Teleprompter of Erie, Inc. v. City of Erie

• Citation: 537 F. Supp. 6
• Decision Date: 11 May 1981
• Docket Number: Civ. A. No. 81-17 Erie.
• Parties: TELEPROMPTER OF ERIE, INC., a corporation, Plaintiff, v. The CITY OF ERIE, a municipal corporation, and its elected officials, officers and agents, the Council of the City of Erie, a legislative body, Larry D. Meredith, President of The Council of the City of Erie, in his representative capacity and as an individual, Erie Telecommunications, Inc., a corporation and Greater Erie Economic Development Corporation, a corporation, Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

537 F. Supp. 6

TELEPROMPTER OF ERIE, INC., a corporation, Plaintiff, v. The CITY OF ERIE, a municipal corporation, and its elected officials, officers and agents, the Council of the City of Erie, a legislative body, Larry D. Meredith, President of The Council of the City of Erie, in his representative capacity and as an individual, Erie Telecommunications, Inc., a corporation and Greater Erie Economic Development Corporation, a corporation, Defendants.

Civ. A. No. 81-17 Erie.

United States District Court, W. D. Pennsylvania.

May 11, 1981.

COPYRIGHT MATERIAL OMITTED

William Burke, Gregory Harvey, Philadelphia, Pa., for plaintiff.

Harold Schmidt, Pittsburgh, Pa., John Quinn, Jr., Erie, Pa., for defendant ETI.

David Ungerman, Stephen H. Hutzelman, Erie, Pa., for defendant Larry Meredith.

Thomas Ridge, Erie, Pa., for defendant GEEDC.

John R. Wingerter, Erie, Pa., for defendant City of Erie.

MEMORANDUM OPINION

KNOX, District Judge.

This suit arises out of a vote by the Council of the City of Erie on November 5, 1980 to award the Erie cable television franchise to Erie Telecommunications, Inc. (ETI). Plaintiff, Teleprompter of Erie, Inc., a Pennsylvania corporation competing for the cable franchise, filed this complaint on January 22, 1981 against the City of Erie, the Council of the City of Erie, Councilman Larry Meredith and two Pennsylvania corporations, ETI and Greater Erie Economic Development Corporation (GEEDC) alleging denial of equal protection and due process by the defendants during the bid procurement and award process. Plaintiff further alleges that the award of the contract to ETI was the result of corrupt influences in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961 et seq. Jurisdiction is predicated on the Civil Rights Act of 1871, 42 U.S.C. § 1983, as amended, and RICO, 18 U.S.C. § 1961 et seq. A pendant state claim is also asserted.

Prior to filing this suit in federal district court, plaintiff filed an action in the Court of Common Pleas of Erie County against the City of Erie and Larry D. Meredith on November 6, 1980. (Equity Action No. 159-1980). On November 25, 1980, ETI intervened in that action and on December 5, 1980, all defendants filed preliminary objections to plaintiff's complaint. Argument on those objections was scheduled for February 25, 1981. After deciding that federal court provided a preferable forum, plaintiff filed the instant action on January 22, 1981 and filed a Praecipe to Discontinue the state court action on January 26, 1981. A petition to strike the state court discontinuance by the defendants is still pending before that court.

On March 9, 1981, the City of Erie filed a Motion to Dismiss the instant complaint and on March 10, ETI filed a Motion to Dismiss, to Strike and, in the Alternative, for Abstention in which defendant GEEDC joins. Lengthy arguments were heard on April 7, 1981, all briefs have now been received by the court and the matter is now ready for disposition.

Factual Background

When passing on motions to dismiss, we must take as true the well-pleaded allegations of the complaint. Scheuer v. Rhodes, 416 U.S. 232, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974); Lasher v. Shafer, 460 F.2d 343 (3d Cir. 1972). In Count I of the complaint, plaintiff alleges that the City of Erie and the City Council awarded the cable communications system contract in a discriminatory, arbitrary and unlawful manner by improperly evaluating plaintiff's proposal, by affording ETI and not plaintiff the opportunity to amend its proposal and to submit an alternative proposal and by failing to grant the award to the best and lowest responsible bidder. Plaintiff alleges that this action was taken in violation of its constitutional rights to due process and equal protection of the laws as guaranteed by the Fourteenth Amendment of the United States Constitution. In Count II, plaintiff charges that the corporate defendants and Councilman Meredith conspired in a preconceived scheme to unlawfully award the contract to ETI in violation of plaintiff's constitutional rights. In Count III it is alleged that, as part of this scheme, employees or agents of ETI and GEEDC attended a private fund-raiser for Meredith on October 20, 1980 and contributed money in exchange for Meredith's favorable exercise of discretion as a public official in violation of RICO. Count IV involves numerous pendant state claims which will rise or fall on the disposition of the first three counts.

Defendants seek dismissal of the complaint on various grounds. They challenge counts I and II, the constitutional claims, for lack of subject matter jurisdiction under Fed.R.Civ.P. 12(b)(1) and 12(b)(6) contending that plaintiff has no recognized property right in the contract and that the complaint fails to show that the defendants acted under color of state law. Defendants move to dismiss the RICO allegations in count III for failure to allege facts: (1) establishing a "pattern of racketeering activity;" (2) showing the necessary investment facts; (3) establishing that ETI is an enterprise which can be liable under RICO; and (4) establishing that ETI is an enterprise which is part of organized crime.

In the alternative, defendants ask us to invoke the doctrine of abstention and decline to entertain this action, or stay it pending determination in state court of ETI's petition to strike the praecipe for discontinuance. In the further alternative, the corporate defendants move to strike count III of the complaint and the municipal defendants move to strike the entire complaint as verbose, scandalous and impertinent.

Abstention

It is logical to address the abstention issue at the outset, since if we decline to entertain this suit we can save ourselves considerable effort. Unfortunately, we do not feel that this is a proper case for the exercise of the doctrine of abstention. Abstention is usually ordered on one of three grounds: (1) there exists an unsettled question of state law, the resolution of which by state courts would make unnecessary, or substantially affect, the ultimate resolution of a federal constitutional issue; (2) the controversy involves an issue of unique state concern having broad policy implications; or (3) to prohibit disruption of an on-going state judicial proceeding. See Three Rivers Cablevision v. City of Pittsburgh, 502 F.Supp. 1118, 1122 (W.D.Pa. 1980). Abstention from the exercise of federal jurisdiction is the exception and not the rule, and is only to be invoked in exceptional circumstances to clearly serve an important countervailing interest. It is unclear under which, if any, of these three circumstances defendants think this case falls. They urge us to abstain in order to avoid "duplicative litigation" since the original action is still pending in state court. However, we do not believe that their concern for judicial economy is genuine since the action is still pending in Erie County only by virtue of their efforts to keep it alive. The bulk of plaintiff's allegations involve questions of federal law and implicate state and local laws only as a means of determining the constitutional issues. There is nothing extraordinary or compelling about the state law questions to justify our abstention in this case, nor do we feel that duplicative litigation will result. Therefore, if jurisdiction is properly invoked, we will not abstain from hearing plaintiff's complaint merely because there is a pending petition to strike the state court discontinuance in the Court of Common Pleas of Erie County.

Property Right

Defendants challenge the sufficiency of counts I and II of the complaint on the grounds that plaintiff has no recognized property right as required by the Fourteenth Amendment. To bring an action within the scope of 42 U.S.C. § 1983, plaintiff must assert and prove that state action unjustly deprived it of a legally protected liberty or property interest. Plaintiff alleges a property interest in the award of the contract as the "best responsible bidder" under the Third Class City Code, 53 P.S. §§ 36901(b) and 36917. Defendants argue that the procedures in the Third Class City Code requiring that contracts be awarded to the best responsible bidder do not apply to the City's award of the cable franchise and therefore cannot give rise to a property right.

In a highly analogous suit brought by a disappointed bidder for the cable television contract in the City of Pittsburgh, another member of this court carefully analyzed, inter alia, whether such a plaintiff had a protected property right in the contract. Three Rivers Cablevision v. City of Pittsburgh, 502 F.Supp. at 1127-1132. After examining state and local laws regulating the award of the cable franchise, the court determined that plaintiff did have a protected interest in that award. In Three Rivers, the court relied on provisions in the City Code and the ordinance governing the terms of the cable contract requiring that the contract be awarded to the "lowest responsible bidder," while at the same time giving the city the right to reject all bids. Therefore, under Pennsylvania law, while the city was not under an obligation to award a cable television contract at all, the court held that if it did award a contract, it must exercise its discretion in a non-arbitrary fashion in determining which bidder was the lowest responsible one. Id. at 1130-1131.

Defendants contend that neither of the provisions of the Third Class City Code require competitive bidding under the circumstances of this case. Title 53 P.S. § 36901 provides in relevant part that:

all services and personal properties required by any city ... where the amount exceeds the sum of two thousand five hundred dollars, shall be furnished and performed under written contract, and the contract shall be awarded and given to the lowest responsible bidder ...

Defendant does not believe that this section is applicable because the award of...