Zaber v. City Of Dubuque

Decision Date14 July 2010
Docket NumberNo. 07-1819.,07-1819.
Citation789 N.W.2d 634
PartiesJ. Thomas ZABER, on behalf of Himself and All Others Similarly Situated, Appellant, v. CITY OF DUBUQUE, Iowa, Appellee.
CourtIowa Supreme Court

OPINION TEXT STARTS HERE

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Terry M. Giebelstein, Thomas D. Waterman, and Richard A. Davidson of Lane & Waterman LLP, Davenport, for appellant.

Ivan T. Webber and James R. Wainwright of Ahlers & Cooney, P.C., Des Moines, for appellee.

Terrence L. Timmins, Des Moines, for amicus curiae Iowa League of Cities.

Bruce H. Stoltze of Stoltze & Updegraff, P.C., Des Moines, and Bradley P. Schroeder of Hartung & Schroeder LLP, Des Moines, for amicus curiae Iowa Trial Lawyers Association.

TERNUS, Chief Justice.

The appellant, J. Thomas Zaber, appeals the district court's dismissal by summary judgment of his claim for a refund of cable television franchise fees imposed by the appellee, City of Dubuque, in excess of the city's cost of regulation. The district court ruled Iowa Code section 477A.7(5) (Supp.2007) retroactively authorized these fees, rejecting the plaintiff's contention section 477A.7(5) violated his due process rights. We affirm the district court's judgment in favor of the city.

I. Scope of Review.

Because this appeal arises from a ruling on a motion for summary judgment, we preface our discussion of the facts and issues with a review of the principles governing our examination of the district court's ruling. ‘To obtain a grant of summary judgment on some issue in an action, the moving party must affirmatively establish the existence of undisputed facts entitling that party to a particular result under controlling law.’ Baker v. City of Iowa City, 750 N.W.2d 93, 97 (Iowa 2008) (quoting Interstate Power Co. v. Ins. Co. of N. Am., 603 N.W.2d 751, 756 (Iowa 1999)); see Iowa R. Civ. P. 1.981(3) (authorizing summary judgment when “there is no genuine issue as to any material fact” and “the moving party is entitled to a judgment as a matter of law”). Neither party points to any issue of material fact with respect to the application of section 477A.7(5). Thus, the disposition of this case rests on a determination whether the city is entitled to judgment as a matter of law under the undisputed facts.

Whether the city is entitled to judgment as a matter of law turns on whether section 477A.7(5), which ratifies fees imposed and collected prior to its enactment, is a proper and constitutional exercise of legislative power. The plaintiff does not dispute that the legislature's intent in enacting this provision was to retroactively authorize illegal franchise fees already assessed by municipalities and paid by their residents. Rather, he claims the legislature's action violates his due process rights. We consider the plaintiff's constitutional claim de novo. Varnum v. Brien, 763 N.W.2d 862, 874 (Iowa 2009).

II. Background Facts and Proceedings.

The plaintiff, Thomas Zaber, sued the City of Dubuque on September 5, 2006, claiming the city had collected an illegal tax from him and others similarly situated in the form of franchise fees for gas and electric utilities and for cable television services in excess of the reasonable cost of regulating these industries. 1 Zaber sought a refund of the illegal taxes based on this court's decision in Kragnes v. City of Des Moines, 714 N.W.2d 632 (Iowa 2006). In that case, we held franchise fees assessed by the City of Des Moines on gas and electric power services constituted an illegal tax to the extent such fees exceeded the reasonable costs of regulating the franchised activity. Kragnes, 714 N.W.2d at 642-43.

The City of Dubuque filed a motion for partial summary judgment, requesting dismissal of the plaintiff's claim for the refund of franchise fees paid for cable television services. This motion rested on the General Assembly's enactment of Iowa Code section 477A.7, which authorized franchise fees on cable television services in excess of the cost of regulation, including fees “assessed by and paid to a municipality prior to May 29, 2007[, the effective date of the act].” Iowa Code § 477A.7(4), (5); see 2007 Iowa Acts ch. 201, § 15 (providing the act, “being deemed of immediate importance, takes effect upon enactment,” May 29, 2007). The plaintiff resisted this motion on the ground the retroactive aspect of the statute violated his due process rights in two ways: (1) it deprived the plaintiff of an accrued refund claim, and (2) the period of retroactivity exceeded the “modest” period constitutionally permitted.

The district court granted the city's motion for partial summary judgment on the plaintiff's refund claim for cable television fees. It concluded the retroactive provision in the statute was curative legislation that bore a rational relationship to a legitimate governmental purpose, namely, preserving “the revenue cities need to carry out their lawful functions.” The district court rejected the plaintiff's due process challenge, ruling retroactive authorization of taxes already collected or assessed was constitutionally permissible and “need not be limited to one year or the previous legislative session,” as the plaintiff contended.

The plaintiff filed an application for interlocutory appeal, which this court granted. 2 On appeal, the plaintiff claims the legislature's retroactive authorization of franchise fees in excess of the cost of regulation violates his rights to substantive due process for two reasons. First, it takes away his accrued right to a refund of illegal taxes assessed and collected by the city. Second, the period of retroactivity exceeds the modest period that is constitutionally allowed. To put these issues in context, we first review the events leading up to the enactment of section 477A.7(5).

III. Enactment of Iowa Code Section 477A.7(5).

As noted above, in Kragnes, this court examined a municipality's power to charge fees for gas and electric services in excess of the cost of regulating those activities. 714 N.W.2d at 637-43. We held:

Our decisions reveal that even after the adoption of the home-rule amendment and the enactment of the Home Rule for Cities bill, we have continued to adhere to the position that a fee imposed by a city needs to be related to the reasonable costs of inspecting, licensing, supervising, or otherwise regulating the activity in order to be permitted under a city's home-rule authority. If a fee charged by a city exceeds the amount necessary to inspect, license, supervise, or otherwise regulate the activity, it is nothing more than a tax levy, which the legislature has strictly prohibited.

Id. at 641. We concluded that, to the extent the franchise fees charged by the defendant city exceeded its cost of regulation, the fees constituted an illegal tax. Id. at 642-43. In the wake of this decision, several lawsuits, including the present case, were filed by residents of various Iowa cities, claiming a five percent franchise fee for cable television services charged by the defendant cities was an illegal tax and should be refunded. See Lindstrom v. City of Des Moines, 470 F.Supp.2d 1002, 1004-05 (S.D.Iowa 2007). 3

While these actions were pending, the Iowa General Assembly enacted a law relating to franchise fees for cable television services. See 2007 Iowa Acts ch. 201. The following provisions of this act are pertinent to our discussion:

4. A franchise fee may be assessed or imposed by a municipality without regard to the municipality's cost of inspecting, supervising, or otherwise regulating the franchise, and the fees collected may be credited to the municipality's general fund and used for municipal general fund purposes.

5. To the extent that any amount of franchise fees assessed by and paid to a municipality prior to the effective date of this Act, pursuant to a franchise agreement between a municipality and any person to erect, maintain, and operate plants and systems for cable television, exceeds the municipality's reasonable costs of inspecting, supervising or otherwise regulating the franchise, such amount is deemed and declared to be authorized and legally assessed by and paid to the municipality.

Id. ch. 201, § 8(4), (5) (emphasis added) (codified at Iowa Code § 477A.7(4), (5)). It is clear from the timing of the enactment and the language used in the statute that the legislature intended section 477A.7(5) to validate any municipality's collection of fees on cable television services in excess of the reasonable costs of inspecting, supervising, or otherwise regulating the franchise, regardless of when the fees were assessed and paid.

The district court relied on the legislature's authorization of past fees in subsection (5) in granting the city's motion for partial summary judgment. It is the constitutionality of this retroactivity provision that lies at the heart of this appeal.

IV. Nature of Issue Presented.

Before we address the constitutionality of section 477A.7(5), we emphasize the issue presented involves taxes that were not authorized at the time they were exacted by the municipalities, 4 but which could have been authorized by the state. See Iowa Const. art. III, § 38A (“Municipal corporations are granted home rule power and authority ... except that they shall not have power to levy any tax unless expressly authorized by the general assembly. (Emphasis added.)). Therefore, we are not faced with a situation in which the legislature attempted to ratify or cure a tax that it lacked the underlying power to authorize. As we held in Kragnes, the defect in the city's imposition of a tax on cable television services was simply its lack of legislative authority to do so. See Kragnes, 714 N.W.2d at 641 (declaring similar charge on gas and electric services to be an unauthorized and illegal tax). Consequently, this case involves not the collection of taxes that government for constitutional reasons lacks the power to impose in some or all instances, but instead involves...

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