UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

CITY OF CAYCE,
Plaintiff-Appellee,

v.
                                                                 No. 95-1682
AT&T COMMUNICATIONS OF THE
SOUTHERN STATES, INCORPORATED,
Defendant-Appellant.

Appeal from the United States District Court
for the District of South Carolina, at Columbia.
Joseph F. Anderson, Jr., District Judge.
(CA-94-346-3-17)

Argued: November 1, 1995

Decided: June 30, 1997

Before MURNAGHAN and MOTZ, Circuit Judges, and
YOUNG, Senior United States District Judge for the
District of Maryland, sitting by designation.

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Reversed by unpublished per curiam opinion.

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COUNSEL

ARGUED: Joseph Robert Guerra, SIDLEY & AUSTIN, Washing-
ton, D.C., for Appellant. Danny Calvert Crowe, TURNER, PADGET,
GRAHAM & LANEY, P.A., Columbia, South Carolina, for Appellee.
ON BRIEF: Bradford A. Berenson, SIDLEY & AUSTIN, Washing-
ton, D.C.; H. Simmons Tate, Jr., Francis P. Mood, SINKLER &
BOYD, P.A., Columbia, South Carolina, for Appellant. Roy D. Bates,
Columbia, South Carolina, for Appellee.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

This is an action in trespass for damages and for injunctive relief
brought by the City of Cayce, a South Carolina municipal corpora-
tion, against AT&T Communications of the Southern States, Inc.
(AT&T), a long distance telephone company incorporated in Georgia.
It arises out of Cayce's attempt to impose an annual franchise fee on
AT&T for the privilege of using interstate fiber-optic cables in rights-
of-way underneath the City's streets, and AT&T's refusal to pay such
a fee.

AT&T is a telecommunications common carrier, which provides
long distance services under authorization from the Federal Commu-
nications Commission and the South Carolina Public Service Com-
mission. AT&T owns long distance switches and lines that run
between major metropolitan areas but it does not own or operate local
telephone switches or lines; the latter are owned by local telephone
companies, like Southern Bell.

In 1987, as part of its program to upgrade its national long distance
network, AT&T began installing major telecommunications fiber-
optic cable lines within South Carolina. These lines were installed
along four routes: (1) Charlotte to Spartanburg, (2) Spartanburg to
Asheville, (3) Wilmington to Columbia, and (4) Columbia to
Augusta. In connection with these routes, fiber-optic cable lines were
installed beneath the public streets in public rights-of-way in the
South Carolina municipalities of Spartanburg, Greenville, Travelers
Rest, Cowpens, Florence, Sumter, Columbia, Cayce, and South Con-
garee.

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Four of these nine municipalities--Columbia, Spartanburg, Sum-
ter, and Greenville--required AT&T to execute franchise agreements
with them prior to the cable installation. The franchise agreements,
which were executed in 1987 and 1988, provided for a one-time
administrative fee to each city of $3 per linear foot of cable under
public streets within the city and an annual franchise fee of $2 per lin-
ear foot. AT&T did not raise any objection to the legality or constitu-
tionality of the annual franchise fee requirement with those four
municipalities.

In November 1987, AT&T's installation contractor applied for a
business license with Cayce for installation of fiber-optic cables
within that city. There was no discussion or request by Cayce that
AT&T enter into a franchise agreement or pay an administrative fee
or annual franchise fee to Cayce. The City had no permit require-
ments for work done within its public rights-of-way except for those
issued by the State Highway Department. AT&T obtained the
required state and county approvals and installed its cables. Although
the streets were maintained by the state and county, AT&T was solely
responsible for the construction and installation of the 22,760 feet of
fiber-optic cables and all attendant costs to Cayce. Similarly, AT&T
is solely responsible for maintaining and servicing the cables. Prior
to and at the time of AT&T cable installation, city officials were
unaware that a fee could or should be obtained from AT&T.

In November or December 1991, city officials first learned that
they "could franchise fiber-optic cables" and that AT&T had agreed
to pay fees for such franchises to other South Carolina municipalities.
In 1992, when city officials requested that AT&T pay a similar fee
to Cayce, an AT&T employee allegedly indicated that if Cayce pro-
vided AT&T with a franchise ordinance, AT&T "would treat the City
of Cayce on the same basis" that it had "treated the City of Colum-
bia." By May 1993, the City had enacted a franchise ordinance and
prepared a franchise agreement that was modeled on Columbia's ordi-
nance and franchise agreement, except that in the Cayce agreement,
the City expressly waived the one-time administrative fee of $3 per
linear foot. AT&T refused to enter into the franchise agreement with,
or pay an annual fee to, Cayce.

In December 1993, Cayce filed suit against AT&T in the Court of
Common Pleas of Lexington County. AT&T removed the action to

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federal court on the basis of diversity of citizenship. In its complaint,
Cayce sought actual and punitive damages for trespass and an injunc-
tion prohibiting AT&T from continuing the use of public streets with-
out complying with the franchise ordinance and paying the franchise
fee. City officials testified in deposition that there is no correlation
between the amount of the proposed annual franchise fee and services
provided by the City to AT&T in connection with the fiber-optic
cables.

At the conclusion of discovery, the district court granted Cayce's
motion for summary judgment. The court reasoned that S.C. Code
Ann. § 5-7-30 (Law. Co-op. Supp. 1995) provided Cayce with "the
power and authority to enact" the franchise ordinance and exact a
franchise fee from AT&T. The district court rejected all of AT&T's
arguments, concluding that Cayce "had the authority under South
Carolina law, to pass the franchise ordinance in issue, and that AT&T
had no legal right to refuse to execute the Franchise Agreement." The
court determined that punitive damages were "not appropriate" and
that the amount of the City's actual damages for the trespass should
be measured by the amount set forth in Cayce's proposed franchise
agreement, $2 per linear foot of cable, or $45,520 per year, from May
3, 1993, the date of the enactment of the Cayce franchise ordinance.
The court also issued a mandatory injunction, requiring AT&T to exe-
cute the franchise agreement with Cayce. AT&T appealed to this
court; Cayce did not cross-appeal. The district court stayed its judg-
ment pending appeal.

On appeal, AT&T maintained, as it did in the district court, that
S.C. Code Ann. § 58-9-2020 (Law. Co-op. Supp. 1994) grants it the
power to construct and maintain lines under any public road, without
paying any franchise fee. The company asserted that S.C. Code Ann.
§ 5-7-30 only permits cities to impose franchise fees on a utility com-
pany's direct provision of services to city residents and does not per-
mit a city to impose a fee on telephone lines that merely pass through
the city without providing any local service or cost to the local munic-
ipality. AT&T also claimed that Cayce consented to the installation
of the fiber-optic cables and cannot retroactively withdraw its con-
sent. Finally, the company contended that Cayce's franchise fee vio-
lates the Commerce Clause of the United States Constitution.

                     4
In contrast, Cayce maintained that the district court correctly con-
cluded that § 5-7-30, which provides cities with the right to "grant
franchises for the use of public streets and makes charges for them"
authorized it to impose the challenged franchise fee on AT&T. The
City argued, again as the district court held, that the right given to
telephone utilities to construct lines "under . .. any public roads" in
§ 58-9-2020 did not prohibit the imposition of this fee, particularly in
view of the municipal consent provision in the South Carolina Consti-
tution, Art. VIII, § 15. The City further argued that its employees
could not, by inaction or otherwise, have consented to AT&T's use
of its streets without a franchise because since only a city council (not
city employees) has the power to grant franchises only the city coun-
cil could have given this consent. Finally, Cayce asserted that the dis-
trict court properly ruled that imposition of the franchise fee did not
violate the Commerce Clause.

Faced with the parties' conflicting interpretations of South Carolina
constitutional and statutory provisions, and no controlling South Car-
olina precedent on point, we certified the following questions of law
to the Supreme Court of South Carolina:

          1. Does the municipal consent power provided by the
          South Carolina Constitution, Art. VIII § 15, and the
          franchise authority provided by S.C. Code § 5-7-30
          (1976) permit a South Carolina municipality to impose
          a fee on a telephone utility for the privilege of installing
          and maintaining, in public rights-of-way beneath city
          streets, interstate fiber-optic cables that provide no
          direct services to local residents?

          2. Does S.C. Code § 58-9-2020 (1976) grant a telephone
          utility the right to construct and maintain such cables
          without payment of a fee to the municipality when the
          municipality provides no services to the company other
          than the physical space for the use of fiber-optic cables?

The Supreme Court of South Carolina, in its discretion, accepted
the certified questions, and on June 2, 1997, issued an opinion
answering the first question in the affirmative and the second in the
negative. City of Cayce v. AT&T Communications of the Southern

                     5
States, Inc., No. 24626, 1997 WL 292133 (S.C. S.Ct. June 2, 1997).
However, in answering the first question, the court explained, "Cayce
has no ability to exercise its franchise authority under § 5-7-30 in
these circumstances, and thus that statute cannot serve as the basis for
the imposition of a fee." Id. at *2. Rather, the basis for the court's
affirmative answer to question 1 is its holding that the municipal con-
sent provision in the state constitution, Art. VIII,§ 15, permits a
municipality to "require payment of a fee as a condition of permitting
a telephone utility to construct and operate an interstate fiber optic
cable using the city's streets" but the court noted "this constitutional
provision speaks to the necessity of municipal consent at the time the
telephone facilities are constructed." Id.

If the City of Cayce had contended that, pursuant to the municipal
consent provision, it was requiring AT&T to pay the challenged fee
as a condition for permitting the utility to operate its fiber-optic cable
under city streets, the answer to the first question would provide sub-
stantial comfort to the City. However, Cayce did not make this argu-
ment. (Although the City relied on the municipal consent provision,
it did so only defensively -- maintaining that the municipal consent
provision did not permit AT&T's reading of § 58-9-2020.) Instead,
Cayce has consistently maintained, as it does in its appellate brief,
that it was "the plain language of S.C. Code Ann.§ 5-7-30" that
authorized it to require AT&T to enter into the franchise agreement
and pay the franchise fee. Thus, the City has never claimed that it
sought to impose something other than a franchise fee and to act other
than pursuant to its franchise authority under § 5-7-30.

Because the South Carolina Supreme Court has now expressly held
that § 5-7-30 cannot "serve as a basis" for the challenged franchise fee
and because § 5-7-30 is the exclusive basis that Cayce has asserted as
authorizing the franchise fee, we must reverse the judgment of the
district court.

REVERSED

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