Time Warner Cable v. City of New York

• Decision Date: 06 November 1996
• Docket Number: No. 96 CIV. 7736 (DLC).,96 CIV. 7736 (DLC).
• Citation: 943 F.Supp. 1357
• Parties: TIME WARNER CABLE OF NEW YORK CITY, A DIVISION OF TIME WARNER ENTERTAINMENT COMPANY, L.P., Paragon Communications d/b/a Time Warner Cable of New York City, Queens Inner Unity Cable Systems d/b/a Quics and TWC Cable Partners d/b/a Staten Island Cable, Plaintiffs, v. CITY OF NEW YORK, Defendant, Bloomberg, L.P., Intervenor-Defendant.
• Court: U.S. District Court — Southern District of New York

943 F.Supp. 1357

TIME WARNER CABLE OF NEW YORK CITY, A DIVISION OF TIME WARNER ENTERTAINMENT COMPANY, L.P., Paragon Communications d/b/a Time Warner Cable of New York City, Queens Inner Unity Cable Systems d/b/a Quics and TWC Cable Partners d/b/a Staten Island Cable, Plaintiffs, v. CITY OF NEW YORK, Defendant, Bloomberg, L.P., Intervenor-Defendant.

No. 96 CIV. 7736 (DLC).

United States District Court, S.D. New York.

November 6, 1996.

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Stuart W. Gold, Robert D. Joffe, Rory O. Millson, Rowan D. Wilson, Christopher P. Bogart, Cravath, Swaine & Moore, New York City, for Plaintiffs.

Paul A. Crotty, Lorna B. Goodman, David B. Goldin, Corporation Counsel for the City of New York, New York City, for Defendant City of New York.

Martin Garbus, Maura Wogan, Edward H. Rosenthal, Edward Hernstadt, Frankfurt, Garbus, Klein & Selz, P.C., New York City, for Intervenor-Defendant Bloomberg L.P.

                   I. Background ......................................................... 1364
                  II. Facts .............................................................. 1366
                

                    A. History and Statutory Structure of Federal Cable Law .................... 1366
                       1. The Cable Communications Policy Act of 1984 .......................... 1367
                          a. Statutory Provisions .............................................. 1367
                          b. A History of PEG .................................................. 1368
                          c. Legislative History of the Cable Act .............................. 1368
                       2. Post-1984 Cable Act Legislation ...................................... 1370
                       3. Other Uses of "Educational" in Telecommunications Law ................ 1371
                    B. "Public," "Educational," and "Governmental" in Practice: Nationally and
                       in New York City ........................................................ 1371
                       1. PEG Nationally ....................................................... 1371
                       2. The History of Educational and Governmental Channels in New York
                          City ................................................................. 1372
                       3. Current Use of Educational and Governmental Channels: Crosswalks ..... 1373
                    C. Time Warner's New York Cable Systems .................................... 1374
                    D. Franchise Agreements Between Time Warner and the City Regarding
                       PEG ..................................................................... 1375
                    E. Facts Underlying the Current Dispute .................................... 1376
                       1. Time Warner's Merger and Application to the City in Connection with
                          the Merger ........................................................... 1376
                       2. DoITT and Time Warner Worked Together in the Ensuing Weeks ........... 1377
                       3. Time Warner's Choice of MSNBC ........................................ 1377
                       4. The City's Reaction to Time Warner's Rejection of Fox ................ 1379
                       5. The Aftermath of Time Warner's Refusal to Carry Fox News ............. 1381
                       6. Summary of Factual Conclusions ....................................... 1383
                  III. Discussion .............................................................. 1384
                       A. Preliminary Injunction Standard ...................................... 1384
                       B. The City's Actions Violate the Cable Act ............................. 1385
                          1. The City's Actions Are at Odds With the Broad Purposes of PEG and
                             the Structure of the Cable Act .................................... 1385
                          2. The City's Actions Violate the Governmental Use Provision of Section
                             531(a) ............................................................ 1386
                          3. The City's Actions Violate the Franchise Agreements ............... 1389
                          4. The City's Actions Violate Section 544(f)(1) ...................... 1391
                       C. The City's Actions Violate Time Warner's First Amendment Rights ...... 1391
                          1. First Amendment Jurisprudence ..................................... 1391
                          2. Applying the First Amendment ...................................... 1394
                             a. Time Warner's First Amendment Rights in the PEG Channels ....... 1394
                             b. Time Warner's First Amendment Rights in the Commercial
                                Channels ....................................................... 1396
                                i. Irreparable Harm ............................................ 1396
                               ii. Likelihood of Success ....................................... 1399
                                   (a) Level of Scrutiny ....................................... 1399
                                   (b) Applying Strict Scrutiny ................................ 1401
                  IV. Conclusion ............................................................... 1403
                

OPINION

COTE, District Judge:

This case concerns the power of a city to influence, control, and even coerce the programming decisions of an operator of a cable television system. It therefore goes to the heart of First Amendment concerns.

The pivotal event in this case occurred on October 1, 1996. On that date, the City of New York ("City") proposed to Time Warner Entertainment Company, L.P. ("Time Warner")¹ — a group of cable operators that provide cable service pursuant to franchise agreements with the City — a plan that called for the City to abandon one of its cable channels designated for public, educational and governmental use ("PEG") if Time Warner would place the new Fox News program on one of Time Warner's commercial cable channels. Time Warner refused to "swap" channels with the City in order to accommodate Fox News. Unwilling to accept Time Warner's decision, a decision protected by the First Amendment and a federal statute, the City raised the ante over the ensuing days in an effort to convince Time Warner to change its mind. This campaign culminated on October 10, 1996, when the City placed Bloomberg Information Television ("BIT") on one of its PEG channels — specifically, a channel set aside for educational or governmental use — and prepared to place Fox News on another PEG channel. This action, intended to compel Time Warner to capitulate, instead has brought the parties before this Court.

So long as there remains a limitation on the number of cable channels, and intense competition over access to this valuable resource, there is a potential for a dispute of this nature to arise. Fortunately, however, the exercise of government power at issue here is without precedent. Given the irregularity of the City's actions in this case, I need not definitively decide each of the difficult issues, including a fine determination about the appropriate use of PEG channels under the Cable Communications Policy Act of 1984 ("Cable Act"). Pub.L. No. 98-549, 98 Stat. 2779 (codified at 47 U.S.C. § 521 et seq.). Nonetheless, I do find that the City's actions are far beyond acceptable PEG use, that the City acted in contravention of the legislative purposes of the Cable Act, and, specifically, violated the provisions relating to PEG use and the editorial autonomy of a cable operator. Most importantly, I find that by engaging in an effort to compel Time Warner to alter its constitutionally-protected editorial decision not to carry Fox News, the City has violated Time Warner's First Amendment rights.

I. Background

Time Warner brought this action for preliminary injunction against the City on October 10, 1996. Defendant City is a municipal corporation organized under the laws of the State of New York. Defendant-intervenor Bloomberg L.P. ("Bloomberg") intervened in the action on October 16, 1996. Bloomberg is a news service that specializes in covering financial news and produces BIT.

Time Warner's complaint alleges that the City's actions violate the franchise agreements, the Cable Act, and the First Amendment. The complaint also alleges that if the City's actions are allowed under the Cable Act, then the Act violates the First Amendment as applied. Finally, the complaint alleges that the City's actions violate the Takings Clause of the Fifth Amendment, New York State law, the New York State Constitution, and the New York City Charter.

On October 11, 1996, this Court held a hearing on Time Warner's application for a temporary restraining order ("TRO") enjoining the City from continuing to show BIT and from placing Fox News on the Crosswalks Network ("Crosswalks"), a group of cable channels set aside for educational and governmental use and supervised by the City. After hearing the parties, this Court granted Time Warner's motion for a TRO.² A hearing on Time Warner's application for a preliminary injunction was set for October 23, 1996, and at the City's request an extension was subsequently granted to October 28. The parties agreed, pursuant to this Court's rules, to have the direct testimony of all witnesses presented by affidavit. Prior to the hearing, the parties were to designate which witnesses they wished to cross-examine in person.

Time Warner submitted affidavits from Richard Aurelio, President of New York City Cable Group³; Allan J. Arffa, outside counsel to Time Warner; Fred Dressler, Senior Vice President of Programming at Time Warner Cable; Spencer B. Hays, Vice President and Deputy General Counsel of Time Warner; Robert S. Jacobs, General Counsel of Time Warner's New York City Cable Group; Stuart J. Lipson, an independent consultant specializing in developing competitive strategies, particularly in the cable industry; Gary McBride, President and CEO of GEMS International Television; Gregory Moore, Executive Director of Northwest Community Television; George William Nichols, President and CEO of Kaleidoscope Network, Inc.; Richard D. Parsons, President of Time Warner; Barry Rosenblum, President of Time Warner Cable of New York City; George C. Stoney, professor of film and television at NYU; and Lynn...