Time Warner v. Everest Midwest Licensee

• Decision Date: 27 August 2004
• Docket Number: No. 03-3005.,03-3005.
• Parties: TIME WARNER ENTERTAINMENT COMPANY, L.P., a Delaware limited partnership; and Liberty Cable of Missouri, Inc., a Missouri corporation, Plaintiffs-Counter Defendants-Appellants, v. EVEREST MIDWEST LICENSEE, L.L.C., dba Everest Connections Corp., Defendant-Appellee, Atrium Partners, L.P., a Kansas limited partnership, Defendant-Counter Claimant-Appellee. National Multihousing Council, Community Associations Institute, Institute of Real Estate Management, National Apartment Association, National Association of Real Estate Investment Trusts, Real Estate Roundtable, and Real Access Alliance, Amici Curiae.
• Court: U.S. Court of Appeals — Tenth Circuit

381 F.3d 1039

TIME WARNER ENTERTAINMENT COMPANY, L.P., a Delaware limited partnership; and Liberty Cable of Missouri, Inc., a Missouri corporation, Plaintiffs-Counter Defendants-Appellants, v. EVEREST MIDWEST LICENSEE, L.L.C., dba Everest Connections Corp., Defendant-Appellee Atrium Partners, L.P., a Kansas limited partnership, Defendant-Counter Claimant-Appellee National Multihousing Council, Community Associations Institute, Institute of Real Estate Management, National Apartment Association, National Association of Real Estate Investment Trusts, Real Estate Roundtable, and Real Access Alliance, Amici Curiae.

No. 03-3005.

United States Court of Appeals, Tenth Circuit.

August 27, 2004.

Appeal from the United States District Court for the District of Kansas, Carlos Murguia, J.

COPYRIGHT MATERIAL OMITTED

Michael W. Quinn (Bernard J. Rhodes, Lathrop & Gage, L.C., Kansas City, MO, with him on the briefs), Time Warner Cable, Stamford, CT, for the Plaintiffs-Appellants.

Lee M. Smithyman (Rachel Lipman Reiber, Everest Midwest Licensee, L.L.C., Kansas City, MO, with him on the brief), Smithyman & Zakoura, Chartered, Overland Park, KS, for the Defendant-Appellee.

Matthew C. Ames, Gerard Lavery Lederer, Miller & Van Eaton, P.L.L.C., Washington, DC; Roger Platt, Vice President & Counsel, The Real Estate Roundtable, Washington, DC; Molly Foley-Healey, Community Associations Institute, Alexandria, VA; Tony Edwards and Robert Cohen, National Association of Real Estate Investment Trusts, Washington, DC, on the brief for the Amici Curiae.

Before LUCERO, McKAY, and HARTZ, Circuit Judges.

LUCERO, Circuit Judge.

At issue in this case is the application of the Federal Communication Commission's ("FCC") cable television "inside wiring rules" under an agreement which grants an incumbent cable provider, Time Warner, a license to maintain the cable wiring its predecessor installed within an apartment complex, The Atriums. The Atriums argues that the license is limited to the wiring currently being used to provide cable television services, and therefore that it may invoke an FCC regulation which requires the incumbent cable provider to sell, abandon, or remove wiring the incumbent cable provider no longer has an legally enforceable right to maintain. See 47 C.F.R. § 76.804. The district court agreed, finding that the license between Time Warner and The Atriums did not extend to wiring not in use providing cable services, and accordingly that The Atriums could invoke the regulations against Time Warner. Exercising jurisdiction under 28 U.S.C. § 1291, we AFFIRM.

I

In April 1987, Joseph Tutera, representing The Atriums, a multi-unit retirement complex, entered into a non-exclusive license agreement with TeleCable of Overland Park ("TeleCable"), Time Warner's predecessor, to provide cable television to The Atriums. The Atriums and TeleCable (now Time Warner¹) executed the standard license agreement, without change; according to the agreement Time Warner received "the right, license and permission to install, operate and maintain" the equipment necessary "to provide CATV and Pay TV services" to The Atriums' tenants. (I App. at 17.) By the contract's terms Time Warner retains property ownership of the equipment installed.

Pursuant to the agreement, Time Warner installed a cable distribution system at The Atriums. There are three general parts to a cable distribution system. First, there is the riser, a large cable that runs into the building through a utility closet on the ground floor, and up through utility closets on each of the floors. Next runs the "home run wiring" at issue in this litigation, which consists of wires that run from the riser through the hallway ceilings on each floor and toward each individual apartment. Finally, there are "home wires"; approximately twelve inches outside each apartment the "home run wiring" becomes "home wires" (there is no physical demarcation between "home run wires" and "home wires"). The "home wires" run into each individual apartment unit. See 47 C.F.R. § 76.5(ll-mm).

In June 2002, The Atriums sent a letter to Time Warner, stating that it intended to allow Everest Midwest Licensee ("Everest"), which received a franchise to provide telecommunication services in Overland Park in the summer of 2001, to compete with Time Warner in the provision of cable television and high speed internet services in The Atriums. To accomplish this goal, The Atriums demanded Time Warner elect to abandon, sell, or remove its home run wires in The Atriums which were not currently being used by Time Warner subscribers, pursuant to recently enacted FCC regulations, specifically 47 C.F.R. § 76.804(b). Section 76.804(b)(1) states:

Where an MVPD [multichannel video programming distributor] owns the home run wiring in an MDU [multiple dwelling unit] and does not (or will not at the conclusion of the notice period) have a legally enforceable right to maintain any home run wire dedicated to an particular unit on the premises against the MDU owner's wishes, the MDU owner may permit multiple MVPDs to compete for the right to use the individual home run wires dedicated to each unit in the MDU. . . . The incumbent MVPD will then have ... to provide a single written election to the MDU owner as to whether, for each and every one of its home run wires dedicated to a subscriber who chooses an alternative provider's service, the incumbent MVPD will: remove the wiring and restore the MDU building consistent with state law; abandon the wiring without disabling it; or sell the wiring to the MDU owner. If the MDU owner refuses to purchase the home run wiring, the MDU owner may permit the alternative provider to purchase it. If the alternative provider is permitted to purchase the wiring, it will be required to make a similar election. . . for each home run wire solely dedicated to a subscriber who switches back from the alternative provider to the incumbent MVPD.

47 C.F.R. § 76.804(b)(1).

In its letter invoking § 76.804(b), The Atriums expressed hope that Time Warner would agree to sell the home run wiring to Everest, as it perceived that such an outcome would "facilitate the ability of tenants to switch from Time Warner to Everest and vice versa on a seamless basis." (I App. at 165.) Time Warner refused, arguing that an MDU owner may invoke the regulations only when the incumbent provider lacks a legally enforceable interest in maintaining the home run wires on the property. Claiming that it retained a legally enforceable interest, Time Warner relied on its interpretation of the license agreement between The Atriums and Time Warner, which stated, in part, that:

1. Subject to the terms and conditions hereinafter set out, Owner [The Atriums] hereby grants to TeleCable [Time Warner] the right, license and permission to install, operate and maintain such of the facilities as TeleCable [Time Warner] deems necessary or desirable in or on the Owner's [The Atriums'] property and in the Project in order to provide CATV and Pay TV services to tenants in the Project. TeleCable [Time Warner] shall have the right to enter the Project at any time to perform maintenance on and make repairs and replacements of the facilities, or any part thereof, and to install or disconnect customers.

(I App. at 17.) As a result, Time Warner concluded that under the license agreement it retained a legal right to maintain all of its home run wiring. Under this interpretation of the agreement, The Atriums could allow Everest into the building to construct its own cable services facilities, i.e., lay its own wiring; however, Time Warner was not obligated under § 76.804(b) to abandon, sell, or remove its home run wiring in The Atriums.

Time Warner proceeded to file suit in federal district court in July 2002, seeking a declaratory judgment that 47 C.F.R. § 76.804(b) did not apply to its home run wiring in The Atriums.² Specifically, Time Warner maintained that it had a preexisting, legally enforceable right to maintain its wires on the property. Time Warner also requested a preliminary injunction preventing The Atriums from invoking the regulations. The parties agreed to consolidate the hearing on Time Warner's preliminary injunction motion with a hearing on the merits. Time Warner Entertainment Co., LP v. Atriums Partners, LP, 232 F.Supp.2d 1257, 1258 (D.Kan.2002). On November 26, 2002, the district court denied the request for the preliminary injunction and found that Time Warner had a legal right only to the home run wires running to apartments of current Time Warner subscribers. Id. at 1268. For the home run wires running to apartments of non-subscribers, the district court found that The Atriums could invoke § 76.804(b), thereby requiring Time Warner to abandon, sell, or remove those home run wires. Id. at 1269. Time Warner appeals.

II

Because the federal home run wiring regulations only apply if an incumbent provider no longer has a legally enforceable right to maintain its home run wires in an MDU, our interpretation of the license agreement necessarily implicates whether the federal regulations apply in this circumstance. However, in addition to analyzing the license agreement between Time Warner and The Atriums, we must also interpret the federal regulations in order to determine if the regulations apply to the facts before us. The FCC regulations contain two provisions potentially relevant to the home run wiring at issue: the building-by-building provision and the unit-by-unit provision. See 47 C.F.R. § 76.804(a) & (b). Under either of the two home run wiring provisions, Time Warner is not obligated to abandon, sell, or remove its home run wiring if it has a legally enforceable right to either remain on the premises (in the building-by-building context) or maintain any particular home run wiring (in the unit-by-unit context). Id. Accordingly, we begin with an analysis of the license agreement between Time Warner and The Atriums,...