Union CATV, Inc. v. City of Sturgis, Ky., 96-5053

• Decision Date: 24 February 1997
• Docket Number: No. 96-5053,96-5053
• Citation: 107 F.3d 434
• Parties: UNION CATV, INC., Plaintiff-Appellant, v. CITY OF STURGIS, KENTUCKY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 434

107 F.3d 434

UNION CATV, INC., Plaintiff-Appellant, v. CITY OF STURGIS, KENTUCKY, Defendant-Appellee.

No. 96-5053.

United States Court of Appeals, Sixth Circuit.

Argued Dec. 2, 1996.

Decided Feb. 24, 1997.

Ellen A. Efros (argued and briefed), Vorys, Sater, Seymour & Pease, Washington, DC, J. Christopher Hopgood, Dorsey, Sullivan, King, Gray & Norment, Henderson, KY, for Union CATV, Inc.

Frederic J. Cowan (argued and briefed), Lynch, Cox, Gilman & Mahan, Louisville, KY, Brian T. Grogan, Moss & Barnett, Minneapolis, MN, for City of Sturgis, Ky.

Sally Williamson, Cameron F. Kerry, Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, Boston, MA, for amicus curiae Cable Telecommunications Association (CATA).

Allen R. Snyder, Washington, DC, for amicus curiae National Cable Television Association (NCTA), Kentucky Cable Television Association (KCTA).

Peter Armstrong, John W. Pestle, Patrick A. Miles, Varnum, Riddering, Schmidt & Howlett, Grand Rapids, MI, for amicus curiae National League of Cities, United States Conference of Mayors, National Association of Telecommunications Officers and Advisors, Kentucky League of Cities, Michigan Municipal League, Tennessee Municipal League, Ohio Municipal League and Michigan Chapter, National Association of Telecommunications Officers and Advisors.

Before: MERRITT, KENNEDY, and GUY, Circuit Judges.

KENNEDY, Circuit Judge.

Plaintiff Union CATV, Inc. ("Union") sought judicial review, pursuant to the Cable Communications Policy Act of 1984 ("Cable Act"), 47 U.S.C. §§ 521-559 (1988 & Supp. V 1993), of the decision by the City of Sturgis to deny Union's proposal for renewal of a cable television franchise. The District Court granted summary judgment for the City. For the following reasons, we AFFIRM.

I.

Sturgis (the "City") is a municipal corporation located in Union County, Kentucky. In 1979, the City granted Union a franchise to provide cable television service in the City for a term of fifteen years. The franchise was set to expire on October 8, 1994.

On September 11, 1991, Union notified the City pursuant to 47 U.S.C. § 546(a)(1) of its intent to seek renewal of its cable franchise. After receiving the notice, the City commenced the process of identifying its cable-related needs and evaluating Union's performance under its current franchise, as required by § 546(a)(1). The City conducted public hearings to obtain input from citizens concerning the franchise renewal. It mailed surveys to citizens in the City to obtain information concerning their needs and interests. On May 31, 1994, Union submitted a formal proposal for franchise renewal.

As of the time Union's franchise was due to expire, the City had not indicated whether it would accept or reject Union's proposal to renew the franchise. ¹ On April 11, 1995, Union filed this action for declaratory judgment and injunctive relief. At a hearing on April 25, 1995, the parties agreed to continue the process for franchise renewal as set forth in the Cable Act, but in an accelerated form. The parties agreed that the City would complete its identification of the community needs and interests as required by § 546(a) and that Union would then have an opportunity to submit its proposal in response. Union waived its right to a full administrative proceeding under § 546(c)(1) and agreed to a "paper hearing" instead.

On May 26, 1995, the City adopted its Needs Assessment Report, which identified the future cable-related community needs and interests. Union subsequently submitted a revised proposal for franchise renewal. On July 10, 1995, the City adopted a resolution denying Union's renewal proposal on the ground that the revised proposal failed to meet the identified cable-related community needs and interests. Two weeks later, Union filed an amended complaint with the District Court, alleging that the City's denial was not supported by a preponderance of the evidence as required by § 546(e)(2)(B). On December 29, 1995, the District Court granted the City's motion for summary judgment.

II.

Union claims on appeal that the District Court erred in refusing to conduct any review of the City's identification of its needs and interests. It is Union's position that at least two of the cable needs identified by the City are not supported by the evidence in the record: the City's demand that every elementary school classroom be wired for cable service, and the City's demand that the length of the franchise term be limited to five years. The District Court held that its role under 47 U.S.C. § 546(e)(2)(B) was to review whether a preponderance of the evidence supported the City's determination that Union's proposal was not reasonable to meet the City's cable-related needs and interests as those needs and interests were identified by the City. We review this question of statutory construction de novo. See Douglas v. Babcock, 990 F.2d 875, 877 (6th Cir.1993).

One purpose of the Cable Act is to "establish an orderly process for franchise renewal which protects cable operators against unfair denials of renewal." 47 U.S.C. § 521(5). Section 546 of the Cable Act sets forth the procedural requirements when a cable operator and a franchising authority cannot agree to renewal of a franchise. ² Between thirty and thirty-six months prior to the expiration of the franchise, the franchising authority may commence a proceeding to review the cable operator's past performance and to identify the future cable-related community needs and interests. 47 U.S.C. § 546(a). The public must be given appropriate notice of the proceeding and afforded an opportunity to participate. Upon the completion of this identification stage, the operator may submit a proposal for franchise renewal. 47 U.S.C. § 546(b). Within four months following the operator's submission of its renewal proposal, the franchising authority must renew the franchise or issue a "preliminary assessment" that the franchise should not be renewed. 47 U.S.C. § 546(c)(1). If the franchising authority decides not to renew the cable franchise, the operator may demand an administrative proceeding to consider whether the denial was justified. 47 U.S.C. § 546(c)(1). The public must be given notice of the administrative proceeding, and a transcript must be made of the proceeding. 47 U.S.C. § 546(c)(1)-(2). The cable operator may introduce evidence regarding both the franchising authority's needs and its proposal. At the completion of the administrative proceeding, the franchising authority must issue a written decision, based on the record of the administrative proceeding, granting or denying the renewal proposal. 47 U.S.C. § 546(c)(3). In the instant case, the record resulted from a "paper hearing." The City and Union agreed that Union would waive its right to a full administrative proceeding and submit its proposal, along with any disagreement with the City's identified cable-related needs and interests, on a paper record.

The Cable Act limits the grounds on which a franchising authority may deny a cable operator's proposal for franchise renewal. Under 47 U.S.C. § 546(c)(1), a franchising authority must consider whether

(A) the cable operator has substantially complied with the material terms of the existing franchise and with applicable law;

(B) the quality of the operator's service, including signal quality, response to consumer complaints, and billing practices, but without regard to the mix or quality of cable services or other services provided over the system, has been reasonable in light of community needs;

(C) the operator has the financial, legal, and technical ability to provide the services, facilities, and equipment as set forth in the operator's proposal; and (D) the operator's proposal is reasonable to meet the future cable-related community needs and interests, taking into account the cost of meeting such needs and interests.

47 U.S.C. § 546(c)(1). A franchising authority may deny a renewal proposal only if it makes an adverse finding with respect to one or more of these four factors. 47 U.S.C. § 546(d). The administrative proceeding provided for in § 546(c) is intended to ensure that the denial of a renewal proposal is based on at least one of these factors. In the instant case, the City relied upon § 546(c)(1)(D) as the sole basis for denying Union's proposal for renewal of its franchise: the City determined that Union's proposal failed to meet the City's future cable-related needs and interests.

A cable operator whose proposal for renewal has been denied may, following the administrative proceeding provided for in § 546(c), appeal to a state or federal district court. ³ 47 U.S.C. § 546(e). The court may grant appropriate relief if it finds that

the operator has demonstrated that the adverse finding of the franchising authority with respect to each of the factors described in subparagraphs (A) through (D) of subsection (c)(1) on which the denial is based is not supported by a preponderance of the evidence, based on the record of the proceeding conducted under subsection (c).

47 U.S.C. § 546(e)(2)(B). The parties disagree on the scope of the district court's review and the application of § 546(e)(2)(B) to § 546(c)(1)(D). Union contends that § 546(e)(2)(B) requires a district court reviewing the City's denial of its renewal proposal under § 546(c)(1)(D) to determine first whether Union has demonstrated that the City's identified needs and interests are not supported by a preponderance of the evidence, and second whether Union has demonstrated that the City's finding that Union's renewal proposal is not reasonable to meet the City's needs and interests is not supported by a preponderance of the evidence, excluding any needs that the court has found not to be supported by the evidence. ⁴ The City argues that the District Court was correct to accept the judgment of the City as to its cable-related needs and interests, whether supported by the record or not, and that judicial...