Sacramento Metropolitan Cable Television Comm. v. Comcast Cable Comm. Mgt., LLC ( 2020 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---- 11 12 SACRAMENTO METROPOLITAN CABLE No. 2:18-CV-00500 WBS EFB TELEVISION COMMISSION, 13 No. 2:18-cv-01212 WBS EFB Plaintiff, 14 MEMORANDUM AND ORDER RE: v. CROSS MOTIONS FOR SUMMARY 15 JUDGMENT COMCAST CABLE COMMUNICATIONS 16 MANAGEMENT, LLC, 17 Defendant. 18 19 ----oo0oo---- 20 Plaintiff Sacramento Metropolitan Cable Television 21 Commission (“SMCTC” or “plaintiff”) brought this action against 22 Defendant Comcast Cable Communications Management, LLC (“Comcast” 23 or “defendant”) claiming that (1) Comcast violated California 24 Public Utility Code §§ 5840, 5860, and 5870; (2) Comcast breached 25 its contract with plaintiff; (3) Comcast unjustly enriched itself 26 at plaintiff’s expense; and (4) that it is entitled to 27 28 1 declaratory relief. (Compl. (Docket No. 1).)1 This court has 2 jurisdiction of this action pursuant to 28 U.S.C. § 1332 because 3 there is complete diversity of citizenship between the parties 4 and the amount in controversy exceeds $75,000, exclusive of 5 interest and costs. 6 Each claim of the Complaint is predicated on the theory 7 that Comcast underpaid annual cable “franchise fees” and Public, 8 Educational, and Governmental (“PEG”) fees owed to plaintiff 9 under California’s Digital Infrastructure and Video Competition 10 Act of 2006 (“DIVCA”), Cal. Pub. Util. Code § 5800, et seq. The 11 claims involve six forms of alleged underpayments based on two 12 audits covering the periods of 2013–2014 and 2015–2016. Comcast 13 moves for summary judgment on each of the six forms of alleged 14 underpayments. (Def.’s Mot. for Summ. J.) (Docket No. 42; Docket 15 No. 34.) SMCTC moves for partial summary judgment on three of the 16 six forms of alleged underpayments and as to whether Comcast’s 17 unilateral deductions prior to paying SMCTC are permitted under 18 DIVCA and applicable federal law.2 (Pl.’s Mot. for Partial Summ. 19 J. (“Pl.’s Mot. for Summ. J.”) (Docket No. 49; Docket No. 41.) 20 1 All docket references refer to the docket entries in Case No. 2:18-cv-00500. These two cases were consolidated 21 pursuant to Federal Rule of Civil Procedure 42(a)(2) for all 22 purposes and the parties agreed that the main case number would be 2:18-cv-500 WBS EFB. (Docket No. 20.) 23 2 SMCTC does not move for summary judgment as to launch 24 incentives, multi-service fees, and customer credits for missed installation/activation appointments. (See generally Pl.’s Mot. 25 for Summ. J.) Although SMCTC did not initially move for summary judgment on tower rental fees, they agree that there are no 26 material issues of disputed facts on this claim and that it is 27 appropriate for disposition on summary judgment. (Pl.’s Opp’n to Def’s Mot. for Summ. J. at 1, 17.) (Docket No. 54.) 28 1 I. Facts & Procedural Background 2 Plaintiff SMCTC is a joint powers agency with certain 3 regulatory authority over cable services in Sacramento County. 4 (Def.’s Statement of Undisputed Facts at ¶ 1 (“Def.’s SUF”) 5 (Docket No. 44).) The members of SMCTC are the County of 6 Sacramento and the cities of Sacramento, Galt, Folsom, Citrus 7 Heights, Rancho Cordova and Elk Grove. (Pl.’s Statement of 8 Undisputed Facts at ¶ 4 (“Pl.’s SUF”)) (Docket No. 49-1.) In 9 California, cable franchises were historically issued by local 10 government entities, such as SMCTC, to cable operators. (Id. at 11 ¶ 4.) DIVCA replaced that regime with a statewide franchising 12 system managed by the California Public Utilities Commission 13 (“CPUC”). (Id. at ¶ 6.) As of 2011, Comcast has operated its 14 cable systems in California pursuant to a CPUC-issued franchise. 15 (Id. at ¶ 7.) Comcast, either directly or through its 16 affiliates, provides video service under a state-issued video 17 franchise within SMCTC’s jurisdiction. (Id. at ¶ 8.) 18 Under the 1984 Federal Cable Act, (“Cable Act”), 47 19 U.S.C. § 521, et seq., franchising authorities may require a 20 cable operator to pay franchise fees up to five percent of its 21 annual “gross revenues . . . . from the operation of the cable 22 system to provide cable service.” 47 U.S.C. § 542(b). Franchise 23 fees are “passed through” and paid by cable subscribers as part 24 of their monthly cable bills. 47 U.S.C. § 542(c). Any fees 25 assessed by franchising authorities for PEG channels and capital 26 support are also “passed through” to cable subscribers. (Id.) 27 DIVCA imposes an annual “User Fee” on cable operators 28 as a condition to obtaining a franchise (“CPUC User Fee”). See 1 Cal. Pub. Util. Code § 441. DIVCA additionally imposes the 2 payment of franchise fees, which are paid to municipalities for 3 the use of the public rights-of-way in their jurisdictions. See 4 Cal. Pub. Util. Code § 5860(a). Unless a locality specifically 5 adopts a lower fee, California Public Utilities Code section 6 5840(q)(1) requires all DIVCA franchisees to pay a franchise fee 7 equal to the applicable local agency equal to five percent of its 8 “gross revenues.” (Pl.’s SUF at ¶ 14.) Neither SMCTC nor its 9 member agencies have adopted a lower fee. (Id.) DIVCA 10 authorizes franchising authorities to implement a PEG fee of up 11 to one percent of cable service revenues, which is also paid to 12 localities. See Cal. Pub. Util. Code § 5870(n). SMCTC and its 13 member agencies have adopted ordinances to activate a one percent 14 PEG fee on DIVCA franchisees, such as Comcast. (Pl.’s SUF at ¶ 15 18.) State franchise holders are authorized to identify and 16 collect both the franchise fees and PEG fees as separate line 17 items on a subscriber’s bill. See Cal. Pub. Util. Code. §§ 18 5860(j); 5870(o). 19 A state franchise holder is required to remit franchise 20 and PEG fees to a local entity on a quarterly basis. See Cal. 21 Pub. Util. Code §§ 5860(h), 5870(m). A local entity may examine 22 a franchise holder’s business records once a year to ensure 23 payment of franchise fees in accordance with Section 5860 of 24 DIVCA. See Cal. Pub. Util. Code § 5860(i). In 2016 and 2017, 25 SMCTC retained Ashpaugh & Sculco, CPAs, PLC (“Ashpaugh & Sculco”) 26 to perform an audit of franchise fees and PEG fees Comcast paid 27 for the 2013–2014 and 2015–2016 periods. (Pl.’s SUF at ¶¶ 23– 28 28.) These audits reported that Comcast had underpaid franchise 1 fees and PEG fees to SMCTC in both audit periods in the amounts 2 of $682,911 for 2013–14 and $828,590 for 2015–16. (Id. at ¶¶ 25, 3 28.) 4 The court previously dealt with certain aspects of this 5 dispute in Comcast of Sacramento I, LLC. v. Sacramento 6 Metropolitan Cable Television Commission, Case No. 2:16-cv-01264 7 WBS EFB, 250 F. Supp.3d 616, 618–27 (E.D. Cal. 2017)(“SMCTC I”). 8 In that case, Comcast sued SMCTC and alleged causes of action for 9 conversion and “common count” after SMCTC withheld Comcast’s 10 franchise security deposit following a dispute over the amount of 11 fees Comcast was required to pay SMCTC under DIVCA. Id. at 619. 12 SMCTC raised a defense of offset, claiming that an audit for the 13 period of 2011-2012 established underpayments of franchise and 14 PEG fees. Id. at 620. The court ruled that PEG fees did not 15 fall within the definition of “gross revenue” for purposes of 16 calculating franchise fees because it fell within an exception 17 stated in Cal. Pub. Util. Code § 5860(e). Id. at 628. The court 18 also found that the CPUC User Fee was a “fee of general 19 applicability” excluded from franchise fees under the Federal 20 Cable Act. Id. at 626. 21 Both SMCTC and Comcast appealed from the judgment in 22 SMCT I. See Comcast of Sacramento I, LLC v. Sacramento 23 Metropolitan Cable Television Commission, 923 F.3d 1163, 1165– 24 1172 (9th Cir. 2019) (“SMCTC II”). The Ninth Circuit held that 25 Comcast’s attempt to recover its security deposit was barred by 26 Section 555a(a) of the Federal Cable Act, which limits relief in 27 suits against franchising authorities to injunctive and 28 declaratory relief. See id. at 1171. While the case was on 1 appeal, SMCTC initiated the present consolidated lawsuits against 2 Comcast based on the two more recent audits referenced in the 3 Complaints.3 4 5 3 The court takes judicial notice of the provisions of the SMCTC members city/county codes and the SMCTC Resolution 6 provided in plaintiff’s request for judicial notice. (Request for Judicial Notice 1–8 (“Pl.’s RJN”) (Docket No. 50).) See Tollis, 7 Inc. v. Cty. of San Diego, 505 F.3d 935, 938 n. 1 (9th Cir. 2007) (“Municipal ordinances are proper subjects for judicial 8 notice.”). Defendant has not objected to items listed in plaintiff’s Request for Judicial Notice 9–11, 13–15, 17, 19, and 9 21. These requests consist of defendant’s franchise application, 10 franchise certificates, the parties’ engagement agreements for analysis of franchise and PEG fees, deposition excerpts by 11 defendant’s witness Lee-Ann Peling, and defendant’s audit responses. Accordingly, the court will take judicial notice of 12 these documents. Defendant objects to the items listed in plaintiff’s Request for Judicial Notice 12, 16, 18, 20, and 21 on 13 the grounds that the contents are hearsay and not subject to 14 judicial notice under Federal Rule of Evidence 201. These documents consist of deposition excerpts from the deposition of 15 Robert Allen Davison and Steven M. Detrick, the 2013-2014 audit report, the 2015-2016 audit report, and the corrected 2015-2016 16 audit report. Because the court did not rely on these documents for the truth of the matter asserted, the court will take 17 judicial notice of these documents as well. 18 Defendant requests that the court take judicial notice of five documents. (Request for Judicial Notice (“Def.’s RJN”)) 19 (Docket No. 46).) These documents are: (1) this court’s April 5, 2017 order on the cross-motions for summary judgment in Case No. 20 2:16-cv-01264 titled Comcast of Sacramento I, LLC v. Sacramento Metropolitan Cable Television Commission, 250 F. Supp. 3d 616, 21 626 (E.D. Cal. 2017) (“SMCTC-I”); (2) the Ninth Circuit Court of 22 Appeal’s Opinion filed on May 8, 2019 in SMCTC-II, 923 F.3d 1163 (9th Cir. 2019); (3) this court’s October 1, 2019 judgment in 23 Case No. 2:16-cv-01264 entered pursuant to the Ninth Circuit’s decision; (4) the operative complaint in the instant case (Case 24 No. 2:18-cv-00500), which contains SMCTC’s 2013-2014 audit reports as attachments, and (5) the operative first amended 25 complaint in the instant case (Case No. 2:18-cv-01212), which contains SMCTC’s 2015-2016 audit report. Plaintiff has not 26 objected. Accordingly, the court will take judicial notice of 27 the items listed in defendant’s Request for Judicial Notice in its entirety. 28 1 II. Discussion 2 Summary judgment is proper “if the movant shows that 3 there is no genuine dispute as to any material fact and the 4 movant is entitled to judgment as a matter of law.” Fed. R. Civ. 5 P. 56(a). A material fact is one that could affect the outcome 6 of the suit, and a genuine issue is one that could permit a 7 reasonable jury to enter a verdict in the non-moving party’s 8 favor. Anderson v. Liberty Lobby Inc., 477 U.S. 242, 248 (1986). 9 The party moving for summary judgment bears the initial 10 burden of establishing the absence of a genuine issue of material 11 fact and can satisfy this burden by presenting evidence that 12 negates an essential element of the non-moving party’s case. 13 Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986). 14 Alternatively, the movant can demonstrate that the non-moving 15 party cannot provide evidence to support an essential element 16 upon which it will bear the burden of proof at trial. Id. Where 17 “the case turns on a mixed question of fact and law and the only 18 disputes relate to the legal significance of undisputed facts, 19 the controversy collapses into a question of law suitable to 20 disposition on summary judgment.” Thrifty Oil Co. v. Bank of Am. 21 Nat’l Tr. & Sav. Ass’n, 322 F.3d 1039, 1046 (9th Cir. 2003). 22 “Where the record taken as a whole could not lead a rational 23 trier of fact to find for the non-moving party, there is no 24 genuine issue for trial.” Matsuhita Elec. Indus. Co. v. Zenith 25 Radio Corp., 475 U.S. 574, 587 (1986). Any inferences drawn from 26 the underlying facts must, however, be viewed in the light most 27 28 1 favorable to the party opposing the motion. See id. 4 2 A. PEG Fees 3 Section 5870(n) of the California Public Utilities Code 4 states that “a local entity may, by ordinance, establish a fee to 5 support PEG channel facilities.” Cal. Pub. Util. Code § 5870(n). 6 Each SMCTC member locality has imposed a PEG fee.5 Comcast, in 7 turn, passes the PEG fee on to its subscribers, who pay the fee 8 “as a separate line item on [their] regular bill.” Cal. Pub. 9 Util. Code § 5870(o). Comcast does not keep any portion of the 10 PEG fees that it bills to subscribers and forwards those PEG 11 payments to SMCTC. (Pl.’s Resp. to Def.’s SUF at ¶ 15 (Docket 12 No. 54–2).) The parties dispute whether Comcast must include PEG 13 fees in its “gross revenue” for purposes of calculating its state 14 franchise fees. The dispute centers over the interpretation of 15 4 Comcast makes several evidentiary objections to the 16 Declaration of Robert Davison and its attachments, the deposition excerpts of Garth Ashpaugh, and the expert report prepared by Mr. 17 Ashpaugh attached to the Declaration of Mark Velasquez (Docket 18 No. 54-1) on the grounds that the statements by Mr. Davison and Mr. Ashpaugh lack foundation, are hearsay, speculative, and 19 irrelevant. (See Docket No. 53-1; Docket No. 56-1.) The Ninth Circuit has established that “to survive summary judgment, a 20 party does not necessarily have to produce evidence in a form that would be admissible at trial, as long as the party satisfies 21 the requirements of Federal Rule of Civil Procedure 56.” Fraser 22 v. Goodale, 342 F.3d 1032, 1036–37 (9th Cir. 2003.) Moreover, “[a]s a practical matter, the court finds this entire exercise of 23 considering evidentiary objections on a motion for summary judgment to be futile and counterproductive.” Burch v. Regents 24 of University of California, 433 F.Supp.2d 1110, 1122 (E.D. Cal. 2006.) Accordingly, if Comcast wishes to raise these evidentiary 25 objections, it may do so at trial. 26 5 See, e.g., Sacramento Cty. Code § 5.50.977; Citrus 27 Heights Mun. Code § 90-183; Elk Grove Mun. Code § 5.50.010; Folsom Mun. Code § 5.50.010; Galt Mun. Code § 5.55.030; Rancho 28 Cordova Mun. Code § 5.75.800; Sacramento City Code § 5.28.2670. 1 California Public Utilities Code § 5860 (“section 5860”). 2 Section 5860(d) defines “gross revenue” for purposes of 3 state franchise fees as: 4 [A]ll revenues actually received by the holder of a state franchise, as determined in accordance 5 with generally accepted accounting principles, that is derived from the operation of the 6 holder’s network to provide cable or video service within the jurisdiction of the local 7 entity, including . . . [a]ll charges billed to subscribers for any and all cable service or 8 video service provided by the holder of a state franchise, including all revenue related to 9 programming provided to the subscriber, equipment rentals, late fees, and insufficient fund fees. 10 11 Cal. Pub. Util. Code § 5860(d)–(d)(1). 12 Section 5860(e)(6) contains an exception to the above 13 provision for “[a]mounts billed to, and collected from, 14 subscribers to recover any tax, fee, or surcharge imposed by any 15 governmental entity on the holder of a state franchise, 16 including, but not limited to, sales and use taxes, gross 17 receipts taxes, excise taxes, utility users taxes, public service 18 taxes, communications taxes, and any other fee not imposed by 19 this section.” See Cal. Pub. Util. Code § 5860(e)(6). 20 Comcast argues that the payments it collects from 21 subscribers to pay PEG fees fit within this exception because 22 they are imposed by section 5870 and thus are not part of “gross 23 revenue” as defined in Section 5860(d). (Def.’s Mot. for Summ. 24 J. at 7.) SMCTC contends that section 5860(e)’s exception does 25 not apply because PEG fees are imposed pursuant to section 26 5860(c). (Pl.’s Mot. for Summ. J. at 13.) Section 5860(c) 27 states that no local entity may demand any additional fees or 28 charges from the holder of a state franchise “based solely on its 1 status as a provider of video or cable services other than as set 2 forth in this division. . .” See Cal. Pub. Util. Code § 5860(c). 3 SMCTC argues that “this division” means Division 2.5 of the 4 California Public Utilities Code (i.e. all of DIVCA), and that 5 5860(c), through its incorporation of all of DIVCA, is the 6 section that effectively authorizes PEG fees. (Pl.’s Mot. for 7 Summ. J. at 13.) 8 Comcast’s position is more persuasive. Under the plain 9 language of Section 5860(e)(6), “gross revenue” does not include 10 revenues from “any. . . fee not imposed by [Section 5860].” Cal. 11 Pub. Util. Code § 5860(e)(6). PEG fees are authorized under 12 California Public Utilities Code section 5870 (“section 5870”). 13 The use of the term “this division” in Section 5860(c) does not 14 displace the legislature’s use of the term “this section” in 15 5860(e)(6), which specifically addresses which fees should be 16 included and excluded from “gross revenue” when calculating 17 franchise fees. If the legislature had meant “this division” in 18 Section 5860(e)(6), it would not have said “this section.” It is 19 improper to “assume that our Legislature chose. . . an indirect 20 route to convey an important and easily expressed message.” 21 Debbie Reynolds Prof. Rehearsal Studios v. Superior Court, 25 22 Cal. App. 4th 222, 232 (2nd Dist. 1994). 23 SMCTC also points out that PEG fees were not 24 specifically enumerated in the exception for “gross revenue” laid 25 out in 5860(e). (Pl.’s Mot. for Summ. J. at 13–14.) They 26 contend that the canon of esjusdem generis (meaning “of the same 27 kind”) dictates that the PEG fees should be not be included 28 because the list of items enumerated are all generally applicable 1 taxes and the PEG fee is not a generally applicable tax. (Id. at 2 14.) However, Section 5860(e)(6) treats “fees”, “taxes”, and 3 “surcharges” the same in enumerating the exclusions from “gross 4 revenue.” See Cal. Pub. Util. Code § 5860(e)(6) (excluding from 5 revenues “amounts billed to, and collected from, subscribers to 6 recover any tax, fee, or surcharge, imposed by any governmental 7 entity on the holder of a state franchise. . .”). Most 8 critically, the legislature chose to use the broad catch-all “any 9 other fee not imposed by this section”, and made no limitations 10 as to the type of fees that would be encompassed. Therefore, the 11 doctrine of esjusdem generis appears to confirm that the 12 exclusion from “gross revenue” applies broadly to “any other 13 fees” not imposed by Section 5860, regardless of whether they are 14 styled as a “fee” or a “tax.” 15 SMCTC additionally argues that PEG fees do not fall 16 within the exception in section 5860(e) because the PEG fees are 17 imposed by DIVCA, not local government entities. (Pl.’s Mot. for 18 Summ. J. at 10.) However, while section 5870(n) authorizes 19 localities to establish a fee to support PEG channel facilities, 20 it does not mandate that localities do so. See Cal. Pub. Util. 21 Code § 5870(n). Instead, localities may decide whether they wish 22 to pass an ordinance to recover a PEG fee and determine the 23 amount of the fee (not to exceed 1 percent of the holder’s “gross 24 revenue” if no fee existed before the implementation of DIVCA or 25 not to exceed 3 percent of the holder’s “gross revenue” if a PEG 26 fee in excess of 1 percent was already being charged before 27 DIVCA.) See id. 28 The California Attorney General Opinion that SMCTC 1 relies on for its position is inapposite. The Attorney General 2 Opinion relates to whether PEG fees were taxes requiring voter 3 approval under California law. See 99 Cal. Op. Att’y Gen. 1 4 (2016) at *5. Although Attorney General Opinions are entitled to 5 “great weight”, Napa Valley Educators’ Association v. Napa Valley 6 Unified School District, 194 Cal. App. 3d 243, 251 (1st Dist. 7 1987), the Opinion cited by SMCTC focused on whether a local 8 entity which passed an ordinance to collect the public access fee 9 was imposing a charge on an individual or entity that would not 10 be otherwise obligated to pay such a fee. See 99 Cal. Op. Att’y 11 Gen. 1 at *5. Because DIVCA mandates that franchise applicants 12 must provide both public access channels and any required funding 13 under Cal. Pub. Util. Code § 5870, the Attorney General concluded 14 that the PEG fees were not a tax. Id. However, the Attorney 15 General did not analyze or mention whether PEG fees are excluded 16 from “gross revenues” under Section 5860(e)(6), and did not 17 address the flexibility that municipalities have in determining 18 whether to impose a PEG fee and in what amount. Accordingly, the 19 court finds that the opinion is not instructive here. The court 20 finds as a matter of law that it is the municipalities who impose 21 a PEG fee, not DIVCA itself. 22 SMCTC finally argues that the PEG fees must be included 23 in calculating franchise fees because the legislature stated that 24 it was their intent that “the definition of gross revenues in 25 this division shall result in local entities maintaining their 26 existing level of revenue from franchise fees.” Cal. Pub. Util. 27 Code § 5810(a)(4)(d). [“S]tatements of the intent of the 28 enacting body contained in a preamble, while not conclusive, are 1 entitled to consideration.” People v. Canty, 32 Cal. 4th 1266, 2 1280 (2004). However, California Code of Civil Procedure § 1859 3 provides that “when a general and a particular provision are 4 inconsistent, the latter is paramount to the former” and “a 5 particular intent will control a general one that is inconsistent 6 with it.” Cal. Code. Civ. P. § 1859. As such, the generalized 7 intent of the legislature set forth in the preamble cannot 8 override the specific exclusions from “gross revenue” set forth 9 in section 5860(e)(6). 10 Accordingly, the court finds as a matter of law that 11 PEG fees do not constitute “gross revenue” under section 5860(d) 12 and will grant summary judgment in Comcast’s favor on this claim. 13 B. CPUC User Fee 14 Comcast argues that it must reduce the state franchise 15 fee it is obligated to pay to SMCTC to stay within the five 16 percent cap on franchise fees imposed by the Federal Cable Act, 17 47 U.S.C. § 541, et seq., because the CPUC User Fee is a 18 “franchise fee” under the Act. (Def.’s Mot. for Summ. J. at 10.) 19 SMCTC disagrees, contending that the CPUC user fee does not count 20 toward the Act’s five percent cap because it is not a “franchise 21 fee.” (Pl.’s Mot. for Summ. J. at 6.) 22 47 U.S.C. § 542(b) of the Federal Cable Act states that 23 “[f]or any twelve-month period, the franchise fees paid by a 24 cable operator with respect to any cable system shall not exceed 25 5 percent of such cable operator’s gross revenues derived in such 26 period from the operation of the cable system to provide cable 27 services.” 47 U.S.C. § 542(g)(1) defines “franchise fee” as 28 including “any tax, fee, or assessment of any kind imposed by a 1 franchising authority or other governmental entity on a cable 2 operator . . . solely because of [its] status as such.” 47 3 U.S.C. § 542(g)(1). Section § 542(g)(2) excludes from this 4 definition “any tax, fee, or assessment of general applicability 5 (including any such tax, fee, or assessment imposed on both 6 utilities and cable operators or their services but not including 7 a tax, fee, or assessment which is unduly discriminatory against 8 cable operators).” DIVCA separately imposes annual franchise 9 fees of five percent of a cable operator’s cable service 10 revenues, which are paid to each locality where it operates its 11 cable system pursuant to a state franchise. See Cal. Pub. Util. 12 Code § 5860(a) (requiring the “holder of a state franchise” to 13 “remit to the local entity a state franchise fee” where it 14 “offers video service”). 15 The CPUC also imposes an annual User Fee “to be paid by 16 an applicant or holder of a state franchise pursuant to [DIVCA] 17 (commencing with Section 5800).” Cal. Pub. Util. Code § 441. 18 “The annual fee shall be established to produce a total amount 19 equal to that amount established in the authorized commission 20 budget for the same year, including adjustments for increases in 21 employee compensation, other increases appropriated by the 22 Legislature, and an appropriate reserve to carry out the 23 provisions of [DIVCA].” Id. The CPUC User Fee applies not only 24 to cable operators, but to all “holders of a state franchise” 25 that authorizes the “operation of any network in the right-of-way 26 capable of providing video service to subscribers” (“video 27 franchise holders”). See id. at § 441, 5830(f)-(h). “[I]t is 28 possible to qualify for the [CPUC User Fee] without being a cable 1 operator.” Cty. of Los Angeles v. Time Warner NY Cable LLC, No. 2 CV-12-06655 SJO (JCx), 2013 WL 12126774, at *2 (C.D. Cal. July 3, 3 2013). 4 This court previously ruled that the CPUC User Fee is 5 not a franchise fee within the meaning of 47 U.S.C. § 542 for two 6 reasons. See SMCTC-I, 250 F. Supp. 3d at 624–25. First, because 7 the CPUC User Fee also applies to non-cable operating video 8 franchise holders, it is not imposed on cable operators “solely 9 because of their status as such” under 47 U.S.C. 542(g)(1). See 10 id. Second, because the User Fee is also imposed on non-cable 11 operators, the court found that it is a fee of “general 12 applicability” under 47 U.S.C. § 542(g)(2). See id. However, 13 Comcast contends that a recent order by the Federal 14 Communications Commission (“FCC”) clarifies the proper scope of 15 franchise fees under 47 U.S.C. § 542 and confirms that the CPUC 16 user fee is a “franchise fee” subject to the federal 5% cap. See 17 In the Matter of Implementation of Section 621(a)(1) of the Cable 18 Commc’ns Policy Act of 1984 As Amended by the Cable Television 19 Consumer Prot. & Competition Act of 1992 (“Section 621 Order”), 20 34 FCC Rcd. 6844, at ¶¶ 80–94 (Aug. 2, 2019). 21 The Section 621 Order emphasizes that Congress defined 22 the term “franchise fee” broadly to “limit the imposition of any 23 tax, fee, or assessment of any kind — including fees purportedly 24 for provision of non-cable services for access to, use of, or the 25 value of the rights of way – to five percent of the cable 26 operator’s revenue from cable services.” Id. at ¶ 90. A local 27 government entity cannot “end-run the cap by imposing fees for 28 access to any public right of way within the franchise area or in 1 instances of overlapping jurisdiction.” Id. The FCC states that 2 47 U.S.C. § 622 envisions that fees imposed on cable operators 3 for access to the rights of way in their capacity as franchisees 4 is a fee imposed on a cable operator “solely because of their 5 status as such.” Id. at ¶ 92. Understood in this manner, the 6 FCC states that “any assessment on a cable operator for 7 constructing, managing, or operating its cable system in the 8 rights-of-way is subject to the five percent cap” even if “other 9 non-cable providers. . . are subject to the same or similar 10 access fees.” Id. at ¶ 92. This is because the definition of 11 “franchise fee” in section 622(g)(1) centers on why the fee is 12 imposed on a cable operator, i.e. “solely because of [its] 13 status” as a franchisee, and not to whom the fee is imposed. 14 (Id.) The FCC states that generally-applicable taxes are 15 distinct and their “validity must be shown, at least in part, by 16 their application to broader classes of entities or citizens 17 beyond providers of cable and non-cable communications services.” 18 (Id.) 19 Comcast contends that, although the CPUC User Fee at 20 issue in this case has a different name and is imposed under a 21 different section of DIVCA from the fees expressly labeled as 22 “franchise fees”, both are “monetary assessments for Comcast’s 23 right to operate its cable system in California and therefore 24 constitute franchise fees subject to the federal 5% cap.” 25 (Def.’s Mot. for Summ. J. at 14.) Comcast likewise argues that 26 the FCC’s order precludes any argument that the CPUC User Fee is 27 a “fee of general applicability” because the CPUC User Fee 28 “applies only to video franchise holders pursuant to a specific 1 enabling statute, as a condition to use of the public right of 2 way under a state franchise.” (Id.) 3 The court is not convinced by Comcast’s argument. The 4 Section 621 Order was addressing the issue of whether Comcast 5 should have to obtain a second franchise and pay the franchise 6 fee again due to its status as a telecommunications provider 7 after already paying one based on its status as a cable operator 8 in City of Eugene v. Comcast of Oregon II, Inc., 359 Or. 528 9 (2016). The Section 621 Order also mentioned in a footnote that 10 many commenters had specifically asked about DIVCA and its annual 11 “administrative fee” in addition to the five percent franchise 12 fees imposed, and cited this court’s previous opinion where it 13 found that the CPUC User Fee was a fee of “general 14 applicability.” See Section 621 Order, 34 FCC Rcd. 6844 at ¶ 117 15 n. 431. Despite being given this opportunity to weigh in on 16 whether the various fees in DIVCA violated the Federal Cable 17 Act’s five percent franchise fee cap, the FCC “decline[d]. . . to 18 opine on the application of the Cable Act to specific state laws” 19 and noted that these concerns are “largely settled by section 20 622, which excludes any tax, fee, or assessment of general 21 applicability from the definition of franchise fees.” Id. at ¶ 22 117. 23 Notwithstanding the Section 621 Order, the court 24 concludes that the CPUC User Fee is a fee of general 25 applicability.6 The CPUC User Fee is not a fee imposed solely on 26 6 Comcast has not contended that the CPUC fee is unduly 27 discriminatory toward cable operators, nor can it do so, because it does not apply solely to cable operators. See Time Warner, 28 2013 WL 12126774 at *2. 1 cable companies or other video franchise holders “in exchange for 2 the cable operator’s right to access and use the rights-of-way.” 3 Id. at ¶ 89. Rather, the CPUC User Fee is a way for the CPUC to 4 recover its regulatory costs associated with DIVCA. See Cal. 5 Pub. Util. Code § 441. The CPUC imposes similar annual user fees 6 on “every electrical, gas, telephone, telegraph, water, sewer 7 system, and heat corporation.” See Cal. Pub. Util. Code § 431.7 8 Although the court recognizes that Comcast is not a public 9 utility, the fact that the CPUC charges these annual user fees to 10 virtually all the utilities and cable franchise holders within 11 its jurisdiction lends further credence to the argument that the 12 CPUC User Fee is a “fee of general applicability” under section 13 542(g)(2). Indeed, the fact that these CPUC annual user fees are 14 assessed against virtually all public utilities in California 15 seems to satisfy the FCC’s admonition in the Section 621 Order 16 that the validity of generally applicable taxes “must be shown, 17 at least in part, by their application to broader classes of 18 entities or citizens beyond providers of cable and non-cable 19 communications services.” See Section 621 Order, 34 FCC Rcd. 20 6844 at ¶ 92. 21 For the reasons stated above, the court finds as a 22 matter of law that the CPUC User Fee is a “fee. . . of general 23 24 7 At oral argument, Comcast argued at length that the CPUC fee imposed on utility companies, see Cal. Pub. Util. Code § 25 431, is distinguishable from the CPUC User Fee at issue here because they were promulgated by different statutes, historically 26 calculated differently, and pay for different expenses within the 27 CPUC. Although the court recognizes these distinctions, they do not change the court’s analysis. 28 1 applicability”, and is not a “franchise fee” within the meaning 2 of 47 U.S.C. § 542.8 Accordingly, the court will grant SMCTC 3 summary judgment on this claim. 4 C. Tower Rental Fees 5 Under Cal. Pub. Util. Code § 5860, “gross revenue” 6 means “all revenue actually received by the holder of a state 7 franchise. . . that is derived from the operation of the holder’s 8 network to provide cable or video service within the jurisdiction 9 of the local entity. . .” See Cal. Pub. Util. Code § 5860(d). 10 Comcast leases available space on its communications towers to 11 third parties, such as wireless carriers. (Pl.’s Resp. to Def.’s 12 SUF at ¶ 28.) The parties disagree as to whether, as a matter of 13 law, these tower rental fees should be included in “gross 14 revenue” for the purpose of calculating franchise and PEG fees. 15 (Def.’s Mot. for Summ. J. at 23.) 16 Comcast contends that tower rental fees are not part of 17 its cable or video service within the jurisdiction of SMCTC 18 because the lessees are third parties who do not use the towers 19 to provide any cable or video service to subscribers. (Def.’s 20 Reply in Supp. of Mot. for Summ. J. at 13.) (Docket No. 56.) 21 SMCTC argues that the tower rental fees should be included in the 22 calculation of Comcast’s “gross revenue” because, in addition to 23 leasing space on the tower, Comcast uses the towers to provide 24 video services to its subscribers and is “obtaining additional 25 revenues by virtue of that operation.” (Pl.’s Opp’n to Def’s 26 27 8 Because the court finds that the CPUC User Fee is a fee of general applicability, the court need not decide whether the 28 Section 621 order applies retroactively or not. 1 Mot. for Summ. J.) (Docket No. 54.) 2 In the court’s view, the leasing of tower space to 3 third party users does not fall within the definition of “gross 4 revenue” under Cal. Pub. Util. Code § 5860(d). Comcast’s tower 5 rental fees are not derived from the operation of the towers to 6 provide cable or video service within the jurisdiction; rather, 7 the tower rental fees are derived from the leasing of facilities 8 for third-party users. (Def.’s Mot. for Summ. J. at 23.) If 9 Comcast were to cease using its towers for the provision of cable 10 and video services to subscribers, it would presumably have no 11 effect on its ability to rent space on these towers to third 12 parties. The fees generated do not depend on Comcast’s operation 13 of the towers to provide video and cable service to its 14 subscribers, but on the physical existence of the tower. 15 Moreover, the Federal Cable Act forecloses including 16 the tower rental fees in the calculation of “gross revenue” for 17 purposes of calculating franchise fees. Under the Federal Cable 18 Act, “the franchise fees paid by a cable operator with respect to 19 any cable system shall not exceed 5 percent of such cable 20 operator’s gross revenues derived in such period from the 21 operation of the cable system to provide cable services.” See 47 22 U.S.C. § 542(b). The FCC has clarified that the franchise fee 23 “only applies to revenue obtained from ‘cable services,’ not non- 24 cable services that Congress understood could provide additional 25 sources of revenue.” See Section 621 Order, 34 FCC Rcd. 6844 at 26 ¶ 89. 27 Accordingly, the court concludes as a matter of law 28 that the tower rental fees should not be included as “gross 1 revenue” for cable services for the purpose of calculating 2 franchise and PEG fees under both California Public Utility Code 3 § 5860(d) and the Federal Cable Act. Comcast is therefore 4 entitled to summary judgment on this claim. 5 D. Multi-Service Fees 6 Section 542(b) of the Cable Act establishes a uniform 7 federal policy which limits franchise fees to five percent of a 8 cable operator’s annual revenues from cable services only. See 9 47 U.S.C. § 542(b). DIVCA, in keeping with the Federal Cable 10 Act, likewise specifies that the state franchise fee shall be 11 applied only to the “gross revenue” attributable to video 12 service. See Cal. Pub. Util. Code § 5860(f). “Gross revenue” is 13 defined as “all revenue actually received by the holder of a 14 state franchise, as determined in accordance with generally 15 accepted accounting principles (“GAAP”). . .” See Cal. Pub. 16 Util. Code § 5860(d). 17 Comcast offers multiple services, such as cable, 18 internet, telephone, and home security monitoring, that customers 19 can purchase individually or in multi-product packages called 20 “bundles.” (Pl.’s Resp. to Def.’s SUF at ¶ 20.) Bundles allow 21 customers to purchase multiple services at a discount compared to 22 the sum of the stand-alone prices for those services when 23 purchased individually. (Id. at 21.) Comcast has established 24 various additional “multi-service” fees that apply to its 25 bundles, including late fees, early termination fees, and whole 26 house maintenance fees. (Def.’s SUF at ¶ 21.) Comcast claims 27 that because of the federal mandate that franchise fees can only 28 be charged on a cable operator’s cable service, it allocates 1 revenues from its multiservice fees to isolate the portion 2 attributable to cable service in calculating franchise fee 3 payments. (Def.’s Mot. for Summ. J. at 17.) Comcast argues that 4 it has correctly allocated the portion of multiservice fees 5 attributable to cable service revenues in calculating its 6 franchise and PEG fees pursuant to GAAP. (See Def.’s Mot. for 7 Summ. J. at 18.) SMCTC disagrees and argues that Comcast’s 8 methodology regarding the allocation of multi-service fees is 9 inconsistent with GAAP and incorrectly allocated. (See Pl.’s 10 Opp’n to Def.’s Mot. for Summ. J. at 17–25.) 11 In its motion for summary judgment, Comcast addresses 12 many multi-service fees: specifically, late fees, not sufficient 13 fund fees, convenience fees (for payment over the telephone), 14 early termination fees, whole house maintenance fees, and video 15 activation/installation credits to customers. (Def’s Mot. for 16 Summ. J. at 16–17.) However, although Comcast moves for summary 17 judgment on all multi-service fees, it failed to identify and 18 address each multi-service fee at issue in its initial motion for 19 summary judgment, such as billing and collection fees and write- 20 offs and recoveries, (See Pl.’s Opp’n to Def’s Mot. for Summ. J. 21 at 18.), and addresses them only in a cursory manner in its 22 Reply. (Def.’s Reply in Supp. of Mot. for Summ. J. at 14, 18.) 23 Most critically, however, Comcast has not demonstrated 24 to the court that the methodology it uses in allocating the 25 revenues for each multi-service fee at issue actually complies 26 with DIVCA and GAAP. Deposition excerpts that Comcast cites for 27 the proposition that its allocations comply with GAAP merely show 28 that Comcast’s Vice President of Finance and Accounting, Jeff 1 Aldi, believes “that GAAP . . . requires the allocation of the 2 late fee or the multi-service fees to the component units of 3 accounting.” (See Decl. of Edward Seidel at Ex. 10, attaching 4 excerpts from the transcript of the August 26, 2020 Dep. of Jeff 5 Aldi at pp. 108:3–109:12; 110:11–111:13) (Docket No. 45).) A 6 simple belief by Comcast’s executive is insufficient to prove 7 that Comcast’s practices in allocating multi-service fees 8 actually comply with GAAP. 9 Moreover, other testimony casts doubt upon Mr. Aldi’s 10 belief that Comcast’s methodology in fact complies with GAAP. 11 Mr. Aldi stated that he does not review the calculations relative 12 to the determination of franchise fees to ensure that they were 13 performed in accordance with GAAP. (See Decl. of Mark Velasquez 14 at Ex. D, attaching excerpts from the transcript of the August 15 26, 2020 Dep. of Jeff Aldi at 96:2–15) (Docket No. 54-1).) 16 Additionally, SMCTC submits that the two other franchise holders 17 within SMCTC’s jurisdiction, who are also required to apply GAAP, 18 allocate similar multi-service fees differently. (Pl.’s Opp’n. 19 to Def.’s Mot. for Summ. J. at 23.) 20 After reviewing all the evidence in the record, the 21 court concludes that there is a genuine issue of material fact as 22 to whether Comcast’s allocation of multi-service fees is 23 appropriate and complies with GAAP and DIVCA. Accordingly, the 24 court will deny Comcast’s motion for summary judgment on this 25 claim. 26 E. Launch Incentives 27 The court next addresses the parties’ contentions as to 28 whether “launch incentives” constitute “gross revenue” pursuant 1 to Cal. Pub. Util. Code § 5860(d). 9 Comcast and other cable 2 operators typically pay programmers for content and then package 3 and distribute that content to subscribers. (Pl.’s Resp. to 4 Def.’s SUF at ¶ 24.) However, in order to sell their content to 5 a cable operator, programmers will sometimes pay certain “launch 6 incentives” to the operator. (Id.) “Launch incentives” are 7 typically paid up front to the cable operator as part of a 8 content agreement. (Id.) Comcast amortizes these “launch 9 incentives” over the life of its contract with the programmer and 10 contends that this effectively lowers the negotiated price a 11 cable operator pays for the content. (Def.’s Mot. for Summ. J. 12 at 20.) 13 Comcast argues that because “launch incentives” reduce 14 Comcast’s costs for programming, they do not constitute “gross 15 revenue” for the purpose of calculating franchise and PEG fees. 16 (Id.) SMCTC disagrees, and argues that under DIVCA, “gross 17 revenue” is all revenue unless excluded. (Pl.’s Opp’n. to Def.’s 18 Mot. for Summ. J. at 34.) Cal. Pub. Util. Code § 5680(e)(9) 19 provides an exclusion from gross revenue for “revenue received as 20 reimbursement by programmers of a specific, identifiable 21 marketing costs incurred by the holder of a state franchise for 22 the introduction of new programming.” SMCTC contends that 23 “launch incentives” count as “gross revenue” unless they 24 specifically fall into this exception under §5680(e)(9). (Pl.’s 25 Opp’n. to Def.’s Mot. for Summ. J. at 34.) 26 9 As defined supra at p.20, “gross revenue” under DIVCA 27 means all revenue actually received by the holder of a state franchise, as determined in accordance with GAAP. See Cal. Pub. 28 Util. Code § 5860(d). 1 A provision of GAAP, Accounting Standards Codification 2 (“A.S.C.”) 605-50-45-12, provides that “cash consideration 3 received by a customer from a vendor is presumed to be a 4 reduction of the prices of the vendor’s products or services . . 5 . [and] shall be characterized as a reduction of cost of sales 6 when recognized in the customer’s income statement.” See 7 Financial Accounting Standards Board, A.S.C. at 605-50-45-12. 8 Comcast cites this provision, and argues that this signifies that 9 “launch incentives” received from the programmer (the “vendor”) 10 constitute a reduction of the purchase price of the programming 11 for cable operators (the “customer”), and therefore do not 12 constitute “gross revenue” under DIVCA. (Def.’s Mot. for Summ. 13 J. at 21.) 14 SMCTC disagrees and points to a different provision of 15 GAAP that details when certain activities that Comcast may 16 classify as “launch incentives” would actually constitute “gross 17 revenue” under DIVCA. (Pl.’s Opp’n. to Def.’s Mot. for Summ. J. 18 at 35.) A.S.C. 607-50-45-13 states that the presumption that 19 cash consideration received by a customer (i.e. Comcast) from a 20 vendor (i.e. the programmer) constitutes a reduction of the 21 prices of the vendor’s products or services is overcome, and the 22 consideration should be considered revenue, when “[the 23 consideration represents] a payment for assets or services 24 delivered to the vendor. . .” See A.S.C. at 605-50-45-13. SMCTC 25 contends that activities like television ads, bill inserts, 26 channel position, or local media ads are all examples of 27 activities that would constitute revenue if cash consideration 28 were received from the programmer. (Decl. of Mark Velasquez at 1 Ex. F, attaching Garth Ashpaugh’s Expert Report at 7.) (Docket 2 No. 54-1.) 3 The court has not been provided detailed information as 4 to what activities Comcast includes within the category of 5 “launch incentives.” Moreover, it is clear that the parties have 6 dueling interpretations of which GAAP provisions are applicable 7 and which activities those GAAP provisions encompass. 8 Accordingly, there is a genuine issue of material fact as to 9 whether Comcast should exclude launch incentives from the 10 definition of “gross revenue” under Cal. Pub. Util. Code § 11 5860(d) and the court will deny Comcast’s motion for summary 12 judgment on this claim. 13 F. Customer Credits for Missed Installations/Appointments 14 Under DIVCA, gross revenue is defined as “all revenue 15 actually received by the holder of a state franchise . . . . as 16 determined in accordance with generally accepted accounting 17 principles, that is derived from the operation of the holder’s 18 network to provide cable or video service. . .” Cal. Pub. Util. 19 Code § 5860(d). Comcast subscribers receive credits on their 20 bills if a Comcast technician is late or fails to show up to an 21 activation or installation appointment. (Pl.’s Resp. to Def.’s 22 SUF at ¶ 26.) SMCTC contends that these credits should be 23 included as “gross revenue” in calculating franchise and PEG 24 fees. (Pl.’s Opp’n to Def.’s Mot. for Summ. J. at 28.) Comcast 25 argues that these customer credits do not count as “gross 26 revenue” under Section 5860(d) because Comcast does not actually 27 receive revenue from the credits it provides to customers; 28 rather, a customer credit is a reduction in the revenue received. 1 (Def.’s Mot. for Summ. J. at 22.) 2 SMCTC’s argument is unpersuasive. SMCTC recognizes 3 that DIVCA excludes from gross revenue “[a]mounts not actually 4 received, even if billed, such as bad debt; refunds, rebates, or 5 discounts to subscribers or other third parties; or revenue 6 imputed from the provision of cable services for free or at 7 reduced rates.” See Cal. Pub. Util. Code § 5860(e)(1). However, 8 SMCTC contends that if Comcast were allowed to exclude credits to 9 customers from the definition of “gross revenue”, it would allow 10 Comcast to push a portion of its costs for untimely business 11 practices onto SMCTC. (Pl.’s Opp’n. to Def.’s Mot. for Summ. J. 12 at 28.) SMCTC’s belief that such a practice would be unfair is 13 unavailing; the plain language of DIVCA limits “gross revenue” to 14 amounts actually received, and Comcast does not receive any 15 revenue for the customer credits that it provides to customers 16 for missed appointments or installations. 17 The court therefore concludes as a matter of law that 18 customer credits for missed installations or appointments do not 19 constitute “gross revenue” under DIVCA for purposes of 20 calculating franchise and PEG fees, and will grant Comcast 21 summary judgment on this claim. 22 G. Comcast’s Unilateral Deductions Prior to Payment of 23 Franchise and PEG Fees to SMCTC 24 Section 555a(a) of the Federal Cable Act states that in 25 any court proceeding “involving a claim against a franchising 26 authority or other governmental entity. . . arising from the 27 regulation of cable service. . . any relief . . . shall be 28 limited to injunctive relief and declaratory relief.” 47 U.S.C. 1 § 555a(a). SMCTC contends that this provision prevents Comcast 2 from engaging in self-help and adjusting its payments of 3 franchise fees and PEG fees before paying SMCTC. (Pl.’s Mot. for 4 Summ. J. at 16.) SMCTC argues that “because Comcast deducts (or 5 takes out the amount rightfully due to SMCTC in advance) before a 6 determination whether such actions are appropriate”, SMCTC is 7 forced to resort to litigation to collect underpayments. (See 8 Pl.’s Reply in Supp. of Mot. for Summ. J. at 10.) (Docket No. 9 57.) Comcast contends that Section 555a(a) does not apply here 10 because SMCTC initiated this lawsuit against Comcast. (Def.’s 11 Mot. in Opp’n to Pl.’s Mot. for Summ. J. at 7.) Accordingly, the 12 court must address whether Comcast is barred from unilaterally 13 adjusting its payments of franchise fees and PEG fees before 14 paying SMCTC, notwithstanding the court’s ruling on whether 15 certain categories of fees constitute “gross revenue” or are 16 “franchise fees”. (Pl.’s Mot. for Summ. J. at 16.) 17 SMCTC relies on Glendale v. Marcus Cable Associates, 18 LLC, 231 Cal. App. 4th 1359, 1377 (2nd Dist. 2014), to support 19 its proposition that Section 555a(a) bars Comcast’s deductions of 20 franchise and PEG fees prior to paying SMCTC. In Glendale, the 21 cable operator initially sought monetary damages and then, 22 confronted with the franchising authority’s Section 555a(a) 23 defense, deleted its express request for damages and 24 reimbursements and replaced it with a request for a declaration 25 that it had a future right of offset based on past overcharges of 26 PEG fees. Glendale, 231 Cal. App. 4th at 1378. The court 27 declared that this was “merely a pleading artifice designed to 28 circumvent the damage prohibition in section 555a(a) of the 1 Federal Cable Act.” Id. 2 SMCTC argues that Comcast’s actions are likewise a 3 “ruse designed to obtain a monetary award in contravention of 4 Section 555a(a).” (Pl.’s Mot. for Summ. J. at 3.) However, the 5 thrust of the case in Glendale was that the cable operator sought 6 to recover money that it had already paid to the franchising 7 authority. Glendale is distinguishable because the procedural 8 posture here is the reverse; SMCTC is the party bringing suit 9 against Comcast and Comcast has not sought damages against SMCTC. 10 SMCTC II, 923 F.3d 1163, 1165 (9th Cir. 2019), likewise 11 offers little support for SMCTC’s position. In SMCTC II, Comcast 12 sought monetary damages for SMCTC’s alleged conversion of its 13 security deposit. See SMCTC II, 923 F.3d at 1167. The Ninth 14 Circuit held that this was barred by Section 555a(a). Id. at 15 1171. However, the Ninth Circuit emphasized that it had not 16 “considered whether [section 555a(a)] would apply were Comcast 17 defending a suit for underpayment of franchise fees brought by 18 SMCTC as would likely occur were Comcast to deduct the deposit as 19 an overpayment from its franchise fee payments. . . instead of 20 bringing suit for damages.” Id. at 1172 (emphasis added). It is 21 precisely this procedural posture, which the Ninth Circuit 22 expressly did not consider, which is at issue here. 23 Moreover, in the recent Section 621 Order, the FCC 24 seems to contemplate that cable providers should take certain 25 offsets or reductions to franchise fees to ensure compliance with 26 the federal 5% cap of franchise fees. See Section 621 Order, 34 27 FCC Rcd. 6844 at ¶ 111 n.416 (stating that “non-capital costs of 28 PEG requirements must be offset from the cable operator’s 1 franchise fee payments.”) This position by the FCC lends support 2 to Comcast’s argument that these offsets or reductions do not 3 violate 47 U.S.C. § 555a(a). 4 SMCTC additionally argues that Comcast’s unilateral 5 deductions from its franchise fees and PEG fees are barred under 6 DIVCA because they violate California Public Utilities Code § 7 5860(h). Under this provision, the state franchise fee shall be 8 remitted quarterly to the applicable local entity, with a summary 9 explaining the basis for the calculation of the state franchise 10 fee. See Cal. Pub. Util. Code § 5860(h). Section 5680(h) 11 further states that “[i]f the holder has overpaid the franchise 12 fee, it may deduct the overpayment from its next quarterly 13 payment.” Id. SMCTC contends that this provision stands for the 14 proposition that cable operators cannot make any deductions 15 except for past overpayments. (Pl.’s Mot. for Summ. J. at 17.) 16 The court disagrees. Cal. Pub. Util. Code § 5680(h) 17 does not address the adjustment of payments required to comply 18 with the Federal Cable Act’s 5% cap on franchise fee payments 19 whatsoever nor does it explicitly bar deductions by cable 20 operators except for past overpayments. Moreover, as addressed 21 above, the FCC contemplates that franchise authorities and cable 22 operators must make offsets or reductions to franchise fees in 23 order to comply with the federal 5% cap on franchise fees laid 24 out in 47 U.S.C. § 542 and relevant FCC requirements. See 25 Section 621 Order, 34 FCC Rcd. 6844 at ¶ 111 n. 416 (stating that 26 “non-capital costs of PEG requirements must be offset from the 27 cable operator’s franchise fee payments.”); id. at ¶ 63 n. 251 28 (holding that franchising authorities cannot ask cable operators 1 to “voluntarily waive the cap and accede to making payments or 2 contributions that are not offset against the statutory limit on 3 franchise fees.”) Because California Public Utilities Code § 4 5860(h) does not state that the only deductions permitted by 5 cable operators are deductions for past overpayments of fees by 6 the provider, the court declines to read such a prohibition into 7 the statute. 8 Accordingly, the court does not find that SMCTC has met 9 its burden to demonstrate that Comcast’s deductions and offsets 10 prior to its payment of franchise and PEG fees to SMCTC violates 11 either 47 U.S.C. § 555a(a) or Cal. Pub. Util. Code § 5680(h) and 12 will deny SMCTC summary judgment on this claim. 13 IT IS THEREFORE ORDERED that Comcast’s motion for 14 summary judgment (Docket No. 42; Docket No. 34.) be, and the same 15 hereby is, GRANTED in part. Comcast is entitled to summary 16 judgment on its claim that PEG fees should not be included as 17 “gross revenue” for the purpose of calculating franchise fees, 18 and its claims that tower rental fees and customer credits for 19 missed installations or appointments should not be included as 20 “gross revenue” for the purpose of calculating franchise fees and 21 PEG fees. Comcast’s motion for summary judgment is DENIED as to 22 all other claims. 23 IT IS FURTHER ORDERED that SMCTC’s motion for partial 24 summary judgment (Docket No. 49; Docket No. 41.) be, and the same 25 hereby is, GRANTED in part. SMCTC is entitled to summary 26 judgment on its claim that CPUC fees are not “franchise fees” 27 under the Federal Cable Act. SMCTC’s motion for summary judgment 28 is DENIED as to all other claims. nnn nn een en no nn nn nn nn on nn ne eo nn nn nnn nn nn 1 te t¢ ak. 1d th Dated: December 18, 2020 WILLIAMB.SHUBB □ ..}©| 3 UNITED STATES DISTRICT JUDGE 5 6 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 32