CNSP v. City of Santa Fe ( 2019 )

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
FOR THE TENTH CIRCUIT January 14, 2019
_________________________________
Elisabeth A. Shumaker
Clerk of Court
CNSP, INC., d/b/a NMSURF,
Plaintiff - Appellant,
v. No. 18-2041
(D.C. No. 1:17-CV-00355-KG-SCY)
CITY OF SANTA FE, (D. N.M.)
Defendant - Appellee.
_________________________________
ORDER AND JUDGMENT*
_________________________________
Before TYMKOVICH, Chief Judge, McKAY, and MATHESON, Circuit Judges.
_________________________________
CNSP, Inc., d/b/a NMSURF, sued the City of Santa Fe for not acting on its
application seeking access to construct an intrastate telecommunications wireline in a
public right-of-way and the City’s actions in administering its telecommunications
ordinances. The federal district court concluded that NMSURF failed to state a claim for
relief and dismissed the complaint. Exercising appellate jurisdiction under 28 U.S.C.
§ 1291, we affirm in part, reverse in part, and remand for further proceedings.
*
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist in the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and collateral
estoppel. It may be cited, however, for its persuasive value consistent with
Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
I. BACKGROUND
In January 2015, NMSURF applied for a telecommunications franchise with the
City of Santa Fe to construct infrastructure in a public right-of-way,1 specifically, an
“intrastate wireline Fiber Optic Network.” Aplt. App. at 17. A complete application
typically leads to a negotiated franchise agreement that is later adopted by a city
ordinance. See City of Santa Fe, N.M., Code of Ordinances, § 27-2.4 (2016). Adoption
of the franchise agreement subjects the franchisee to a two percent infrastructure
maintenance fee, so long as the fee is not “imposed in any circumstances . . . [that] would
violate the Constitution or statutes of the United States.” Id. § 27-2.5(A).
In March 2017, NMSURF sued the City in federal district court, alleging that the
City “ha[d] delayed and prohibited [NMSURF’s] application for [public right-of-way
access], thereby harming [NMSURF’s] intrastate wireline business.” Aplt. App. at 9-10.
While NMSURF’s application was pending, the City allegedly granted other
telecommunications companies access to a public right-of-way and did not require them
to pay internet access fees. NMSURF claimed that the City’s actions violated 47 U.S.C.
§ 253’s guarantee of open and non-discriminatory access to public rights-of-way for the
provision of telecommunications services. The City moved to dismiss, arguing that
NMSURF had failed to plead a plausible claim because § 253 does not provide a private
1
Under the City’s telecommunications ordinances, the term “‘Public right-of-
way’ has the meaning of Section 3-1-2(M) NMSA 1978,” City of Santa Fe, N.M.,
Code of Ordinances, § 27-2.3 (2016) (italics omitted), which references “any
thoroughfare that can accommodate pedestrian or vehicular traffic, is open to the
public and is under the control of the municipality,” N.M. Stat. Ann. § 3-1-2(M).
2
cause of action. The district court construed the motion as seeking judgment on the
pleadings and granted it.2 NMSURF appealed.
While this appeal was pending, the City, on May 9, 2018, passed an ordinance
granting NMSURF a telecommunications franchise. See City of Santa Fe, N.M.,
Ordinance No. 2018-13 (May 9, 2018).
II. DISCUSSION
A. Legal Background
“We review a district court’s grant of a motion for judgment on the pleadings
de novo, using the same standard that applies to a Rule 12(b)(6) motion.” Colony Ins.
Co. v. Burke, 698 F.3d 1222, 1228 (10th Cir. 2012) (internal quotation marks omitted).
“[A] complaint must contain sufficient factual matter, accepted as true, to state a claim
for relief that is plausible on its face. We assume the factual allegations are true and ask
whether it is plausible that the plaintiff is entitled to relief.” Bixler v. Foster, 596 F.3d
751, 756 (10th Cir. 2010) (brackets, citation, and internal quotations marks omitted); see
Ashcroft v. Iqbal, 566 U.S. 662, 678 (2009); Bell Atl. Corp. v. Twombley, 550 U.S. 544,
570 (2007).
2
NMSURF also claimed that the City violated the Equal Protection Clauses of
the U.S. and New Mexico Constitutions and the Anti-donation Clause of the New
Mexico Constitution. NMSURF’s federal equal protection claim is not before us
because NMSURF does not contest its dismissal by the district court. See Coleman v.
B-G Maint. Mgmt. of Colo., Inc., 108 F.3d 1199, 1205 (10th Cir. 1997) (“Issues not
raised in the opening brief are deemed abandoned or waived.”). As for NMSURF’s
claims under the New Mexico Constitution, the district court declined to exercise
supplemental jurisdiction over them after dismissing NMSURF’s federal claims.
3
Section 253, entitled “Removal of barriers to entry,” is part of the
Telecommunications Act of 1996 (“TCA”) and preempts local laws that “have the effect
of prohibiting the ability of any entity to provide any interstate or intrastate
telecommunications service.” 47 U.S.C. § 253(a). Despite that prohibition, local
governments retain the authority “to manage the public rights-of-way [and] 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.” Id. § 253(c). Thus, “section 253(a) states the general rule [of preemption]
and section 253(c) provides the exception—a safe harbor functioning as an affirmative
defense—to that rule.” Level 3 Commc’ns, L.L.C. v. City of St. Louis, 477 F.3d 528, 532
(8th Cir. 2007). Subsection (d) authorizes the Federal Communications Commission
(FCC) to determine whether a “local government has permitted or imposed any statute,
regulation, or legal requirement that violates subsection (a)” and to then “preempt the
enforcement of such statute, regulation, or legal requirement to the extent necessary to
correct such violation or inconsistency.” Id. § 253(d).
B. Analysis
1. No Private Right of Action for Damages
NMSURF seeks relief under § 253(c) through an implied private right of action
brought under 42 U.S.C. § 1983. But “where the text and structure of a statute provide
no indication that Congress intends to create new individual rights, there is no basis for a
private suit, whether under § 1983 or under an implied right of action.” Gonzaga Univ. v.
4
Doe, 536 U.S. 273, 286 (2002). In Qwest Corp. v. City of Santa Fe, 380 F.3d 1258, 1265
(10th Cir. 2004), this court held that “nothing in the text or structure of § 253 indicates a
[ ] [congressional] intention to create a private right.” In so holding, we applied
Gonzaga’s test for discerning a private right of action—whether a statute grants any
“‘private rights to any identifiable class’” Id. (quoting Gonzaga, 536 U.S. at 284). We
acknowledged that the Supreme Court said in Gonzaga that it had been “reluctan[t] to
infer congressional intent to create a federal right” in Spending Clause legislation. Qwest
Corp., 380 F.3d at 1265 n.2. Thus, we “assume[d], without deciding, that Gonzaga
provides the correct test.” Id.
Seizing upon that assumption, NMSURF argues that the correct test for finding
whether § 253(c) authorizes a private right of action is Cort v. Ash, 422 U.S. 66, 78
(1975) (identifying four factors relevant to deciding “whether a private remedy is implicit
in a statute not expressly providing one”).3 The Sixth Circuit has said that Cort supports
finding a private right of action in § 253(c). TCG Detroit v. City of Dearborn, 206 F.3d
618, 623-24 (6th Cir. 2000); but cf. Superior Commc’ns v. City of Riverview, 881 F.3d
432, 444 (6th Cir. 2018) (“hold[ing] that there is no private cause of action available
under § 253(a)”). Nonetheless, NMSURF’s argument fails to persuade us.
3
The Cort factors are (1) “the plaintiff [is] one of the class for whose especial
benefit the statute was enacted”; (2) “there [is] an[ ] indication of legislative intent,
explicit or implicit, either to create such a remedy or to deny one[ ]”; (3) “it [is]
consistent with the underlying purposes of the legislative scheme to imply such a
remedy for the plaintiff”; and (4) “the cause of action [is] one traditionally relegated
to state law, in an area basically the concern of the States, so that it would be
inappropriate to infer a cause of action based solely on federal law.” 422 U.S. at 78
(internal quotation marks omitted).
5
First, “the critical inquiry is whether Congress intended to create a private right of
action.” Walls v. Wells Fargo Bank, N.A., 276 F.3d 502, 508 (9th Cir. 2002); see also
Casas v. Am. Airlines, Inc., 304 F.3d 517, 522 (5th Cir. 2002) (stating that congressional
intent is the “touchstone of the Cort analysis”). In Qwest, this court assessed whether
Congress intended to supply a private right of action anywhere in § 253, and it found no
such intent. 380 F.3d at 1265-67. We are bound by that determination, whether it was
derived from a Cort or a Gonzaga analysis. See Tootle v. USDB Commandant, 390 F.3d
1280, 1283 (10th Cir. 2004) (“We are bound by the precedent of prior panels absent en
banc reconsideration or a superseding contrary decision by the Supreme Court.” (internal
quotation marks omitted)).
Second, in City of Rancho Palos Verdes v. Abrams, 544 U.S. 113 (2005), the
Supreme Court cited Gonzaga in a TCA case when it addressed whether Congress
intended to create a private right of action to enforce limitations on a local government’s
regulation of antenna towers. See id. at 120 (observing that “to sustain a § 1983 action,
the plaintiff must demonstrate that the federal statute creates an individually enforceable
right in the class of beneficiaries to which he belongs”). The Supreme Court’s decision
validates Qwest’s reliance on Gonzaga in the context of § 253.
Third, since City of Rancho Palos Verde was decided in 2005, the Eighth and
Second Circuits have decided that § 253 does not create a private right of action. See
Spectra Commc’ns Grp., LLC v. City of Cameron, 806 F.3d 1113, 1119 (8th Cir. 2015)
(applying Gonzaga and “conclud[ing] that the text of § 253 does not indicate that
6
Congress intended to create a private right of action”); NextG Networks of N.Y., Inc. v.
City of N.Y., 513 F.3d 49, 52-53 (2d Cir. 2008) (same).
2. Preemption Claim and Equitable Relief
In the district court, NMSURF argued that § 253 preempts various parts of the
City’s telecommunications-franchise ordinance. Aplt. App. at 42-45. Citing § 253(d)
and Qwest, the district court concluded that only the FCC has the authority to declare
preemption, so NMSURF did not state a claim on this ground. See 47 U.S.C. § 253(d)
(requiring the FCC to preempt any statute, regulation, or legal requirement that violates
subsection (a) or (b)).
Contesting this ruling on appeal, NMSURF argues correctly in its opening brief
that this court in Qwest held that “[a] party may bring a claim under the Supremacy
Clause that a local enactment is preempted even if the federal law at issue does not create
a private right of action.” 380 F.3d at 1266; see, e.g., Sprint Telephony PCS, L.P. v. Cty.
of San Diego, 543 F.3d 571, 574-75, 580-81 (9th Cir. 2008) (en banc).
The Supreme Court, however, later clarified that no “implied right of action [is]
contained in the Supremacy Clause.” Armstrong v. Exceptional Child Center, Inc., 135
S. Ct. 1378, 1384 (2015). Rather, the power of federal courts to enjoin state laws that
violate federal law arises from “the creation of courts of equity.” Id. Thus, “federal
courts may in some circumstances grant injunctive relief against state officers who are
violating, or planning to violate, federal law.” Id.4 Those circumstances include whether
4
NMSURF’s complaint did not name any state officers or City officials as
defendants.
7
Congress has expressly or implicitly precluded private enforcement of federal law. Id. at
1385.
Moreover, in Safe Streets Alliance v. Hickenlooper, 859 F.3d 865 (10th Cir. 2017),
this court held in a divided opinion that to maintain an equitable cause of action to
“enforce [a federal statute’s] preemptive effects,” id. at 903, the plaintiff must plausibly
allege that the statute confers on the plaintiff a federal substantive “right of her or his own
to vindicate,” id. at 902.5
Neither the district court nor the parties discussed or even cited to Armstrong or
Safe Streets Alliance. We therefore asked the parties to address these cases in
supplemental briefs as to whether NMSURF may proceed with an equitable preemption
claim.
Having studied the supplemental briefs,6 we remand this issue for NMSURF to
amend its complaint. In its order dismissing the complaint, the district court (a) simply
determined that a court cannot entertain an equitable preemption claim because
subsection (d) of the statute mentions only the FCC’s preemption authority,7 and (b) did
5
In a concurring opinion, Judge Hartz found “no language in Armstrong
stating that the Court should ‘first’ (or ever, when examining the federal courts’
equity power) concern itself with whether the party seeking injunctive relief alleged
any federal substantive right.” Id. at 916.
6
We also received an amicus brief from CenturyLink, CTIA, and USTelecom.
7
See 47 U.S.C. § 253(d) (“If . . . the Commission determines that a State or
local government has permitted or imposed any statute, regulation, or legal
requirement that violates subsection (a) or (b) of this section, the Commission shall
preempt the enforcement of such statute, regulation, or legal requirement to the
extent necessary to correct such violation or inconsistency.”).
8
not analyze the complaint’s allegations or whether they stated a claim under Armstrong
and Safe Streets Alliance.8 To enable meaningful review of whether NMSURF has stated
an equitable preemption claim, the allegations in the complaint should be updated and
revised in light of (a) Armstrong and Safe Streets Alliance, and (b) NMSURF’s having
been awarded a franchise.
Examination of the complaint supports these points. The factual allegations
describe the provisions of Chapter 27 of The City of Santa Fe City Code, which governs
telecommunications facilities. Aplt. App. at 11-13. The complaint then alleges three
causes of action. Only the first is at issue on this appeal.9 It is titled “Violation of
Telecommunications Act – Removal of Barriers to Entry.” Id. at 14. It alleges that the
City “has not acted on NMSURF’s application.” Id. It describes specific provisions of
Chapter 27, including § 27.2.5(A), which requires a 2 percent fee “for all services
8
Although the district court did not analyze NMSURF’s equitable preemption
claim based on the relevant case law, it nevertheless viewed the complaint as
containing such a claim. The claim’s presence is evident from “read[ing] [the
complaint] as a whole” and “expansively construing [the complaint].” Zokari v.
Gates, 561 F.3d 1076, 1085 (10th Cir. 2009). See, e.g., Aplt. App. at 10 (complaint’s
prefatory allegation that “[t]he court should pre-empt and invalidate” the City’s
telecommunications-franchise ordinance); id. at 16 (complaint’s § 253 claim for
relief, which alleges that the City’s telecommunications-franchise ordinance “should
be invalidated and or pre-empted”); id. at 19-20 (complaint’s prayer for declaratory
and injunctive relief, which alleges that the City’s telecommunications-franchise
ordinance is “pre-empted, invalid, and . . . contrary to the Constitution, [t]he [TCA],
and laws of the United States”).
9
The second cause of action alleges a violation of equal protection under the
Fifth Amendment and a violation of the New Mexico Constitution. The third also
alleges a violation of the New Mexico Constitution.
9
terminated to an address in the City.” Id. at 15. And it alleges repeatedly that Chapter 27
“has the effect of prohibiting entry.” Id. at 16.
Although the complaint states that “Defendants’ [sic] Chapter 27 City Code
violations cause ongoing harm to NMSURF and should be invalidated and or pre-
empted,” id., the first cause of action emphasizes that the City’s administration of
Chapter 27 has prevented NMSURF from access to a public right-of-way. And although
NMSURF states at the beginning and end of the complaint that it wants the court to
preempt certain sections of Chapter 27, it is not clear whether this remedy was requested
to enable NMSURF to obtain a franchise, which the City now has granted, and it is not
clear whether or to what extent its preemption challenge is moot.
For these reasons, the district court’s dismissal of NMSURF’s claim for
preemption is not amenable to appellate review, and the matter must be remanded for
NMSURF to clarify its claim. The case also must be remanded for the district court to
address an even more fundamental question—whether the federal courts have jurisdiction
over NMSURF’s putative equitable preemption claim. We turn to that question next.10
3. Potential Mootness Issue
Because the City granted a franchise to NMSURF while this appeal was pending,
and because the primary concern of the original complaint was the City’s failure to act on
10
We recognize that the district court denied NMSURF’s request for leave to
amend the complaint because NMSURF did not file a formal motion or a proposed
amended complaint. Aplt. App. at 77-78. We do not question the basis for that ruling.
Our remand for NMSURF to file an amended complaint is premised on the parties’ and
the district court’s failure to address relevant case law on equitable preemption and on
factual developments raising mootness concerns.
10
NMSURF’s franchise application, the award of the franchise raises a mootness concern.
Although we asked the parties to address this concern in their supplemental briefs, they
paid scant attention to this issue. NMSURF did contend in its reply brief that despite
having been granted a franchise, the City has set “un-equal fees,” obtained “a three year
plus competitive edge over NMSURF . . . by creating its own network,” avoided
“pay[ing] any charges for revenues generated under its municipal network,” and failed to
“institute policies, practices, and procedures to ensure compliance with [public right of
way] applications.” Aplt. Reply Br. at 4, 12 (internal quotation marks omitted).
As with the question of whether the complaint states a claim, and despite factual
assertions in the reply brief, we again find the complaint inadequate to meaningfully
assess the mootness issue. The district court on remand, with the benefit of an updated
amended complaint, should determine whether the City’s recent grant of a
telecommunications franchise to NMSURF has mooted NMSURF’s equitable preemption
claim. See Restoration Risk Retention Grp. v. Gutierrez, 880 F.3d 339, 342 (7th Cir.
2018) (remanding for a mootness determination where “intervening amendments to [a
state] statute [may have] render[ed] th[e] litigation moot”); Grimm v. Gloucester Cty.
Sch. Bd., 869 F.3d 286, 290 (4th Cir. 2017) (remanding for a mootness determination in
light of intervening events “requir[ing] factual development of the record” (internal
quotation marks omitted)).
III. CONCLUSION
We affirm the district court’s dismissal of NMSURF’s § 253 damages claim. We
reverse the dismissal of NMSURF’s preemption claim for equitable relief, and we
11
remand with instructions to order NMSURF to file an amended complaint and for further
proceedings consistent with this Order and Judgment.11
Entered for the Court
Scott M. Matheson, Jr.
Circuit Judge
11
If the district court on remand determines that NMSURF has pled a plausible
equitable preemption claim, not mooted by the City’s recent grant of a franchise, the
district court will need to revisit NMSURF’s state law claims, which were dismissed
due to the lack of an attendant federal jurisdiction claim.
12