Storer Cable Communications v. MONTGOMERY, ALA.
| Decision Date | 17 June 1993 |
| Docket Number | Civ. A. No. 90-T-958-N. |
| Citation | 826 F. Supp. 1338 |
| Parties | STORER CABLE COMMUNICATIONS, INC., et al., Plaintiffs, v. THE CITY OF MONTGOMERY, ALABAMA, et al., Defendants. |
| Court | U.S. District Court — Middle District of Alabama |
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James C. Cunningham, Jr., Terry S. Bienstock, Frates, Bienstock & Sheehe, Miami, FL, Robert A. Huffaker, Rushton, Stakely, Johnston & Garrett, Montgomery, AL, for plaintiffs.
Susan Russ Walker, Bradley Byrne, Miller, Hamilton, Snider & Odom, Tyrone C. Means, Mark Englehart, Cynthia Clinton, Anita Kelly, Thomas, Means & Gillis, Montgomery, AL, for defendant Montgomery Cablevision and Entertainment, Inc.
Robert A. Huffaker, Rushton, Stakely, Johnston & Garrett, P.A., Montgomery, AL, Terry S. Bienstock, Philip J. Kantor, Ira Hershkowitz, Bienstock & Clark, Miami, FL, for counterclaim defendants Storer Cable Communications, Inc., Satellite Services, Inc., Tele-Communications, Inc. and ESPN, Inc.
Solomon S. Seay, Jr., Montgomery, AL, Alan Shor, John J. Dalton, Mark S. Vander-Broek, Jim Lamberth, Thomas E. Campbell, June Kirkland, Richard Ford, Troutman Sanders, Ralph Greil, Atlanta, GA, for counterclaim defendants Turner Broadcasting System, Inc., Turner Network Television, Inc. and Turner Cable Network Sales, Inc.
Stephen N. Dodd, Mary Elizabeth Culberson, Office of Atty. Gen., James Evans, Alabama State House, Montgomery, AL, for State of Alabama.
W. Joseph McCorkle, W. Joseph McCorkle, Jr., Maury D. Smith, Balch & Bingham, Montgomery, AL, for City of Montgomery.
Several cable television companies initially brought this lawsuit against defendant City of Montgomery, Alabama, challenging the legality of two municipal ordinances. The plaintiffs — Storer Cable Communications, Inc., ESPN, Inc., Satellite Services, Inc., and Turner Network Television, Inc. — contended that the ordinances violated a number of federal constitutional provisions and statutes, as well as Alabama law. Montgomery Cablevision Entertainment, Inc., a new local cable television operator in Montgomery, intervened as a defendant and filed a counterclaim against the plaintiffs and Tele-Communications, Inc., Turner Broadcasting Systems, Inc., and Turner Cable Network Sales, Inc. As the counterclaim plaintiff, Montgomery Cablevision charges these counterclaim defendants with violating the following federal, state, and municipal antitrust laws: §§ 1 & 2 of the Sherman Act, 15 U.S.C.A. §§ 1, 2; 1975 Ala.Code § 6-5-60; Alabama state common law governing monopolies; and City of Montgomery Ordinance 48-90 §§ 3, 4. The cable company also charges the counterclaim defendants with the state-law tort of intentional interference with business relations. Montgomery Cablevision seeks declaratory and injunctive relief and treble damages pursuant to § 4 of the Clayton Act, 15 U.S.C.A. § 15(a).1
On October 9, 1992, this court entered an order regarding the validity of the two municipal ordinances. The court found that federal law preempted certain aspects of the ordinances, but declared the ordinances to be valid in other respects. See Storer Cable Communications, Inc. v. City of Montgomery, 806 F.Supp. 1518 (M.D.Ala.1992) (Thompson, J.). This cause is again before the court, this time on motions to dismiss filed pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure by the counterclaim defendants. They contend that Montgomery Cablevision has failed "to state a claim upon which relief can be granted" in its counterclaim. Fed.R.Civ.P. 12(b)(6). For the reasons that follow, the court concludes that the motions to dismiss should be denied.
The allegations of Montgomery Cablevision's counterclaim are as follows. The production, transmission, distribution, and sale of cable television programming is a major industry in the United States, grossing billions of dollars in annual sales. This industry affects interstate commerce, and the parties involved in this litigation transact business in interstate commerce.
Cable television programming is produced by "program suppliers" or "programming services," such as Turner Network and ESPN, who develop and produce a variety of television programs. Program suppliers contract with distributors, such as Satellite Services, to distribute their programs to cable television "exhibitors" or "operators," who own local cable television systems. Cable television operators, such as Storer Cable, Montgomery Cablevision, and Tele-Communications, receive the programming by satellite and exhibit the programming to subscribers on local cable television systems for a monthly fee in particular service areas. The provision of programming to subscribers is often referred to as "retail cable sales."
According to Montgomery Cablevision, most local markets for cable television service in the United States are de facto monopolies. Because the market for retail sales of cable television is a capital intensive industry, there are substantial barriers to entry into the market. Moreover, "overbuilders," or new entrants into local cable services markets, have had to face a variety of anti-competitive practices by incumbent monopolists intent on foreclosing markets to the newly franchised cable operators.2 For example, existing local operators secure exclusive dealing contracts with program suppliers to shut new competitors out of programming critical to their ability to compete with the incumbent cable franchise. In some cases, these exclusive dealing contracts are carried out by a program supplier who is vertically integrated with a local cable system operator or who has ownership or managerial interests in it.
In 1990, Montgomery Cablevision was awarded a new franchise by the City of Montgomery to provide cable television services to subscribers in the Montgomery area. It is currently in the start-up phase of providing such services and intends to compete directly with Storer Cable, which has been providing cable television services to subscribers in the Montgomery area since 1976. Montgomery Cablevision plans to offer consumers more channels, superior picture quality, more responsive customer service, and competitive prices in the retail cable television services market.3 Before Montgomery Cablevision received its franchise in 1990, Storer Cable was the only cable television company operating in the Montgomery area. Storer Cable currently provides service to 92% of the homes in the Montgomery area that subscribe to cable television.
To begin providing competitive cable services, Montgomery Cablevision has acquired property and equipment, built and installed a receiving station, contracted for system mapping, design, and engineering, hired and trained sales people, placed advertisements, and begun selling subscriptions in certain areas of Montgomery. It has also attempted to secure long-term contracts with suppliers of attractive and competitive cable programs. For example, in May 1990, Montgomery Cablevision approached Turner Cable Network Sales, a company engaged in the business of programming sales, to request an affiliation contract to carry the Turner Network program service. Turner Network, a cable television program supplier, produces a television program service consisting of Metro-Goldwyn-Mayer ("MGM") movies, dramatic shows, situation comedies, game shows, special children's programming, entertainment programming, and sports programs, including National Football League ("NFL") games and National Basketball Association ("NBA") playoff games.4 Later that month, Turner Cable Network Sales informed Montgomery Cablevision that it would not sell the Turner Network program service to the cable company. In August 1990, Montgomery Cablevision made a second request for a contract to carry the Turner Network program service, which was again denied. On or about the time that Montgomery Cablevision requested a contract to carry the Turner Network program service, Storer Cable entered into an exclusive contract for it. The Turner companies are allegedly vertically integrated with Storer Cable or otherwise financially or managerially related or affiliated with it.5
In May 1990, Montgomery Cablevision requested an affiliation contract also from ESPN to carry ESPN's NFL Football Package. This package consists of three preseason NFL games, eight regular season Sunday night NFL games, and the postseason Pro Bowl. ESPN refused to sell its NFL package to Montgomery Cablevision. In August 1990, Montgomery Cablevision again requested the NFL package from ESPN, which was again denied. At the same time, Storer Cable received an affiliate contract for the NFL package from ESPN. Moreover, Storer Cable entered into an exclusive contract with ESPN, which provided that none of Storer Cable's competitors in the Montgomery area would receive ESPN's football package.
According to Montgomery Cablevision, ESPN's football programming and the Turner Network program service — in particular, the Sunday night NFL games — are demanded or desired by a substantial number of current and potential cable subscribers in the Montgomery area. Moreover, this particular programming is not available from any other cable programming source. Montgomery Cablevision maintains that, because of the exclusive contracts, it has been placed at a competitive disadvantage with regard to Storer Cable, which is able to offer this highly desirable programming to its customers. It has encountered substantial difficulty in signing up subscribers and obtaining financing; it has also suffered a reduction in the value of its business exceeding three million dollars.6
Montgomery Cablevision contends that not only has it suffered injuries but the exclusive dealing arrangements among the counterclaim defendants have hindered and restrained competition among cable operators in the...
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