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CNSP, Inc. v. City of Santa Fe

United States District Court, D. New Mexico

March 14, 2018

CNSP, INC. D/B/A NMSURF, Plaintiff,
CITY OF SANTA FE, Defendant.


         This matter comes before the Court upon Defendant City of Santa Fe's Motion to Dismiss for Failure to State a Claim (Motion to Dismiss), filed April 11, 2017, which seeks to dismiss Plaintiff's federal claims under Fed.R.Civ.P. 12(b)(6) for failure to state a claim upon which relief can be granted. (Doc. 14). Plaintiff filed a response on April 25, 2017, opposing the Motion to Dismiss and, in the alternative, seeking leave to amend its Complaint for Declaratory Judgment, Injunctive and Other Relief (Complaint) (Doc. 1) should the Court decide to grant the Motion to Dismiss. (Doc. 23). Defendant City of Santa Fe (City) filed a reply on May 5, 2017. (Doc. 29). Having considered the Motion to Dismiss and the accompanying briefing, the Court grants the Motion to Dismiss, denies Plaintiff's request to amend the Complaint, and declines to exercise supplemental jurisdiction over the state claims. Consequently, the Court will dismiss this suit in its entirety.

         A. Background

         Under Chapter 27 of the City's ordinances, any entity that “proposes to construct a telecommunications infrastructure in the city's public rights-of-way [PROW] shall submit an application….” City of Santa Fe Ord. (#2016-42, §7), § 27-2.4(A) (as amended Nov. 9, 2016).[1]Once the City accepts an application to “construct a telecommunications infrastructure in the” PROW, the City's “director” reviews the application, and, if the application is acceptable, negotiates the terms of a franchise. Id. at § 27-2.4(B). The City, through its city council, must then adopt the franchise by ordinance in order to grant the franchise. Id. at § 27.24(C). After the City grants a franchise, the franchisee must pay an infrastructure maintenance franchise fee of 2% of all gross charges sought by the franchisee for “telecommunications originating or received in the city.” City of Santa Fe Ord. (#2010-14, § 7), § 27-2.5 (as amended Nov. 9, 2016).

         Plaintiff contends in the Complaint that, since the Court's 2013 ruling in Quest v. City of Santa Fe invalidating a previous 3% gross fee for telecommunications services, “[t]he City has not processed PROW agreements for multiple telecommunications providers … thereby prohibiting PROW access to providers.” (Doc. 1) at 6-7, ¶¶ 15, 16, and 26. Plaintiff alleges that the City, nonetheless, entered into a professional services contract with CyberMesa, a telecommunications company, in March 2014 to create “a one mile fiber line to allegedly lower the costs of other Internet Providers in the City; however, no other providers have access to this line due to cost and proximity.” Id. at 4, ¶ 1. Plaintiff asserts that the City actually donated to Cybermesa the “one mile fiber line.” Id. at 12, ¶ 53. Plaintiff further alleges that under this agreement the City granted CyberMesa PROW access, compensated CyberMesa monetarily, and granted CyberMesa the right to revenue from its telecommunications services. Id. at 6-7, ¶¶ 18 and 19; at 11, ¶ 49. Also, Plaintiff contends that Cybermesa does not pay any fees under Chapter 27. Id. at ¶ 53. Aside from these allegations, Plaintiff notes in its response that both it and CyberMesa are Competitive Local Exchange Carriers (CLECs). (Doc. 23) at 16.

         In January 2015, Plaintiff applied for PROW access under Chapter 27 “for purposes of creating an Intrastate Wireline Fiber to The Home/Business Telecommunications Network.” (Doc. 1) at 3, ¶ 1. A few days later, the City accepted Plaintiff's application. Id. at 7, ¶ 21. The City, however, has not acted on Plaintiff's application. Id. at 8, ¶ 31. Plaintiff claims that this delay in acting on its application results in it “losing ninety thousand dollars ($90, 000.00) per month in revenues for Phase One development and additional revenues from further phase developments totaling four million five hundred thousand dollars ($4, 500, 000).” Id. at 10, ¶ 44. Plaintiff further claims that it “has spent approximately $150, 000.00 in equipment, engineering fees, and materials.” Id. at 11, ¶ 45.

         Although the City has not acted on Plaintiff's application for PROW access, Plaintiff maintains that, in addition to CyberMesa, the City granted Comcast and CenturyLink, both telecommunications companies, PROW access. Id. at ¶ 49. Plaintiff alleges also that Comcast and CenturyLink do not pay the 2% gross fee for internet access as required by Chapter 27. Id. at 12, ¶¶ 51 and 52.

         Plaintiff sued the City on March 20, 2017. In the First Cause of Action, Plaintiff alleges that the City is violating the federal Telecommunications Act (TCA) by prohibiting Plaintiff access to the PROW. Plaintiff specifically cites 47 U.S.C. Sections 253(a) and (c) of the TCA to support the First Cause of Action. In the Second Cause of Action, Plaintiff alleges that the City is violating the Fifth Amendment due process clause of the United States Constitution and Article II, Section 18 of the New Mexico Constitution by denying Plaintiff equal protection of the law. Plaintiff contends that the City's actions violate Plaintiff's equal protection rights by (1) granting PROW access to telecommunications companies, but not acting on Plaintiff's franchise application, and (2) seeking to collect the 2% gross fee charge from new franchisees with PROW access, but not collecting this fee from other telecommunications providers who have PROW access. Finally, in the Third Cause of Action, Plaintiff alleges the City violated Article IX, Section 14 of the New Mexico Constitution, the Anti-Donation Clause, by entering into a professional services agreement with Cybermesa and donating it a fiber optic line.

         Relevant to this Motion to Dismiss, Plaintiff seeks money damages as well as a declaration that “Chapter 27 of the City of Santa Fe Code or the violating sections are preempted, invalid, and are contrary to the Constitution, ” the TCA, “and laws of the United States….” (Doc. 1) at 13, ¶ 65(a). Plaintiff further asks the Court to enjoin the City “from implementing or enforcing Chapter 27 or the violating sections” and to order the City to pay daily fines for continuing to violate the TCA. Id. at 14, ¶ 65(b) and (h). Finally, Plaintiff seeks an order requiring “the City to institute policies, practices, and procedures to ensure compliance with PROW applications, including but not limited to implementing appropriate policies and training to all employees and officials regarding PROW under the Telecommunications Act.” Id. at ¶ 65(i).

         The City now moves under Rule 12(b)(6) to dismiss (1) the TCA claims because a private right of action for money damages is unavailable for those claims, (2) the request to declare that the TCA preempts Chapter 27, and (3) the Fifth Amendment equal protection claims. Plaintiff opposes the Motion to Dismiss in its entirety, but “requests leave to amend” if the Court determines to grant the Motion to Dismiss. (Doc. 23) at 16.

         B. Standard of Review

         Although the City brings this Motion to Dismiss under Rule 12(b)(6), the Court considers the Motion to Dismiss as a motion for judgment on the pleadings under Fed.R.Civ.P. 12(c). See Memorandum Opinion and Order (Doc. 51) at 4 (determining that Court will consider Motion to Dismiss under Rule 12(c) instead of Rule 12(b)(6)). Whether the Court analyzes the Motion to Dismiss under Rule 12(b)(6) or (c), courts “use the same standard when evaluating 12(b)(6) and 12(c) motions.” Jacobsen v. Deseret Book Co., 287 F.3d 936, 941 n. 2 (10th Cir. 2002). In ruling on a Rule 12(b)(6) motion to dismiss, the Court must accept all well-pleaded allegations as true and must view them in the light most favorable to the plaintiff. See Zinermon v. Burch, 494 U.S. 113, 118 (1990); Swanson v. Bixler, 750 F.2d 810, 813 (10th Cir.1984). Rule 12(b)(6) requires that a complaint set forth the grounds of a plaintiff's entitlement to relief through more than labels, conclusions and a formulaic recitation of the elements of a cause of action. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).

         To survive a Rule 12(b)(6) motion to dismiss, a plaintiff must allege facts sufficient to state a plausible claim of relief. Id. at 570. A claim is facially plausible if the plaintiff pleads facts sufficient for the court to reasonably infer that the defendant is liable for the alleged misconduct. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). “The plausibility standard is not akin to a ‘probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id.

         C. Discussion

         1. Whether Plaintiff has Stated a Plausible TCA Private Cause of Action for Money Damages and TCA Claim for Declaration of Preemption

         Plaintiff cites two provisions of the TCA to support its claims for monetary relief under the TCA. First, Plaintiff cites 47 U.S.C. Section 253(a), which states: “No State or local statute or regulation, or other State or local legal requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service.”

         Second, Plaintiff cites Section 253(c), a safe harbor provision, which states:

Nothing in this section affects the authority of a State or local government to manage the public rights-of-way or 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.

See Qwest Corp. v. City of Santa Fe, New Mexico, 380 F.3d 1258, 1271-72 (10th Cir. 2004) (characterizing Section 253(c) as safe harbor provision). Relevant to these two provisions is Section 253(d), the remedy provision for Section 253, which states:

If, after notice and an opportunity for public comment, the [Federal Communications] 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.

         The City argues that Section 253, as a whole, does not provide a private right of action for money damages. Because Plaintiff specifically refers to Section 253(a) and (c) in the Complaint, the Court finds it necessary to examine whether each Section may provide a private right of action for money damages. Moreover, the City argues that Plaintiff has not pled factual allegations, even when viewed in the light most favorable to Plaintiff, sufficient to support its request for a declaration ...

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