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Qwest Corp. v. City of Des Moines, Iowa

United States Court of Appeals, Eighth Circuit

July 17, 2018

Qwest Corporation, doing business as CenturyLink QC; Windstream Communications, LLC, Formerly doing business as Windstream Communications, Inc.; McLeodUSA Telecommunications Services, L.L.C. Plaintiffs - Appellants
City of Des Moines, Iowa Defendant-Appellee

          Submitted: May 16, 2018

          Appeal from United States District Court for the Southern District of Iowa - Des Moines

          Before BENTON, KELLY, and STRAS, Circuit Judges.


         In this case, several wire-line telecommunications carriers (collectively, the Carriers) contest an ordinance enacted by the City of Des Moines, Iowa. The ordinance charges the Carriers for their use of public rights-of-way. The Carriers claim the ordinance is preempted by federal law, and exceeds the City's powers under Iowa Code chapter 480A. We affirm in part, vacate in part, and remand for further proceedings.

         Wire-line carriers transmit telecommunications data through wires and cables. Often these wires are buried under, or suspended above, public rights-of-way like city streets and sidewalks. Iowa law requires municipalities to give private companies (like the Carriers) access to their rights-of-way, but allows municipalities to charge fees related to that access. At issue in this case are fees for "management costs," which Iowa municipalities can charge to public utilities that use the rights-of-way. Iowa Code § 480A.3. We will call these "management fees."

         Des Moines first imposed a management fee in 1998. Back then, the City calculated the fee each year based on each individual carrier's total feet of line. Between 2002 and 2015, the management fees ranged from $0.0083/foot to $0.009/foot. In 2015, the City amended its management fee ordinance; this amendment went into effect on January 1, 2018. Under the amended ordinance, the City stopped calculating management fees each year. Instead, the City adopted a schedule whereby it would increase the fee by $0.02/foot every year until it reached a target fee of $0.12/foot. With this lawsuit, the Carriers challenge the new fee schedule.

         The district court entered judgment for the City following a bench trial. With regards to the Carriers' claim that the ordinance was preempted by federal law, the district court found:

The City's Ordinance does not violate federal law . . . The [Carriers] presented no credible evidence to prove the Ordinance would have an actual adverse effect that would eliminate their ability to provide telecommunications services. . . . [The Carriers] presented no evidence that increased fees would actually or effectively prohibit the provision of services. Even the [Carriers'] expert witness . . . was unable to explain in testimony any actual adverse impact on the services to be provided.

         With regards to the Carriers' claim that Des Moines had exceeded its authority under Iowa law, the district court concluded:

The City's Ordinance does not violate State law . . . . [The City's expert's s]tudy demonstrated that the Ordinance is competitively neutral and reflects proportionately the costs incurred by the City as a result of the various types of uses of the [public rights-of-way]. The City's estimates of future costs complies with the general language of the Iowa Supreme Court [precedent] . . . .

         Following a bench trial, our role is to review the district court's legal conclusions de novo and its factual findings for clear error. Urban Hotel Dev. Co. v. President Dev. Grp., L.C., 535 F.3d 874, 879 (8th Cir. 2008). On questions of Iowa state law, we are bound by the decisions of the Supreme Court of Iowa. See St. Paul Fire & Marine Ins. Co. v. Schrum, 149 F.3d 878, 880 (8th Cir. 1998). Absent Iowa case law directly on point, "we may consider 'relevant state precedent, analogous decisions, considered dicta, . . . and any other reliable data.'" Id. (quoting Lindsay Mfg. Co. v. Hartford Accident & Indem. Co., 118 F.3d 1263, 1267 (8th Cir. 1997)).

         We begin with the federal preemption issue. The federal Telecommunications Act preempts state and local laws and regulations if they "prohibit or have the effect of prohibiting the ability of any interstate or intrastate telecommunications service." 47 U.S.C. § 253(a). In the first step of this analysis, the Carriers must show that the City "formally or effectively prohibit[ed] entry into the [telecommunication services] market." Level 3 Comms., LLC v. City of St. Louis, 477 F.3d 528, 532 (8th Cir. 2007). The Carriers present no evidence that the fee increase formally or effectively prohibits entry into the Des Moines telecommunications market. Absent any such evidence, we conclude that the Telecommunications Act does not preempt the City's ordinance. We affirm the district court's finding of non-preemption.

         Turning to the state-law issue, the question is whether the City exceeded its authority under Iowa law when it adopted a new management fee schedule. Iowa Code § 480A.3 authorizes the City to charge the Carriers management fees. The statute limits fees to "those management costs caused by the public utility's activity in the public right-of-way." Iowa Code § 480A.3 (emphasis added). The code defines "management costs" as "the reasonable costs a local government actually incurs in managing public rights-of-ways." Iowa Code § 480A.2(2) (emphasis added). Read together, these provisions authorize the City to collect fees to cover costs that (1) ...

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