TCG Detroit v. City of Dearborn

Decision Date26 May 2004
Docket NumberDocket No. 232609.
Citation680 N.W.2d 24,261 Mich. App. 69
PartiesTCG DETROIT, Plaintiff-Counterdefendant/Appellee, v. CITY OF DEARBORN, Defendant-Counterplaintiff/Appellant.
CourtCourt of Appeal of Michigan — District of US

Clark Hill PLC (by Roderick S. Coy, Michael P. Calabrese, and Richard C. Marsh) and Peggy Nelson, Detroit; Chicago, Ill, for the plaintiff.

Debra A. Walling, John W. Tanner, III, and William H. Irving, and Miller & Van Eaton, P.L.L.C. (by William Malone, John F. Noble, and Holly L. Saurer), Dearborn; Washington, DC, for the city of Dearborn.

Loomis, Ewert, Parsley, Davis & Gotting, P.C. (by Harvey J. Messing, Gary L. Field, Lisa A. Hanson, and Michael C. Rampe), Lansing, for the Telecommunications Association of Michigan.

Kitch Drutchas Wagner DeNardis & Valitutti (by Michael J. Watza, Susan Healy Zitterman, and Christina A. Ginter) Detroit, for PROTEC.

Before: SMOLENSKI, P.J., and WHITE and WILDER, JJ.

WHITE, J.

Defendant City of Dearborn (Dearborn) appeals as of right the order denying its motion for summary disposition, which challenged the constitutionality of certain provisions of the Michigan Telecommunications Act (MTA), MCL 484.2101 et seq., article 2A of which has since been repealed,1 and the court's rulings regarding what constitutes "fixed and variable costs" thereunder. We affirm.

I

The facts as stated in the circuit court's opinion denying defendant's motion for summary disposition are not in dispute:

TCG is licensed by the Michigan Public Service Commission to provide local telecommunications services within the City [of Dearborn]. Its chief competitor in providing local telecommunications services within the City is Ameritech, who is the incumbent local exchange carrier. However, TCG does not possess any telecommunications facilities within the City. TCG sought, through an agreement with Detroit Edison, to install fiber optic cable in existing Edison ducts. These, however, lie in the City's rights of way.
Sometime in early 1994, the City was informed of TCG's plan to install fiber optic cable in the Edison ducts. By this time approximately seven out of a planned twenty-seven miles of fiber optic cable within Edison's existing conduit had been installed in the City. The City objected and asserted, as it presently does, that TCG needed to enter into a franchise agreement with the City before entering into the City's right of ways [sic] to install telecommunications facilities, such as fiber optic cable. Thereafter TCG negotiated with the City to enter into a franchise agreement that would enable TCG to use the City's rights of way. During this time the City adopted its Telecommunications Ordinance [.]
By September 1995, the parties nearly reached an agreement. The proposed agreement required TCG to pay the City a franchise fee of 4% of TCG's gross revenues, a $50,000 one time payment, and up to $2500 of the costs incurred by the City in connection with its granting the franchise. Also under the proposed agreement, TCG, if it should ever install its own conduit within the City, would also install, at its own cost, an inner conduit for use by the City. Finally, the proposed agreement contained a "most favored nation" clause under which TCG would be obligated to pay the City, at its election, a higher percentage of revenue in the event TCG agreed to pay a higher percentage to any other municipality within the tri-county area.

The parties continued to negotiate over the resolution of some apparently minor details when, on November 30, 1995, under 1995 PA 216, MCL 484.2101 et seq., the revised provisions of the Michigan Telecommunications Act (the Act) took effect. Based on the provisions of the Act, TCG took the position that it no longer needed to enter into a franchise agreement with the City. TCG maintained that upon its complying with the provisions of the Act, the City was required to issue a permit for the use of its rights of way. Further negotiations ultimately came to an impasse and this case followed.

Procedural Posture

In September 1996, plaintiff TCG filed a complaint against Dearborn in the United States District Court for the Eastern District of Michigan seeking a declaratory ruling, an injunction, and damages, and alleging that Dearborn had violated § 253 of the Federal Communications Act (FCA), 47 USC 151 et seq., and article 2A of the MTA, by failing to allow TCG access to public rights-of-way in Dearborn for placement of fiber optic cables. The district court dismissed the state law claims without prejudice. With regard to the federal claim, the court found that the fees Dearborn sought (the same fees it initially sought in the instant case, i.e., four percent of TCG's gross revenues, a one-time charge of $50,000, and the requirement that if TCG installed its own conduit in the rights-of-way, it do so for the city as well) were "fair and reasonable" under subsection 253(c) of the FCA, which provides that local governments retain authority "to require fair and reasonable compensation from telecommunications providers," for use of a public right-of-way. TCG Detroit v. Dearborn, 16 F.Supp. 2d 785, 788-791 (E.D.Mich., 1998), aff'd 206 F.3d 618 (C.A.6, 2000).

TCG refiled the state law counts in February 1998, in a seven-count complaint for declaratory judgment and an injunction. Counts I, II, and III allege violation of the MTA by failure to issue a permit, failure to limit permit conditions as necessary to manage rights-of-way, and failure to limit fees and assessments to Dearborn's fixed and variable costs, respectively. TCG sought a declaration that Dearborn's Telecommunications Regulatory Ordinance2 is invalid because it is contrary to the MTA, and that Dearborn may not require TCG to enter into a franchise agreement or pay the franchise fees Dearborn demanded.

Dearborn counter claimed, seeking past due franchise fees and TCG's ejection from its rights-of-way should it fail to pay Dearborn the fees sought.

Dearborn filed a motion for summary disposition asserting that portions of article 2A of the MTA are unconstitutional in that they impermissibly impinge on Dearborn's franchising rights derived from Const 1963, art 7, § 29. The circuit court denied Dearborn's motion, concluding that the MTA could be construed consistently with art 7, § 29. Dearborn's motion for partial reconsideration was denied.

TCG moved for summary disposition, arguing that portions of Dearborn's 1994 ordinance violated the MTA, and that certain provisions of the draft franchise agreement Dearborn and TCG had nearly agreed on infringed on the Michigan Public Service Commission's power and authority and violated the MTA. The court3 granted TCG's motion in part and denied it in part, concluding that the challenged portions of Dearborn's ordinance did not violate the MTA, but that portions of the draft franchise agreement did. The rulings on TCG's motion have not been appealed.

II

We first address Dearborn's argument that § 253 of the MTA, MCL 484.2253, which provides that a local government may not exact compensation for telephone companies' access to its rights-of-way in excess of its "fixed and variable costs ... in granting a permit and maintaining the right-of-ways, easements, or public places used by a provider," impermissibly impinges on the grant of authority to local governments provided in Const 1963, art 7, § 29.

A

The constitutionality of § 253 of the MTA presents a question of law that this Court reviews de novo. Tolksdorf v. Griffith, 464 Mich. 1, 5, 626 N.W.2d 163 (2001). "[A] statute is presumed to be constitutional unless its unconstitutionality is clearly apparent." McDougall v. Schanz, 461 Mich. 15, 24, 597 N.W.2d 148 (1999). The constitutionality of a statute must be determined on the basis of the provisions of the act itself. Judicial Attorneys Ass'n v. Michigan, 459 Mich. 291, 303, 586 N.W.2d 894 (1998). The party challenging the constitutionality of the statute has the burden of proving the invalidity of the statute. In re Trejo Minors, 462 Mich. 341, 355, 612 N.W.2d 407 (2000). The constitutionality of a statute will ordinarily not be considered unless it is essential to the disposition of the case. Trent v. Suburban Mobility Auth. for Regional Transportation, 252 Mich.App. 247, 252, 651 N.W.2d 171 (2002).

Const 1963, art 7, § 29 provides:

No person, partnership, association or corporation, public or private, operating a public utility shall have the right to the use of the highways, streets, alleys or other public places of any county, township, city or village for wires, poles, pipes, tracks, conduits or other utility facilities, without the consent of the duly constituted authority of the county, township, city or village; or to transact local business therein without first obtaining a franchise from the township, city or village. Except as otherwise provided in this constitution the right of all counties, townships, cities and villages to the reasonable control of then highways, streets, alleys and public places is hereby reserved to such local units of government. [Emphasis added.]

The predecessor provision, Const 1908, art 8, § 28 provided:

No person, partnership, association or corporation operating a public utility shall have the right to the use of the highways, streets, alleys or other public places of any city, village or township for wires, poles, pipes, tracks or conduits, without the consent of the duly constituted authorities of such city, village or township; nor to transact a local business therein without first obtaining a franchise therefor from such city, village or township. The right of all cities, villages and townships to the reasonable control of their streets, alleys and public places is hereby reserved to such cities, villages and townships.

Article 2A of the MTA, MCL 484.2251-484.2253, provided at pertinent times (see n 1):

ARTICLE 2A...

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