Lansdowne on the Potomac Homeowners Ass'n v. OpenBand at Lansdowne, LLC

713 F.3d 187, 2013 WL 1364274
CourtCourt of Appeals for the Fourth Circuit
DecidedApril 5, 2013
Docket12-1925
StatusPublished
Cited by78 cases

This text of 713 F.3d 187 (Lansdowne on the Potomac Homeowners Ass'n v. OpenBand at Lansdowne, LLC) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fourth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Lansdowne on the Potomac Homeowners Ass'n v. OpenBand at Lansdowne, LLC, 713 F.3d 187, 2013 WL 1364274 (4th Cir. 2013).

Opinion

Affirmed by published opinion. Judge WILKINSON wrote the opinion, in which Judge MOTZ and Judge THACKER joined.

OPINION

WILKINSON, Circuit Judge:

Lansdowne on the Potomac Homeowners Association sued OpenBand, a group of interlocking entities that provides cable services to the Lansdowne on the Potomac real estate development. 1 The homeowners association alleged that Open-Band entered into a series of contracts that conferred upon Open-Band the exclusive right to provide video services to the development, in violation of an order of the Federal Communications Commission prohibiting such exclusivity arrangements. The district court agreed, declaring the challenged provisions null and void and permanently enjoining their enforcement. Because the contract provisions prohibit competing cable providers from accessing the Lansdowne development in patent violation of the FCC’s Order, we affirm the judgment of the district court.

I.

A.

In 1992, Congress enacted the Cable Television Consumer Protection and Com *192 petition Act (“1992 Cable Act”), Pub.L. No. 102-385, 106 Stat. 1460. Congress made several findings in passing the Act, among them that “most cable television subscribers have no opportunity to select between competing cable systems”; that this lack of competition had led to “undue market power for the cable operator as compared to that of consumers”; and that cable prices were rising almost three times faster than the rate of inflation. 1992 Cable Act § 2(a)(2), (1), 106 Stat. at 1460. The Act accordingly made it unlawful for a cable operator to engage in “unfair methods of competition or unfair or deceptive acts or practices, the purpose or effect of which is to hinder significantly or to prevent” any other operator from providing services to consumers. 47 U.S.C. § 548(b). The Act also authorized the FCC to “prescribe regulations to specify particular conduct that is prohibited by” this provision. Id. § 548(c)(1).

Pursuant to that authority, the FCC issued a notice of proposed rulemaking in March 2007 soliciting comments on the propriety of a practice popular among cable operators: the use of “exclusivity clauses” that grant the operator exclusive access for providing video services within a particular multiple dwelling unit (“MDU”). Exclusive Service Contracts for Provision of Video Services in Multiple Dwelling Units and Other Real Estate Developments, 22 FCC Red. 5,935 (proposed Mar. 27, 2007). In response, the FCC received comments revealing that exclusivity clauses “have the clear effect of barring new entry into MDUs by wire-based” video providers and that such clauses were “widespread” and increasing in their use. Exclusive Service Contracts for Provision of Video Services in Multiple Dwelling Units and Other Real Estate Developments, 22 FCC Red. 20,235 ¶¶ 10, 15 (Nov. 27, 2007) (“Exclusivity Order”). Commented also highlighted the injuries that exclusivity clauses inflict upon consumers, such as increased prices, lower quality, and a reduced menu of cable channel options. See id. ¶ 17-23. The FCC thus concluded that “exclusivity clauses cause significant harm to competition and consumers” and that “the harms of [such] clauses outweigh their benefits.” Id. ¶ 26.

Based on this record, the FCC unanimously adopted the Exclusivity Order at issue in this ease. The order sets forth the following rule: “[N]o cable operator ... shall enforce or execute any provision in a contract that grants it the exclusive right to provide any video programming service (alone or in combination with other services) to a MDU. Any such exclusivity clause shah be null and void.” Exclusivity Order ¶ 31 (codified at 47 C.F.R. § 76.2000(a)).

B.

In 1999, a partnership of Virginia land developers created the Lansdowne Community Development (“LCD”), a limited liability company with the purpose of developing a residential community known as Lansdowne on the Potomac in Loudoun County, Virginia. The Lansdowne development comprises roughly 850 acres of land, upon which some 2,155 individual homes are built. Although Lansdowne residents own their own homes, all residents share an interest in common areas that require central management. LCD therefore created appellee, the Lansdowne on the Potomac Homeowners Association (“LHOA” or “the homeowners association”), to provide for the management of the development and amenities such as video, phone, and internet services.

In the process of planning the development, LCD engaged M.C. Dean, Inc., a Virginia technical services contractor, to design and install telecommunications sys- *193 terns in the community. For its part, according to M.C. Dean’s CEO, the company sought from LCD the “exclusive right to provide ... telecommunication services” to Lansdowne. M.C. Dean created a number of corporate entities and entered into a series of contemporaneous, interlocking contractual arrangements to achieve this end.

The structure of this whole enterprise was a convoluted one. With respect to the corporate entities, M.C. Dean formed OpenBand at Lansdowne (“OBL”), a limited liability company with the purpose of developing and administering telecommunication services at Lansdowne. OBL had two members: a wholly owned subsidiary of M.C. Dean’s called OpenBand SPE (“OBS”), which M.C. Dean created for the purpose of holding its interest in OBL, and a subsidiary of LCD’s called LCD Communications. 2 M.C. Dean also formed Open-Band Multimedia, LLC (“OBM”), which is an FCC-certified open video system operator that provides video and internet services to Lansdowne and other Virginia communities. Lastly, M.C. Dean formed OpenBand of Virginia (“OBV”), which provides phone service to Virginia communities, including Lansdowne. OBL, OBS, OBM, OBV, and M.C. Dean are all defendants and appellants in this case (collectively, “OpenBand”). 3

With respect to the contractual arrangements, three are of particular relevance. First, LCD granted a deed of easement to OBL on May 14, 2001, entitled the “Exclusive Easement for Telecommunications Services at Lansdowne on the Potomac.” LHOA is named as a party to the deed as the “Future Owner” of the Property. LHOA ratified the easement acting through its then-president (who was also president of LCD, which controlled LHOA at the time). 4 By its express terms, the deed grants to OBL “exclusive easements for the purpose of constructing, operating, maintaining, adding to, altering, or replacing (collectively ‘Administering’ or ‘Administer’) [telecommunications infrastructure] for the collection, provision, and distribution of video, telephonic, internet, data services, or other communications, data or media (collectively ‘Utilities’).” The deed provides that “the exclusive easements” shall be “deemed to reserve solely to [OBL] the rights to Administer Utilities on, under and across the Property such that ...

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713 F.3d 187, 2013 WL 1364274, Counsel Stack Legal Research, https://law.counselstack.com/opinion/lansdowne-on-the-potomac-homeowners-assn-v-openband-at-lansdowne-llc-ca4-2013.