Comcast of Sacramento I, LLC et al v. Sacramento Metropolitan Cable Television Commission

Filing 31

MEMORANDUM and ORDER signed by Senior Judge William B. Shubb on 4/5/2017 GRANTING IN PART AND DENYING IN PART 21 Plaintiffs' Motion for Summary Judgment ; and GRANTING IN PART AND DENYING IN PART 22 Defendant's Cross-Motion for Summary Judgment. Within fourteen days of the date this Order is signed, the parties shall submit a form of Judgment consistent with this Order, setting forth the amount of payment, if any, plaintiffs are entitled to under this Order. (Kirksey Smith, K)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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COMCAST OF SACRAMENTO I, LLC;
COMCAST OF SACRAMENTO II,
LLC; and COMCAST OF
SACRAMENTO III, LLC;
Plaintiffs,

CIV. NO. 2:16-cv-1264 WBS EFB
MEMORANDUM AND ORDER RE: MOTION
AND CROSS-MOTION FOR SUMMARY
JUDGMENT

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v.
SACRAMENTO METROPOLITAN CABLE
TELEVISION COMMISSION and
DOES 1 through 20,
Defendant.

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Plaintiffs Comcast of Sacramento I, Comcast of

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Sacramento II, and Comcast of Sacramento III brought this action

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against defendant the Sacramento Metropolitan Cable Television

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Commission, seeking return of a security deposit provided by

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plaintiffs’ predecessor-in-interest to defendant some thirty-

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three years ago.

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for summary judgment against defendant, and defendant cross-moves

(Compl. (Docket No. 1).)

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Plaintiffs now move

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for summary judgment against plaintiffs.

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21); Def.’s Cross-Mot. (Docket No. 22).)

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I.

(Pls.’ Mot. (Docket No.

Factual and Procedural Background1

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Plaintiffs are mutually affiliated limited liability

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companies which provide cable television service in Sacramento

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County.

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Decl.”) ¶ 2 (Docket No. 21-2); Def.’s Mot., Mem. (“Def.’s Mem.”)

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at 1 n.3, 12 (Docket No. 22-1).)

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authority which “administer[s] and enforce[es] cable television

(See Docket No. 18; Decl. of Lee-Ann Peling (“Peling

Defendant is a municipal

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franchises and licenses” in Sacramento County.

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Davison ¶ 2 (Docket No. 22-3).)

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(Decl. of Robert

In 1984, plaintiffs’ predecessor-in-interest

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(“predecessor”) provided a $250,000 deposit to defendant as

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security for its performance of various obligations the county

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imposed upon it as a cable franchisee.

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(“Rowe Decl.”) ¶ 3 (Docket No. 21-3); Def.’s Req. for Judicial

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Notice Ex. A, Sacramento Cnty. Code § 5.50.702 (Docket No. 22-

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4).2)

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deposit to the predecessor after it had satisfied some of those

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obligations.

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Code section 5.50.702, defendant was to hold the remaining

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$100,000 (“security deposit”) in an interest-bearing account

(See Decl. of Jill Rowe

In 1992, defendant refunded all but $100,000 of the

(Rowe Decl. ¶ 4.)

Pursuant to Sacramento County

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The facts discussed in this Order are not disputed.

The court hereby takes judicial notice of the
provisions of Sacramento County Code provided with defendant’s
Cross-Motion (Docket No. 22-4 Ex. A) and plaintiffs’ Reply
(Docket No. 25-1 Exs. 1-4). See Tollis, Inc. v. Cty. of San
Diego, 505 F.3d 935, 938 n.1 (9th Cir. 2007) (“Municipal
ordinances are proper subjects for judicial notice.”).
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until “termination of the [predecessor’s] franchise and

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satisfaction of any damages . . . which may be due” to defendant,

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at which time the security deposit and its accrued interest would

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be returned to the predecessor.

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5.50.702.)

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(Sacramento Cnty. Code §

After 1992, plaintiffs became successors-in-interest to

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the predecessor’s franchise and the security deposit.

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Decl. ¶ 4.)

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(See Rowe

In 2006, California passed the Digital Infrastructure

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and Video Competition Act (“DIVCA”), which divested municipal

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authorities of all “franchise-granting authority” for “video

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service[s]” and vested such authority in the California Public

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Utilities Commission (“CPUC”).

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Cty. of Los Angeles v. Time Warner NY Cable LLC, No. CV-12-06655

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SJO (JCx), 2013 WL 12126774, at *2 (C.D. Cal. July 3, 2013).

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Pursuant to DIVCA, plaintiffs switched to a CPUC-issued franchise

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in 2011.

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issued franchise plaintiffs had been operating under terminated

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by operation of law.

(Davison Decl. ¶ 5.)

Cal. Pub. Util. Code § 5840(a);

At that time, the defendant-

(Steiner Decl. ¶ 6.)

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Following the termination of plaintiffs’ franchise with

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defendant, plaintiffs and defendant became embroiled in a dispute

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over the amount of fees plaintiffs are required to pay defendant

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under DIVCA.

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are required to pay: (1) an annually determined administrative

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fee to CPUC (“CPUC fee”), Cal. Pub. Util. Code § 441; (2) a state

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franchise fee of five percent of gross revenues to defendant

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(“state franchise fee”), id. § 5840(q)(1); and (3) a public,

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educational, and government programming fee of one percent of

(See Davison Decl. ¶ 8.)

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Under DIVCA, plaintiffs

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gross revenues to defendant (“PEG fee”), id. § 5870(n).

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parties disagree about whether plaintiffs are entitled to deduct

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their CPUC fee payments from their state franchise fee payments

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under federal law, and whether payments they collect from their

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subscribers to pay PEG fees must be included in their gross

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revenues for purposes of calculating their state franchise fees.

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The

On November 10, 2014, plaintiffs sent a letter to

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defendant demanding return of the security deposit.

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Decl. Ex. 1 at 33-36, Security Deposit Demand.)

(Steiner

Contending that

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plaintiffs underpaid state franchise fees for the 2011 and 2012

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calendar years by $334,610, defendant rejected plaintiffs’ demand

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and notified them that it would be keeping the security deposit

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as a partial set-off against the amount allegedly owed.

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Decl. ¶¶ 6, 8.)

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security deposit from the interest-bearing account it had been

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held in to defendant’s general account.

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The security deposit, with interest, totaled $227,639.45 at the

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time of transfer.

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(Davison

In March 2015, defendant transferred the

(See Peling Decl. ¶ 4.)

(Rowe Decl. ¶ 5.)

On June 8, 2016, plaintiffs filed this action.

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(Compl.)

Plaintiffs allege causes of action for conversion and

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“common count” against defendant, seeking payment of the security

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deposit, interest the deposit accrued up to the date it was

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transferred to defendant’s general account, and prejudgment

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interest calculated at seven percent per annum the deposit

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accrued from the date it was transferred to the date judgment is

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entered in this case.

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at 11 (Docket No. 21-1).)

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amount sought as of April 3, 2017 is $260,818.16.

(Id. at 4; Pls.’ Mot., Mem. (“Pls.’ Mem.”)
According to plaintiffs, the total

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(See Pls.’

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Mem. at 11.)

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Plaintiffs now move for summary judgment against

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defendant.

(Pls.’ Mot.)

Defendant cross-moves for summary

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judgment against plaintiffs.

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bases its Cross-Motion on three affirmative defenses: (1)

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immunity under California Government Code section 815, (2)

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expiration of the applicable statute of limitations, and (3)

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right to set off plaintiffs’ security deposit and its accrued

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interest against state franchise fees allegedly owed by

(Def.’s Cross-Mot.)

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plaintiffs for the 2011 and 2012 calendar years.

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Mem. at 4-5, 12.)

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II.

Defendant

(See Def.’s

Legal Standard

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Summary judgment is proper “if the movant shows that

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there is no genuine dispute as to any material fact and the

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movant is entitled to judgment as a matter of law.”

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P. 56(a).

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of the suit, and a genuine issue is one that could permit a

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reasonable jury to enter a verdict in the non-moving party’s

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favor.

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(1986).

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undisputed, and the heart of the controversy is the legal effect

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of such facts, such a dispute effectively becomes a question of

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law that can, quite properly, be decided on summary judgment.”

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Joyce v. Renaissance Design Inc., No. CV 99-07995 LGB (EX), 2000

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WL 34335721, at *2 (C.D. Cal. May 3, 2000); see also Braxton-

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Secret v. A.H. Robins Co., 769 F.2d 528, 531 (9th Cir. 1985)

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(“[W]here the palpable facts are substantially undisputed, [the

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controverted] issues can become questions of law which may be

Fed. R. Civ.

A material fact is one that could affect the outcome

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
“[W]here the operative facts are substantially

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properly decided by summary judgment.”).

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III. Discussion

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Defendant focuses exclusively on affirmative defenses

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in its Cross-Motion.

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raised in its affirmative defenses, plaintiffs are entitled to

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the security deposit and its accrued interest under their

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conversion and “common count” causes of action.

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It does not dispute that absent the issues

To succeed on a conversion claim under California law,
plaintiffs must establish: “(1) [their] ownership or right to

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possession of the [disputed] property; (2) the defendant’s

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conversion by a wrongful act or disposition of property rights;

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and (3) damages.”

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1395, 1405 (5th Dist. 2006) (quoting Burlesci v. Petersen, 68

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Cal. App. 4th 1062, 1066 (1st Dist. 1998)).

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undisputed that plaintiffs’ predecessor provided a $250,000

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deposit to defendant and that plaintiffs are successors-in-

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interest to the remaining portion of that deposit and its accrued

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interest.

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undisputed that after plaintiffs’ franchise with defendant

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terminated, at which time the security deposit became due to

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plaintiffs, (see Sacramento Cnty. Code § 5.50.702), defendant

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transferred the security deposit to its general account, causing

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monetary loss to plaintiffs.

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Decl. ¶ 9.)

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conversion claim in this action.

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Mendoza v. Rast Produce Co., 140 Cal. App. 4th

Here, it is

(See Rowe Decl. ¶ 3; Davison Decl. ¶ 4.)

It is also

(See Peling Decl. ¶ 4; Davison

Thus, plaintiffs have established a facially valid

Plaintiffs state a second cause of action for “common

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count.”

“A common count is not a specific cause of action,

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however; rather, it is a simplified form of pleading normally
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used to aver the existence of various forms of monetary

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indebtedness . . . .”

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379, 394, (1st Dist. 2004) (citing Zumbrun v. Univ. of S.

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California, 25 Cal. App. 3d 1, 14-15 (2d Dist. 1972)).

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common count is used as an alternative way of seeking the same

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recovery demanded in a specific cause of action, and is based on

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the same facts,” it “must stand or fall with [the specific] cause

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of action.”

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Farmers Ins. Exch. v. Zerin, 53 Cal. App. 4th 445, 459-60 (3d

McBride v. Boughton, 123 Cal. App. 4th

“When a

Id. (citing Zumbrun, 25 Cal. App. 3d at 14 and

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Dist. 1997)).

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to seek the same relief and be based on the same facts as their

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conversion claim, the court will decide their “common count”

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claim together with their conversion claim.

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Because plaintiffs’ “common count” claim appears

Having addressed the facial validity of plaintiffs’

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claims, the court next addresses whether plaintiffs’ claims

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survive defendant’s affirmative defenses.

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A.

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Immunity Under California Government Code Section 815
Defendant contends that plaintiffs’ claims are barred

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under California Government Code section 815 (“section 815”)

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because they are not statutory causes of action.

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4.)

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[a] public entity is not liable for an injury, whether such

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injury arises out of an act or omission of the public entity or a

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public employee or any other person.”

(Def.’s Mem. at

Section 815 states that “[e]xcept provided by statute . . .

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Cal. Gov’t Code § 815(a).

Plaintiff correctly notes, however, that section 815’s

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bar on non-statutory claims does not apply to claims based on

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contract.

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does not “affect[] liability based on contract”).

See Cal. Gov’t Code § 814 (noting that section 815

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“Whether an

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action is based on contract or tort depends upon the nature of

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the right sued upon, not the form of the pleading or relief

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demanded.”

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4th 950, 958 (2d Dist. 2003).

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promise . . . is contractual.”

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of a noncontractual duty . . . is tortious.”

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the action will be considered based on contract rather than

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tort.”

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64, 113 (1st Dist. 2001)).

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Util. Audit Co. v. City of Los Angeles, 112 Cal. App.
An action “based on breach of
Id.

An action “based on breach
Id.

“If unclear

Id. (citing Roe v. State of California, 94 Cal. App. 4th

Though plaintiffs’ sole operative cause of action is a

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tort, see Moore v. Regents of Univ. of California, 51 Cal. 3d

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120, 136 (1990) (referring to conversion as a “tort”), the right

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sued upon in this case is contractual.

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to plaintiffs’ claim for return of the security deposit is

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Sacramento County Code section 5.50.702 (“section 5.50.702”),

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which acts as a promise on defendant’s part to return the deposit

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to plaintiffs “[u]pon termination of the [their] franchise and

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satisfaction of any damages . . . which may be due” to defendant.

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(Sacramento Cnty. Code § 5.50.702.)

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section 5.50.018 expressly refers to section 5.50.702 as a

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“provision[] of . . . contract.”

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Sacramento Cnty. Code § 5.50.018 (“All . . . provisions of

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[franchise] contract[s] shall be deemed to be embodied in the

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Franchise Documents . . . .”); Sacramento Cnty. Code § 5.50.012j

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(defining “Franchise Documents” to include Sacramento County Code

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section 5.50.702).)

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not subject to section 815’s bar on non-statutory actions.

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B.

The provision giving rise

Sacramento County Code

(See Docket No. 25-1 Ex. 1,

Thus, this action is based on contract, and

Statute of Limitations
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Defendant next contends that plaintiffs’ claims are

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barred under California Code of Civil Procedure section 338

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(“section 338”), (see Def.’s Mem. at 12), which imposes a three-

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year limitations period on conversion claims, see Cal. Civ. Proc.

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Code § 338(c)(1) (subjecting “action[s] for taking, detaining, or

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injuring goods or chattels” to three-year limitations period);

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AmerUS Life Ins. Co. v. Bank of Am., N.A., 143 Cal. App. 4th 631,

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639 (2d Dist. 2006) (“[California] Code of Civil Procedure,

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section 338, subdivision (c) . . . applies to the conversion of

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personal property . . . .”).

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338’s limitations period began to run in this case when

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plaintiffs’ franchise with defendant terminated in 2011, at which

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time the security deposit became due to plaintiffs.

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Mem. at 12.)

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June 2016, defendant contends, this action is barred under

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section 338.

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According to defendant, section

(See Def.’s

Because plaintiffs did not file this action until

(Id.)

Plaintiffs correctly note that under California law,

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however, the limitations period on a conversion claim that arises

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from an originally lawful taking “does not begin to run until the

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return of the property has been demanded and refused or until a

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repudiation of the owner’s title is unequivocally brought to her

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or his attention.”

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Office, No. F071223, 2017 WL 1007953, at *15 (5th Dist. Mar. 15,

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2017) (quoting Coy v. Cnty. of Los Angeles, 235 Cal. App. 3d

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1077, 1088 (2d Dist. 1991)).

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defendant’s receipt of $250,000 from plaintiffs’ predecessor was

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originally lawful.

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Thus, section 338’s limitations period did not begin to run in

Ramirez v. Tulare Cnty. District Attorney’s

Here, it is undisputed that

(See Pls.’ Mem. at 5; Def.’s Mem. at 12.)

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this case until plaintiffs demanded and were refused the security

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deposit or had unequivocal notice that defendant repudiated their

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ownership of the security deposit.

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The evidence before the court indicates that

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plaintiffs’ action is timely under both limitations triggering

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tests.

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plaintiffs did not demand the security deposit until November 10,

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2014, and defendant did not repudiate their ownership of the

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security deposit until March 2015, when it informed plaintiffs

According to an affidavit submitted by plaintiffs,

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that it would be transferring the security deposit to its general

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account.

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evidence indicating that a demand or repudiation took place prior

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to November 2014.

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8, 2016, the evidence before the court indicates that this action

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is timely under section 338.

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(See Peling Decl. ¶¶ 4-5.)

Defendant has not cited any

Because plaintiffs filed this action on June

Defendant requests, as an alternative to judgment under

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section 338, that the court continue disposition of its section

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338 defense to allow it to conduct discovery regarding that

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defense.

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party requesting continuance of a summary judgment motion to

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conduct discovery “must identify by affidavit the specific facts

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that [the] discovery would reveal” and “explain why [such]

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information . . . [is] essential to [that party’s] opposition” to

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the other party’s motion.

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Francisco, 441 F.3d 1090, 1100 (9th Cir. 2006) (citing Fed. R.

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Civ. P. 56(d)); see also State of Cal. v. Campbell, 138 F.3d 772,

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779 (9th Cir. 1998) (same).

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discovery would reveal “whether [plaintiffs] made any demand for

(Def.’s Mem. at 13.)

The Ninth Circuit has held that a

Tatum v. City & Cnty. of San

Here, defendant represents that

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return of [their] security deposit prior to November 2014,”

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which, according to defendant, is essential to any opposition it

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might raise to plaintiffs’ position that this action is timely

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under the limitations triggering tests they have cited.

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Steiner Decl. ¶ 7.)

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(See

Putting aside the fact that there is already evidence

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indicating that plaintiffs did not demand return of the security

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deposit prior to November 2014, (see Peling Decl. ¶ 5), defendant

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fails to explain why the information it seeks is essential to

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showing that this action is untimely.

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test at issue in defendant’s discovery request is demand of the

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property in question and refusal of such demand.

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2017 WL 1007953, at *15.

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plaintiffs’ demand after they have made a demand, the date of

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refusal is dispositive of whether plaintiffs demanded and

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defendant refused to return the security deposit prior to June 8,

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2013.3

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of their security deposit is not essential to that inquiry.

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Because the date of plaintiffs’ first demand is not essential to

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defendant’s statute of limitations defense, the court will deny

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defendant’s request for continuance.

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C.

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The limitations triggering

See Ramirez,

Because defendant can only refuse

Thus, the date on which plaintiffs first demanded return

Right to Set-Off
Defendant focuses most of its Cross-Motion brief on its

set-off defense.

That defense, as indicated in the fact section

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If defendant refused a demand prior to June 8, 2013,
this action is untimely. If defendant did not refuse a demand
prior to June 8, 2013, this action is timely (assuming defendant
also did not unequivocally repudiate plaintiffs’ ownership of the
security deposit prior to that date).
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of this Order, posits that defendant has a right to set off

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plaintiffs’ security deposit and its accrued interest against

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$334,610 in state franchise fees that plaintiffs allegedly

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underpaid for the 2011 and 2012 calendar years.

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California Code of Civil Procedure section 431.70

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states that “[w]here cross-demands for money have existed between

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persons at any point in time when neither demand was barred by

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the statute of limitations, and an action is thereafter commenced

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by one such person, the other person may assert in the answer the

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defense of payment in that the two demands are compensated so far

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as they equal each other . . . .”

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This procedure, often referred to as a “set-off,” is intended to

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“eliminate[] a superfluous exchange of money between the

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parties.”

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Cal. Civ. Proc. Code § 431.70.

Jess v. Herrmann, 26 Cal. 3d 131, 137 (1979).
“[A] defendant may . . . assert [a] setoff defensively

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to defeat the plaintiff’s claim in whole or in part,” though it

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“may not [use the setoff to] obtain an award of affirmative

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relief against [the] plaintiff.”

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v. TIG Specialty Ins. Co., 29 Cal. 4th 189, 198, (2002).

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determining whether to grant a set-off, the court may adjudicate

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the merits of yet-to-be-adjudicated set-off claims.

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Unicom Sys., Inc. v. Farmers Grp., Inc., 405 F. App’x 152, 154

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(9th Cir. 2010) (affirming lower court’s adjudication of merits

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of set-off claim).

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Constr. Protective Servs., Inc.
In

See, e.g.,

Defendant asserts, and plaintiffs do not dispute, that

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timely cross-demands for the security deposit and state franchise

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fees in question existed concurrently after the state franchise

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fees for the 2011 and 2012 calendar years became due.
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(See

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Def.’s Mem. at 5.)

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not pay the state franchise fees in question.

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¶¶ 7-8.)

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such fees.

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Plaintiffs also do not dispute that they did
(See Peling Decl.

They dispute only whether defendant may charge them

The state franchise fees in question consist of fees

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that plaintiffs allegedly underpaid for the 2011 and 2012

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calendar years because they: (1) unilaterally deducted their CPUC

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fees from their state franchise fees, and (2) failed to include

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payments they collected from subscribers to pay PEG fees in their

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gross revenues in calculating their state franchise fees.

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1.

Deduction of CPUC Fees

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The parties’ dispute with respect to plaintiffs’

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deduction of CPUC fees centers over the interpretation of 47

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U.S.C. § 542 (“section 542”), subdivision (b) of which states

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that “[f]or any twelve-month period, the franchise fees paid by a

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cable operator with respect to any cable system shall not exceed

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5 percent of such cable operator’s gross revenues derived in such

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period from the operation of the cable system to provide cable

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services.”

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fee is not a “franchise fee” within the meaning of section

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542(b), and thus does not count toward the five percent cap it

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imposes.

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is a “franchise fee” within the meaning of section 542(b), and

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thus counts toward its five percent cap.

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Because the CPUC fee counts toward section 542(b)’s five percent

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cap, according to plaintiffs, the five percent state franchise

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fee they are obligated to pay defendant under DIVCA must be

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reduced by the CPUC fee, pursuant to the principle of federal

47 U.S.C. § 542(b).

(Def.’s Mem. at 7.)

Defendant argues that the CPUC

Plaintiffs argue that the CPUC fee

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(Pls.’ Mem. at 7.)

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preemption.

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Section 542(g)(1) defines “franchise fee” to include

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“any tax, fee, or assessment of any kind imposed by a franchising

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authority or other governmental entity on a cable operator . . .

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solely because of [its] status as such.”

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Section 542(g)(2) expressly excludes from its definition of

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“franchise fee” “any tax, fee, or assessment of general

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applicability (including any such tax, fee, or assessment imposed

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on both utilities and cable operators or their services but not

47 U.S.C. § 542(g)(1).

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including a tax, fee, or assessment which is unduly

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discriminatory against cable operators).”

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Id. § 542(g)(2)(A).

The CPUC fee, codified in California Public Utilities

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Code section 441 (“section 441”), applies not only to cable

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operators, but to all “holders of a state franchise” that

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authorizes the “operation of any network in the right-of-way

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capable of providing video service to subscribers” (“video

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franchise holders”).

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see also Time Warner, 2013 WL 12126774, at *5 (noting that “it is

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possible to qualify for [the CPUC] fee without being a cable

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operator”).

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such] as Netflix, RedBox, and Blockbuster” may be subject to the

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CPUC fee.

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Cal. Pub. Util. Code §§ 441, 5830(f), (h);

“[N]on-cable operat[ing] video [franchise holders

Time Warner, 2013 WL 12126774, at *5.
In view of the applicability of the CPUC fee to non-

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cable operating video franchise holders, it would not be proper

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to conclude that the fee is imposed on cable operators “solely

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because of their status as such.”

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cable operators because of their status as video franchise

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holders, a status that is different from the status of being
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The CPUC fee is imposed on

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cable operators.

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cable, it would still be subject to the CPUC fee so long as it

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holds a video franchise.

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If a given cable company were to stop operating

The applicability of the CPUC fee to non-cable

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operators also supports finding that it is a “fee . . . of

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general applicability” under section 542(g)(2).

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all entities that hold a video franchise, not merely cable

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operators, are subject to the CPUC fee.

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unduly discriminatory towards cable operators because it does not

As noted above,

The CPUC fee is not

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apply only to them.

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fee “of general applicability” under section 542(g)(2).4

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Thus, the court finds that the CPUC fee is a

Because the CPUC fee is not imposed on cable companies

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“solely because of their status as such,” and because it is a

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“fee . . . of general applicability,” the CPUC fee is not a

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“franchise fee” within the meaning of section 542.

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The court’s position on this issue accords with the

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position of at least two other courts, which have also held fees

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that are imposed on non-cable operating entities to be excluded

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At oral argument, plaintiffs argued at length that the
CPUC fee does not apply to utilities because CPUC charges a
separate fee to “electrical, gas, telephone, telegraph, water,
sewer system, and heat corporation[s] and every other public
utility.” (See also Pls.’ Reply at 9-10 (citing Cal. Pub. Util.
Code § 431) (Docket No. 25).) That a given entity is subject to
CPUC’s utility fee, however, does not mean that it may not also
be subject to CPUC’s video franchise fee. Section 441, by its
terms, imposes its fee on all holders of a video franchise; it
makes no exceptions for entities subject to other fees imposed by
CPUC. Moreover, even if the court were to find that the CPUC fee
does not apply to utilities, that would not preclude the CPUC fee
from being a fee of general applicability under section
542(g)(2). See 47 U.S.C. § 542 (merely stating that fees of
general applicability “includ[e] . . . fee[s] . . . imposed on
both utilities and cable operators”).
15

1

from the definition of “franchise fees” under section 542.

2

Zayo Grp., LLC v. Mayor & City Council of Baltimore, No. JFM-16-

3

592, 2016 WL 3448261 (D. Md. June 14, 2016) (holding that conduit

4

use fee that applies to “all users of the City’s conduit system,”

5

not merely cable companies, is not “franchise fee” within the

6

meaning of section 542); City of Eugene v. Comcast of Oregon II,

7

Inc., 359 Or. 528, 558 (2016) (holding that license fee that

8

applies to all companies that “provide[] telecommunications

9

services over . . . public rights of way,” not merely cable

See

10

companies, is not “franchise fee” within the meaning of section

11

542).

12

Plaintiffs cite Time Warner, 2013 WL 12126774, for the

13

contrary position.

14

the CPUC fee applies to non-cable operators, section 542 “does

15

not require that a franchise fee be a fee assessed solely against

16

cable operators; [instead,] it requires that cable operators’

17

status as cable operators be the sole reason for assessment of a

18

franchise fee.”

19

company used its video franchise only to operate cable service,

20

the Time Warner court reasoned that if the company did not

21

operate cable service, it would not be a video franchisee, and

22

thus not be subject to the CPUC fee.

23

reasoning, the Time Warner court concluded that the company’s

24

status as a cable operator was the sole reason it was subject to

25

the CPUC fee.

26

In Time Warner, the court noted that though

Id. at *5.

Noting that the defendant cable

See id.

Based on that

Id.

This court disagrees with Time Warner’s analysis.

27

Assuming Time Warner’s paraphrase of section 542 to be correct,

28

it still would not be the case that a cable company’s status as a
16

1

cable operator is the sole reason it is subject to the CPUC fee.

2

As explained above, a cable company is subject to the CPUC fee

3

for the separate reason that it is a video franchise holder.

4

That a cable company uses its video franchise only to provide

5

cable service does not change the fact that it is a video

6

franchise holder, and thus subject to the CPUC fee for that

7

reason.

8

did, that entities that use their video franchise only to provide

9

cable service would not be video franchisees if they did not

It requires a leap of logic to conclude, as Time Warner

10

provide cable service.

11

conclusion does not follow from its premises.

12

Warner is an unpublished district court decision, this court is

13

not bound to follow it.

14

800 F.2d 945, 949 (9th Cir. 1986) (“The law is clear that an

15

unpublished district court decision has no precedential

16

authority.”).

17

Thus, in this court’s view, Time Warner’s
Because Time

See People of Territory of Guam v. Yang,

For the reasons stated above, the court finds that the

18

CPUC fee is not a “franchise fee” within the meaning of section

19

542.

20

meaning of section 542, plaintiffs were not entitled under

21

section 542 to deduct CPUC fees from their state franchise fees

22

for the 2011 and 2012 calendar years.

Because the CPUC fee is not a “franchise fee” within the

23

2.

Failure to Include PEG Payments in Gross Revenues

24

The parties also dispute whether plaintiffs must

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include payments they collect from subscribers to pay PEG fees in

26

their gross revenues for purposes of calculating their state

27

franchise fees.

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California Public Utilities Code section 5860 (“section 5860”).

Their dispute centers over the interpretation of

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10
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Section 5860(d) defines “gross revenue” for purposes of
state franchise fees as:
[A]ll revenue actually received by the holder of a
state franchise, as determined in accordance with
generally accepted accounting principles, that is
derived from the operation of the holder’s network to
provide cable or video service within the jurisdiction
of the local entity, including . . . [a]ll charges
billed to subscribers for any and all cable service or
video service provided by the holder of a state
franchise, including all revenue related to
programming provided to the subscriber, equipment
rentals, late fees, and insufficient fund fees.
Cal. Pub. Util. Code § 5860(d).
Section 5860(e), however, states that “the term ‘gross

12

revenue’ set forth in [section 5860(d)] does not include . . .

13

[a]mounts billed to, and collected from, subscribers to recover

14

any tax, fee, or surcharge imposed by any governmental entity on

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the holder of a state franchise, including, but not limited to,

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sales and use taxes, gross receipts taxes, excise taxes, utility

17

users taxes, public service taxes, communication taxes, and any

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other fee not imposed by this section.”

19

Id. § 5860(e).

Plaintiffs argue that payments they collect from

20

subscribers to pay PEG fees fit squarely within the exception

21

stated in section 5860(e), and thus are not part of “gross

22

revenues” as defined in section 5860(d).

23

Plaintiffs’ position appears to be correct.

PEG fees,

24

which are allowed under California Public Utilities code section

25

5870 (“section 5870”) and established pursuant to Sacramento

26

County Code, are charged by defendant to plaintiffs.

27

Decl. ¶ 8.)

28

subscribers, (id.), who pay the fee “as a separate line item on

(Peling

Plaintiffs, in turn, pass the fee on to their

18

1

[their] regular bill,” Cal. Pub. Util. Code § 5870(o).

2

Plaintiffs then forward the PEG payments made by their

3

subscribers to defendant.

4

expressly authorized and described in section 5870(o).

5

Util. Code § 5870(o).

6

from their subscribers to pay PEG fees are “amounts billed to,

7

and collected from, subscribers to recover . . . [a] fee . . .

8

imposed by [a] governmental entity,” they are not part of “gross

9

revenue[s]” as defined in section 5860(d).

10

(Peling Decl. ¶ 8.)

This procedure is
Cal. Pub.

Because the payments plaintiffs collect

Defendant contends that section 5860(e)’s exception

11

applies only to payments collected from subscribers to recover

12

“fee[s] not imposed by [section 5860],” and that PEG fees are

13

imposed pursuant to section 5860(c).

14

Because PEG fees are imposed pursuant to section 5860, defendant

15

concludes, payments collected to recover them are “gross

16

revenues.”

17

(Def.’s Mem. at 9-10.)

Both premises supporting this argument are flawed.

18

Section 5860(e) does not limit its exception to “fee[s] not

19

imposed by [section 5860].”

20

exception “includ[es], but [is] not limited to . . . fee[s] not

21

imposed by [section 5860].”

22

Moreover, there is no indication that section 5860 imposes PEG

23

fees.

24

merely authorizes “local entit[ies] to impose utility user taxes

25

and other generally applicable taxes, fees, and charges under

26

other applicable provisions of state law.”

27

Nowhere does it impose PEG fees.

28

without merit.

It expressly states that its

Cal. Pub. Util. Code § 5860(e).

Section 5860(c), which defendant cites for that assertion,

19

Id. § 5860(c).

Thus, defendant’s argument is

1

Defendant also argues that plaintiffs were not

2

permitted, as a procedural matter, to unilaterally deduct PEG

3

payments collected from subscribers from their gross revenues in

4

calculating state franchise fees.

5

Cable Assocs., LLC, 231 Cal. App. 4th 1359 (2d Dist. 2014),

6

according to defendant, stands for the proposition that a cable

7

company may not unilaterally withhold disputed state franchise

8

fees from municipal authorities.

9

Instead, the company must pay the fees to the authority, then

City of Glendale v. Marcus

(Def.’s Mem. at 10-11.)

10

challenge whether the fees were proper in court.

11

plaintiffs unilaterally deducted PEG payments from their gross

12

revenues in calculating state franchise fees for the 2011 and

13

2012 calendar years, defendant contends, defendant is entitled to

14

the state franchise fees plaintiffs would otherwise have paid for

15

those cycles under City of Glendale.

16

This argument is without merit as well.

(Id.)

Because

City of

17

Glendale was a case that affirmed a lower court’s denial of a

18

cable company’s request for a declaration stating that it may

19

withhold future PEG fee payments in order to offset past PEG fee

20

overpayments.

21

City of Glendale was decided based on the court’s conclusion that

22

such a declaration would, in effect, circumvent 47 U.S.C. §

23

555a’s prohibition on award of damages against governmental

24

entities in cable regulation suits.

25

decide the legality of unilaterally withholding disputed state

26

franchise fees.

See City of Glendale, 231 Cal. App. 4th at 1378.

See id.

The case did not

Thus, City of Glendale does not stand for the

27
28
20

1

proposition defendant cites it for.5

2

Because the payments plaintiffs collect from

3

subscribers to pay PEG fees are not part of “gross revenue[s]”

4

under section 5860, plaintiffs were entitled to withhold them

5

from their gross revenues when calculating state franchise fees

6

for the 2011 and 2012 calendar years.

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For the reasons stated in this Order, the court finds
that plaintiffs have established a valid conversion claim for
5

City of Glendale raises the question of whether this
action is barred under 47 U.S.C. § 555a (“section 555a”).
Section 555a states that “[i]n any court proceeding . . .
involving any claim against a . . . governmental entity . . .
arising from the regulation of cable service . . . any relief . .
. shall be limited to injunctive relief and declaratory relief.”
47 U.S.C. § 555a. Here, plaintiffs are seeking return of a
security deposit plus interest. But defendant has already
transferred that money to its general account. (Peling Decl. ¶
4.) Thus, an argument can be made that this is a suit for
damages. See Edelman v. Jordan, 415 U.S. 651, 677 (1974)
(holding that “prospective injunctive relief . . . may not
include a retroactive award which requires the payment of funds
from the state treasury”).
It is doubtful, however, that this action “aris[es]
from the regulation of cable service” under section 555a. The
parties’ dispute is about defendant’s failure to return a
security deposit. The court is not aware of a case that has held
or suggested that an action brought by a cable company to recover
a security deposit from a cable-regulating entity is one that
“aris[es] from the regulation of cable service” under section
555a. Cases that have applied section 555a appear to indicate
that section 555a was meant to bar claims arising directly out of
cable regulation, as opposed to claims that are only tangentially
related to cable regulation. Cf., e.g., Coplin v. Fairfield Pub.
Access Television Comm., 111 F.3d 1395, 1408 (8th Cir. 1997)
(applying section 555a to action brought by talk show producer
challenging city’s decision to ban him from public access cable
channel based on content of his show); Jones Intercable of San
Diego, Inc. v. City of Chula Vista, 80 F.3d 320, 324 (9th Cir.
1996) (applying section 555a to action brought by cable operator
challenging city’s requirement that it obtain a permit before
providing cable services). Accordingly, the court will not deny
plaintiffs’ claims based on section 555a.
21

1

recovery of their security deposit plus its accrued interest, and

2

defendant has established a right to set off that amount by the

3

amount of CPUC fees plaintiffs deducted from their 2011 and 2012

4

state franchise fees.

5

the security deposit, interest the deposit accrued prior to the

6

date it was transferred to defendant’s account, and prejudgment

7

interest calculated at seven percent per annum6 the deposit

8

accrued from the date it was transferred to the date judgment is

9

entered in this case, less the CPUC fees plaintiffs deducted from

10

their state franchise fees for the 2011 and 2012 calendar years.

11

Because the parties have not offered the court a calculation of

12

what this sum is, the court will permit the parties to do so

13

before entering judgment on this Order.

14

Accordingly, plaintiffs are entitled to

IT IS THEREFORE ORDERED that plaintiffs’ Motion for

15

summary judgment be, and the same hereby is, GRANTED IN PART and

16

DENIED IN PART, and that defendant’s Cross-Motion for summary

17

judgment be, and the same hereby is, GRANTED IN PART and DENIED

18

IN PART, as follows:

19

(1)

Plaintiffs are entitled to payment of the $100,000

20

security deposit discussed in this Order, interest the

21

deposit accrued prior to the date it was transferred to

22

defendant’s general account, and prejudgment interest

23

calculated at seven percent per annum the deposit

24

accrued from the date it was transferred to the date

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27
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6

“The legal rate of interest on an obligation before the
entry of judgment is 7 percent, unless otherwise specified by
statute.” Uzyel v. Kadisha, 188 Cal. App. 4th 866, 921 (2d Dist.
2010). The parties have not cited, and the court is not aware
of, a statute that requires a different interest rate in this
action.
22

1

judgment is entered in this case, less the fees imposed

2

pursuant to California Public Utilities Code section

3

441 that plaintiffs deducted from their state franchise

4

fees for the 2011 and 2012 calendar years.

5

(2)

Plaintiffs’ Motion and defendant’s Cross-Motion are

6

DENIED in all other respects.

7

IT IS FURTHER ORDERED that within fourteen days of the

8

date this Order is signed, the parties shall submit a form of

9

Judgment consistent with this Order, setting forth the amount of

10

payment, if any, plaintiffs are entitled to under this Order.

11

Dated:

April 5, 2017

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