Verizon Wireless (Vaw) LLC v. Sahr

457 F.Supp.2d 940

VERIZON WIRELESS (VAW) LLC, Commnet Cellular License Holding LLC, Missouri Valley Cellular, Inc., Sanborn Cellular, Inc., and Eastern South Dakota Cellular, Inc., d/b/a Verizon Wireless, Plaintiffs, v. Bob SAHR, Gary Hanson and Dustin Johnson, in their official capacities as the Commissioners of the South Dakota Public Utilities Commission, Defendants SOUTH DAKOTA TELECOMMUNICTIONS ASS'N and Venture Communications Cooperative, Interveners.

No. CIV 04-3014.

United States District Court, D. South Dakota, Central Division.

October 13, 2006.

COPYRIGHT MATERIAL OMITTED

Craig A. Pfeifle, Gene N. Lebrun, Lynn, Jackson, Shultz & Lebrun, PC, Rapid City, SD, David C. McDonald, Philip R. Schenkenberg, Briggs & Morgan, P.A., Minneapolis, MN, for Plaintiffs.

Rolayne L. Ailts Wiest, Public Utilities Commission, Pierre, SD, for Defendants.

Darla Pollman Rogers, Margo D. Northrup, Riter, Rogers, Wattier & Brown, LLP, Pierre, SD, for Intervenors.

OPINION AND ORDER ON PLAITIFFS' MOTION FOR SUMARY JUDGMENT

KORNMANN, District Judge.

INTRODUCTION

[¶ 1] Plaintiffs have filed a motion (Doc. 51) for summary judgment, contending certain provisions of the South Dakota Codified Laws are preempted by federal law. During the 2004 legislative session, the South Dakota Legislature enacted several new provisions, which impose certain requirements on telecommunications carriers and tie those requirements to carrier compensation. Plaintiffs assert the state's new regulatory scheme impermissibly conflicts with the established federal regulatory framework and, therefore, it is preempted.

[¶ 2] Plaintiffs Verizon Wireless (VAW) LLC, CommNet Cellular License Holding LLC, Missouri Valley Cellular, Inc., Sanborn Cellular, Inc., and Eastern South Dakota Cellular (collectively "Verizon") all provide wireless telecommunications in South Dakota under the "Verizon Wireless" brand name. In the telecommunications industry, wireless carriers are referred to as Commercial Mobile Radio Service or "CMRS" providers. CMRS providers essentially offer one-way or twoway radio communication services between land stations and mobile receivers. See 47 C.F.R. § 20.3.

[¶ 3] Verizon, in conjunction with its provision of CMRS services in South Dakota, sends and receives calls to and from state regulated landline companies. These companies are referred to as local exchange carriers ("LECs"). LECs may also be referred to as incumbent local exchange carriers ("ILECs") or competitive local exchange carriers ("CLECs"). An ILEC is a telephone company that was providing local service when the Telecommunications Act of 1996 was enacted. Whereas, CLEC is the term used for any company that offers local telephone service and was not the original monopoly telephone company in a specific area.

[¶ 4] Defendants Bob Sahr, Gary Hanson, and Dustin Johnson are Commissioners of the South Dakota Public Utilities Commission ("SDPUC"). SDPUC is given legislative and statutory authority under Title 49 of the South Dakota Codified Laws and is responsible, among other things, for regulating intrastate telecommunications rates and service quality. Pursuant to a motion (Doc. 18) to intervene, which was unopposed, South Dakota Telecommunications Association ("SDTA") and Venture Communications Cooperative became parties to this suit.

[¶ 5] SDTA is comprised of 29 communitybased cooperative, privately owned, municipal and tribal telecommunications companies. Collectively, these companies serve approximately 80 percent of the state's land mass and roughly two-thirds of the state's incorporated communities. SDTA provides regulatory and legal assistance to its member companies and representation before the Federal Communications Commission ("FCC"), the SDPUC, and various other governmental agencies. Venture Communications Cooperative, a non-profit organization and a member company of SDTA, provides communication services to cooperative members located throughout central and northeastern South Dakota.

DISCUSSION

1. SUMMARY JUDGMENT STANDARD

[¶ 6] The summary judgment standard is well known and has been set forth by this court in numerous opinions. See Hanson v. North Star Mutual Insurance Co., 1999 DSD 34 ¶ 8, 71 F.Supp.2d 1007, 1009-1010 (D.S.D.1999), Gardner v. Trip County, 1998 DSD 38 ¶ 8, 66 F.Supp.2d 1094, 1098 (D.S.D.1998), Patterson Farm, Inc. v. City ofBritton, 1998 DSD 34 ¶ 7, 22 F.Supp.2d 1085, 1088-89 (D.S.D.1998), and Smith v. Horton Industries, 1998 DSD 26 ¶ 2, 17 F.Supp.2d 1094, 1095 (D.S.D.1998). Summary judgment is proper where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Donaho v. FMC Corporation, 74 F.3d 894, 898 (8th Cir.1996). The United States Supreme Court has held that:

The plain language of Rule 56(c) mandates the entry of summary judgment ... against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. In such a situation, there can be "no genuine issue as to any material fact," since a complete failure of proof concerning an essential element of the non-moving party's case necessarily renders all other facts immaterial.

Celotex Corporation v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). "A material fact dispute is genuine if the evidence is sufficient to allow a reasonable jury to return a verdict for the non-moving party." Landon v. Northwest Airlines, Inc., 72 F.3d 620, 624 (8th Cir.1995). "[T]he burden on the moving party may be discharged by `showing'—that is, pointing out to the district court—that there is an absence of evidence to support the nonmoving party's case." Celotex Corporation v. Catrett, 477 U.S. at 325, 106 S.Ct. at 2554. Rule 56(e) "requires the nonmoving party to go beyond the pleadings and by [its] own affidavits, or by the `depositions, answers to interrogatories, and admissions on file,' designate `specific facts showing that there is a genuine issue for trial.'" Id. at 324, 106 S.Ct. at 2553. In considering the motion for summary judgment, this Court must view the facts in the light most favorable to the non-moving party and give that party the benefit of all reasonable inferences that can be drawn from the facts. Donaho, 74 F.3d at 897-98. "[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

2. THE LAW OF PREEMPTION

[¶ 7] The Supremacy Clause of Art. VI of the United States Constitution invests Congress with the authority to preempt state law. U.S. Const. Art. VI, CI. 2; Louisiana Public Service Com'n v. FCC, 476 U.S. 355, 368, 106 S.Ct. 1890, 90 L.Ed.2d 369 (1986). Federal preemption occurs when: (1) Congress explicitly prohibits state regulation; (2) Congress implicitly prohibits state regulation by pervasively occupying the regulatory field and leaving no room for the states to supplement federal law; (3) state law directly conflicts with federal law; or (4) a federal agency, acting within the scope of its delegated authority, intends its regulations to have preemptive effect. Id.

[¶ 8] Preemption by the FCC of state regulation of telephone services is permissible when: (a) the matter to be regulated has both interstate and intrastate aspects; (b) preemption is necessary to protect a valid federal regulatory objective; and (c) state regulation would negate the exercise by the FCC of its own lawful authority because regulation of the interstate aspects of the matter cannot be "unbundled" from regulation of the intrastate aspects. Public Service Com'n of Maryland v. FCC, 909 F.2d 1510 (D.C.Cir.1990); Qivest Corporation v. Scott, 380 F.3d 367, 372 (8th Cir.2004). The FCC is barred from preempting state regulation of a subject matter where there is a way to separate the interstate component from the intrastate component. Louisiana Public Service Com'n, 476 U.S. at 375 fn. 4, 106 S.Ct. at 1902 fn. 4; Qwest Corporation, 380 F.3d at 372.

[¶ 9] Moreover, the FCC may preempt any state or local statute or regulation that prohibits or has the effect of prohibiting the ability of any entity to provide telecommunications service. 47 U.S.C. § 253(a); XO Missouri v. City of Maryland Heights, 256 F.Supp.2d. 987, 991 (E.D.Mo.2003). Section 253(a) contains the only substantive limitations on state government regulation of telecommunications and the following two subsections are "safe harbors," functioning as affirmative defenses to preemption of state exercise of authority that would otherwise violate the first subsection. Thus, if a state statute does not meet the criteria of the second and third subsections, the state government has not "violated" the subsections, but the particular regulation is not immune from preemption as an exception to the general prohibition in the first subsection. Level 3 Communications, LLC v. City of St. Louis, Mo., 405 F.Supp.2d 1047, 1056 (E.D.Mo.2005). Therefore, prior to declaring a statute preempted, we must conduct both an analysis of whether the statute violates the first subsection, containing the substantive limitations on state government regulation of telecommunications, and an analysis under the safe harbor provisions. Id.

3. THE TELECOMMUNICATIONS ACT OF 1996 AND FCC IMPLEMENTING DECISIONS

[¶ 10] Congress enacted the Telecommunications Act ("the Act" or "the 1996 Act") in February of 1996, greatly amending the Communications Act of 1934. The Act "is a unique hybrid of statutory and common law that divides decision making authority among the FCC, State commissions, and private parties." Southwestern Bell Tel. Co. v. Connect Communications Corporation, 72 F.Supp.2d 1043, 1044 (E...