CENT. TELECOMMUNICATIONS v. City of Jefferson City, 83-4068-CV-C-5.

• Decision Date: 29 February 1984
• Docket Number: No. 83-4068-CV-C-5.,83-4068-CV-C-5.
• Citation: 589 F. Supp. 85
• Parties: CENTRAL TELECOMMUNICATIONS, INC., Plaintiff, v. CITY OF JEFFERSON CITY, MISSOURI, and TCI Cablevision, Inc., Defendants.
• Court: U.S. District Court — Western District of Missouri

589 F. Supp. 85

CENTRAL TELECOMMUNICATIONS, INC., Plaintiff, v. CITY OF JEFFERSON CITY, MISSOURI, and TCI Cablevision, Inc., Defendants.

No. 83-4068-CV-C-5.

United States District Court, W.D. Missouri, C.D.

February 29, 1984.

COPYRIGHT MATERIAL OMITTED

R. Lawrence Ward, G. Stephen Long, Joseph U. DeCuyper, Kansas City, Mo., for plaintiff.

Lyndell H. Porterfield, Thomas M. Newmark, St. Louis, Mo., for City of Jefferson City, Mo.

Harold R. Farrow, Oakland, Cal., Henry Andrae, Duane Schreimann, Jefferson City, Mo., for defendants.

ORDER

SCOTT O. WRIGHT, District Judge.

I. Introduction

Plaintiff, Central Communications, Inc. (Central), has filed a fourteen-count complaint asserting anti-trust, constitutional and common law claims against the City of Jefferson City and TCI Cablevision, Inc. (TCI). The defendants have filed motions to dismiss which are pending before the Court.

In support of its claims, Central alleges that since 1978 defendant TCI has been the sole operator of a cable television system within the city limits of Jefferson City. TCI has conducted its cable television system pursuant to a "license" or "franchise" granted through city ordinances. In late 1980, the City began studying and thereafter adopted on December 15, 1980, a bid procedure by which the new franchise (to be effective April 1, 1981) could be awarded. The City initiated this process by sending a "Request for Proposals for Cable Television Service" (RFP) to numerous cable television companies, including defendant TCI.

The City's bid process mandated that all bids were to be based entirely upon the RFP specifications and that said bids, once received by the City, were to be evaluated by an independent consulting agency in Dallas, Texas.

The plaintiff alleges that during the time that bids were being considered by the City, TCI illegally contacted and threatened the consultant retained by the City, threatened to cut off cable television service to the City, withheld franchise payments from the City, instituted sham litigation against the City, met illegally with City officials, and threatened other cable company bidders.

Plaintiff further alleges that on January 25, 1982, the City Council voted on two bills and selected the plaintiff's bid. It is alleged that they further authorized and directed the City Attorney to negotiate with plaintiff in order to prepare the necessary franchise documents, including two ordinances, a regulatory ordinance and a franchise award ordinance.

The plaintiff further alleges that the City Attorney conducted secret negotiations with the defendant TCI while representing to the plaintiff that it would be awarded the franchise.

On April 20, 1982, the Council voted 7-3 in favor of awarding the franchise to plaintiff Central. The plaintiff alleges that Mayor Hartsfield, acting pursuant to an agreement and in concert with TCI, the City Attorney and others, vetoed the Council's franchise award to Central. On the same date and after the Mayor's veto, ordinances were presented to the Council awarding the franchise to the defendant TCI. The Council voted 5-5 on these ordinances and they were passed by the deciding vote of the Mayor.

Plaintiff alleges that Mayor Hartsfield's veto and subsequent votes were in violation of state law prohibiting such action by the Mayor where he has a conflict of interest. The plaintiff further alleges that the Mayor had a conflict of interest because he worked for a telephone company from whom the defendant TCI rented space.

Mayor Hartsfield's veto and subsequent votes were allegedly cast pursuant to an agreement with TCI, City Attorney Utterback and others not yet known by the plaintiff to award the franchise to TCI despite its having not presented a bid which complied with the RFP procedure.

II. Motions to Dismiss

A. Anti-trust Claims

1. Parker exemption

The City asserts that it is immune from liability because its actions were authorized by the State of Missouri. Federal anti-trust laws do not prohibit a state from exercising its sovereign powers to impose certain anti-competitive restraints. The Supreme Court first addressed the conflict between federal anti-trust law and state sovereign power in Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943). The Court stated:

We find nothing in the language of the Sherman Act or in its history which suggests that its purpose was to restrain a state or its officers or agents from activity directed by its legislature. In a dual system of government in which, under the Constitution, the States are sovereign, save only as Congress may constitutionally subtract from their authority, an unexpressed purpose to nullify a state's control over its officers and agents is not lightly to be attributed to Congress.

Id. at 350-51, 63 S.Ct. at 313. A municipality is not itself sovereign and, accordingly, is entitled to the Parker exemption "only to the extent that it acted pursuant to a clearly articulated and affirmatively expressed state policy." Community Communications Co. v. City of Boulder, 455 U.S. 40, 54, 102 S.Ct. 835, 842, 70 L.Ed.2d 810 (1982), citing, City of Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 413, 98 S.Ct. 1123, 1136, 55 L.Ed.2d 364 (1978). A two-prong test must be satisfied to establish a state policy sufficient to confer Parker immunity upon a municipality. "The legislature must have authorized the challenged activity, and it must have done so with an intent to displace competition." Gold Cross Ambulance & Transfer v. City of Kansas City, 705 F.2d 1005, 1011 (8th Cir.1983) (citations omitted) (emphasis added). "A sufficient state policy to displace competition exists if the challenged restraint is a necessary or reasonable consequence of engaging in the authorized activity." Id. at 1012-13. (citations omitted).

The City of Jefferson City asserts that the first element of the two-prong Parker immunity test has been met in this case. The City asserts that the challenged activity in this case is the regulation and control of cable television businesses and that such activity has specifically been authorized by the Missouri legislature.¹ The plaintiff, however, asserts that the challenged activity in this case is an alleged conspiracy between certain City officials and defendant TCI.

The plaintiff in this action has alleged a conspiracy between certain City officials and defendant TCI to restrain and monopolize trade. Plaintiff alleges that on April 20, 1982, the City Council voted in favor of awarding a franchise to the plaintiff which would have allowed the plaintiff to deliver cable television to the City of Jefferson City. Plaintiff further alleges that the Mayor then vetoed the franchise award. The veto, plaintiff alleges, was a result of a conspiracy with defendant TCI and was in violation of state law because the Mayor had a conflict of interest which prohibited him from participating in the bid procedure. The Mayor allegedly was employed at the local telephone company, from whom defendant TCI rented space for its cable. Because of the foregoing allegations, plaintiff alleges that the defendant City is unentitled to Parker immunity.

In Westborough Mall v. City of Cape Girardeau, Missouri, 693 F.2d 733 (8th Cir.1982), the Eighth Circuit ruled that Parker immunity did not, as a matter of law, exempt the city from liability where the plaintiff alleges an illegal conspiracy. Id. at 746.

In Westborough Mall the plaintiffs alleged "a conspiracy to thwart normal zoning procedures and to directly injure the plaintiffs by illegally depriving them of their property. Id. at 746. Such action, the Court held, was not "... in furtherance of any clearly articulated state policy." Id. Thus, plaintiff Central asserts that the Parker immunity is unavailable to the City in this case because a conspiracy to circumvent competitive bid procedures, to interfere with plaintiff's prospective business relationships, and to deprive the plaintiff of a franchise is not in furtherance of any clearly articulated state policy. Essentially, plaintiff asserts that these acts exceed the scope of activities contemplated by the Missouri legislature. Well-pleaded material allegations are deemed admitted for purposes of determining whether a cause of action has been stated; thus, plaintiff's complaint against the City cannot be dismissed at this point because of Parker immunity.

2. Noerr-Pennington Doctrine

The defendants assert that plaintiff's anti-trust claims are barred by the Noerr-Pennington doctrine. "The Noerr-Pennington doctrine exempts from the anti-trust laws lobbying and other joint efforts by private individuals to obtain legislative or executive action." Westborough Mall v. City of Cape Girardeau, 693 F.2d 733, 745 (8th Cir.1982) (citation omitted). The plaintiff has alleged that defendant TCI engaged in unlawful conduct and employed illegal means to influence the City, thus the Noerr-Pennington doctrine may not be relied on to exempt the defendants from anti-trust liability at this stage of the proceedings. Westborough Mall v. City of Cape Girardeau, 693 F.2d 733, 745-46 (8th Cir.1982).

3. Tenth Amendment

The City asserts that the Tenth Amendment mandates rejection of the plaintiff's anti-trust claims. The Tenth Amendment bars the operation of any federal enactments that "directly displace the States' freedom to structure integral operations in the areas of traditional government functions...." National League of Cities v. Usery, 426 U.S. 833, 851, 96 S.Ct. 2465, 2474, 49 L.Ed.2d 245 (1976).

In Hodel v. Virginia Surface Mining and Reclamation Ass'n, Inc., 452 U.S. 264, 101 S.Ct. 2352, 69 L.Ed.2d 1 (1981), the Supreme Court set forth the following test to be used in determining if the Tenth Amendment has been violated by the challenged federal statute:

First, there must be a showing that the challenged statute regulates the "States as States." (citations omitted). Second, the federal regulation

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