Schloss v. City of Indianapolis
| Citation | 553 N.E.2d 1204 |
| Decision Date | 17 May 1990 |
| Docket Number | No. 41S04-9005-CV-351,41S04-9005-CV-351 |
| Parties | Robert E. SCHLOSS, individually and as representative of a class, Appellant (Plaintiff Below), v. CITY OF INDIANAPOLIS, Appellee (Defendant Below). |
| Court | Indiana Supreme Court |
Henry J. Price, Jerry Garau, Price & Shula, Indianapolis, for appellant.
James B. Burroughs, City-County Legal Div., Indianapolis, for appellee.
The questions presented in this case are whether the Cable Communications Policy Act of 1984, 47 U.S.C. Secs. 521-559, preempts Ind.Code Sec. 36-1-3-8(5) in the field of cable television franchise fees, and whether a cable television subscriber has standing to challenge the amount of such fees imposed by the City of Indianapolis.
The City of Indianapolis has granted cable television franchises to private companies. Pursuant to the Indianapolis and Marion County, Ind., Code of Ordinances Sec. 8 1/2-80(a) (1979), 1 these companies pay an annual franchise fee equal to three percent of gross accrued revenues from cable television operations. The fee is passed on to cable television subscribers as part of the cost of cable television service.
Robert Schloss is a cable television subscriber. His complaint alleged that the annual franchise fee created by the municipal ordinance exceeds the amount a local government may require under Ind.Code Sec. 36-1-3-8(5) in that the amount collected is greater than the cost of regulating the franchises. 2 He sought declaratory and injunctive relief against the city, and compensation for the portion of the allegedly excessive franchise fees that had been passed on to him. He also asked the trial court to order the cable companies to pass any reduction in franchise fees through to their subscribers.
The trial court held that the federal Cable Act rather than Ind.Code Sec. 36-1-3-8(5) controls the amount of franchise fees that local governments may charge. It concluded Schloss had no standing and dismissed the case. The Court of Appeals affirmed. Schloss v. City of Indianapolis (1988), Ind.App., 528 N.E.2d 1143. We grant transfer.
The City argues that Schloss lacks standing to challenge the amount of the franchise fee because he does not have a legally cognizable stake in the outcome of the litigation. The city asserts that any injury Schloss might suffer is indirect; the cable companies may elect to pass on the franchise fee to their customers or choose not to do so.
The judicial doctrine of standing focuses on whether the complaining party is the proper person to invoke the court's power. It is designed to assure that litigation will be actively and vigorously contested. See Indiana Educ. Employment Relations Bd. v. Benton Community Schools (1977), 266 Ind. 491, 496-7, 365 N.E.2d 752, 754-5. The standing requirement is a limit on the court's jurisdiction which restrains the judiciary to resolving real controversies in which the complaining party has a demonstrable injury. See City of Indianapolis v. Board of Tax Comm'rs (1974), 261 Ind. 635, 308 N.E.2d 868.
This Court recently described the interest which a party must possess to confer standing:
[I]n order to invoke a court's jurisdiction, a plaintiff must demonstrate a personal stake in the outcome of the lawsuit and must show that he or she has sustained or was in immediate danger of sustaining, some direct injury as a result of the conduct at issue.
Higgins v. Hale (1985), Ind., 476 N.E.2d 95, 101. 3
Whether Schloss has suffered any direct injury is answered by a stipulation of the parties: "The three percent (3%) franchise fee paid by American, Indianapolis Cablevision and Comcast to the City is a cost which is passed to individual customers and is included in the cost of all goods and services sold by these franchised cable companies." Record at 32. Schloss is an individual customer who would suffer direct injury as a result of excessive franchise fees.
Whether Schloss has a personal stake in the outcome of the suit is a more difficult question.
It is far from clear that Schloss would be entitled to collect the excess fees should they be determined unlawful. Neither the Cable Act nor Ind.Code Sec. 36-1-3-8 provide reimbursement or other damages for consumers who are injured because a municipality charges excess fees. Indeed, the only legal peg upon which Schloss may hang his hat is 47 U.S.C. Sec. 542(e): "Any cable operator shall pass through to subscribers the amount of any decrease in a franchise fee."
Counsel for the city urges us to read Sec. 542(e) in conjunction with 47 U.S.C. Sec. 543, which prevents states from regulating the rates that the cable operators charge their customers. The city notes that even if the franchise fee exceeds the amount permitted under federal law Schloss may not benefit from its reduction because a cable company could reduce the amount of the bill attributed to franchise fees while at the same time raising the total bill. The argument is alluring. Since the Congress deregulated cable prices, fees charged cable subscribers have risen dramatically. During the last decade rates have approximately doubled. 4 With rates escalating at that pace, eliminating part of a three per cent fee would be little noticed.
Schloss, however, seeks a reduction only in the franchise fee, and Sec. 542(e) provides for that reduction, giving him a stake in the outcome of the litigation. Schloss has standing.
Schloss argues that Ind.Code Sec. 36-1-3-8(5) prohibits the city from imposing its three per cent fee. The city has responded by saying that the federal Cable Act, which permits a five percent fee, preempts state laws purporting to regulate cable prices. The trial court and the Court of Appeals agreed. We find it unnecessary to resolve the merits of this preemption defense because we conclude that Ind.Code Sec. 36-1-3-8(5) does not apply to the city's cable television franchise fee. The city's authority to accept franchise fees from the cable companies stems from its power to enter into contracts with those companies and not from its power to issue licenses and charge fees tied to regulatory costs.
In reaching the conclusion that the cable franchise is not a license, we begin with the hornbook definition of a license:
A permit, granted by an appropriate governmental body, generally for a consideration, to a person, firm, or corporation to pursue some occupation or to carry on some business subject to regulation under the police power. A license is not a contract between the state and the licensee, but is a mere personal permit.
Black's Law Dictionary 829 (5th ed. 1979) (citation omitted). A license fee is the consideration given for the receipt of the permit. It must be related to the government's cost for regulating the occupation or business. Northern Indiana Coin Operators Ass'n v. South Bend (1985), Ind.App., 478 N.E.2d 704, 706 (citing Ind.Code Sec. 36-1-3-8 (1982)).
Indianapolis grants licenses and exacts regulation-related fees for a wide variety of business activities: it licenses the right to run massage parlors, operate taxicabs, deal in secondhand goods, and sell beverages, flowers, and foods from carts. 5 Each type of license is granted to a number of people in anticipation of competition among them. Every person wishing to engage in a licensed business must follow certain procedures set by ordinance and pay a fee. Indiana Code Sec. 36-1-3-8(5) applies to this type of a set fee, one assessed against numerous people in exchange for the opportunity to compete in the marketplace.
The agreements between the city and the cable companies are quite different from these licenses. The agreements involved in this case are franchise contracts. In these contracts, the city has granted to the cable operator both the right to sell cable television services in a particular area to the exclusion of other operators and the privilege of using the public ways of the city for the purpose of constructing and operating the cable television systems in the territory covered. The quid pro quo for the grant of these two...
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