Marotte v. City of N.Y.
| Decision Date | 07 February 2019 |
| Docket Number | 16-CV-8953 (GHW) (OTW) |
| Parties | RICHARD T. MAROTTE, Plaintiff, v. THE CITY OF NEW YORK, et al., Defendants. |
| Court | U.S. District Court — Southern District of New York |
REPORT & RECOMMENDATION
Pro se Plaintiff Richard T. Marotte brought this action, primarily alleging violations of the Telecommunications Act of 1996, 47 U.S.C. § 151 et seq., against Defendants the City of New York, the New York City Department of Information Technology and Telecommunications (DoITT), Telebeam Communications Corp., and CityBridge LLC. Plaintiff worked in the public pay telephone industry from 1986 until 2002, when he left the industry. In 2014, after a public bidding process, the City of New York entered into an agreement with CityBridge LLC, in which CityBridge LLC would build communications hotspots on the City's sidewalks as a replacement for the previously existing pay telephones. These hotspots would provide free wireless Internet and free domestic telephone calls, among other things. Plaintiff, who did not participate in the public bidding process, alleges that the bidding process, the agreement between the City and CityBridge LLC, as well as the City's regulatory scheme relating to telecommunications on the City's sidewalks, all violate the Telecommunications Act of 1996.
Before me for Report and Recommendation are Defendants' motions to dismiss Plaintiff's Amended Complaint in accordance with Fed. R. Civ. P. 12(b)(1), for lack of subject matter jurisdiction, and Fed. R. Civ. P. 12(b)(6), for failure to state a claim upon which relief can be granted (ECF 75, 78, 82) and Plaintiff's Letter Motion for Leave to Amend (ECF 116). For the reasons that follow, I recommend that Defendants' Motions to Dismiss be GRANTED and Plaintiff's Motion for Leave to Amend be DENIED.
Since 1959, the City of New York has undertaken several regulatory schemes to address public payphones. This lawsuit relates to the City's latest regulatory scheme, including the use of sidewalk telecommunications structures that provide both telephone service and free internet via Wi-Fi hotspots. These structures, known as LinkNYC, are currently operating in the City's five boroughs. In order to best understand Plaintiff's suit, which asserts claims under the Federal Telecommunications Act of 1996 ("TCA"), 47 U.S.C. § 151 et seq., a brief history of the City's payphone regulatory schemes, leading up to the LinkNYC program, is important context.
Before 1985, New York Telephone, then an AT&T subsidiary, was the sole company authorized by the City to install and operate public payphones on the City's public rights-of-way—more commonly referred to as the City's sidewalks. (See Am. Compl. ¶ 19; id. ¶ 1). Local Law 78, which was enacted in 1959, made it illegal to install or maintain a public payphone on the sidewalk without a City license. (Id. ¶ 19). Thus, because only New York Telephone could obtain a City license, they were the only company legally permitted to install and operate public payphones on the sidewalks. (Id.) After 1985, a number of independent payphone providers sought to enter the payphone market and operate on the City's sidewalks, but they were barred entry by Local Law 78. (Id. ¶ 20).
New York State law provides that the City is responsible for the operation and administration of the City's sidewalks, and under the New York City Charter, the sidewalks are part of the "inalienable property" of the City and cannot be sold or leased. See General City Law § 20(7) & (10); New York City Charter § 383.
The New York City Charter was revised in 1989 to require entities wishing to install and maintain payphones on City sidewalks to first obtain a franchise from the City. (Am. Compl. ¶ 19). The New York City Department of Information Technology and Telecommunications ("DoITT") is charged with the responsibility to administer and award City franchises for telecommunication services, including payphones. (See id. ¶ 13).
In September 1995, the City enacted Local Law 68, which went into effect in March 1996. (Id. ¶ 31). Local Law 68 repealed the licensing regime previously established under Local Law 78 and provided that entities wishing to install and maintain payphones on City sidewalks would need to obtain both a franchise from the City and a permit for each payphone. (Id.) In effect, an entity would first have to obtain a franchise, which would permit it to operate on the City's sidewalks and, once it obtained the City franchise, the entity would then apply for a permit for each individual payphone it wished to install. (Id.)
In 1999, under the Local Law 68 licensing regime, more than 100 payphone operators obtained franchises from the City, each issued for an 11-year term. The City retained the right, at its sole discretion, to extend the franchises from an 11-year term to a 15-year term. The City, in 2010, extended these franchises to 15-year terms, with new expirations dates of October 14, 2014. (See Defs.' Mem. of Law at 6, ECF 79).2
As the existing payphone franchises were set to expire on October 14, 2014, the City issued, on April 30, 2014, a "Request for Proposals for a Franchise to Install, Operate, and Maintain Public Communications Structures" (the "2014 PCS RFP") in the City. (See Am. Compl. ¶ 42; see also Friedman Decl. at 1, ECF 85). The 2014 PCS RFP invited "qualified" entities to submit a franchise proposal, with a requirement that, if chosen, the entities would provide Wi-Fi and phone services on a City-approved public connection point. (Am. Compl. ¶¶ 45-48). The2014 PCS RFP would grant a franchise contract running to June 24, 2026, with an option to extend at the City's discretion. (Friedman Decl. at 3). According to the text of the 2014 PCS RFP, the franchise would have to install, operate, and maintain up to 10,000 public communications structures. (Id. at 4). The structures would have to offer free Wi-Fi but could charge a fee for phone services, except for emergency calls and calls to the City's 311 service. (Id.)
After a competitive bidding process, the City awarded a non-exclusive franchise to Defendant CityBridge LLC ("CityBridge"), a consortium of telecommunications companies. . Under the terms of the franchise agreement, CityBridge built a network of LinkNYC hotspots across the City, each providing free wireless internet access, free telephone calls to telephone numbers in the United States, access to City services, free cellular phone charging, and digital displays for advertising and public service announcements. (See Friedman Decl. Ex. 4).
The TCA, passed in 1996, "fundamentally restructure[d] local telephone markets." AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 371 (1999). Prior to the TCA, "local phone service was thought to be a natural monopoly" in which states "typically granted an exclusive franchise in each local service area to a local exchange carrier (LEC), which owned, among other things, the local loops (wires connecting telephones to switches), the switches (equipment directing calls to their destinations), and the transport trunks (wires carrying calls between switches) that constitute a local exchange network." Id.
The TCA was designed to "bring competition to local-exchange markets." Verizon Commc'ns Inc, v. FCC, 535 U.S. 467, 539 (2002). The local exchange carriers enjoyed "an almost insurmountable competitive advantage" because newcomers could compete only by "replicating the incumbent's entire existing network." Id. at 490. To level the playing field, the TCA imposes a number of duties on incumbent local exchange carriers "intended to facilitate market entry," including a requirement that incumbents share their network with would-be competitors. See AT&T Corp., 525 U.S. at 371. In addition, the TCA prevents state and local governments from "enforc[ing] laws that impede competition." Id. This objective is served by § 253(a), the provision Plaintiff invokes here. Titled "Removal of barriers to entry," § 253(a) provides that:
No State or local statute or regulation, or other State or local legal requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service.
47 U.S.C. § 253(a).
But the TCA also "provides for a number of 'safe harbor' exceptions for states and local governments to establish regulatory requirements." Global Network Commc'ns, Inc. v. City of New York, 562 F.3d 145, 151 (2d Cir. 2009) ("Global Network"). The safe harbor is set forth at § 253(c), which provides that:
Nothing in this section affects the authority of a State or local government to manage the public rights-of-way or to require fair and reasonable compensation from telecommunications providers, on a competitively neutral and nondiscriminatory basis, for use of public rights-of-way on a nondiscriminatory basis, if the compensation required is publicly disclosed by such government.
47 U.S.C. § 253(c). A regulation that falls within this safe harbor is protected even if it has the effect of prohibiting telecommunications service in contravention of § 253(a). See Global Network, 562 F.3d at 150-51.
Although § 253 was designed to generate competition in local exchange markets, payphones also provide "telecommunications service" as that term is defined by the TCA and used in § 253. See 47 U.S.C. § 153(53). Regulations governing payphones are thus subject to both § 253(a) preclusion and the § 253(c) safe harbor. See Global Network, 562 F.3d at 150-51.
Plaintiff Richard T. Marotte is a New York resident who owned and operated All Global Tel-Com, Inc., a payphone company operating in New York and New Jersey, from 1986 to 1995. (Am. Compl. ¶ 8...
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