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FOR IMMEDIATE NEWS RELEASE NEWS RELEASE # 15 FROM: CLERK OF SUPREME COURT OF LOUISIANA

The Opinions handed down on the 22nd day of February, 2007 , are as follows:

BY CALOGERO, C.J. :

2006-C -2227

ELIZABETH W. NAQUIN, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED v. LAFAYETTE CITY-PARISH CONSOLIDATED GOVENMENT, CITY OF LAFAYETTE, AND LAFAYETTE PUBLIC UTILITIES AUTHORITY (Parish of Lafayette) For the foregoing reasons, the court of appeal decision enjoining the issuance of the bonds authorized by Bond Ordinance 0-053-2006 is reversed and the plaintiffs' demand that the issuance of the bonds be enjoined is denied. REVERSED; DISTRICT COURT JUDGMENT REINSTATED.

02/22/2007 SUPREME COURT OF LOUISIANA No. 2006-C-2227 ELIZABETH W. NAQUIN, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED VERSUS LAFAYETTE CITY-PARISH CONSOLIDATED GOVERNMENT, CITY OF LAFAYETTE, and LAFAYETTE PUBLIC UTILITIES AUTHORITY ON WRIT OF CERTIORARI TO THE COURT OF APPEAL THIRD CIRCUIT, PARISH OF LAFAYETTE CALOGERO, Chief Justice The issue presented in this case is whether the court of appeal properly enjoined the issuance of $125 million in municipal bonds to fund the construction and implementation of a "Fiber-to-the-Home" ("FTTH") telecommunications system in the City of Lafayette. The court of appeal found that the ordinance authorizing issuance of the bonds violates the Local Government Fair Competition Act, La. Rev. Stat. 45:844.41-45:844.56. Following our review of the law and the record in this case, we find that the court of appeal improperly enjoined the issuance of the bonds. Thus, we reverse the court of appeal judgment and deny plaintiffs' request that issuance of the bonds be enjoined. The dispute in this case is between resident taxpayers of the City of Lafayette, on one side, and the Lafayette City-Parish Government and Lafayette Public Utilities Authority (hereinafter referred to collectively as "Lafayette"), on the other. Lafayette wants to develop a broadband communications system to provide state-of-the-art telecommunication services, including internet, cable television and telephone, to Lafayette residents. In order to finance its proposed telecommunications system, Lafayette proposed and the voters approved a referendum to issue bonds, supported
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in part by a secondary or subordinate pledge of the revenues of the Lafayette Utilities System. Lafayette then adopted a 2005 bond ordinance to implement the bonds, which ordinance was successfully challenged by Bellsouth Telecommunications. In Bellsouth Telecommunications, Inc. v. City of Lafayette, 05-1478, 05-1505 (La. App. 3 Cir. 1/5/06), 919 So. 2d 844, the court of appeal enjoined issuance of the bonds authorized by the 2005 bond ordinance. Lafayette then adopted the 2006 bond ordinance at issue herein, which was challenged by these plaintiffs, Lafayette taxpayers. Their primary stated concern was to enjoin the pledge of utility system revenues that are in part being sought by plaintiffs in a separate lawsuit because of alleged overcharges for utilities services.

BACKGROUND, FACTS, AND PROCEDURAL HISTORY The advantages of broadband technology over traditional internet services provided by copper telephone wires have been described as follows: Broadband or high-speed Internet access is provided by a series of technologies that give users the ability to send and receive data at volumes and speeds far greater than current Internet access over traditional telephones. In addition to offering speed, broadband access provides a continuous, "always on" connection (no need to dial-up) and a "two-way" capability, that is, the ability to both receive (download) and transmit (upload) data at high speeds. Broadband access, along with the content and service it might enable, has the potential to transform the Internet: both what it offers and how it is used. It is likely that many of the future applications that will best exploit the technological capabilities of broadband have yet to be developed.1 Broadband availability has emerged as an important priority in the United States in recent years, as demonstrated by actions of both the executive and legislative branches of the federal government. In fact, President Bush set a goal of universal

Lennard G. Kruger & Angele A. Gilroy, "IB10045: Broadband Internet Access: Background and Issues," CRS Issue Brief for Congress (Washington, D.C.: Congressional Research Service, Library of Congress, 2006), at http://www.opencrs.com/document /IB10045 (last visited on Feb. 8, 2007). 2

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broadband availability by 2007.2 Executive interest in telecommunications however predates the current administration, as demonstrated by the following quotation: The Clinton Administration has developed a broad plan to interconnect industry, government, research, education, and each home with advanced telecommunications networks and information resources and technologies. Considered a key part of a larger vision to improve U.S. high technology, economic development, health care, and education, this is the National Information Infrastructure (NII). The NII may be viewed three ways: as a policy for national information infrastructure development; as federal programs to enhance and support this development; and a wide range of applications which demonstrate the tangible uses and benefits of the technologies. The policy has been articulated in a series of NII reports; the program is supported through major government R&D and grant efforts; the applications focus on a variety of applications in schools, libraries, hospitals, government, and businesses. 3 Congress has also shown strong interest in telecommunications issues, as evidenced by the passage of the Telecommunications Act of 1996 to "promote competition and reduce regulation in order to secure lower prices and higher quality services for American telecommunications consumers and encourage the rapid deployment of new telecommunications technologies."4 The Act "provides a wide range of provisions which may affect who develops the information infrastructure of the 21st century."5 Seen from a public policy perspective, the goals of the

Telecommunications Act of 1996 "are to ensure that broadband deployment is timely and contributes to the nation's economic growth, that industry competes fairly, and that service is provided to all sectors and geographical locations of American

2

Id.

Glenn J. McLoughlin, "IB 95051: The National Information Infrastructure: The Federal Role," CRS Issue Brief for Congress (Washington, D.C.: Congressional Research Service, Library of Congress, 2000), at http://www.opencrs.com/document/IB95051/ (visited Feb. 8, 2007). (Emphasis in original).
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3

Telecommunications Act of 1996, Pub. L. 104-104, 110 Stat. 56. McLoughlin, supra. 3

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society."6 The Act is designed to "open[] up markets to competition by removing unnecessary regulatory barriers to entry."7 Working with the Federal Communications Commission (FCC), Congress "is seeking to ensure fair competition among the players so that broadband will be available and affordable in a timely manner to all Americans who want it."8 By 2001, as a result of the actions taken at the federal level, many offices and businesses had broadband internet access, but "a remaining challenge [was] providing broadband over `the last mile' to consumers in their homes."9 Rural and low-income communities continued to "lack full access to high-speed broadband internet service," a fact that has prompted Congress to examine "the scope and effect of federal broadband financial assistance programs (including universal service), and the impact of

telecommunications regulation and new technologies on broadband deployment."10 At the state level, the Louisiana Legislature in 2004 adopted the Fair Competition Act, La. Rev. Stat. 45:844.41 et seq., which allows local municipal governments to provide broadband internet services, subject to certain restrictions.11 It is this Act that is at the heart of the legal dispute in this case. La. Rev. Stat. 45:844.42 sets forth seven "legislative findings and declarations of intent" underlying adoption of the Fair Competition Act, the first of which is "to ensure that cable

6

Kruger & Gilroy, supra.

Charles B. Goldfarb, "Telecommunications Act: Competition, Innovation, and Reform," CRS Report for Congress (Washington, D.C.: Congressional Research Service, Library of Congress, 2006).
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7

Kruger & Gilroy, supra. Id. Id.

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According to an article in the January 11, 2005, issue of the national newspaper USA Today, "Bellsouth, Cox and others worked with the Lafayette Utility System (LUS) to develop the Fair Competition Act." William A. Oliver, "Competition Should Be Fair," USA Today, (Gannett Co., Inc., 2005), at http://www.lexis.com/research/retrieve?_m=2502c089c 1195bcd3c18b6b717e5985c&doc (last visited on Dec. 18, 2006). 4

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television services and telecommunications and advanced services are provided through fair competition consistent with the federal Telecommunications Act of 1996, Pub. L. 104-104, in order to provide the widest possible diversity of information and news sources to the general public." Relative specifically to telecommunications services provided by local governments, La. Rev. Stat. 45:844.42 lists the following findings and declarations of intent, which respectively discourage local governments from discriminating against competing private providers and assure the local governments's right to engage in lawful business practices in which private sector competitors are legally permitted to engage: (6) To ensure that when a local government provides to its inhabitants cable television services, telecommunications services or advanced services, or any combination thereof, and competes with providers whose activities are regulated by the local government entity, the local government does not discriminate against the competing providers of the same services. (7) To ensure that when a local government provides to its inhabitants cable television services, telecommunications services or advanced services, or any combination thereof, it will not be precluded from engaging in "bundling" those services or engaging in any other lawful business practice that its private-sector competitors are legally permitted to engage in. (Emphasis added.) Following the adoption of Louisiana's Fair Competition Act, the City of Lafayette proposed to offer broadband telecommunications services to its citizens. Lafayette's broadband communications system would employ FTTH technology, just one of a number of broadband technologies that include cable, digital subscriber line (DSL), fixed wireless, and broadband over powerline (BPL) satellites. FTTH technology delivers telecommunications services via fiber optic cables to every home and business in the covered area. In contrast, a more traditional system delivers services to a distant point, with the remaining distance to each home and business

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being covered by technically inferior and bandwidth-limiting copper (telephone) wires. On July 15, 2005, the first step for developing Lafayette's proposed communications system was taken when a 62 to 38 percent majority of voters in the City of Lafayette approved, in a special election, the following bond proposition: Shall the City of Lafayette, State of Louisiana ("the City"), issue its communications system revenue bonds in an amount not exceeding One Hundred Twenty-Five Million Dollars ($125,000,000) to run not more than twenty-five (25) years from date of issuance to be sold at par, premium or discount with interest at a rate or rates not exceeding nine per centum (9%) per annum, for the purpose of constructing, acquiring, developing, extending and improving a local telephone, cable TV, highspeed fiber to the home (FTTH) Internet service and other related services, (the Communications System") and, should the City determine that any bond proceeds are unnecessary for Communications System purposes, for repurchasing or paying any such bonds and for constructing, acquiring and improving the combined waterworks plant and system, electric power and light plant and system and sewer systems of the City (the "Utilities System"), including acquiring the necessary furniture, fixtures and equipment in connection with all the above described additions and improvements as established and set forth in the City's then current capital budget adopted after budget hearings held in the manner contemplated by the Home Rule Charter, paying the costs of issuance, funding a reserve for the bonds, and providing working capital, said bonds to be payable from the net income and revenues of the Communications System and to the amount necessary, from a secondary or subordinate pledge of the revenues of the Utilities System? (Emphasis added.) Following the approval of the above proposition, on September 6, 2005, defendants, Lafayette and its public utilities authority, acting in joint session, adopted Bond Ordinance No. 0-230-2005, which authorized Lafayette to incur debt and issue twenty-five year revenue bonds not exceeding $125 million to fund the proposed communications system in accordance with the bond proposition approved by Lafayette voters. However, in response to a challenge filed by Bellsouth

Telecommunications, Inc., in which the plaintiffs in this case intervened, Lafayette was enjoined by the Louisiana Court of Appeal, Third Circuit, from issuing the bonds
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as authorized by Ordinance No. 0-230-2005. Bellsouth Telecommunications, Inc. v. City of Lafayette, 05-1478, 05-1505 (La. App. 3 Cir. 1/5/06), 919 So. 2d 844.12 In Bellsouth, the court of appeal found that Bond Ordinance No. 0-230-2005 was invalid under the Fair Competition Act for two reasons: (1) because the bond repayment sections of the ordinance violated the provisions of La. Rev. 45.844.53(2), which provides that "[a] local government may not cross subsidize its covered services with . . . income from other local government or utility service," and (2) the bond ordinance provisions relative to the "pledge" of the revenues of the Lafayette Utilities System actually created an assignment of the revenues, which violates La. Rev. Stat. 45:844.52(3), a statute that allows a pledge, but not an assignment, of revenues of the utilities system. On March 21, 2006, in response to the court of appeal's decision in Bellsouth Telecommunications, Lafayette adopted Bond Ordinance No. 0-053-2006, which was designed to supplement, amend, and restate in its entirety Ordinance No. 0-230-2005. The supplemental ordinance again authorized the incurrence of debt and issuance of communications system revenue bonds not exceeding $125 million to fund the proposed communications system in accordance with the bond proposition approved
The effect of the court of appeal's decision in the earlier Bellsouth opinion has been raised in this case. For example, Lafayette filed an exception of res judicata in the district court, arguing that "multiple claims asserted by the plaintiffs in the pending challenge to Bond Ordinance 0-053-2006 were barred because those identical claims had been decided [in the Bellsouth case] and were final." Naquin, 06-0904 at 4, 937 So. 2d at 903. The court of appeal rejected Lafayette's res judicata plea, stating as follows: "The 2006 Ordinance constitutes a new Ordinance which, pursuant to La. R.S. 13:5122, is wholly subject to challenge by any interested person via procedures set forth in the Bond Validation Law." Id. at 10, 937 So. 2d at 907. In this court, plaintiffs have argued that Lafayette is prohibited from raising certain issues because it failed to seek supervisory review of the Bellsouth decision from this court. However, we reject that argument. The court of appeal correctly found that Bond Ordinance 0-053 -2006 is a wholly new bond ordinance subject to wholly new challenges. It follows logically that, if the plaintiffs are not bound by the Bellsouth decision concerning rulings against their interests, neither is the defendant bound by rulings against its interests in the Bellsouth decision. The plaintiffs are entitled to raise any arguments allowed by law against the 2006 Ordinance, and Lafayette is entitled to defend its ordinance by making any and all legal arguments against the plaintiffs' challenges, even if the same or similar arguments were rejected by the court of appeal's final decision in the separate Bellsouth case, because, as the court of appeal found, this case involves a wholly new bond ordinance subject to wholly new challenges. 7
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by Lafayette voters. Bond Ordinance No. 0-053-2006 further provided for the form of the revenue bonds, the rights of the bondholders, the payment of the bonds and the application of the proceeds, and for other matters in connection with the communications system bonds. On April 21, 2006, the plaintiffs, residents of the City of Lafayette, filed a "Motion for Judgment," asserting that the newly-adopted Bond Ordinance No. 0-0532006 violates certain provisions of the Fair Competition Act. The district court denied plaintiffs' motion for judgment. The court of appeal reversed the district court judgment in Naquin v. Lafayette City Parish Consol. Gov't, 06-904 (La. App. 3 Cir. 8/10/06), 937 So. 2d 900, ruling in favor of the challengers, just as it had ruled in favor of the challengers in Bellsouth, 05-1478, 05-1505, 919 So. 2d 844. The court of appeal enjoined Lafayette from issuing the telecommunications bonds authorized by Bond Ordinance No. 0-053-2006. The court of appeal decision in Naquin is based on its finding that certain provisions of Bond Ordinance No. 0-053-2006 violate the Fair Competition Act's prohibition against "cross subsidization" of covered services with income from Lafayette's utility system, that is, La. Rev. Stat. 45:844.53(2). The court of appeal rejected all of the plaintiffs' other arguments. This court granted Lafayette's application for supervisory writs to review the court of appeal decision enjoining the issuance of the bonds authorized by Bond Ordinance No. 0-053-2006. Naquin v. Lafayette City-Parish Consolidated

Government, 06-2227 (La. 10/13/06), 939 So. 2d 352. The parties to this case, as well as a number of amici,13 have submitted numerous arguments for this court's consideration. We must first determine whether the constitutional peremption

Amici curiae briefs have been submitted by the following entities: (1) the Louisiana Public Service Commission ("LPSC"), (2) the Louisiana Municipal Association ("LMA"); and (3) the Fiber to the Home Council. All of these amici are aligned with Lafayette in challenging the court of appeal decision enjoining issuance of the bonds authorized by Bond Ordinance No. 0-053-2006. 8

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principles set forth in La. Const. Art. 6

Download 2006-C-2227 ELIZABETH W. NAQUIN, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILA

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