Community Communications Company, Inc. v. City of Boulder, Colorado

630 F.2d 704, 1980 WL 579546

• Court: Court of Appeals for the Tenth Circuit
• Decided: October 1, 1980
• Docket: 80-1348
• Status: Published

Opinions

SETH, Chief Judge.

The plaintiff, who holds a non-exclusive franchise from the City of Boulder to engage in the cable television business in the City, brought this action against the City and another cable TV business entity. Some eleven causes of action are asserted. The complaint is directed to a City ordinance which placed a moratorium on expansion by the plaintiff in the City and to the action by the City in soliciting other cable TV business to engage in business under a proposed model ordinance. One of the causes of action asserted an antitrust violation, and this was the concern of the trial judge.

The plaintiff sought a temporary restraining order against the City to prevent its restrictions on expansion. The trial court granted the order on the basis of the antitrust allegations. The defendant City has taken this appeal from the order.

Before this court the central issue is whether the City is exempt from the antitrust laws.

There were two principal actions taken by the City which were considered by the trial court without really differentiating between them. One was the 90-day moratorium on expansion by the plaintiff, and the second was the model ordinance for cable television in Boulder with the solicitation of new businesses to enter the market under the proposed ordinance. The 90-day moratorium was imposed by the City by a general ordinance and by the enactment of an ordinance directed specifically to the nonexclusive franchise of plaintiff. The restraining order issued was in general terms and was directed to any unilateral action by the City to restrict or revoke the authority of plaintiff to “conduct” its business in Boulder.

The trial court combined the two elements in the following summary of what the court considered Boulder to have done:

“Most simply stated, Boulder has attempted to restrict the lawful, business of CCC by preventing it from obtaining new customers for three months while potential competitors submit proposals for serving those same customers. The motivation may be to foster competition in the long run, but the direct and immediate effect is a restraint of trade and an artificial and unreasonable geographical market allocation.”

The three-month period expired one day following the entry of the restraining order so we must assume that the trial court was considering the model ordinance as a substantial and continuing factor.

Of the model ordinance and the solicitation, the court was critical of the method or the way the matter was handled. The objection thus appears to be to the way it was done and not what was done. The following quotation from the trial court’s order demonstrates this aspect of the ruling and also shows how the trial court disposed of the Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315, contentions. The court of this said:

“Assuming that Boulder does have the claimed authority to regulate cable television within the City in the manner which would be required to impose all of the terms and conditions in the draft ordinance which was submitted to the plaintiff and other cable companies, the approach taken is not an appropriate exercise and articulation of a policy of regulation. It is not characteristic of utility regulation for the regulating authority to negotiate with those to be regulated and then formulate the final policy by exercising legislative power through an offer and acceptance mechanism. It might well be a different case if Boulder had enacted an ordinance articulating qualifying criteria for cable companies to do business in the City, with such other regulations as the City government might believe to be necessary and proper in the exercise of police power, and then to confront the contention that such an ordinance has an anticompetitive effect. That is not this case. Here, upon the present record, Parker v. Brown is wholly inapplicable and Boulder is subject to antitrust liability under City of Lafayette v. Louisiana Power & Light [435 U.S. 989, 98 S.Ct. 1123, 55 L.Ed.2d 364], supra for the actions which it has taken.”

We cannot agree that the method followed by the City somehow eliminated the Parker v. Brown considerations. We also cannot agree that the model ordinance with the solicitation and negotiations was somehow improper or beyond the authority of the City. This would not seem to be an issue in the case. The very same method apparently was followed by Vail in the Manor Vail case hereinafter considered, and the Colorado Supreme Court found nothing to comment on. In Manor Vail Condominium Ass’n v. Town of Vail, 604 P.2d 1168 (Colo.), the Supreme Court of Colorado considered a rather broad challenge to an ordinance of the Town of Vail regulating cable television. A franchise had there been granted to a subsidiary of the plaintiff in this action. The ordinance also fixed rates under Colorado “home rule” authority. The company there sought to support the ordinance as a proper function of the town. The challenge basically was to categories established for rate making under the Constitution. The Colorado Supreme Court upheld the rate making as a valid exercise of regulatory authority. The court treated the issues as it would any regulatory authority exercised by the State of Colorado. Thus strict scrutiny compared to “legitimate state interest,” was applied. The court also refers to the wide latitude to be afforded local governments in the exercise of police powers. The treatment of the rate issue in the Manor Vail case is significant to our problems here. The state court did not expressly discuss home rule, but assumed that the Town of Vail had full authority to regulate rates. The issue treated was how the regulation was carried out.

It is a mistake to generalize about “home rule” as it may be treated in opinions from different jurisdictions. We are concerned only with Colorado home rule under article XX, section 6, of the Colorado Constitution. The pertinent part reads:

“Section 6. Home rule for cities and towns. The people of each city or town of this state, having a population of two thousand inhabitants as determined by the last preceding census taken under the authority of the United States, the state of Colorado or said city or town, are hereby vested with, and they shall always have, power to make, amend, add to or replace the charter of said city or town, which shall be its organic law and extend to all its local and municipal matters. “Such charter and the ordinances made pursuant thereto in such matters shall supersede within the territorial limits and other jurisdiction of said city or town any law of the state in conflict therewith.

“It is the intention of this article to grant and confirm to the people of all municipalities coming within its provisions the full right of self-government in both local and municipal matters and the enumeration herein of certain powers shall not be construed to deny such cities and towns, and to the people thereof, any right or power essential or proper to the full exercise of such right.

“The statutes of the state of Colorado, so far as applicable, shall continue to apply to such cities and towns, except insofar as superseded by the charters of such cities and towns or by ordinance passed pursuant to such charters.”

The trial court said during the hearing as to authority for the City of Boulder:

“THE COURT: If you get down to the ultimate source of the power, and governmental concepts, Boulder is exercising authority of the people of the state of Colorado in matters of local concern within Boulder, because the people of the state of Colorado exercising their ultimate sovereign power put Article 20 in the Constitution of this state. They are not operating under some delegated authority from the representatives in the general assembly. They are operating on the basis of the ultimate sovereign authority of the people of the state. That’s what Colorado’s Article 20 is all about.”

The source of the authority of the City here is thus derived directly from the state constitution and is not a residual or delegated power.' See the references in City and County of Denver v. Henry, 95 Colo. 582, 38 P.2d 895, to the situations where an ordinance may even supersede a state statute as to matters of purely local concern. See also Service Oil Co. v. Rhodus, 179 Colo. 335, 500 P.2d 807, and Davis v. City and County of Denver, 140 Colo. 30, 342 P.2d 674. In any event, we are here concerned with City action in the absence of any regulation whatever by the State of Colorado. Under these circumstances there is no interaction of state and local regulation. We have only the action or exercise of authority by the City.

The Colorado Supreme Court has considered the scope of the Colorado version of home rule in several other cases including Veterans of For. Wars, Etc. v. Steamboat Springs, 575 P.2d 835 (Colo.), Security Life and Accident Co. v. Temple, 177 Colo. 14, 492 P.2d 63, and Four-County Met. C.I. Dist. v. Board of County Com’rs., 149 Colo. 284, 369 P.2d 67. In the Four-County Metro case the court stated that the home rule cities in Colorado as to local matters had the complete authority.

The franchise of the plaintiff cable TV company is necessarily limited to service within the City of Boulder. The services provided are limited to City residents through the use of City streets and ways. The matter or subject is a local one. The Colorado court in the Manor Vail opinion assumed that the rate regulation of cable TV was a matter of local concern in the home rule context. See also People v. Mountain States Tel. & Tel. Co., 125 Colo. 167, 243 P.2d 397. The Supreme Court in TV Pix, Inc. v. Taylor, 396 U.S. 556, 90 S.Ct. 749, 24 L.Ed.2d 746, affirmed a three-judge court decision (304 F.Supp. 459, D.Nev.) holding that the regulation of the community antenna system was a local business and did not constitute an interference with interstate commerce. The facts before us represent a comparable situation.

It would not seem useful under these circumstances to explore the differences between control by contract or by police power. The City is not in the television business in any way, and whether by contract or police power the action is an exercise of governmental authority. There is no element of proprietary interest of the City.

We must hold that under the Colorado Constitution and under the Manor Vail decision that the regulation of the business of cable TV is well within the power and authority of the City of Boulder. Further, under the circumstances the regulation here concerned was the only control or active supervision exercised by state or local government, and it represented the only expression of policy as to the subject matter.

The record contains a number of transcripts of City Council meetings. The discussions were extensive and the purpose of the moratorium and the model ordinance was made clear. There are also statements of purpose accompanying the ordinances. The City adopted a policy of fostering competition to receive a franchise for cable TV within the City, again a non-exclusive franchise. The moratorium was to permit these applications under circumstances where there remained a substantial number of customers not yet connected to the cable of the plaintiff. This appears to be a very clear statement of policy on the public record. Whoever obtained the franchise or the additional franchise would be required to operate under the model ordinance. The ordinance had been formulated after hearings, discussions and negotiations. The City had a consultant to give advice on the matter.

We cannot agree with the trial court that the City is not exempt from antitrust liability under Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315. In Parker suit was brought to enjoin enforcement of a California state agricultural proration program which restricted competition among growers and maintained prices. The Supreme Court found that the restraints of the plan were imposed as an act of government, and that such “state action” is not prohibited by the Sherman Act.

The trial court here apparently concluded that Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 98 S.Ct. 1123, 55 L.Ed.2d 364, was controlling. However, in Lafayette the City was authorized to own and operate its electric utility. Louisiana Power & Light was sued by the City for antitrust violations, and the utility counterclaimed under the Sherman Act for alleged anticompetitive activities. A divided Supreme Court ruled that the City was not immune from antitrust liability. The decision, considering the several opinions, was grounded on the fact that the action was not directed or authorized by the state “pursuant to state policy to displace competition with regulation or monopoly public service.” 435 U.S. at 413, 98 S.Ct. at 1137.

City of Lafayette must be distinguished from the case before us because, as discussed above, no proprietary interest of the City is here involved. In any event, the statement of policy requirement in Lafayette has been met as indicated in the home rule discussion herein.

The Supreme Court holding in California Retail Liquor Dealers Ass’n. v. Midcal Aluminum, Inc., 445 U.S. 97, 100 S.Ct. 937, 63 L.Ed.2d 233 (1980), supports an application of the Parker exemption in these circumstances. The Court in California Retail set out two standards for governmental antitrust immunity: “First, the challenged restraint must be ‘one clearly articulated and affirmatively expressed as State policy’; second, the policy must be ‘actively supervised’ by the State itself.” (445 U.S. at 105, 100 S.Ct. at 943, citing City of Lafayette, supra.) This latest test for the Parker exemption has been met by the City of Boulder. The policy was affirmatively expressed through the language of the ordinances. The second part of the California Retail test was met by the active supervision and enforcement of the policy by imposition of the 90-day moratorium on construction and by issuance of civil and then criminal citations to cable workers when the moratorium was ignored.

We conclude that City of Lafayette is not applicable to a situation wherein the governmental entity is asserting a governmental rather than proprietary interest, and that instead the Parker-Midcal doctrine is applicable to exempt the City from antitrust liability.

We must thus conclude that the trial court was in error as a matter of law as to the basis for issuance of the temporary restraining order. There is expressed no other basis for the restraining order than the antitrust factor.

In these circumstances we do not apply the usual standards outlined in Penn v. San Juan Hospital, Inc., 528 F.2d 1181 (10th Cir.); Securities & Exchange Commission v. Pearson, 426 F.2d 1339 (10th Cir.), and the typical cases.

A temporary restraining order must be set aside although there may be no abuse of discretion as to the balance of equities or as to the matter of irreparable injury if the trial court has based its action to a substantial extent upon a determination of law which the appellate court considers to be in error. Of this doctrine the District of Columbia Circuit in Northeast Construction Co. v. Romney, 485 F.2d 752 (D.C.Cir.) said after referring to the broad discretion of the trial court as to the equities, irreparable injury, and related factors:

“But a preliminary injunction must be reversed even where no abuse of discretion exists as to such matters, when the trial court has proceeded upon a premise as to the rule of law which the appellate court deems erroneous. We conclude that underlying the District Court’s conclusion of law, that plaintiff is likely to succeed on the merits, is an erroneous legal premise that requires reversal.”

See also United States v. School Dist. of Ferndale, 577 F.2d 1339 (6th Cir.); Hamilton v. Butz, 520 F.2d 709 (9th Cir.); Grubbs v. Butz, 514 F.2d 1323 (D.C.Cir.); Society for Animal Rights, Inc. v. Schlesinger, 512 F.2d 915 (D.C.Cir.); and Pullum v. Greene, 396 F.2d 251 (5th Cir.).

Thus we must reverse the judgment and order of the trial court and remand the case. We also terminate our order entered in this action on May 9, 1980 which was directed to the plaintiff.