Paragould Cablevision Inc. v. City of Paragould

• Decision Date: 13 May 1991
• Docket Number: No. 90-153,90-153
• Parties: , Util. L. Rep. P 26,093 PARAGOULD CABLEVISION INC., Appellant, v. CITY OF PARAGOULD, Arkansas; and Paragould Light and Water Commission, Appellees.
• Court: Arkansas Supreme Court

Page 688

809 S.W.2d 688

305 Ark. 476, Util. L. Rep. P 26,093

PARAGOULD CABLEVISION INC., Appellant, v. CITY OF PARAGOULD, Arkansas; and Paragould Light and Water

Commission, Appellees.

No. 90-153.

Supreme Court of Arkansas.

May 13, 1991.

James M. McHaney, Jr., No. Little Rock, David R. Goodson, Paragould, Bruce D. Sokler, Washington, D.C., for appellant.

W. Randolph Young, Washington, D.C., Robert F. Thompson, Donis B. Hamilton, Paragould, for appellees.

MORTON GITELMAN, Special Justice.

This is an appeal from the Greene County Chancery Court which entered a summary judgment dismissing the complaint of appellant, Paragould Cablevision, Inc. (Cablevision). Cablevision is the holder of a non-exclusive franchise to operate a cable television system in the appellee City of Paragould, Arkansas (City). The company has operated its system since 1963 and it has approximately 6,000 subscribers. The current franchise expires December 9, 1993.

Sometime after the 1983 renewal of Cablevision's franchise, citizens in Paragould expressed dissatisfaction with its services and rates. The City employed consultants to study the feasibility of initiating a city-owned cable television system, and in June 1986, the voters authorized the City to acquire and operate a system. Subsequently, the City enacted a resolution whereby the appellee Paragould Light and Water Commission (Commission) was charged with the duty of acquiring and operating a cable television system and, after a municipal election on October 31, 1989, the City undertook to issue Capital Improvement Bonds under Act 871 of 1985 in the amount of $3.22 million to finance the cost of the system.

On January 18, 1990, Cablevision filed a complaint in this case seeking an injunction against the issuance of the bonds and a declaration that the Commission had no power to acquire and operate a cable television system. Cablevision's complaint is based upon the claims that the Commission has no power to operate a cable television system under the state legislation authorizing its existence and that a delegation of such power to the Commission by the City is ultra vires; also, the arrangement contemplated by the City and the Commission constitutes an illegal exaction under Ark. Const. art. 16, § 13.

After a hearing, the chancellor found that the City has authority under Act 328 of 1987 to construct and operate a cable television system and, under Acts 871 of 1985 and 26 of 1988, it has the authority to issue bonds to finance construction of the system; the chancellor also found that the City can legally and properly delegate authority to the Commission to construct and operate the system and that such delegation is not a prohibited delegation of legislative authority but, rather, is a delegation of administrative and ministerial functions. Thus, as the chancellor further found, there is no illegal exaction prohibited by the Arkansas Constitution. We affirm.

I. Issues on Appeal

Cablevision concedes, as it must, that Arkansas cities have the authority to own and operate cable television systems. Act 328 of 1987; Ark.Code Ann. § 14-199-601(a) (Supp.1989) provides:

Any first-class city, second-class city, and incorporated town may own, construct, acquire, purchase, maintain, and operate a television signal distribution system for the purpose of receiving, transmitting, and distributing television impulses and television energy, including audio signals and transient visual images, to the inhabitants of the city or town and to the inhabitants of an area not to exceed two (2) miles outside the boundaries of the city or town.

Cablevision also does not contest the authority of cities to issue bonds for the purpose of financing a cable television system.

Although at one time the power of municipal corporations to engage in entrepreneurial activities was subject to serious question, see 12 E. McQuillin, Municipal Corporations § 36.02 (3d rev. ed. 1986), the peculiar nature of cable television renders it distinct from municipal hotels, brickyards, tanneries, taxi companies, and the like. The furnishing of news, information, and entertainment to the public is an activity that is clearly tinged with a public interest, and cable television systems are clearly subject to governmental regulation.

Prior to federal regulation of cable communications, courts were sometimes called upon to sort out the legal issues involved in what were called "Community Antenna Television" (CATV) enterprises. In the absence of statutory guidance, courts resorted to basic principles of property law and the law of unfair competition. See, e.g., Intermountain Electronics, Inc. v. Tintic School Dist., 14 Utah 2d 86, 377 P.2d 783 (1963); Cable Vision, Inc. v. KUTV, Inc., 211 F.Supp. 47 (D.Idaho 1962), vacated, 335 F.2d 348 (9th Cir.1964); Dispatch, Inc. v. City of Erie, 249 F.Supp. 267 (W.D.Penn.1965); Lamb Enterprises, Inc. v. City of Erie, 286 F.Supp. 865 (W.D.Penn.1967), aff'd, 396 F.2d 752 (3d Cir.1967); United Artists Television, Inc. v. Fortnightly Corp., 377 F.2d 872 (2d Cir.1967); Buckeye Cablevision, Inc. v. F.C.C., 387 F.2d 220 (D.C.Cir.1967); Black Hills Video Corp. v. F.C.C., 399 F.2d 65 (8th Cir.1968).

In more recent times, federal regulation has been the prominent focus in analyzing the legal framework of the cable television industry. The Cable Act of 1984, 47 U.S.C. §§ 521 to 559. establishes national policy in this area. See Reyerson & Sinel, Regulating Cable Television in the 1990's, 17 Stetson L.Rev. 607 (1988). The Cable Act specifically provides that cable systems are not common carriers or public utilities, section 541(c). Furthermore, the act does not prohibit municipal ownership of cable systems or franchises, section 522(4), nor does it require that franchises be exclusive, section 541(a)(1). Thus, the federal legislation has no preemptive effect in the case before us.

II. Status of the Commission

Cablevision's key argument is that, although the City is authorized to acquire and operate a cable television system in competition with the existing private system, the City has no power to delegate such authority to the Commission, and the Commission has no authority to accept such delegation. Cablevision argues that the Commission is a creature of statute and has only those powers expressly granted by the enabling act. This argument requires us to consider the status of the Commission.

In 1933, the City issued bonds and constructed a municipal electric light plant which was completed in 1939. In 1941, the City, by ordinance, created a commission to control and operate the municipal plant. This ordinance refers to, and is based upon, Act 70 of 1941. Act 70 authorized municipal corporations "owning, operating and controlling municipally-owned light and power plants" to create a five-member board for "the purpose of directing, controlling and operating such municipal light and power plants within such city...." The act goes on to prescribe the method of selection of such board members and the power of the board to control and operate the plant and dispose of surplus property, but states that the board "shall not sell or rent the right to own, use and operate the equipment of such light and power plant." Section 1 of Act 70 states that it applies to cities having a population (under the 1940 census) of not less than 7,070 or more than 7,085. Act 70 was never judicially challenged, but it could be viewed as an example of the type of local or special legislation prohibited by Amendment 14 to the Arkansas Constitution. See Anderson, Special and Local Acts in Arkansas, 3 Ark.L.Rev. 113 (1948).

In 1953, the General Assembly passed Act 562, which rectified the questionable validity of Act 70. Act 562 permits cities of the first class "whose municipally owned water, sewer and/or light plants are not now being operated by a commission or commissions created by or pursuant to valid special or local acts of the Arkansas Legislature," to create such commissions. In all material respects, the powers of such commissions are the same as the powers of the board created under the authority of Act 70. The City promptly passed an ordinance re-establishing its power commission under Act 562, designating it as the Light Plant Commission of the City of Paragould. In 1984, by ordinances, the City vested control of the water and sewer system in the Commission and changed its name to Paragould Light and Water Commission.

Cablevision claims that the Commission is a separate and distinct entity from the City, having its origin in Act 562 of 1953, and is in no way an arm of the City or its alter ego. Because Act 562 does not grant power to such commissions to operate anything but electric plants, waterworks, and sewer plants, Cablevision argues that operation of a cable television system by the Commission would be ultra vires.

The City contends that the Commission is an agency of the City and is the most efficient department of city government to operate a cable system. The Commission owns vehicles and, more importantly, light poles, which are the means of conveying television signals from the central receiving equipment to the homes of subscribers. Also, the Commission has personnel, equipment, and expertise for the billing of consumers and collection of accounts.

At trial, Cablevision introduced no independent evidence to prove that the Commission is a distinct entity from the City. Instead, Cablevision relied on the four corners of Act 562 to prove that the only powers of a commission created under that act exclude operation of a cable system. In the absence of a record demonstrating that the actual authority and operation of the Commission is independent of the City, we are left with the task of interpreting the legislative intent underlying Act 562. In doing so, we are struck with the many indications within the act itself that the legislature did not intend to create entities separate and apart...