent with [the Cable Act] shall be deemed to be preempted and superceded." 47 U.S.C. § 556(c).

In the case of Puerto Rico, its legislature created an agency — the Telecommunications Regulatory Board of Puerto Rico — to be its "franchising authority" under the Cable Act. 27 P.R. Laws Ann. § 265 et seq. The enabling legislation, enacted on September 12, 1996, vested the Board with the authority, among others, to grant cable franchises, 27 P.R. Laws Ann. § 269h ("[t]he Board shall be empowered to grant nonexclusive franchises to one or more cable companies"), and to assess cable franchise fees, 27 P.R. Laws Ann. § 267j(h) ("franchise fees ... shall be paid in full to the Board as of the effective date of this Act").

On September 25, 2001, the Board renewed Liberty's franchise to operate cable systems in several municipalities, including Caguas (Franchise FC-59), Barceloneta (Franchise FC-41), and Las Piedras (Franchise FC-59). The franchise agreements granted Liberty, among other things, "extensive and valuable rights to operate its cable system for profit using the public rights-of-way and public utility easements within the franchise area."

In November 2001, the municipalities of Barceloneta⁴ and Las Piedras⁵ enacted ordinances imposing a 5% fee for the use of rights-of-way within those municipalities. Caguas enacted a similar ordinance on February 21, 2002.⁶

We now invalidate these ordinances to the extent they conflict with the Cable Act. It is established beyond peradventure that under the Supremacy Clause, U.S. Const. art. VI, cl. 2, federal law preempts inconsistent state law when: (1) "Congress, in enacting a federal statute, has expressed a clear intent to pre-empt state law;" (2) "it is clear, despite the absence of explicit preemptive language, that Congress has intended, by legislating comprehensively, to occupy an entire field of regulation and has thereby left no room for the States to...