Madison Cablevision, Inc. v. City of Morganton

• Decision Date: 07 December 1989
• Docket Number: No. 624PA87,624PA87
• Citation: 386 S.E.2d 200,325 N.C. 634
• Court: North Carolina Supreme Court
• Parties: , 58 USLW 2429, 1990-1 Trade Cases P 68,933 MADISON CABLEVISION, INC. v. CITY OF MORGANTON, North Carolina.

Page 200

386 S.E.2d 200

325 N.C. 634, 58 USLW 2429, 1990-1

Trade Cases P 68,933

MADISON CABLEVISION, INC. v. CITY OF MORGANTON, North Carolina.

No. 624PA87.

Supreme Court of North Carolina.

Dec. 7, 1989.

Tharrington, Smith & Hargrove by Wade H. Hargrove, Randall M. Roden, and Michael Crowell, Raleigh, for plaintiff-appellant.

Mitchell, Blackwell, Mitchell & Smith, P.A. by Thomas G. Smith, Valdese, Settlemyer & Hodges by Steve B. Settlemyer, Morganton, and Spiegel & McDiarmid by Joseph Van Eaton and Barbara S. Esbin, Washington, D.C., for defendant-appellant.

N.C. League of Municipalities by S. Ellis Hankins, General Counsel, Raleigh, amicus curiae.

Adams, McCullough & Beard by Hugh Stevens, Raleigh, for N.C. Press Ass'n, N.C. Ass'n of Broadcasters, and N.C. CATV Ass'n, amici curiae.

MEYER, Justice.

The posture of this case is somewhat unusual in that the issues presented on appeal to this Court are intermeshed with other issues yet to be decided in an action pending in the United States District Court for the Western District of North Carolina. We thus discuss the posture of the case at some length. The only issues presented to this Court for decision in this case are as follows: (1) whether the provisions of chapter 160A, article 16, part 1 of the North Carolina General Statutes which authorize cities to finance, acquire, construct, own, and operate a cable television system violate the "public purpose clause" of the North Carolina Constitution, article V, section 2(1); and (2) whether the City of Morganton's refusal to grant cable television franchises to private applicants, including the plaintiff, and its decision to build and operate a municipal cable system violate the exclusive emoluments and monopoly clauses of the North Carolina Constitution, article I, sections 32 and 34, or the antimonopoly and unfair trade practices provisions of chapter 75 of the North Carolina General Statutes. We answer both issues in the negative and affirm the entry of summary judgment for the defendant City.

Madison Cablevision, Inc. (hereinafter "Madison Cable"), is a privately owned company currently providing cable television service in the City of Morganton pursuant to a twenty-year franchise which expired in October 1986 and which the City has not renewed. Madison Cable continues to provide service pending the outcome of litigation. Madison Cable initially filed an action in the United States District Court for the Western District of North Carolina asserting twelve claims for relief from the actions of the City in refusing to renew Madison Cable's expired franchise or to grant a franchise to any private company, including the plaintiff, and in planning the establishment of a municipally owned and operated cable television system. While the record on appeal before this Court does not contain a copy of the complaint filed in the United States District Court, we learn from an abstention Memorandum and Order entered in that case by United States District Court Judge Woodrow W. Jones on 3 July 1986 that the twelve claims asserted in the federal action sought relief under both federal and state law. The first claim for relief is for a declaratory judgment that Madison Cable's request for franchise renewal is governed by the Cable Communications Policy Act of 1984 (hereinafter "Cable Act"), 47 U.S.C.A. § 546 (West 1984), which provides procedures to be followed by cities for renewal of cable franchises and further provides that denial of an application for renewal shall be made upon adverse findings with respect to certain enumerated factors. The second claim for relief is for judicial review of the City's decision not to renew Madison Cable's franchise pursuant to the Cable Act, 47 U.S.C.A. §§ 546, 555 (West 1984). In its third claim for relief, Madison Cable alleges that rights of freedom of the press and speech guaranteed to it by the United States Constitution and the North Carolina Constitution have been violated. In its fourth claim for relief, Madison Cable alleges a violation of the equal protection clause of the fourteenth amendment to the United States Constitution. Its fifth claim for relief alleges confiscation of property without due process of law in violation of the fifth and fourteenth amendments to the United States Constitution. The sixth and seventh claims for relief allege, respectively, attempted monopolization in violation of section 2 of the Sherman Act, 15 U.S.C.A. § 2 (West 1974), and violation of article I, sections 32 and 34 of the North Carolina Constitution and the monopoly and antitrust laws of North Carolina, N.C.G.S. ch. 75 (1985). The eighth claim for relief alleges deprivation of Madison Cable's constitutional rights in violation of the Civil Rights Act, 42 U.S.C.A. § 1983 (West 1979). In its ninth and tenth claims for relief, Madison Cable alleges common law claims of interference with contractual relations and breach of contract. The eleventh claim for relief alleges violation of the public purpose requirement of the North Carolina Constitution, article V, section 2(1). In its twelfth claim for relief, Madison Cable alleges that the City's option to purchase the franchisee's cable system at the expiration of the franchise is an unconstitutional, and therefore unenforceable, provision of the franchise agreement.

Defendant City of Morganton (hereinafter "City") filed an answer and a motion for summary judgment. Following submission of briefs and oral argument, United States District Court Judge Woodrow Jones dismissed the first two claims relating to the franchise renewal provisions of the federal Cable Act on the basis that the Act was not applicable because of the effective date of the Act and ruled that he should retain jurisdiction but abstain from deciding Madison Cable's federal claims pending submission of certain nonfederal claims to the courts of the State of North Carolina. Plaintiff was ordered to file its complaint in state court forthwith.

Pursuant to and consistent with Judge Jones' abstention order, Madison Cable filed a complaint in the Superior Court of Burke County, invoking in its prayer for relief only the public purpose and antimonopoly provisions of the North Carolina Constitution and the unfair trade practices provisions of chapter 75 of the North Carolina General Statutes. The City filed its answer to the complaint and also filed a motion for summary judgment as to both claims. Madison Cable filed an "Opposition" with supporting affidavits and its own motion for summary judgment. After arguments on the motions, Judge Gaines ultimately denied plaintiff's motion for summary judgment and granted summary judgment for the defendant City. Plaintiff appealed that order to the Court of Appeals, and this Court allowed defendant's bypass motion on 18 December 1987.

With that statement of the posture of the case, we now move to a statement of the facts on which the issues are to be determined.

As is the case in numerous other North Carolina cities, community antenna television (CATV) service has been provided in the City of Morganton pursuant to a nonexclusive, limited term franchise, subject to a number of public service requirements. The franchise granted Madison Cable the right for a period of twenty years to place wires and appurtenances in the public rights-of-way, but also required Madison Cable, upon termination of the franchise, to remove its facilities and restore public places to their original condition. The franchise agreement did not give Madison Cable any right to renewal and gave the City an option to purchase the system at the end of the franchise term. The franchise expired in October 1986, but service continues pending the outcome of litigation. Subscribers to plaintiff's service pay a monthly fee based on the level of service selected. A choice of twenty-seven different channels of television programming are presently offered, including the three broadcast networks; independent television stations; news, sports, movie, informational, and entertainment channels, including some pay channels; and commercial advertising services. No studio or cable channel is provided for public origination of local television programming. Such service was available during the early period of the franchise but was discontinued because it was not used by the public.

Because of the approaching 1986 termination date of the twenty-year franchise and because the franchise provided no right of renewal and contained no provisions regarding procedures for renewal, the City in late 1983 began to gather information and develop procedures for the purpose of making a rational decision as to the future of cable television in Morganton. In December 1983, Madison Cable submitted a proposal to the City for renewal of its franchise. The proposal was denied. The City engaged the services of an independent consulting firm and a Washington, D.C., law firm to assist it in its studies. The consulting firm made three studies relating to (1) an analysis of comparable cable system offerings, (2) local communication needs, and (3) the feasibility of a municipal cable system. These studies, which were made available for public inspection, concluded in effect that the cable system then existing in the city was inadequate, that the city needed a modern cable communications system, and that a city-owned and operated system was feasible.

After reviewing the studies, the City of Morganton, on 24 September 1984, issued a request for information ("RFI") to the general public and provided copies to three private cable companies--Madison Cable, Burke Cable Company, Ltd. ("Burke"), and Catawba Valley Cable TV ("Catawba")--which had expressed an interest in providing cable service to the City. The RFI stated that a public hearing would be held on 14 November 1984 for the purposes of:

(a) determining whether the franchise then held by Madison should be renewed;

(b) determining whether other...