HARBOR BROADCASTING v. BOUNDARY WATERS

• Citation: 636 N.W.2d 560
• Decision Date: 04 December 2001
• Docket Number: No. C1-01-667.,C1-01-667.
• Parties: HARBOR BROADCASTING, INC., a Minnesota corporation, and Eclectic Enterprises, Inc., a Minnesota corporation, Appellants, v. BOUNDARY WATERS BROADCASTERS, INC., a Minnesota corporation, and The Estate of Suzanna Kuralt, Respondents.
• Court: Minnesota Court of Appeals

636 N.W.2d 560

HARBOR BROADCASTING, INC., a Minnesota corporation, and Eclectic Enterprises, Inc., a Minnesota corporation, Appellants, v. BOUNDARY WATERS BROADCASTERS, INC., a Minnesota corporation, and The Estate of Suzanna Kuralt, Respondents.

No. C1-01-667.

Court of Appeals of Minnesota.

December 4, 2001.

Michael C. Mahoney, Mark W. Peery, Mahoney & Hagberg, P.A., Wayzata, MN, for appellants.

Keith J. Broady, Timothy C. Matson, Abdo and Abdo, P.A., Minneapolis, MN, for respondents.

Considered and decided by ANDERSON, Presiding Judge, PETERSON, Judge, and FORSBERG, Judge.¹

OPINION

G. BARRY ANDERSON, Judge.

Appellants brought an action in state court against respondents for tortious interference with business expectancy. Respondents moved to dismiss appellants' claim on the theory that the Federal Communications Act of 1934(FCA) preempted appellants' claim. The district court granted respondents' motion to dismiss and appellants now argue that the district court erred because (1) there is no irreconcilable conflict between the FCA and the common-law remedy of tortious interference with business expectancy; (2) in the alternative, if there is an irreconcilable conflict, the FCA's savings clause preserves the common-law remedy of tortious interference with business expectancy because the claim is predicated on rights and duties distinguishable from those created under the FCA. We conclude that there is an irreconcilable conflict between the FCA and appellants' state common-law tort action and that the FCA's savings clause does not preserve appellants' state-law claim because the common-law action is predicated on rights and duties created under the FCA, and thus we affirm.

FACTS

Appellant Harbor Broadcasting, Inc. (Harbor), is a Minnesota corporation and the former owner of WWAX, a radio station located in Hermantown, Minnesota. Appellant Eclectic Enterprises, Inc. (Eclectic), is a Minnesota corporation that managed and operated WWAX before its sale on October 1, 1999. Respondent Boundary Waters Broadcasters, Inc. (Boundary Waters), is a Minnesota corporation and the former owner of WELY, a radio station located in Ely, Minnesota. Respondent Estate of Suzanna Kuralt is a New York estate and the former owner of Boundary Waters.

In 1996, the Federal Communications Commission (FCC) granted Harbor a permit to operate WWAX in Hermantown; Harbor retained Eclectic to manage WWAX. On January 10, 1997, the FCC issued a report and order (Upgrade Order) granting Harbor's request to increase the power of its radio transmission and to operate on a different frequency (channel 221C3, instead of 221A). The effect would be an increase in the range of the radio station and, consequently, advertising revenues.

WWAX's increased transmission power posed a risk of signal interference for WELY because of frequency similarity, and the Upgrade Order required WELY to change its frequency and WWAX to reimburse WELY for reasonable expenses associated with that change.

According to appellants' complaint, Harbor "took all steps reasonably necessary to guarantee and assure * * * WELY that it would be reimbursed for all such reasonable costs of changing their frequencies," but Boundary Waters "failed and refused to take any steps whatsoever to comply with the * * * Upgrade Order," so that "WWAX FM was never allowed to increase its power and take advantage of the increased revenues and enhanced value [of the station]." Harbor claims it sold WWAX to KDQS Acquisition Corporation in October 1999 "for a mere pittance of what it would have otherwise been worth," resulting in a loss to Eclectic of "potential profits it would have received during the period it could have operated * * * WWAX under increased power."

On May 22, 2000, appellants served respondents with a summons and complaint, alleging, inter alia, tortious interference with business expectancy. Respondents moved to dismiss appellants' state-law claims for failure to state a claim upon which relief can be granted under Minn. R. Civ. P. 12.02(e), or in the alternative, for summary judgment under Minn. R. Civ. P. 56.04.

The district court dismissed for failure to state a claim upon which relief can be granted. The court ruled that the FCA's savings clause preserved "state law causes of action for breaches of duty that are distinguishable from those created under the act." But the court concluded that appellants' cause of action was "entirely predicated" on respondents' alleged failure to negotiate in good faith over reimbursement expenses and did not arise out of a separate contractual relationship, but was based solely on the Upgrade Order. Therefore, the court held that appellants' claim for tortious interference with business expectancy did not "establish a distinguishable state law cause of action." This appeal followed.

ISSUE

Whether the FCA preempts appellants' cause of action for tortious interference with business expectancy?

ANALYSIS

When reviewing cases dismissed for failure to state a claim upon which relief can be granted under Minn. R. Civ. P. 12.02(e), this court determines only

whether the complaint sets forth a legally sufficient claim for relief. It is immaterial to our consideration here whether or not the plaintiff can prove the facts alleged.

Doyle v. Kuch, 611 N.W.2d 28, 31 (Minn. App.2000) (quoting Royal Realty Co. v. Levin, 244 Minn. 288, 290, 69 N.W.2d 667, 670 (1955)). The supreme court has explained,

A claim is sufficient against a motion to dismiss * * * if it is possible on any evidence which might be produced, consistent with the pleader's theory, to grant the relief demanded. To state it another way, under this rule a pleading will be dismissed only if it appears to a certainty that no facts, which could be introduced consistent with the pleading, exist which would support granting the relief demanded.

N. States Power Co. v. Franklin, 265 Minn. 391, 395, 122 N.W.2d 26, 29 (1963) (citation omitted).

Appellants argue that their claim for tortious interference with business expectancy is not preempted by the FCA because (1) it does not conflict with the FCA and (2) the FCA's savings clause permits such a claim even if it conflicts with certain FCA provisions.

A. Implied Preemption: Irreconcilable Conflict

Appellants first argue that the FCA does not preempt a claim for tortious interference with business expectancy because it does not conflict with the FCA. Appellants argue that Congress neither expressly preempted state-law causes of action in the FCA's statutory scheme nor sought to occupy the whole field of law touching and concerning FCA-regulated entities. Therefore, because there is not an irreconcilable conflict between a state-law claim for tortious interference with business expectancy and the FCA, appellants argue that their claim should be permitted to proceed.

The United States Supreme Court has cautioned,

In the absence of an express congressional command, state law is pre-empted if that law actually conflicts with federal law or if federal law so thoroughly occupies a legislative field "`as to make reasonable the inference that Congress left no room for the States to supplement it.'"

Cipollone v. Liggett Group, Inc., 505 U.S. 504, 516, 112 S.Ct. 2608, 2617, 120 L.Ed.2d 407 (1992) (citations and quotations omitted). Moreover, our supreme court has noted that there is a presumption against preemption:

Preemption of state law by federal statute or regulation is not favored "in the absence of persuasive reasons either that the nature of the regulated subject matter permits no other conclusion, or that Congress has unmistakably so ordained."

Blackburn v. Doubleday Broad. Co., 353 N.W.2d 550, 554 (Minn.1984) (quoting Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142, 83 S.Ct. 1210, 1217, 10 L.Ed.2d 248 (1963)).² Therefore, "[i]n determining whether preemption is appropriate, a key question is whether Congress intended to make its jurisdiction exclusive." Blackburn, 353 N.W.2d at 554 (citations omitted). We recognize, however, that a preemption claim under the FCA "cannot be judged by reference to broad statements about the `comprehensive' nature of federal regulation under the [FCA]." Head v. New Mexico Bd. of Exam'rs in Optometry, 374 U.S. 424, 429-30, 83 S.Ct. 1759, 1763, 10 L.Ed.2d 983 (1963) (citations omitted).

"The [FCA] constitutes a plenary exercise of the federal government's power to occupy and regulate the broadcast industry." Blackburn, 353 N.W.2d at 552 (citation omitted). Under the FCA, Congress has delegated to the FCC "comprehensive powers * * * to administer a `unified and comprehensive regulatory system for the industry.'" Id. (quoting FCC v. Pottsville Broad. Co., 309 U.S. 134, 137, 60 S.Ct. 437, 439, 84 L.Ed. 656 (1940)). Indeed, the FCA governs many areas of communications law:

The FCC is vested with the authority to assign frequencies to stations and determine the power each station shall use, and to issue regulations necessary to carry out the provisions of the chapter. 47 U.S.C. § 303. The FCC is further vested with the authority to "grant to any applicant therefor a station license provided for by this chapter[,]" 47 U.S.C. § 307(a), and to "make such distribution of licenses, frequencies, hours of operation, and of power among the several States and communities as to provide a fair, efficient, and equitable distribution of radio service to each of the same." 47 U.S.C. § 307(b). 47 U.S.C. § 308 sets out the requirements for applying for a station license, or a modification or renewal thereof. 47 U.S.C. § 309 sets out the considerations of the FCC in granting licenses, the procedures followed by the FCC in granting applications for licenses, and the procedures for filing petitions to deny applications. 47 U.S.C. § 312 provides administrative sanctions for violations of the chapter or of any rules or regulations promulgated thereunder.

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