City of Burlington v. Mountain Cable Co.
| Decision Date | 10 November 1988 |
| Docket Number | No. 87-156,87-156 |
| Parties | CITY OF BURLINGTON v. MOUNTAIN CABLE COMPANY. |
| Court | Vermont Supreme Court |
Certiorari Denied July 3, 1989. See 109 S.Ct. 3245
John L. Franco, Jr., Asst. City Atty., Burlington, for plaintiff-appellant.
Leo A. Bisson, Jr., of Downs Rachlin & Martin, St. Johnsbury, for defendant-appellee.
William E. Wargo, City Atty., Winooski, for proposed-intervenor cross-appellant.
Before ALLEN, C.J., PECK, GIBSON and MAHADY, JJ., and KEYSER, J. (Ret.), Specially Assigned.
The City of Burlington (City) appeals from the denial of its motion to enjoin Mountain Cable Company (Mountain) from increasing its basic cable television service rates prior to December 29, 1987. We affirm.
In June of 1985, the City and Mountain entered into a contract regarding the provision of cable television service to Burlington residents. Under the terms of the agreement, the City withdrew its objections then pending before the Public Service Board to the reconstruction of the cable system by Mountain, withdrew its opposition to the sale of the franchise rights of Mountain's predecessor to Mountain and agreed to give its active support to the reconstruction of the system by Mountain. It further agreed to withdraw its application for a certificate from the Public Service Board to operate a municipal television system, to forbear from seeking such a certificate in the future, and to drop all claims to the franchise rights being transferred from Mountain's predecessor to Mountain. The parties agreed that the contract constituted a settlement and compromise of all pending matters between the City, Mountain, and Mountain's predecessor. Pursuant to the settlement, litigation then pending between the parties was dismissed and objections by the City to proposed actions by Mountain then pending before the Public Service Board were withdrawn.
The instant dispute arose over the construction of a provision in the agreement which limits Mountain's right to raise rates for basic cable service in the City. Mountain informed the City of its intention to raise the basic cable rates as of January 1, 1987. The City then instituted this action seeking to prohibit the increase, contending that under the agreement Mountain could not raise its basic rates until December 29, 1987.
At the hearing on the motion for preliminary and permanent injunction, the trial court, sua sponte, questioned whether the paragraph in dispute had been preempted by the Cable Communications Policy Act of 1984 (Act). In a subsequent decision the trial court concluded that the attempt to regulate rates was illegal and denied the motion for a preliminary injunction.
On appeal, the City argues that the Act does not preclude enforcement of the contract because it only prohibits rate regulation by franchising authorities, and the State, rather than the City, is the franchising authority.
We note at the outset that the issue of illegality was not pleaded or raised by Mountain, and that Mountain neither briefed nor argued this issue at hearing or in this Court. 1 Courts, however, are not at liberty to ignore illegal provisions in contracts even though the parties have agreed not to contest the contract on grounds of illegality. While, normally, illegality must be pleaded, V.R.C.P. 8(c), if of a serious nature, a court of its own motion will take notice of it and deny relief. See Vermont Department of Public Service v. Massachusetts Municipal Wholesale Electric Co., 151 Vt. 73, ----, 558 A.2d 215, 225 (1988); see also Rathke v. Yakima Valley Grape Growers Ass'n, 30 Wash.2d 486, 192 P.2d 349 (1948) ().
The Act was promulgated with an effective date of October 30, 1984. Its purposes were, inter alia, to:
(1) establish a national policy concerning cable communications;
....
(3) establish guidelines for the exercise of Federal, State, and local authority with respect to the regulation of cable systems;
....
(6) promote competition in cable communications and minimize unnecessary regulation that would impose an undue economic burden on cable systems.
47 U.S.C. § 521.
With respect to rate regulation the Act provides:
(a) Any Federal agency or State may not regulate the rates for the provision of cable service except to the extent provided under this section. Any franchising authority may regulate the rates for the provision of cable service, or any other communications service provided over a cable system to cable subscribers, but only to the extent provided under this section.
....
(c) In the case of any cable system for which a franchise has been granted on or before the effective date of this title, until the end of the 2-year period beginning on such effective date, the franchising authority may, to the extent provided in a franchise--
(1) regulate the rates for the provision of basic cable service, including multiple tiers of basic cable service;
(2) require the provision of any service tier provided without charge (disregarding any installation or rental charge for equipment necessary for receipt of such tier); or
(3) regulate rates for the initial installation or the rental of 1 set of the minimum equipment which is necessary for the subscriber's receipt of basic cable service.
47 U.S.C. § 543.
A "State" under the Act "means any State, or political subdivision, or agency thereof." 47 U.S.C. § 522(15). The City is such a subdivision and may not regulate except as authorized by the Act. The exceptions are limited, and it is not claimed that any apply to the facts of this case.
The City's argument that the Act prohibits only "franchising authorities" from rate regulation overlooks the plain language of the Act, which prohibits rate regulation by a political subdivision. The language in the disputed paragraph of the contract regulates the rates which Mountain may charge during the term of the contract. It prohibits any increase by more than the greater of: i) 5%, ii) the annual rate of inflation in Burlington, or iii) the annual percentage of increase in Mountain's costs. That the regulation is contained in a contract for good and valuable considerations is immaterial. 2 The attempt to enforce the provisions of the paragraph is an attempt to regulate, and this the Act forbids.
The City argues that the legislative history of the Act supports its argument that it is intended only to prohibit the regulation of subscription rates by franchising authorities. 1984 U.S.Code & Admin.News 4655, 4702-4705. That portion of the history to which our attention is directed simply indicates that the section dealing with regulation of rates is intended to establish a uniform policy of regulation where regulation is still permitted by franchising authorities. It does not suggest that the prohibition against basic rate regulation is directed against franchising authorities only.
The legislative history and the language of the Act evidence the declared policy of Congress to prohibit...
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