Reply Brief — Group W. Cable, Inc. v. Florida Power Corp.

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Text

No. 85-1660

“in. Supreme Court. U.S.

FILED

NOV 10 1986

IN THE

JOSEPH F. SPANIOL, JR.

CLERK

Supreme Court of the United States

OCTOBER TERM, 1986

GRouP WC

NATIONAL CABLE TELEVISI

AND Cox CABLEVISIO

ABLE, IN

‘ “7

\ j ~ Ti

, {

FLORIDA POWER Cor!

On Appeal from the United States Court of Appeals

for the Eleventh Circuit

REPLY BRIEF FOR APPELLANTS

E. BARRETT PRETTYMAN, JR.*

JAY E. RICKS

GARDNER F. GILLESPIE, III

JOHN G. ROBERTS, JR.

HOGAN & HARTSON

815 Connecticut Ave., N.W.

Washington, D.C. 20006-4072

(202) 331-4500

Counsel for Group W ¢ ‘able, Ine.

CHARLES H. HELEIN

J. CHRISTOPHER REDDING

MICHELLE K. RUSK

Dow, LOHNES & ALBERTSON

1255 Twenty-third St., N.W.

Suite 500

Washington, D.C. 20037

(202) 857-2760

Counsel for Cor Cablevision

Corporation

“Counsel of Record

BRENDA L. Fox

Davip L. NICOLI

NATIONAL CABLE

ASSOCIATION, INC.

1724 Massachusetts Ave., N.W

Washington, D.C. 20036

(202) 775-3664

LEVISION

PRESS OF BYRON 8S. ADAMS, WASHINGTON, D.C. (202) 347-8203

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES. .........ccccc cc eeeeeeeeeeee ii

IE SALT ea ee Oe 1

I. The Pole Attachment Act Is Routine Rate

Regulation And Not A Taking of

IIIT tntiaticidsamadadusenadtanenntbtedetstistecrsanmemenee 1

II. The Present Case Is Distinguishable From

SIE: pacttuesicmendbeusadidiuaiinbninnniideapensesnteetenes )

III. The Rates Permitted Under the Act Exceed

the Appropriate Measure of Just Compen-

Sioa siscola td cinsigsiaiiebaindannsspininéniatinnssene 14

TABLE OF AUTHORITIES

CASES: Page

Bailey v. Mississippi Power & Light Co., File No.

PA-83-0026, FCC Mimeo No. 36118 (Sept. 11,

19BB) ...c.ccccesescoveescsssceseessenccnsnnennnnnnnnmnn 10-11

Block v. Hirsh, 256 U.S. 135 (1921) — .....cceeeeeeeeeeee 6,13

Bowles v. Willingham, 321 U.S. 503 (1944) ........ 6,8,11

Burlington Light & Power Co. v. City of Burlington,

93 Vt. 27, 106 A. 513 (1918) ..........000c0000080s: 5-6

Connolly v. Pension Benefit Guaranty Corp., 106

S.Ct. 1018 (19BG) — ..cccccccscoccosorsenscsssnneennnna 8,11

FCC v. ITT World Communications, Inc., 466 U.S.

463 (1964) ...ccceceosceesessseseesessennnnnennennnnnnnn 18-19

Flynn v. City of Cambridge, 383 Mass. 152, 418

N.E.2d S35 (1961) ..cccccccccoscosocssevescesssnenennnneas 13

General Telephone Co. v. PSC, 63 A.D.2d 93, 406

N.Y.S.28 909 (1978) .cccoccccccccesecsseccsssssnnenenenens 4

Goldblatt v. Town of Hempstead, 369 U.S. 590

(19GB) ..cccosccrseccesescenesscsesssensnnensnnnnnnnnmmE 7

Grace v. Town of Brookline, 379 Mass. 43, 399

N.E.2d 1088 (1979) .ccocococesccveccossscnsssnsssnnsannens 13

Harrison v. PPG Industries, Inc., 446 U.S. 578

(19BO) ...cccecsoverscossesesesnsesesessnnnennnnnnnnnnnnnnE 19

International Cable T.V. Corp. v. All Metal Fab-

ricators, Inc., 66 Pub. Util. Rep. 3d (PUR) 446

(Cal. Pub. Util. Comm’n 1966) .......:::0cceeeees . 4

Kentucky CATV Ass’n v. Volz, 675 S.W.2d 393 (Ky.

Ct. App. 1983), review denied (Ky. 1984) _ .... 4

Las Cruces TV Cable v. New Mexico Corp. Comm’n,

102 N.M. 720, 699 P.2d 1072 (1985) _........... 4

Lord Mfg. Co. v. United States, 84 F. Supp. 748

(Ct. Cl. 1949), cert. denied, 339 U.S. 956

(196) ......cccocseorsesesscocessenesssesnsaeesnesnnnnnnnnnnnnnn 15

Loretto v. Teleprompter Manhattan CATV Corp.,

458 U.S. 419 (1982) ..............ccccccccsceseeseeees 7,9-12,16

iii

Table of Authorities Continued

Page

Marcus Brown Holding Co. v. Feldman, 256 U.S.

i cocenvonececs 11

Metropolitan Transit Authority v. ICC, 792 F.2d

287 (2d Cir. 1986), petition for cert. filed, 55

U.S.L.W. 3185 (U.S. Sept. 2, 1986)

I sccvesenscrcceecs 3,16,18

Missouri Pacific Ry. v. Nebraska, 217 U.S. 196

CE 2

Munn v. Illinois, 94 U.S. 113 (1877) voces. 3,6,9

Nash v. City of Santa Monica, 37 Cal. 3d 97, 688

P.2d 894, 207 Cal. Rptr. 285 (1984), appeal

dismissed, 470 U.S. 1046 (1985) ooeceeeeeeees. 13

New York Telephone Co. v. Town of North Hemp-

stead, 41 N.Y. 2d 691, 395 N.Y.S.2d 143, 363

nn... cscseneveceereerocees 5

Northern Pacific Ry. v. North Dakota, 236 U.S. 585

nn. , cccccsevensccccccoceces 2

Penn Central Transportation Co. v. New York City,

| 7

PruneYard Shopping Center v. Robins, 447 U.S. 74

ane cccccccccnccescesscossoncesevesceeese 10

Reichelderfer v. Quinn, 287 U.S. 315 (1982) ....... 7-8

Tele-Communications, Inc. v. South Carolina Elec-

tric & Gas Co., File No. PA-83-0027, FCC Mi-

meo No. 3994 (April 19, 1985) ooo... 12-13,14

Thompson v. Texas Mexican Railway Co., 328 U.S.

iii ccccccccscrcevecovcccececcorcees 17

Western Union Telegraph Co. v. Pennsylvania Raii-

road, 195 U.S. 540 (1904) oo. eeeeeees 2

Whitney Cablevision v. Southern Indiana Gas &

Electric Co., File No. PA-84-0017, FCC Mimeo

CS onc cccecccnccerccnceess 12

Wisconsin Telephone Co. v. City of Sheboygan, 111

Wis. 23, 86 N.W. 657 (1901) ooo. eee 5

United States v. Cors, 337 U.S. 325 (1949) _........ 14-15

Table of Authorities Continued

United States v. 50 Acres of Land, 469 U.S. 24

STUTTETTED ”. Wecdsinilieininisiaiasiiipclenipadsbeeabidesiansieaundsbiadesdimiaiiedibiaabiets:

United States v. 564.54 Acres of Land, 441 U.S. 506

SUIUEET ._-diccinndslecsiibicsitadacsagaummiunmeonpacamaimenadlnamannad

United States v. Jones, 336 U.S. 641 (1949) .......

United States v. Miller, 317 U.S. 369 (1943) ......

STATUTES AND REGULATIONS:

Fy. Clee. SE sisiinincicoiedieiettiiaie

Gay 6 Gee .. ociiinneneneiinba

Cal. Pub. Util. Code § 767.5(b) (Deering Supp.

SRD; ceicniicibieieibiaichgidicitcal esc alee i

Conn. Gen. Stat. Ann. § 7-148d (West 1986) .....

Conn. Gen. Stat. Ann. § 47a-20 (West 1986) _.....

Mass. Ann. Spec. Laws chs. 57 & 59 (Michie/Law.

CD TUE ectsinincdasncnaieaneeees

N.Y. Unconsol. Laws §§ 8581 et seg. (McKinney

We Ge GI. TD. wnicenincknsicessesteccmareens

LEGISLATIVE MATERIAL:

S. Rep. No. 580, 95th Cong., 1st Sess. (1977)

Pole Attachment: Hearings on H.R. 15372 and H.R.

15268 Before the Subcomm. on Communica-

tions of the House Comm. on Interstate and

Foreign Comm., 94th Cong., 2d Sess.

SEEN ‘cedenwusdisiosiansieetebiidisabiente tr to

123 Cong. Rec. 16694 (1977) ..........0.......scscsseeeeeee

IN THE

Supreme Court of the Gnited States

OCTOBER TERM, 1986

No. 85-1660

Group W CaBLE, INC.,

NATIONAL CABLE TELEVISION ASSOCIATION, INC.,

AND Cox CABLEVISION CORPORATION,

Appellants,

Vv.

FLORIDA POWER CORPORATION, et al.,

Appellees.

On Appeal from the United States Court of Appeals

for the Eleventh Circuit

REPLY BRIEF FOR APPELLANTS

I. The Pole Attachment Act Is Routine Rate Regulation

And Not A Taking of Property

The utility companies devote considerable energy to

establishing that privately-owned public utilities are

entitled to the protections of the Takings Clause of

the Fifth Amendment.' That question, however, is not

at issue. The cable operators in no way dispute that

privately-owned public utilities are protected against

' See Fla. Power Br. at 21-28; Tampa Elec. Br. at 20-27; Ala.

Power Br. at 10 n.7.

uncompensated takings of their private property.’ The

question is whether regulation of the rates that util-

ities may charge for leasing space on the poles they

use to provide electric or telephone service is nec-

essarily a taking for which compensation must be

paid.®

* See Group W Br. at 22 n.51.

* The cases cited by the utility companies support the undis-

puted general proposition that the Takings Clause extends to

utility property, but do not support the claim that a taking

occurred in this case. The issue in Western Union Telegraph Co.

v. Pennsylvania Railroad, 195 U.S. 540 (1904), for example, was

not even whether a taking had occurred, but whether an Act

of Congress granted telegraph companies the power of eminent

domain. See id. at 559. The Court held that the Act did not,

because it contained no provision for ‘reasonable compensation”

upon the exercise of the asserted eminent domain power. /d. at

570. Here there is no question of eminent domain power, since

the Pole Attachment Act only applies to utilities that have vol-

untarily chosen to lease pole space to cable operators. In ad-

dition, the Pole Attachment Act, unlike the Act at issue in

Western Union, assures that the utilities receive ‘‘just and rea-

sonable’ rates for the attachments they permit. 47 U.S.C. §

224(b\ 1).

Cases cited by the utility companies finding a taking when

government sought to usurp the managerial prerogatives of a

utility by forcing it to engage in new businesses or provide new

services, see, e.g., Fla. Power Br. at 24, are not on point. Noth-

ing in the Pole Attachment Act requires utilities to lease space

to cable operators. Other cases finding a taking because a utility

was compelled to provide a service “at a loss or without sub-

stantial compensation,” Northern Pacific Ry. v. North Dakota,

236 U.S. 585, 599 (1915), or indeed with no compensation, Mis-

souri Pacific Ry. v. Nebraska, 217 U.S. 196, 205 (1910), are

also inapposite. Utilities that do choose to provide pole attach-

ments receive reimbursement equal to fully-allocated costs, in-

cluding a reasonable rate of return.

At least since Munn v. Illinois, 94 U.S. 113, 126-

132 (1877), this Court has recognized that such rate

regulation is not a taking, so long as the regulated

utility is permitted to receive a nonconfiscatory rate

of return. The utility companies do not allege that

the rates they are authorized to charge for leasing

space to cable operators are confiscatory. Those rates

ensure recovery by the utility of not only all operating

expenses and capital costs associated with the leasing

of space to cable operators, but also a reasonable rate

of return.‘ Contrary to the utility companies’ conten-

tions, this case “‘fits more into the regulatory rather

than the taking mode as those terms have tradition-

ally been applied by American courts.’’ Metropolitan

Transportation Authority v. ICC, 792 F.2d 287, 297

(2d Cir. 1986), petition for cert. filed, 55 U.S.L.W.

3185 (U.S. Sept. 2, 1986) (No. 86-409).°

‘See Group W. Br. at 9-10.

* The court in Metropolitan Transportation Authority held that

no taking occurred on facts far more compelling than those of

the present case. That case concerned provisions of the Rail

Passenger Service Act, 45 U.S.C. § 562, that require private

railroads to permit Amtrak to use their tracks and facilities,

with compensation set by the ICC and generally limited to in-

cremental or avoidable costs. See 792 F.2d at 290-291. The court

held that it was not a taking to ‘‘requir{e] one public utility to

give another operative rights over its facilities, subject to an

obligation to pay reasonable reimbursement, in order to deliver

service to the public.’ Jd. at 297. Assuming arguendo that a

taking had occurred, the court further held that an award of

avoidable costs set by the ICC constituted just compensation.

Id. In the present case, nothing in the Pole Attachment Act

requires a utility to grant pole attachment rights to cable op-

erators, and utilities that choose to do so receive not simply

avoidable costs but fully-allocated costs. See id. at 291 (con-

trasting avoidable and fully-allocated costs).

The utilities argue that the leasing of space on the

poles they have erected in public rights of way to

provide electrical service ‘“‘does not involve services

provided by Florida Power in its public utility capac-

ity.”’® The only reason that the utilities have space

on poles to lease, however, is because as public util-

ities they were granted access to public rights of way

and the power of eminent domain. Like other public

utilities, Florida Power received these special privi-

leges because it pledged that such property will be

used to promote the general public welfare. The Pole

Attachment Act seeks to promote the public welfare

through widespread availability of reasonably priced

cable television service by ensuring that pole attach-

ment charges are not excessive. The utility compa-

nies’ suggestion that they are immune from such

regulation is nothing short of a repudiation of the

obligations they accepted when authorized to eree

their poles.’

* Fla. Power Br. at 24; see Tampa Elec. Br. at 21-22.

‘Florida Power cites a number of state court and utility com-

mission decisions concluding that pole attachments do not fall

within the state utility commission’s regulatory jurisdiction. Fla.

Power Br. at 24-25 & n.19. As statutory interpretations, these

decisions merely demonstrate that some state legislatures have

not yet chosen to regulate pole attachments, without considering

whether a government could so regulate if it desired. In fact,

a number of states do regulate poie attachments as public utility

services. See, e.g., General Telephone Co. v. PSC, 63 A.D.2d 93,

406 N.Y.S.2d 909 (1978); Kentucky CATV Ass’n v. Volz, 675

S.W.2d 393 (Ky. Ct. App. 1983), review denied (Ky. 1984); Las

Cruces TV Cable v. New Mexico Corp. Comm'n, 102 N.M. 720,

699 P.2d 1072 (1985). In addition, the holding in International

Cable T.V. Corp. v. Ali Metal Fabricators, Inc., 66 Pub. Util.

Rep. 3d (PUR) 446 (Cal. Pub. Util. Comm’n 1966), that pole

Contrary to the suggestion of Tampa Electric," the

poles used in the provision of utility service are dis-

tinguishable for takings purposes from other utility

property, such as an office building.’ Unlike an office

building, utility poles enjoy a special status because

they are utility property. Utility poles are located in

public rights of way or on private property through

the exercise of eminent domain. As a direct conse-

quence of this special status, utility poles represent

a monopoly gateway for the distribution of commu-

nications and electric power cables within a commu

nity. That monopoly was not intended to be exploited

as a gateway, but was granted to ensure the efficient

delivery of telephone and electric service. The use of

utility poles, therefore, is subject to regulation to an

extent that may or may not be true with respect to

other utility property.'°

attachments were outside the jurisdiction of the California Public

Utility Commission, has since heen overruled by the California

legislature. See Cal. Pub. Util. Code § 767.5(b) (Deering Supp.

1986) (finding that California utilities have dedicated their poles

to the provision of cable television pole attachments).

* See Tampa Elec. Br. at 23.

* See Group W Br. at 22 n.51.

the proposition that space on utility poles is private property

have nothing to do with the facts of this case. In all those cases,

municipalities sought to use poles for city services, with no reim-

bursement to the pole owner. In New York Telephone Co. v.

Town of North Hempstead, 41 N.Y.2d 691, 395 N.Y.S.2d 143,

363 N.E.2d 694 (1977), the city simply attached its street lights

to the utility’s poles. In Wisconsin Telephone Co. v. City of

Sheboygan, 111 Wis. 23, 86 N.W. 657 (1901), the city asserted

the right to attach fire alarm boxes, again with no reimburse-

ment whatsoever to the pole owner. And in Burlington Light

In any event, Congress has determined that the

public interest is implicated in the rates utilities

charge for leasing space to cable operators. See S.

Rep. No. 580, 95th Cong., Ist Sess. 18 (1977). Quite

apart from the electric companies’ status as regulated

utilities, this determination clearly suffices to support

rate regulation.

In this regard the Pole Attachment Act is indistin-

guishable from typical rent control, which has long

been upheld by this Court. See Block v. Hirsh, 256

U.S. 135 (1921); Bowles v. Willingham, 321 U.S. 503

(1944). In the case of rent control, a legislative body

determines that the public interest is affected by rents

being charged, and authorizes regulation of those

rents. Under rent control, the tenant physically oc-

cupies the premises at rates lower than those the

landlord would otherwise charge. Yet this has never

been considered an unconstitutional taking, so long

as the landlord receives a nonconfiscatory return. As

Justice Holmes noted for the Court in Block v. Hirsh,

256 U.S. at 157, “‘if the public interest be established

the regulation of rates is one of the first forms in

which it is asserted, and the validity of such regu-

lation has been settled since Munn v. Illinois.”

The Act at issue in this case is not simply “‘like’’

rent control; it is rent control. Congress has deter-

mined that the rents being charged to cable operators

for leasing space on utility poles affect the public

& Power Co. v. City of Burlington, 93 Vt. 27, 106 A. 513 (1918),

the city claimed the right to string the wires of its municipally-

owned power company on a competitor’s poles -- for free. In

the present case, of course, the Pole Attachment Act grants no

right of access to poles, and certainly does not grant access free

of charge.

interest, and has undertaken regulation of those rents.

A holding that such regulation is a taking would call

into question not only this Court’s precedents up-

holding rent control, but the constitutional validity of

the numerous rent control statutes enacted across the

country on the basis of those precedents.'! Nothing

in Loretto v. Teleprompter Manhattan CATV Corp.,

458 U.S. 419 (1982), compels such a result; indeed,

the Court in that case specifically noted that its hold-

ing was in no way meant to undermine rent control.

Id. at 440. Ignoring this caveat by extending Loretto

to the present case would thus have consequences far

beyond the cable industry.

The utilities’ complaint in this case is simply that

they are subject to regulation and cannot charge rents

as high as they could in the absence of regulation.

The logic of their position would require a finding of

a taking no matter what rate was set by the FCC,

unless the rate were that which the utilities could

exact in an unregulated market. Their position is thus

tantamount to an assertion that regulation of pole

attachment rates is completely beyond the jurisdiction

of Congress, unless Congress provides compensation

for any diminution in value caused by regulation.

It has long been recognized, however, that mere

diminution in value caused by regulation does not

constitute a taking. See, e.g., Penn Central Trans-

portation Co. v. New York City, 438 U.S. 104, 131

(1978); Goldblatt v. Town of Hempstead, 369 U.S. 590,

594 (1962); Reichelderfer v. Quinn, 287 U.S. 315, 319

11 See, e.g., Conn. Gen. Stat. Ann. § 7-148d (West 1986); Mass.

Ann. Spec. Laws chs. 57 & 59 (Michie/Law. Co-op. 1979); N.Y.

Unconsol. Laws §§ 8581 et seg. (McKinney 1974 & Supp. 1986).

(1932). In particular, the Court has recognized that

rent control, ‘‘the same as other forms of regulation,

may reduce the value of the property regulated. But

* * * that does not mean that the regulation is un-

constitutional.’’ Bowles v. Willingham, 321 U.S. at

517. This is peculiarly true where, as here, the value

allegedly diminished by regulation reflected menopoly

profits. It is even truer when the diminution allegedly

suffered by the utility is covered by an adjustment

of the rates charged to utility users, to ensure that

the regulated utility continues to receive its consti-

tutionally-mandated adequate rate of return.”

The argument of the utilities that the ratepayers

are being required to subsidize the cable operators

turns the facts on their head.'* It is the cable oper-

ators who subsidize the ratepayers, not vice versa. If

there were no pole attachments by cable operators,

the utilities and their ratepayers would be compelled

to bear the entire cost of erecting and maintaining

the poles. Under the Act, cable operators relieve the

ratepayers of a portion of the cost of the poles, in-

cluding a return on investment."

‘2 See Group W Br. at 23.

'8 See Fla. Power Br. at 28; Tampa Elec. Br. at 26; Ala. Power

Br. at 14.

'* Congress is of course free to regulate the extent to which

cable operators offset costs that would otherwise be borne by

ratepayers. See, e.g., Connolly v. Pension Benefit Guaranty Corp.,

106 S. Ct. 1018, 1025 (1986) (‘In the course of regulating com-

mercial and other human affairs, Congress routinely creates bur-

dens for some that directly benefit others. * * * Given the

propriety of the governmental power to regulate, it cannot be

said that the Taking Clause is violated whenever legislation re-

quires one person to use his or her assets for the benefit of

Il. The Present Case Is Distinguishable From Loretto

In light of the foregoing, the utilities are compelled

to attempt to bring the normal rate regulation to

which they object within the ‘‘very narrow’’ holding

of Loretto, 458 U.S. at 441. Accepting the utilities’

claim would permit the limited exception of Loretto

to swallow the usual rules of takings jurisprudence,

and call into question long-accepted regulation.

Since the activity regulated in this case is the

charging of rents in a lease agreement, there is nec-

essarily an element of ‘‘physical occupation.’’ In any

case involving a lease, that is precisely what the les-

see pays for -- the right to occupy space owned by

the lessor. The fact that an aspect of physical occu-

pation is involved, however, does not compel a con-

clusion that a taking has occurred under Loretto. That

case does not, as the utility companies suggest, stand

for the proposition that a taking occurs whenever the

government regulates dealings that involve physical

occupation. Such a reading of Loretto would mean

that any rent control is automatically a taking, since

rent control involves physical occupation below rates

the landlord would charge in an unregulated market.

It would mean that commonplace regulation by the

ICC of compensation for trackage rights is necessarily

a taking, since the exercise of such rights involves

physical occupation and use of another’s tracks. See

supra n.5. It would also require a rethinking of well-

established precedents such as Munn v. Illinois, su

pra, since that case upheld regulation of the rates

another”). In any event, it is difficult to discern how regulation

by Congress of the subsidy from cable operators to utility rate-

payers can give rise to a takings claim by the utility companies.

that may be charged for physically occupying the fa-

cility at issue, a grain elevator. And it would require

rethinking more recent precedents, such as Prune-

Yard Shopping Center v. Robins, 447 U.S. 74 (1980),

since that case upheld provisions in state law au-

thorizing activity that involved physical intrusions on

private property. As the Court noted in PruneYard,

‘the fact that [appellees] may have ‘physically in-

vaded’ appellants’ property cannot be viewed as de-

terminative.”’ Jd. at 84.

In fact, the present case is quite unlike Loretto.

The statute at issue in Loretto forced building owners

to accept the attachments involved in that case. In

an effort to fit this case within the holding of Loretto,

the utility companies misread the Pole Attachment

Act to require utilities to lease space on their poles

to cable operators.’ By its terms, however, the Act

applies only to utilities that have chosen to lease pole

space ‘‘for wire communication.”’ 47 U.S.C. § 224(a\1).

The Act “‘does not vest within a [cable] system op-

erator a right to access to a utility pole, nor does

the [Act] require a power company to dedicate a por-

tion of its pole plant to communications use.”’ S. Rep.

No. 580, 95th Cong., lst Sess. 16 (1977). The FCC

has recognized that the Act ‘‘does not guarantee cable

operators a right of access to a utility’s poles.’’ Bailey

v. Mississippi. Power & Light Co., File No. PA-83-

0026, FCC Mimeo No. 36118 (Sept. 11, 1985), at 4

R16

'S Fla. Power Br. at 16-21; Tampa Elec. Br. at 8, 16-19; Ala.

Power Br. at 10-13.

‘© Bailey -- the only authority cited by the utility companies

-- does not support their contention that the Act requires utilities

In short, the attachments at issue in this case -- in

contrast to those in Loretto -- were authorized not by

the government but by the utility companies them-

selves, in contracts with the cable operators. Congress

has chosen to regulate the rates that may be set in

such contracts, but, as this Court noted just last Term,

“ijf the regulatory statute is otherwise within the

powers of Congress * * * its application may not be

defeated by private contractual provisions.’’ Connoily

v. Pension Benefit Guaranty Corp., 106 S. Ct. at 1025;

see Marcus Brown Holding Co. v. Feldman, 256 U.S.

170, 198 (1921) (rent control statute upheld against

claim that it impairs obligation of contracts).

Again, the analogy to rent control is compelling.

In Bowles v. Willingham, 321 U.S. at 517, this Court

rejected a takings challenge to rent control, noting

that nothing in the rent control statute required own-

ers to devote their property to the rental market:

We are not dealing here with a situation

which invokes a “‘‘taking’’ of property. * * *

By § 4(d) of the Act it is provided that ‘‘noth-

ing in this Act shall be construed to require

any person * * * to offer any accomodations

for rent.’’ There is no requirement that the

apartments in question be used for purposes

which bring them under the Act.

So too here, there is nothing in the Pole Attachment

Act that requires utility companies to lease space on

to grant access to their poles to cable operators. That case

involved a utility that had already voluntarily chosen to lease

space on its poles to cable operators, see Bailey, supra, at 44

3, 8, 9, and, as noted, the FCC in its decision expressly stated

that the Act does not grant a right of access.

their poles for cable purposes. The legislative history

expressly disavows any right of access, and the agency

charged with administering the Act has held that no

such right exists. Bowles, not Loretto, is controlling.

The utility companies also contend that there is a

taking in the present case under Loretto because the

regulated attachments cannot be terminated.!? The

utilities, however, have never attempted to exclude

the cable operators from their poles, for the simple

reason that it is the rate, not the attachment itself,

to which they object. Although the utilities assert that

it would be ‘futile’ to attempt to exclude the cable

operators,'* that claim is premature and, on this re-

cord, entirely speculative. It should await a case in

which a legitimate attempt is made to oust cable op-

erators from the space they occupy, and the FCC

blocks that attempt. The only authority the utilities

cite for this “‘futility’”’ argument are two cases in

which the FCC determined that utilities were retal-

iating against cable operators because the latter ex-

ercised their rights under the law. In Whitney

Cablevision v. Southern Indiana Gas & Electric Co.,

File No. PA-84-0017, FCC Mimeo No. 841 (Nov. 16,

1984), the utility sought to terminate the contract

immediately after the cable operator requested infor-

mation to determine if the pole attachment rate it

was paying complied with Commission rules. Jd. at 4

3. In Tele-Communications, Inc. v. South Carolina

Electric & Gas Co., File No. PA-83-0027, FCC Mimeo

No. 3994 (April 19, 1985), the Commission determined

'’ See Fla. Power Br. at 16-21; Tampa Elec. Br. at 16-18; Ala.

Power Br. at 10-11.

'* Fla. Power Br. at 19 n.15; Ala. Power Br. at 11 n&.

that the utility's ‘“‘sudden decision to terminate the

agreement was in response to [the cable operator's]

announced intention to file a rate complaint.” Jd. at

Permitting utilities to punish cable operators when-

ever the latter exercise their rights under the Act

would, of course, be tantamount to repealing the Act.

The utilities could threaten to terminate agreements

unless the cable operators agreed to pay pre-regulation

rates. Preventing retaliatory evictions in no way trans-

forms the leases into permanent occupations, any more

than preventing landlords from evicting tenants for

exercising rights under rent control statutes or housing

codes effects a permanent occupation and renders the

rent control a taking. Rent control statutes typically

contain retaliatory eviction provisions,’® and such pro-

visions have been consistently upheld against takings

challenges. See, e.g., Flynn v. City of Cambridge, 383

Mass. 152, 418 N.E.2d 335 (1981); Grace v. Town of

Brookline, 379 Mass. 43, 399 N.E.2d 1038 (1979); ef.

Nash v. City of Santa Monica, 37 Cal. 3d. 97, 688 P.2d

894, 207 Cal. Rptr. 285 (1984), appeal dismissed, 470

U.S. 1046 (1985). The first rent control statute to reach

this Court contained eviction protections, and the Court

upheld them, noting that ‘‘[i]f the tenant remained sub-

ject to the landlord’s power to evict, the attempt to

limit the landlord’s demands would fail.’”’ Block v. Hirsh,

256 U.S. at 157-158. Here the cable operators remain

fully subject to the utility companies’ power to evict,

so long as that power is not exercised solely to avoid

1% See, e.g., Conn. Gen. Stat. Ann. §§ 7-148d(b), 47a-20 (West

1986); Mass. Ann. Spec. Laws ch. 57, § 9; ch. 59 (Michie/Law.

Co-op. 1979); N.Y. Unconsol. Laws § 8585 (McKinney 1974 &

Supp. 1986).

rent control and frustrate Congress’s ‘“‘attempt to

limit the landlord’s demands.” As the FCC has rec-

ognized, preventing retaliatory evictions ‘‘does not

mean * * * that a contract right to terminate cannot

be exercised for good cause * * *.”’ Tele-Communi-

cations, Inc. v. South Carolina Electric & Gas Co..,

supra, at ¢ 8.

III. The Rates Permitted Under the Act Exceed the

Appropriate Measure of Just Compensation

Even if this Court were to determine that regu-

lation of the rates that may be charged for leasing

space on the poles constituted a taking, it is clear

that the rates set by the FCC, subject to judicial

review, constitute more than adequate just compen-

sation. The utility companies contend that fair market

value is the measure of just compensation, suggesting

that they are therefore entitled to receive the same

rents they would have received in the absence of reg-

ulation.” As the Court emphasized in United States

Vv. 564.54 Acres of Land, 441 U.S. 506, 512 (1979),

however, it “has refused to designate market value

as the sole measure of just compensation. For there

are situations where this standard is inappropriate.”

See United States v. Cors, 337 U.S. 325, 332 (1949)

(Court ‘“‘has refused to make a fetish even of market

value, since that may not be the best measure of value

in some cases’’). One such situation is where no fair

market exists, when the Court cannot determine what

a willing buyer would pay to a willing seller because

the market is distorted.

In the leading case of United States v. Cors, supra,

this Court considered whether the owner of a boat

*® See Fla. Power Br. at 32-36; Tampa Elec. Br. at 31: Ala.

Power Br. at 18-19.

requisitioned by the War Shipping Administration in

1942 was entitled to market value compensation when

that value was inflated by the urgent need for ships.

The Court held that in that case market value ‘does

not reflect what ‘a willing buyer would pay in cash

to a willing seller,’ in a fair market. * * * That is a

hold-up value, not a fair market value.” Id. at 333-

334 (quoting United States v. Miller, 317 U.S. 369,

374 (1943)).

Congress has determined that the rents set by the

utilities prior to regulation reflected “‘a hold-up value.”’

The pre-regulation rates were based on the fact that,

for cable operators, utilities were ‘“‘the only game in

town’?! and that utilities could dictate to “cable op-

erators ‘take it or leave it’ terms.’ As the Court

recognized in Cors, such rates do not reflect “fair

market value’ and cannot be considered an appro-

priate measure of just compensation. 337 U.S. at

334.23 That the utilities could charge more in the ab-

sence of regulation does not establish that the com-

pensation they receive for pole attachments is

constitutionally inadequate.”

21 Pole Attachment: Hearings on H.R. 15372 and H.R. 15268

Before the Subcomm. on Communications of the House Comm.

on Interstate and Foreign Commerce, 94th Cong., 2d Sess. 24

(1976) (Rep. Van Deerlin).

22 123 Cong. Rec. 16694 (1977) (statement of Rep. Wirth, spon-

sor of Act).

23 See also Lord Mfg. Co. v. United States, 84 F.Supp. 748 (Ct.

Cl. 1949) (where market value of goods appropriated for war

effort was based on virtual monopoly plus shortages, just com-

pensation was not market value but cost plus 10%), cert. denied,

339 U.S. 956 (1950).

24 The utilities’ assumption that the measure of the compen-

The utilities recognize that the goal of the just com-

pensation requirement is to put the owner of property

in as good a position as if his property had not been

taken.” In suggesting that this standard requires a

return to pre-regulation rents, however, the utilities

adopt a theory of compensation wholly inconsistent

with their theory of a taking. They cannot argue that

there is a taking in this case simply because rates

have been lowered. Rather, they argue that the Act

effects a taking because it authorizes a physical oc-

cupation. The goal of just compensation, therefore,

should be to restore the utilities to the position they

would be in if there had been no physical occupation.

This would require an award equal to any extra ex-

pense incurred by the utilities due to the attachments,

so-called ‘‘avoidable costs.’ The Act, however, per-

mits the utilities to receive not only avoidable costs

but fully-allocated costs, a greater degree of compen-

sation.”

sation due is the rate they could charge prior to regulation was

expressly not embraced by the Court in Loretto, 458 U.S. at

441 (‘‘our conclusion that § 828 works a taking of a portion of

appellant's property does not presuppose that the fee which

many landlords had obtained from Teleprompter prior to the

law’s enactment is a proper measure of the value of the property

taken’’).

*5 See, e.g., Fla. Power Br. at 32.

°° See Metropolitan Transportation Authority v. ICC, 792 F.2d

at 297 (‘assuming arguendo that there has been a taking, com-

pensation is adequate since [the owner], in obtaining avoidable

costs, will receive what it would have had but for the taking.

* * * In other words, the owner * * * will be put into the

same position monetarily as it would have occupied if the prop-

erty had not been taken, and this is precisely the guiding prin-

ciple of what is just compensation’’).

*" Congress, of course, may authorize compensation greater

It is important to recognize that the court below

did not rule that the regulated rents were inadequate

to satisfy the appropriate standard of just compen-

sation. Rather, the court declined even to consider

the adequacy of compensation, because of the role of

the FCC in setting the amount of compensation. See

App. 16a-17a. This Court, however, not only has per-

mitted administrative agencies to play a role in es-

tablishing just compensation, subject to judicial

review, but has emphasized the benefits of such an

approach. In Thompson v. Texas Mexican Railway

Co., 328 U.S. 134, 147-148 (1946), the Court upheld

the authority of the ICC to set rents for trackage

rights:

If the parties were allowed to by-pass the

Commission and litigate the question in the

courts, the power to fix the rental under

trackage agreements would be shifted from

the Commission to the courts and juries. *

* * [I]t is one of the Commission’s high func-

tions to protect the public interest against

unfair or oppressive financial practices which

in the past led to such great havoc and dis-

aster. That policy would be undermined if the

carriers could repair to courts for determi-

nation of the conditions under which trackage

rights could be secured. Then jury verdicts

or settlements would take the place of the

expert and informed judgment of the Com-

mission.

The Court noted that ‘‘{aJny legal, including consti-

tutional, rights of [the track owner] are protected by

than the constitutional minimum. See United States v. 50 Acres

of Land, 469 U.S. 24, 30 n.14 (1984).

the review which Congress has granted the orders of

the Commission.”’ Jd. at 150.

Here too Congress has determined that the public

interest requires regulation by an expert agency of

the rents that utilities charge cable operators. Re-

quiring such questions to be resolved by courts in the

first instance would undermine the purposes of the

Act. Nor does permitting the FCC to determine the

appropriate rents usurp judicial functions, since the

FCC determinations are subject to judicial review.”

The utilities contend, however, that judicial review

is inadequate in this case, because a reviewing court

is allegedly limited to the administrative record, and

that record is limited by the FCC. Their argument

proves too much. Any judicial review of administra-

tive action is limited as a general matter, but that

does not mean that the review is constitutionally in-

adequate. The evidence before the FCC and the re-

viewing court in every pole attachment case is

sufficient to determine whether the utility has re-

ceived fully-allocated costs -- including an adequate

rate of return -- and no more is required to determine

just compensation. In any event, if a reviewing court

determines that additional evidence is required, that

court is always free to remand the case to the agency

for development of the necessary factual record. See

FCC v. ITT World Communications, Inc., 466 U.S.

** See Metropolitan Transportution Authority v. ICC, 792 F.2d

at 296 (rejecting claim that statute at issue in that case “is an

unconstitutional condemnation act because an administrative

agency rather than a court determines the compensation and

because the statute ties the agency’s hands in determination of

that amount’’).

_ 463, 469 (1984); Harrison v. PPG Industries, Inc.,

446 U.S. 578, 593-594 (1980).”

The utilities’ arguments amount to little more than

expressions of dissatisfaction with regulation, because

they could charge more without it. Such dissatisfac-

tion, however, has never been considered to rise to

the level of a constitutional violation. The utilities

receive a fair rent for the use of the space on their

poles that they have decided to lease to the cable

operators. Under the Fifth Amendment, they are en-

titled to no more.

CONCLUSION

For the reasons expressed above, and in appellants’

main brief, the judgment below should be reversed.

22 In United States v. Jones, 336 U.S. 641 (1949), the Court

held that the Court of Claims was without jurisdiction to review

Interstate Commerce Commission rate orders, in part because

the Court of Claims -- unlike the District Courts -- ‘‘has juris-

diction only to render a money judgment against the United

States and none to remand to the Commission for further con-

sideration a rate order which it might find confiscatory.”’ Jd. at

670. The Court stressed that jurisdiction in the District Courts

possessed the ‘‘outstanding advantage” over jurisdiction in the

Court of Claims that the District Courts “have power, on finding

a rate order invalid, whether as confiscatory or as not complying

with the statute, to remand the cause to the Commission for

further proceedings.” Jd. at 671.

Respectfully submitted,

E. BARRETT PRETTYMAN, JR.* BRENDA L. Fox

JAY E. Ricks DaviID L. NICOLL

GARDNER F. GILLESPIE, III NATIONAL CABLE TELEVISION

JOHN G. ROBERTS, JR. ASSOCIATION, INC.

HOGAN & HARTSON 1724 Massachusetts Ave., N.W.

815 Connecticut Ave., N.W. Washington, D.C. 20036

Washington, D.C. 20006-4072 (202) 775-3664