The opinion of the court was delivered by: LOUIS STANTON, District Judge
Plaintiff Global Network Communications, Inc. ("Global") filed
its complaint in this action on October 7, 2003, alleging that
the City of New York's regulations governing public pay
telephones ("PPTs") and its actions (including removal of
Global's PPTs from their locations on the streets, and threatened
denial of Global's application for a franchise) violated federal
law and Global's constitutional rights. On November 12, 2004,
defendants the City of New York and its Department of Information
Technology and Telecommunications ("DoITT") moved to dismiss the
complaint (the original and amended complaints are collectively
referred to as the "complaint").
On March 11, 2005, during the briefing of this motion, DoITT
issued a final "Notice of Commissioner's Final Determination To
Not Propose Award of a Public Pay Telephone Franchise to Global Network Communications, Inc." (the "Final Determination"). Since
the City's ordinances require that anyone who wishes to install
and maintain PPTs on public rights-of-way must have a franchise
to do so, see New York City Admin. Code §§ 23-402 and 23-403, the
Final Determination ended Global's prospects of offering PPTs on
Applying Global's claims to the present facts, the complaint is
dismissed for failure to state a claim upon which relief may be
granted, for the following reasons.
The federal Telecommunications Act of 1996 ("TCA"),
47 U.S.C. § 253(a) in sweeping terms forbids any state or local statute,
regulation or legal requirement that "may prohibit or have the
effect of prohibiting the ability of any entity to provide any
interstate or intrastate telecommunications service." However, a
special provision preserves untouched the right of State and
local governments to require fair compensation for use of local
public streets. Section 253(c) expressly excludes, and provides a
safe harbor for, "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 . . . for use of
public rights-of-way. . . ."*fn1 The City's action in denying Global's application for a
franchise fits comfortably within this safe-harbor exception.
Inherently, the City's right to require compensation from
telecommunications providers includes the reasonable expectation
that its compensation will be paid accurately in full, on time,
and without criminal involvement or fraud.
Global, as a telecommunications provider, through its president
and sole owner Ronald Massie (an "associate" of the Bonanno crime
family) has a flagrant criminal record of using its Mafia
connections and defrauding its customers. Members of the Bonanno
crime family, including a "capo," were given commissions for
providing locations where Global could put its pay telephones.
These were profitable locations, from which Global derived
approximately 20-30% of its business income (Massie's testimony
in U.S. v. Lombardozzi, pp. 540-43). Massie was allowed to use
the name of Frank Lino, a "made" member of the Bonanno
organization, to "intervene in any problems that we came across
in the course of [Global's] business." (id. p. 537) During 1997
through March of 2000 Global defrauded those who were entitled to
commissions for allowing telephones to be placed in their
establishments, out of about $1,800,000 (id. p. 526):
Q: Okay, Mr. Massie, you also told us that you pled
guilty to mail fraud, correct? A: That's correct.
Q: What did you do in connection with your plea of
guilty to mail fraud?
A: We mailed checks out to the people that receive
commissions, based on the income of the company.
Q: Okay. What was fraudulent about that?
A: Instead of reporting all of the income, I skimmed
money off the top, so it's not reported, thus, when
we sent the commissions out, it wasn't based on the
full amount of money collected.
Q: Mr. Massie, approximately how much money did you
skim when you were making these computations on the
A: About a $1,800,000.
Q: Over what period of time?
A: From May of '97 through March of 2000.
Q: Did you pay taxes on the money that you skimmed?
A: I did not.
Q: What did you do with some of the money that you
A: I diverted some of it offshore. I made loans with
some of it.*fn2
When the City commissioner declined to issue Global a franchise
to place its PPTs on New York City property he stated, among
other things: As set forth in detail below, there are multiple
independent bases for not proposing the award of a
franchise to Global to the Franchise and Concession
Review Committee: (1) Global established a
significant part of its business through its use of
organized crime soldiers; (2) Global has defrauded
property owners who authorized use of property for
Global PPTs; and (3) Global has been repeatedly
delinquent in the payment of registry fees and thus
cannot be reliably trusted to timely pay franchise
compensation and also has significant unpaid fines
related to its payphone operations that remain
payable to the City.
The City has legitimate right-of-way management
concerns that include, for example, whether users of
the right-of-way are able to complain about some
aspect of a street PPT without fear of intercession
by organized crime figures, whether City personnel
whose task it is to enforce management of rights of
way requirements can perform their jobs without fear
of organized crime action, and whether reasonable
compensation for use of the rights-of-way will be
accurately paid to the City.
(Final Determination: Ex. U to March 11, 2005 Murray affid.)
No federal law or regulation should be construed to force the
City to franchise Global to provide PPT services on New York
City's public property and rights-of-way, when the record shows
that Global cannot be expected to pay its obligations to the City
in a timely or honest manner. Local governments as well as
"Courts are free to assume that past misconduct is `highly
suggestive of the likelihood of future violations.'" United
States v. Carson, 52 F.3d 1173, 1184 (2d Cir. 1995) (quoting
SEC v. Management Dynamics, Inc., 515 F.3d 801, 807 (2d Cir.
A major thrust of plaintiff's argument is that the denial was
wrong on the merits and lacked due process. One must consider
separately claims that the refusal was erroneous, arbitrary or
capricious and unfair (which must be determined in a New York
Supreme Court Article 78 proceeding) from claims that the refusal
systematically deprived Global of its due process rights (which
raise constitutional issues and may be heard by this court
without need for prior exhaustion of state remedies).
To the extent that Global alleges the City acted erroneously,
arbitrarily or capriciously in its franchise denial and the
removal of Global's PPTs, Global has not exhausted its state law
remedies under N.Y. Civ Pract. Law & Rules Art. 78.
The Second Circuit has emphasized, citing Parrat v. Taylor,
451 U.S. 527 (1981), that "there is no constitutional violation
(and no available § 1983 action) when there is an adequate state
postdeprivation procedure to remedy a random, arbitrary
deprivation of property or liberty." Hellenic American
Neighborhood Action Comm. v. City of New York, 101 F.3d 877, 882
(2d Cir. 1996) (emphasis in original). "In reviewing state administrative proceedings, it is the function of the federal
courts to determine only whether the state has provided adequate
avenues of redress to review and remedy arbitrary action."
Alfaro Motors, Inc. v. Ward, 814 F.2d 883, 888 (2d Cir. 1987).
"Article 78 `provides the mechanism for challenging a specific
decision of a state administrative agency.'" Campo v. New York
City Employees' Ret. Sys., 843 F.2d 96, 101 (2d Cir. ...