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Insight Kentucky Partners II, L.P. v. Louisville/Jefferson County Metro Government

United States District Court, W.D. Kentucky, Louisville

March 29, 2017

INSIGHT KENTUCKY PARTNERS II, L.P. PLAINTIFF
v.
LOUISVILLE/JEFFERSON COUNTY METRO GOVERNMENT and LOUISVILLE METRO COUNCIL DEFENDANTS

          MEMORANDUM OPINION

          Charles R. Simpson III, Senior Judge United States District Court

         I. Introduction

         This matter is before the Court on the motion of Defendants Louisville/Jefferson County Metro Government and Louisville Metro Council (collectively, “Defendants”) to dismiss the claims under Federal Rule of Civil Procedure 12(b)(6), ECF No. 18. Plaintiff Insight Kentucky Partners II, L.P. (“Insight”) responded, ECF No. 23. Defendants replied, ECF No. 24. For the reasons explained below, the Court will grant in part and deny in part Defendants' motion to dismiss.

         II. Allegations in the Complaint

         Wireline video providers use facilities placed in public rights-of-way to provide video programming to their customers. Compl. ¶ 9, ECF No. 1. These providers run wires and cables, including fiber optic wires, from central locations to their customers' businesses and residences. Id. ¶ 10. Most of the wires and cables are hung aerially on existing utility poles along the public rights-of-way. Id.

         A. Insight and the Louisville Metro Council Regulations

         Insight is a wireline video provider operating in Louisville, Kentucky. Id. ¶ 9. Insight and its predecessor entities have been providing customers in the area with services for decades. Id. ¶ 15. Louisville Metro Council regulates Insight as a “Cable Communications System.” Id. ¶ 17. The regulations placed on Insight are apparently costly and concern “extension of service requirements, customer service obligations, privacy regulations, performance measurements, interconnection requirements with other similar networks, rate regulation, requirements regarding street occupancy, reporting requirements, handling complaints, and the requirement to obtain a franchise from Louisville Metro.Id. ¶¶ 19, 20. For example, the regulations require Insight to maintain a repair and maintenance service that is capable of responding to customer complaints or requests within twenty-four hours and to provide Louisville Metro Council with the results of system performance measurement tests. Id. ¶ 37. Insight must also maintain service logs and follow a preventive maintenance program. Id.

         Regarding the franchise requirement, Insight has operated under a franchise agreement with Louisville Metro Council since May 31, 1998. Id. ¶ 21. In 2010, the franchise agreement expired. Id. Insight initiated timely renewal negotiations under the Federal Cable Act. Id. In 2012 and 2015, Insight entered into settlement agreements with Louisville Metro Council. Id. ¶ 21 n.1. These agreements confirmed that the 1998 franchise agreement was still in effect. Id.

         B. AT&T and the Louisville Metro Council Regulations

         BellSouth Telecommunications, LLC (AT&T) is another wireline video provider operating in Louisville. Id. ¶ 9. Unlike with Insight, Louisville Metro Council does not regulate AT&T as a “Cable Communications System.” Id. ¶ 24. According to Insight, AT&T takes the position that it operates under a historic state-issued telecommunications franchise and does not require a separate video franchise to operate in Louisville. Id. Thus, AT&T apparently is not subject to the regulations placed on Insight, nor is it required to obtain a franchise from Louisville Metro Council. Id.

         C. Google and the Louisville Metro Council Regulations

         Google Fiber Kentucky, LLC (“Google”) has applied for and been granted authority by Louisville Metro Council to become a wireline video provider in the city and surrounding area, and plans to construct its own wireline video network. Id. ¶ 9. When Google has finished constructing its wireline video network, it will compete with AT&T and Insight in providing video services to customers in Louisville. Id. ¶¶ 11-14.

         Unlike with Insight, Louisville Metro Council does not plan to regulate Google as a “Cable Communications System.” Id. ¶ 27. Instead, Louisville Metro Council will treat Google as a “Communications Service” provider and will subject it to minimal regulations. Id.

         In February 2016, Louisville Metro Council approved an “Interlocal Cooperation Agreement” with the Jefferson County, Kentucky municipalities that possess franchise authority. Id. ¶ 29. The agreement authorizes Louisville Metro Council to advertise and process bids for a single, standard franchise agreement for communication infrastructure service providers seeking to serve the Louisville Metro area and municipalities in Jefferson County (a “Uniform Franchise”). Id.

         In June 2016, Louisville Metro Council awarded Google a Uniform Franchise. Id. ¶ 30. The Uniform Franchise requires Google to comply with applicable requirements in the Louisville Metro Public Works & Assets Utility Policy and with Louisville Metro Council's permitting and inspection requirements related to working in the public right-of-way. Id. ¶ 31. The Uniform Franchise also requires Google to pay a “Communications Franchise Fee” in an amount not to exceed $50, 000.00, if state law were changed to permit such a fee. Id. Overall, Insight asserts that the Uniform Franchise agreement and the Louisville Metro Code regulations placed on Google will be less burdensome than those that Louisville Metro Council has placed on it. Id. ¶ 37.

         D. Insight's Request to Decrease Regulations and the Louisville Metro Council's Adoption of the One-Touch Ordinance

         In June 2016, Insight sent Louisville Metro Council a letter seeking regulatory treatment similar to the regulations that it will apparently place on Google. Id. ¶ 43. In July 2016, after Louisville Metro had awarded Google a Uniform Franchise, Insight sent another letter that again sought regulatory treatment similar to the regulations that will be placed on Google. Id. ¶ 44. In August 2016, Louisville Metro Council declined Insight's requests. Id. ¶ 46.

         A few months before Insight sought similar regulatory treatment, in February 2016, Louisville Metro Council adopted the One-Touch Ordinance. Id. ¶ 59. The One-Touch Ordinance allows a communications service provider seeking to make a new utility pole attachment to relocate or alter the attachments or facilities of any preexisting third-party user to accommodate its own approved attachments. Id. ¶ 60. The communications service provider must use the owner of the utility pole's approved contractors. Id. The One-Touch Ordinance does not require the communications service provider to notify the preexisting third-party of its intent to relocate or alter the attachments, unless the relocation or alteration would cause a customer outage. Id. ¶ 61. If the communications service provider has not provided advance notice of its intent to relocate or alter an attachment, it must notify the preexisting third-party about any relocation or alteration within 30 days after performing the work. Id. ¶ 62. The preexisting third-party then has 14 days to inspect the work to make any claim of damages or other complaints. Id.

         E. Insight's Claims against Defendants

         In September 2016, Insight filed suit against Defendants. Compl. 1, ECF No. 1. Insight asserts six claims. First, Insight claims under 42 U.S.C. § 1983 that Defendants' preferential treatment of AT&T and Google infringed on its ability to engage in and transmit speech, which violated the First and Fourteenth Amendments to the United States Constitution and Section 8 of the Kentucky Constitution (Count I). Id. ¶¶ 71-86. Second, Insight asserts under 42 U.S.C. § 1983 that Defendants' preferential treatment of AT&T and Google denied it equal protection of the law, which violated the First and Fourteenth Amendments to the United States Constitution and Section 2 of the Kentucky Constitution (Count II). Id. ¶¶ 87-105. Third, Insight asserts that Kentucky law granting the Public Service Commission exclusive authority to regulate utility pole attachments preempts Louisville's One-Touch Ordinance (Count III). Id. ¶¶ 106-15. Fourth, Insight claims under 42 U.S.C. § 1983 that the One-Touch Ordinance constitutes an unlawful taking of its property, which violates the Fifth and Fourteenth Amendments to the United States Constitution and Section 13 of the Kentucky Constitution (Count IV). Id. ¶¶ 116-24. Fifth, Insight also seeks declaratory relief and an award of attorney fees under 42 U.S.C. §§ 1983 and 1988 to remedy the alleged constitutional violations (Count V). Id. ¶¶ 125-32. Sixth, Insight seeks a declaratory judgment under 28 U.S.C. §§ 2201 and 2202 to determine the respective rights of the parties (Count VI). Id. ¶¶ 133-36.

         III. Discussion

         Defendants now move to dismiss Counts I through V under Federal Rule of Civil Procedure 12(b)(6).[1] Rule 12(b)(6) provides that a party may move to dismiss a cause of action for “failure to state a claim upon which relief can be granted.” To survive a motion to dismiss, a complaint must contain sufficient facts to state a claim that is “plausible on its face.” Bell Atl. Corp. v. Twombly, 55 U.S. 544, 570 (2007). A complaint states a plausible claim for relief when the court may “draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A court is not required to accept legal conclusions or “threadbare recitals of the elements of a cause of action.” Id. When resolving a motion to dismiss, the court must “construe the complaint in the light most favorable to the ...


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