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

Supreme Court, U.S,

rrERE DR |

Nos. 85-1658 AUE 28 1966

85-1660 JOSEPH F. SPANIOL, JR,

CLERK

IN THE

Supreme Court of the Gnited States

OCTOBER TERM, 1986

FEDERAL COMMUNICATIONS COMMISSION AND

UNITED STATES OF AMERICA.

Appellants,

i.

FLORIDA POWER CORPORATION, ef al.,

Appellees.

GROUP W CABLE, INC.. ef al..

Appellants,

Vv.

FLORIDA POWER CORPORATION, ef al.,

Appellees.

On Appeal from the United States Court of Appeals

for the Eleventh Circuit

BRIEF FOR EDISON ELECTRIC INSTITUTE

AMICUS CURIAE IN SUPPORT OF APPELLEES

ROBERT L. BAUM*

JAN J. SAGETT

EDISON ELECTRIC INSTITUTE

1111-19th Street, N.W.

Washington, D.C. 20036

(202) 828-7679

*Counsel of Record

August 1986

A TR AR ae IE cm mI ec me NY

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

a

QUESTION PRESENTED

Whether the Eleventh Circuit correctly ruled that

the Pole Attachment Act, which authorizes the per-

manent physical attachment of cable television equip-

ment to the property of an investor-owned (private)

utility company, constitutes a taking of the utility

company’s property, for which the fifth amendment

requires the payment of just compensation?

il

TABLE OF CONTENTS

QUESTION PRESENTED .......:scssesesseeessensessarnnennessesnees

TABLE OF AUTHORITIES .......ccccccsseeeeeeeseeeneneseneesenenes

INTRODUCTION ..cccccccccccessssssscceerenseeeeeresssessscssssssenenens

INTEREST OF EDISON ELECTRIC INSTITUTE .....--++++-

COUNTERSTATEMENT OF THE CASE .....ssssseeeeeeeeeeeeees

SUMMARY OF ARGUMENT ....ccccssceeeeeeseneeeeesesereeneeeees

ARGUMENT .......cccccccsscccccreccscccosccreescsssensscosssesooossssses

I. Investor-Owned Utilities Are Entitled to Full

Recognition of Their Constitutional Property

Rights Under the Fifth Amendment ...........

II. The Permanent Physical Attachment of Ca-

ble Television Equipment to Investor-Owned

Utility Poles Constitutes a Per Se Taking .

A. This Case Is Controlled by the Traditional

Per Se Taking Rule Reaffirmed in

LOT EERO e0ecescccccccccscsvescesessoesscssosssesesennnnnens

B. The Permanent Physical Taking Allowed

Under the Pole Attachment Act Is Indis-

tinguishable from Loretto ......-.::+seee-

C. The Private Property Rights at Issue in

this Case Are ago ee from the

Private Property Rights Upheld in Lor-

CEO .ecerercccccccccccccccsccccscoccosscsccessssosososesensees

CONCLUSION .0cccccccccccccccscoccccssevocsscesovesesessossssssosesnsees

11

11

14

16

18

~ke e ok ape oe

ili

TABLE OF AUTHORITIES

CASES: Page

Alabama Power Co. v. FCC, 773 F.2d 362 (D.C.

od 14

Block v. Hirsh, 256 U.S. 135 (1921) eeeeececcccccccece. 17

Board of Public Utility Commissioners v. New York

Telephone Co., 271 U.S. 23 (1926) o..cceccecees. &

Bowles v. Willingham, 321 U.S. 503 a 17

Central Telecommunications, Inc. v. TCI Cablevi-

sion, Inc., 610 F. Supp. 891 (W.D. Mo.

| Ss 5

City of Los Angeles v. Preferred Communications,

Inc., slip op. No. 85-390 (June 2, 1986) ...... 14

Connolly v. Pension Benefit Guaranty Corp., 106 S.

eR RTT 13

Consolidated Edison v. Public Service Commission,

447 U.S. 530 (1980) oo... eeeccccscescccscseces. 10

Edgar A. Levy Leasing Co. v. Siegel, 258 U.S. 242

Ee 17

Energy Reserves “eer | Inc. v. Kansas Power &

Light Co., 459 U.S. 400 (1983) ooeeeecccccecceceee. 17

Florida Power Corp. v. FCC, 772 F.2d 1537 (11th

Cir. 1985) (per curiam) ......cccccccecceccecseeceees passim

Heart y Atlanta Motel, Inc. v. United States, 379

nc cccceseresserreess 17

Home Building & Loan Association v. Blaisdell, 290

17

ICC v. Oregon-Washington Railroad & Navigation

a 8

Kaiser Aetna v. Un‘ted States, 444 U.S. 164

Neen cccccececceces. 12, 13

iv

Table of Authorities-Continued

Page

Loretto v. Teleprompter Manhattan CATV Corp.,

rT ) & " Y | ” nesmemetraea passim

MacDonald, Sommer & Frates v. Yolo County, 106

a Ee. Be ED. Kcennssciceciscictilsistadastdiesteniaconien 13

Missouri ex rel. Southwestern Bell Telephone Co. v.

Public Service Commission, 262 U.S. 276

EERUTETED . ccetsavasuesaisctansevngetadmmmbedeieienstpleddseaddaibigtens 8

Pacific Gas & Electric Co. v. Public Utilities Com-

mission, 106 S. Ct. 903 (1986)... 10

Penn Central Transportation Co. v. New York City,

ae Ce ee GD atcoceeseeceemenen 13

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

GESTEED: . ‘naihsnselbscssiaiicinianielinadinsdheashighanicebehdiaedatammandadadae 13

Queenside Hills Realty Co. v. Sazl, 328 U.S. 80

UNETEE. sntsuisnioianintnseenseusianiuldiaddeanieanaddaaaiahiaaaaaes 17

San Diego Gas & Electric Co. v. San Diego, 450

Tas EE GEE «= stivsinnrtsnissnincsesacaanaataeed 12

Texas Power & Light Co. v. FCC, 784 F.2d 1265

ee Ge EE wiseiveneaccncecnsneeniibdinaciatenioaasains 18

United States v. Causby, 328 U.S. 256 (1946) _.... 12

United States v. General Motors Corp., 323 U.S.

UTE TOUT | ssnsoncsveccnesrenienneieinennianseniiidibadaan 12

United States v. Petty Motor Co., 327 U.S. 372

CID <inbcincsensntenssitapesntnapieadaiaaiadinniaiadanigiaiiad 12

Western Union ste Co. v. Pennsyivania Rail-

road Co., 195 U.S. 540 (1904) — ...........cccesseees 8

ADMINISTRATIVE DECISIONS:

David Bailey d/b/a Port Gibson Cable TV v. Mis-

sissippi Power & Light Co., FCC Mimeo No.

ee Gs Be, UND treeumsincenniresnessinanionancnes 15

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

tric & Gas Co., FCC Mimeo No. 3994

Se a THUD” " Inciadedbetsedtalien eee 15

ret oo. \\

Table of Authorities-Continued

Page

Teleservice Corp. of America v. Southwestern Public

Service Co., No. PA-79-0010 (FCC July 17,

TD suuisdcinmiensenductonnintnnnceniannsnnenmnthinetneininiaaiens 4

Television Cable Service, Inc. v. Monongahela Power

oe Eee et § S00) ee 4

Whitney Cablevision v. Southern Indiana Gas &

Electric Co., FCC Mimeo No. 841 (Nov. 16,

SEE -sitdeadecdeiauliidtiinddedteeuietblianibianuiedabbidadaiadedades 15

CONSTITUTIONAL PROVISIONS AND STATUTES:

ee ee, so a ciaieendeeicninmapaneien 10

ci SUR: SITE, WT saiccsirecnesncnnnsnnnennnncanneienaeninie passim

Pole Attachment Act (Communications Act Amend-

ments of 1978), Pub. L. No. 95-234, §6, 92 Stat.

33 (codified as amended at 47 U.S.C. § 224

eof £ SB. ener passim

TAINED scdsudensoneectndsdcelieadiaadeumaiedibitedsmeneiss 1

i SEIN: » suvedunateaduananadneesnauduntaaietesiannetmnaasia 3

MISCELLANEOUS:

Leepson, Cable Television: Coming of Age, Vol. Il,

No. 24 Congressional Quarterly Editorial Re-

search Reports 967 (Dec. 27, 1985) ............. 4

Michelman, Property, Utility, & Fairness: Com-

ments on the Ethical Foundations of “Just

Compensation”’ Law, 80 Harv. L. Rev. 1165

GIO: sndcnsusoiaseiiciouesinieseemmeaennaiiseiaaasesnuianatens 12

National Association of Broadcasters, Great Expec-

tations: A Television Manager’s Guide to the

PUD GHG. TI csstnccccrnccescsecsicnenetnnensecnens 4

Television Digest (May 1985) ...........ccccccsssssseeeeenes 4

INTRODUCTION

The Edison Electric Institute (EEI) supports

Appellees Florida Power Corporation, Tampa Electric

Company, Mississippi Power & Light Company, Al-

abama Power Company, and Arizona Public Service

Company in seeking affirmance of the decision of the

Eleventh Circuit that the Pole Attachment Act (Com-

munications Act Amendments of 1978), Pub. L. No.

95-234, § 6, 92 Stat. 33 (codified as amended at 47

U.S.C. § 224 (1982 & Supp. III 1985)), is unconsti-

_ tutional.’

INTEREST OF EDISON ELECTRIC INSTITUTE

EEI is the national association of investor-owned

electric utility companies in the United States. Its 176

members serve approximately 96 percent of all cus-

tomers served by the investor-owned segment of the

industry. They generate about 75 percent of all elec-

tricity in the country, and service 73 percent of all

ultimate electric utility customers in the nation.

The Pole Attachment Act applies only to investor-

owned utilities. 47 U.S.C. § 224(aX1).2 Many EEI

member companies are subject to the jurisdiction of

. The written consents of all parties to the filing of this brief

have been filed with the Clerk of this Court, pursuant to Sup.

Ct. R. 36.

2 Investor-owned electric utility companies, as distinct from

municipal (public) electric utility companies and rural electric

cooperatives, and like private businesses, issue stock to share-

holders. Of course, investor-owned utility companies are subject

to regulation in the provision of electric utility service to the

public, including limits on the rate of return to investors. Inves-

tor-owned utility companies own property in the name of the

utility company, and enjoy property rights like any other cor-

poration.

the Federal Communications Commission (FCC) under

the Act. The Act confers authority on the FCC to

regulate the rates, terms and conditions of cable tel-

evision attachments to the utility poles owned by those

investor-owned utility companies that are not regu-

lated in this regard by the states. EE] members own

and control millions of poles necessary for the trans-

mission and distribution of electric energy to their

customers or ratepayers. Private cable television op-

erators have found it to be economically expedient to

use a substantial number of these poles for the pur-

pose of attaching cables, amplifiers, power supplies,

grounds, guys, anchors and other equipment used in

the provision of cable television service.

Under the aegis of the Pole Attachment Act, the

FCC repeatedly has authorized cable television com-

panies to occupy space on utility poles owned by EEI

members, and paid for by investors and ratepayers,

at rates drastically lower than contracted for by the

cable operators and the utilities. For example, in this

case, rates per pole negotiated by Appellee Florida

Power Corporation of $7.15, $5.50, and $6.24 each

were reduced by the FCC to $1.79 per pole—reduc-

tions of 75 percent, 71 percent, and 62 percent, re-

spectively. Florida Power Corp. v. FCC, 772 F.2d

1537, 1541 (11th Cir. 1985) (J.S. App. la, 7a).°

EEI member companies have a substantia! interest

in supporting the Eleventh Circuit’s rejection of this

unconstitutional regulatory scheme, as representatives

of both the right of utility company investors to be

$“J.S. App.” refers to the Appendix to the Jurisdictional

Statement filed by the Federal Communications Commission and

the United States of America in No. 85-1658.

free from the uncompensated taking of their property

and the right of utility ratepayers to avoid a forced

subsidy of cable television investors and customers.

COUNTERSTATEMENT OF THE CASE

There are approximately 215 investor-owned elec-

tric utilities in the country providing electric utility

service to over 77 million customers.‘ The rates elec-

tric utility customers pay for this service and the rate

of return to the utility’s shareholders are regulated

by government authorities. To the extent investor-

owned utilities are prohibited by federal law from

receiving full compensation for the use of their prop-

erty by virtue of the Pole Attachment Act, the utility

company investors and utility ratepayers are forced

to subsidize the cost of cable transmission.

Utility poles are owned, operated, maintained and

used by investor-owned utilities for providing elec-

tricity. Cable companies have entered into contracts

with investor-owned utilities allowing the cable com-

panies to use these valuable utility poles. The con-

tractually agreed-upon cable pole attachment rates

have been reduced, however, based on rate prescrip-

tions by the FCC using a formula set out by federal

statute. 47 U.S.C. § 224(d).°

‘The number of utility customers is based on the number of

meters, or accounts, and includes commercial as well as resi-

dential customers. Some multistory dwellings may not be sep-

arately metered, however. Therefore, this number does not

necessarily reflect the number of separate residential households

receiving electric utility service.

‘ Drastic reductions by the FCC in contractually established

pole attachment rates have been commonplace. The FCC his-

4

The customers served by investor-owned utilities

pay for and receive electricity, a necessity of modern

life. In contrast, subscription to cable television en-

tertainment service is a matter of choice. Many elec-

tric utility ratepayers do not elect to subscribe to

cable, e.g., commercial establishments, residential util-

ity ratepayers who own satellite dishes, or people who

object to certain cable programming selections. Only

about 41 percent of all television households® cur-

rently subscribe to cable,’ and only about 55 to 57

percent of homes with access to cable elect to sub-

scribe.* Electric utility ratepayers, as a result, sub-

sidize the cost of cable service for those choosing to

subscribe insofar as pole attachment rates are kept

artificially low.

torically has sharply reduced rates previously agreed to by cable

operators under the Pole Attachment Act. See, e.g., Television

Cabie Serv., Inc. v. Monongahela Power Co., 88 F.C.C.2d 56

(1981) (per pole contract rates of $7.17 and $8.16 reduced to

$1.46); Teleservice Corp. of America v. Southwestern Pub. Serv.

Co., No. PA-79-0010 (FCC July 17, 1981) (per pole contract

rates of $5.00 and $4.00 reduced to $.90). Moreover, in this

case, the FCC reduced the Group W and Acton CATV contract

rates below what the cable companies requested.

* Television households are simply the number of U.S. house-

holds equipped with at least one television set. There were ap-

proximately 86.4 million TV households, compared to 34 to 40

million cable households, as of the end of 1985. National As-

sociation of Broadcasters, Great Expectations: A Television Man-

ager’s Guide to the Future 11, 19 (Apr. 1986) [hereinafter cited

as NAB Report).

*Leepson, Cable Television: Coming of Age, Voi. II, No. 24

Congressional Quarterly Editorial Research Reports 967 (Dec.

27, 1985) (citing Television Digest (May 1985)).

*NAB Report, supra note 6, at 20.

Cable operators normally must obtain a franchise

agreement with a municipal authority which permits

them to offer cable television service in the franchise

area. Most franchising authorities select one cable op-

erator to provide cable service in a given area, and

the selected cable operator usually enjoys a monopoly

position relative to the provision of cable television

service in that area. See Central Telecommunications,

Inc. v. TCI Cablevision, Inc., 610 F. Supp. 891,

899-900 (W.D. Mo. 1985). Cable operators pay a fee

to the franchising authority for the cable franchise,

and pass on the costs of providing cable service to

cabie subscribers.

SUMMARY OF ARGUMENT

The Eleventh Circuit correctly ruled that the Pole

Attachment Act, 47 U.S.C. § 224, which authorizes

the permanent physical attachment of cable television

equipment to the property of investor-owned utility

companies, constitutes a taking of that property in

violation of the fifth amendment.

Investor-owned utilities are entitled to full recog-

nition of their constitutional property rights. These

rights are in no way diminished by the use of the

property to provide electricity or by the accompanying

government regulation of such use. Under the fifth

amendment, the private property of an investor-owned

utility may not be taken for use by cable television

companies or any other entity without the payment

of just compensation.

This case is controlled by the traditional per se

taking rule applicable to permanent physical occupa-

tion of property applied by this Court in Loretto v.

Teleprompter Manhattan CATV Corp., 458 U.S. 419

6

(1982). The Pole Attachment Act, like the statute

struck down by the Court in Loretto, allows cable

television companies to attach cable equipment to pri-

vate property without providing just compensation as

required by the fifth amendment. Neither the char-

acter of the permanent physical taking nor the private

property rights at issue distinguish this case from

Loretto.

Appellants and their Amici essentially are asking

the over 77 million electric utility ratepayers to sub-

sidize the cable television industry and those who have

chosen to receive their service. The Eleventh Circuit’s

rejection of this untenable proposition is in complete

accordance with this Court’s decision in Loretto and

should be affirmed.

ARGUMENT

I. Investor-Owned Utilities Are Entitled to Full Reec-

ognition of Their Constitutional Property Rights Un-

der the I “th Amendment.

The property of investor-owned utilities used to pro-

vide electricity is private property within the protec-

tion of the fifth amendment to the United States

Constitution. The fifth amendment requires the pay-

ment of just compensation when private property is

taken for a public use. U.S. Const. amend. V. Ac-

cordingly, a governmentally authorized taking of the

property of an investor-owned utility is constitutional

only on the payment of just compensation.®

*EEI is not specifically addressing the issue of whether the

Pole Attachment Act fails to provide for the determination of

just compensation required by the fifth amendment. EF] adopts

the position taken on this issue by the Appellees.

eet DS Ve se bi et

tn ee

Sa ROTTS «COMER, RR RR RR 4 Yon pret

ee

~]

The arguments of both the Federal and Cable

Appellants essentially suggest that investor-owned

utilities do not have private property rights in their

utility poles. There simply is no support for this po-

sition.!°

The Appellants rest their case for a utility excep-

tion to the fifth amendment on the facts that the

utility poles are used to provide a public utility service

and that investor-owned utility companies are regu-

lated by government authorities in their provision of

utility service."! Group W Brief at 16, 18-20; Federal

'° Notwithstanding their arguments for a utility exception to

the taking clause, the Cable Appellants acknowledge that some

“utility property can, of course, be the subject of an unconsti-

tutional taking.” See Group W Cable, et al. [hereinafter cited

as Group W] Brief at 22 n.51. The Cable Appellants fail to

distinguish between the utility property they admit is protected

by the fifth amendment and utility poles, except on the basis

that cable companies have a present economic interest in using

the poles. /d. The interest of the party for whose benefit private

property is taken does not remove the constitutional requirement

of just compensation to the property owner.

‘The Federal Appellants argue that the utility companies

“simply object to the regulation of rates they charge for per-

mitting an additional set of wires to be strung on poles they

themselves use for precisely that purpose, and only for that

purpose.’’ Federal Appellants’ Brief at 14 (emphasis added). In

fact, the utility companies use their poles for a wholly distinct

purpose (provision of electricity) from the purpose for which the

cable companies seek access (provision of television entertain-

ment). The distinction is not insignificant. Even assuming that

utility company property is dedicated to a public use, such ded-

ication is to the company’s basic utility service. The Pole At-

tachment Act allows for uncompensated physical access for

provision of enhanced television service, a function totally un-

related to providing electricity.

Appellants’ Brief at 13-14. This Court previously has

held with respect to the constitutional protection af-

forded to private property devoted to a public rather

than a private use that ‘‘[t]here is no difference what-

ever in principle arising from the difference in the

uses.’’ Western Union Telegraph Co. v. Pennsylvania

Railroad Co., 195 U.S. 540, 570 (1904). Western

Union had argued that the railroad could not require

it to remove its poles and wires from the railroad

right-of-way because the right-of-way was “‘property

devoted to a public use.” Jd. at 573. The Court agreed

that the railroad property was devoted to a public

uSe, but held that, nonetheless, the right-of-way was

protected from a taking without just compensation

under the fifth amendment.”

The Court consistently has held that neither gov-

ernment authorities as regulators of utility services

nor the public as consumers of such services are en-

titled to any interest in the property of investor-owned

utility companies that is used to render such ser-

vices.’ Surely, cable operators cannot be entitled to

ine right to physically occupy utility company prop-

2 Accord ICC v. Oregon-Washington R.R. & Nav. Co., 288 U.S.

14, 40-41 (1933) (despite the fact that railroads are dedicated

to public use, they are the private property of their owners and

their assets cannot be taken without just compensation).

'8 See Missouri er rel. Southwestern Bell Tel. Co. v. Public

Serv. Comm'n, 262 U.S. 276, 289 (1923) (‘It must never be

forgotten that while the state may regulate with a view to

enforcing reasonable rates and charges, it is not the owner of

the property of public utility companies, and is not clothed with

the general powers of management incident to ownership.’’) and

Board of Pub. Util. Comm’rs v. New York Tel. Co., 271 US.

23, 32 (1926) (“By paying bills for service [ratepayers] do not

SE AE a Aire at et Ot te fi Del

MD le ee Ma de Se oe

erty free from constitutional limitations when neither

government authorities nor ratepayers could assert

such a right. Moreover, were the Court now to hold

that utility property belongs to the government, to

the ratepayers, or to any other members of the public

at large (such as the cable operators), the untenable

result would be that any industry which provides pub-

lie services and is regulated for public policy reasons—

including the cable industry—no longer wouid have

protected rights in its property.

Extending the Appellants’ argument to its logical

conclusion, the government could order utility com-

panies to make the following utility company property

available tc the public: extra office space; conference

rooms during times when they are not otherwise in

use; computers, photocopiers or other equipment when

not otherwise in use, ‘etc. Such intrusive uses of util-

ity-owned property cannot be justified based on the

fact that the property is used in the provision of

electricity to the public and is subject to government

regulation in connection with that use. As the Cable

Appellants recognize, Group W Brief at 22 n.51, there

is no precedent for the proposition that an investor-

owned company denudes itself of fifth amendment

protection by using its property for a utility service.

Yet this is the logical terminus of the Appellants’

argument.

A determination that investor-owned utility com-

panies have no fifth amendment rights against the

uncompensated taking of their property by cable com-

panies would be inconsistent with the decisions of this

acquire any interest, legal or equitable, in the property used for

their convenience or in the funds of the company.”’).

10

Court recognizing the constitutional rights of utilities

in other contexts. As Justice Marshall stated in his

concurring opinion in Pacific Gas & Electric Co. v.

Public Utilities Commission, 106 S. Ct. 903, 915 n.1

(1986):

That the utility passes on its overhead costs

to ratepayers at a rate fixed by law rather

than the market cannot affect the utility’s

ownership of its property, nor its right to

use that property for expressive purposes,

see Consolidated Edison Co. v. Public Service

Comm’n of New York, 447 U.S. 530, 534 n.

1, 100 S.Ct. 2326, 2331 n. 1, 65 L.Ed.2d 319

(1980).

Expanding on the precedent of Consolidated Edison,

the Court found in Pacific Gas & Electric that the

regulated status of a utility company does not lessen

its right to be free from state regulation that burdens

its speech. 106 S. Ct. at 912 n.4 (1986). Implicit in

both the plurality and the concurring opinions in Pa-

cific Gas & Electric is the principle that utility com-

panies have private property rights in their billing

envelopes. 106 S. Ct. at 910 n.8, 912, 913, 914

(Burger, C.J., concurring); 915 n.1, 917 (Marshall, J.,

concurring). A fortiori, investor-owned utility com-

panies have private property rights in their utility

poles as well.’

'* Amici Nor-West Cable Communications and Preferred Com-

munications, Inc. argue, Brief at 11-16, that the Eleventh Cir-

cuit’s decision will result in restraining the first amendment

rights of the cable companies. To the extent that first amend-

ment rights of the cable companies might even come into play

in this case, however, they do not justify taking electric utility

property without just compensation.

1]

II. The Permanent Physical Attachment of Cable Tel-

evision Equipment to Investor-Owned Utility Poles

Constitutes a Per Se Taking.

A. This Case Is Controlled By the Traditional Per Se Tak-

ing Rule Reaffirmed in Loretto.

The Eleventh Circuit’s decision falls squarely within

the parameters of the traditional per se rule of the

fifth amendment, reaffirmed by this Court in Loretto

v. Teleprompter Manhattan CATV Corp. that ‘‘a per-

manent physical occupation 1s unquestionably a tak-

ing.”’ 458 U.S. 419, 485 n.12 (1982) (emphasis in

original).!* Inasmuch as the fifth amendment applies

with full force to the private property of an investor-

owned utility, as discussed above, there is no need

for the Court to look beyond Loretto in deciding

whether the Pole Attachment Act effects a com-

pensable taking.’*

In analyzing property rights under the fifth amend-

ment, this Court has adopted a “bundle of rights’

approach, which includes, inter alia, the rights to

possess, use and dispose of property, and the right

‘8 As the Court stated in Loretto, ‘‘the character of the [phys-

ical] invasion is qualitatively more intrusive than perhaps any

other category of property regulation.’’ 458 U.S. at 441. The

Court’s decision in Loretto did not break any new ground, but

merely recited the traditional rule that in cases involving a per-

manent physica! occupation, a taking always has been found. See

id. at 427-28, 435, 441.

‘6 The facts in Loretto are indistinguishable from the facts in

this case. In Loretto, the Court held that a New York law

requiring property owners to permit attachment of cable tele-

vision equipment to their property constituted a compensable

taking.

12

to exclude others from using the property.’’ As the

Court recognized in Loretto, ‘‘[t]o the extent that the

government permanently occupies physical property,

it effectively destroys each of these rights.’’ 458 U.S.

at 435 (emphasis in origina!). The Court noted:

The one incontestable case for compensation . .

seems toe occur when the government deliberately

brings it about that its agents, or the public at

large, “‘regularly”’ use, or “‘permanentiy”’ occupy,

space or a thing which theretofore was under-

stood to be under private ownership.

Id. at 427 n.5, (quoting Michelman, Property, Utility,

and Fairness: Comments on the Ethical Foundations

of ‘Just Compensation”’ Law, 80 Harv. L. Rev. 1165,

1184 (1967) (footnote omitted)); see also United States

v. Causby, 328 U.S. 256, 266-67 (1946); United States

v. Petty Motor Co., 327 U.S. 372, 374-75, 384-85

(1946); San Diego Gas & Electric Co. v. San Diego,

450 U.S. 621, 657-59 (1981) (Brennan, J., dissenting).

In Loretto, the Court reaffirmed ‘“‘the rule that a

permanent physical occupation is a government action

of such unique character that it is a taking without

regard to other factors that a court might ordinarily

examine.”’ 458 U.S. at 432. The Court held:

[W]hen the physical intrusion reaches the extreme

form of a permanent physical occupation, .. . ‘‘the

character of the government action’’ not only is

an important factor in resolving whether the ac-

tion works a taking but also is determinative.

7 See, e.g., Loretto, 458 U.S. at 433, 435; Kaiser Aetna v.

United Stutes, 444 U.S. 164 (1979); and United States v. General

Motors Corp., 323 U.S. 373 (1945).

i ee

Oe SO RE a a

13

Id. at 426 (citing Penn Central Transportation Co. v.

New York City, 488 U.S. 104 (1978)) (emphasis added).

A permanent physical occupation of private prop-

erty, authorized by government action, universally is

considered to be a compensable taking under the fifth

amendment without regard to the public benefit of

the occupation or the extent of the economic impact

on the property owner. Jd. at 435-36. Those factors

are considered only in the more difficult cases in-

volving an alleged taking through some nonpossessory

(i.e., nonphysical or temporary) regulation or use, to

which the protection of the fifth amendment has been

extended.'* In this case, as in Loretto, a physical in-

vasion of property is at issue.'® Thus, it was not only

proper, but indeed required under principles of stare

decisis, for the Eleventh Circuit to follow Loretto in

i® The multifactor balancing test referred to in the cases cited

by Appellants, Group W Brief at 23 n.53, only applies to takings

which do not involve a permanent physical invasion of private

property. See, e.g., Connolly v. Pension Benefit Guar. Corp., 106

S. Ct. 1018 (1986) (unsuccessful fifth amendment challenge to

provisions of statute governing multi-employer pension plans

which nullified a contractual provision limiting liability); Mac-

Donald, Sommer & Frates v. Yolo County, 106 S. Ct. 2561 (1986)

(compensable taking not established in case involving rejection

by a planning commission of a proposal to subdivide real prop-

erty into lots); and PruneYard Shopping Center v. Robins, 447

U.S. 74 (1980) (no violation of fifth amendment property rights

when public was given temporary access to shopping center to

exercise protected first amendment right of free speech).

1’ As in Kaiser Aetna v. United States, 444 U.S. at 179-80,

this is not a case in which the government merely is exercising

regulatory power, but rather involves physical invasion of prop-

erty by the government.

14

reaching the conclusion that the Pole Attachment Act

allows an unconstitutional taking.

B. The Permanent Physical Taking Allowed Under the Pole

Attachment Act Is Indistinguishable from Loretto.

As the Eleventh Circuit properly recognized, ‘‘Lor-

etto and the instant case are virtually indistinguish-

able; they both involve the placement of plates, boxes,

wires, bolts and screws upon the property of a re-

luctant owner.” J.S. App. at 14a. At least one other

court simply assumed that the physical attachment of

such cable equipment to utility property “‘is clearly a

taking’ under the authority of Loretto. Alabama

Power Co. v. FCC, 773 F.2d 362, 367 n.8 (D.C. Cir.

1985) (vacating the FCC’s decision that pole attach-

ment rates of electric utility companies were exces-

sive; and noting, without reaching the issue, that the

physical attachment of cable equipment to the utility

poles would be a taking under Loretto).

Appellants attempt to avoid the result mandated

under Loretto by asserting that, although the utility

company’s poles are physically occupied by the cable

television equipment, the space occupied by cable may

be reclaimed by Florida Power under the terms of

the pole attachment contracts if the space is required

for utility service. Group W Brief at 24-28; Federal

Appellants’ Brief at 15-18. This argument assumes

that the utility company will be allowed to enforce

its contractual arrangements.” In fact, as the Elev-

enth Circuit stated, ‘‘the FCC has made it quite clear

2° Notwithstanding their assertions in this case, the cable com-

panies argued in City of Los Angeles v. Preferred Communica-

tions, Inc., slip op. No. 85-390 (June 2, 1986), that access to

utilities’ poles may not be limited, at least by the government.

Wag A eA hy ey ct ts tain OE ae teen Aaah aed “ohn.

15

that it intends to require continued provision of space

at FCC—ordered rates.” J.S. App. at 12a. Unlike the

property owner in Loretto, who could have forced the

cable company to disconnect at any time by occupying

the building herself or by converting it to a com-

mercial property, it is a virtual certainty that the

utility company will not be permitted by the FCC to

disconnect cable attachments on the basis of any con-

tractual provisions. See id. (citing Loretto, 458 U.S.

at 439 & n.17).2! Thus, as the Eleventh Circuit held,

“the extent of the occupation in the case of Florida

Power not only satisfies Loretto’s permanency re-

quirement, but significantly exceeds it.” J.S. App. at

13a.

The fact that, as an initial matter, investor-owned

utility companies voluntarily entered into contracts

with cable companies does not in any way detract

from the conclusion that there has been a permanent

physical taking of property for which just compen-

sation is due. Access voluntarily granted at a nego-

21 The FCC has ruled uniformly that utilities may not refuse

to permit cable operators to continue to occupy space on’ poles

owned and operated by the utilities for provision of electricity.

See, e.g., Whitney Cablevision v. Southern Indiana Gas & Elec.

Co.. FCC Mimeo No. 841 (Nov. 16, 1984); Tele-Communications,

Inc. v. South Carolina Elec. & Gas Co., FCC Mimeo No. 3994

(Apr. 19, 1985). In one case, David Bailey d/b/a

Port Gibson Cable TV v. Mississippi Power & Light Co., FCC

Mimeo No. 36118 (Sept. 11, 1985), the FCC ruled that a utility

must expand its facilities to make room for initial attachments

by a new cable operator. The mere recitation of the facts in

the Port Gibson case by the Federal Appellants in no way sup-

ports their bare assertion that the FCC has not attempted to

limit the utilities’ power to terminate pole attachment contracts.

Federal Appellants’ Brief at 16-17.

16

tiated rate no longer can be considered voluntary at

the substantially reduced rate imposed under the Pole

Attachment Act.” As the Eleventh Circuit recognized:

[Bly insisting on a significantly lower rate,

the cable companies have themselves trans-

formed their status from that of an invitee,

to use their own terms, to that of an un-

wanted guest. While they may have been in-

vited at the outset, they certainly weren’t

invited at the rate imposed by the FCC.

J.S. App. at 10a-lla. Moreover, in Loretto the cable

company also had routinely entered into agreements

with property owners for the initial attachment of

cable equipment to the property. 458 U.S. at 423.%

Thus, the alleged distinction between the two cases

is simply a red herring.

C. The Private Property Rights at Issue in this Case Are

Indistinguishable from the Private Property Rights Up-

held in Loretto.

Utility rate regulation, like the rent control appli-

cable to the apartment building in Loretto, does not

in any way abrogate the applicakle fifth amendment

rights of investor-owned utilities. The issue before the

Court is not, as the Appellants would have the Court

believe, whether-government authorities will be able

to continue regulating utility rates and services if

2 By allowing the cable companies to attach their cables at a

rate substantially below the agreed-upon contract rate, the stat-

ute provides a windfall for the cable companies.

*8 Under those agreements, property owners had been com-

pensated at a standard rate of five percent of gross revenues

realized by the cable company from the particular property. 458

U.S. at 422-23.

17

investor-owned utilities are found to have fifth amend-

ment rights, just as the issue in Loretto was not

whether states would he able to continue regulating

housing conditions or landlord/tenant relationships. See

458 U.S. at 440.

In Loretto, this Court distinguished cases involving

state regulation of housing conditions or landlord/ten-

ant relationships based on the fact that such regu-

lations do not authorize the permanent occupation of

the landlord’s property by a third party. Loretto, 458

U.S. at 440 (distinguishing Heart of Atlanta Motel,

Inc. v. United States, 379 U.S. 241 (1964); Queenside

Hills Realty Co. v. Saxl, 328 U.S. 80 (1946); Bowles

v. Willingham, 321 U.S. 503 (1944); Home Building

& Loan Association v. Blaisdell, 290 U.S. 398 (1934)

(overruled subsequent to the Loretto decision in En-

ergy Reserves Group, Inc. v. Kansas Power & Light

Co., 459 U.S. 400 (1983)); Edgar A. Levy Leasing Co.

v. Siegel, 258 U.S. 242 (1922); and Block v. Hirsh,

256 U.S. 135 (1921)). The Court here also can distin-

guish the utility rate cases cited by Appellants and

their Amici on similar grounds: utility rate regulation

does not authorize the permanent occupation of utility

property by a third party.*

24 REI disagrees with the Federal Appellants’ unsupported and

confusing claim that regulation of the rates charged to the cable

companies by investor-owned utilities “‘would be no less con-

sistent with the Just Compensation Clause than is any other

component of the state rate regulation scheme.” Federal

Appellants’ Brief at 11. The fact that investor-owned utilities

are subject to rate regulation for selling electricity is not relevant

to the question of whether there is a compensable taking when

the government authorizes the permanent occupation of the util-

ity’s property by a third party. Accordingly, cases cited by

18

Without any basis for distinguishing Loretto, Cable

Appellants and their Amici attempt to ride the backs

of the ratepayers, arguing that, regardless of whether

the cable companies justly compensate investor-owned

utilities for their occupation of the utility poles, the

utilities will be made whole by the ratepayers. See

Group W Brief at 23, and Amicus Texas Cable TV

Association, Inc., et al., Brief at 11. This argument

misconceives the issue before the Court. The issue is

not whether regulation provides utilities an opportu-

nity to earn a fair return on investment from the

ratepayers, but whether a physical taking of private

utility property by the cable industry requires just

compensation.” This is the precise question which was

before the Court in Loretto and which was answered

in the affirmative.

Appellants (Group W Brief at 22 n.51, Federal Appellants’ Brief

at 9-10) to support the proposition that fifth amendment taking

claims by utilities have been vejected when the utility rates as-

sure a nonconfiscatory return have no applicability to this case.

* In Texas Power & Light Co. v. FCC, 784 F.2d 1265, 1272

(5th Cir. 1986), the Fifth Circuit rejected Group W’s argument

that the utility company would, in any case, receive a fair return

from utility ratepayers, as if that somehow justified passing on

costs to the ratepayers so that cable television companies can

benefit.

|

t

'

|

'

19

CONCLUSION

For the foregoing reasons, Amicus Curiae Edison

Electric Institute respectfully urges the Court to af-

firm the decision of the Eleventh Circuit.

Respectfully submitted,

ROBERT L. BAUM*

JAN J. SAGETT

Edison Electric Institute

1111 19th Street, N.W.

Washington, D.C. 20036

(202) 828-7679

“Counsel of Record

August 1986