Qwest Corporation v. City of Des Moines, Iowa , 896 F.3d 843 ( 2018 )


Menu:
  •                  United States Court of Appeals
    For the Eighth Circuit
    ___________________________
    No. 17-1257
    ___________________________
    Qwest Corporation, doing business as CenturyLink QC; Windstream
    Communications, LLC, Formerly doing business as Windstream Communications,
    Inc.; McLeodUSA Telecommunications Services, L.L.C.
    lllllllllllllllllllllPlaintiffs - Appellants
    v.
    City of Des Moines, Iowa
    lllllllllllllllllllllDefendant - Appellee
    ____________
    Appeal from United States District Court
    for the Southern District of Iowa - Des Moines
    ____________
    Submitted: May 16, 2018
    Filed: July 17, 2018
    ____________
    Before BENTON, KELLY, and STRAS, Circuit Judges.
    ____________
    KELLY, Circuit Judge.
    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
    -2-
    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
    -3-
    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) the City has actually incurred in managing the rights-of-way, (2) are
    reasonable, and (3) are caused by the public utility’s activity in the rights-of-way.
    On appeal, the parties’ main disagreement is whether the City’s construction
    costs qualify as “management costs” under the statute. To answer this question, we
    first have to resolve the parties’ initial dispute over the meaning of “managing” and
    “actually incurred” as used in these statutory provisions. As to “managing,” the Iowa
    legislature defined “management costs” as those “actually incurr[ed] in managing
    public rights-of-way,” Iowa Code § 480A.2(2), but did not further define the word
    “managing.” When interpreting statutory terms, the Iowa courts “consider the context
    in which the words of the statute are used.” Lauridsen v. City of Okoboji Bd. of
    Adjustment, 
    554 N.W.2d 541
    , 544 (Iowa 1996). Here, the legislature explained that
    its purpose in enacting chapter 480A was to “define the right of local governments
    to charge public utilities for . . . operation of public utility facilities in local
    government rights-of-way.” Iowa Code § 480A.1 (emphasis added). Since the
    legislature defined “management” using the word “managing,” we conclude that the
    legislature intended these terms to be given their plain and ordinary meaning. In
    Iowa, that means we look to the dictionary definition of the term. 
    Lauridsen, 554 N.W.2d at 544
    . “Manage” means “to conduct, carry on, supervise, or control.”
    -4-
    Manage, Oxford English Dictionary (2018); see also MANAGE, Black’s Law
    Dictionary (10th ed. 2014) (“1. To exercise executive, administrative, and supervisory
    powers. 2. To conduct, control, carry on, or supervise. 3. To regulate or administer
    a use or expenditure.”). Thus, the City can satisfy the first element of the statutory
    definition by showing that it has actually incurred costs in conducting, carrying on,
    supervising, or controlling the public rights-of-way.
    As to “actually incurred,” the statute provides no definition. We think that is
    because the Iowa legislature used words that are clear enough. See 
    Lauridsen, 554 N.W.2d at 544
    . A cost is actually incurred when it is no longer hypothetical or
    projected. Similarly, a future cost that has yet to materialize is also not a cost actually
    incurred. See, e.g., Actual, Oxford English Dictionary (2018) (“Existing in fact, real;
    carried out, acted in reality. [As o]pposed to potential, possible, ideal, etc.”); Incur,
    Merriam-Webster Dictionary (2018) (“[T]o become liable or subject to . . . .”).
    Turning now to whether construction costs are “management costs” that the
    City can properly charge the Carriers, our answer is maybe. The parties agree that
    construction costs are the “increased costs that the City incurs to engineer and
    construct around the presence of utilities” in the public rights-of-way. These
    construction costs are management costs if they (1) are actually incurred in
    conducting, carrying on, supervising, or controlling the public rights-of-way; (2) are
    reasonable; and (3) are caused by the Carriers’ activity in the right-of-way.
    The City’s principal argument—that all construction costs count as
    management costs—is based not on the plain language of chapter 480A but instead
    on a decision of the Supreme Court of Iowa called Kragnes II. See Kragnes v. City
    of Des Moines (Kragnes II), 
    810 N.W.2d 492
    (Iowa 2012). In Kragnes I, the court
    had held that a city has authority to impose a franchise fee “so long as the charge is
    reasonably related to the reasonable costs of inspecting, licensing, supervising, or
    otherwise regulating the activity that is being franchised.” Kragnes v. City of Des
    -5-
    Moines (Kragnes I), 
    714 N.W.2d 632
    , 642–43 (Iowa 2006). In Kragnes II, the court
    then concluded that certain construction costs met this standard, and were thus a
    permissible component of the franchise fee. Kragnes 
    II, 810 N.W.2d at 508
    –11. But
    Kragnes I and II concerned a different kind of municipal fee (franchise fees) imposed
    pursuant to a different statute (Iowa Code § 364.2), which are assessed under a
    different legal standard (reasonable relationship to exercise of police power). See 
    id. at 497;
    Kragnes 
    I, 714 N.W.2d at 642
    . That the Supreme Court of Iowa approved of
    various fees associated with the City’s construction projects in Kragnes II does not
    dispose of this case.
    Nevertheless, the Kragnes cases provide a useful backdrop for our analysis.
    See St. Paul 
    Fire, 149 F.3d at 880
    . In Kragnes I, the Supreme Court of Iowa applied
    its longstanding home-rule precedent. It explained that Iowa municipalities lack
    power to levy taxes (unless authorized by the legislature), but may use their police
    power to impose certain fees. Kragnes 
    I, 714 N.W.2d at 639
    –40. However, this
    regulatory power to charge fees must be given “a much narrower construction”: fees
    are limited to those that “will legitimately assist in the regulation.” 
    Id. at 642
    (quoting Star Transp. Co. v. Mason City, 
    192 N.W. 873
    , 883 (Iowa 1923)). We think
    our analysis of Iowa Code chapter 480A is consistent with these precedents because
    management fees are limited to costs actually incurred by municipalities in managing
    the rights-of-way, and because those limits are prescribed by chapter 480A’s plain
    text.
    With the proper legal standard in mind, we think the appropriate next step is
    to remand this matter for additional fact finding.1 The record in this case is replete
    with dense reports and conflicting expert opinions. Much turns on which experts to
    1
    The City argues that the district court simply adopted the City’s proposed
    order. We see no indication that the district court did so and, in any event, we
    question whether this case’s complex factual disputes are amenable to such summary
    disposition.
    -6-
    believe, and those decisions must be made in the first instance by the trier of fact. All
    of the parties’ myriad remaining arguments involve application of the law to the
    facts—we do not address those arguments at this juncture.
    For these reasons, we affirm the district court’s finding of non-preemption, but
    vacate the judgment with regards to Iowa Code chapter 480A. We remand the case
    to the district court to make additional findings of fact, and apply the legal standard
    set out in this opinion.
    ______________________________
    -7-