Lindstrom v. City of Des Moines, Ia

• Decision Date: 16 January 2007
• Docket Number: No. 4:06-cv-00534.,No. 3:06-cv-00107.,No. 4:06-cv-00474(L).,No. 3:06-cv-00106.,No. 4:06-cv-00532.,No. 4:06-cv-00533.,No. 4:06-cv-00531.,4:06-cv-00474(L).,4:06-cv-00533.,4:06-cv-00532.,3:06-cv-00106.,4:06-cv-00531.,3:06-cv-00107.,4:06-cv-00534.
• Parties: Mary E. LINDSTROM, on behalf of herself and all others similarly situated, Plaintiff, v. CITY OF DES MOINES, IOWA, Defendant. Richard W. Curtis, on behalf of himself and all others similarly situated, Plaintiff, v. City of Bettendorf, Iowa, Defendant. Lance E. Howard, on behalf of himself and all others similarly situated, Plaintiff, v. City of Davenport, Iowa, Defendant. Kathleen Sweisberger, on behalf of herself and all others similarly situated, Plaintiff, v. City of Sioux City, Iowa, Defendant. Robert P. Klieman, on behalf of himself and all others similarly situated, Plaintiff, v. City of Waterloo, Iowa, Defendant. J. Thomas Zaber, on behalf of himself and all others similarly situated, Plaintiff, v. City of Dubuque, Iowa, Defendant. Verlis M. Miller, on behalf of himself and all others similarly situated, Plaintiff, v. City of Cedar Rapids, Iowa, Defendant.
• Court: U.S. District Court — Southern District of Iowa

470 F.Supp.2d 1002

Mary E. LINDSTROM, on behalf of herself and all others similarly situated, Plaintiff, v. CITY OF DES MOINES, IOWA, Defendant.

Richard W. Curtis, on behalf of himself and all others similarly situated, Plaintiff, v. City of Bettendorf, Iowa, Defendant.

Lance E. Howard, on behalf of himself and all others similarly situated, Plaintiff, v. City of Davenport, Iowa, Defendant.

Kathleen Sweisberger, on behalf of herself and all others similarly situated, Plaintiff, v. City of Sioux City, Iowa, Defendant.

Robert P. Klieman, on behalf of himself and all others similarly situated, Plaintiff, v. City of Waterloo, Iowa, Defendant.

J. Thomas Zaber, on behalf of himself and all others similarly situated, Plaintiff, v. City of Dubuque, Iowa, Defendant.

Verlis M. Miller, on behalf of himself and all others similarly situated, Plaintiff, v. City of Cedar Rapids, Iowa, Defendant.

No. 4:06-cv-00474(L).

No. 4:06-cv-00533.

No. 4:06-cv-00532.

No. 3:06-cv-00106.

No. 4:06-cv-00531.

No. 3:06-cv-00107.

No. 4:06-cv-00534.

United States District Court, S.D. Iowa, Central Division.

January 16, 2007.

James R. Wainwright, Ahlers & Cooney, P.C., Ivan T. Webber, Ahlers Cooney Dorweiler Haynie Smith & Allbee, Des Moines, IA, for City of Bettendorf, City of Davenport, City of Dubuque, City of Sioux City, City of Waterloo, Iowa.

Mohammad H, Sheronick, Cedar Rapids Attorney's Office, Cedar Rapids, IA, for City of Cedar Rapids, Iowa.

Mark Godwin, Des Moines City Attorney, Des Moines, IA, for City of Des Moines, Iowa.

Richard A. Davidson, Terry M. Giebelstein, Thomas D Waterman, Lane & Waterman, LLP, Davenport, IA, for Plaintiffs.

OPINION

PRATT, District Judge.

Before the Court are several Motions to Remand (hereinafter referred to as a singular "Motion to Remand"), filed by Plaintiffs in the above captioned cases.¹ Defendants resisted the motion, and Plaintiffs replied. A hearing was held on January 3, 2007. The matter is fully submitted.

I. BACKGROUND

All seven captioned cases were filed in Iowa state courts and removed to federal court by the respective Defendants. Plaintiffs essentially plead that each is a resident of their respective cities, and each was a customer of cable television services within that city. Each City Defendant currently charges, and has for many years charged, under its franchise agreements and ordinances, a "franchise fee" of up to 5% of the gross revenue for cable television and other services to customers situated within that City.

According to Plaintiffs, this "franchise fee" constitutes a tax and revenue-generating measure which has been and continues to be illegally imposed, exacted, and collected from the Plaintiffs and others similarly situated. As such, Plaintiffs claim the tax is void and should be refunded. Specifically, Plaintiffs rely on the rule in Iowa Code § 364.3(4), that a City may not levy a tax unless specifically authorized by state law, and the fact that Iowa law does not specifically authorize the Defendants to tax cable television services. Plaintiffs cite a recent Iowa Supreme Court decision, Kragnes v. City of Des Moines, 714 N.W.2d 632 (Iowa 2006), in support of their claim.

II. LAW AND ANALYSIS

This. Court, as a court of limited jurisdiction, has a duty to assure itself that it has subject matter jurisdiction in every case. See Barclay Square Props. v. Midwest Fed. Say. & Loan Ass'n of Minneapolis, 893 F.2d 968, 969 (8th Cir.1990); Sanders v. Clemco Indus., 823 F.2d 214, 216 (8th Cir.1987). Such jurisdiction must be based on either 28 U.S.C. § 1331, providing that the "district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States," or on 28 U.S.C. § 1332, providing that the "district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs, and is between citizens of different States . . . ." Defendants removed the individually filed cases on the following basis:

While the Petition itself makes no Federal Claim, the City is removing on the grounds that the Plaintiffs claims for money damages and attorney fees are completely preempted under federal cable franchise law and/or Plaintiffs claims arise under federal cable franchise law. Therefore, this case is removed pursuant to 28 U.S.C. § 1441(a) and (b) as supported by the common law authority found in Aetna Health Inc. v. Davila, 542 U.S. 200, 207-08, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004) and/or Christianson v. Colt Industries Operating Corp., 486 U.S. 800, 808-11, 108 S.Ct. 2166, 100 L.Ed.2d 811 (1988).

See Clerk's No. 1 (Notice of Removal) at ¶¶ 3-4.²

Plaintiffs argue that removal of these cases was improper because Plaintiffs have stated only a single claim that arises under state law, i.e., whether the Cities can collect the cable franchise fees, in amounts exceeding the reasonable costs of regulating the activity, without express authorization by the Iowa Legislature. According to Plaintiffs, their claim neither arises under the Federal Cable Communications Policy Act, 47 U.S.C. § 521 et seq. ("Federal. Cable Act"), nor is the claim preempted in whole or in part by the Federal Cable Act, meaning that this Court lacks subject matter jurisdiction over the action.

A. Plaintiffs' Claim

Plaintiffs' claim is patterned after the claim made in Kragnes v. City of Des Moines, 714 N.W.2d at 632. There, a citizen of the City of Des Moines brought an action alleging that the franchise fees the city assessed for gas and electric services amounted to illegal taxes. Id. at 633. In the 1960s, the City of Des Moines entered into franchise agreements with the predecessor to MidAmerican Energy Company ("MidAmerican") for natural gas and electric services. Id. The franchise agreement provided for "an annual franchise, occupation or privilege tax" of one percent of the gross receipts derived from the company's distribution and sale of electric energy to customers within the corporate limits of the City, and two percent of the gross receipts from the company's distribution and sale of natural gas. Id. at 635. The City negotiated and updated their franchise agreements for gas and electric service with MidAmerican, extending the franchises for ten years, and increasing the franchise fee to three percent for gas and three percent for electricity, effective September 2004. Id. The increased franchise fees were imposed, in lieu of a raise in property taxes, to cover the costs of basic city services, such as police officers, firefighters, and street reconstruction. Id.

The increased franchise fees were so effective in raising funds for the City that in March 2005, the city council resolved to increase the fees to five percent on both gas and electricity, effective June 1, 2005. It was during this approximate time-frame that Lisa Kragnes, on behalf of herself and all others similarly situated, claimed that the franchise fees, charged and collected by the City through its franchise agreements with MidAmerican, were illegal taxes. Id. at 636. After extensive analysis of Iowa law, the Iowa Supreme Court remanded the matter to the district court for a determination of what portion, if any, of the franchise fees were "reasonably related to the City's administrative expenses in exercising its police power." Id. at 643. In reaching this result, the court concluded that "any franchise fee charged by a city must be reasonably related to the city's administrative expenses in the exercise of its police power. These expenses include the reasonable costs of inspecting, licensing, supervising, or otherwise regulating the activity the city is franchising." Id. at 642.

B. Preemption

As previously noted, before it may analyze the merits of an action, the Court must first satisfy itself that it possesses jurisdiction to hear the claim asserted. The party removing the case to federal court bears the burden of showing that either diversity or federal subject matter jurisdiction is present on the facts of the Complaint. See McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 80 L.Ed. 1135 (1936); Hatridge v. Aetna Cas. & Sur. Co., 415 F.2d 809, 814 (8th Cir.1969); 28 U.S.C. § 1446(a).

Defendants first assert that this Court has federal subject matter jurisdiction because Plaintiffs' claim is wholly preempted by the Federal Cable Act. "For federal question jurisdiction, the federal question generally must appear on the face of the complaint." Luecke v. Schnucks Mkts., Inc., 85 F.3d 356, 358 (8th Cir.1996) (citing Caterpillar, Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987)). Clearly, nothing on the face of Plaintiffs' Complaint raises a federal question. Nonetheless, "Nil exception to this rule ... holds that when `an area of state law has been completely pre-empted, any claim purportedly based on that preempted state law is considered, from its inception, a federal claim, and therefore arises under federal law.'" Id. (quoting Caterpillar, 482 U.S. at 393, 107 S.Ct. 2425); see Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 8, 123 S.Ct. 2058, 156 L.Ed.2d 1 (2003). "The doctrine of preemption arises from the Supremacy Clause of the Constitution, which requires that state law must give way when it conflicts with or frustrates federal law." Chapman v. Lab One, 390 F.3d 620, 624 (8th Cir.2004) (citing CSX Transp., Inc. v Easterwood, 507 U.S. 658, 663, 113 S.Ct. 1732, 123 L.Ed.2d 387 (1993)). "As such, `complete preemption' of a state-law cause of action provides a basis for removal of an action to federal court." Id.; see also Beneficial Nat'l Bank, 539 U.S. at 11, 123 S.Ct. 2058 (concluding that the National Bank Act provides an exclusive federal cause of action for usury against national banks); Caterpillar, 482 U.S. at 393-94, 107 S.Ct. 2425 (recognizing the complete preemption doctrine in labor cases involving...