Sacramento Cable Television v. City of Sacramento

• Decision Date: 20 September 1991
• Docket Number: No. C008372,C008372
• Citation: 286 Cal.Rptr. 470,234 Cal.App.3d 232
• Court: California Court of Appeals Court of Appeals
• Parties: , 19 Media L. Rep. 1532 SACRAMENTO CABLE TELEVISION et al., Plaintiffs and Appellants, v. CITY OF SACRAMENTO et al., Defendants and Respondents.

Page 470

286 Cal.Rptr. 470

234 Cal.App.3d 232, 19 Media L. Rep. 1532

SACRAMENTO CABLE TELEVISION et al., Plaintiffs and Appellants, v. CITY OF SACRAMENTO et al., Defendants and Respondents.

No. C008372.

Court of Appeal, Third District, California.

Sept. 20, 1991.

Rehearing Denied Oct. 16, 1991.

Review Denied Jan. 16, 1992.

Stephen J. Meyer, Dan L. Carroll, Downey, Brand, Seymour & Rohwer, Sacramento, and John B. Moorhead, Baker & Hostetler, Denver, Colo., for plaintiffs and appellants.

James Jackson, City Atty., Theodore H. Kobey, Jr., Asst. City Atty., Sacramento, and Richard R. Terzian, Margaret L. Oldendorf, Adams, Duque & Hazeltine, Los Angeles, for defendants and respondents.

Peter W. Michaels, Martin Kassman, Jonathan K. Sobel, Cooper, White & Cooper, San Francisco, Frank W. Lloyd, III, Diane B. Burstein, Caroline O. Roberts, Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, Washington, D.C., and Spencer R. Katz, Alan J. Gardner, Carrington F. Phillip, Oakland, Jeffrey Sinsheimer, Berkeley, for amicus curiae, California Cable Television Ass'n.

PUGLIA, Presiding Justice.

Plaintiffs Sacramento Cable Television (SCT) and Christine Barney appeal from a judgment dismissing their challenge to a tax imposed by defendant City of Sacramento (City) on users of cable television service. Plaintiffs contend the tax violates both the First Amendment to the United States Constitution and the franchise agreement between City and SCT. The trial court granted summary judgment to defendants, concluding the tax, which also applies to telephone, gas, and electric utilities, is one of general applicability and is rationally based. We shall affirm.

I

SCT is a California partnership engaged in the business of supplying cable television service. SCT supplies over 99 percent of the cable television service within City pursuant to a nonexclusive franchise agreement between City and SCT. Plaintiff Christine Barney is a resident of City and a subscriber to the cable television services of SCT. Defendant Michael Medema is the City revenue manager.

SCT's service is transmitted to subscribers from a central location through coaxial cables which are either attached to public utility poles, placed in conduits located in property owned by public utilities or over which public utilities have an easement, or placed in City street rights-of-way. The original grant of a cable franchise to SCT is embodied in a resolution of the Sacramento Metropolitan Cable Television Commission and City Ordinance No. 81-103, which added Chapter 20 to the City Code. Section 20.600 of the City Code requires SCT to pay franchise fees to City "[f]or the use of the streets and for the purposes of providing revenue with which to defray the costs of regulation arising out of issuance of franchises ... and promoting, assisting and financing community use programming and other cable services of a public character."

The relationship between SCT and City is also governed by Ordinance No. 88-076, which amended portions of Ordinance No. 81-103. Section 8.01 of the franchise resolution and amended franchise ordinance provides in part: "this Amended and Restated Resolution shall operate to preclude the Public Entities from imposing any monetary or property obligation on the Franchise Entities based on their being cable companies or cable television operators, or on their subscribers by reason of their status as such, excepting any tax, fee or assessment of general applicability."

City imposes a sales tax of 1 percent on the sale of tangible personal property (City Code, § 41.15) and a comparable use tax on the use of tangible personal property (City Code, § 41.16). This includes books, video tapes and audio tapes but does not include newspapers, periodicals, radio transmission, single channel distribution systems, satellite master antenna systems, or multi-point microwave distribution systems. City imposes a 5 percent tax on the price of admission to live entertainment events where the price exceeds $10 and to closed circuit transmission of live entertainment events. (City Code, § 41.92.)

Prior to enactment of Ordinance No. 89-047, article VI of the City Code (§ 41.50, et seq.) imposed a utility users tax of 7- 1/2 percent on the use of telephone, gas, and electric service. This tax is paid by the user of the service. Ordinance No. 89-047 amended various sections of article VI and added section 41.54-2, which imposes the same 7- 1/2 percent tax on the use of cable television service. Neither SCT nor its subscribers, nor the providers or customers of telephone, electric or gas service are subject to either the City's sales or use tax.

SCT filed this action seeking declaratory and injunctive relief to prohibit enforcement of the utility tax on cable television service. The matter was submitted on cross motions for summary judgment, a stipulation of undisputed facts, and declarations. On December 12, 1989, the trial court granted defendants' motion as previously indicated. Judgment of dismissal was entered December 28, 1989.

II

The First Amendment to the United States Constitution, made applicable to the states through the Fourteenth Amendment, prohibits the enactment of any law "abridging the freedom of speech, or of the press...." (Douglas v. Jeannette (1943) 319 U.S. 157, 162, 63 S.Ct. 877, 880, 87 L.Ed. 1324, 1328.) This limitation applies to municipal ordinances. (Lovell v. Griffin (1938) 303 U.S. 444, 450, 58 S.Ct. 666, 668, 82 L.Ed. 949, 952.) Disseminators and subscribers of cable television service are engaged in protected First Amendment "speech" and are therefore entitled to protection. (Leathers v. Medlock (1991) 499 U.S. 439, 111 S.Ct. 1438, 113 L.Ed.2d 494 (hereafter Leathers ); Los Angeles v. Preferred Communications (1986) 476 U.S. 488, 494-495, 106 S.Ct. 2034, 2037-2038, 90 L.Ed.2d 480, 487.)

However, the First Amendment does not insulate the press from taxation. "The state has the power to enact statutes which impose taxes on all businesses, including the press, in order to generate revenue so long as those laws operate evenhandedly upon all similarly situated. [Citation.]" (Times Mirror Co. v. City of Los Angeles (1987) 192 Cal.App.3d 170, 179, 237 Cal.Rptr. 346 (hereafter Times Mirror ).) It is only when a taxing scheme singles out protected speakers or differentiates between protected speakers and others or among protected speakers that First Amendment concerns arise.

For example, in Minneapolis Star v. Minnesota Comm. of Rev. (1983) 460 U.S. 575, 103 S.Ct. 1365, 75 L.Ed.2d 295, a tax on the use by newspaper publishers of ink and paper was found to implicate First Amendment rights both because it singled out the press for different tax treatment and because it differentiated among First Amendment speakers. Not only did the tax apply solely to newspapers but it exempted the first $100,000 of ink and paper used, thereby singling out only a few large newspapers to bear the full burden of the tax.

In Festival Enterprises, Inc. v. City of Pleasant Hill (1986) 182 Cal.App.3d 960, 227 Cal.Rptr. 601, the Court of Appeal found an admissions tax, which effectively applied only to the two movie theaters run by the plaintiff, raised First Amendment considerations despite the broader wording of the ordinance creating the tax. Similarly, in United Artists Communications, Inc. v. City of Montclair (1989) 209 Cal.App.3d 245, 257 Cal.Rptr. 124, an admissions tax, 90 percent of the burden of which fell on two movie theaters operated by the plaintiff and two adult bookstores, was found to implicate the First Amendment.

"The danger from a tax scheme that targets a small number of speakers is the danger of censorship; a tax on a small number of speakers runs the risk of affecting only a limited range of views. The risk is similar to that from content-based regulation: it will distort the market for ideas. 'The constitutional right of free expression is ... intended to remove governmental restraints from the arena of public discussion, putting the decision as to what views shall be voiced largely into the hands of each of us ... in the belief that no other approach would comport with the premise of individual dignity and choice upon which our political system rests.' [Citation.]" (Leathers, 499 U.S. at p. ----, 111 S.Ct. at pp. 1444-1445, 113 L.Ed.2d at p. 505.)

Where a taxing scheme targets First Amendment speakers, it will be upheld only if the taxing entity demonstrates the scheme is necessary to serve a compelling interest which cannot be achieved by more general taxation. (Minneapolis Star, 460 U.S. at p. 585 fn. 7, 103 S.Ct. at p. 1372 fn. 7, 75 L.Ed.2d at p. 305.) In Minneapolis Star the only justification given for the discriminatory ink and paper tax was raising revenue. Because such interest could have been served as well by a more general tax which did not single out protected speakers, the court held it insufficient justification. (460 U.S. at pp. 582-585, 103 S.Ct. at pp. 1370-1372, 75 L.Ed.2d at pp. 303-305.)

Plaintiffs contend the tax here in question implicates First Amendment considerations because it treats cable television differently from other protected speakers and because it singles out SCT, which provides 99 percent of the cable service in the City. Therefore, according to plaintiffs, the sole basis for enactment of the tax, revenue generation, is insufficient justification and the tax must be struck down.

Were the tax here one imposed solely on cable television we might agree it cannot withstand constitutional scrutiny. Individualized treatment, which threatens individualized mistreatment and the consequent suppression of ideas, is at the heart of First Amendment concerns. (Minneapolis Star, 460 U.S. at p. 588, 103 S.Ct. at p. 1373, 75 L.Ed.2d at p. 307.) But the tax here is broader. Although referred to in Ordinance No. 89-047 as a "cable television use tax," the actual tax in issue is City's utility users tax (City Code, §...