Cequel III Communications I, LLC v. Local Agency Formation Commission of Nevada County

In this action Cequel III Communications I, LLC (Cequel), a franchised cable television provider, sought to invalidate the Local Agency Formation Commission of Nevada County’s approval of the application of Truckee Donner Public Utility District (District) to provide broadband services, including cable television, to citizens within its jurisdictional limits. The trial court entered judgment for the Local Agency Formation Commission of Nevada County (LAFCo) on Cequel’s three causes of action for validation (Code Civ. Proc., § 863), writ of mandate (Code Civ. Proc., § 1085), and declaratory relief. On appeal Cequel does not challenge the trial court’s decision on its validation cause of action, but contends the trial court erred in denying its petition for writ of mandate because (1) the District lacks legal authority to provide cable television services, (2) LAFCo violated its statutory duty to determine whether there was a need for the proposed services and the services could be provided on a fiscally sound basis, and (3) LAFCo violated its duty to conduct an independent determination of whether the District was authorized to provide broadband services. We disagree and shall affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

On October 22, 1999, the District submitted an application to LAFCo seeking authorization to offer telecommunication services, which the District described as wholesale high-speed telephony and data transport, Internet data transport, and cable television, within the District’s boundaries, generally described as the greater Truckee area.

Cequel’s predecessor in interest, USA Media, opposed the District’s entry into the cable television market on the basis cable television service was not a utility service the District was authorized to provide. In light of this opposition and on advice of counsel, LAFCo required the District to agree to indemnify LAFCo for all costs of defending LAFCo in any litigation or administrative proceeding brought in connection with the District’s application.

LAFCo formed an ad hoc committee to work with the District in evaluating the application. After review of the application materials, a staff report, the report of the ad hoc committee and a public hearing, LAFCo approved resolution No. 01-01 on January 18, 2001, determining it was in the interest of the public that the District be permitted to provide the new services to the community. LAFCo approved the District’s application subject to several specific terms and conditions, including that the District prepare a draft master service element for the communications services it intended to

On October 22, 2002, LAFCo approved a resolution extending the time for the District to comply with the terms and conditions of resolution No. 01-01 until January 27, 2005.

In July 2004 a revised master service element for broadband telecommunications services was submitted by the District to LAFCo. The District also submitted a final risk mitigation plan and a revised “Fiber to the User Business Plan” to LAFCo on July 30, 2004. The District provided LAFCo with a legal opinion regarding its financing and a copy of its earlier legal opinion regarding its authority to provide cable television service. LAFCo obtained an independent certified public accountant review of the District’s financial projections for the provision of the service and a legal opinion regarding the District’s risk mitigation plan. After extensive review, the ad hoc committee of LAFCo recommended LAFCo accept the master service element prepared by the District and incorporate it into the District’s sphere of influence plan, determine the risk mitigation plan provides adequate assurance the District’s water and electrical service ratepayers will not be required to subsidize the new services, and issue a certificate of compliance.

After a public hearing on August 11, 2004, LAFCo unanimously adopted resolution No. 04-09 accepting the District’s master service element and amending the District’s, sphere of influence plan accordingly. LAFCo also unanimously approved a certificate of compliance certifying the District had complied with the conditions of resolution No. 01-01. LAFCo adopted resolution No. 04-15 extending the time to begin providing services to January 1, 2008.

On August 26, 2004, Cequel requested LAFCo reconsider resolution No. 01-01, resolution No. 04-09, resolution No. 04-15, and its certificate of compliance relating to the District’s application to offer new services. Cequel first claimed LAFCo failed to independently determine that the District’s business plan describes services that are needed and that the District can

LAFCo’s arguments presuppose Cequel or its predecessor could have properly filed a court action challenging resolution No. 01-01 immediately after its adoption. The language of resolution No. 01-01, however, conditions LAFCo’s approval of the District’s application on the District’s further preparation of a master service element, adoption of a risk mitigation plan, and obtainment of franchise agreements, giving the District two years initially to accomplish these tasks. Resolution No. 01-01 provides LAFCo will only issue a certificate of compliance after the completion of all of these additional items. Resolution Ño.' 01-01 then states: “Only upon issuance of the Certificate of Compliance shall LAFCo approval to provide the additional class of service be effective.” (Italics added.) Thus, until the District successfully completed the additional requirements and a certificate of compliance was issued, LAFCo’s approval was not final, but only tentative. There was no certainty the District would be able to successfully meet the additional requirements. Any legal challenge filed immediately after the adoption of resolution No. 01-01 and before LAFCo’s issuance of a certificate of compliance would have been premature.

As Cequel did not have the ability to file an earlier legal challenge, the issues it raises regarding the determinations made by LAFCo in resolution No. 01-01 are timely.

The District Has Authority to Provide Cable Television Services

A. Standard of Review

The District’s authority to provide cable television services is a question of first impression in California. The trial court concluded the District had the authority to provide such service. The parties disagree as to the applicable standard of review of that decision on appeal. Cequel contends the question is subject to de novo review by this court. Although the District agrees the standard of review for this question is the independent judgment of the court,

“The primary objective of statutory interpretation is to ascertain and effectuate legislative intent. [Citation.] To do so, a court first examines the actual language of the statute, giving the words their ordinary, commonsense meaning. [Citation.] The statute’s words generally provide the most reliable indicator of legislative intent; if they are clear and unambiguous, ‘[t]here is no need for judicial construction and a court may not indulge in it.’ [Citation.] Accordingly, ‘[i]f there is no ambiguity in the language, we presume the Legislature meant what it said and the plain meaning of the statute governs.’[Citation.]

“Where, however, the statutory language is ambiguous on its face or is shown to. have a latent ambiguity such that it does not provide a definitive answer, we may resort to extrinsic sources to determine legislative intent. [Citations.] Under this circumstance, ‘the court may examine the context in which the language appears, adopting the construction that best harmonizes the statute internally and with related statutes.’ [Citation.] ‘In such cases, a court may consider both the legislative history of the statute and the wider historical circumstances of its enactment to ascertain the legislative intent.’ [Citation.]” (Lewis v. County of Sacramento, supra, 93 Cal.App.4th at pp. 119-120.)

The phrase “other means of communication” in section 16461 does not explicitly include or exclude the provision of broadband services, in particular, cable television service. In considering whether cable television comes within the authority and powers granted by the language of section 16461, we find helpful a 1962 opinion of the California Attorney General. In such opinion the Attorney General considered whether an existing PUD could acquire, construct, own and operate a translator television installation. (40 Ops.Cal.Atty.Gen. 25, 26 (1962).) The opinion concluded the district was authorized to provide such service as the installation was a building used for a public purpose as authorized by section 16463, but also under the alternate authority of section 16461 for providing “other means of communication.” (40 Ops.Cal.Atty.Gen. at pp. 26-27.)

The opinion expressly considered the scope of the language “other means of communication” and determined the “or” used in section 16461 to separate “other means of communication” from “telephone service” was not intended

Having concluded the phrase “other means of communication” was not limited to those means of communication that are similar to, and used as alternate to, telephone service, the opinion turned to the meaning of the word “communication” as used in section 16461. The opinion adopted a broad construction of the term as meaning “ ‘ “intelligence, news, that is communicated or imparted, a written or verbal message,” and is not restricted to mere words but “includes acts as well, embracing every variety of affairs that can form the subject of negotiation, interviews, or actions between two persons, and every method by which one person can contrive impressions or information from the conduct, condition, or language of another . . . ” (40 Ops.Cal.Atty.Gen., supra, at p. 28, citing In re Cattalini (1946) 72 Cal.App.2d 662 , 667-668 [ 165 P.2d 250 ].) Television, as a means of mass communication, fell within this definition. Thus, the district was authorized by section 16461 to own and operate a translator television installation to supply its inhabitants with such a means of mass communication. (40 Ops.Cal.Atty.Gen., supra, at pp. 28-29.)

We agree with this Attorney General opinion. The phrase “other means of communication” used in section 16461 is not limited to means of communication similar to telephone service. The term “communication” used in section 16461 broadly means any form of passing information between two persons, including mass communication in the form of television. Cable television is a means of communication that PUD’s are authorized to provide their inhabitants.

Our construction of the phrase “other means of communication” in section 16461 finds further support from the California Supreme Court’s opinion in In re Orosi Public Utility Dist. (1925) 196 Cal. 43 [ 235 P. 1004 ] (Orosi) and a second opinion of the California Attorney General found at 54 Ops.Cal.Atty.Gen. 135 (1971).

The Supreme Court continued: “In enacting the statute here in question [the Public Utility District Act], the [Legislature has made provision whereby the inhabitants of the state living outside the limits of cities and towns may serve their own purposes through the operation of the same kind of utilities, when organized for that purpose. [][] That such was the intention of the [L]egislature. may be gleaned from a reading of the provision declaring the purposes for which public utility districts may be created in unincorporated territory. They are the acquisition, construction, and use of works for supplying the inhabitants of the district with light, water, power, heat, transportation, telephone service, or other means of communication, or means for the disposition of garbage, sewage, or refuse matter. It has the power to do all things necessary or convenient to the full exercise of the powers granted by the act. It is significant that, when the [Legislature came to pass the act extending to the inhabitants outside of incorporated cities and towns the privileges in regard to the acquisition and use of their own public utilities that are granted by the state constitution to municipalities, it should have followed so closely the language of the constitutional amendment of 1911 in the statement of the purposes for which the districts may be created. We are convinced that it was its intention to provide for the creation of public corporations. of a quasi-municipal character, with power to carry on the particular functions committed to them.” (Orosi, supra, 196 Cal. at pp. 55-56, italics added.) As the Supreme Court concluded the Orosi Public Utility District was properly formed as a quasi-municipal corporation under the Public Utility District Act, allowing it to tax its inhabitants and property

Although we recognize municipalities have greater powers and broader authority than PUD’s in other areas (Orosi, supra, 196 Cal. at pp. 56-57), with respect to the acquisition, construction, and operation of utility services that are identified by the same language for both municipalities and PUD’s, the opinion of the California Supreme Court in Orosi suggests the authority of cities and districts should be considered the same.

The California Attorney General has issued an opinion concluding general law cities have the authority to construct, own and operate a community cable television system under the constitutional authority of article XI, section 9 (former § 19) to furnish inhabitants with “ ‘means of communication.’ ” (54 Ops.Cal.Atty.Gen., supra, at p. 137, italics omitted.) Cequel “concedes, as it must, that cable television is a form of communication and that, for the purposes of municipal corporations, could be considered a means of communication authorized within the scope of the constitutional grant of authority,” but argues the same result cannot be reached with regard to a PUD’s statutory authority. We disagree. The statutory language in section 16461 has been found to intentionally track the constitutional language applicable to the authority of municipal corporations to provide utility services, so as to “extend[] to the inhabitants outside of incorporated cities and towns the privileges in regard to the acquisition and use of their own public utilities that are granted by the state constitution to municipalities.” (Orosi, supra, 196 Cal. at p. 56.)

Cequel argues, however, a PUD’s statutory authority is limited to the provision of “essential” “utility” services, which it claims cable television is not.

Specifically, Cequel points us to the decision of Television Transmission v. Public Util. Com. (1956) 47 Cal.2d 82 [ 301 P.2d 862 ] (Television Transmission), which it claims stands for the proposition that cable television service is not a utility service. Actually, the question before the California Supreme Court in Television Transmission was whether a private corporation operating a “community television antenna” furnishing coaxial television antenna service (cable television) to areas of Contra Costa County was a “public utility” so as to be subject to regulation by the Public Utilities Commission (PUC). (Id. at p. 84.) The Supreme Court determined the PUC had no jurisdiction over a

Similarly, this court’s opinion in Sacramento Cable Television v. City of Sacramento (1991) 234 Cal.App.3d 232 [ 286 Cal.Rptr. 470 ] (Sacramento Cable), is inapposite. Sacramento Cable involved a challenge by a private cable television company and one of its individual users to a utility user tax imposed by the city on cable television users. (Id. at p. 235.) This court recognized a private company providing cable television is not a “utility” under section 216, but found there is nevertheless a clear degree of similarity between telephone, gas, electric and cable television service that justified classifying cable television with the other utilities services for purposes of imposing a utility users’ tax. (Sacramento Cable, supra, at pp. 241-242.) The case is not authority on the question of whether cable television service can be provided by a PUD pursuant to section 16461.

In Orange County Cable Communications Co. v. City of San Clemente (1976) 59 Cal.App.3d 165 [ 130 Cal.Rptr. 429 ] (Orange County Cable), a private cable television provider sought a writ of mandate to compel the city to raise the rates it was allowed to charge its subscribers for its service. (Id. at p. 167.) The appellate court found specious the argument that the cable television company had a constitutional right to a just and reasonable return on its investment. (Id. at p. 170.) As the private cable television company was not a public utility, the relationship of the parties was contractual and the city was only required to act in good faith. (Id. at pp. 170-172.) The cable television company failed to show any evidence the city acted in bad faith. (Id. at pp. 172-174.) Again, this case does not assist our inquiry into whether a PUD is authorized to provide cable television service.

Greening v. Johnson (1997) 53 Cal.App.4th 1223 [ 62 Cal.Rptr.2d 214 ] (Greening), was an action brought by mobilehome park owners against residents of the mobilehome park to recover unpaid monthly charges for cable television. The appellate court held the Mobilehome Residency Law

Cequel contends the list of works contained in section 16461 are subject to the limitation in section 16467 that all such works must be utility works or services. Section 16467 provides, in part, “[o]nly revenue producing utilities shall be acquired, owned, or operated by a district.” Cequel claims the word “utilities” used in this provision indicates a PUD may operate only utility works and services. Cequel then reiterates cable television is not a utility service.

Section 16467 is directed at the financing of a PUD’s services, not at defining what services may be offered. Nevertheless, to the extent it can be read to limit a district’s services to utility services, we view all of the works identified in section 16461 as being utility services by virtue of their being authorized services of a PUD. Cable television fairly comes within the grant of authority in section 16461 for a PUD to supply an “other means of communication.” As we have already explained, the cases that conclude a private corporation’s provision of cable television service does not make the private corporation a utility subject to PUC regulation (Television Transmission, supra, 47 Cal.2d 82 ; Sacramento Cable, supra, 234 Cal.App.3d 232 ; Orange County Cable, supra, 59 Cal.App.3d 165 ) are not authority that cable television may not be supplied by a PUD as one of its utility services under section 16461. Section 16467 does not suggest otherwise.

We have also reviewed and carefully considered the other authorities cited by Cequel for its claim that cable television may not be provided by the District because it is not an “essential” utility service. Greyhound Lines, Inc. v. Public Utilities Com. (1968) 68 Cal.2d 406 [ 67 Cal.Rptr. 97 , 438 P.2d 801 ], involved a challenge by the bus company to the PUC’s decision ordering it to

Nor do we see section 16463 as a restriction on a PUD’s services under section 16461 to essential services.

Section 16463 provides: “A district may acquire, construct, own, complete, use, and operate a fire department, street lighting system, public parks, public playgrounds, golf courses, public swimming pools, public recreation buildings, buildings to be used for public purposes, and works to provide for the drainage of roads, streets, and public places, including, but not limited to, curbs, gutters, sidewalks, and pavement of streets. For purposes of this division, all of those projects shall be considered a public utility or public utility works.”

According to Cequel, the only possible explanation for the last sentence of section 16463 expressly declaring the listed projects to be “a public utility or public utility works” is that the Legislature, “in light of the unquestionable limitation imposed by the [Public Utilities] Code restricting PUDs to essential utility services,” deemed “certain non-essential, albeit desirable, additional municipal-type services as a public utility for the purpose of the [Public Utility District] Act.”

Finally we come to Cequel’s argument regarding section 16486, the statute governing the Kirkwood Meadows PUD. In 1981 the Legislature enacted section 16486, which provides, in pertinent part: “(a) In addition to all other powers, excepting telephone service, authorized by this division, the Kirkwood Meadows Public Utility District may acquire, construct, own, and operate public parking facilities and cable television facilities and may provide snow removal and road maintenance services for all roads open to the public, including, but not limited to, public roads and roads offered for dedication but not accepted, within the district.” (Italics added.) Cequel claims “the Legislature explicitly acknowledged that specific statutory authorization was necessary in order to enable the Kirkwood Meadows PUD to provide cable television services” by its use of the language “[i]n addition to all other powers” at the beginning of section 16486. Cequel’s argument essentially is that if a PUD already had the authority to offer cable television, the Legislature would not have seen fit to expressly grant Kirkwood Meadows PUD the authority to offer cable television service as an additional power.

Such interpretation is not the only way section 16486 can be read. The phrase “[i]n addition to all other powers” can also be reasonably read as the Legislature’s method of incorporating sections 16461 and 16463 into the powers granted the Kirkwood Meadows PUD and its express authorization of cable television service can be seen as the Legislature’s method of making sure cable television was an included power, in light of the lack of controlling authority on whether cable television was an “other means of communication” within the meaning of section 16461. When statutory language is ambiguous, we may resort to extrinsic sources, including legislative history, to determine legislative intent. (Lewis v. County of Sacramento, supra, 93 Cal.App.4th at pp. 119-120.)

We do not read the record as Cequel does. Prior to submitting its application to provide the new services to LAFCo, the District asked its legal counsel to review the District’s authority to offer a fiber optics cable system. Counsel opined such system was an “other means of communication” within the meaning of section 16461. The District submitted its application to LAFCo. Cequel’s predecessor, USA Media, opposed the District’s entry into the cable television market. A legal opinion drafted at the request of USA Media argued the District was not authorized to provide cable television service under current statutory law. The District responded to LAFCo with a detailed legal analysis of the District’s position as to its legal authority. USA Media provided two further discussions of its legal opinion as to the District’s lack of authority.

This history provides the context for the comments in the LAFCo staff report that “[i]n the presence of such a dispute, approval by LAFCo of the District’s request for authorization, to provide such services could result in a legal challenge to the LAFCo decision by USA-Media, [f] LAFCo could avoid such litigation by requiring that the District resolve the legal question before deeming the application complete. The District, however, desires that LAFCo proceed prior to final resolution of the dispute with USA Media. To mitigate any impact on LAFCo, the District is willing to provide an indemnification agreement to. protect the Commission in the event of a legal challenge.” It was also in this context that questions were posed by LAFCo commissioners to LAFCo’s legal counsel regarding the authority of the District to provide the new services. Counsel noted the issue was unclear, but it was his opinion there was authority for the District to proceed. He stated he could not “tell [the commission] absolutely .conclusively because the law in this area is ambiguous. If that is so, my feeling is that, if the [District wants to proceed, and they’re prepared to indemnify LAFCo . . . then we can proceed without absolute clarity in the law.”

These comments do not demonstrate a refusal; or failure of LAFCo to determine the authority of the District to provide the proposed services, but an understanding that the issue had not previously been resolved by the

The judgment is affirmed. Costs on appeal are awarded to respondents. (Cal. Rules of Court, rule 8.276(a).)

"Morrison, Acting R J., and Hull, J., concurred.