PARAGOULD CABLEVISION v. City of Paragould, Ark.

• Decision Date: 09 May 1990
• Docket Number: No. J-C-90-14.,J-C-90-14.
• Citation: 739 F. Supp. 1314
• Parties: PARAGOULD CABLEVISION, INC., Plaintiff, v. CITY OF PARAGOULD, ARKANSAS, et al., Defendants.
• Court: U.S. District Court — Eastern District of Arkansas

739 F. Supp. 1314

PARAGOULD CABLEVISION, INC., Plaintiff, v. CITY OF PARAGOULD, ARKANSAS, et al., Defendants.

No. J-C-90-14.

United States District Court, E.D. Arkansas, Jonesboro Division.

May 9, 1990.

James W. McHaney, Jr., Little Rock, Ark., David R. Goodson, Paragould, Ark., Bruce D. Sokler, Washington, D.C., for plaintiff.

Robert F. Thompson, Donis B. Hamilton, Paragould, Ark., for defendants.

ORDER

EISELE, Chief Judge.

In this action plaintiff seeks injunctive relief for alleged violations of the Sherman Antitrust Act, 15 U.S.C. § 2 (1976), the First and Fourteenth Amendments to the United States Constitution as well as the laws of the State of Arkansas. At issue before the Court are defendant City of Paragould and its Light and Water Commission's Motions to Dismiss pursuant to Fed.R.Civ.P. 12(b)(6). Plaintiff has responded. The Court will grant the motions for the reasons indicated in the body of this Order.

I. THE STANDARD ON MOTIONS TO DISMISS

Under a Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted the complaint is to be construed in the light most favorable to plaintiff and its allegations are taken as true. Scheuer v. Rhodes, 416 U.S. 232, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). See also Baxley-DeLamar Monuments, Inc. v. American Cemetery Association, 843 F.2d 1154 (8th Cir.1988).

The critical issue is the sufficiency of the complaint which is governed by the pleading standard stated in Rule 8(a). A pleading setting forth a claim for relief must contain a short and plain statement of the claim showing that the pleader is entitled to relief. Included then, in the determination of whether a claim is stated is the calculus of whether relief can be granted on this claim. Davis v. Passman, 442 U.S. 228, 99 S.Ct. 2264, 60 L.Ed.2d 846 (1979).

The sufficiency requirement most frequently utilized is derived from the Supreme Court's pronouncement that

in appraising the sufficiency of the complaint we follow, of course, the accepted rule that a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.

Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957).

Mindful of these guiding principles, the Court addresses defendants' motions.

II. FACTS

A. Parties and Jurisdiction

Plaintiff Paragould Cablevision, Inc. ("PCI") is a Massachusetts corporation headquartered and with its principal place of business in Greene County, Arkansas. Plaintiff operates a cable television system in Paragould, Arkansas under a franchise agreement entered into on November 28, 1983.

The complaint names 16 defendants including the City of Paragould ("the City"), its Light and Water Commission ("LWC"), the mayor and 13 individual members of the City Council and the Light and Water Commission. Paragould is an incorporated city and the LWC is a municipal entity created under A.C.A. § 14-200-106 with the charge to operate the City's water and electric systems.

Jurisdiction lies under Section 16 of the Clayton Act of 1914, codified at 15 U.S.C. § 26, 42 U.S.C. § 1983, 28 U.S.C. § 1331 and by pendant jurisdiction over the State law claims. Venue is proper in the Eastern District of Arkansas pursuant to 28 U.S.C. § 1391(b).

B. Background

The Franchise Agreement entered into between the City and PCI was explicitly termed non-exclusive. In the past seven years, plaintiff has had no competition in the operation of its cable system in Paragould. However, on June 17, 1986 an ordinance authorizing the construction and operation of a municipal cable system was approved by referendum vote and on January 16, 1989, a franchise agreement was concluded between the City and LWC for the latter to build and operate a system in Paragould. To finance the municipal system, the City conducted a referendum vote to authorize issuance of $3.22 million of municipal bonds which passed on October 31, 1989. On January 22, of this year, the City acted pursuant to the referendum and authorized the bonds to be issued.

C. The Nature of the Claims Alleged

Plaintiff's 17 page complaint alleges numerous violations in three Counts which are divided among antitrust violations, violations of the First and Fourteenth Amendments, and breach of state contract law claims respectively.

The alleged Sherman Act violations derive from the Section 2 monopoly prohibition which states:

Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding one million dollars if a corporation, or if any other person, one hundred thousand dollars, or by imprisonment not exceeding three years or by both said punishments, in the discretion of the court.

15 U.S.C. § 2.

Plaintiff alleges inter alia that its Count I claims assert "its right to be free from unfair and illegal competition brought about by Defendants' dual role as a direct competitor of Cablevision and as a utility operator with exclusive control over utility poles which are vital to the existence of Cablevision." Plaintiff's Memorandum of Points and Authorities in Opposition to Defendants' Motion to Dismiss, p. 2 (hereafter "Plaintiff's Memorandum"). Specifically, plaintiff asserts a monopoly leverage theory of liability which is defined as "the use of monopoly power in one market to amplify or `leverage,' a position in another competitive market." Kerasotes Michigan Theatres v. National Amusements, 854 F.2d 135, 137 (6th Cir.1988), cert. dismissed, ___ U.S. ___, 109 S.Ct. 2461, 104 L.Ed.2d 982 (1989) (citations omitted). Here, the defendants are alleged to possess a monopoly over the electricity and water services and are allegedly attempting to "leverage" their economic power in the cable television market. The acts comprising violations under this theory are (1) LWC's ownership of electric utility poles and its power, under the Pole Attachment Agreement, entered into by PCI and LWC, to restrict PCI's use of those poles and to terminate the Agreement under certain circumstances; (2) the failure to correctly assess and include the cost of the relocation of utility poles necessary for installation of LWC's cable system wires in the financial estimates for the project used by the City; and (3) LWC's plan to string cable wire in alleged violation of certain spacing safety standards promulgated in the National Electric Safety Code.

Defendants assert their immunity to antitrust liability under the "State Action Immunity" doctrine and argue that, in any event, not only does the complaint fail to state a Sherman violation but any alleged violations have yet to occur and are unripe.

Plaintiff in Count II alleges violations of the First and Fourteenth Amendments stemming from restrictions imposed on PCI's unfettered right to sell and transmit advertising in the absence of similar restrictions on LWC's ability to do likewise. Plaintiff finds that these contractual disparities constitute regulation of legitimate commercial speech in the absence of substantial state interest. PCI also alleges that the restrictions amount to "selective taxation in a situation where, all things being equal, one party remains exempt from taxation and the other party does not." Id. p. 19.

For their part, defendants argue that a probable franchise fee of 3% on any additional advertising is not so burdensome as to rise to the level of a First Amendment violation and the claim of unequal treatment in a contractual setting similarly does not state a violation of the Fourteenth Amendment.

Count III alleges breaches of good faith and fair dealing amounting to contractual breach under Arkansas law.

Defendant seeks dismissal under Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966), for lack of federal jurisdiction over the pendant state claims.

III. THE ANTITRUST CLAIMS

A. Legislative Immunity

As an initial matter the Court finds that plaintiff's claims against the individual members of the City Council and the members of the LWC under 42 U.S.C. § 1983 are barred. Legislators are absolutely immune from suit for all damages or injunctive relief when performing their roles "in a field where legislatures traditionally have power to act." Tenney v. Brandhove, 341 U.S. 367, 379, 71 S.Ct. 783, 789, 95 L.Ed. 1019 (1951); Green v. DeCamp, 612 F.2d 368 (8th Cir.1980). When engaged in the implementation of laws, city or executive officers are not absolutely immune. See e.g. Latino Political Action Comm. v. City of Boston, 581 F.Supp. 478 (D.C.Mass.1984), aff'd, 784 F.2d 409 (1st Cir.1986).

Here, there is no allegation that the individuals named as defendants acted in any capacity other than their official ones. The City Council and the LWC have not been said to have implemented laws in violation of the constitutional rights of plaintiff.

It is also a point worthy of note that although municipalities are granted immunity from damages arising from their anti-competitive acts in violation of the antitrust laws under the Local Government Antitrust Act of 1964, 15 U.S.C. §§ 34-36, this act

in no way affects a plaintiff's ability to bring suit against a local government for injunctive relief against `threatened loss or damage by a violation of the antitrust laws' under Section 16 of the Clayton Act, 15 U.S.C. § 26. Nor does it prevent the award of reasonable attorney's fees to a plaintiff `substantially prevailing' in such a suit. In such injunctive actions, the defendant(s) would be forced to rely on traditional antitrust analysis, rather than the Local Antitrust Act, to seek immunity or to establish other defenses.

Sinel, The Lawful Regulation of Cable Television, 241 PLI/Pat 259, p. 44 (W...