Mountain Solutions v. State Corp. Com'n of Ks

• Decision Date: 23 May 1997
• Docket Number: Civil Action No. 97-2116-GTV.
• Citation: 966 F.Supp. 1043
• Parties: MOUNTAIN SOLUTIONS, INC., et al., Plaintiffs, v. STATE CORPORATION COMMISSION OF THE STATE OF KANSAS, et al., Defendants.
• Court: U.S. District Court — District of Kansas

966 F.Supp. 1043

MOUNTAIN SOLUTIONS, INC., et al., Plaintiffs, v. STATE CORPORATION COMMISSION OF THE STATE OF KANSAS, et al., Defendants.

Civil Action No. 97-2116-GTV.

United States District Court, D. Kansas.

May 23, 1997.

Mark P. Johnson, Jan P. Helder, Jr., Lisa C. Creighton, Sonnenschein, Nath & Rosenthal, Kansas City, MO, for Mountain Solutions, Inc., Sprint Spectrum, L.P., Liberty Cellular, Inc., Mercury Cellular of Kansas, Western Wireless Corporation, DCC PCS, Inc., Dobson Cellular of Kansas/Missouri, Inc.

Marc E. Elkins, Morrison & Heckler, L.L.P., Kansas City, MO, Mark P. Johnson, Sonnenschein, Nath & Rosenthal, Kansas City, MO, for Topeka Cellular Telephone, Airtouch Cellular of Kansas, CMT Partners.

Eva Powers, Stephen H. Kukta, Kansas Corporation Commission, Topeka, KS, for State Corporation Commission of State of Kansas, National Exchange Carrier Association, Inc., Commissioner of the State Corporation Commission of the State of Kansas, Timothy E. McKee, Commissioner of the State Corporation Commission of the State of Kansas, Susan M. Seltsam, Commissioner of the State Corporation Commission of the State of Kansas, John Wine.

Michael C. Cavell, William R. Drexel, Southwestern Bell Telephone Co., Topeka, KS, Michael D. Moeller, Shook, Hardy & Bacon L.L.P., Kansas City, MO, for Southwestern Bell Telephone Company.

James M. Caplinger, Mark E. Caplinger, James M. Caplinger, Jr., James M. Caplinger, Chtd., Topeka, KS, for Inventors-Defendants.

Victor A. Davis, Jr., Weary, Davis, Henry, Struebing & Troup, Junction City, KS, for Kansas Cable Telecommunications Association, Inc.

MEMORANDUM AND ORDER

VAN BEBBER, Chief Judge.

Plaintiffs bring this action seeking an injunction prohibiting defendants from requiring commercial mobile service providers in Kansas to contribute to the Kansas Universal Service Fund. The case comes before the court on plaintiffs' motion for a preliminary injunction (Doc. 3).¹ For the reasons set forth below, plaintiffs' motion is denied.

I. Background

On April 4, 1996, in response to a legislative mandate under the Kansas Telecommunications Act of 1996, K.S.A. § 66-2001 et seq., the Kansas Corporation Commission ("KCC") established the Kansas Universal Service Fund ("KUSF"). The purpose of the KUSF is to ensure that rural telephone customers, who often are affected adversely by rate rebalancing, continue to enjoy affordable intrastate telecommunications services. By administering the collection and distribution of universal service support payments, the KUSF is able, in theory, to guarantee "that every Kansan will have access to a first class telecommunications infrastructure that provides excellent services at an affordable price." K.S.A. § 66-2001(a).

The KUSF compensates independent local exchange carriers for the revenues lost as a result of the state-imposed mandatory reductions in intrastate access charges.² See id. §§ 66-2005(c) & 66-2008(a). In this manner, customers enjoy reduced intra-state long-distance rates (albeit offset somewhat with possible increased local service rates) while local exchange carriers minimize the financial setback that rate rebalancing creates.

The specific statute governing KUSF funding states that "every telecommunications carrier, telecommunications public utility and wireless telecommunications service provider that provides intrastate telecommunications services" in Kansas must contribute to the fund on an equitable basis. K.S.A. § 66-2008(b). Acting pursuant to this statute, the KCC issued an order directing, inter alia, all wireless communications providers,³ which are also known as commercial mobile service providers, to contribute a percentage of their retail revenue to the KUSF each month. See In the Matter of a General Investigation Into Competition within the Telecommunications Industry in the State of Kansas, No. 190,492-U at ¶¶ 109-110 (Dec. 27, 1996). The KCC further held that the contribution requirement was not inconsistent with any federal law. Id. at ¶ 187.

A group of telecommunications industry associations and commercial mobile service providers, five of whom are plaintiffs in this action, subsequently filed a petition for reconsideration of the KCC's December 27, 1996 order. On February 3, 1997, the KCC denied the reconsideration request. Those entities then appealed the KCC's order to the Kansas Court of Appeals, where the matter is now pending.

In the case at bar, ten commercial mobile service providers have brought suit against the KCC, the KCC Commissioners, and the National Exchange Carrier Association, which administers the KUSF, claiming that K.S.A. § 66-2008(b) is preempted by 47 U.S.C. § 332(c)(3)(A). Plaintiffs contend, therefore, that the KCC's order enforcing section 66-2008(b) contravenes the Constitution's Supremacy Clause, see U.S. Const. art. VI, cl. 2, and must be enjoined. Defendants dispute any preemption issue and insist that the Kansas statute and corresponding KCC order are specifically authorized by 47 U.S.C. § 254(f).

II. Discussion

A. Abstention

Before addressing plaintiffs' request for injunctive relief, the court first must determine whether it should entertain this lawsuit in the first place. Although no party or intervenor has raised the issue, the specter of the abstention doctrine looms about the court.

Federal courts have a general obligation to exercise the jurisdiction that Congress grants them. Seneca-Cayuga Tribe v. State of Oklahoma, 874 F.2d 709, 711 (10th Cir. 1989). "As courts within a federalist system, however, they are on rare occasions permitted or required not to exercise their jurisdiction where such inaction is necessary to avoid undue interference with states' conduct of their own affairs." Id. The decision whether to abstain from interfering with a state judicial proceeding is governed by the principles set forth in Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971), and its progeny.

Younger abstention requires three elements: (1) an ongoing judicial (or, in a proper case, administrative proceeding); (2) the presence of an important state interest; and (3) an adequate opportunity to raise federal claims in the state proceeding. Seneca-Cayuga Tribe, 874 F.2d at 711. Although the KCC's order mandating KUSF contributions from commercial mobile service providers is presently before the Kansas Court of Appeals, all parties and intervenors in the case at bar have indicated that no preemption issues are raised in that appeal. This contention is disingenuous. At least one of the plaintiffs in this action, CMT Partners, explicitly raised the preemption issue in its state court appellate brief. Moreover, the Supreme Court has made clear that state courts are "presumed competent to resolve federal issues." Chick Kam Choo v. Exxon Corp., 486 U.S. 140, 150, 108 S.Ct. 1684, 1691, 100 L.Ed.2d 127 (1988).

Nevertheless, there is an exception to the Younger abstention doctrine. If a federal court is confronted with "facially conclusive claims of federal preemption," the court need not abstain, but instead, may decide the preemption question. GTE Mobilnet of Ohio v. Johnson, 111 F.3d 469, 475 & 476-77 (6th Cir.1997) (citing Bunning v. Commonwealth of Ky., 42 F.3d 1008 (6th Cir.1994) and Norfolk & W. Ry. Co. v. Public Utils. Comm'n, 926 F.2d 567 (6th Cir.1991)). As the discussion in Part B.2. of this opinion demonstrates, such a situation is presented here. Accordingly, the court finds it appropriate to rule on the merits of plaintiffs' claims.

B. Preliminary Injunction

Preliminary injunctive relief may be granted only if the moving party can establish that: (1) the movant will suffer irreparable injury unless the injunction issues; (2) the threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party; (3) the injunction, if issued, would not be adverse to the public interest; and (4) there is a substantial likelihood that the movant will eventually prevail on the merits. Kansas Health Care Ass'n, Inc. v. Kansas Dep't of Social and Rehabilitation Servs., 31 F.3d 1536, 1542 (10th Cir.1994). The court will confine its analysis to the first and fourth prongs of the preliminary injunction test.

1. Irreparable Harm

Plaintiffs (and the commercial mobile service provider intervenors) contend that they will suffer irreparable harm if an injunction does not issue because they will be forced to pass on the costs of their KUSF contributions to their customers. They argue that the concomitant increase in cost of commercial mobile service will diminish their customer base. The court rejects this claim.

First, the decision to pass on KUSF contribution costs to customers is a business judgment beyond the purview of the court. If commercial mobile service providers are concerned that a rise in monthly billings will drive away customers, those companies are free to assume some or all of the costs themselves. All telecommunications providers in Kansas are subject to the same assessment (on an equitable basis) and face identical economic considerations. Plaintiffs are not in a unique situation and it would be inappropriate for the court to put them in a competitively advantageous position by excusing their contribution obligations.

Second, if through judicial decree or legislative enactment, commercial mobile service providers are held to be exempt from the mandatory contribution requirement, their payments into the KUSF may be recovered. At the May 19, 1997 hearing, the KCC's counsel advised the court that the KCC has the authority to increase the assessments of other telecommunications providers in order to provide a vehicle by which plaintiffs may recoup any overpayments. Moreover, while the Eleventh Amendment may preclude a recovery action against the KCC in federal court, nothing would prevent plaintiffs from bringing such a case in state court. In short, plaintiffs have failed to establish that they will suffer...