Court Opinion

ID: 9496843
Source: CourtListenerOpinion
Date Created: 2023-08-05 16:36:43.222008+00
Date Added: 2024-06-11T17:57:50.154575
License: Public Domain

SCHEINDLIN, District Judge,
dissenting.
I agree that under the “well pleaded complaint” rule, the City of Rome failed to raise a federal question that provides a basis for subject matter jurisdiction. I dissent, however, because I would deem the City’s complaint to be constructively amended to raise a claim under the Telecommunications Act of 1996, Pub.L. No. 104-104, 110 Stat. 56 (1996).1 As the majority correctly notes, “[w]e have the discretionary power under certain circumstances to amend a complaint constructively to recognize unpleaded claims ... when the effect will be to acknowledge that certain issues upon which the lower court’s decision has been based or issues consistent with the trial court’s judgment have been litigated.” Greenblatt v. Delta Plumbing & Heating Corp., 68 F.3d 561, 569 (2d Cir.1995) (quoting 6A Charles A. Wright, Arthur R Miller & Mary Kay Kane, Federal Practice and Procedure § 1494, at 56 (2d ed.1990)). Because the lower court undoubtedly based its decision on — and the parties have consistently litigated- — questions of federal law, *184constructive amendment is the proper course.
I.
The majority implies that even if we were so inclined, we have no power to constructively amend the City’s complaint because “it is not self-evident in this case that the City could have asserted a federal cause of action under Section 253(c) in any actual complaint.” (emphasis supplied.) I address this contention first.
Because the City’s complaint requested declaratory relief, the proper question is not whether the City “has articulated a basis for recovery under federal law” on some claim that the City itself may possess, but whether the City has articulated a basis under which Verizon might recover under federal law, and thus on which the City might seek declaratory relief.2 The answer to that question is “yes”.
Four judges of the Court of Appeals for the Fourth Circuit, dissenting in Interstate Petroleum Corp. v. Morgan, recently explained why:
Under the Declaratory Judgment Act, a federal court “may declare the rights and other legal relations of any interested party seeking such declaration.” 28 U.S.C. § 2201(a) (West 1994). Although the Declaratory Judgment Act “does not broaden federal jurisdiction, see, e.g., Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671, 70 S.Ct. 876, 94 L.Ed. 1194 (1950), it does allow parties to precipitate suits that otherwise might need to wait for the declaratory relief defendant to bring a coercive action.” Gulf States Paper Corp. v. Ingram, 811 F.2d 1464, 1467 (11th Cir.1987) (parallel citations omitted); see Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 19 & n. 19, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983); Aetna Cas. & Sur. Co. v. Quarles, 92 F.2d 321, 325 (4th Cir.1937). That the federal right actually litigated when declaratory relief is sought may belong to the declaratory judgment defendant rather than to the declaratory judgment plaintiff does not change the fact that the action arises under federal law. See Columbia Gas. Transmission Corp. v, Drain, 237 F.3d 366, 370 (4th Cir.2001); Lowe v. Ingalls Shipbuilding, 723 F.2d 1173, 1179 (5th Cir.1984); Gulf States Paper, 811 F.2d at 1467 (explaining that the declaratory judgment remedy “allows a party to bootstrap its way into federal court by bringing a federal suit that corresponds to one the opposing party might have brought” (internal quotation marks omitted)). Accordingly, “[a] person may seek declaratory relief in federal court if the one against whom *185he brings his action could have asserted his own rights there.” Standard Ins. Co. v. Saklad, 127 F.3d 1179, 1181 (9th Cir.1997); Columbia Gas Transmission, 237 F.3d at 370 (explaining that under certain circumstances “the proper jurisdictional question is whether the complaint alleges a claim arising under federal law that the declaratory judgment defendant could affirmatively bring against the declaratory judgment plaintiff’); Hunter Douglas Inc. v. Sheet Metal Workers International Association, Local 159, 714 F.2d 342, 345 (4th Cir.1983) (explaining, in context of re: moval from state court, that whether a district court has subject matter jurisdiction over a declaratory judgment action is determined “by reference to the character of the threatened action.”).
249 F.3d 215, 226-27 (4th Cir.2001) (en banc) (Wilkins, Williams, Motz, and Trax-ler, JJ., dissenting). See also Franchise Tax Bd., 463 U.S. at 19 n. 19, 103 S.Ct. 2841 (noting with approval that “[fjederal courts have routinely taken original jurisdiction over declaratory judgment suits in which, if the declaratory judgment defendant brought a coercive action to enforce its rights, that suit would necessarily present a federal question.”); Columbia Gas Transmission, 237 F.3d at 370 (“[I]n a declaratory judgment action, the federal right litigated may belong to the declaratory judgment defendant rather than the declaratory judgment plaintiff.”)3
There is no serious question that Verizon could have asserted a claim against the City under section 253 of the Telecommunications Act. See TCG New York, Inc. v. City of White Plains, 305 F.3d 67, 73-75 (2d Cir.2002) (holding that court had jurisdiction over telecommunications provider’s claim under section 253); see also New Jersey Payphone Ass’n v. Town of West New York, 299 F.3d 235 (3d Cir.2002); BellSouth Telecommunications, Inc. v. Town of Palm Beach, 252 F.3d 1169 (11th Cir.2001); TCG Detroit v. City of Dearborn, 206 F.3d 618, 624 (6th Cir.2000) (holding" that Section 253 “authorizes a private right of action in federal court for telecommunications providers”).4 Because the district court would have had jurisdiction if Verizon had brought such a suit, it also had jurisdiction when the City sought a declaration that it did not violate Verizon’s rights under the Telecommunications Act.5
*186II.
Assuming, then, that we have the authority to constructively amend the City’s complaint, it follows under the facts of this case that we should exercise that authority. Here, the district court based its decision solely on the application of the Telecommunications Act. But even before that, the parties to the suit — particularly the City — had so injected federal issues into this litigation that in its submissions to this court, the City conceded that it had asserted “Federal claims.”
The City’s complaint originally asked for a declaration determining “the legal rights and liabilities of the parties hereto with respect to the Franchise granted to Defendant, pursuant to § 27 of the New York State Transportation Corporation Law and § 33 of the City of Rome Charter.... ” The majority presumes that this means that the City was explicitly asking for a declaration of its rights under state law.
As an initial matter, it is not at all clear that the City’s complaint raises only state law claims. The complaint is susceptible to two equally plausible readings; it can be read as asking either (1) for a declaration of the parties’ rights under state law, or (2) for a declaration of the parties’ rights regarding a franchise that was granted pursuant to state law. In support of the second reading is the City’s continual references to Section 27 of the Transportation Corporation Law and Section 33 of the City Charter as the sources of its authority to grant franchises. See, e.g., Complaint ¶4 (“Pursuant to § 27 of the New York State Transportation Corporation Law and § 33 of the Rome City Charter, on or about December 19, 1949, Plaintiff granted the original grantee the license or franchise to use the public streets and other public rights-of-way ... in connection with the transaction of the Original Grantee’s telecommunications business.”); see also id. ¶¶ 5, 8 (alleging that TCL § 27 and § 33 of the City Charter govern the duration of franchises and transferability of franchises to a grantee’s successor-in-interest). Also in support of this reading is a chain of correspondence between the City and Verizon attached to the complaint, discussing federal, state, and local law. Although the majority is certainly correct to conclude that this correspondence does not raise a federal question under the well-pleaded complaint rule, it provides context to the City’s allegations and suggests that the ambiguous phrase “legal rights and liabilities” refers to rights and liabilities under federal — as well as state and local — law.6
*187Under this reading, the City’s complaint only asks for an adjudication of its rights and liabilities generally, not with specific reference to state law, as the majority assumes. Thus, this case is similar to Vitarroz Corp. v. Borden, Inc., 644 F.2d 960 (2d Cir.1981), where we found federal question jurisdiction when plaintiff did not oppose removal of a case that, while originally filed in state court, could have given rise to either state or federal claims. See id. at 964 (“by not contesting jurisdiction at an early stage, we think the plaintiff permitted the District Court to exercise jurisdiction, since the Court was entitled to conclude that the plaintiff was willing to see its ... claim treated as one based on federal law.”). Here, as in Vitarroz, the City not only acquiesced to Verizon’s removal of its case to federal court, but actively litigated federal issues once in district court.
In any event, by the time the lower court was ready to address Verizon’s motion to dismiss, the City was assuredly asking for a declaration under both state and federal law. In the course of litigation the City voluntarily submitted to the district court its Standard Franchise Agreement, which provided the basis for its franchise negotiations with Verizon’s competitors. The Standard Franchise Agreement was not submitted merely as an example of negotiations between the City and other telecommunications providers. Rather, the City stipulated — in the course of motion practice — that “said form would substantially be the same form utilized between the City and [Verizon],” and that it “set forth the fixed parameters and criteria upon which all telecommunication^ franchises are granted,” 10/6/03 Verizon Letter Brief 3 (quoting City of Rome’s Opposition to Verizon’s Motion to Dismiss at 10) (emphasis supplied, alterations in original). Indeed, the crux of the City’s argument under the Telecommunications Act is that it is required to impose the Standard Franchise Agreement on Verizon, otherwise the City would not be treating telecommunications providers “on a competitively neutral and nondiscriminatory basis,” 47 U.S.C. § 253(c). See Appellant’s Brief at 15 (“the lower court’s failure to require Defendant to negotiate and enter into a franchise agreement would ... put the City in danger of violating the [Act], as other service providers that have entered a franchise agreement with the City could allege illegal disparity of treatment. More specifically, conditions that have been imposed on already franchised providers and new service providers, have not been applied to Verizon, and it is that difference in treatment that is prohibited... .”); id. at 7-8 (“the documents utilized between the City/Adelphia and City/Fiberteeh are similar in form and content as the one that would be utilized between the City of Rome and Verizon”) (emphasis supplied).
The majority claims that “[t]here is some dispute about how susceptible to alteration the provisions included with the City’s ‘standard franchise agreement’ actually are.” But the City has admitted in an affidavit before the district court and in its brief before this Court that the Standard Franchise Agreement’s terms are essentially inflexible. As evidence of the supposed dispute, the majority points to a footnote — appended to the City’s admission that the Standard Franchise Agreement is “similar in form and content as the one that would be utilized between the City of Rome and Verizon” — that purports to “address a possible misconception” by explaining that Verizon was still free to “negotiate the language” of its own fran*188chise agreement. Taken in context, this footnote only explains that while the parties may have been able to “negotiate the language” of any agreement between them, the Standard Franchise Agreement nevertheless supplies the rigid “parameters and provisions” of that agreement. Any suggestion that Verizon could have negotiated the essential terms of the Standard Franchise Agreement is belied by the City’s own argument that it was required to impose the same conditions on all telecommunications providers.
The City’s actions during this litigation may provide some insight into the declaration it actually seeks. Reviewing only the four corners of the complaint, it appears that the City initially sought a declaratory judgment as to whether Verizon is obliged to negotiate with the City to renew its franchise. But what the City eventually sought was a declaratory judgment as to Verizon’s obligation to agree to the Standard Franchise Agreement (or a substantially similar agreement). See, e.g., Affidavit in Opposition to Defendant’s Motion to Dismiss ¶ 20 (“On or about June 6, 2002, upon motion of Defendant, the matter was removed to Federal Court for the Northern District of New York to determine the threshold issue of whether or not granting the City’s requested relief would violation [sic] 47 U.S.C.S. § 253.”); Appellant’s Brief at 23-28 (devoting six pages of the City’s brief to the argument that “Provisions of City’s Franchise Agreement Are Consistent With Federal Law And Are Validly Related to Management of its Rights-of-Way.”); id. at 3 (“Under 28 U.S.C.S. § 1331, the Northern District Court of New York had original jurisdiction over this matter by virtue of the fact [that] the controversy involved the laws of the United States — more specifically interpreting the Telecommunications Act of 1996.”) (emphasis supplied, citations omitted).
Moreover, the district court plainly viewed the City’s declaratory judgment action as a request for construction of its rights under Section 253(c). The court elected not to decide the state and local claims. Instead, the district court focused almost entirely on the validity of the Standard Franchise Agreement under the Telecommunications Act, concluding that, ‘While the City is permitted to enact and impose lawful ordinances and legal requirements on [Verizon] that conform with section 253(c) ... and other applicable laws and legal rights, [Verizon] is under no obligation to negotiate with the City under the terms of the proposed Agreement.” City of Rome, New York v. Verizon Communications, Inc., 240 F.Supp.2d 176, 181 (N.D.N.Y.2003).
This case is very similar to our recent decision in Wahlstrom v. Kawasaki Heavy Indus. Ltd., 4 F.3d 1084 (2d Cir.1993), where we constructively amended a complaint. Wahlstrom involved a suit for wrongful death under Connecticut state law. Defendant, in turn, asserted federal maritime law as an affirmative defense, and plaintiffs responded by asserting a right under maritime law as well. The court constructively amended the complaint because “the parties’ briefs and oral argument on appeal focused squarely on the issue of what relief, if any, is available to the Wahlstroms under federal maritime law.” Id. at 1087. Similarly, the City’s complaint seeks a declaration of its rights and liabilities. Verizon asserted the Telecommunications Act as an affirmative defense, and the City responded by asserting a right (to manage its rights-of-way) under section 253(c) of the Act. And, as in Wahlstrom, the parties’ briefs — both below and on appeal — and oral argument were addressed primarily to the parties’ rights and liabilities under federal law.
*189The majority attempts to distinguish Wahlstrom by questioning whether the City could have brought a claim under Section 253. “Were the City’s complaint constructively amended to reflect the federal issues litigated below,” the majority argues, “it would ask not for a declaratory judgment of its rights under Section 253, but rather of the survival of its rights under state and local law notwithstanding any defense Verizon might have under Section 253.” This linguistic legerdemain is not convincing. Section 253(c) specifically preserves “the authority of a State or local government to manage the public rights-of-way or to require fair and reasonable compensation from telecommunications providers .... ” 47 U.S.C. § 253(c). Whether Section 253(c) thus contains a grant of authority or a preservation of existing authority is a distinction without a difference. Under the terms of the statute, Section 253(c) reserves to state and localities the power to manage their public rights-of-way; it follows that they can bring a declaratory judgment action to construe their rights under that section. And indeed, that is precisely what the City has effectively done by asserting that Section 253(c) “provides the City with the ability to obtain reasonable compensation for [Verizon’s] utilization of the City’s rights-of-way.” See also Appellant’s Brief at 2 (arguing that “[bjecause Federal, State and local law collectively give the City the right to manage its public rights-of-way and grant franchises, the City acted appropriately by attempting to compel Defendant to renew its franchise.”) (emphasis supplied). In all events, the City could surely have brought a declaratory judgment action to determine whether its conduct would violate section 253 by imposing the Standard Franchise Agreement, see supra Part I, thereby preempting a potential suit by Verizon.
Ill
That the parties’ conduct can crystallize the issues in a litigation is a basic tenet of notice pleading, which “relies on liberal discovery rules and summary judgment motions to define disputed facts and issues and to dispose of unmeritorious claims.” Swierkiewicz v. Sorema, N.A., 534 U.S. 506, 512, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002). It makes little sense now to return to the question presented in the City’s complaint, disregarding the substantial expenditure of efforts by the court and the parties in the interim. See Universal Reinsurance Co. v. St. Paul Fire & Marine Ins. Co., 312 F.3d 82, 89 (2d Cir.2002) (explaining that federal courts have an “imperative to salvage jurisdiction where possible,” even when it did not originally exist); see also Newman-Green, Inc. v. Alfonzo-Larrain, 490 U.S. 826, 836, 109 S.Ct. 2218, 104 L.Ed.2d 893 (1989) (noting that requiring dismissal after judgment “would impose unnecessary and wasteful burdens on the parties, judges, and other litigants waiting for judicial attention.”). Having framed the question in terms of the Standard Franchise Agreement — and thus, under federal law — the City cannot now complain that it does not like the answer. See Vitarroz, 644 F.2d at 965 (holding that the court will not “permit the pleader of an ambiguous claim to assert his preference for a state forum after a set of facts that can be pleaded as a federal claim has been removed to federal court and allowed to remain there for some period of time.”); cf. Barbara v. N.Y. Stock Exchange, Inc., 99 F.3d 49, 49 (2d Cir.1996) (“[O]nce [plaintiff] decided to take advantage of his involuntary presence in federal court to add a federal claim to his complaint, he was bound to remain there.”) (citation omitted). To hold otherwise would be manifestly unfair to Verizon, and to the district court that carefully adjudi*190cated the issues presented to it by the parties. I therefore respectfully dissent.

. Section 253 of the Act, entitled "Removal of barriers to entry,” provides in pertinent part:
(a)In general
No State or local statute or regulation, or other State or local legal requirement, may prohibit or have the effect of prohibiting the ability of any entity to provide any interstate or intrastate telecommunications service.
(b) State regulatory authority
Nothing in this section shall affect the ability of a State to impose, on a competitively neutral basis and consistent with section 254 of this title, requirements necessary to preserve and advance universal service, protect the public safety and welfare, ensure the continued quality of telecommunications services, and safeguard the rights of consumers.
(c) State and local government authority
Nothing in this section affects the authority of a State or local government to manage the public rights-of-way or to require fair and reasonable compensation from telecommunications providers, on a competitively neutral and nondiscriminatory basis, for use of public rights-of-way on a nondiscriminatory basis, if the compensation required is publicly disclosed by such government.
47 U.S.C. § 253 (1996).

. This may not be the proper question in all cases involving declaratory relief. However, where a plaintiff requests a declaration that will, in effect, turn aside an impending coercive suit by the defendant, jurisdiction is determined "by the character of the threatened action.” Hunter Douglas Inc. v. Sheet Metal Workers International Association, Local 159, 714 F.2d 342, 345 (4th Cir.1983) (citing Public Service Comm’n of Utah v. Wycoff Co., 344 U.S. 237, 248, 73 S.Ct. 236, 97 L.Ed. 291 (1952)). The course of litigation in this case made clear that the City sought to avert Verizon’s assertion of rights under the Telecommunications Act as much as it sought a declaration of its own rights. Of particular note in this regard are two letters from Verizon to the City, attached as exhibits to the City’s complaint, which contain thinly-veiled threats from Verizon that it would sue the City under the Telecommunications Act. See, e.g., 6/5/01 Letter from Verizon to City of Rome, Ex. C to the Complaint (citing the Telecommunications Act and cases decided thereunder before concluding, "We trust that the City will continue to allow Verizon to install and maintain its facilities within the public rights-of-way without interference with our state franchise rights and that no other legal action to enforce our rights will be necessary.”).

. The Supreme Court has explained that “[t]aking jurisdiction over this type of suit is consistent with the dictum in [Public Service Comm’n, 344 U.S. at 248, 73 S.Ct. 236], in which we stated only that a declaratory judgment plaintiff could not get original federal jurisdiction if the anticipated lawsuit by the declaratory judgment defendant would not 'arise under' federal law. It is also consistent with the nature of the declaratory remedy itself, which was designed to permit adjudication of either party’s claims of right. See E. Borchard, Declaratory Judgments 15-18, 23-25 (1934).” Franchise Tax Bd., 463 U.S. at 19 n. 19, 103 S.Ct. 2841.

. Although we explicitly declined to decide whether section 253 confers a private right of action on telecommunications providers in TCG New York, the passages from the legislative history cited by the majority strongly suggest that such a right exists. The remarks of Senator Slade Gorton are particularly telling:
There is no preemption ... for subsection (c) which is entitled, 'Local Government Authority,' and which is the subsection which preserves to local governments control over their public rights of way. It accepts .the proposition from those two Senators that these local powers should be retained locally, that any challenge to them take place in the Federal district court in that locality and that the Federal Communications Commission not be able to preempt such actions.
141 Cong. Rec. S8213 (daily ed. June 13, 1995) (emphasis supplied).

. Of course, I recognize that the City did not explicitly seek such a declaration in its complaint. Rather, as explained more fully be*186low, the City’s actions throughout the entire litigation history of this case make plain its intention to have its rights under the Telecommunications Act adjudicated.

. In further support of this second reading is that the City's request for a declaration determining "the legal rights and liabilities of the parties hereto with respect to the Franchise granted to Defendant, pursuant to § 27 of the New York State Transportation Corporation Law and § 33 of the City of Rome Charter,” fails to cite section 23 of the New York General City Law. The City has persistently cited section 23 of the General City Law as the statute responsible for the expiration of Verizon’s franchise and Verizon's need to negotiate a new one. See, e.g., Affidavit in Opposition to Defendant’s Motion to Dismiss ¶ 6 ("in 1913, the State of New York enacted Section 23 of the General City Law, and said law, among other things, limited the duration of franchises by cities within the State of New York to fifty (50) years."); id. ¶ 13 (“By virtue of § 33 of the Rome Charter Laws and § 23(b)(2) of the NYS General City Law both limiting the duration of franchises granted by cities to fifty (50) years, Defendant's 1949 Franchise expired on December 19, 1999.”). The omission of section 23 of the General City Law from the City's request for relief leads to the conclusion that the citations that are there — to section 27 of the Transportation Corporation Law and section 33 of the City Charter- — only describe the source of the City's historical authority to grant the franchise.