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A Texas appellate court has considered a property owner's constitutional challenge to a statute that allowed the state’s public utility commission to resolve access disputes between property owners and telecommunication carriers by allowing the commission to set a "reasonable" fee that telecommunication carriers would pay to the owners when the parties cannot agree on the access fee.
Geoquest Center ("Building") is a large office building in Houston owned by San Felipe, Ltd. ("Owner"). Ten other telecommunication carriers had access to the Building in exchange for a monthly fee the carriers paid to the Owner. Time Warner Telecom ("Carrier") sought access to the Building to provide service to one of the tenants. The Carrier and the Owner could not reach an agreement on a monthly fee the Carrier would pay to the Owner.
After the Owner rejected the Carrier's final offer, the Carrier filed a complaint with the Public Utility Commission of Texas ("Commission"), pursuant to a Texas statute ("Statute"). The Statute encouraged equal access for telecommunication carriers to customers and as a way of ensuring such access, directed the Commission to create a mechanism to resolve access fee disputes between property owners and telecommunication carriers. Pursuant to the Statute, the Commission sent the case to an administrative hearing for determination on a "reasonable" level of compensation that the Carrier should pay to the Owner for access to the Building. Instead of participating in the administrative hearing, the Owner filed a lawsuit challenging the constitutionality of the Statute. The trial court rejected the Owner's challenge, and the Owner appealed.
The Court of Appeal of Texas, Third District, affirmed the ruling of the trial court. The court first considered the Owner's argument that the Texas legislature did not give the Commission the power to force a property owner to accept a fee in exchange for access to the property. Looking at the legislative directive to the Commission, the court found that the Legislature had directed the Commission to create a process that balanced a property owner's right to receive compensation against the utility's right to have access to the property without having to pay exorbitant fees. Further, the court found that the Commission needed the power to resolve the disputes in order to fulfill its statutory directives. Because the dispute resolution mechanism was an essential mechanism to effective regulation by the Commission, the court upheld the Commission's right to create such a mechanism.
Next, the Owner argued that the Statute did not give the Commission enough guidance as to what type of compensation should be awarded to property owners for forced access. The court found that this inquiry was fact intensive with many factors involved, and so needed to be considered on a case-by-case basis. Therefore, the court found that the legislative guidance given to the Commission was sufficient to support the Commission’s creation of the dispute resolution method.
Finally, the Owner argued that the Statute was facially unconstitutional because it constituted a taking of private property without providing a mechanism to assure adequate compensation to the private property owner, in violation of the Fifth Amendment of the Constitution of the United States. The Owner argued that the exact method for determining compensation must be written into the Statute. The court rejected the Owner's facial challenge to the Statute. The court stated that the Owner could only bring a takings lawsuit if it was denied just compensation after participating in the Commission's hearing process. Thus, the rulings of the trial court were affirmed.
Texas Bldg. Owners & Managers Ass'n, Inc. v. Pub. Util. Comm'n of Texas, No. 03-02-00611-CV, 2003 WL 21282233 (Tex. App. June 5, 2003). [This is a citation to a Westlaw document. Westlaw is a subscription, online legal research service. If an official reporter citation should become available for this case, the citation will be updated to reflect this information].
Editor's Note: NAR Legal Affairs would like to thank Ron Walker, General Counsel for the Texas Association of REALTORS®, for alerting us to this decision.
NAR is also a member of the Real Access Alliance, which participated in the Owner's challenge of the Commission's regulations.