The opinion of the court was delivered by: GOETTEL
In this action for breach of contract, the City of Poughkeepsie, New York (the "City") is suing its cable television franchisee, Poughkeepsie Cablevision, Inc. ("Cablevision"), for damages stemming from its refusal to pay the full amount of the monthly franchise fee that is specified in Cablevision's contract with the City. In its answer, Cablevision has set forth, inter alia, the affirmative defense that both New York law and federal law have rendered illegal the contractual provision in question. The City now moves for summary judgment pursuant to Fed. R. Civ. P. 56. Cablevision and New York's State Commission on Cable Television (the "Commission"), which has intervened as a party defendant, cross-move, inter alia, for dismissal of the action for lack of subject matter jurisdiction. For the reasons discussed below, the Court concludes that the City's motion must be denied and the defendants' motion must be granted.
On December 17, 1965, the City and Cablevision entered into a contract giving Cablevision a franchise to provide cable television services within the City for a period of twenty-five years. In return, Cablevision agreed to pay the City 5% of its gross receipts from its customers within Poughkeepsie. In 1970, the contract was amended to incorporate a series of yearly increases in the franchise fee payments, which were to culminate in January 1974 in a 7% fee. Under the amended contract, this 7% fee was to remain in effect until the end of the term of the franchise on December 17, 1990.
However, in 1972, both the federal and New York State governments promulgated rules regulating the maximum fee a cable television franchisor could charge its franchisee. First, the Federal Communications Commission (the "F.C.C.") limited franchise fees to a maximum of 3% of a franchisee's yearly gross revenues. 36 F.C.C.2d 143 (1972), codified and hereinafter referred to as 47 C.F.R. § 76.31 (1982). This franchise ceiling was made immediately effective upon franchises granted after March 31, 1972. However, for franchises granted before this date, as was Cablevision's, the ceiling would become effective either at the end of the franchise term or 15 years after the date of the initial grant, whichever occurred first. 47 C.F.R. § 76.31. Thus, the effect of the regulation should have been to reduce Cablevision's fee from 7% to 3% on December 17, 1980, even though the parties' amended contract called for a continuation of the higher fee for another ten years.
At approximately the same time, the State of New York enacted section 818 of article 28 of the Executive Law, which became effective January 1, 1973.
That section provides:
Nothing in this article shall be construed to limit the power of any municipality to impose upon any cable television company, a fee, tax or charge, provided that any such fee, tax or charge when added to the amount payable to the commission pursuant to section eight hundred seventeen does not exceed the maximum amount permitted by applicable federal law, rules or regulations.
N.Y. Exec. Law § 818 (McKinney 1982). The reference therein to "section eight hundred seventeen" is to that provision which authorizes the State Commission on Cable Television to allocate its costs among the state's cable television companies in proportion to their "gross annual receipts" and to charge those companies accordingly. N.Y. Exec. Law § 817 (McKinney 1982). Thus, the effect of section 818 is twofold: first, it limits the cable franchise fees charged by a municipality to the maximum amount allowable under the federal law; second, the statute requires the municipality to reduce the maximum amount by whatever amount is assessed and charged to the franchisee by the Commission. The second restriction was made effective on all franchises, including Cablevision's, as early as January 1, 1973.
Shortly after Cablevision reduced its monthly franchise fee payments in accordance with the federal and state provisions, the City brought this action seeking both damages for breach of contract and a declaratory judgment that the defendant has breached its contract, that the contract and its specific terms are legally valid, and that the New York law on which Cablevision rests its affirmative defense is unconstitutional because it impairs the obligation of contracts in violation of article I, section 10, clause 1 of the U.S. Constitution.
The City asserts that this Court has jurisdiction under 28 U.S.C. § 1331 (Supp. V 1981), which provides that "the district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." Specifically, in its statement of jurisdiction, the City alleges that a federal question is raised under the "contracts clause" of the Constitution because New York's law adopting the federal limitation on franchise fees impairs its contractual relationship with Cablevision. Cablevision and the Commission respond that the City's complaint is a common law action for breach of contract that is not based on federal law and that this Court, therefore, does not have the jurisdiction to hear the City's complaint.
The elementary requirement that must be met before federal jurisdiction may be invoked is that the federal question in the complaint must be well pleaded. Put differently, the complaint must, on its face, state the federal law under which relief is sought.
It is not enough that the plaintiff alleges some anticipated defense to his cause of action and asserts that the defense is invalidated by some provision of the Constitution of the United States. Although such allegations show that very likely, in the course of the litigation, a question under the Constitution would arise, they do not show that the suit, that is, the plaintiff's original cause of action, arises under the Constitution.
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