Sacramento Metropolitan Cable Television Comm. v. Comcast Cable Comm. Mgt., LLC
Filing
61
MEMORANDUM AND ORDER GRANTING IN PART AND DENYING IN PARTY CROSS MOTIONS FOR SUMMARY JUDGMENT 42 , 49 signed by Senior Judge William B. Shubb on 12/18/2020.(Kirksey Smith, K)
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UNITED STATES DISTRICT COURT
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EASTERN DISTRICT OF CALIFORNIA
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----oo0oo----
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SACRAMENTO METROPOLITAN CABLE
TELEVISION COMMISSION,
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No. 2:18-CV-00500 WBS EFB
No. 2:18-cv-01212 WBS EFB
Plaintiff,
MEMORANDUM AND ORDER RE:
CROSS MOTIONS FOR SUMMARY
JUDGMENT
v.
COMCAST CABLE COMMUNICATIONS
MANAGEMENT, LLC,
Defendant.
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----oo0oo---Plaintiff Sacramento Metropolitan Cable Television
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Commission (“SMCTC” or “plaintiff”) brought this action against
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Defendant Comcast Cable Communications Management, LLC (“Comcast”
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or “defendant”) claiming that (1) Comcast violated California
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Public Utility Code §§ 5840, 5860, and 5870; (2) Comcast breached
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its contract with plaintiff; (3) Comcast unjustly enriched itself
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at plaintiff’s expense; and (4) that it is entitled to
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declaratory relief.
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jurisdiction of this action pursuant to 28 U.S.C. § 1332 because
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there is complete diversity of citizenship between the parties
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and the amount in controversy exceeds $75,000, exclusive of
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interest and costs.
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(Compl. (Docket No. 1).)1
This court has
Each claim of the Complaint is predicated on the theory
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that Comcast underpaid annual cable “franchise fees” and Public,
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Educational, and Governmental (“PEG”) fees owed to plaintiff
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under California’s Digital Infrastructure and Video Competition
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Act of 2006 (“DIVCA”), Cal. Pub. Util. Code § 5800, et seq.
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claims involve six forms of alleged underpayments based on two
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audits covering the periods of 2013–2014 and 2015–2016.
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moves for summary judgment on each of the six forms of alleged
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underpayments.
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No. 34.) SMCTC moves for partial summary judgment on three of the
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six forms of alleged underpayments and as to whether Comcast’s
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unilateral deductions prior to paying SMCTC are permitted under
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DIVCA and applicable federal law.2
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J. (“Pl.’s Mot. for Summ. J.”) (Docket No. 49; Docket No. 41.)
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All docket references refer to the docket entries in
Case No. 2:18-cv-00500. These two cases were consolidated
pursuant to Federal Rule of Civil Procedure 42(a)(2) for all
purposes and the parties agreed that the main case number would
be 2:18-cv-500 WBS EFB. (Docket No. 20.)
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The
Comcast
(Def.’s Mot. for Summ. J.) (Docket No. 42; Docket
(Pl.’s Mot. for Partial Summ.
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SMCTC does not move for summary judgment as to launch
incentives, multi-service fees, and customer credits for missed
installation/activation appointments. (See generally Pl.’s Mot.
for Summ. J.) Although SMCTC did not initially move for summary
judgment on tower rental fees, they agree that there are no
material issues of disputed facts on this claim and that it is
appropriate for disposition on summary judgment. (Pl.’s Opp’n to
Def’s Mot. for Summ. J. at 1, 17.) (Docket No. 54.)
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I.
Facts & Procedural Background
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Plaintiff SMCTC is a joint powers agency with certain
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regulatory authority over cable services in Sacramento County.
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(Def.’s Statement of Undisputed Facts at ¶ 1 (“Def.’s SUF”)
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(Docket No. 44).)
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Sacramento and the cities of Sacramento, Galt, Folsom, Citrus
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Heights, Rancho Cordova and Elk Grove.
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Undisputed Facts at ¶ 4 (“Pl.’s SUF”)) (Docket No. 49-1.)
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California, cable franchises were historically issued by local
The members of SMCTC are the County of
(Pl.’s Statement of
In
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government entities, such as SMCTC, to cable operators.
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¶ 4.)
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system managed by the California Public Utilities Commission
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(“CPUC”).
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cable systems in California pursuant to a CPUC-issued franchise.
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(Id. at ¶ 7.)
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affiliates, provides video service under a state-issued video
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franchise within SMCTC’s jurisdiction.
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(Id. at
DIVCA replaced that regime with a statewide franchising
(Id. at ¶ 6.)
As of 2011, Comcast has operated its
Comcast, either directly or through its
(Id. at ¶ 8.)
Under the 1984 Federal Cable Act, (“Cable Act”), 47
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U.S.C. § 521, et seq., franchising authorities may require a
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cable operator to pay franchise fees up to five percent of its
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annual “gross revenues . . . . from the operation of the cable
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system to provide cable service.”
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fees are “passed through” and paid by cable subscribers as part
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of their monthly cable bills.
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assessed by franchising authorities for PEG channels and capital
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support are also “passed through” to cable subscribers.
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47 U.S.C. § 542(b).
47 U.S.C. § 542(c).
Franchise
Any fees
(Id.)
DIVCA imposes an annual “User Fee” on cable operators
as a condition to obtaining a franchise (“CPUC User Fee”).
3
See
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Cal. Pub. Util. Code § 441.
DIVCA additionally imposes the
2
payment of franchise fees, which are paid to municipalities for
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the use of the public rights-of-way in their jurisdictions.
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Cal. Pub. Util. Code § 5860(a).
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adopts a lower fee, California Public Utilities Code section
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5840(q)(1) requires all DIVCA franchisees to pay a franchise fee
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equal to the applicable local agency equal to five percent of its
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“gross revenues.”
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member agencies have adopted a lower fee.
See
Unless a locality specifically
(Pl.’s SUF at ¶ 14.)
Neither SMCTC nor its
(Id.)
DIVCA
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authorizes franchising authorities to implement a PEG fee of up
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to one percent of cable service revenues, which is also paid to
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localities.
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member agencies have adopted ordinances to activate a one percent
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PEG fee on DIVCA franchisees, such as Comcast.
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18.)
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collect both the franchise fees and PEG fees as separate line
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items on a subscriber’s bill.
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5860(j); 5870(o).
See Cal. Pub. Util. Code § 5870(n).
SMCTC and its
(Pl.’s SUF at ¶
State franchise holders are authorized to identify and
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See Cal. Pub. Util. Code. §§
A state franchise holder is required to remit franchise
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and PEG fees to a local entity on a quarterly basis.
See Cal.
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Pub. Util. Code §§ 5860(h), 5870(m).
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a franchise holder’s business records once a year to ensure
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payment of franchise fees in accordance with Section 5860 of
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DIVCA.
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SMCTC retained Ashpaugh & Sculco, CPAs, PLC (“Ashpaugh & Sculco”)
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to perform an audit of franchise fees and PEG fees Comcast paid
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for the 2013–2014 and 2015–2016 periods.
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28.)
A local entity may examine
See Cal. Pub. Util. Code § 5860(i).
In 2016 and 2017,
(Pl.’s SUF at ¶¶ 23–
These audits reported that Comcast had underpaid franchise
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fees and PEG fees to SMCTC in both audit periods in the amounts
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of $682,911 for 2013–14 and $828,590 for 2015–16.
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28.)
4
(Id. at ¶¶ 25,
The court previously dealt with certain aspects of this
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dispute in Comcast of Sacramento I, LLC. v. Sacramento
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Metropolitan Cable Television Commission, Case No. 2:16-cv-01264
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WBS EFB, 250 F. Supp.3d 616, 618–27 (E.D. Cal. 2017)(“SMCTC I”).
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In that case, Comcast sued SMCTC and alleged causes of action for
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conversion and “common count” after SMCTC withheld Comcast’s
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franchise security deposit following a dispute over the amount of
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fees Comcast was required to pay SMCTC under DIVCA.
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SMCTC raised a defense of offset, claiming that an audit for the
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period of 2011-2012 established underpayments of franchise and
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PEG fees.
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fall within the definition of “gross revenue” for purposes of
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calculating franchise fees because it fell within an exception
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stated in Cal. Pub. Util. Code § 5860(e).
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also found that the CPUC User Fee was a “fee of general
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applicability” excluded from franchise fees under the Federal
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Cable Act.
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Id. at 620.
Id. at 619.
The court ruled that PEG fees did not
Id. at 628.
The court
Id. at 626.
Both SMCTC and Comcast appealed from the judgment in
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SMCT I.
See Comcast of Sacramento I, LLC v. Sacramento
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Metropolitan Cable Television Commission, 923 F.3d 1163, 1165–
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1172 (9th Cir. 2019) (“SMCTC II”).
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Comcast’s attempt to recover its security deposit was barred by
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Section 555a(a) of the Federal Cable Act, which limits relief in
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suits against franchising authorities to injunctive and
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declaratory relief.
The Ninth Circuit held that
See id. at 1171.
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While the case was on
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appeal, SMCTC initiated the present consolidated lawsuits against
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Comcast based on the two more recent audits referenced in the
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Complaints.3
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The court takes judicial notice of the provisions of
the SMCTC members city/county codes and the SMCTC Resolution
provided in plaintiff’s request for judicial notice. (Request for
Judicial Notice 1–8 (“Pl.’s RJN”) (Docket No. 50).) 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.”). Defendant has not objected to items listed in
plaintiff’s Request for Judicial Notice 9–11, 13–15, 17, 19, and
21. These requests consist of defendant’s franchise application,
franchise certificates, the parties’ engagement agreements for
analysis of franchise and PEG fees, deposition excerpts by
defendant’s witness Lee-Ann Peling, and defendant’s audit
responses. Accordingly, the court will take judicial notice of
these documents. Defendant objects to the items listed in
plaintiff’s Request for Judicial Notice 12, 16, 18, 20, and 21 on
the grounds that the contents are hearsay and not subject to
judicial notice under Federal Rule of Evidence 201. These
documents consist of deposition excerpts from the deposition of
Robert Allen Davison and Steven M. Detrick, the 2013-2014 audit
report, the 2015-2016 audit report, and the corrected 2015-2016
audit report. Because the court did not rely on these documents
for the truth of the matter asserted, the court will take
judicial notice of these documents as well.
Defendant requests that the court take judicial notice of
five documents. (Request for Judicial Notice (“Def.’s RJN”))
(Docket No. 46).) These documents are: (1) this court’s April 5,
2017 order on the cross-motions for summary judgment in Case No.
2:16-cv-01264 titled Comcast of Sacramento I, LLC v. Sacramento
Metropolitan Cable Television Commission, 250 F. Supp. 3d 616,
626 (E.D. Cal. 2017) (“SMCTC-I”); (2) the Ninth Circuit Court of
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
Case No. 2:16-cv-01264 entered pursuant to the Ninth Circuit’s
decision; (4) the operative complaint in the instant case (Case
No. 2:18-cv-00500), which contains SMCTC’s 2013-2014 audit
reports as attachments, and (5) the operative first amended
complaint in the instant case (Case No. 2:18-cv-01212), which
contains SMCTC’s 2015-2016 audit report. Plaintiff has not
objected. Accordingly, the court will take judicial notice of
the items listed in defendant’s Request for Judicial Notice in
its entirety.
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II.
Discussion
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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.
Fed. R. Civ.
A material fact is one that could affect the outcome
Anderson v. Liberty Lobby Inc., 477 U.S. 242, 248 (1986).
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The party moving for summary judgment bears the initial
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burden of establishing the absence of a genuine issue of material
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fact and can satisfy this burden by presenting evidence that
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negates an essential element of the non-moving party’s case.
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Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986).
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Alternatively, the movant can demonstrate that the non-moving
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party cannot provide evidence to support an essential element
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upon which it will bear the burden of proof at trial.
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“the case turns on a mixed question of fact and law and the only
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disputes relate to the legal significance of undisputed facts,
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the controversy collapses into a question of law suitable to
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disposition on summary judgment.”
21
Nat’l Tr. & Sav. Ass’n, 322 F.3d 1039, 1046 (9th Cir. 2003).
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“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
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genuine issue for trial.”
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Radio Corp., 475 U.S. 574, 587 (1986).
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the underlying facts must, however, be viewed in the light most
Id.
Where
Thrifty Oil Co. v. Bank of Am.
Matsuhita Elec. Indus. Co. v. Zenith
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Any inferences drawn from
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favorable to the party opposing the motion.
A.
See id.
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PEG Fees
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Section 5870(n) of the California Public Utilities Code
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states that “a local entity may, by ordinance, establish a fee to
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support PEG channel facilities.”
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Each SMCTC member locality has imposed a PEG fee.5
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turn, passes the PEG fee on to its subscribers, who pay the fee
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“as a separate line item on [their] regular bill.”
9
Util. Code § 5870(o).
Cal. Pub. Util. Code § 5870(n).
Comcast, in
Cal. Pub.
Comcast does not keep any portion of the
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PEG fees that it bills to subscribers and forwards those PEG
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payments to SMCTC.
12
No. 54–2).)
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fees in its “gross revenue” for purposes of calculating its state
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franchise fees.
(Pl.’s Resp. to Def.’s SUF at ¶ 15 (Docket
The parties dispute whether Comcast must include PEG
The dispute centers over the interpretation of
15
Comcast makes several evidentiary objections to the
Declaration of Robert Davison and its attachments, the deposition
excerpts of Garth Ashpaugh, and the expert report prepared by Mr.
Ashpaugh attached to the Declaration of Mark Velasquez (Docket
No. 54-1) on the grounds that the statements by Mr. Davison and
Mr. Ashpaugh lack foundation, are hearsay, speculative, and
irrelevant. (See Docket No. 53-1; Docket No. 56-1.) The Ninth
Circuit has established that “to survive summary judgment, a
party does not necessarily have to produce evidence in a form
that would be admissible at trial, as long as the party satisfies
the requirements of Federal Rule of Civil Procedure 56.” Fraser
v. Goodale, 342 F.3d 1032, 1036–37 (9th Cir. 2003.) Moreover,
“[a]s a practical matter, the court finds this entire exercise of
considering evidentiary objections on a motion for summary
judgment to be futile and counterproductive.” Burch v. Regents
of University of California, 433 F.Supp.2d 1110, 1122 (E.D. Cal.
2006.) Accordingly, if Comcast wishes to raise these evidentiary
objections, it may do so at trial.
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See, e.g., Sacramento Cty. Code § 5.50.977; Citrus
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
Cordova Mun. Code § 5.75.800; Sacramento City Code § 5.28.2670.
8
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California Public Utilities Code § 5860 (“section 5860”).
2
3
Section 5860(d) defines “gross revenue” for purposes of
state franchise fees as:
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[A]ll revenues 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.
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6
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Cal. Pub. Util. Code § 5860(d)–(d)(1).
12
Section 5860(e)(6) contains an exception to the above
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provision for “[a]mounts billed to, and collected from,
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subscribers to recover any tax, fee, or surcharge imposed by any
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governmental entity on the holder of a state franchise,
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including, but not limited to, sales and use taxes, gross
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receipts taxes, excise taxes, utility users taxes, public service
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taxes, communications taxes, and any other fee not imposed by
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this section.”
20
See Cal. Pub. Util. Code § 5860(e)(6).
Comcast argues that the payments it collects from
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subscribers to pay PEG fees fit within this exception because
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they are imposed by section 5870 and thus are not part of “gross
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revenue” as defined in Section 5860(d).
24
J. at 7.)
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not apply because PEG fees are imposed pursuant to section
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5860(c).
27
states that no local entity may demand any additional fees or
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charges from the holder of a state franchise “based solely on its
(Def.’s Mot. for Summ.
SMCTC contends that section 5860(e)’s exception does
(Pl.’s Mot. for Summ. J. at 13.)
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Section 5860(c)
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status as a provider of video or cable services other than as set
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forth in this division. . .”
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SMCTC argues that “this division” means Division 2.5 of the
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California Public Utilities Code (i.e. all of DIVCA), and that
5
5860(c), through its incorporation of all of DIVCA, is the
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section that effectively authorizes PEG fees.
7
Summ. J. at 13.)
8
9
See Cal. Pub. Util. Code § 5860(c).
(Pl.’s Mot. for
Comcast’s position is more persuasive.
Under the plain
language of Section 5860(e)(6), “gross revenue” does not include
10
revenues from “any. . . fee not imposed by [Section 5860].”
11
Pub. Util. Code § 5860(e)(6).
12
California Public Utilities Code section 5870 (“section 5870”).
13
The use of the term “this division” in Section 5860(c) does not
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displace the legislature’s use of the term “this section” in
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5860(e)(6), which specifically addresses which fees should be
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included and excluded from “gross revenue” when calculating
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franchise fees.
18
Section 5860(e)(6), it would not have said “this section.”
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
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Cal. App. 4th 222, 232 (2nd Dist. 1994).
23
Cal.
PEG fees are authorized under
If the legislature had meant “this division” in
It is
SMCTC also points out that PEG fees were not
24
specifically enumerated in the exception for “gross revenue” laid
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out in 5860(e).
26
contend that the canon of esjusdem generis (meaning “of the same
27
kind”) dictates that the PEG fees should be not be included
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because the list of items enumerated are all generally applicable
(Pl.’s Mot. for Summ. J. at 13–14.)
10
They
1
taxes and the PEG fee is not a generally applicable tax.
(Id. at
2
14.)
3
“surcharges” the same in enumerating the exclusions from “gross
4
revenue.”
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. . .”).
8
critically, the legislature chose to use the broad catch-all “any
9
other fee not imposed by this section”, and made no limitations
However, Section 5860(e)(6) treats “fees”, “taxes”, and
See Cal. Pub. Util. Code § 5860(e)(6) (excluding from
Most
10
as to the type of fees that would be encompassed.
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
Therefore, the
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.
18
Summ. J. at 10.)
19
localities to establish a fee to support PEG channel facilities,
20
it does not mandate that localities do so.
21
Code § 5870(n).
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.)
28
(Pl.’s Mot. for
However, while section 5870(n) authorizes
See Cal. Pub. Util.
Instead, localities may decide whether they wish
See id.
The California Attorney General Opinion that SMCTC
11
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.
4
(2016) at *5.
5
“great weight”, Napa Valley Educators’ Association v. Napa Valley
6
Unified School District, 194 Cal. App. 3d 243, 251 (1st Dist.
7
1987),
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
See 99 Cal. Op. Att’y Gen. 1
Although Attorney General Opinions are entitled to
the Opinion cited by SMCTC focused on whether a local
10
be otherwise obligated to pay such a fee.
See 99 Cal. Op. Att’y
11
Gen. 1 at *5.
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.
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.
19
court finds that the opinion is not instructive here.
20
finds as a matter of law that it is the municipalities who impose
21
a PEG fee, not DIVCA itself.
Because DIVCA mandates that franchise applicants
Id.
However, the Attorney
Accordingly, the
The court
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.”
27
Code § 5810(a)(4)(d).
28
enacting body contained in a preamble, while not conclusive, are
Cal. Pub. Util.
[“S]tatements of the intent of the
12
1
entitled to consideration.”
2
1280 (2004).
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.”
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
People v. Canty, 32 Cal. 4th 1266,
However, California Code of Civil Procedure § 1859
Cal. Code. Civ. P. § 1859.
As such, the generalized
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.
14
CPUC User Fee
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.
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.”
22
(Def.’s Mot. for Summ. J. at 10.)
(Pl.’s Mot. for Summ. J. at 6.)
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.”
28
including “any tax, fee, or assessment of any kind imposed by a
47 U.S.C. § 542(g)(1) defines “franchise fee” as
13
1
franchising authority or other governmental entity on a cable
2
operator . . . solely because of [its] status as such.”
3
U.S.C. § 542(g)(1).
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).”
9
fees of five percent of a cable operator’s cable service
47
Section § 542(g)(2) excludes from this
DIVCA separately imposes annual franchise
10
revenues, which are paid to each locality where it operates its
11
cable system pursuant to a state franchise.
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
See Cal. Pub. Util.
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).”
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].”
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”).
28
possible to qualify for the [CPUC User Fee] without being a cable
Id.
Cal. Pub. Util. Code § 441.
The CPUC User Fee applies not only
See id. at § 441, 5830(f)-(h).
14
“[I]t is
1
operator.”
2
CV-12-06655 SJO (JCx), 2013 WL 12126774, at *2 (C.D. Cal. July 3,
3
2013).
4
Cty. of Los Angeles v. Time Warner NY Cable LLC, No.
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.
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 SMCTC-I, 250 F. Supp. 3d at 624–25.
First, because
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).
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.
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).
See id. However,
See
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.”
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
15
Id. at ¶ 90.
A local
1
instances of overlapping jurisdiction.”
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.”
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
Id. at ¶ 92.
Id. at ¶ 92.
Id.
The FCC states that
Understood in this manner, the
10
access fees.”
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.)
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.)
The FCC states that generally-applicable taxes are
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.)
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
16
Comcast likewise argues that
1
enabling statute, as a condition to use of the public right of
2
way under a state franchise.”
3
(Id.)
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.”
15
n. 431.
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.”
22
117.
23
See Section 621 Order, 34 FCC Rcd. 6844 at ¶ 117
Despite being given this opportunity to weigh in on
Id. at ¶
Notwithstanding the Section 621 Order, the court
24
concludes that the CPUC User Fee is a fee of general
25
applicability.6
26
27
28
The CPUC User Fee is not a fee imposed solely on
Comcast has not contended that the CPUC fee is unduly
discriminatory toward cable operators, nor can it do so, because
it does not apply solely to cable operators. See Time Warner,
2013 WL 12126774 at *2.
17
6
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.
4
recover its regulatory costs associated with DIVCA.
5
Pub. Util. Code § 441.
6
on “every electrical, gas, telephone, telegraph, water, sewer
7
system, and heat corporation.”
8
Although the court recognizes that Comcast is not a public
9
utility, the fact that the CPUC charges these annual user fees to
Rather, the CPUC User Fee is a way for the CPUC to
See Cal.
The CPUC imposes similar annual user fees
See Cal. Pub. Util. Code § 431.7
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).
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.”
20
6844 at ¶ 92.
21
22
Indeed, the fact that these CPUC annual user fees are
See Section 621 Order, 34 FCC Rcd.
For the reasons stated above, the court finds as a
matter of law that the CPUC User Fee is a “fee. . . of general
23
24
25
26
27
At oral argument, Comcast argued at length that the
CPUC fee imposed on utility companies, see Cal. Pub. Util. Code §
431, is distinguishable from the CPUC User Fee at issue here
because they were promulgated by different statutes, historically
calculated differently, and pay for different expenses within the
CPUC. Although the court recognizes these distinctions, they do
not change the court’s analysis.
7
28
18
1
applicability”, and is not a “franchise fee” within the meaning
2
of 47 U.S.C. § 542.8
3
summary judgment on this claim.
4
C.
5
Accordingly, the court will grant SMCTC
Tower Rental Fees
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.
12
SUF at ¶ 28.)
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
(Pl.’s Resp. to Def.’s
The parties disagree as to whether, as a matter of
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.
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.”
(Def.’s
(Pl.’s Opp’n to Def’s
26
27
28
Because the court finds that the CPUC User Fee is a fee
of general applicability, the court need not decide whether the
Section 621 order applies retroactively or not.
19
8
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).
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.
9
Comcast were to cease using its towers for the provision of cable
Comcast’s tower
(Def.’s Mot. for Summ. J. at 23.)
If
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.
13
of the towers to provide video and cable service to its
14
subscribers, but on the physical existence of the tower.
15
The fees generated do not depend on Comcast’s operation
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.
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.”
22
U.S.C. § 542(b).
23
“only applies to revenue obtained from ‘cable services,’ not non-
24
cable services that Congress understood could provide additional
25
sources of revenue.”
26
¶ 89.
27
28
Under the Federal Cable
See 47
The FCC has clarified that the franchise fee
See Section 621 Order, 34 FCC Rcd. 6844 at
Accordingly, the court concludes as a matter of law
that the tower rental fees should not be included as “gross
20
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.
4
entitled to summary judgment on this claim.
5
D.
Comcast is therefore
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.
9
47 U.S.C. § 542(b).
See
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.
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”). . .”
16
Util. Code § 5860(d).
17
See Cal. Pub. Util. Code § 5860(f).
“Gross revenue” is
See Cal. Pub.
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.”
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.
24
various additional “multi-service” fees that apply to its
25
bundles, including late fees, early termination fees, and whole
26
house maintenance fees.
27
that because of the federal mandate that franchise fees can only
28
be charged on a cable operator’s cable service, it allocates
(Pl.’s Resp. to Def.’s SUF at ¶ 20.)
(Id. at 21.)
Comcast has established
(Def.’s SUF at ¶ 21.)
21
Bundles allow
Comcast claims
1
revenues from its multiservice fees to isolate the portion
2
attributable to cable service in calculating franchise fee
3
payments.
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.
7
Summ. J. at 18.)
8
methodology regarding the allocation of multi-service fees is
9
inconsistent with GAAP and incorrectly allocated.
10
(Def.’s Mot. for Summ. J. at 17.)
Comcast argues that
(See Def.’s Mot. for
SMCTC disagrees and argues that Comcast’s
(See Pl.’s
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.
16
Summ. J. at 16–17.)
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.
23
(Def’s Mot. for
However, although Comcast moves for summary
(Def.’s Reply in Supp. of Mot. for Summ. J. at 14, 18.)
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.
27
the proposition that its allocations comply with GAAP merely show
28
that Comcast’s Vice President of Finance and Accounting, Jeff
Deposition excerpts that Comcast cites for
22
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.”
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).)
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
(See Decl. of Edward Seidel at Ex. 10, attaching
A
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.
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.
19
to Def.’s Mot. for Summ. J. at 23.)
20
(See Decl. of Mark Velasquez
(Pl.’s Opp’n.
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.
24
court will deny Comcast’s motion for summary judgment on this
25
claim.
26
27
28
E.
Accordingly, the
Launch Incentives
The court next addresses the parties’ contentions as to
whether “launch incentives” constitute “gross revenue” pursuant
23
1
to Cal. Pub. Util. Code § 5860(d).
2
operators typically pay programmers for content and then package
3
and distribute that content to subscribers.
4
Def.’s SUF at ¶ 24.)
5
a cable operator, programmers will sometimes pay certain “launch
6
incentives” to the operator.
7
typically paid up front to the cable operator as part of a
8
content agreement.
9
incentives” over the life of its contract with the programmer and
9
Comcast and other cable
(Pl.’s Resp. to
However, in order to sell their content to
(Id.)
(Id.)
“Launch incentives” are
Comcast amortizes these “launch
10
contends that this effectively lowers the negotiated price a
11
cable operator pays for the content.
12
at 20.)
13
(Def.’s Mot. for Summ. J.
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.)
17
revenue” is all revenue unless excluded.
18
Mot. for Summ. J. at 34.)
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.”
23
“launch incentives” count as “gross revenue” unless they
24
specifically fall into this exception under §5680(e)(9).
25
Opp’n. to Def.’s Mot. for Summ. J. at 34.)
26
27
28
SMCTC disagrees, and argues that under DIVCA, “gross
(Pl.’s Opp’n. to Def.’s
Cal. Pub. Util. Code § 5680(e)(9)
SMCTC contends that
(Pl.’s
As defined supra at p.20, “gross revenue” under DIVCA
means all revenue actually received by the holder of a state
franchise, as determined in accordance with GAAP. See Cal. Pub.
Util. Code § 5860(d).
24
9
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.”
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.
13
J. at 21.)
14
See
(Def.’s Mot. for Summ.
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.
18
at 35.)
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. . .”
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.
(Pl.’s Opp’n. to Def.’s Mot. for Summ. J.
A.S.C. 607-50-45-13 states that the presumption that
See A.S.C. at 605-50-45-13.
25
SMCTC
(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.”
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
Moreover, it is clear that the parties have
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. . .”
19
Code § 5860(d).
20
bills if a Comcast technician is late or fails to show up to an
21
activation or installation appointment.
22
SUF at ¶ 26.)
23
included as “gross revenue” in calculating franchise and PEG
24
fees.
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.
Cal. Pub. Util.
Comcast subscribers receive credits on their
(Pl.’s Resp. to Def.’s
SMCTC contends that these credits should be
(Pl.’s Opp’n to Def.’s Mot. for Summ. J. at 28.)
26
Comcast
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.”
8
SMCTC contends that if Comcast were allowed to exclude credits to
9
customers from the definition of “gross revenue”, it would allow
See Cal. Pub. Util. Code § 5860(e)(1).
However,
10
Comcast to push a portion of its costs for untimely business
11
practices onto SMCTC.
12
at 28.)
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
(Pl.’s Opp’n. to Def.’s Mot. for Summ. J.
SMCTC’s belief that such a practice would be unfair is
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.”
27
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.
4
Summ. J. at 16.)
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.
8
Pl.’s Reply in Supp. of Mot. for Summ. J.
9
57.)
(Pl.’s Mot. for
SMCTC argues that “because Comcast deducts (or
(See
at 10.) (Docket No.
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.)
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”.
Accordingly, the
(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.
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.
27
declared that this was “merely a pleading artifice designed to
28
circumvent the damage prohibition in section 555a(a) of the
Glendale, 231 Cal. App. 4th at 1378.
28
In Glendale, the
The court
1
Federal Cable Act.”
2
Id.
SMCTC argues that Comcast’s actions are likewise a
3
“ruse designed to obtain a monetary award in contravention of
4
Section 555a(a).”
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.
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
(Pl.’s Mot. for Summ. J. at 3.)
However, the
Glendale is distinguishable because the procedural
11
offers little support for SMCTC’s position.
12
sought monetary damages for SMCTC’s alleged conversion of its
13
security deposit.
14
Circuit held that this was barred by Section 555a(a).
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1171.
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“considered whether [section 555a(a)] would apply were Comcast
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defending a suit for underpayment of franchise fees brought by
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SMCTC as would likely occur were Comcast to deduct the deposit as
19
an overpayment from its franchise fee payments. . . instead of
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bringing suit for damages.”
21
precisely this procedural posture, which the Ninth Circuit
22
expressly did not consider, which is at issue here.
23
In SMCTC II, Comcast
See SMCTC II, 923 F.3d at 1167.
The Ninth
Id. at
However, the Ninth Circuit emphasized that it had not
Id. at 1172 (emphasis added).
It is
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.
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
29
See Section 621 Order, 34
1
franchise fee payments.”)
2
to Comcast’s argument that these offsets or reductions do not
3
violate 47 U.S.C. § 555a(a).
4
This position by the FCC lends support
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).
8
remitted quarterly to the applicable local entity, with a summary
9
explaining the basis for the calculation of the state franchise
Under this provision, the state franchise fee shall be
10
fee.
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.”
14
proposition that cable operators cannot make any deductions
15
except for past overpayments.
16
See Cal. Pub. Util. Code § 5860(h).
Id.
Section 5680(h)
SMCTC contends that this provision stands for the
The court disagrees.
(Pl.’s Mot. for Summ. J. at 17.)
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.
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.
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
30
Moreover, as addressed
See
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.”)
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
Because California Public Utilities Code §
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.
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.
22
all other claims.
23
Comcast is entitled to summary
Comcast’s motion for summary judgment is DENIED as to
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.
26
judgment on its claim that CPUC fees are not “franchise fees”
27
under the Federal Cable Act.
28
is DENIED as to all other claims.
SMCTC is entitled to summary
SMCTC’s motion for summary judgment
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Dated:
December 18, 2020
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