PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
TIME WARNER ENTERTAINMENT-
ADVANCE/NEWHOUSE PARTNERSHIP,
Plaintiff-Appellant,
v. No. 06-1974
CARTERET-CRAVEN ELECTRIC
MEMBERSHIP CORPORATION,
Defendant-Appellee.
Appeal from the United States District Court
for the Eastern District of North Carolina, at Greenville.
James C. Dever III, District Judge.
(4:05-cv-00146-D)
Argued: September 27, 2007
Decided: October 31, 2007
Before NIEMEYER and MICHAEL, Circuit Judges, and
T. S. ELLIS, III, Senior United States District Judge
for the Eastern District of Virginia, sitting by designation.
Affirmed by published opinion. Judge Niemeyer wrote the opinion,
in which Judge Michael and Senior Judge Ellis joined.
COUNSEL
ARGUED: Gardner F. Gillespie, III, HOGAN & HARTSON, L.L.P.,
Washington, D.C., for Appellant. Pressly McAuley Millen, WOM-
BLE, CARLYLE, SANDRIDGE & RICE, P.L.L.C., Raleigh, North
2 TIME WARNER v. CARTERET-CRAVEN
Carolina, for Appellee. ON BRIEF: Gary J. Rickner, WARD &
SMITH, P.A., New Bern, North Carolina; Paul A. Werner, HOGAN
& HARTSON, L.L.P., Washington, D.C., for Appellant.
OPINION
NIEMEYER, Circuit Judge:
For many years, Carteret-Craven Electric Membership Corpora-
tion, a North Carolina electric cooperative, had a pole-attachment
agreement with Time Warner Entertainment-Advance/Newhouse
Partnership, a cable service provider, permitting Time Warner to
attach its cable to Carteret-Craven Electric’s utility poles. The initial
fee in the 1997 renewal of the agreement provided that Time Warner
pay $6 per pole. After Carteret-Craven Electric terminated that agree-
ment in 2004, it demanded an increase to $20 per pole as a condition
of any new agreement.
Claiming that the proposed new rate was unreasonable and dis-
criminatory, Time Warner refused to enter into a new agreement.
Instead, it commenced this diversity action, requesting a declaratory
judgment that Carteret-Craven Electric, in charging excessive and dis-
criminatory rent for pole attachments, violated (1) a statutory duty
imposed on electric cooperatives in North Carolina to charge only
reasonable and nondiscriminatory rates, see N.C. Gen. Stat. §§ 117-
16, 117-16.1, and (2) a common law duty as an electric utility to
charge only reasonable and nondiscriminatory rates, see Salisbury &
Spencer Ry. v. Southern Power Co., 101 S.E. 593 (N.C. 1919). The
district court granted Carteret-Craven Electric’s motion to dismiss
under Federal Rule of Civil Procedure 12(b)(6) as to both claims, and
Time Warner appealed the district court’s ruling, but only as to its
common law claim.
Because the common law duty requiring an electric public utility
to charge reasonable and nondiscriminatory rates for electric service
does not clearly apply to pole-attachment agreements and we are not
free to extend North Carolina common law to hold that it does, we
affirm.
TIME WARNER v. CARTERET-CRAVEN 3
I
Carteret-Craven Electric, organized as an electric cooperative
under Chapter 117 of North Carolina’s General Statutes, provides
electric service to customers in Carteret, Craven, Jones, and Onslow
Counties on the southeastern coast of North Carolina. For many years,
Carteret-Craven Electric leased excess space on its utility poles to
Time Warner pursuant to a negotiated license agreement between
them. In the 1997 renewal of their agreement, Time Warner agreed
to pay $6.00 per pole for the first 12 months of the contract, thereafter
to be adjusted by "an amount equal to the annual percentage change
in the Handy-Whitment Index of Public Utilities, Bulletin 139, South-
eastern Region, F.E.R.C. account 364, Poles, Towers, & Fixtures
. . . ."
In July 2004, Carteret-Craven Electric legally terminated the 1997
agreement and proposed a new license agreement, with a pole-rental
rate of $20.07 per pole. It stated that it calculated this figure by apply-
ing the Federal Communications Commission’s formula for determin-
ing the proper rental rate for pole attachments charged by federally
regulated utilities to telecommunications service companies. When
Time Warner objected to the new rate as too high and pointed out that
Carteret-Craven Electric’s application of the FCC formula was erro-
neous and that the properly calculated FCC rate was actually $11.96
per pole, Carteret-Craven Electric declared that it intended nonethe-
less to charge the $20.07 rate.
Following an impasse in negotiations, Time Warner commenced
this action. In its complaint, it alleged that the $20.07 pole-attachment
rate far exceeded Carteret-Craven Electric’s cost in making pole
space available and that it "far eclips[ed] the rates that would be
obtained by use of rate methodologies used by the FCC or other state
utility commissions." It also alleged that the $20.07 rate exceeded the
rates paid by Time Warner under pole-attachment agreements with
other utilities in North Carolina. Finally, it alleged that "on informa-
tion and belief, [Carteret-Craven Electric] charge[d] a similarly-
situated attaching entity, Sprint Corporation, a pole-attachment rental
rate of less than $10 per pole." Time Warner grounded Count I of its
complaint on Carteret-Craven Electric’s statutory duty under North
Carolina’s General Statutes, §§ 117-16 and 117-16.1 (requiring an
4 TIME WARNER v. CARTERET-CRAVEN
electric cooperative to charge reasonable and nondiscriminatory rates
for its service to customers), and it grounded Count II on Carteret-
Craven Electric’s common law duty, as it articulated the duty, "to
offer its members reasonable, cost-based, nondiscriminatory rates for
electric power and any other goods or services that it provides by way
of its property which is devoted to the public use."
The district court granted Carteret-Craven Electric’s motion to dis-
miss, concluding, with respect to the statutory claim, that "entering
into a license agreement with a cable company to provide space on
its poles does not constitute a ‘service’ or ‘services’ as defined in
Chapter 117 [North Carolina General Statutes]," and §§ 117-16 and
117-16.1 "do not provide authority for this court to conclude that
defendant may assess only a reasonable and non-discriminatory pole-
attachment rate." The court concluded, with respect to Time Warner’s
common law claim, that it could not locate any case interpreting
North Carolina law "to extend the common law prohibition against
discriminatory rates to include negotiated prices for business agree-
ments that are unrelated to the basic statutory purpose of an entity
such as [Carteret-Craven Electric]," and that it should not "create" or
"expand" North Carolina common law.
From the district court’s order dated August 11, 2006, Time War-
ner appealed, but only with respect to its common law claim. Time
Warner contends on appeal that the common law duty imposed on
utilities in North Carolina to charge only reasonable and nondiscrimi-
natory rates for service also applies to Carteret-Craven Electric’s pro-
posed rate under the pole-attachment agreement and that the amount
Carteret-Craven Electric seeks to charge for pole attachments is in
fact unreasonable and discriminatory.
II
Resting upon the North Carolina common law principle that a pub-
lic utility must "render [its] service at uniform and reasonable rates
and without discrimination," see Clinton-Dunn Tel. Co. v. Carolina
Tel. & Tel. Co., 74 S.E. 636, 639 (N.C. 1912), Time Warner argues
that a public utility also has a duty to charge reasonable and nondis-
criminatory rates "for use of [its] property" used in providing its ser-
vice. Thus, Time Warner claims that Carteret-Craven Electric must
TIME WARNER v. CARTERET-CRAVEN 5
lease the excess space on its utility poles at reasonable and nondis-
criminatory rental rates and that Carteret-Craven Electric is violating
this common law duty because the rate that it proposes is both unrea-
sonable and discriminatory. The proposed $20.07 per pole rate is
more than three times the rate that had been established in the prior
contract; it is virtually double the rate calculated under the federal
Pole Attachment Act; and it far exceeds the rate that Time Warner has
to pay other utilities in North Carolina. Moreover, as Time Warner
alleges in its complaint, this rate is discriminatory in that Carteret-
Craven Electric only charges Sprint Corporation, which Time Warner
claims is a similarly situated attaching entity, $10.00 per pole to string
its telephone lines, approximately one half of what it proposes to
charge Time Warner.
Carteret-Craven Electric agrees with Time Warner that public utili-
ties have a common law duty to sell their "service" to customers at
reasonable and nondiscriminatory rates. It argues, however, that it is
an electric utility and is not in the business of providing public access
to excess space on its utility poles or on any other property it owns.
It asserts, "there is simply no basis for finding a common law duty of
non-discrimination or reasonableness for an electric membership cor-
poration with respect to anything other than its sales of electric
energy."
The governing principles are not in dispute. Public utility compa-
nies, such as those in the business of transmitting electricity locally
to consumers, "are natural monopolies created by the economic forces
of high threshold capital requirements and virtually unlimited econ-
omy of scale." See Jackson v. Metro. Edison Co., 419 U.S. 345, 351-
52 n.8 (1974). It would make little economic sense for competitors to
invest in duplicative sets of electrical poles and transmission lines.
Because of the impracticalities of competition, regulation is necessary
as a "substitute for competition." Id. at 352 n.8. With regulation, pub-
lic utilities are precluded from extracting monopoly premiums for
their vital services.
Carteret-Craven Electric is not a typical utility, however, but rather
an electric cooperative organized under Chapter 117 of North Caroli-
na’s General Statutes, which authorizes the creation and operation of
"electric membership corporations" — corporations owned and oper-
6 TIME WARNER v. CARTERET-CRAVEN
ated by their members. North Carolina law authorizes such corpora-
tions to be formed by persons residing in communities "not served,
or inadequately served, with electric energy" and to operate "for the
purpose of promoting and encouraging the fullest possible use of elec-
tric energy in the rural section of the State by making electric energy
available to inhabitants of the State at the lowest cost consistent with
sound economy and prudent management of the business of such cor-
porations." N.C. Gen. Stat. §§ 117-8, 117-10. They are nonprofit cor-
porations created, operated, and owned by their members who are the
persons using the energy supplied by the corporation. See id. § 117-
16. The members elect a board of directors who in turn elect a presi-
dent and a secretary to operate the corporation. Accordingly, the cus-
tomers of electric cooperatives in North Carolina ultimately have the
power to determine the rates that they themselves pay for electric
energy. Likewise, they have the authority to decide whether to lease
excess space on their utility poles and the rate at which they charge
for that space. See id. §§ 117-18(9), 117-20.
Even though the members of electric cooperatives have the ulti-
mate power over rates, statutes nonetheless prohibit electric coopera-
tives from charging other than reasonable and uniform rates for
service. See id. §§ 117-16, 117-16.1. But even as statutes require that
electric service be provided at reasonable and uniform rates, no stat-
ute imposes any restriction on the amount that an electric cooperative
may charge "[t]o sell, lease, mortgage or otherwise encumber or dis-
pose of all or any part of its property." Id. § 117-18(9). More particu-
larly, no statute imposes a restriction on whether an electric
cooperative can lease excess pole space or establishes the rate that it
can charge for that space. The only relevant statutory provision sim-
ply authorizes the cooperative to sell or lease its property as "neces-
sary or convenient for carrying out the purpose for which it was
formed." Id. § 117-18.
At the federal level, Congress has enacted the Pole Attachment Act
of 1978 to regulate the rates that utilities can charge for pole attach-
ments. See 47 U.S.C. § 224(b)(1). The Act, however, specifically
exempts "any person who is cooperatively organized." See id.
§ 224(a)(1). Indeed, the Act was enacted specifically for the purpose
sought to be attained by Time Warner in this case — to regulate the
pole-attachment agreements of public utilities, which are "unquestion-
TIME WARNER v. CARTERET-CRAVEN 7
ably in a position to extract monopoly rents from cable [television]
systems in the form of unreasonably high pole attachment rates." S.
Rep. No. 95-580, at 13 (1977), as reprinted in 1978 U.S.C.C.A.N.
109, 121 (internal citations omitted). But Congress recognized that
member-owned cooperatives do not present the same danger. As the
Senate Report explained:
Cooperatively owned utilities, by and large, are located in
rural areas where often over-the-air television service is
poor. Thus the customers of these utilities have an added
incentive to foster the growth of cable television in their
areas.
Id. at 18, as reprinted in 1978 U.S.C.C.A.N. 109, 126. Moreover,
cooperatively owned utilities have a built-in check against abuses
"[b]ecause the pole rates charged by municipally owned and coopera-
tive utilities are already subject to a decisionmaking process based
upon constituent needs and interests." Id.
Thus, no federal statute regulates electric cooperatives, and, unless
the provision of excess pole space to the public is a "service" that is
thought to be provided to customers by electric cooperatives, no
North Carolina statutory regulation applies to regulate pole-
attachment rates charged by electric cooperatives in North Carolina.
Time Warner initially contended in this case that providing excess
pole space was a "service," as regulated by §§ 117-16 and 117-16.1
of the North Carolina General Statutes. The district court, however,
dismissed that claim as failing to state a cause of action, concluding:
[H]aving considered the statute, the Commission’s lack of
regulatory activity, and cases from other states, the court
concludes that section 117-16 and section 117-16.1 do not
provide authority for this court to conclude that defendant
may assess only a reasonable and non-discriminatory pole-
attachment rate. Relatedly, the court concludes that defen-
dant’s entering into a license agreement with a cable com-
pany to provide space on its poles does not constitute a
"service" or "services" as defined in Chapter 117.
8 TIME WARNER v. CARTERET-CRAVEN
Time Warner does not challenge this conclusion on appeal. Rather, it
limits its contention to the claim that even though no statute regulates
pole-attachment rates that may be charged by electric cooperatives in
North Carolina, the common law of North Carolina does.
Before the district court, Time Warner relied principally on the
case of Salisbury & Spencer Railway Co. v. Southern Power Co.
("Salisbury I"), 101 S.E. 593 (N.C. 1919). It argued that under Salis-
bury I, public utilities have a common law duty to charge reasonable
and nondiscriminatory rates "for use of their property" used in provid-
ing their service. In essence, it argued that the common law regulation
of a public utility’s service rates includes the regulation of rates
charged for use of its property used to provide that service. The dis-
trict court, however, rejected this argument, concluding:
This court has not located any case interpreting North Caro-
lina law to extend the common law prohibition against dis-
criminatory rates to include negotiated prices for business
agreements that are unrelated to the basic statutory purpose
of an entity such as [Carteret-Craven Electric]. Likewise,
this court has not located any case applying North Carolina
common law to regulate pole-attachment agreements in any
manner whatsoever. . . . While appreciative of plaintiff’s
invitation to be the first, this court will not undertake such
an expansion of North Carolina’s public policy.
On appeal, Time Warner contends that the district court erred in
adopting so limited a view of the "services" of an electric cooperative
that are subject to the common law requirements of reasonableness
and nondiscrimination. Arguing that the district court holding was "an
inappropriately crabbed view of the common law duty" owed of utili-
ties, Time Warner asserts that because utility poles are facilities
devoted to the public use by extending electric lines to customers, the
utility has a duty to license pole attachments to customers at reason-
able and nondiscriminatory rates.
Because of the importance of the services provided by utility com-
panies and their status as natural monopolies, both before and even
after the extensive statutory regulation of utilities came about, a body
of common law developed under which natural monopolies, such as
TIME WARNER v. CARTERET-CRAVEN 9
electric companies, were required to deal in a reasonable and nondis-
criminatory manner when selling their service to their customers. This
is true under the common law of North Carolina, as elsewhere. Time
Warner argues that because an electric utility monopoly includes the
right to place and own utility poles, the common law must also
impose a duty of reasonableness and nondiscrimination with respect
to leasing access to those poles. To make this argument, it relies prin-
cipally on Salisbury I, 101 S.E. 593.
In Salisbury I, the defendant was a public utility corporation sub-
ject to the laws governing public utilities in North Carolina. See 101
S.E. at 598. The utility sold electric power to the plaintiff, another
public utility, which in turn resold the power to consumers. Id. The
defendant public utility corporation, however, charged its own subsid-
iary far less for power than it charged the plaintiff and other custom-
ers. Id. Rejecting the defendant public utility’s argument that it had
a right to discriminate among consumers, the Supreme Court of North
Carolina held that "[i]t is well settled that the common-law obligation
of equal and undiscriminating service clearly requires the same
charges shall be made to all consumers for the rendering of similar
service." Id. at 599.
This holding, however, does not advance Time Warner’s argument
for an extension of the common law duty. The North Carolina court
found a duty of reasonableness and nondiscrimination to apply to the
defendant utility’s electric energy sales, the very service that was the
basis for the defendant to be subject to regulation as a public utility.
Explaining the need for nondiscrimination in the sale of electric
energy, the North Carolina court stated that such discrimination
"would leave Salisbury and Spencer [two towns served by the plain-
tiff’s resale of electricity] without lights for the homes and places of
business of its people and without power for the operation of their
industrial plants or any means of operating the street railway." 101
S.E. at 595.
In contrast to Salisbury I, the case before us does not involve the
utility function that Carteret-Craven Electric was formed to provide.
Carteret-Craven Electric’s public responsibility extends to "promoting
and encouraging the fullest possible use of electric energy in the rural
section of the State." N.C. Gen. Stat. § 117-10 (emphasis added).
10 TIME WARNER v. CARTERET-CRAVEN
Although cable services have grown to become important also,
Carteret-Craven Electric was not created to provide such service.
Moreover, Carteret-Craven Electric was not created to sell, lease, or
dispose of its property. While it has those rights, they were given as
ancillary to Carteret-Craven Electric’s business of providing electric
energy to its customers.
All of the other North Carolina cases on which Time Warner relies
likewise apply the duties of reasonableness and nondiscrimination
only to rates charged to customers for the specific services the utility
was created to provide. For example, in In re Lower Cape Fear Water
& Sewer Authority, 407 S.E.2d 155 (N.C. 1991), the North Carolina
Supreme Court noted that the local water and sewer authority, a utility
organized for the purpose of supplying water, even though not subject
to the statute governing public utilities, was nonetheless "subject to
the common law rule that it cannot charge rates that would constitute
an unwarranted discrimination among the parties it was formed to
serve." 407 S.E.2d at 157 (emphasis added).
And in Griffin v. Goldsboro Water Co., 30 S.E. 319 (N.C. 1898),
the North Carolina Supreme Court found that a water utility was
"from the very nature of its functions . . . affected with a public use."
30 S.E. at 319 (internal quotation marks omitted). The court held that
in the absence of legislation, the judiciary could protect the public
against the exaction of oppressive and unreasonable rates. Yet, the
court’s holding made clear that the enunciated duty applied only to
water, the commodity which the defendant was organized to provide.
Finally, in Salisbury & Spencer Railway Co. v. Southern Power
Co. ("Salisbury II"), 105 S.E. 28 (N.C. 1920), the North Carolina
Supreme Court exercised judicial authority to prevent discriminatory
rates, stating that under the common law the court "possesses ample
power to prevent discrimination in rates by all public service compa-
nies, and it cannot be doubted that mandamus will lie to compel the
[utility] to furnish its service to the consuming public without dis-
crimination." 105 S.E. at 29. Again, however, the case concerned the
sale of the particular service that the utility was created to provide.
These cases are typical of North Carolina’s cases, and all of the
other cases cited by Time Warner for the proposition that utilities are
TIME WARNER v. CARTERET-CRAVEN 11
subject to a duty of reasonableness and nondiscrimination similarly
concern regulation of the particular function the utility was created to
provide.*
Even though Time Warner recognizes that these cases deal with the
specific service that the given utility was created to provide, it urges
that we interpret the common law duty of a public utility more expan-
sively by broadening the definition or scope of the utility’s "service"
to include the provision of excess pole space to customers. To justify
this approach, Time Warner cites State ex rel. Utilities Commission
v. Southern Bell Telephone & Telegraph Co., 299 S.E.2d 763 (N.C.
1983), for the proposition that a public utility’s duty of reasonable-
ness and nondiscrimination extends to ancillary activities.
In Southern Bell, the North Carolina Supreme Court addressed
whether revenues from the printing of the "yellow pages" could be
included as part of the "public utility function" and therefore as part
of the rate structure of the telephone utility. Rejecting Southern Bell’s
*See N.C. Pub. Serv. Co. v. Southern Power Co., 282 F. 837, 841-42
(4th Cir. 1922) (relying on the implication of duties to the defendant
power company regarding nondiscrimination "in consideration of the ser-
vice to the public expected of it in the exercise of the charter powers
granted," namely, "furnishing electricity"); Dale v. City of Morganton,
155 S.E. 2d 136, 141 (N.C. 1967) (requiring an electric company to fur-
nish electricity to a property on a nondiscriminatory basis); Pee Dee
Elec. Membership Corp. v. Carolina Power & Light Co., 117 S.E. 2d
764, 769-70 (N.C. 1961) (noting a "duty of a court in equity to fill in the
vacuum" created by an absence of a specific statute with respect to the
plaintiff electric cooperative’s distribution of electric energy (internal
quotation marks omitted)); Halifax Paper Co. v. Roanoke Rapids Sani-
tary Dist., 61 S.E.2d 378, 380 (N.C. 1950) (concerning the provision of
water to customers by an entity formed for such purpose); Walls v.
Strickland, 93 S.E. 857, 857 (N.C. 1917) (concerning the provision of
telephone service by a telephone company); Clinton-Dunn Tel. Co. v.
Carolina Tel. & Tel. Co., 74 S.E. 636, 637 (N.C. 1912) (concerning a
telephone service dispute between two telephone companies arising out
of the disconnection of telephone customers in one locale from the
defendant’s systems); Godwin v. Carolina Tel. & Tel. Co., 48 S.E. 636,
636 (N.C. 1904) (recognizing a generic requirement that a telephone
company provide telephone service to all on a nondiscriminatory basis).
12 TIME WARNER v. CARTERET-CRAVEN
argument that the publication and distribution of yellow pages was
not part of the utility’s services, the North Carolina Supreme Court
stated:
Although Southern Bell is technically correct in its conten-
tion that actual transmission of messages across telephone
lines is not dependent on the existence of the yellow pages,
such an interpretation of the public utility function is far too
narrow. Southern Bell’s utility function is to provide ade-
quate service to its subscribers. To suggest that the mere
transmission of messages across telephone lines is adequate
telephone service is ludicrous.
299 S.E.2d at 765. In short, the court held that the provision of the
yellow pages was part of the main function that the telephone utility
was created to perform — providing telephone service to its custom-
ers — and that adequate telephone service could not be provided
without a telephone directory. But that holding is not analogous to
what Time Warner would have us do. In the case before us, the leas-
ing of excess pole space to a cable company is not even arguably nec-
essary to or part of the public utility’s function of providing electric
energy to its customers. At most, it supports Carteret-Craven Elec-
tric’s efforts to raise money from sources collateral to the provision
of electrical service.
In sum, Time Warner cites no case holding that under the common
law, a utility’s property, such as excess space on utility poles, must
be made available to the utility’s customers and that utilities must
lease that excess utility space at reasonable and nondiscriminatory
rates. Surely any common law principle that would require a utility
to lease its property, such as its excess utility pole space, to its electri-
cal service customers who are cable service providers would also
require that the utility lease its excess pole space to other customers
who might, for example, wish to advertise on them. The principle
might, indeed, have to apply to excess office space because offices
are property of the utility used in providing electric service to custom-
ers. No case, however, expands the concept of a utility’s "service" to
include a requirement to lease to its customers its facilities that it built
to provide its service to customers.
TIME WARNER v. CARTERET-CRAVEN 13
Time Warner places much emphasis on the fact that it also is a
public utility that needs access to the essential resources of Carteret-
Craven Electric’s utility poles. But the fact that an electric utility has
the only poles in a geographical area does not, under North Carolina
common law, require it to lease excess space on those poles to others.
Its business is not pole leasing; its business is to provide electric ser-
vice. Indeed, it was just the problem identified by Time Warner —
the obvious inefficiency in distributing electric service and cable to
the same community by means of separate facilities — that prompted
Congress to pass the Pole Attachment Act and the 1996 amendments
to it, as contained in the Telecommunications Act of 1996. See 47
U.S.C.A. § 224(f) (West 2001). The fact that enactment of such regu-
lation was thought to be necessary, however, is telling about the exis-
tence of pole-attachment regulation before the federal statutes. Absent
the federal statutes, there was no common law requirement that utili-
ties lease their poles at reasonable and nondiscriminatory rates or that
they even make their poles available for pole attachment at all. In
order to establish these duties, Congress needed to enact the Pole
Attachment Act and the later amendments to it. And of course, as
already noted, these statutes specifically exempt electric cooperatives.
If Time Warner had wished to address the problem through allega-
tions that Carteret-Craven Electric misused its monopoly power, it
would have had to rely on the substantially different legal principles
provided by applicable antitrust law. In this case, however, Time
Warner did not charge Carteret-Craven Electric with any antitrust vio-
lation. It contended only that under North Carolina common law con-
tract principles, a public utility must charge reasonable and
nondiscriminatory rates for its services, including the leasing of its
property. It says that because it is a "customer" of Carteret-Craven
Electric for electrical service, it is entitled to lease Carteret-Craven
Electric’s excess pole space at reasonable and nondiscriminatory
rates. Yet no case has so held.
III
Even as Time Warner argues that "[t]he only thing unique about
this case is the application of these well-established principles to the
particular facts at hand," it acknowledges that the district court
believed that applying North Carolina’s common law to the facts at
14 TIME WARNER v. CARTERET-CRAVEN
hand "would lead it into waters unchartered by North Carolina
courts." It contends, however, that the district court’s observation
misconstrues its responsibility as a federal court sitting with diversity
jurisdiction. As Time Warner argues:
The precedents of this Court make clear that it is the duty
of the United States District Courts, sitting in diversity juris-
diction, to anticipate how the highest court in the state
would rule on an open question of state law.
See, e.g., Private Mortgage Invest. Servs., Inc. v. Hotel & Club
Assocs., Inc., 296 F.3d 308, 312 (4th Cir. 2002); Wells v. Liddy, 186
F.3d 505, 527-28 (4th Cir. 1999). And it maintains that we can readily
anticipate that North Carolina would apply the common law princi-
ples regulating public utilities to pole leasing, based on existing pre-
cedent. We do not agree, however. There are several indications that
argue powerfully for leaving this question open for development by
the North Carolina legislature or the North Carolina Supreme Court.
First, because an electric cooperative’s leasing of excess pole space
is distinct from its provision of electric services to customers, in the
absence of a North Carolina case, we are not persuaded by logic that
North Carolina courts would subject pole-attachment agreements to
the same degree of judicial regulation as they require with respect to
rates for electrical services. As the district court found persuasive
with respect to electric cooperatives, the governing statute draws a
distinction between "render[ing] [electrical] service" — the purpose
for which Carteret-Craven Electric was created — and "leas[ing] . . .
any part of its property" — an ancillary right which would include
any pole-attachment agreement. See N.C. Gen. Stat. §§ 117-16, 117-
18(9).
Second, neither Congress nor the North Carolina legislature has
elected to regulate pole-attachment agreements for electric coopera-
tives, although they have had the opportunity to do so. Congress
explicitly exempted cooperatively organized entities such as Carteret-
Craven Electric from regulation under the Federal Pole Attachment
Act. See 47 U.S.C.A. § 224(a)(1) (West 2001) ("The term ‘utility’ . . .
does not include . . . any person who is cooperatively organized . . .").
Similarly, the North Carolina legislature has made no attempt to regu-
TIME WARNER v. CARTERET-CRAVEN 15
late pole-attachment agreements for electric cooperatives. Time War-
ner implicitly admits as much in arguing that the North Carolina
Utilities Commission does not have jurisdiction over pole-attachment
agreements. If Congress and the North Carolina legislature have
elected not to regulate pole-attachment agreements for electric coop-
eratives, it is not the place of a federal court sitting in diversity to
jump in and do so as a predicted extension of state common law.
Third, the policy for not statutorily regulating pole-attachment
agreements involving electric cooperatives also applies to any consid-
eration of creating a common law duty. The policy behind legislative
inaction is the fact that cooperatively organized utilities are uniquely
qualified to regulate pole attachments for themselves. As Congress
noted, cooperatives have a built-in check against abuses "because the
pole rates charged by . . . cooperative utilities are already subject to
a decisionmaking process based upon constituent needs and interests."
S. Rep. No. 95-580, at 18, as reprinted in 1978 U.S.C.C.A.N. 109,
126. As owners and voting members of the cooperative, the electric
utility customers control the actions of the corporation that would
facilitate or restrict their receipt of cable service.
Fourth, North Carolina courts have been traditionally reluctant to
tread on what are regarded as legislative prerogatives. Thus, in a case
concerning the scope of service to be offered by an electric member-
ship corporation, the North Carolina Supreme Court held that
"[c]ourts have no right to usurp legislative power and by judicial
decrees formulate a public policy not declared by the Legislature."
Duke Power Co. v. Blue Ridge Elec. Membership Corp., 122 S.E.2d
782, 784 (N.C. 1961).
Fifth, sitting in diversity, a federal court "should not create or
expand [a] State’s public policy." St. Paul Fire & Marine Ins. Co. v.
Jacobson, 48 F.3d 778, 783 (4th Cir. 1995). Moreover, "[a]bsent a
strong countervailing federal interest, the federal court . . . should not
elbow its way into this controversy to render what may be an uncer-
tain and ephemeral interpretation of state law." Mitcheson v. Harris,
955 F.2d 235, 238 (4th Cir. 1992)(internal quotation marks omitted).
Time Warner has proffered no cases interpreting North Carolina law
to extend the common law prohibition against unreasonable and dis-
criminatory rates to include negotiated prices for agreements that are
16 TIME WARNER v. CARTERET-CRAVEN
unrelated to the basic statutory provision of services for which the
entity was created, and we have found none. Indeed, Time Warner
acknowledged to the district court that it too had been unable to find
any state or federal case that had relied on the common law to regu-
late pole-attachment agreements.
We conclude accordingly that as a court sitting in diversity, we
should not create or extend the North Carolina common law as
requested by Time Warner.
IV
We appreciate, with genuine sympathy to Time Warner’s argu-
ment, the efficiency that Time Warner seeks to effect by using exist-
ing electric utility poles for the distribution of its cable service.
Indeed, this efficiency is precisely the reason for Congress’ enactment
of the Pole Attachment Act. But Congress specifically excluded coop-
eratives. The proposed pole-attachment agreement between Time
Warner and Carteret-Craven Electric must, we conclude, be reached
through private negotiation, if at all. And if any regulation or compul-
sion is to be applied to pole-attachment agreements, it should be done
by the North Carolina legislature, the North Carolina Utilities Com-
mission, the North Carolina state courts, or indeed, Time Warner’s
fellow cooperative members, but not by us.
The judgment of the district court is
AFFIRMED.