The opinion of the court was delivered by: Illston, District Judge.
ORDER GRANTING PRELIMINARY INJUNCTION
On April 25, 2001, the Court heard argument on defendants' motion to
dismiss and plaintiff's motion for a preliminary injunction. Having
carefully considered the arguments of the parties and the papers
submitted, including supplemental briefing, the Court hereby DENIES
defendants' motion to dismiss, and GRANTS plaintiffs motion for a
preliminary injunction, for the reasons set forth below.
Plaintiff Qwest Communications Corporation ("Qwest") is a telephone
company defined as a public utility under California Public Utilities
Code § 216. Compl. ¶ 4. The California Public Utilities
Commission ("PUC") has granted Qwest certificates of public convenience
and necessity ("CPCN") to provide interexchange, or long distance,
telecommunication services. Id. at ¶ 1; see Declaration of Anne
Richeson in Supp. Prelim. Inj. ("Richeson Decl.") ¶ 9 and Ex. A.
Qwest provides broadband Internet-based data, voice and image
connectivity to businesses, consumers and other communications service
providers. Compl. ¶ 28.
In December 1999, Qwest won a competitive bidding process and entered
into a government contract to provide faster and expanded
telecommunications capacity to the Lawrence Berkeley National Laboratory
("LBN Laboratory"). Compl. ¶ 30; Richeson Decl. ¶ 8. LBN
Laboratory is the technical administrator and central hub of a program
operated by the United States Department of Energy ("DOE") known as the
Energy Sciences Network ("ESNET"). Richeson Decl. ¶ 7. The ESNET is
a highspeed communication network that allows Department of Energy
researchers and collaborators throughout the nation access to a community
of research facilities, resources and information. Id. at ¶¶ 3-5.
In order to upgrade LBN Laboratory's telecommunications capacity, Qwest
must install a "local loop" between LBN Laboratory and Qwest's central
system. Compl. ¶ 31; Richeson Decl. ¶ 10. This involves
constructing a conduit — "a pipeline of sorts" — through
which fiber optic cable is strung. Id. at ¶ 32. Sometime in March
2000, Qwest began to formulate a construction plan to lay its conduit
through public rights-of-way in the City of Berkeley ("City" or
"Berkeley"). Id. at ¶ 32. Qwest met and communicated with city
officials from April through December 2000 to negotiate an acceptable
construction plan to encroach upon the City's public rights-of-way. See
id. at ¶¶ 33, 35, 41-45. The parties were unable to agree, and Qwest
consequently did not obtain the necessary permits to begin construction.
Qwest claims that the City refused to process its application after July
10, 2000, pursuant to a de facto moratorium on telecommunications
infrastructure construction pending enactment of an ordinance affecting
installation of telecommunication services in Berkeley. Id. at ¶¶
On December 22, 2000, Berkeley enacted Ordinance No. 6608 — N.S.
(codified at Berkeley Municipal Code §§ 16.10 et seq.) (the
"Ordinance"), effective January 21, 2001. Id. at ¶ 46. On January
23, 2001, the City passed a Fee Schedule to accompany the Ordinance. Id.
at ¶ 48. The City's new Ordinance creates a comprehensive scheme
intended "to more specifically regulate Telecommunications carriers
providing telecommunications services using public rights of ways and
other public property." Ordinance § 16.10.010 (attached at
Complaint, Ex. B).
The Ordinance applies to all telecommunications carriers seeking to
encroach upon Berkeley's public rights-of-way to provide
telecommunication services. Ordinance § 16.10.030. All carriers must
first obtain registration and pay related registration fees, which must
be updated annually. Id. at § 16.10.040; see also Fee Schedule 2-3
(attached at Complaint, Ex. C). All carriers must also obtain a Special
Telecommunications Permit pursuant to § 16.10.050 of the Ordinance
and pay additional fees. See also Fee Schedule 3-4. Unless a carrier
claims exemption under § 16.10.070, and the City affirmatively
determines that an exemption does indeed apply, all carriers are subject
to a franchise fee to provide telecommunications services using the
City's public rights-of-way. See also id. 5-7.
Qwest filed this lawsuit against the City of Berkeley on February 13,
2001, seeking primarily to invalidate the new Ordinance and Fee Schedule
pursuant to the Supremacy Clause of the United States Constitution, U.S.
Const. art. VI, cl. 2, and the "conflict with general laws" provision of
the California Constitution. Cal. Const. art. XI, § 7. According to
Qwest, Berkeley's Ordinance is preempted by the Federal
Telecommunications Act of 1996 ("FTA"), 47 U.S.C. § 253(a) and (c),
the California Public Utilities Code §§ 7901 and 7901.1, and the
California Government Code § 50030. Qwest also asserts a claim of
intentional interference with contractual relationship.
Presently before the Court are a motion by the City to dismiss the
complaint and a motion by Qwest for a preliminary injunction based on the
preemption claims. These motions were fully briefed and scheduled for
argument on April 25, 2001. On April 24, 2001, the Ninth Circuit decided
City of Auburn et al. v. Qwest Corporation, 247 F.3d 966 (9th Cir.
2001), which addresses and resolves many of the questions presented in
the instant motions. The parties addressed the new case during oral
argument, and were also given the opportunity to submit, and did submit,
supplemental briefs on the impact of the City of Auburn case. The Court
has considered the supplemental briefing in deciding the questions before
I. Berkeley's Motion to Dismiss
The City seeks dismissal of the First (federal preemption) and Fifth
(intentional interference with contractual relationship) Causes of
Action, and any claims in the complaint which challenge the Fee
Schedule, pursuant to Rule 12(b)(6) of the Federal Rules of Civil
Procedure. Rule 12(b)(6) requires that a district court must dismiss a
complaint if it fails to state a claim upon which relief can be granted.
The question presented by a motion to dismiss is not whether the
plaintiff will prevail in the action, but whether the plaintiff is
entitled to offer evidence in support of the claim. Scheuer v. Rhodes,
416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90(1974), overruled on other
grounds by Davis v. Scherer, 468 U.S. 183, 104 S.Ct. 3012, 82 L.Ed.2d
If the Court dismisses the complaint, it must then decide whether to
grant leave to amend. The Ninth Circuit has "repeatedly held that a
district court should grant leave to amend even if no request to amend
the pleading was made, unless it determines that the pleading could not
possibly be cured by the allegation of other facts." Lopez v. Smith,
203 F.3d 1122, 1130 (9th Cir. 2000) (citations and internal quotation
A. Federal Preemption (First Cause of Action)
Qwest's First Cause of Action seeks a declaration that the Ordinance is
void under the Supremacy Clause of the United States Constitution,
because it is preempted by § 253 of the Federal Telecommunications
In its motion to dismiss, the City argued that the First Cause of
Action must be dismissed because § 253 of the FTA does not create an
express or implied private right of action under which Qwest could sue.
At oral argument, however, the City withdrew this challenge to Qwest's
standing in light of the recent decision, City of Auburn v. Qwest Corp.,
247 F.3d 966 (9th Cir. 2001). The Ninth Circuit in City of Auburn allowed
Qwest to raise a federal preemption challenge based on § 253 against
several local ordinances regulating telecommunications service carriers.
The court did not discuss whether Qwest could sue under § 253 but
instead cited the Supremacy Clause of the United States Constitution.*fn3
The court held that § 253 of the FTA expressly preempts any state or
local law that is contrary to its provisions, and the only question for
the court "is whether the ordinances `interfere with, or are contrary to'
the Act." Id. at 980 (citing Hillsborough County v. Automated Med.
Labs., Inc., 471 U.S. 707, 712, 105 S.Ct. 2371, 85 L.Ed.2d 714 (1985)).
Qwest's challenge to the Ordinance here is also based on the Supremacy
Clause. Compl., ¶¶ 2, 67, 73. The Supreme Court has affirmed what
City of Auburn implicitly held: private plaintiffs seeking injunctive or
declaratory relief may challenge a state statute or local ordinance
pursuant to the Supremacy Clause, regardless whether a federal statute
confers a private right of action on the plaintiffs. Shaw v. Delta Air
lines, Inc., 463 U.S. 85, 96 n. 14, 103 S.Ct. 2890, 2899 n. 14, 77
L.Ed.2d 490 (1983) ("A plaintiff who seeks injunctive relief from state
regulation, on the ground that such regulation is pre-empted by a federal
statute which, by virtue of the Supremacy Clause of the Constitution,
must prevail, thus presents a federal question which the federal courts
have jurisdiction under 28 U.S.C. § 1331 to resolve."); see also Bud
Antle, Inc. v. Barbosa, 45 F.3d 1261, 1269 (9th Cir. 1994) ("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.").
The First Cause of Action for federal preemption of the Ordinance
states a claim upon which relief can be granted; the motion to dismiss
this claim is DENIED.
B. Intentional Interference with Contractual Relationship (Fifth Cause of
The City argues that the intentional interference with contractual
relationship claim fails because Qwest has not submitted a compensation
claim with the City as required by the California Tort Claims Act,
California Government Code § 810 et seq. With respect to Qwest's
claim for damages, the City is correct.
The Tort Claims Act represents a limited waiver of sovereign immunity
to bring tort claims against the State of California and its public
entities, including municipalities such as Berkeley. See Cal. Gov.Code
§ 815 and § 811.2 (defining public entity to include City or City
Council). Plaintiffs desiring to bring tort claims against a public
entity must comply with the detailed procedural requirements enumerated
in the Tort Claims Act, and failure to do so is a bar to suit. Williams
v. Horvath, 16 Cal.3d 834, 838, 129 Cal.Rptr. 453, 548 P.2d 1125(1976);
San Jose v. Superior Court, 12 Cal.3d 447, 455, 115 Cal.Rptr. 797,
525 P.2d 701(1974). As the City correctly notes, one procedural
prerequisite under the Tort Claims Act is that a claimant seeking monetary
damages must file a written claim with the proper public entity before
commencing suit. See Cal. Gov.Code §§ 905 and 905.2. Such a claim must
be presented no later than six months after the cause of action accrued.
Id. at § 911.2.
Qwest alleges in its Fifth Cause of Action that it "has suffered and
continues to suffer damages" as a result of the City's unlawful conduct,
and requests "such consequential damages . . . as Qwest may prove to the
Court." Compl. ¶ 107 and Prayer for Relief, ¶ (ix). Yet, Qwest
does not allege that it has submitted a claim with the City to seek
compensation for such alleged damages. Thus, Qwest's claim for damages is
Qwest points out, however, that its tort claim against the City also
seeks injunctive relief, which is not subject to the procedural
requirements of the Tort Claims Act. See Minsky v. City of Los Angeles,
11 Cal.3d 113, 121, 113 Cal.Rptr. 102, 520 P.2d 726(1974); see also
Pacific Gas & Electric Co. v. Bear Stearns & Co., 50 Cal.3d 1118, 1130
n. 9, 270 Cal.Rptr. 1, 791 P.2d 587(1990) ("Injunctive relief is
available to restrain unjustified interference with contractual relations
when damages would not afford an
adequate remedy.") (citations omitted). At oral argument, Qwest withdrew
any claim for damages asserted in its cause of action for intentional
interference of contractual relationship.
Qwest's claim for monetary damages in the Fifth Cause of Action is
barred and the City's motion to dismiss it is GRANTED. As to injunctive
relief only, the Fifth Cause of Action states a claim upon which relief
can be granted; as to this claim, the motion to dismiss is DENIED.
C. Challenges to the Fee Schedule
As a more general matter, Berkeley argues that all claims in the
complaint which challenge the Fee Schedule or portions of the Ordinance
implementing the Fee Schedule must be dismissed as barred by the Tax
Injunction Act of 1937 ("TIA"), 28 U.S.C. § 1341. Qwest responds that
the charges imposed by the Fee Schedule are not taxes within the meaning
of the TIA, and thus the Court is not required to abstain.
The TIA states: "The district courts shall not enjoin, suspend or
restrain the assessment, levy or collection of any tax under State law
where a plain, speedy and efficient remedy may be had in the courts of
such State." 28 U.S.C. § 1341. It is a question of federal law
whether a municipal charge constitutes a tax. Wright v. Riveland,
219 F.3d 905, 911 (9th Cir. 2000); see also Trailer Marine Transport
Corp. v. Rivera Vazquez, 977 F.2d 1, (1st Cir. 1992) (label placed on
assessment by state may be pertinent in deciding whether assessment is
"tax," but label is not determinative). The Ninth Circuit relies on three
considerations in making this determination: (1) the entity that imposes
the charge; (2) the parties on whom the charge is imposed; and (3)
whether the funds collected for the charge are expended for general
public purposes, or used for the regulation or benefit of the parties on
whom the charge is imposed. Bidart Bros. v. California Apple Comm'n,
73 F.3d 925, 931 (9th Cir. 1996); see also San Juan Cellular Tel. Co. v.
Public Serv. Comm'n of Puerto Rico, 967 F.2d 683, 685 (1st Cir. 1992)
(describing classic tax as "imposed . . . upon many, or all, ...