City of Los Angeles v. Preferred Communications, Inc

• Decision Date: 02 June 1986
• Docket Number: No. 85-390,85-390
• Citation: 476 U.S. 488,106 S.Ct. 2034,90 L.Ed.2d 480
• Parties: CITY OF LOS ANGELES and Department of Water and Power, Petitioners v. PREFERRED COMMUNICATIONS, INC
• Court: U.S. Supreme Court

476 U.S. 488

106 S.Ct. 2034

90 L.Ed.2d 480

CITY OF LOS ANGELES and Department of Water and Power, Petitioners

v PREFERRED COMMUNICATIONS, INC.

No. 85-390.

Argued April 29, 1986.

Decided June 2, 1986.

Syllabus

Respondent sued petitioners, the city of Los Angeles and its Department of Water and Power (DWP), in Federal District Court, alleging, inter alia, a violation of its rights under the First Amendment by reason of (1) the city's refusal to grant respondent a cable television franchise on the ground that respondent had failed to participate in an auction for a single franchise in the area and (2) DWP's refusal to grant access to poles or underground conduits used for power lines. The District Court dismissed the complaint for failure to state a claim upon which relief could be granted. The Court of Appeals reversed and remanded for further proceedings.

Held: The complaint should not have been dismissed. The activities in which respondent allegedly seeks to engage plainly implicate First Amendment interests. Through original programming or by exercising editorial discretion over which stations or programs to include in its repertoire, respondent seeks to communicate messages on a wide variety of topics and in a wide variety of formats. But where speech and conduct are joined in a single course of action, the First Amendment values must be balanced against competing societal interests. Thus, where the city has made factual assertions to justify restrictions on cable television franchising and these assertions are disputed by respondent, there must be a fuller development of the disputed factual issues before this Court will decide the legal issues. Accordingly, the case will be remanded to the District Court so that petitioners may file an answer and the material factual disputes may be resolved. Pp. 493-496.

754 F.2d 1396 (CA9 1985), affirmed and remanded.

REHNQUIST, J., delivered the opinion for a unanimous Court. BLACKMUN, J., filed a concurring opinion, in which MARSHALL and O'CONNOR, JJ., joined, post, p. 496.

Edward J. Perez, Los Angeles, Cal., for petitioners.

Harold R. Farrow, Oakland, Cal., for respondent.

[Amicus Curiae Information from pages 489-490 intentionally omitted] Justice REHNQUIST delivered the opinion of the Court.

Respondent Preferred Communications, Inc., sued petitioners City of Los Angeles (City) and the Department of Water and Power (DWP) in the United States District Court for the Central District of California. The complaint alleged a violation of respondent's rights under the First and Fourteenth Amendments, and under §§ 1 and 2 of the Sherman Act, by reason of the City's refusal to grant respondent a cable television franchise and of DWP's refusal to grant access to DWP's poles or underground conduits used for power lines. The District Court dismissed the complaint for failure to state a claim upon which relief could be granted. See Fed.Rule Civ.Proc. 12(b)(6). The Court of Appeals for the Ninth Circuit affirmed with respect to the Sherman Act, but reversed as to the First Amendment claim. 754 F.2d 1396 (1985). We granted certiorari with respect to the latter issue, 474 U.S. 979, 106 S.Ct. 380, 88 L.Ed.2d 333 (1985).

Respondent's complaint against the City and DWP alleged, inter alia, the following facts: Respondent asked Pacific Telephone and Telegraph (PT & T) and DWP for permission to lease space on their utility poles in order to provide cable television service in the south central area of Los Angeles. App. 6a. These utilities responded that they would not lease the space unless respondent first obtained a cable television franchise from the City. Ibid. Respondent asked the City for a franchise, but the City refused to grant it one, stating that respondent had failed to participate in an auction that was to award a single franchise in the area. Id., at 6a-7a.¹

The complaint further alleged that cable operators are First Amendment speakers, id., at 3a, that there is sufficient excess physical capacity and economic demand in the south central area of Los Angeles to accommodate more than one cable company, id., at 4a, and that the City's auction process allowed it to discriminate among franchise applicants based on which one it deemed to be the "best." Id., at 6a. Based on these and other factual allegations, the complaint alleged that the City and DWP had violated the Free Speech Clause of the First Amendment, as made applicable to the State by the Fourteenth Amendment, §§ 1 and 2 of the Sherman Act the California Constitution, and certain provisions of state law. Id., at 11a-19a.

The City did not deny that there was excess physical capacity to accommodate more than one cable television system. But it argued that the physical scarcity of available space on public utility structures, the limits of economic demand for the cable medium, and the practical and esthetic disruptive effect that installing and maintaining a cable system has on the public right-of-way justified its decision to restrict access to its facilities to a single cable television company. 754 F.2d, at 1401.

The District Court dismissed the free speech claim without leave to amend for failure to state a claim upon which relief could be granted. See Fed.Rule Civ.Proc. 12(b)(6). It also dismissed the antitrust claims, reasoning that petitioners were immune from antitrust liability under the state-action doctrine of Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1963). Finally, it declined to exercise pendent jurisdiction over the remaining state claims.

The Court of Appeals for the Ninth Circuit affirmed in part and reversed in part. 754 F.2d 1396 (1985). It upheld the conclusion that petitioners were immune from liability under the federal antitrust laws. Id., at 1411-1415. But it reversed the District Court's dismissal of the First Amendment claim, and remanded for further proceedings. Id., at 1401-1411. It held that, taking the allegations in the complaint as true, id., at 1399, the City violated the First Amendment by refusing to issue a franchise to more than one cable television company when there was sufficient excess physical and economic capacity to accommodate more than one. Id., at 1401-1405, 1411. The Court of Appeals expressed the view that the facts alleged in the complaint brought respondent into the ambit of cases such as Miami Herald Publishing Co. v. Tornillo, 418 U.S. 241, 94 S.Ct. 2831, 41 L.Ed.2d 730 (1974), rather than of cases such as Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 89 S.Ct. 1794, 23 L.Ed.2d 371 (1969) and Members of City Council v. Taxpayers for Vincent, 466 U.S. 789, 104 S.Ct. 2118, 80 L.Ed.2d 772 (1984). 754 F.2d, at 1403-1411.

We agree with the Court of Appeals that respondent's complaint should not have been dismissed, and we therefore affirm the judgment of that court; but we do so on a narrower ground than the one taken by it. The well-pleaded facts in the complaint include allegations of sufficient excess physical capacity and economic demand for cable television operators in the area which respondent sought to serve.² The City, while admitting the existence of excess physical capacity on the utility poles, the rights-of-way, and the like, justifies the limit on franchises in terms of minimizing the demand that cable systems make for the use of public property. The City characterizes these uses as the stringing of "nearly 700 miles of hanging and buried wire and other appliances necessary for the operation of its system." Brief for Petitioners 12. The City also characterizes them as "a permanent visual blight," ibid., and adds that the process of installation and repair of such a system in effect subjects city facilities designed for other purposes to a servitude which will cause traffic delays and hazards and esthetic unsightliness. Respondent in its turn replies that the City does not "provide anything more than speculations and assumptions," and that the City's "legitimate concerns are easily satisfied without the need to limit the right to speak to a single speaker." Brief for Respondent 9.

We of course take the well-pleaded allegations of the complaint as true for the purpose of a motion to dismiss, see, e.g., Kugler v. Helfant, 421 U.S. 117, 125-126, n. 5, 95 S.Ct. 1524, 1531, n. 5, 44 L.Ed.2d 15 (1975). Ordinarily such a motion frames a legal issue such as the one which the Court of Appeals undertook to decide in this case. But this case is different from a case between private litigants for two reasons: first, it is an action of a municipal corporation taken pursuant to a city ordinance that is challenged here, and, second, the ordinance is challenged on colorable First Amendment grounds. The City has adduced essentially factual arguments to justify the restrictions on cable franchising imposed by its ordinance, but the factual assertions of the City are disputed at least in part by respondent. We are unwilling to decide the legal questions posed by the parties without a more thoroughly developed record of proceedings in which the parties have an opportunity to prove those disputed factual assertions upon which they rely.

We do think that the activities in which respondent allegedly seeks to engage plainly implicate First Amendment interests. Respondent alleges:

"The business of cable television, like that of newspapers and magazines, is to provide its subscribers with a mixture of news, information and entertainment. As do newspapers, cable television companies use a portion of their available space to reprint (or retransmit) the communications of others, while at the same time providing some original content." App. 3a.

Thus, through original programming or by exercising editorial discretion over which stations or programs to include in its repertoire, respondent seeks to communicate messages on a wide variety of topics and in a wide variety of formats. We recently noted that cable operators exercise "a significant...