Spectrum Pacific West LLC v. Yuma, City of ( 2020 )

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Spectrum Pacific West LLC, No. CV-20-01204-PHX-DWL 10 Plaintiff, ORDER 11 v. 12 City of Yuma, 13 Defendant. 14 15 INTRODUCTION 16 In 1984, Congress passed the Cable Communications Policy Act (the “Cable Act”). 17 Among other things, the Cable Act “establish[ed] franchise procedures and standards 18 which encourage the growth and development of cable systems and which assure that cable 19 systems are responsive to the needs and interests of the local community.” 47 U.S.C. 20 § 521(2). Cable systems are generally facilities “designed to provide cable service which 21 includes video programming.” Id. § 522(7). Under the Cable Act, a franchising authority 22 may grant a franchise to a cable operator. Id. § 541(a)(1). A franchising authority is a 23 “governmental entity empowered by Federal, State, or local law to grant a franchise,” and 24 a franchise constitutes authorization by the franchising authority to construct or operate a 25 cable system. Id. § 522(9)-(10). A franchise permits the cable operator to construct the 26 cable system “over public rights-of-way, and through easements.” Id. § 541(a)(2). A cable 27 operator may not operate a cable system without a franchise. Id. § 541(b)(1). 28 In 2018, Arizona passed a statewide uniform video franchising law. A.R.S. § 9- 1 1401 et seq. Under this new law, “the licensing of video service providers and the 2 regulation and use of video service are not subject to further regulation by a local 3 government.” Id. § 9-1402(A). The state expressly “occupie[d] the entire field of licensing 4 and regulation of video service” and, in certain circumstances, preempted local law or 5 franchise agreements with a local government. Id. § 9-1402(B)-(C). The new law required 6 local governments to “adopt a standard form of uniform video service license agreement 7 for video service providers to be used by the local government” on or before July 1, 2019. 8 Id. § 9-1411(B). Between December 31, 2019 and July 1, 2020, a cable operator with an 9 existing franchise issued by a local government entity could choose to continue operating 10 under the existing franchise or terminate the franchise in favor of a uniform video service 11 license. Id. § 9-1412(A)-(B). 12 On June 17, 2020, Plaintiff Spectrum Pacific West LLC (“Charter”) sued the City 13 of Yuma (the “City”), asserting claims related to the City’s alleged non-compliance with 14 Arizona’s uniform video franchising law. (Doc. 1.) Now pending before the Court is the 15 City’s motion to dismiss for failure to state a claim. (Doc. 12.) Charter filed a response 16 (Doc. 13) and the City filed a reply (Doc. 16). For the reasons explained below, the motion 17 will be denied.1 18 BACKGROUND 19 The following allegations, which are assumed to be true for purposes of the City’s 20 motion unless contradicted by matters properly subject to judicial notice, are derived from 21 Charter’s complaint. (Doc. 1.) 22 Charter is a cable operator that “provides cable and other advanced communication 23 services—such as broadband internet access and digital voice—to residential and business 24 subscribers in the City.” (Id. ¶ 2.) Charter is a party to four “interrelated agreements with 25 the City,” which are all “collectively part of the franchise agreement” (the “Agreements”). 26 (Id. ¶ 16.) 27 1 The parties requested oral argument but this request will be denied because the 28 issues are fully briefed and oral argument will not aid the Court’s decision. See Fed. R. Civ. P. 78(b) (courts may decide motions without oral hearings); LRCiv 7.2(f) (same). 1 On December 16, 2019, Charter notified the City that it “intended to terminate its 2 local cable franchise in favor of a uniform video service license effective December 31, 3 2019.” (Id. ¶ 79.) On December 17, 2019, the City responded and “denied any obligation 4 to comply with the Uniform Franchise Law and refused to provide Charter with the 5 standard form of application and affidavit necessary for Charter to apply for a uniform 6 video service license.” (Id. ¶ 81.) The City “purported to require and still requires Charter 7 to continue to comply with all of the obligations under” the Agreements. (Id. ¶ 82.) 8 DISCUSSION 9 Charter has asserted three claims against the City. Count One is a state-law claim 10 for violation of Arizona’s uniform video franchising law. (Id. ¶¶ 90-106.) Count Two is 11 a federal claim, the precise contours of which are disputed (as discussed in more detail 12 below). (Id. ¶¶ 107-09.) Count Three is a request for a declaratory judgment that the City 13 has violated Arizona law, that the Agreements are terminated, and that the obligations 14 imposed under the Agreements are preempted by state law. (Id. ¶¶ 110-17.) Charter also 15 requests an injunction to require the City to “adopt the standard form of application, 16 affidavit, and uniform video service license agreement compliant with Arizona law” and 17 to prevent the City from enforcing the Agreements. (Id. at 18.) The City moves to dismiss 18 all claims. (Doc. 12.) 19 I. Legal Standard 20 To survive a motion to dismiss under Rule 12(b)(6), “a party must allege ‘sufficient 21 factual matter, accepted as true, to state a claim to relief that is plausible on its face.’” In 22 re Fitness Holdings Int’l, Inc., 714 F.3d 1141, 1144 (9th Cir. 2013) (quoting Ashcroft v. 23 Iqbal, 556 U.S. 662, 678 (2009)). “A claim has facial plausibility when the plaintiff pleads 24 factual content that allows the court to draw the reasonable inference that the defendant is 25 liable for the misconduct alleged.” Id. (quoting Iqbal, 556 U.S. at 678). “[A]ll well- 26 pleaded allegations of material fact in the complaint are accepted as true and are construed 27 in the light most favorable to the non-moving party.” Id. at 1144-45 (internal quotation 28 marks omitted). However, the court need not accept legal conclusions couched as factual 1 allegations. Iqbal, 556 U.S. at 679-80. The court also may dismiss due to “a lack of a 2 cognizable legal theory.” Mollett v. Netflix, Inc., 795 F.3d 1062, 1065 (9th Cir. 2015) 3 (internal quotation marks omitted). 4 II. Count One 5 The City argues that Charter’s state-law claim should be dismissed because Charter 6 did not provide a notice of claim as required by A.R.S. § 12-821.01. (Doc. 12 at 5-10.) 7 Charter acknowledges it did not provide a notice of claim but argues that, because it is only 8 requesting declaratory and injunctive relief, it was not required to do so. (Doc. 13 at 6-9.) 9 Under Arizona law, a party seeking to bring a claim against a public entity must file 10 a “notice of claim” with that entity within 180 days of the action accruing. A.R.S. § 12- 11 821.01(A). “The claim shall . . . contain a specific amount for which the claim can be 12 settled and the facts supporting that amount.” Id. “If a notice of claim is not properly filed 13 within the statutory time limit, a plaintiff’s claim is barred by statute.” Falcon ex rel. 14 Sandoval v. Maricopa County, 144 P.3d 1254, 1256 (Ariz. 2006). “Actual notice and 15 substantial compliance do not excuse failure to comply with the statutory requirements.” 16 Id. 17 It is well established that Arizona’s notice of claim statute generally does not apply 18 to claims for declaratory or injunctive relief. Home Builders Ass’n of Cent. Ariz. v. Kard, 19 199 P.3d 629, 636 (Ariz. Ct. App. 2008) (“The notice of claim statute applies to a request 20 for damages, rather than to a request for declaratory or injunctive relief.”); State v. Mabery 21 Ranch, Co., L.L.C., 165 P.3d 211, 223 (Ariz. Ct. App. 2007) (“[T]he drafters intended the 22 statute to apply to claims for money damages . . . [and] not to apply to claims that seek 23 only to restrain government conduct.”); Martineau v. Maricopa County, 86 P.3d 912, 917 24 (Ariz. Ct. App. 2004) (“[I]n view of the nature of the action—that is, a declaratory 25 judgment action seeking to invalidate the County’s policy—Appellants were not required 26 to comply with Arizona’s public entity and county claim notice statutes.”). The City argues 27 that Charter’s claims nevertheless trigger A.R.S. § 12-821.01(A) because Charter is 28 effectively seeking something of value: “the recovery of valuable property interests” 1 through the repudiation of “four separate and bargained for contracts.” (Doc. 12 at 8.) The 2 City further argues that a judgment in Charter’s favor would implicate public funds because 3 the “impact on the City should [its] bargained and paid for consideration be altered would 4 be significant.” (Id.) The City contends that Charter’s request for relief is the equivalent 5 of a damages claim, noting that Charter indicated in its complaint that “the value of the 6 interests at stake exceeds $75,000.” (Id.) 7 The City cites Arpaio v. Maricopa County Board of Supervisors, 238 P.3d 626 8 (Ariz. Ct. App. 2010) in support of its position, but Arpaio is easily distinguishable. There, 9 the Arizona legislature passed a bill that required each county to transfer money to the 10 state’s general fund. 238 P.3d at 628. Maricopa County’s share was $24 million, and the 11 Maricopa County Board of Supervisors voted to “designate and transfer sums from twenty- 12 six special revenue funds.” Id. The Maricopa County Sheriff and Maricopa County 13 Attorney filed suit “seeking injunctive relief and a declaratory judgment alleging the Board 14 unlawfully seized more than $24 million from special revenue funds established for the use 15 and administration” in other areas. Id. at 629. After the superior court ruled against the 16 plaintiffs, Maricopa County transferred the funds to the state. Id. On appeal, the court 17 ordered supplemental briefing on “whether the operation of Arizona’s notice of claim 18 statute and the fact that no notices of claim had been filed against either governmental 19 entity . . . would render the Sheriff’s claims moot.” Id. at 630 (citation omitted). Although 20 the court acknowledged that, in general, “one who seeks declaratory relief need not comply 21 with” the notice of claim statute, it concluded that the because the plaintiffs’ claim against 22 the state was effectively a request for an injunction requiring a public entity to transfer 23 money out of its coffers, “such a claim would indeed constitute the type of claim requiring 24 compliance with the notice of claim statute.” Id. Similarly, because the claim against the 25 Board of Supervisors was effectively a request to replenish the missing funds via “the 26 reallocation of other funding within the County’s budget,” it was “logical to treat the 27 Sheriff’s contention as the equivalent of a damages claim, seeking recovery of funds he 28 argues were inappropriately taken.” Id. 1 No similar circumstances are present here.2 The City does not contend that a 2 favorable declaratory judgment would require a monetary judgment against the City or 3 recovery of funds paid by Charter to the City. Cf. Martineau, 86 P.3d at 913 (“Appellants’ 4 claim for declaratory relief does not seek damages and would not result in any monetary 5 award against the County even if successful (absent possible costs and attorneys’ fees), and 6 therefore would have no direct effect upon the County’s financial planning or budgeting.”). 7 The City similarly does not contend that a favorable injunction would require the City to 8 remit any payment to Charter. Compare Rosenkrantz v. Ariz. Bd. of Regents, 2020 WL 9 4346754, *2-3 (D. Ariz. 2020) (Arizona’s notice of claim statute applied because plaintiffs 10 “asserted they [were] entitled to a return of the pro-rated, unused funds” and were thus 11 bringing “an action for monetary damages under the guise of seeking declaratory relief”). 12 Nor has the City asserted that Charter’s claims would be amenable to “minute itemization 13 or to settlement for a sum certain,” Martineau, 86 P.3d at 916, which further weighs against 14 finding that Charter’s claims are subject to the notice of claim statute. A.R.S. § 12- 15 821.01(A) (“The claim shall also contain a specific amount for which the claim can be 16 settled and the facts supporting that amount.”). 17 The bottom line is that, although the City argues that the issuance of a judgment in 18 Charter’s favor would “implicat[e]” public funds (Doc. 12 at 8) and have a “substantial 19 financial impact” on the City’s budget and “financial planning” (Doc. 16 at 7), the City has 20 not identified any public funds it would have to pay Charter to satisfy any judgment in 21 22 2 Charter also cites various unpublished and depublished state court cases to support its argument (Doc. 13 at 8-9), but the Court may not use unpublished Arizona state court 23 cases to interpret Arizona law. See, e.g., Ariz. Sup. Ct. R. 111(c)(1) (“Memorandum decisions of Arizona state courts are not precedential . . . .”); N. Improvement Co. v. United 24 States, 398 F. Supp. 3d 509, 522 (D. Ariz. 2019) (“Under Arizona law, [an unpublished] decision is not precedent and may be cited only to establish claim preclusion, issue 25 preclusion, or law of the case, to assist a court in deciding whether to publish an opinion, grant a motion for reconsideration, or grant a petition for review, or for persuasive value if 26 it was issued on or after January 1, 2015. None of these conditions applies. As a result, U.S. Power cannot, under Arizona law, be cited as precedent or even for its 27 persuasive value.”) (citation omitted); CWT Can. II Ltd. P’ship v. Danzik, 2018 WL 571797, *5 n.5 (D. Ariz. 2018) (“Counterdefendants cite a 2012 memorandum decision 28 from the Arizona Court of Appeals, but that case may not be cited under Arizona Supreme Court Rule 111(c).”). 1 Charter’s favor. The Court acknowledges the City’s assertion that a judgment in Charter’s 2 favor could “result in the actual physical removal of the City’s critical emergency 3 communications infrastructure or put the City in a position of vulnerability to whatever 4 price Charter names.” (Doc. 16 at 8.) Nevertheless, the City has not identified—nor has 5 the Court identified in its own research—any published Arizona decision extending the 6 notice of claim statute to claims for declaratory or injunctive relief that would not require 7 a monetary judgment or transfer of funds and would only have an indirect impact, if any, 8 on a public entity’s budget. Declaratory judgments and injunctions are not valueless, cf. 9 Martinez v. Johnson & Johnson Consumer Inc., — F. Supp. 3d —, 2020 WL 3820392, *2 10 (C.D. Cal. 2020) (“When the plaintiff seeks injunctive relief, the cost of complying with 11 the injunction is included in the amount in controversy.”), yet Arizona has long exempted 12 them from the notice of claim statute, with only few exceptions not applicable here.3 13 III. Count Two 14 Count Two of Charter’s complaint is a federal claim. Unfortunately, the complaint 15 is somewhat ambiguous in its description of the nature of this claim. Some portions of the 16 complaint suggest that Count Two is a claim arising directly under the Cable Act. (Doc. 1 17 ¶ 18 [“The Court has federal question jurisdiction . . . . [because] Charter asserts claims 18 against the City under the federal Cable Act.”]; id. at 16 [heading of Count Two: “Violation 19 of Cable Act, 47 U.S.C. § 556(b)”].) Other portions of the complaint suggest that Count 20 Two is actually a preemption claim arising under the Supremacy Clause of the 21 Constitution. (Id. ¶ 109 [“The City’s refusal to obey state franchising law . . . is 22 inconsistent with the recognition of state authority in the federal framework and is therefore 23 3 Charter stated in its response that the City “purported to offer Charter a ‘standard 24 form of uniform video service license agreement for video service providers’” on August 13, 2020. (Doc. 13 at 5 n.1.) The City argues in its reply that its issuance of a uniform 25 video service license renders the issue of failing to provide a uniform video service license moot, so the “case now affects [two of the Agreements] only.” (Doc. 16 at 2-3.) Because 26 the City does not argue that these developments render this entire action moot, and because the issue of partial mootness was raised for the first time in the City’s reply, the Court 27 declines to rule on the issue at this time. ThermoLife Int’l LLC v. NeoGenis Labs Inc., 2020 WL 6395442, *7 (D. Ariz. 2020) (“The Court declines to rule on this argument, which 28 ThermoLife raised for the first time in a reply and which has not been fully briefed by the parties.”). 1 preempted. See U.S. Const. art. VI, cl. 2; 47 U.S.C. § 556(c).”].) 2 The City, which interprets Count Two as a direct claim under the Cable Act, argues 3 this claim must be dismissed because Section 556(b) “contains no clause that would permit 4 a company like Charter to file a claim to enforce the provision—there is no private right of 5 action created by the clause.” (Doc. 12 at 10.) Charter responds that it may seek 6 declaratory and injunctive relief from “a state actor engaging in conduct that is preempted 7 under federal law” and, therefore, violates the Supremacy Clause. (Doc. 13 at 10.) The 8 City replies that a Supremacy Clause argument is foreclosed because Charter did not plead 9 a Supremacy Clause claim. (Doc. 16 at 9.) 10 “It is beyond dispute that federal courts have jurisdiction over suits to enjoin state 11 officials from interfering with federal rights. A plaintiff who seeks injunctive relief from 12 state regulation, on the ground that such regulation is pre-empted by a federal statute which, 13 by virtue of the Supremacy Clause of the Constitution, must prevail, thus presents a federal 14 question . . . .” Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96 n.14 (1983) (citation omitted). 15 See also Cal. Tow Truck Ass’n v. City & County of San Francisco, 693 F.3d 847, 857 (9th 16 Cir. 2012) (preemption challenge to city ordinances presented a federal question under 17 Shaw); Armstrong v. Exceptional Child Ctr., Inc., 575 U.S. 320, 327 (2015) (holding that 18 the Supremacy Clause does not contain an implied right of action but recognizing that the 19 “ability to sue to enjoin unconstitutional actions by state and federal officers is the creation 20 of courts of equity, and reflects a long history of judicial review of illegal executive action, 21 tracing back to England”). 22 The Court disagrees with the City that Charter has failed to plead a preemption 23 claim. As noted, paragraph 109 of the complaint specifically uses the word “preemption” 24 and cites the Supremacy Clause. The City’s argument that Section 556 does not confer a 25 private right of action is thus irrelevant. See, e.g., Bud Antle, Inc. v. Barbosa, 45 F.3d 1261, 26 1269 (9th Cir. 1994) (“[I]t appears to be the general rule that a private party may seek 27 declaratory and injunctive relief against the enforcement of a state statutory scheme on the 28 ground of federal preemption. Even in the absence of an explicit statutory provision establishing a cause of action, a private party may ordinarily seek declaratory and || injunctive relief against state action on the basis of federal preemption.”) (citations □□ omitted). Itis unfortunate that the complaint contains other paragraphs that suggest Count 4|| Two arises under the Cable Act, but this “amounted to no more than inartful pleading, an 5 || error that does not in itself constitute an actual defect of federal jurisdiction.” Nationwide 6|| Mut. Ins. Co. v. Liberatore, 408 F.3d 1158, 1162 (9th Cir. 2005) (internal quotation marks omitted) (holding the district court did not err in denying a motion to dismiss where the || “existence of federal subject-matter jurisdiction, predicated on federal question 9 || jurisdiction, was clear’). See also 1 Gensler, Federal Rules of Civil Procedure, Rules and 10 || Commentary, Rule 8, at 164 (2020) (Rule 8(e) “stands as a reminder that, when enforcing 11 || the pleading requirements, courts must not exalt form over substance or rely on errors in || draftsmanship to bar justice.”) (footnote and internal quotation marks omitted). 13} IV. Count Three 14 The City argues that “[b]ecause Counts IJ and II fail,” Charter’s third count, a request 15 || for declaratory relief, should be dismissed as well. (Doc. 12 at 11.) Because Counts One || and Two have not been dismissed, this argument fails. 17 Accordingly, 18 IT IS ORDERED that the City’s motion to dismiss (Doc. 12) is denied. 19 Dated this 15th day of December, 2020. 20 21 Lm ee” 22 f _o——— Dominic W. Lanza 23 United States District Judge 24 25 26 27 28 -9-