please the court my name is david goodnight for quest corp the city of tucson says telecommunications ordinance has been a disaster three out of four wire line providers have been involved in litigation with the city of even pretend to comply with the provisions of the act as they've been interpreted by this court and city of auburn and other courts across the country there are two i think essential facts about the posture of this case that i want to highlight and the first is this it was the city of tucson that filed suit against qwest two years ago to enforce its ordinance in the quote war into action and as you know the judge trot the court to the city of tucson was attempting to enforce its franchise ordinance and to extract fees from qwest corporation the second fact that i think is critical would be very different if prior to filing the city of tucson had amended that chapter and had not sued qwest but these two parties have been engaged in a battle over this ordinance along with several other wireline providers in the city now for five years i want to just highlight several of the provisions of the telecommunications ordinance that are particularly problematic the most one of them most troubling provisions is one that courts across the country have stricken down without exception and this court and city of auburn addressed this issue and that is the ordinance gives the city council of tucson a right to request any subject to the licensing requirements today that's correct so what's this all about what it's what it's all about your honor is that the the last minute amendments to the two son made you know so what its last and well watching it whether it whether it takes you out of the earth out of the fire zone that you don't like being and and on its face it does it how your saying will some time in the future that may be found to be invalid while courts don't operate on the sometime in the future maybe as well there i simply don't understand what this case is all about in retrospect and even more if it took quest out of the fire zone we wouldn't be here but it does why does it doesn't because the city of tucson has been very careful to make sure that that amendment is not final it's reserved the right what does that mean shot final well two things one is the city but first amendment is not quietly there if you want to look at it that well the city is reserve the right to change that amendment at any time and in response to quests i don't understand what you mean by has reserve the right you can change anything any time of unless you're barred from doing so by the federal constitution in your state constitution and that's the problem given the history of litigation between these parties in tucson asking us to decide a hypothetical case if it changes it's not hypothetical in the sense that this was clearly a litigation tactic to avoid the merits on the  need to use the street been accurate so what you've got an ordinance now that takes you out of the of the problem that you don't like being in the sun i simply don't understand how you can get us to rule and something like that had the city having the one confusing question is why tucson doesn't agree the way everybody else has this so what's a question or honor is twofold one is this question of finality that i've mentioned when we when the when that amendment was passed we wrote a letter to the city and said do you agree that qwest has a pre state for granted and they wouldn't and they wouldn't right now the other the other so what is that the amendment itself is unlawful what the amendment does why has it been a icated to be unlawful no but that's that's why we're here and what the amendment does is it creates two tiers of regulation in the city of tucson it creates one for one set of telecom providers today as we sit here today they have to pay application so action it did there's no question that tucson wants to have it both ways your honor it wants to be able to enforce this ordinance to extract fees at five percent would you you know i understand what you're doing on this special legislation thing but how would you have standing to attack that but we have said we have standing when the case was filed your honor because i mean to attack the idea that this is fresh the legislation because that it is avers you so you're not damaged by well we are damaged in the sense that we are not able to get a final resolution on the merits and that's what we want we want this dispute settled after five years in two different lawsuits whether we win or lose we want to ruling from this court saying what this three because it vests unlimited discretion in the city council because the election requirement you want us to rule on the cases the old city had never passed right or moves seventy days thirty seven that's exactly right and we just ignore consistently taken the position that quest is subject to this ordinance up until the moment after two years of litigation twenty four depositions up until the moment that judge fieldwork was ready to rule on the merits and he said this all the time one side sees the train coming gets off the track well and i know the court's seen this many times and and the courts established i think a pretty solid body of precedent that these kinds of last minute tactical amendment which are designed to avoid the merit should not be tolerated and the point i want to make is that quest is a quest to spent literally millions of dollars in the last five years defending first the quote war until action which ultimately was in state court and then this stipulated the validity of the territorial grants rights as as to tucson absolutely there's a doubt about it because we've asked for that very assurance and they've refused to give it to us and you know the i want to come actual point i made that i think is very troubling what this amendment does is it absolutely defeats the purpose of the telecom and the act is designed to eliminate discrimination to provide for competitive neutrality and today in the city you have just the opposite how can it be right that this court would let stand an ordinance that suggests some companies to a five percent the others paying three point five percent others paying two percent some companies paying seventy five hundred dollars of like a l have to pay fifty now mr vanier will stand up here and say well we amended this and we don't intend to apply it in the future but that gives quest no finality and it leaves a discriminatory two tiered system on the books in the city of tucson i want to address what your best case for the proposition that we are and we have the power to disregard something that's a last minute litigation tactic it stands in the form of litigation and these cases stand for the proposition that its two sons heavy burden to show that this dispute will not arise again and that these kinds of last minute litigation tactics are generally not tolerated  and in this case i guess i would i would say your honor that well we don't have a letter threatening prosecution we have the fact of an earlier lawsuit as this court found that was designed to compel compliance with this ordinance and a failure to respond to our five percent that question raised today as being subject of attacks injunction and is really a ruling of first impression across the country no court in my knowledge has ruled that these which are specifically denominated and legitimacy of such piece under section two fifty three and in this case if you look at the language of age two you can see that the fee is a quid pro quo in exchange for use of the right of way in fact two is a leading state local tax expert who captures both the language of the relevant ordinances as well as the legislative history where in documents internally the city said this is a rent being imposed pursuant to the city's for monopoly power in its proprietary capacity to extract grants from franchise telecommunications providers do you think the district court should apply the with a guard to the drug test to determine whether or not intact exactly right your honor i think that that that was fair i think there is a much more fundamental question that precedes the application of the bite our test and that is as professor hellerstein points out is this a quid pro quo says that it does not apply to a telecom provider who is providing service today who uses less than a thousand feet of the right of way it is tied very plainly by the language to not only the use of the right of way transaction privilege passes under that state's unique definition of telecommunications service but as professor hellerstein points out that doesn't answer the question under federal law and this issue is governed by federal law and the fundamental question is unless the court has further questions i'd like to reserve there i mean that's one of my time on either of those issues in this case the tax issue there seems to be agreement on this point if the fees here are a tax they may not be preempted because section six a one of the telecommunications act bars preemption state law state or local laws pertaining to taxation what you heard from qwest was they don't challenge the court's invite art interpretation they claim vide art should not apply and that the question telecommunications providers although this section does apply only to telecommunications service providers to actually employ those taxes on a number of utilities the the tax the purpose of the provision is stated in one thousand one thousand  it's for raising revenue not a quid pro quo if you turn to the taxation the provisions they're referring to in one thousand nine hundred seventy eight one impose the two percent transaction privilege tax doesn't even mention rights of way and in fact the record shows it applies to people who do not use the right of way like wireless providers there is a second part which imposes an additional one and a half percent transaction privilege tax on that class of telecommunications service providers who use the rights of way but the fact that it falls on that class doesn't make it a quid pro quo the question you've got to ask is is the payment made in return for the grant of a right to use the rights of way and of that and that is an issue we raised at the beginning of the case but one but at the point at the state of the case we were in where we've come in and essentially affirmed the validity of the tax i think there is case law that suggests that it can be heard by the the fact that it falls on a class of providers simply doesn't make it a quid pro quo nobody gets anything in return for paying the one and a half percent they don't get a right to use the rights of way in any respect and the distinction has actually been clear between tax that falls on a class of providers using the rights of way in a franchise fee or rent where there's a grant a tad since the eighty's a supreme court first dealt with a dealt with this case in a case called st louis the united railway and it said you know it's a clear distinction if this is attacked in voluntarily and there's no rights that are granted in conjunction with it it's just not a quid pro quo it's not a rant and that's the case here so they should learn that this case these are taxes and by the way the court doesn't even have to under arizona law but on certain factual issues which underlie this case the factual issues the court below found and class has an appeal this determination are so much that questions collaterally stop them challenging them and the two that are important here is the state court found these fees are not for use of the rights of way and these these were adopted pursuant to the taxing authority not the proprietary authority which is the authority under which one would impose a rat what's your next  we all agree seven b does not apply if west quest is trying to bring this in under the voluntary cessation exception to the business doctrine this is not a case of voluntary cessation when we brought the  did not by the way demand that class comply with seven b that actually asked that question be required to apply for a franchise under the arizona state constitution and under the city charter neither of which are being challenged here  under that suit qwest didn't say we've been a trying to him for seven b against him actually came in and allege the reverse that the city had never ever interfered with qwest operations in the city of tucson because qwest didn't have a license or franchise under seventy and keep in mind that that case was filed the kolarov to action occurred five years after seven b was first put into action into force so this is not a case where we ceased any action this is a case where the judge below said you know i don't see any efforts by the league had couldn't point to any true efforts by the city to enforce seven b against qwest he was concerned because the law on its face appeared to apply to quotes and he indicated in his order that if we eliminated that there would be no problem here and that made sense because there's actually state law in nine five eighty two he which says we franchise is as valid that means that as soon as the coast is clear you're going to come back in and repeal the ordinance then quote go after question again now the point of the amendment and the point of the existence of their claim of the state wide territorial franchise is that until that issue is resolved we can apply seventy two of them as long as they got that claim outstanding so i hear you saying there is a live issue as to whether their territorial franchise is valid there is an issue that's unresolved but what the we can't bring that if you independently so there is no way for the city to attack qwest franchise grant it is conceivable the state might try to revoke it it is conceivable that somebody else might attack it but we can't bring it and what makes issue of quest territorial franchise was actually an issue in a case involving g s t that came up before this court and was declared moot because the by the court of appeals because of the g s t settled with the city so the interesting thing is qwest is actually trying to have it both ways it's trying to essentially attacked a franchise the city's franchise ordinance which now benefits g s t because it allows us to use to use our rights of way doesn't attack them striking down seven b doesn't do anything or change any quest behavior or any city behavior with respect to quest but it certainly matches up g s t and it puts g s t in a position where it can never challenge if we exceed the territorial franchise the question is how then does g s t come in and say you know this territorial franchise is a problem under two fifty three it's an oddity here to see quest defend its position on the ground that its territorial grant violates section two fifty three but they want us to at the same time agree that we will never challenge it and never raise the issue and essentially get this court to endorse it it's an odd conflict here and it's certainly one that ought not to defeat any kind of movements because one of the reasons one of the things that is absolutely the case is the statewide franchise is not at issue in this case it's not an issue they explicitly took it out of issue they protested when we even mentioned the issue and the court below said the state wide franchise is not at issue so they're telling you that to get out of this case we don't just have to tell him we want to ply seven d which is really the thing that's being attacked we have to agree to an issue that's not even in the case i know of no move in this case this stance for the principle that we have to give them something that's not even a tissue to move the case and your position basically as a criminal resisting partly tells us th that is that that even if the even if you were to find that this fell within the voluntary cessation issue exception there are two things that should lead you to declare this case moved one is one is the fact that there is a state law this is not a case where the city is acting on its own it is applying compliant conforming its law to a state law that prevents us from franchising west that fact makes it pretty makes it certain that we're not going to change back because  it's from doing that we always acted consistent with that the the second thing is that as you alluded to well as with sort of alluded to in your call equate with mr good night the real parties in interest here are not qwest but the other providers some of whom have settled with the city and are now working happily under chapter seven be this is not a case where  b does them no benefit they're certainly not here and to issue relief that's really designed not only does it offend principles of standing but you ought to be cautious here because i think it creates some real problems in terms of competition in tucson market last issue is what if you find for some if you find that you should reach the merits of mr goodnights essentially urging what mr goodnow is urging his brief is for you to go through what is a fairly extensive record and decide this case on the merits and obviously we don't think you reach the merits here but even if you wanted to this would be a case where you would need to remain and to the district court the fact is that in offering which is the case he relies on for the idea this court should decide things on the merits this court recognized that in exceptional circumstances it might be appropriate to decide the merits without sending it back to the district court case in the exceptional circumstances there were you had an immediate threat to entry you had a statute where everyone agreed it could be applied on its face and there was nothing else that needed to be looked at you had no policy or record of what the impact of that was so there were no additional facts to be  memo that applied to a completely different provision of the tucson city code section seven c which has been repealed but that's an example of the sort of issues we have here the  with respect to the seven b itself our position has been that our authority under seven b is constrained by two things one is arizona state law nine five eighty two and nine five eighty three authority under both state law and obviously under federal law this is not a case where we claim a right to act in violation of the telecommunications act so this is also not a case where you can decide the issue based on just reading the law we actually have a record of application and what they're asking you to do is say read the law and imagine a worst case scenario what could they do with this so for example they complain our applications  burdensome they're not we have a very simple application i think it's one or two pages long and there's no problem filling out we've never denied a franchise or a license to anyone who's requested it that record in the policies of application are obviously relevant to the interpretation that's something that you would have to muddle and go through in order to resolve this case this is obviously also coming up on a summary judgment motion and unlike the auburn case we have about twenty pages of i think we've got a total of something on the order of twenty stating the fact this record if you took all the statement of facts that we presented you could not resolve this case in favor of class because if we show that there's been no prohibition that there is no likelihood of probation and no material impact on quest it's very unlike you know gallows didn't even come up in quest argument and in response to the court's question of you know what's this all about we think it's about it's obviously a collateral attack on tucson the state court tax judgment but it's also about deterring small cities from taxing quest because cities don't act knowing that they're into a professional litigation machine which is what this has turned into as we look at the cases and see the same parties same counsel litigating over and over again over the same issues because in this case none of the cities i represent have a telecommunication ordinance they have sales tax ordinances that tax businesses and their communities and this court in portland that page after twelve forty two question whether or not two fifty three even applies if it's just a general sales tax ordinance and we suggest this is the time to answer that question and say it doesn't because this is just a general sales tax ordinance and that when the court questioned same fault last wait auburn doesn't can't go so far as to apply to fifty three to a general sales tax ordinance this court should accept this case as the way they answer that question and stop this professional litigation which in my cities they've had the phone sue because it makes it less apparent that this is a tax lateral attack on tucson's state court judgment so what we have here is we haven't conceded anything on the state court grant we've always acknowledged state law is the definition of businesses not right away fees this is just how businesses are defined in there is no put up with pro quo and as we pointed out in our papers don't exist no gallus has a charter for vision that says if the state of arizona the regulates all utilities in arizona nogales reserves the right to regulate well gosh is the state of arizona going to eliminate its public utilities commission not likely elections the sales tax filing qwest commits fraud it can be investigated they want you to abolish that provision that's a to have three of the problems open brief but the best showing how these little cities are is the sentence any person partnership firm or corporation applying for a license as an agent sales month solicitor peddler or drummer can have its license r polishes that's crazy and these little city shouldn't be in this case we have sales tax ordinances we do not have telecommunication ordinances and there is no right it's moot by dark testifies and should apply here and the statement that this court made in portland saying that auburn doesn't reach far enough to apply to usurping and continues to illegally usurp the franchise for use of the rights of way of the city of tucson for the transaction of its business a franchise is a grant of the right to use public property in a particular way and tucson's quote war until after action asks by what authority is question using public property tucson's objective in bringing this action was to force quest to apply to use and pay for its use of the public rights of way in the city of grant has never been resolved nothing has changed in the sense that qwest has always contended that it has such a grant and tucson has always denied that it has such a class in this case to make that determination no your honor not an issue it's not a case finality to this ordinance you're the i agree with mr vanney that the issue of whether quest has a legitimate and valid state wide grant is not in this case it's not before the court this was brought to preempt the tucson ordinance under federal law but the amendment was obviously a litigation tactic and is in no sense final mr mann eaton made the point that the right of way fees were revenue raising well i think that the initial fundamental question is whether or not these fees are being imposed by tucson and it's proprietary capacity rather than a regulatory capacity in exchange for use of the right of way exacting a rent and we believe the legislative history in the language makes it clear that that's the case but i make the point that that it doesn't help for the question to say that right of way fees are revenue raising cities or making millions of dollars a year in a city like the city of tucson you're talking about the difference between two percent and three point five percent is millions of dollars annually and that ultimately is a cost that that gets passed on through rate regulation to qwest customers that's who ends up paying these fees it makes it more difficult for quest to deploy services and improve services in rural areas that's what this fight is about and what the city wants to do what it's continually attempted to do is to extract five percent of gross revenues raising revenue for its own benefit from qwest and other companies what about general sales tax and the the ordinances that we have challenges to the small cities are ordinances as professor hellerstein points out and as we quote that contain language saying that this is a thief for use in one case for example of the of the city's streets alleys and highways on its face a thief or use of the rights of way not a generally applicable tax but a fee in exchange for the use of the city streets alleys and highways that provision found in all three cities code i believe in two of the three there's a language right in the code provisions that that ties the fee to use of the city streets alleys and highways that we've quoted the language in the record or on mr van eaton obviously acknowledged in response to which was passed prior to the act is a classic three to fifty three ordinance that in many established ways runs afoul of section two fifty three in just the same way that city of auburn held and this can be decided on an appellate record as a matter of law