Month: October 2016

New FCC filing in LOU

Here is the new FCC filing in the Louisville OTMR lawsuit.

In my blog post on October 13, I said:

“In Louisville, if AT&T wins the federal preemption argument in their summary judgment motion, it will be good news for AT&T here in Nashville. Due to some nuances in Kentucky law that are different than in Tennessee, the converse is not necessarily true.  If AT&T loses its summary judgment motion, it might be, but won’t necessarily be, bad news for them in the Nashville lawsuit.”

The FCC letter today addresses the nuance where Kentucky law is different than Tennessee law. In Part A of the Discussion, the FCC notes that “Kentucky has invoked the reverse-preemption provision…”  Because of this, argues the FCC, there is no federal preemption of the Louisville OTMR ordinance.

Unlike Kentucky, Tennessee has not made any regulations in this area and so this reverse-preemption argument does not apply in Tennessee. This isn’t a random opinion I am asserting. In Council Director Jameson’s Analysis (see page 19) of OTMR, he said “Although states may ‘opt out’ and assume individual responsibility for their own poles by certifying with the FCC that it does so, Tennessee has yet to submit any such certification.” Kentucky opted out. Tennessee hasn’t.

Today’s filing by the FCC in Louisville: (1) is a good, solid restatement of the known preference of FCC leadership for faster high speed broadband deployment, including policies like OTMR; (2) it does not change any of the FCC regulations that some argue are at odds with OTMR (3) may well influence the Court in Louisville to rule against AT&T’s federal preemption argument in that case; (4) is good news for Google and bad news for AT&T; and (5) is not directly applicable to Tennessee because our state has never chosen to regulate pole attachments and therefore FCC regulations should apply here.

Everyone who is mostly interested in sound bites will gravitate to the extremes of “the FCC just totally validated OTMR in all imaginable ways” or “this means nothing.” Both positions are wrong. The precise points made by the FCC are that they prefer faster broadband deployment, including policies like OTMR and that federal preemption doesn’t apply in the Commonwealth of Kentucky. I assume AT&T would have preferred that the FCC keep its opinions to itself. But the specific FCC opinions stated in today’s filing will not resolve the legal disputes in Nashville.

Comcast sues Metro

The debate over the One Touch Make Ready ordinance has moved from the Council to the courts, and I am moving from advocating about it to analysis of the lawsuits. Here’s an update I wrote a few weeks ago.

Today, Comcast filed suit against Metro. It looks like they are raising basically the same issues that AT&T has raised.

Nashville deserves to have faster, better broadband service. That is what’s best for our economy, our schools, and our families. Unfortunately, this litigation may slow down transitioning our digital infrastructure to high speed fiber and future wireless technologies. I hope for a quick end to these lawsuits.

STRP Case Ruling Today

Judge Kelvin Jones apparently ruled today that Metro’s short term rental ordinance is unconstitutional. Stacey Barchenger and Joey Garrison have the most complete reporting I have seen. You should read their story for background.

There are wildly different perspectives on what the ruling means. The Beacon Center said in a press release that this lower court ruling “is an enormous victory for the Beacon Legal Foundation” and “sends a loud and clear message to cities across the state when it comes to restricting homeowners’ rights in the new economy.” They believe they have defeated all short term rental regulation in Nashville. At the other end of the spectrum, the Vice Mayor and one of my colleagues tweeted late today that they think, without an authorizing ordinance, short term rentals are not an allowed use at all in property that is zoned residential. These are obviously very different perspectives.

Here’s what I think I know:

  • The ruling was given verbally from the Judge in the courtroom. There is no written ruling and apparently won’t be until the court reporter completes a transcript of the hearing. There is no binding order of the Court until it is on paper and signed by the Judge. This may take as little as a few days or as much as a few weeks — so it will be soon either way. But the lack of a signed order at this time underscores the idea that everyone should take a breath and wait to see exactly what is being decided.
  • I am told, and Ms. Barchenger reports, that the entire STRP statute is being struck down. For determining next steps, the precise basis of the ruling matters. Specifically, if it is correct that the basis of the ruling is solely due to vagueness, that can be corrected. There would probably be multiple ways to make short term rental laws very precise in their meaning. Again, seeing a transcript or a written order will be important for people to understand the implications and possible next steps.
  • It is going to take at least a few business days — probably longer — for everyone’s view of the new landscape to come into focus. My initial reaction is that both ends of the spectrum have things to worry about.
  • I’ll start with the side claiming that, without an authorizing ordinance in place, short term rentals are not allowed because: (1) they are taxed as hotels; and (2) hotels aren’t an allowed use in residential districts. The Beacon Center has been making arguments on Twitter about why they think this is wrong. I’ll just mention that I have heard that the BZA apparently ruled sometime in the last few years that short term rentals are an allowed use in residential zones in Nashville. I don’t know if this is true, and that BZA ruling would have been before the State Attorney General stated that short term rentals should be taxed as hotels. Regardless, I suspect that the “short term rentals are dead” argument would have to deal with that BZA ruling somehow.
  • At the other end, there is the argument that property rights are vindicated now, and there are no short term rental regulations in Nashville any longer. This argument has to contend with the possibility that either the lower court, or the Court of Appeals, might allow the ordinance to stay in place pending appeal. The plaintiffs might also be the dog that caught the bus. They clearly succeeded today, but based on my conversations this afternoon with multiple investor-owned short term rental operators, this decision creates massive uncertainty about what happens next. Uncertainty is bad for business.
  • Five minutes after I learned about the ruling, I got a call from the Tennessean and told them, “If the thought is that the law regarding investor-owned short-term rentals is vague, that sort of pushes us toward having no regulations or outlawing them completely.”
  • Now I’ve known about this for almost 9 hours, and I think I still feel the same way.
  • For better or worse, Nashville came up with a set of rules that tried to balance the desire of some to run a short term rental business in their residential real estate with the desire of their neighbors to enjoy their neighborhood free of sometimes distracting business activity. Now we have a judge telling us that our attempt to find that balance failed and that it is unconstitutionally vague. That is probably going to force us to take a side — to decide that short term rentals are an allowed, unregulated use for a residence, or to decide to prohibit that use in a clear, non-vague way.

My inbox and phone blew up when the ruling came out. I’m going to see what the actual court order says when it comes out. I’m going to listen to what Metro Legal has to say about the impact of the ruling and about options for Nashville. I’m definitely going to hear from a whole lot of Davidson County constituents about what they think should happen next. I’m not going to rush to a decision about any of it — it’s been less than half a day and there isn’t enough information available to make a decent decision, or to even know what all the questions are.

 

October 18 Council Meeting

Here’s what’s up on October 18:

Resolutions

Bridgestone givith: A resolution (-398) to accept artwork being donated by Bridgestone to the Metro Arts Commission.

Bridgestone taketh: A resolution (-399) to extend the $500 per employee incentive for Bridgestone to a new location on Hickory Hollow Parkway. This is expected to apply to approximately 415 new positions.

Tracking marijuana law enforcement: I am co-sponsoring a resolution (-408) that would ask the Metro Nashville Police Department, the District Attorney, and the Circuit Court Clerk to work together to track statistics showing the rates of civil and criminal citations, by race and gender. Read more here.

First Reading

USD expansion: The Mayor and Council Members for Districts 7-9, 13-15, and 31 have filed an ordinance (-455) to expand the USD.

Second Reading

The next 21st Century technology bills: In November, we’ll have a public meeting about an ordinance (-415) that would give Planning the power to have a say where wireless transmitters are located in Nashville. Over the next several decades, we are going to care a lot about where wireless transmitters are located. While we are waiting for that bill to move forward, there is a franchisee who wants approval to put up wireless transmission towers now.  That ordinance (-302) is set for 2nd reading.  I have been told that this franchisee is committing to comply with whatever Planning-related rules we end up passing related to wireless transmission facilities. If that’s the case, this should be approved.

Short Term Rental Properties: Wrote about this here.  I expect to indefinitely defer my bills about maximum occupancy (-375) and maximum density (-382) pending the recommendations of the consultant being hired by the Mayor’s office.

Technical correction to an affordable housing bill:  Failed to attach the final draft of an exhibit to a bill passed in early September.  Getting that fixed with a new ordinance (-435).  Oops.

Third Reading

Tenant conduct lease clauses?: CM Hastings has an ordinance (-308) that would require landlords receiving money from the Barnes Housing Fund to add tenant conduct clauses to leases. On the one hand, based on what I have seen throughout my law practice, the proposed tenant conduct language is pretty standard stuff that is already in most residential and commercial lease agreements. On the other hand, the fact that this is applying only to landlords who receive Barnes Housing Fund money (and not TIF money, or PILOT money, or the Mayor’s new affordable housing incentive money) is coming off to some as discriminatory against one group of lower income tenants. I know that CM Hastings has no bad intent at all. I’m not sure how this one will shake out.

Council reports to be posted and be searchable: I am co-sponsoring this ordinance (-416) with CM Cooper to require that all reports required to be given to the Council be posted online in a searchable format.

Bordeaux long term care lease: This ordinance (-422) would approve a new lease of the Bordeaux Long Term Care facility to Signature Healthcare through mid-2020. This is the next phase of Metro exiting the long term care business. We’ll need to keep spending money as we exit, but I think the economics of this deal are fine. I understand that there are ongoing conversations between the administration and some Council Members about what Metro can do to be assured that Signature provides an appropriate level of care at the facility.

Bonus Issue

There’s media coverage today about the Metro pension. The pension is 92% funded, which is good. The pension has an annualized return of 7+% over a ten year period, which is good. The pension’s return compares well to other similar pensions, which is good. But it has a non-traditional asset allocation and that’s what the story in the paper today is about. We should want to learn more about the asset allocation choices that are being made. But, I’d much rather be reading this story than one about an ordinary asset allocation model with terrible long term returns.

My take on OTMR litigation so far

For several weeks, I have avoided offering commentary on the OTMR litigation because I know that, no matter what I say, some are going to think I’m looking at it through an anti-Google or pro-AT&T lens.

But since I have 25 years of experience handling business disputes in federal court, and 5 years of work on the Board of NES, I’m going to go ahead and give my thoughts about the litigation from time-to-time.

None of this is in any particular order.  None of this is official information from Metro or anyone else. None of this repeats privileged communications. And, I am not speaking for Metro here. This is just stuff I’m thinking about the lawsuits:

– I don’t care who is actually named in the Nashville lawsuit as of today, there are multiple parties who are certainly actively planning a litigation strategy. These include Metro, AT&T, Google, Comcast, and NES. On top of this, I’d bet money that TVA is paying attention to what is happening, as well as the State of Tennessee. And, there are probably more than a few state level lobbyists who are thinking about what, if anything, might happen in the legislature.  There have probably been times over the last few weeks where the collective hourly rate of everyone billing time on this has been into the several thousands of dollars per hour.

– At this point in a lawsuit, anyone who says they know how it’s going to go at the end is just making a guess. There are too many moving parts to predict accurately more than a few steps ahead.

– In Louisville, if AT&T wins the federal preemption argument in their summary judgment motion, it will be good news for AT&T here in Nashville. Due to some nuances in Kentucky law that are different than in Tennessee, the converse is not necessarily true.  If AT&T loses its summary judgment motion, it might be, but won’t necessarily be, bad news for them in the Nashville lawsuit.

– The federal preemption argument that AT&T is making is a pretty good argument. Blame Congress if you want. Blame the telecommunications lobby in D.C. over the last century if you want. But there are clear federal regulations about moving stuff on poles, and our OTMR ordinance is in conflict with those clear federal regulations.

– Anybody who says they know how the lawsuit plays out if AT&T wins its federal preemption argument in Louisville or Nashville is making stuff up. Maybe our federal court would only invalidate the ordinance on AT&T’s poles and not on NES’s poles. Maybe our federal court would be swayed by how inefficient that would be, come up with some argument to still rule against AT&T so OTMR could go forward, and let a court of appeals sort it out. Maybe our federal court will just copy whatever happens in Louisville, or maybe not. There just isn’t a way to know.

– Media reports show that AT&T sent a letter to NES saying that they expect NES to honor its existing agreement with AT&T. What’s up with that? I don’t know – but my guess is that AT&T doesn’t have an actual legal dispute with NES yet. When you have a contract with someone, you really shouldn’t sue them until they breach the contract or until they make it clear that they are about to breach the contract.  I infer that NES hasn’t made a definitive statement to AT&T yet about whether NES will honor the contract or the OTMR ordinance.  I presume that, if NES chooses to honor the ordinance, they’ll be a defendant pretty quickly – maybe in a separate lawsuit – maybe in the existing lawsuit.

– Speaking of NES as a defendant…you have to wonder whether Comcast has a lawsuit getting ready to be filed. Like Google and AT&T, Comcast has a contract with NES for pole attachments. My best guess is that OTMR conflicts with that contract too.

– Very few members of the public or media ever come to NES Board meetings. If you had been to a few about two years ago, you would have been treated to a complicated analysis about the role that TVA plays in the area of pole attachment regulations. I am paraphrasing, but I think it boils down to the idea that TVA has the complete unilateral ability to regulate, if it wants, what happens with attachments on poles that carry TVA power. In Tennessee, TVA has never exercised the right to make pole attachment regulations. If they ever did, as I understand it, we’d all have to follow their regulations. Most likely, TVA will continue to not regulate attachments here – but they are a player in this saga if they want to be one.

– Most of the media coverage of the lawsuit focuses on the top level headline of AT&T suing Metro, and some coverage talks about the federal preemption argument I have talked about here. But AT&T is also suing based on the Metro Charter – which says that NES “shall have exclusive management and control of the operation of said electric power plant and/or distribution system.” AT&T argues that, because the Charter grants NES the exclusive right to manage and control the power grid and distribution system, the Council and Mayor had no authority to enact OTMR. This is a pretty esoteric Charter issue – and there is absolutely no case law on this topic. The Charter is a unique document in Tennessee and this provision has never been litigated. Novel issues create uncertainty for all parties.

– About Google’s offer to help…I mean, if I’m Metro Legal, I’d guess I’d rather have their help than not, but it honestly won’t help that much. Metro will likely be in touch with Louisville, which has every reason to share information freely with Nashville. Metro will have its own outside counsel who will get paid to consider only Metro’s best interests. Plus, there is no way to have really deep collaboration sessions with Google’s team because meetings like that would not have the protection of the attorney-client privilege or work product doctrine.  So, Metro could really only share ideas about concepts with Google, but not strategy.  You never know what matters to a judge though – maybe it helps in the long run.

– Speaking of the judge, the Nashville case got assigned to Judge Kevin Sharp. I don’t think he’s got a bias or perspective that would influence the case one way or another. He’s a careful thinker. When he was in private practice, he did some work for big companies, and he did some work as a plaintiff’s lawyer for regular people. I don’t think he’ll take political issues into consideration.

– OTMR was never going to be implemented right away. There was always going to be some time for the companies involved to create needed new procedures.  NES was always going to have to approve some contractors to do OTMR too. My sense was that it was going to take 90 days, plus or minus, before Google could actually make a request to make a One Touch move of someone else’s equipment. Until these companies do this leg work, things might develop slowly in the litigation.

Here’s a quick list of things I am looking for over the next few months:

– What happens with the Louisville summary judgment? It will be interesting. Any result will be argued all ways by all parties here in Nashville. In the end, it’ll be an interesting non-binding data point and perhaps not much more.

– How long does it take for NES to be ready for Google to make a One Touch request? Will NES honor the ordinance (I assume, yes?) or their contract with AT&T?

– Is Comcast going to sue? Do they wait until there’s an actual One Touch request to move their equipment?

– Is NES inevitably a party because of their central role as a pole owner, and a party to written contracts with Google, and AT&T, and Comcast? Does NES join (or get forced to join) in litigating the Metro Charter issue that AT&T raised in its lawsuit?

Metro has asked for its deadline to file an Answer or a Motion to Dismiss to be moved to November 14. Louisville filed a Motion to Dismiss, which was denied. This is really a tactical decision, and I’m not in those conversations. I’d expect a Motion to Dismiss by Metro to be a likely loser…but sometimes you might file a motion that is a probable loser anyway just to have a chance to run your arguments by the judge, and try to get a preview of how the court is thinking about things. Best case is that you win your long shot motion. Worst case is that you maybe learn something about the judge’s thoughts. The down side is time – it slows the case down to file a motion that you suspect is a loser. In federal court, sometimes the wait for a ruling on a motion is an excruciating multi-month exercise.

– Usually, there is a case management conference about 6-8 weeks after a case is filed. The conference in this case is set for November 21. Judge Sharp has one of the Magistrate Judges conduct his case management conferences, and they typically are mostly administrative (setting deadlines, etc.). However, the parties are required to submit a proposed case management plan a few days in advance. That probably won’t be very interesting, but it might give a little insight into the pace of litigation that the parties expect. Also, I’m guessing everyone’s out-of-town lawyers will show up for that conference.

I know this has been a long post and my comments are in no particular order.  But I’ve been holding back for a few weeks…and I wanted to just get these thoughts out.

I’ll try to provide more thoughts as the two (maybe more?) lawsuits move forward.

Metro asking to extend time to respond to AT&T suit

This morning, Metro filed a motion to extend their time to November 14 to file a “responsive pleading” to the AT&T lawsuit.  I haven’t looked to see when the original deadline is, but it is probably coming up in the next several business days.

Nothing really unusual about this.

A “responsive pleading” means that Metro might respond to the substance of the allegations in an Answer, or file a Motion to Dismiss the AT&T lawsuit.

AT&T is not opposing the request for an extension of time.

(Because I am a registered ‘filer’ in the court’s electronic case filing system, I am able to sign up to get email notice whenever a document is filed in this case. I got this document from the court’s filing system, not from either of the parties.)

Resolution To Track Marijuana Enforcement

Although I don’t support fully legalizing marijuana, I did vote in favor of Metro’s new ordinance that allows police officers to issue a civil citation instead of a misdemeanor warrant for possession of small amounts of marijuana. I voted in favor mostly due to race issues. Despite research showing that the rate of marijuana use in America does not vary by race, substantially more African Americans are punished criminally than whites. That’s not a criticism of any individual police officer, police chief, prosecutor, judge, or jury. But it’s true, and it’s a problem.

Allowing Metro police officers the discretion to give a civil citation if they choose is an imperfect solution. It would be better if we could wake up one day to find that the rate of arrests and convictions among race groups were equal, just like the underlying drug use. Short of that though, we should experiment with changes in our enforcement laws, and then track the results. That is why I am co-sponsoring a resolution that would ask the Metro Nashville Police Department, the District Attorney, and the Circuit Court Clerk to work together to track statistics showing the rates of civil and criminal citations, by race and gender.

The fact that drug laws are enforced more heavily against minority groups is a part of continued racial injustice. Some of the initial reaction to the resolution shows how uncomfortable it still is to talk publicly about race. For example, some have disputed my “hypothesis” that drug laws are enforced unfairly along race group lines in America. And, one letter to the editor in the Tennessean suggested that disproportionate arrests were because “the person on the street…just cannot behave properly.”

These responses miss the point. The statistics about the uneven impact of drug enforcement cannot be disputed. African-Americans get punished criminally for drug offenses at dramatically higher rates than whites. That is the problem. We can and should debate the roles of education, poverty, family, jobs, and wages. But, being smart enough or well-behaved enough does not explain the statistics. No – race is the core issue just as it has been for so long.

These statistics are a call to action. It is important that Nashville talk about race openly. We have to be able to talk about the truth that African-Americans are arrested and convicted disproportionately for drug offenses. Inevitably, a few will finger point or get defensive about this. I believe more of us will rise above that and focus on solutions, on moving toward the goal of equal justice under the law for all of us.

My STRP Bills On The Council Agenda Next Week

I have two short term rental bills that are set for 2nd reading next week — one is about maximum occupancy for a unit, and the other is about how many units can be in any one part of town.  (There’s a third bill pending also — CM Burkley Allen is the lead sponsor on that one.)

In response to many in the Council (including me) asking for better enforcement of our existing laws, the Mayor announced last week that Metro is hiring a consultant that “will make recommendations related to staff size, organizational structure, work shift assignments, as well as proactive property maintenance code administration and enforcement by the end of 2016.” This will include a review of all enforcement efforts related to short term rental properties.

This is welcome news. About the only thing everyone has agreed on is that Metro needs better enforcement of these laws. I’m also glad that the turnaround time will be quick so we can have a report back by the end of the year.

In order to give this process a chance to play out, I plan to defer my two bills indefinitely.