Recent notable developments include the following:


Berkeley, CA Telecom Carrier Ordinance and Fees Preempted:   The federal Ninth Circuit Court of Appeals has affirmed a trial court decision that the City of Berkeley, California’s Telecommunications Carriers ordinance is invalid and preempted by the federal Telecommunications Act of 1996 because it “may” have the effect of prohibiting a carrier’s telecommunication services in the City.  As in its earlier Auburn case, the Ninth Circuit found that Berkeley’s licensing fees for telecommunications carrier usage of public rights-of-way, in excess of the actual cost of maintaining such rights-of-way, contribute to a regulatory scheme having the impermissible effect of precluding telecommunication companies from providing services.  In its new decision, the Court stopped short of saying that all non-cost based right-of-way fees are automatically preempted, but indicates fees in excess of cost are an important part of the Court’s consideration of an excessive regulatory scheme.  The court also found in effect that the local ordinance’s “common carrier exemption procedure”, intended to save the ordinance from being over-regulatory, was itself too burdensome to avoid invalidity. 


Similarly, the court found excessive the local requirements for an applicant to identify its state and federal qualifications, furnish annual documentation of its compliance with various state and federal laws, and submit its rates and contracts, or face denial of excavation permits.  The Court concluded that all of the foregoing requirements are invalid because they exceed the legitimate city management of its own rights-of-way, and extend to controlling the telecommunication carriers and services themselves, rather than merely the City’s property.  The Ninth Circuit also reinforced its rule that local regulations are invalid under the Telecommunications Act if they “may” have the effect of prohibiting the provision of telecommunications services, without requiring proof that such an effect has actually occurred.  (Qwest Communications Inc. v. City of Berkeley, 9th Cir. No. 03-15852, January 12, 2006)


California Can’t Deny Cell Sites on Aesthetics Alone:   The Ninth Circuit also ruled this week that under California state law read in conjunction with the federal Telecommunications Act, local governments cannot use aesthetics/design criteria to deny building permits for cellular telephone tower and antenna sites.  Cellular telephone and other wireless communications providers, if certificated by the state Public Utilities Commission to provide telephone services, are automatically franchised on a state-wide, no-fee basis to use all public roads and rights-of-way to install service facilities, “in such manner and at such points as not to incommode the public use of the road or highway or interrupt the navigation of the waters” (California Public Utilities Code Section 7901).  Under the Ninth Circuit’s reading of this statute and related state laws, local authorities retain “reasonable control as to the time, place and manner in which roads, highways and waterways are accessed” for telecom purposes, but only on the basis of function and continued public usability of the rights-of-way, and not the way they appear.  Accordingly, “local regulators retain no authority to deny permits based on aesthetics” when reviewing permit applications for cell sites and other telecom structures in public rights-of-way.  Turning to civil procedure, the Court then found that given a Telecom Act challenge to a local permit denial, the City was required to show “substantial evidence” to justify denial.  Because under state law the City could not consider any aesthetic evidence, it therefore could not defend any Telecom Act permit denial based on aesthetic evidence, and to that extent the denial is insupportable.  (Sprint PCS Assets, LLC v. City of La Canada Flintridge, 9th Cir. No. 05-55014, January 17, 2006)


Tucson, AZ Telecom Ordinance Survives, but Right-of-Way Fees Deemed Taxes:   The same panel of appellate judges which gutted the Berkeley Telecom licensing ordinance also decided a case last week challenging a telecom licensing ordinance adopted by Tucson and other Arizona cities.  The Ninth Circuit managed to avoid the substance of Tucson’s ordinance, however, finding the case moot because challenger Qwest is exempt from the Tucson ordinance and therefore in no position to challenge it.  Interestingly, the Ninth Circuit also found that a federal court challenge to a local telecom license fee may be required to be pursued in state rather than federal court, under the federal Tax Injunction Act which generally blocks access to federal courts for challenges to local taxes.  In this connection, the Ninth Circuit stated, “we hold that where, as here, an ordinance requires that a telecommunications provider pay a percentage of its gross revenues to the municipality, and the revenue from that charge is directed to the municipality’s general fund, the charge constitutes a tax”.  While not binding on California state courts, this holding at least raises the question of whether new, local telecom licensing ordinances and fees (and perhaps similar cable franchise fees) which raise general revenue funds, are “taxes” under state law and therefore subject to the Prop 62 requirement of two-thirds approval by local voters before such new taxes can be adopted.  (Qwest Corp. v. City of Tucson, 9th Cir. No. 04-16940, January 13, 2006)


Bankruptcy No Bar to Regulatory Enforcement:   In a case involving the bankruptcy of California’s largest electric utility, Pacific Gas & Electric, the Ninth Circuit has held that unlike most litigation against a bankrupt party, which must be pursued through the bankruptcy court, regulatory enforcement actions in certain circumstances cannot be removed to bankruptcy court, and may proceed directly against the bankrupt entity through the usual channels.  Under bankruptcy law, a civil court proceeding may generally be removed to bankruptcy court, except “a civil action by a governmental unit to enforce such governmental unit’s police or regulatory power” (besides merely monetary cases).  Accordingly, the Ninth Circuit allows a case to proceed against PG&E outside bankruptcy, as brought by the Attorney General asserting unfair business practice (Section 17200) claims.  (City and County of San Francisco v. PG&E, 9th Cir. No. 03-17051, January 10, 2006).


Retailer’s Declared Value Coverage Regulated as Insurance?:   The California Court of Appeal has held that “declared value coverage” offered by a retailer as part of its shipping services for customers, may be subject to regulation under state law as a form of insurance.  The declared value coverage (also known as excess value coverage) is offered by the retailer at an additional price to pay the customer for loss or damage occurring during product shipment, for which the retailer is otherwise not responsible.  Disregarding common sense and existing law that contract indemnity provisions are not regulated as insurance if they are secondary parts of a commercial transaction not intended as insurance, the Court refused to dismiss a consumer class action against the retailer alleging that the declared value coverage did not comply with Insurance Code requirements.  (Wayne v. Staples Inc., California Court of Appeal No. V178160, January 4, 2006)


California Court Converts Compliance Claims into Wage Claims: Another California Court of Appeal recently ruled that when employees claim they are entitled to payment of wages for non-working time such as travel time in company vehicles to and from a job, that any nonpayment for what should have been compensable time will also constitute a violation of minimum wage law, since a zero wage was paid for the hours claimed as compensable.  The Court declined to follow the federal “averaging” rule whereby hours worked during an entire work week are compared to total wages paid, and instead decided that California policy makes it a minimum wage violation whenever an employee is not paid for any amount of compensable time.  The effect is to leverage claims for compensable time in any area of unclarity, into a double violation if the claim prevails.  In this case, there was an underlying finding that workers in the field for a utility pole maintenance company, were entitled to be paid for travel time in company vehicles, time spent loading equipment and supplied into the vehicles, and time spent maintaining the vehicles.  (Armenta v. Osmose, Inc., California Court of Appeal No. V174806, December 29, 2005)


Linked Attorney(s)