Carlin Communications, Inc. v. Mountain States Tel. and Tel. Co.
| Decision Date | 07 December 1987 |
| Docket Number | No. 85-2797,85-2797 |
| Parties | CARLIN COMMUNICATIONS, INC., a New York corporation, Sapphire Communications, Inc., an Arizona corporation, Plaintiffs-Appellees, v. The MOUNTAIN STATES TELEPHONE AND TELEGRAPH COMPANY, a Colorado corporation, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Ninth Circuit |
David A. Henderson, Louis J. Hoffman, Phoenix, Ariz., Lawrence E. Adelman, Norman Beier, New York City, for plaintiffs-appellees.
Ruth V. McGregor, Nancy L. Rowen, Phoenix, Ariz., for defendants-appellants.
Appeal from the United States District Court for the District of Arizona.
Before SNEED, ALARCON and CANBY, Circuit Judges.
Modern telephonic technology permits the pervasive transmission of vast quantities of information, as well as Shakespeare, Shaw, and smut. The essential question before us is whether a regional telephone company, despite its public utility status, may refuse to carry smut on its dial-a-message network. The district court concluded that it may not. We disagree and therefore vacate the injunction granted below.
Carlin Communications supplies salacious telephone messages to the public. In early 1985, appellant Mountain States Tel. & Tel. Co. (Mountain Bell) began carrying Carlin's messages on its "976" or "Scoopline" Community reaction to Carlin's messages was strongly adverse. School officials complained to Mountain Bell about children calling Carlin's number; newspaper editorials chastised Mountain Bell for profiting from such entertainment. On May 23, 1985, a deputy attorney of Maricopa County, Arizona, wrote to Mountain Bell threatening to prosecute if the company continued to provide 976 lines to Carlin. The letter stated that Carlin's 976 service violated an Arizona statute prohibiting the distribution of sexually explicit material to minors. 1
dial-a-message network, which offers the public various kinds of information such as sports updates, weather reports, and the like. Business subscribers pay Mountain Bell for a 976 line to carry their messages, specifying the price per call they wish the public to be charged. Mountain Bell collects the dial-a-message charges as part of its regular billing process and, after subtracting its own share, remits the proceeds to its 976 business subscribers.
Mountain Bell immediately sent Carlin a notice that its service would be terminated in five days. At the same time, Mountain Bell filed a federal declaratory judgment action to determine its rights and duties. At an expedited hearing, the district court (per Copple, J.) held preliminarily that Carlin's message business did violate Arizona law and ordered Mountain Bell to proceed with its termination of Carlin's service on May 29, 1985, as scheduled. Mountain Bell did so.
Shortly thereafter, Mountain Bell's officers met and decided to adopt a policy of refusing 976 service to any company offering sexual "adult entertainment" messages, even if carrying the messages would not violate the laws of any of the various states within which Mountain Bell operates. On June 3, 1985, Mountain Bell publicly announced its new policy and voluntarily dismissed its declaratory judgment action.
Carlin brought suit against Mountain Bell both under 42 U.S.C. Sec. 1983, asserting First Amendment rights, and under Arizona public utility law. Although Carlin originally sought damages as well as an injunction, it later waived its damage claims. The district court (per Hardy, J.) granted summary judgment to Carlin on both state and federal grounds. The court ordered Mountain Bell to restore Carlin's 976 service and permanently enjoined the phone company from disconnecting Carlin on the basis of message content. Mountain Bell appeals. To explicate our differences with the district court, we will discuss Carlin's rights first under state law and then under the Constitution of the United States.
A public utility in Arizona, as elsewhere, must offer its service to "all persons alike without discrimination." Trico Elec. Coop. Inc. v. Corp. Comm'n, 86 Ariz. 27, 38, 339 P.2d 1046, 1054 (1959); see Ariz.Rev.Stat. Sec. 40-334(A). 2 The district court held below that Mountain Bell's decision to exclude "adult entertainment" companies from its 976 network violated this duty. We disagree for two reasons.
The principle of nondiscrimination does not preclude distinctions based on reasonable business classifications. See 1 A. Priest, Principles of Public Utility Regulations 86-87 (1969); 64 Am.Jur.2d Public Utilities Sec. 38, at 578 (1972). A relevant example of such a distinction appears in Dollar A Day Rent A Car Sys. v. Mountain States Tel. & Tel. Co., 22 Ariz.App. 270, 526 P.2d 1068 (1974). There the plaintiff challenged Mountain Bell's refusal to carry its advertisement in the yellow pages. As in our case, the refusal to carry plaintiff's message rested on an explicit content-based restriction: Mountain Bell's policy was to exclude all price advertising from the yellow pages, and the phone company had refused to print even the plaintiff's name in the directory because the name allegedly stated the price of plaintiff's product. Assuming without deciding that the nondiscrimination rule applied, the state court held that Mountain Bell's policy on price advertising and its refusal to carry Dollar A Day's advertisement did not constitute an impermissible discrimination.
Three factors were important to the court's decision in Dollar A Day. First, the challenged advertising policy was not directed arbitrarily at plaintiff but consistently applied to all. See 526 P.2d at 1072. Second, Mountain Bell had a legitimate interest in protecting itself from the liability that might arise from misquotations of price (whether deliberate or inadvertent). Id. Finally, Mountain Bell was furthering a state policy against deceptive advertising, even though its blanket rule went further than state prohibitions. See id. 526 P.2d at 1073.
Similar considerations apply here. Carlin has not been singled out for adverse treatment; on the contrary, Mountain Bell expressly resolved to exclude all "adult entertainment" messages from the 976 network. Mountain Bell faces, moreover, potential criminal liability for carrying Carlin's messages under state obscenity laws. Finally, Ariz.Rev.Stat. Sec. 13-3506 () furnishes the same sort of public policy support for Mountain Bell's decision of which the court made use in Dollar A Day. Mountain Bell's policy here, as in Dollar A Day, is broader than the statute, which would not support a blanket prohibition of Carlin's service. 3 But the phone company's policy is clearly consonant with the public policy--protecting minors from "adult entertainment"--embodied in the statute.
Both the yellow pages and the 976 network provide a service to the public. Both carry messages from businesses to the public. Dollar A Day, even when viewed narrowly, indicates that Mountain Bell may exercise some business judgment about what messages, even lawful ones, it will carry. This strongly suggests that Mountain Bell permissibly exercised its judgment here.
Moreover, we question whether state public utility law in its traditional form makes sense as applied to Mountain Bell's 976 network. The technology of that network differs fundamentally from that of basic phone service. As pointed out above, individuals do not speak to each other on the 976 lines. Instead, "over 7,900 callers can be connected simultaneously to the same recorded message." Carlin Communication, Inc. v. FCC, 787 F.2d 846, 850 (2d Cir.1986). Under these circumstances the telephone is serving as a medium by which Carlin broadcasts its messages. The phone company resembles less a common carrier than it does a small radio station.
Once the telephone company becomes a medium for public rather than private communication, the fit of traditional common carrier law becomes much less snug. See generally CBS v. Democratic Nat'l Comm., 412 U.S. 94, 104-09, 93 S.Ct. 2080, 2087-90, 36 L.Ed.2d 772 (1973) (). Arizona may, of course, decide to make the phone company operate the 976 network as a content-neutral public forum open to any and all speakers. We are very reluctant, however, to infer such a principle from traditional public utility law.
We therefore decline to hold that state public utility law compels Mountain Bell to carry salacious or pornographic messages, both lawful and unlawful, on its 976 network.
Carlin also sued Mountain Bell under 42 U.S.C. Sec. 1983, alleging a violation of its First Amendment rights. To succeed under Sec. 1983, Carlin must initially show that Mountain Bell's conduct was "state action." It is settled law that Mountain Bell's actions cannot be deemed state action simply because of the phone company's public utility status. See Jackson v. Metropolitan Edison Co., 419 U.S. 345, 350-54, 95 S.Ct. 449, 453-55, 42 L.Ed.2d 477 (1974); Martin v. Pacific Northwest Bell Tel. Co., 441 F.2d 1116, 1118 (9th Cir.), cert. denied, 404 U.S. 873, 92 S.Ct. 89, 30 L.Ed.2d 117 (1971). The district court found state action nevertheless in both Mountain Bell's initial termination of Carlin's service and its subsequent policy decision to exclude all "adult entertainment" messages from the 976 network. We agree that state action inhered in the first decision but hold that it did not in the second. This conclusion requires us to vacate the injunction granted below.
As stated earlier, Mountain Bell was informed by a...
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