Bellsouth Telecommunications, LLC v. New Orleans City
Filing
38
ORDER AND REASONS GRANTING 18 Motion for Summary Judgment; DENYING 20 Motion for Summary Judgment. Signed by Judge Mary Ann Vial Lemmon on 7/7/2014. (my)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
BELL SOUTH
TELECOMMUNICATIONS, LLC
D/B/A AT&T LOUISIANA
CIVIL ACTION
VERSUS
NO: 13-5976
THE CITY OF NEW ORLEANS
SECTION: "S" (3)
ORDER AND REASONS
IT IS HEREBY ORDERED that the Motion for Summary Judgment filed by plaintiff,
BellSouth Telecommunications, LLC, d/b/a AT&T Louisiana, (Doc. #18) is GRANTED, and
plaintiff is awarded $874,169.22, plus pre-judgment interest at the interest rate due under Louisiana
law beginning on July 31, 2012, and post judgment interest at the interest rate due under Federal law
from the date of this judgment until paid.
IT IS FURTHER ORDERED that the Motion for Summary Judgment filed by defendant,
The City of New Orleans (Doc. #20) is DENIED.
BACKGROUND
This matter is before the court on cross-motions for summary judgment. Plaintiff, BellSouth
Telecommunications, LLC, d/b/a AT&T Louisiana, argues that it is entitled to summary judgment
finding that the 2011 Ordinance enacted by the City of New Orleans to collect payments from
BellSouth was void ab initio as unconstitutional, and seeks a refund of the money it paid the City
under that ordinance, plus interest. The City, on the other hand, argues that the 2011 Ordinance was
never declared unconstitutional by the United States Court of Appeals for the Fifth Circuit and,
therefore BellSouth is not entitled to a refund.
The history of this case relates to two prior, consolidated lawsuits filed in the United States
District Court for the Eastern District of Louisiana (Civil Action Nos. 09-151 and 11-2116). Orders
in both of those suits were appealed to the United States Court of Appeals for the Fifth Circuit,
which explained the pertinent background as follows:
The City of New Orleans (“the City”) filed suit against BellSouth
Telecommunications, L.L.C. (“BellSouth,” or “the company”), claiming that the
company owed it additional compensation for the use of its public rights-of-way.
After a bench trial, the district court issued findings of fact and conclusions of law
that rejected the City's claims for additional compensation pursuant to the various
contracts between the parties. However, the court awarded the City unjust
enrichment damages in the amount of $1,549,240.93 to compensate the City for
benefits the company had received from its use of the City's rights-of-way from the
end of 2006 to the time of judgment. Both parties appealed.
After the court entered an order indicating its method for calculating the amount
of unjust enrichment damages, the City enacted an ordinance [Ordinance No. 24,547
("the 2011 Ordinance")] intended to force BellSouth to continue compensating the
City in future years for the unjust enrichment identified by the district court.
BellSouth moved for a preliminary injunction to enjoin the City from enforcing the
ordinance pending its appeal from the district court's judgment. The district court
denied the injunction. BellSouth appealed, and we consolidated the various appeals.
*
*
*
The parties' contractual relationship began in 1879 when the City Council
enacted Ordinance No. 4906 (“1879 Ordinance”). Section 1 of the 1879 Ordinance
authorized BellSouth
to construct and maintain a line or lines of telegraphs through the streets of
this city, the line or lines to be constructed along such streets, at such points
and in such manner as to the kind and position of the telegraph poles, the
height of the wires above the streets, and in all other particulars, as the
Administrator of the Department of Improvements of this city may direct;
provided, however, that the said company shall connect their wires with the
Mayor's office, chief of police office and fire alarm telegraph office, and
place and keep telephones therein, free of charge to the city, so that the said
telephones may be used in connection with all wires under the control of said
company.
New Orleans, La., Ordinance 4906 (Feb. 18, 1879).
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Section 2 of the 1879 Ordinance provided “[t]hat all the acts and doings of said
company under this ordinance shall be subject to any ordinance or ordinances that
may hereafter be passed by the City Council concerning the same.” Id. BellSouth
provided the free phones to the City and used the City's rights-of-way to construct
and maintain telecommunications lines pursuant to the 1879 Ordinance.
In 1880, the Louisiana legislature enacted Act. 124, which granted corporations
formed “for the purpose of transmitting intelligence by magnetic telegraph or
telephone or other system of transmitting intelligence, the equivalent thereof which
may be hereafter invented or discovered” the right to “construct [and] maintain such
telegraph, telephone or other lines necessary to transmit intelligence along all State,
parish or public roads or public works.” 1880 La. Acts 168 (codified as amended at
LA.REV.STAT. § 45:781(A)). The Act also permitted companies to construct and
maintain lines “along the streets of any city, with the consent of the council or
trustees thereof.” Id.
Apparently discontent with its consideration under the 1879 Ordinance, the City
passed a new ordinance in December 1883, which purported to “regulate and control
the erection and maintenance of poles for supporting wires of the telephones within
[the City]”; the Ordinance provided, inter alia, that
No poles shall be allowed to be erected, or any existing poles be allowed to
remain, in [a certain] portion of the city ..., except on the payment of $5 per
annum per pole for every such pole erected or at present in use within that
section of the city[;] said payments to be in consideration of the privilege and
advantage of entering upon, using, and permanently occupying the streets,
ways and places of the city for private property, and to be paid annually in
advance ....
City of New Orleans v. Great S. Tel. & Tel. Co., 3 So. 533, 534 (La.1888) (citation
omitted).
The City filed suit to enjoin BellSouth from using or maintaining the 600 poles
it had erected in a designated portion of town until the company paid the amount due
under the 1883 Ordinance. On appeal, the Louisiana Supreme Court invalidated the
1883 Ordinance, holding that the City could not exact additional consideration from
BellSouth for the company's “continued enjoyment of privileges already granted.”
Id. at 535. The court concluded that because BellSouth had complied with the
conditions of the 1879 Ordinance, the City's “grant of authority” to BellSouth had
become an “irrevocable contract, and the city is powerless to set it aside or to
interpolate new or more onerous considerations therein.” Id. (citing Trustees of
Dartmouth College v. Woodward, 17 U.S. (4 Wheat.) 518, 4 L.Ed. 629 (1819)).
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In 1906, the City inquired “whether [BellSouth] would be willing to pay [the
City] a considerable sum per annum for the use of the streets.” BellSouth responded
to the inquiry by letter. The company first stated that it was “in the enjoyment of a
grant, made in 1879, which gave it for legal consideration the right to conduct its
business and make use of the streets, and cannot therefore make any payment or
contribution to the City as a consideration for a grant already acquired.” However,
“recognizing the fact that the grant has by reason of the great development of the
telephone business proved to be of great benefit to the Company,” BellSouth
expressed its “willing[ness] to pay to the [City], quarterly, ... three (3) per cent of its
gross receipts from rentals paid by telephone subscribers for rental of telephones in
[the City], so long as [BellSouth] is alone operating in the city.” The company
further qualified its offer as follows: “Should any other person or company acquire
the right to conduct a telephone exchange or business in the City, the Company
would not feel justified in continuing its payments, and would cease to make them.”
In response, the City Council adopted a motion to accept BellSouth's tender of
3% of its gross receipts for local telephone rentals, but “with the reservation that said
tender ... and the acceptance of said [tender] ... shall in nowise constitute a contract
between [BellSouth] and the [City] or bind the [City] to hereafter grant no other
privileges for the use of streets in connection with the telephone business.” BellSouth
began making payments under the 1906 Agreement.
In 1916, BellSouth sent a letter to the City's Commissioner of Public Property,
purporting to confirm a previous conversation involving BellSouth and certain City
officials. In the letter, BellSouth agreed to provide the City with telephone service
at regulated rates, less a 33.33% discount; the parties also agreed that the discount
“would apply to all classes of service which are or may be furnished to the City or
any of its Departments.” The letter further stated that BellSouth would provide the
City with 25 additional telephones, free of charge, “[i]n addition to the three free
telephones which the Company furnishes to the City under its franchise obligation.”
BellSouth does not appear to have received any explicit consideration for its
“additional” concessions in the 1916 Letter Agreement.
In 1984, the divestiture of AT&T broke the company into several smaller
companies, including BellSouth. Under the divestiture, BellSouth could no longer
own or provide telephone equipment to its customers. Accordingly, BellSouth could
no longer provide free telephones to the City as required by the 1879 Ordinance and
the 1916 Letter Agreement. To solve this problem, the parties entered into the 1984
Concession Agreement. Under the Agreement, BellSouth agreed to make a lump sum
payment of $417,285.18 to “cover the City's budgetary deficit for one year on the
equipment portion of the concession,” in exchange for the City's agreement “to a cap
on the lines and service portion of the concession at the present dollar value, i.e.,
$31,407.21 monthly.” The parties further agreed that the 1984 Concession
Agreement would only amend the 1916 Letter Agreement, and it would not waive
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any of the City's other rights, including its rights under the 1906 Agreement—that
is, BellSouth's obligation to pay the City 3% of its gross receipts from local recurring
revenue. BellSouth has fulfilled its obligations under the 1984 Agreement, which
involve making payments totaling $376,886.52 annually.
In 1996, the City Council enacted the Ordinance of General Applicability
(“OGA”), to provide for uniform procedures, terms, conditions and compensation for
telecommunications franchises that use the City's rights-of-way. New Orleans, La.,
Ordinance 17,560 (Feb. 1, 1996). The OGA applies to all franchisees occupying the
City's rights-of-way for the purposes of regulating the installation, maintenance,
repair and/or operation of wired telecommunications systems. However, the OGA
distinguishes between new and existing franchisees to the extent it regulates the
compensation owed to the City for the use of its rights-of-way. For compensation
purposes, the OGA applies to pre-existing franchises only if those franchises
“acknowledge susceptibility to an [OGA].” Id. The OGA provides that pre-existing
franchises that do not acknowledge susceptibility to an OGA “shall remain subject
to all existing provisions of such pre-existing franchise, as well as being subject to
[certain non-compensation parts of the OGA].” Id. The compensation provisions of
the OGA do apply, however, to all pre-existing franchises when they are renewed.
In early 2000, the City informed BellSouth of its belief that the company owed
it an additional $7,250,983 under the 1906 agreement for the years 1997–1998FN2
When BellSouth refused to pay, the City filed suit in Louisiana state court (1) to
recover the outstanding compensation due under the 1906 Agreement and (2) to
obtain a declaration that all future payments under the 1906 Agreement must be
based upon 3% of the company's total gross receipts from the City, as opposed to 3%
of its gross receipts from local recurring telephone services. BellSouth removed the
suit to federal court and filed a counterclaim seeking (1) a declaration that the 1906
Agreement had terminated since BellSouth was no longer the exclusive provider of
telecommunications services in the City and (2) a return of all payments made under
the 1906 Agreement after BellSouth was no longer the exclusive provider of
telecommunications services in the City.FN3
FN2. In 1994, the City had made a similar claim, and it had demanded additional
compensation from the company under the 1906 Agreement. BellSouth eventually
agreed to pay the City $2.5 million as a credit against any future liability under the
1906 Agreement; BellSouth did not admit liability.
FN3. The Federal Telecommunications Act of 1996 definitively introduced
competition into the City's market for telephone services. Nevertheless, BellSouth
continued to make payments to the City under the 1906 Letter Agreement after other
telecommunications providers had begun providing services in the City.
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In 2001, the parties settled their lawsuit and entered into the 2001 Settlement
Agreement, which was ratified by the City Council. The 2001 Settlement Agreement
was “intended to fully and completely compromise, settle and finally terminate all
of the disputes, claims and causes of action by and between BellSouth and the City
with respect to the agreements and ordinances described herein and in the Pending
City Suit.” The Settlement Agreement contained the following material terms: (1)
the City expressly recognized the grant of rights conferred to BellSouth by the 1879
Ordinance, as interpreted and confirmed by the Great Southern court; the City also
expressly recognized that it was not entitled to seek additional compensation or
consideration from BellSouth for the rights conferred by the 1879 Ordinance; (2) the
parties expressly recognized that the 1906 Agreement had terminated because other
companies had acquired the right to conduct telephone business in the City; (3)
BellSouth agreed to pay the City a fixed, annual amount of $5.5 million for six years,
terminating in January 2006; and (4) the parties mutually released each other from
all claims, whether known or unknown, that in any way concerned the 1879
Ordinance, the 1906 Agreement, or the 1984 Concession Agreement.
As “further consideration for the settlement embodied in th[e] agreement”: (1)
the Mayor agreed to publicly support state Simplified Tax Legislation; and (2) if
Louisiana did not pass Simplified Tax Legislation prior to January 2007, the parties
agreed that the City could elect, by ordinance “during the calendar year 2007,” to
enter into a Local Municipality Agreement (“LMA”), which would require BellSouth
to pay the City 5% of its gross revenues from certain BellSouth Accounts. The
Settlement Agreement provided that the LMA would have a maximum primary term
of five years, and that it could be extended for one additional five year term if certain
conditions were satisfied.
The Settlement Agreement further provided that the City would have no right to
elect to enter the LMA if it failed to meet its obligations under the Agreement, which
included the requirement that it enact an ordinance entering into the LMA during the
calendar year 2007. Lastly, the parties agreed that the Settlement Agreement “shall
form the entire and only agreement between the Parties and that no promises,
inducement or other agreement expressed herein has been made.”
BellSouth made the required $5.5 million annual payments through 2006.
However, Louisiana did not pass the Simplified Tax Legislation, and the City
Council did not pass an ordinance entering into the LMA during the calendar year
2007. Accordingly, starting in 2007, BellSouth was only paying the City
$376,886.52 annually to use the City's rights-of-way under the 1984 Concession
Agreement. When BellSouth refused the City's demand for additional compensation,
the City filed the present lawsuit in January 2009.
In its complaint, the City asserted several claims for damages alleging that
BellSouth owed it additional compensation for use of its rights-of-way. The City also
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sought various forms of declaratory relief that would allow it to subject BellSouth's
franchise to the compensation provisions of the OGA. BellSouth answered and
denied the City's claims. It also asserted a counterclaim against the City, seeking
damages from certain payments it had made to the City pursuant to the 2001
Settlement Agreement and the 1906 Agreement.
The district court held a bench trial, and, in November 2010, it issued its findings
of fact and conclusions of law. In its findings and conclusions, the district court
agreed with BellSouth that the company did not owe the City additional
compensation pursuant to any of the existing agreements between the parties.
First, the district court concluded that the 1879 Ordinance was valid and that
Great Southern precluded the City from imposing new or more onerous consideration
for the franchise rights granted therein. The court also rejected the City's argument
that the 1879 Ordinance only granted the company a franchise to use the City
rights-of-way aboveground. The court similarly rejected the City's argument that the
1906 Agreement actually granted BellSouth a franchise right to use the City's belowground rights-of way.
Second, the district court concluded that the 1984 Concession Agreement was
valid and that it monetized BellSouth's obligations under the 1879 Ordinance and the
1916 Letter Agreement.
Third, the district court concluded that the OGA did not regulate the
compensation owed by BellSouth to the City for its franchise rights under the 1879
Ordinance. The court found that BellSouth's 1879 franchise rights preexisted the
OGA, did not acknowledge susceptibility to the OGA, and had not been renewed
since the passage of the OGA. Similarly, because the district court concluded that the
1906 Agreement did not grant any franchise right to BellSouth, it determined that the
OGA did not apply to whatever benefit the company received from the 1906
Agreement.
However, the district court disagreed with BellSouth's interpretation of the
parties' contracts in two important respects. First, the court determined that BellSouth
entered into the 1906 Agreement in exchange “for some benefit other than
exclusivity.” It based that conclusion on (1) the City's refusal to provide BellSouth
with exclusivity in 1906, (2) BellSouth's decision to continue making the payments
even after competition entered the telecommunications market, and (3) the fact that
BellSouth did not raise an exclusivity claim regarding the 1906 payments until it
brought a counter-claim in the 2000 litigation. The district court further concluded
that the 1906 Agreement granted BellSouth a benefit in addition to and separate from
its 1879 franchise rights. However, the court acknowledged that it could not identify
the exact benefit that BellSouth did receive from the 1906 Agreement.
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Second, the district court rejected BellSouth's contention that the “further
consideration” provisions of the 2001 Settlement Agreement—Simplified Tax
Legislation and the LMA—were exclusive. Specifically, the court concluded that the
inclusion of the two “further consideration” provisions in the 2001 Settlement
Agreement “indicated that the parties contemplated compensation would be paid by
BellSouth to the City post–2006 in addition to BellSouth's payments to the City
pursuant to the 1984 Concession Agreement.” The court related this conclusion to
its prior determination that the 1906 Agreement conferred an unknown benefit to
BellSouth: that is, the court concluded that the parties intended the “further
consideration” as compensation for the unknown benefit BellSouth would continue
to receive from the 1906 Agreement. It concluded that the failure to enact either of
the enumerated “further consideration” conditions did not “foreclose the City from
receiving compensation from BellSouth post–2006 for the benefits BellSouth has
enjoyed and continues to enjoy which were granted originally in the 1906
Agreement.” However, the court determined that no valid agreement governed the
amount of compensation BellSouth owed to the City post–2006 for the benefits it
was continuing to receive from the 1906 Agreement.
Because the court determined that “no agreed upon method of payment has been
in place from 2006,” it concluded that “the doctrine of unjust enrichment must be
used to define the extent of BellSouth's obligation to pay the City for the benefits it
has been receiving post–2006 which originally derived from the 1906 Agreement and
later were recognized in the 2001 Settlement Agreement.” In particular, the court
concluded that the equities of the situation merited an award of unjust enrichment
damages under Louisiana law; the court concluded that BellSouth had no
justification for failing to “compensate the City post–2006 since the parties
contemplated that payments would continue after 2006 and BellSouth has continued
to enjoy the same benefits post–2006 as when it was previously making payments
to the City pursuant to the 1906 Agreement and the 2001 Settlement Agreement.”
The district court eventually decided to use the amount BellSouth would have
paid if the City had decided to enact the LMA, minus a credit to BellSouth for
discounts it gives to the City on services, as a basis for calculating the unjust
enrichment damages. Following this formula, the district court entered judgment in
favor of the City in the amount of $1,549,240.93 to compensate the City for the
company's use of its rights-of-way from the end of 2006 to the time of judgment.
Both parties timely filed notices of appeal.
The district court's pre-judgment orders indicated that BellSouth should make
“similar payments for subsequent years, unless the rights and obligations of the
parties change so as to no longer require such payments.” A month after the court's
judgment was entered, the City passed the 2011 Ordinance in order to set the
compensation BellSouth would have to pay the City in future years for the benefits
it would receive “in excess of such benefits received by said company pursuant to
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[the 1879 Ordinance].” New Orleans, La., Ordinance 24,547 (July 7, 2011). As the
district court described the 2011 Ordinance, it is “an effort to legislate future unjust
enrichment payments” by requiring “BellSouth to pay five-percent of its gross
revenues ‘derived from its business in [the City].’ ”
BellSouth filed a motion seeking a preliminary injunction to enjoin the
enforcement of the 2011 Ordinance, contending inter alia, that it violates Great
Southern and the district court's earlier rulings. The district court denied BellSouth's
request for a preliminary injunction, primarily concluding that the 2011 Ordinance
properly “carve[d] out Great Southern” by expressly stating that the City was seeking
compensation for benefits “in excess” of those granted by the 1879 Ordinance. Thus,
the district court concluded that enjoining the 2011 Ordinance would effectively
overturn its 2009 judgment awarding unjust enrichment damages. BellSouth
appealed, and we consolidated the parties' various appeals.
City of New Orleans v. BellSouth Telecomm., Inc., 690 F.3d 312, 316-323 (5th Cir. 2012).
On February 17, 2012, while the appeal was pending, Bell South paid the City $874,169.22,
pursuant to the 2011 Ordinance. Bell South specified that the payment was made "under protest."
On September 12, 2012, the United States Court of Appeals for the Fifth Circuit affirmed
the district court's findings of fact and conclusions of law "to the extent the court rejected the City's
claims for damages." Id. at 316. The appellate court concluded:
that the 1879 Ordinance prevents the City from unilaterally increasing the
consideration owed to it by BellSouth for both present and future uses of its
rights-of-way. In Great Southern, the Louisiana Supreme Court invalidated an 1883
Ordinance, in which the City had attempted to require BellSouth to pay “$5 per
annum per pole for every” pole “erected or at present in use” in a part of the City.
3 So. at 534. The 1883 Ordinance plainly attempted to impose additional
consideration on BellSouth for both its existing and future uses of the City's
rights-of-way. See id. (“No poles shall be allowed to be erected, ... except on the
payment of $5 per annum per pole for every such pole erected ....”) (citation
omitted). Accordingly, because the Great Southern court struck down the 1883
Ordinance in its entirety, we agree with the district court that the holding in Great
Southern prevents the City from unilaterally increasing the consideration required
by the 1879 Ordinance for both present and future uses of the City's rights-of-way.
Id. at 323. The court also concluded "that the 1879 Ordinance granted BellSouth a franchise right
to use the City's rights-of-way both above and below the surface." Id. Further, the court "reject[ed]
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the City's argument that it was the 1906 Agreement that granted the company a franchise to place
its lines underground," that exclusivity was the only benefit BellSouth received from the 1906
agreement, and that "the City is precluded from arguing otherwise because it expressly
acknowledged in the 2001 Settlement Agreement that the 1906 agreement had terminated when the
company was no longer the only telephone company operating in the City." Id.
The United States Court of Appeals for the Fifth Circuit also rejected the City's argument
that the district court erred by finding that the OGA did not govern the compensation owed by
BellSouth for use of the City's rights-of-way because the OGA set the compensation owed under the
1879 Ordnance and for rights and benefits BellSouth had beyond the 1879 Ordinance. Id. at 324-25.
The court stated:
First, we need not decide whether the City intendd for the OGA to regulate the
compensation owed by BellSouth under the 1879 Ordinance because the City lacks
the authority to unilaterally increase the consideration due for BellSouth's rights
under the Ordinance . . . Accordingly, even if the City intended for the compensation
provisions of the OGA to apply to the 1879 Ordinance, the OGA would then violate
the terms of 1879 Ordinance as interpreted in Great Southern. That is, the OGA
would conflict with the 1879 Ordinance by attempting to unilaterally increase the
consideration owed by BellSouth for its franchise rights. See id. at 535 (“[T]he city
is powerless to set [the grant of authority to BellSouth in the 1879 Ordinance] aside
or to interpolate new or more onerous consideration therein.”).
Second, we reject the City's argument that the OGA regulates the compensation
owed by BellSouth for the franchise rights “it utilizes beyond those granted under
the 1879 Ordinance.” In short, the City has failed to establish that BellSouth enjoys
any franchise rights beyond those granted to it by the 1879 Ordinance. As we
previously concluded, the 1879 Ordinance gave BellSouth the right to use the City's
rights-of-way both above and belowground, and, as we will discuss more fully
below, the 1906 Agreement did not give the company any additional franchise rights.
Thus, the City has not established that BellSouth possesses any franchise rights other
than those granted by the 1879 Ordinance.
10
Accordingly, we agree with the district court that the City is not entitled to any
additional compensation under any ordinance or the existing contracts between the
parties.
Id. at 325.
The United States Court of Appeals for the Fifth Circuit reversed and vacated the district
court's unjust enrichment award, and found that the 2011 Ordinance was unenforceable because it
was an attempt to codify the unjust enrichment damages. Id. at 326-328. The court found that there
was no justification for an award of unjust enrichment damages as any enrichment BellSouth
received post-2006 for its use of the City's rights-of-way has a justification in contract because "the
City released its claims for additional compensation from BellSouth in exchange for substantial
consideration under the terms of the [2001] Settlement Agreement." Id. at 328. As to the 2011
Ordinance the appellate court stated:
The 2011 Ordinance attempts to legislate future unjust enrichment damages by
setting the compensation BellSouth must pay the City in future years for the benefits
it receives “in excess of such benefits received by said company pursuant to [the
1879 Ordinance].”
However, as we have already held, the district court's unjust enrichment award
was based on an erroneous assumption that BellSouth received some “indeterminate
benefit” from the 1906 Agreement apart from exclusivity and the franchise rights
granted in the 1879 Ordinance. Thus, the 2011 Ordinance merely seeks to increase
the consideration BellSouth owes to the City for the rights granted to it under the
1879 Ordinance. Accordingly, the 2011 Ordinance violates the Great Southern
court's holding that “the city is powerless to set [the grant of authority to BellSouth]
aside or to interpolate new or more onerous considerations therein.” 3 So. at 535.
Given our conclusion that the district court erred by awarding unjust enrichment
damages, the City necessarily lacks the authority to enforce the 2011 Ordinance,
which attempts to codify those unjust enrichment damages.
Id. at 329. The court further explained:
the City recognized the validity of the Great Southern decision in the 2001
Settlement Agreement. In the agreement, the City
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expressly recognize[d] the grant of rights conferred to BellSouth by the
1879 Ordinance, as interpreted and confirmed by the Great Southern
court. Specifically and without limitation, the City recognizes, as the
Great Southern Court held, that the City is not entitled to seek
additional compensation or consideration from BellSouth for the rights
conferred by the 1879 Ordinance.
Given this acknowledgment of the continuing force of Great Southern, we conclude
that the City is precluded from arguing that Great Southern improperly limits the
consideration it can demand for the rights granted to BellSouth by the 1879
Ordinance. See LA. CIV.CODE ANN. art. 3076; Brown, 630 So.2d at 748–50.
Id. at 329-330. The appellate court remanded the case to the district court with instructions to
permanently enjoin the City from enforcing the 2011 Ordinance. Id. at 330.
After the district court entered the permanent injunction, BellSouth requested that the City
refund the $874,169.22. The City refused, and Bell South moved the court to order the repayment.
The court denied the motion holding that "[a]n Order to Enforce Judgment is not the appropriate
method by which BellSouth may attempt to recover payment made before the Ordinance was
enjoined."
Thus, on September 27, 2013, BellSouth filed this action against the City seeking to recover
the $874,169.22 it paid "under protest" pursuant to the 2011 Ordinance. BellSouth alleges that, by
referring to Great Southern, which in turn cited Dartmouth College, the United States Court of
Appeals for the Fifth Circuit ruled that the 2011 Ordinance was unconstitutional, rendering it void
ab initio. Thus, Bell South argues that it is entitled to a return of the money under the theory of
repayment of a thing not owed, Louisiana Civil Code article 2299, or conversion. Alternatively, Bell
South seeks a declaratory judgment that it be permitted to use the amount paid to the City under the
2011 Ordinance as a credit and offset against any future amounts that it may owe to the City.
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The City argues that the 2011 Ordinance was not void ab initio because the United States
Court of Appeals for the Fifth Circuit never specifically stated that it was unconstitutional. The City
argues that the appellate court stated that the city lacked the authority to enforce the 2011 Ordinance,
not the authority to enact it.
ANALYSIS
A. Summary Judgment Standard
Summary judgment is proper when, viewing the evidence in the light most favorable to the
non-movant, “there is no genuine issue as to any material fact and ... the moving party is entitled to
judgment as a matter of law.” Amburgey v. Corhart Refractories Corp., 936 F.2d 805, 809 (5th Cir.
1991); FED. R. CIV. PROC. 56(c). If the moving party meets the initial burden of establishing that
there is no genuine issue, the burden shifts to the non-moving party to produce evidence of the
existence of a genuine issue for trial. Celeotex Corp. v. Catrett, 106 S.Ct. 2548, 2552 (1986). The
non-movant cannot satisfy the summary judgment burden with conclusory allegations,
unsubstantiated assertions, or only a scintilla of evidence. Little v. Liquid Air Corp., 37 F.3d 1069,
1075 (5th Cir. 1994) (en banc). If the opposing party bears the burden of proof at trial, the moving
party does not have to submit evidentiary documents to properly support its motion, but need only
point out the absence of evidence supporting the essential elements of the opposing party’s case.
Saunders v. Michelin Tire Corp., 942 F.2d 299, 301 (5th Cir. 1991).
B. 2011 Ordinance Was Void Ab Initio
As stated above, the United States Court of Appeals for the Fifth Circuit held that the City
has no authority to unilaterally increase the amount BellSouth owes to it for the use of its rights-ofway under the 1879 Ordinance, and accordingly, the 2011 Ordinance violates the Great Southern
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court's holding. City of New Orleans, 690 F.3d at 329. In Great Southern, the Supreme Court of
Louisiana held that the 1879 Ordinance was an “irrevocable contract, and the city is powerless to
set it aside or to interpolate new or more onerous considerations therein.” Id. (citing Trustees of
Dartmouth College v. Woodward, 17 U.S. (4 Wheat.) 518, 4 L.Ed. 629 (1819)). The Dartmouth
College decision upon which Great Southern relies held that a contract cannot be impaired by the
acts of the state without violating the Contract Clause of the Constitution of the United States.1 See
Dartmouth College v. Woodward, 17 U.S. (4 Wheat.) 518, 4 L.Ed. 629 (1819). Therefore, because
the United States Court of Appeals for the Fifth Circuit held that the 2011 Ordinance was void ab
initio as unconstitutional under the Contract Clause because it impaired the rights and obligations
set by the 1879 Ordinance, BellSouth's is entitled to a refund of the $874,169.22 it paid under protest
pursuant to the 2011 Ordinance.2
1
The Contract Clause, which appears in Article I, Section 10, Clause 1 of the Constitution of the
United States provides:
No State shall enter into any Treat, Alliance, or Confederation; grant Letters of Marque and
Reprisal; coin Money; emit Bills of Credit, make any Thing but gold and silver Coin a
Tender in Payments of Debts; pass any Bill of Attainder, ex post facto Law, or Law
impairing the Obligation of Contracts, or grant any Title of Nobility.
2
The City argues that the 2011 Ordinance was in effect with BellSouth paid under protest because
the appellate court stated that the City did not have the authority to enforce the ordinance, not that the City
did not have the authority to enact it. This argument ignores the United States Court of Appeals specific
references to Great Southern, which lead to the conclusion that the 2011 Ordinance was void ab initio.
14
C. BellSouth's Theories of Recovery
BellSouth alleges three theories of recovery in its complaint: (1) repayment of a thing not
owed under Louisiana Civil Code article 2299; (2) conversion3; or (3) declaratory judgment that it
is entitled to use the money paid under protest pursuant to the 2011 Ordinance to offset amounts it
may owe to the City in the future.4
Louisiana Civil Code article 2299 provides: "A person who has received a payment or a
thing not owed to him is bound to restore it to the person from whom he received it." Because the
2011 Ordinance was void ab initio, the City of New Orleans received payment of a thing not owed
3
“Conversion is defined as an act in derogation of the plaintiff's possessory rights or any wrongful
exercise or assumption of authority over another’s goods, depriving him of the possession, permanently, or
for an indefinite time.” Chrysler Credit Corp. v. Whitney Nat'l Bank, 51 F.3d 553, 557 (5th Cir.1995). “The
tort of conversion is committed when one wrongfully does any act of dominion over the property of another
in denial of or inconsistent with the owner’s rights.” F.G. Bruschweiler (Antiques) Ltd. v. GBA Great British
Antiques, L.L.C., 860 So.2d 644, 649 (La. Ct. App. 2006) (citing Aymond v. State, Dept. of Revenue and
Taxation, 672 So.2d 273, 275 (La Ct. App. 1996)). Specifically, the tort of conversion is committed when
any of the following occurs: (1) possession is acquired in an unauthorized manner; (2) the chattel is removed
from one place to another with the intent to exercise control over it; (3) possession of the chattel is transferred
without authority; (4) possession is withheld from the owner or possessor; (5) the chattel is altered or
destroyed; (6) the chattel is used improperly; or (7) ownership is asserted over the chattel. Daul Drilling Co.
v. Mills Equip. Inv., Inc., 721 So.2d 853, 856 (La. Ct. App. 1998). In order to prevail on a claim of
conversion under Louisiana law, the plaintiff must prove that: (1) he owned or had the right to possess funds
that were misused by the defendant; (2) the misuse was inconsistent with the plaintiff’s rights of ownership;
and (3) the misuse constituted a wrongful taking of the funds. Chrysler Credit Corp. v. Whitney Nat'l Bank,
798 F.Supp. 1234, 1236-37 (E.D .La.1992) (citing Chrysler Credit Corp. v. Perry Chrysler Plymouth, 783
F.2d 480, 484 (5th Cir.1986)).
4
The federal Declaratory Judgment Act states: "[i]n a case of actual controversy within its
jurisdiction, . . . any court of the United States, upon the filing of an appropriate pleading, may declare the
rights and other legal relations of any interested party seeking such declaration, whether or not further relief
is or could be sought." 28 U.S.C. § 2201. "A federal court may not issue a declaratory judgment unless there
exists an 'actual controversy'; i.e., there must be a substantial controversy of sufficient immediacy and reality
between the parties having adverse legal interests." Middle S. Energy, Inc. v. City of New Orleans, 800 F.2d
488, 490 (5th Cir. 1986). A controversy is justiciable only where "it can be presently litigated and decided
and not hypothetical, conjectural, conditional or based upon the possibility of a factual situation that may
never develop." Rowan Cos. v. Grim, 876 F.2d 26, 28 (5th Cir. 1989) (quoting Brown & Root, Inc. v. Big
Rock Corp., 383 F.2d 662, 665 (5th Cir. 1967)). It gives federal courts the competence to declare rights, but
it does not impose a duty to do so. If there is jurisdiction, whether to grant a declaratory judgment is within
the sound discretion of the trial court.
15
to it and is bound to restore it under Louisiana law. Therefore, the City must repay the $874,169.22
to BellSouth.5
D. Interest
"The setting of prejudgment interest rates is committed to the broad discretion of the district
court." Superior Derrick Servs., L.L.C. v. LONESTAR 203, 547 Fed. Appx. 432, 443 (5th Cir.
2013). "Under 28 U.S.C. § 1961(a), in diversity cases, post-judgment interest is calculated at the
federal rate, while pre-judgment interest is calculated under state law." Boston Old Colony Ins. Co.
v. Tiner Assocs., Inc., 288 F.3d 222, 234 (5th Cir. 2002). Prejudgement interest generally runs from
the date of the loss, but it is within the court's discretion to find that interest should run from the date
of judicial demand if there was a delay in filing suit or other factors making the precise date of the
loss difficult to determine. See Superior Derrick Servs., 547 Fed. Appx. at 443.
In this case, BellSouth is awarded pre-judgment interest at the interest rate due under
Louisiana law beginning on July 31, 2012, the date on which the United States Court of Appeals for
the Fifth Circuit held that the 2011 Ordinance was void ab initio, because that is when it became
clear that the payment was not owed. BellSouth is also awarded post judgment interest at the
interest rate due under Federal law from the date of this judgment until paid.
CONCLUSION
IT IS HEREBY ORDERED that the Motion for Summary Judgment filed by plaintiff,
BellSouth Telecommunications, LLC, d/b/a AT&T Louisiana, (Doc. #18) is GRANTED, and
plaintiff is awarded $874,169.22, plus pre-judgment interest at the interest rate due under Louisiana
5
Because the court finds that BellSouth is entitled to a refund of the money under Louisiana Civil
Code article 2299, it is unnecessary to consider BellSouth's alternative argument that the money it paid under
protest pursuant to the 2011 Ordinance, plus interest, should be used to offset amounts it may owe to the City
in the future. The City does not specifically ask that the court address the repayment in that manner.
16
law beginning on July 31, 2012, and post judgment interest at the interest rate due under Federal law
from the date of this judgment until paid.
IT IS FURTHER ORDERED that the Motion for Summary Judgment filed by defendant,
The City of New Orleans (Doc. #20) is DENIED.
7th
New Orleans, Louisiana, this _____ day of July, 2014.
____________________________________
MARY ANN VIAL LEMMON
UNITED STATES DISTRICT JUDGE
17
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