Petition — Community Communications Co. v. Boulder
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80-1350
ALEXANDER L. STEVAS,
CLERK
No. 80-
In THE
Supreme Court of the United States
OctoBer TERM, 1980
COMMUNITY CQMMUNICATIONS COMPANY, INC.
Petitioner,
v.
CITY OF BOULDER, COLORADO, et al.,
Respondents.
PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE TENTH CIRCUIT
THomas A. SEATON
35 Embarcadero Cove
Oakland, California 94606
(415) 261-4100
Counsel for Petitioner
Haro_tp R. FARRow
35 Embarcadero Cove
Oakland, California 94606
Stephen M. Brett
2900 First of Denver Plaza
Denver, Colorado 80202
Oj Counsel
i
QUESTIONS PRESENTED
1. Are home rule municipalities automatically im-
mune from liability under the federal antitrust laws by
operation of the state action doctrine?
2. Assuming arguendo that the acts here complained of
can be properly classified as “non-proprietary” or “‘govern-
mental,” is Respondent City of Boulder immune from lia-
bility under the federal antitrust laws, because City of
Lafayette v. Louisiana Power & Light Co., 435 U.S. 389
(1978), is limited to “proprietary” conduct?
PARTIES TO THE PROCEEDING
Petitioner: Community Communications Company,
Inc., a Colorado corporation and a wholly owned subsidiary
of Tele-communications, Inc., a Delaware corporation (see
Appendix for List of Petitioner’s Affiliated Companies).
Respondents: City of Boulder, Colorado; Boulder
Communications Co., a Colorado corporation: Thomas
Cross; I. Jack Kerner; Michael Thompson; Donald Passa-
laqua; Barry Telleen; and Dennis DuBe.
il
TABLE OF CONTENTS
QUESTIONS PRESEN TED
PARTIES ‘TO THE PROCEEDING
TABLE OF CONTENTS
TABLE OF AUTHORITIES
OPINIONS BELOW
JURISDICTION
CONSTITUTIONAL PROVISIONS, STATUTES,
AND ORDINANCES INVOLVED
STATEMENT OF ‘THE CASE
REASONS FOR ALLOWANCE OF ‘THE WRIT
I, INTRODUCTION: THE TENTH
CIRCUIT'S DECISION ‘TO CONFER
BROAD ANTITRUST IMMUNITY
ON LOCAL GOVERNMENTS
CONFLICTS DIRECTLY WITH ‘THE
DECISIONS OF ‘THIS COURT
Il. THE TENTH CIRCUIT'S DECISION
ERRONEOUSLY ELEVATES COLORADO
HOME RULE CITIES TO THE STATUS
OF STATES — PRECISELY WHAT
CITY OF LAFAYETTE SOUGHT
TO PREVENT
A. THE OPINION EQUATES HOME
RULE CITIES WITH THE STATE
B. ATTRIBUTION OF STATE ACTION
IMMUNITY TO HOME RULE
MUNICIPALITIES SHATTERS THE
DUAL SOVEREIGNTY OF OUR
FEDERAL SYSTEM
C, ATTRIBUTION OF STATE ACTION
IMMUNITY TO HOME RULE
MUNICIPALITIES UNDERMINES
THE ANTITRUST LAWS
~~ —_—- —
10
10
12
iil
II, CITY OF LAFAYETTE IS NOT LIMITED
TO PROPRIETARY CONDUCT 14
A. THE CHIEF JUSTICE DOES NOT
FAVOR BLANKET ANTIPRUST
IMMUNITY 15
B. BOULDER’S CONDUCT WAS
PROPRIETARY AS THAT TERM
HAS BEEN GENERALLY DEFINED 18
IV. UNDER A PROPER APPLICATION OF
CITY OF LAFAYETTE, ‘THE CITY OF
BOULDER IS NOT ENTITLED TO
ANTITRUST IMMUNITY IN THIS CASE — 20
A. THE STATE POLICY REQUIREMENT
WAS NOT SATISFIED 21
B. THE STATE MANDATE REQUIRE-
MENT WAS NOT SATISFIED 26
CONCLUSION , 30
APPENDIX A-l
Community Communications Co, v. City of
Boulder, Colorado, 630 F.2d 704
(10th Cir, 1980) A-1
Community Communications Co, v. City of
Boulder, Colorado, 485 F. Supp. 1036
(D. Colo. 1980) A-36
Constitutional Provisions, Statutes and
Ordinances Involved waa A-47
Home Rule Amendment, Colo. Const.
art. XX, § 6 A-47
Boulder, Colo., Ordinance No. 2846
(Oct. 6, 1964) A-50
Boulder, Colo., Ordinance No. 4472
(Dec. 18, 1979) A-55
Boulder, Colo., Ordinance No. 4473
(Dec. 18, 1979) . ak, ernsmeses =
iv
Page
Colorado Antitrust Statute, Colo. Rev.
Stat. §§ 6-4-101, 6-4-102 (1974 and
Supp. 1980) A-66
Municipal Powers Statute, Colo. Rev.
Stat. § 31-15-702(1) (1974) A-67
Sherman Antitrust Act §§ 1, 2, 26 Stat.
209, as amended, 15 U.S.C. §§ 1, 2 (1976) A-68
Supremacy Clause, U.S, Const.
art. VI, cl. 2 A-69
Re The Mountain States Telephone &
Telegraph Co., 73 P.U.R.3d 161 (Colo.
Pub. Util. Comm. 1968) A-70
List of Petitioner's Affiliated Companies A-92
C TABLE OF AUTHORITIES
Beckenstein v. Hartford Electric Light Co.,
479 F. Supp. 417 (D. Conn, 1979) 26
California Retail Liquor Dealer Association v.
Midcal Aluminum, Inc., 445 U.S. 97 (1980) passim
Cantor v. Detroit Edison Co., 428 U.S. 579 (1976) 16, 24
Caribe Trailer Systems, Inc. v. Puerto Rico
Maritime Shipping Authority, 475 F. Supp. 711
(D. D.C. 1979) 26
City & County of Denver v. Mountain States
Telephone & Telegraph Co., 67 Colo. 225,
184 P.604 (1919) 18
City & County of Denver y. Sweet, 138 Colo. 41,
$29 P.2d 441 (1958) 12, 18
City of Boulder v. Community Communications Co.,
No. 80 CV 0198-1 (Boulder Dist. Ct. Feb. 6, 1980) 4
City of Fairfax v. Fairfax Hospital Association, 562
F.2d 280 (4th Cir. 1977), vacated & remanded
on other grounds, 435 U.S. 992 (1978) _. . 28
Cases Page
City of Lafayette v. Louisiana Power & Light Co.,
435 U.S. 389 (1978) passim
City of Lafayette v. Louisiana Power & Light Co.,
532 F.2d 431 (5th Cir, 1977) 20
Community Communications Co, y. City of Boulder,
Colorado, 485 F. Supp. 1035 (D. Colo, 1980) 5
Community Communications v. City of Boulder,
Colorado, 630 F.2d 704 (10th Cir, 1980) passim
DeLong v. City & County of Denver, 195 Colo.
27, 576 P.2d 537 (1978) 25
Denver Urban Renewal Authority v. Byrne, 9 Colo.
Law. 743, Colo. , P.2d
(Oct. 27, 1980) 25
Duke & Co. v. Foerster, 521 F.2d 1277
(3d Cir, 1975) 21, 26
Eastern Railroad Presidents Conference v. Noerr
Motor Freight, Inc., 365 U.S. 127 (1961) 9, 19
Feminist Women's Health Center, Inc. v.
Mohammad, 586 F.2d 530 (5th Cir. 1978),
cert, denied, 444 U.S, 924 (1980) 27
General Aircraft Corp. v. Air America, Inc., 482
F.Supp. 3 (D.D.C. 1979) 19
Glenwillow Landfill, Inc. v. City of Akron,
485 F. Supp. 671 (N.D. Ohio 1979) 28
Goldfarb v. Virginia State Bar,
421 U.S. 773 (1975) .. 9, 15, 17
Grendel's Den, Inc. v. Goodwin, 495 F. Supp.
761 (D. Mass. 1980) 21
Guthrie Aircraft, Inc. v. Genesee County, 494
F. Supp. 950 (W.D.N.Y. 1980) 21, 27, 29
Hecht v. Pro-Football, Inc., 444 F.2d 931 (D.C.
Cir.) , cert. denied, 404 U.S. 1047 (1971) cence ae
In re Airport Car Rental Antitrust Litigation, 474
F. Supp. 1072 (N.D. Cal. 1979) ................... 19, 23, 28
vi
Cases Page
Interconnect Planning Corp. vy. American
‘Telephone & Telegraph Co., 465 F. Supp. 811
(S.D.N.Y. 1978) 24
Kurek v. Pleasure Driveway & Park District of
Peoria, Hlinois, 557 F.2d 580 (7th Cir. 1977),
vacated & remanded, 435 U.S 92, aff'd per
curiam on remand, 583 F.2d (7th Cir.),
cert. denied, 439 U.S. 1090 (1978) 19, 25
Manor Vail Condominium Association vy. “Lown
of Vail, Colo. , 604 P.2d 1168 (1980) 24
Mason City Center Associates v. City of Mason City,
lowa, 468 F. Supp. 737 (N.D. Iowa 1979) 21
Mobilfone of Northeastern Pennsylvania, Inc. v.
Commonwealth ‘Pelephone Co., 571 F.2d 141
(3d Cir. 1978) | 2]
National Food Stores, Inc. v. North Washington
Street Water %& Saniiation District, 163 Colo.
192, 429 P.2d 283 (1967) 2)
New Motor Vehicle Board of California v. Orrin
W. Fox Co., 439 U.S. 96 (1978) 14
New York State Electric & Gas Corp. v. Federal
Energy Regulatory Commission, No, 79-4185
(2d Cir. Sept. 30, 1980) 23
Olsen y. Smith, 195 U.S. 332 (1904) 1]
Parker v. Brown, 317 U.S. 341 (1943) passim
People v. Mountain States Telephone & ‘Telegraph
Co., 125 Colo. 167, 243 P.2d 297 (1952) 18, 25
Perl-Mack Enterprises Co, y. City & County of
Denver, 194 Colo. 4, 568 P.2d 468 (1977) 20)
Pinehurst Airlines, Inc. v. Resort Air Services,
Inc., 476 F. Supp. 543 (M.D.N.C. 1979) 28, 29
Princeton Community Phone Book, Inc. v. Bate,
582 F.2d 706 (3d Cir.) , cert. denied, 439
U.S. 966 (1978) 26
vii
Cases Page
Pueblo Aircraft Service, Inc. y. City of Pueblo,
Colorado, 498 F. Supp. 1205
(D. Colo. 1980) 11, 28, 29
Re Mountain States Telephone & ‘Telegraph Co. 73
P.U.R. 3d 161 (Colo. Pub. Util. Comm. 1968) — 21, 24
Sacramento Coca-Cola Bottling Co. v. Chauffeurs,
‘Teamsters & Helpers, Local No. 150, 440 F.2d
1096 (9th Cir.) , cert. denied, 404 U.S. 826 (1971) 19
Shrader v. Horton, 471 F. Supp. 1236 (W.D. Va. 1979) ,
aff'd per curiam, 626 F.24 1163 (4th Cir. 1980) 26
Star Lines, Ltd. v. Puerto Rico Maritime Shipping
Authority, 451 F. Supp. 157 (S.D.N.Y. 1978) 28
TV Pix, Inc. v. ‘Taylor, 301 F. Supp. 459, (D. Nev.
1968). aff'd per curiam, 396 U.S. 556 (1970) 21, 24
United Mine Workers v. Pennington,
381 U.S. 657 (1965) i)
United States v. Southwestern Cable Co., 392
U.S. 157 (1968) 25
United States v. ‘Vexas State Board of Public
Accountancy, 592 F.2d 919 (5th Cir. 1979),
cert. denied, 444 U.S. 832 (1980) 27
Vela v. People, 174 Colo. 465, 484 P.2d 1204 (1971) 24
Virginia Academy of Clinical Psychologists v.
Blue Shield of Virginia, 624 F.2d 476 (4th
Cir. 1980) , petition for cert. filed, 49 U.S.L.W.
3456 (Dec. 23, 1980) (No. 80-930) 28
George R. Whitten, Jr., Inc. v. Paddock Pool
Builders, Inc., 424 F.2d 24 (Ist Cir.), cert.
denied, 400 U.S. 850 (1970) 19
Woolen vy. Surtran ‘Vaxicabs, Inc., 461 F. Supp.
1025 (N.D. Tex. 1978) 13, 27, 28, 20
Vili
Constitutional Provisions, Statutes, & Ordinances Page
9 4
Boulder, Colo., Ordinance No. 2846 (Oct. 6, 1964) . 2.
Boulder, Colo., Ordinance No. 4472
(Dec. 18, 1979)
Boulder, Colo.. Ordinance No. 4473 (Dec. 18, 1979) |
Colorado Antitrust Statute, Colo. Rev. Stat.
$$ 6-4-101, 6-4-102 (1974 and Supp. 1979) 21, 28
Home Rule Amendment, Colo. Const. art. XX, § 6 passim
Kan. Stat. §§ 15-124, 19-101 (1975 and Supp. 1979) 13
Municipal Powers Statute, Colo. Rev. Stat.
§ 31-15-702 (1)(a)(VI) (1974 21
N.H. Stat. Ann. §§ 49:B:1, 3, 11 (Supp. 1979) 13
N.J. Stat. Ann. § 40:42:1 (Supp. 1979) 13
N.Y. Mun. Home Rule Law (Consol. Supp. 1979) 13
Sherman Antitrust Act § 1, 26 Stat. 209, as
amended, 15 U.S.C. § | (1976) 4
‘Tex. Civ. Stat. Ann. art. 46d (Vernon 1969) 13
W. Va. Code § 8-12-2 (1976) 13
ix
Page
Periodicals
Levi, Application of Municipal Ordinances to
Special Purpose Districts and Regulated
Industries: A Home Rule Approach, 12 Urb. L.
Ann. 77 (1976) oe a
Note, 65 Geo. L.J. 1547 (1977) ..........-....-----.. 27
The State Action Antitrust Defense for Local
Governments: A State Authorization Approach,
12 Urb. Law. 315 (1980) _ . 25, 25, 27
Thomas, City of Lafayette’s State Action Test
Reformulated: A Meaningful Standard of
Antitrust Immunity for Cities, 1980 Ariz. St.
L.J. 345 (1980) sens sanosnasencs He
Vanlandingham, Municipal Home Maske i in the
United States, 10 Wm. & Mary L. Rev. 269 (1968) 13
Other Authorities
J. Banks, Colorado Law of Cities & Counties
(3d ed. 1979) . os sstesepunssecsedinee: I
Colorado Municipal Sie, Municipal eo
County Officials in Colorado (1979) 12
E. McQuillin, 2 The Law of Municipal
Corporations (3d ed. 1979) eens a)
]
OPINIONS BELOW
The opinion of the United States Court of Appeals
for the Tenth Circuit is reported at 630 F.2d 704 and ap-
pears in the Appendix herein. The opinion of the United
States District Court for the District of Colorado is re-
ported at 485 F. Supp. 1035 and also appears in the Ap-
pendix.
JURISDICTION
The judgment of the United States Court of Appeals
for the Tenth Circuit was entered on May 28, 1980. A
timely petition for rehearing en banc was denied by order
entered October 1, 1980. This petition is filed within the
period of time established by order of Justice White dated
December 9, 1980. Jurisdiction of this Court is invoked
pursuant to 28 U.S.C. § 1254(1) (1966).
CONSTITUTIONAL PROVISIONS, STATUTES
AND ORDINANCES INVOLVED
The following constitutional provisions, statutes, and ordi-
nances are quoted in the Appendix:
Home Rule Amendment, Colo. Const. art. XX, § 6
Boulder, Colo., Ordinance No. 2846 (Oct. 6, 1964)
Boulder, Colo., Ordinance No. 4472 (Dec. 18, 1979)
Boulder, Colo., Ordinance No. 4473 (Dec. 18, 1979)
Colorado Antitrust Statute, Colo. Rev. Stat. §§ 6-4-101,
6-4-102 (1974 & Supp. 1979)
Municipal Powers Statute, Colo. Rev. Stat. § 31-15-
702(1) (1974)
Sherman Antitrust Act §§ 1, 2, 26 Stat. 209, as
amended, 15 U.S.C. § 1, 2 (1976)
Supremacy Clause, U.S. Const. art. VI, cl.2
STATEMENT OF THE CASE
This antitrust case arises from the Boulder City Coun-
cil’s rescission of a permit granted Petitioner, Community
Communications Company, Inc., to operate a cable tele-
vision system throughout the City of Boulder, Colorado.
The City Council granted the permit to Petitioner’s pre-
decessor by Ordinance No. 2846, enacted October 6, 1964.
The permit was revocable, nonexclusive, and for a twenty-
year term. In consideration for the permit, the grantee
agreed to pay the City of Boulder 2% of annual gross reve-
nues. The City Council consented to the assignment of the
permit to Petitioner by resolution adopted July 5, 1966.
The original purpose of the permit was to enable Boul-
der residents with poor off-air antenna reception of Denver
television stations to receive the Denver signals by cable
television. Conventional television transmission is poor in
part of the city due to Boulder’s location at the foothills of
the Rocky Mountains. Petitioner restricted cable television
service to the area of poor antenna reception, a neighbor-
hood comprising about 20% of Boulder’s residential units,
since the remainder of Boulder’s residents had no demand
for Petitioner's service.
Cable television technology improved dramatically in
1978 and 1979. In addition to the retransmission of tele-
vision signals, reception of a variety of non-broadcast pro-
gramming material became practical via satellite technol-
ogy. Because of the availability of this new programming,
Petitioner believed that there would be a demand for cable
television service city-wide. On May 9, 1979, Petitioner
notified the City Council of its intent to expand both,
programming and the physical area served. In reliance
upon the City Council’s favorable response,’ Petitioner
spent approximately $900,000 on facilities, supplies, and
labor.
On July 1, 1979, Boulder Communications Company
{hereinafter BCC], a newly formed business organized by
six Boulder citizens, requested a permit from the City
'In a letter to Petitioner dated May 25, 1979, the City Council's
designated cabie coordinator and Director of Media and Pro-
gramming of the Boulder Public Library, Mr. Richard Varnes,
expressed great pleasure with Petitioner's decision to expand
service.
3
Council to compete with Petitioner for cable television cus-
tomers city-wide. Since Petitioner's permit was nonexclu-
sive, the City Council was legally able to grant another per-
mit. Moreover, Mountain States Telephone & ‘Tclegraph
Company and the Public Service Company of Colorado,
joint owners of the utility poles upon which Petitioner's
cable was strung, informed City Council that the utility
poles could accommodate additional cables. ‘The cable tele-
vision consultant to the City Council advised that cable
televir‘on service was not a natural monopoly and that com-
petitive service was feasible.’ Furthermore, Petitioner ex-
pressly declared its willingness to compete with BCC. De-
spite the absence of legal, physical, and economic con-
straints, the City Council declined to issue BCC a permit.
Between July 1979 and December 1979, representa-
tives of BCC and the City of Boulder held a number of
meetings. Initially, BCC asked the city to issue 2 second
nonexclusive permit to provide cable television service.
Later, however, BCC urged the city to revoke Petitioner's
permit and award BCC the sole permit.
By memorandum dated December 8, 1979, the City
Attorney advised the City Council that Petitioner was com-
plying with the license contract and that unilateral revoca-
tion of Petitioner's license would be illegal. ‘The City At-
torney urged a contractual method to rescind Petitioner's
permit: the adoption of ordinances imposing a moratorium
on Petitioner's expansion and providing that continued
service by Petitioner in the area then served would signify
Petitioner's acceptance. 630 F.2d 704, 715 (Markey, C. j.,
dissenting.)
The City Council enacted two ordinances on Decem-
ber 18, 1979. Ordinance No. 4472 repealed Ordinance No.
?"The city’s cable television consultant, Mr. Robert Sample, for-
mer Director of Media and Programming of the Boulder Public
Library, advised the City Council on July 31, 1979: “[i}f there
are a couple of franchise holders, they may overbuild the other
and compete for service.”
4
2846, which had granted Petitioner the permit to provide
city-wide cable television service, and reenacted Ordinance
No. 2846 subject to a 90-day moratorium on construction.
Ordinance No. 4473 declared the situation an emergency,
i.e., threatening the public health and safety of the com-
munity, so thai Ordinance No. 4472 could be implemented
immediately. The putative purpose of the moratorium was
to freeze the status quo so that potential competitors might
“catch up” with Petitioner.”
On January 15, 1980, Petitioner filed a complaint in
the United States District Court for the District of Colo-
rado seeking an injunction against the enforcement of
Ordinance Nos. 4472 and 4473, on grounds that they
violated Section | of the Sherman Act, 15 U.S.C. § 1 (1976),
as well as other state and federal laws. During the pendency
of the federal action, Petitioner continued its construction
program and on February 4, 1980, the city filed a state
court action in the Boulder District Court seeking to en-
join Petitioner from stringing new cable. The state court
denied the city’s requested injunction on February 6, 1980.
City of Boulder v. Community Communications Co., No.
80 CV 0198-1 (Boulder Dist. Ct. Feb. 6, 1980) .
The city then resorted to self-help: civil and criminal
citations were issued to Petitioner's cable-stringers, and on
February 11, 1980, the City Manager ordered city em-
ployees to dismantle Petitioner's newly strung cable. By
February 14, 1980, 6,350 feet of Petitioner's cable had been
*Shortly after enactment of the ordinances, the City Council issued
a request for bids from other cable companies. The City Council
also promulgated a model cable television ordinance, the terms
of which reflected an increasingly proprietary interest in cable
television: the city would have the unconditional right to pur-
chase the cable television system at a weice excluding goodwill
and limited to depreciated capital investinent; the city would re-
tain the right of prior approval of every contract negotiated by
the cable television company, including contracts on program
content; and, in consideration for the permit, the cable television
company would pay the city 5% of its annual gross revenues.
5
destroyed. Thereafter, Petitioner ceased cable construction
and, on February 22, 1980, filed a motion for preliminary
injunctive relief.
In considering the antitrust claim, the trial court
focused on the immunity question. The court believed
that antitrust liability would not apply to a home rule city’s
actions which were local, governmental (as opposed to pro-
prietary) , and properly within the authority granted it by
Article XX (the home rule provision) of the Colorado Con-
stitution. After expressing some doubt that the City of Boul-
der had the authority claimed over cable television, the
court held that even if such authority existed, the use of
that authority to impose the terms and conditions of a
model ordinance requiring prescribed forms of media serv-
ice is not a typically governmental type of action which
would entitle it to immunity, 485 F. Supp. at 1039.
On March 17, 1980, the United States District Court,
granted Petitioner a preliminary injunction and entered
the following order:
[T}hat so long as the plaintiff, Community Com-
munications Company, Inc., operates within the
terms and conditions of Ordinance No. 2846, en-
acted October 6, 1964, the City of Boulder and
all of its officers agents, servants, employees, and
attorneys are enjoined from taking any unilateral
action to restrict, limit, or revoke the authority
of the plaintiff to conduct its cable television
business in the City of Boulder.
485 F. Supp. 1035, 1041.
The United States Court of Appeals for the Tenth
Circuit in a split decision entered May 28, 1980, reversed
the District Court, holding that the City of Boulder was
immune from Petitioner's antitrust claim. The Court of
Appeals first distinguished City of Lafayette v. Louisiana
Power & Light Co., 435 U.S. 389 (1978) , the landmark case
addressing the application of Parker state action immunity
6
to municipalities, as a case applicable only to the propri-
etary conduct of municipalities. he conduct of the City of
Boulder was classified as non-proprietary. Ihe Court then
concluded that since Colorado home rule cities were sov-
ereign in matters of local concern, they should be accorded
deference as states in applying the antitrust laws to their
conduct, Finding that cable television was a matter of
purely local concern, *he Court held that the Boulder ordi-
nances contained the requisite expression of state policy to
displace competition and, in enforcing the ordinances, the
City had met the requirement of active supervision set forth
in California Retail Liquor Dealers Association v. Midcal
Aluminum, Inc., 445 U.S. 97 (1980).
“[Cjompelled by a conviction that the judgment below
was eminently sound and unequivocally correct,” 630 F.2d
at 709, Judge Markey, Chief Judge of the United States
Court of Customs and Patent Appeals, sitting by designa-
tion, filed a vigorous dissenting opinion on July 1, 1980. In
his view:
Colorado home rule cities do not have antitrust
immunity under City of Lafayette standards. No
state policy whatsoever exists in relation to cable
TV .... With no policy whatever on regulation
of cable TV, by cities or otherwise, it can hardly
be said that Colorado has a state policy “to dis-
place competition” in cable TV with regulation
or monopoly public service. Much less can it be
said that Colorado has a comprehensive, clearly
articulated, affirmatively expressed, and actively
State supervised anticompetitive policy for cable
TV.
630 F.2d at 717.
Pursuant to Rule 35, F.R.A.P., Petitioner submitted a
petition for rehearing en banc on June 25, 1980. By order
October |, 1980, the petition was denied.
7
REASONS FOR ALLOWANCE OF THE WRIT
I. Introduction: The Tenth Circuit’s Decision To
Confer Broad Antitrust Immunity On Local
Governments Conflicts Directly With The Deci-
sions Of This Court.
In City of Lafayette v. Louisiana Power & Light Co.,
435 U.S. 389 (1978), this Court held that the immunity
conferred by Parker v. Brown, 317 U.S. 341 (1943), was
not automatically applicable to local governmental units:
(Phe Parker doctrine exempts only anticompeti-
tive conduct engaged in as an act of government
by the State as sovercign or by its subdivisions,
pursuant to state policy to displace competition
with regulation or monopoly public service .
435 U.S. at 4t3.
(A)n adequate state mandate for anticompetitive
activities of cities and other subordinate govern-
mental units exists when it is found “from the
authority given a governmental entity to operate
in a particular area, that the legislature contem-
plated the kind of action complained of.”
Id. at 415 (citation omitted) .
In the language preceding this holding, the majority
noted the presumption against repeal by implication of the
antitrust laws, /d. at 399, and explained why that presump-
tion should apply to local government:
If municipalities were free to make economic
choices counseled solely by their own parochial in-
terests and without regard to their anticompetitive
celfects, a serious chink in the armer of antitrust
protection would be introduced at odds with tie
comprehensive policy [of competition! Congress
established.
Id. at 408.
8
Cities are not themselves sovereign; they do not
receive all the federal deference of the States that
create them.
Id. at 412.
In light of the serious economic dislocation which
could result if cities were free to place their own
parochial interests above the Nation's goals re-
flected in the antitrust laws, [citation] we are es-
pecially unwilling to presume that Congress in-
tended to exclude anticompetitive municipal ac-
tion from their reach.
Id. at 413.
When cities, each of the same status under state
law, are equally free to approach a policy decision
in their own way, the anticompetitive restraints
adopted as policy by any one of them, may ex-
press its own preference, rather than that of the
State.
Id. at 414.
In four and one-half pages a Tenth Circuit panel has
all but obliterated the plurality’s holding, permitting the
triumph of the parochial economic interests which City
of Lafayette sought to restrain. After narrowly reading
City of Lafayette as only including proprietary conduct
within its compass, the ‘Tenth Circuit found that the broad
mandate over matters of local concern given Colorado
home rule cities by the Colorado Constitution transformed
such cities into the State when acting on local matters.
Therefore, reasoned the majority, whenever a home rule
city’s conduct reflects its own municipal policy to displace
competition, and is coupled with city supervision of the
challenged conduct, the home rule municipality escapes
liability under the test set forth in California Retail Liquor
Dealers Association v. Midcal Aluminum, Inc., 445 U.S. 97
(1980):
We conclude that City of Lafayette is not applic-
able to a situation wherein the governmental en-
lity is asserting a governmental rather than a
proprietary interest, and that instead the Parker
Midcal doctrine is applicable to exempt the City
from antitrust liability.
630 F.2d at 708.
By limiting City of Lafayette to proprietary conduct,
the Tenth Circuit’s opinion ignores Justice Brennan's
plurality opinion which made no such distinction between
governmental and proprietary conduct, and reads too much
into the concurrence of the Chief Justice whose record
opposing blanket antitrust immunity is well known. See,
e.g., Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975).
It compounds this error by limiting the term proprietary
to governmental operation or ownership of a business, a
definition at odds with settled precepts of municipal law,
Colorado state law and federal court decisions defining
proprietary in the related Noerr-Pennington’ context.
By totally immunizing Colorado home rule cities from
the reach of the Sherman Act, the ‘Venth Circuit has effec-
tively overruled City of Lafayette. Under the ‘Tenth Cir-
cuit’s test, the judicial inquiry will focus on whether a
municipal policy, actively supervised by the home rule city
itself, exists to displace competition. In fact, under the
Tenth Circuit's holding, home rule cities will henceforth be
treated as sovereigns, directly counter to City of Lafayette’s
mandate; every Colorado home rule city, each possessing
the same status under state law, will be free to announce
its own policy to govern competition, the very result which
City of Lafayette sought to avoid. Thus, the concept of
dual sovereignty underlying Parker is undermined as a new
category of entities enjoying blanket immunity is created.
‘Eastern Railroad Presidents Conference v. Noerr Motor Freight,
Inc. 365 U.S. 127 (1961); United Mine Workers v, Pennington,
381 U.S. 657 (1965).
10
II. The Tenth Circuit’s Decision Erroneously Ele-
vates Colorado Home Rule Cities To The Status
Of States — Precisely What City Of Lafayette
Sought To Prevent.
A. THE OPINION EQUATES HOME RULE
CITIES WITH THE STATE.
The Tenth Circuit's treatment of Boulder as a state is
evidenced by its application of the test from California Re-
tail Liquor Dealers Association v. Midcal Aluminum, Inc.,
a case involving not a muncipality but a state agency.
The court reasoned that Boulder’s home rule status con-
verted municipal action into state action:
The [state] policy was affirmatively expressed
through the language of the [municipal] ordi-
nances. The second part of the California Retail
test was met by the active supervision and enforce-
ment of the policy by {the City of Boulder’s| im-
position of the 90-day moratorium on construc-
tion and by issuance of civil and then criminal
citations to cable workers when the moratorium
was ignored.
630 F.2d at 708.
Of course, given this test, all home rule cities, not just
Colorado home rule cities, will usually find themselves
immune. The structure of cities is such that their anti-
competitive conduct will usually be a reflection of munici-
pal policy and will be actively supervised by the City.
Let there be no doubt: the decision of the ‘Venth Cir-
cuit elevates home rule cities acting in local matters to the
status of states. Lest petitioner's characterization of the deci-
sion be considered hyperbolic, the following language from
a decision of the United States District Court for the Dis-
trict of Colorado following The ‘Tenth Circuit's opinion
is cited to the Court:
[M]unicipal policy exercised by a Home Rule
11
City in Colorado is the equivalent of “state action”
when exercised in connection with local affairs.
Pueblo Aircraft Service, Inc. v. City of Pueblo, Colorado,
498 F. Supp. 1205, 1210 (D. Colo. 1980).
B. ATTRIBUTION OF STATE ACTION IMMU-
NITY TO HOME RULE MUNICIPALITIES SHA'T-
TERS THE DUAL SOVEREIGNTY OF OUR FED.
ERAL SYSTEM.
The quintessence of federalism is dual sovereignty ol
the state and national governments. The purpose of the
Parker state action exemption is to prevent the federal gov-
ernment from undue encroachment upon stale sovercignty.
317 U.S. at 350-51; see Olsen v. Smith, 195 U.S, 332, 344
(1904). “Government activity should be exempt from the
antitrust laws, then, only if their application would ‘severe-
ly impinge’ upon the system of federalism.” Woolen v.
Surtran Taxicabs, Inc., 461 F. Supp. 1025, 1028 (N.D.
Tex. 1978).
As this Court has recognized, however: “{C}ities
are not themselves sovereign; they do not receive all the
federal deference of the States that create them.” City of}
Lafayette, 435 U.S. at 412 (plurality opinion). It matters
not that cities have home rule status. “ However ‘sovereign’
home rule cities . .. may be [under state law}, they none-
theless carry the status of municipalities so far as federalism
is concerned.”” Woolen v. Surtram Taxicabs, Inc., 461 F.
Supp. 1025, 1032 (N.D. Tex. 1978). The Tenth Circuit's
exaltation of home rule cities to sovereignty is, moreover,
particularly anomalous, given the following declaration by
the Supreme Court of Colorado:
The United States Constitution provides for a
national government with a federal system of
States. All powers not expressly granted the fed-
12
eral government are reserved to the states or to
the people. United States Constitution, Tenth
Amendment. Colorado’s Enabling Act, approved
by the federal government when we acquired
statehood, insured that our state will have a re-
publican form of government. Enabling Act, S 4.
Clearly our federal system does not envisage as a
part thereof city-states.
City & County of Denver v. Sweet, 138 Colo. 41, 48, 329
P.2d 441, 444-45 (1958) (emphasis in original) .
The leading treatise on municipal law supports this
statement of Colorado law: “[A] municipality adopting a
home rule charter does not become an independent sover-
eignty.”” 2 E. McQuiLuin, THe LAw or Municipar Corpo-
RATIONS, § 9.08a, at 638. (3d ed. 1979) (citations omitted).
C. ATTRIBUTION OF STATE ACTION IMMU-
NITY TO HOME RULE MUNICIPALITIES UNDER-
MINES THE ANTITRUST LAWS.
The attribution of state action immunity to home
rule municipalities would effectively clothe hundreds of
municipalities across the county with immunity from the
antitrust laws. There are 55 home rule cities in Colorado
alone. See Colorado Municipal League, MUNICIPAL AND
County OFFICIALS IN CoLorapo (1979). The Colorado
Home Rule Amendment is not unique. At least forty state
constitutions include home rule provisions. Levi, A pplica-
tion of Municipal Ordinances to Special Purpose Districts
and Regulated Industries: A Home Rule Approach, 12
Urs.L. ANN. 77, 78 n.4 (1976). Although differences exist
13
among the home rule provisions of state constitutions,’
each grants municipalities autonomy over local affairs.
Such local autonomy was the basis for the Tenth Circuit's
decision, 630 F.2d at 708,
The impact of blanket antitrust immunity for home
rule municipalities would be profound. As this Court has
warned:
If municipalities were free to make economic
choices counseled solely by their own parochial
interests and without regard to their anticompeti-
tive effects, a serious chink in the armor of anti-
trust protection would be introduced at edds with
the comprehensive national policy Congress es-
tablished.
‘Constitutional home rule provisions are either self-executing,
mandatory, or permissive. A self-executing provision authorizes
a municipality to enact a home rule charter and exercise home
rule powers, without state enabling legislation. A mandatory pro-
vision differs from a self-executing provision only in that state
legislatures are directed to adopt enabling legislation prior to
municipal home rule action, A permissive provision authorizes
home rule, if the state legislature, in its discretion, delegates
home rule powers to municipalities, See generally Vanlanding-
ham, Municipal Home Rule in the United States, 10 WM. &
Mary L.. Rev. 169, 178 (1968). Regardless of the nature of the
constitutional provision, home rule municipalities have substan-
tial authority to enact legislation on matters of local concern.
Six states with no constitutional home rule provisions have
home rule statutes which also authorize municipal control over
matters of locai concern. See Kan. Star. 15-124 19-101, (1975
& Supp. 1979); N.H. Rev. Svar, Ann. 49:B:1, 3, TL (Supp:
1979); N. Y. Mux. Home Rute Law (Consol. Supp. 1979);
W. Va. Cope 8-12-2 (1976); N. J. Star. ANN, 40:42:1 (Supp.
1979); ‘Tex. Civ. Star. Ann. Art. 16D) (Vernon 1969). Re-
spondent may argue that statutory home rule cities do not pos-
sess as much power as constitutional home rule cities, because
the state legislature may modify the home rule grant by subse-
quent legislation. However, the powers of constitutional home
rule cities may also be withdrawn or modified, albeit by consti-
tional amendment rather than legislative fiat. City & County of
Denver v. Sweet, 138 Colo, at 49, $29 P.2d at 445,
14
City of Lafayette, 435 U.S. at 408 (footnote omitted). As
Jude Markey noted in dissent, the ‘Tenth Circuit panel
opinion permits ‘a city ordinance [to} do what ‘the Consti-
tution or laws of any State’ cannot do namely [create] new
immunities from the ‘Supreme Law of the Land.” 630
F.2d at 715. For example, home rule municipalities would
be free to award monopolies to favored companies, by enact-
ing an ordinance, Furthermore, recognition of state action
immunity for home rule cities opens the door to immunity
for subordinate divisions of the municipal government as
well as other political subdivisions, such as counties and
school districts.
III, City Of Lafayette Is Not Limited To Propri-
etary Conduct.
This Court has never declared or applied different
criteria Lo proprictary and governmental conduct of state
government entities secking state action antitrust immunity.
City of Lafayette established no such proprictary - govern-
mental distinction, 630 F.2d at 718 (Markey, C.J., dissent:
ing) . Indeed, the plurality opinion in City of Lafayette did
not even characterize the conduct of the petitioning cities
as proprietary or governmental. Only the concurring opin-
ion of the Chief Justice drew such a distinction, 435 U.S, at
422. The City of Lafayette dissenters expressly rejected re-
cognition of a proprictary-governmental distinction. /d, at
433-34,
If there were a proprietary - governmental distinction
relevant to state action immunity, the distinction would
logically apply to state agencies as well as political sub-
divisions. However, the post-City of Lafayette opinions
of this Court involving state agencies are silent with re-
spect to any such distinction. See New Motor Vehicle Board
of California v. Orrin W. Fox Co., 439 U.S. 96 (1978) ;
California Retail Liquor Dealers Association v. Midcal
Aluminum, Inc, 445 U.S. 97 (1980).
15
The ‘Fenth Cireuit majority herein apparently be:
lieved that the consideration of the proprictary - govern:
mental distinction by the Chict Justice demonstrated his
unwillingness to ever impose antitrust liability on cities
acting in their governmental capacity. In the ‘Penth Gir
cuit’s view, the dissenters and the Chief Justice, comprising
a majority of the City of Lafayette Court, would foreclose
any extension of Cily of Lafayette beyond the proprietary
conduct there held subject to liability, Phe City of Lafay-
ette dissent cannot be read as endorsing a distinction be:
tween proprictary and governmental conduct, Moreover,
the Chief Justice has long been absolutely opposed to blan-
ket antitrust immunity,
A. THE CHIEF JUSTICE DOES NOT FAVOR
BLANKET AN TIE RUST IMMUNTTY.,
Petitioner submits that the ‘Penth Circuit: majority
has read too much into the City of Lafayette concurrence,
The Chief Justice only sought to limit the Court's consid-
cration to the issue of “whether the Sherman Act reaches the
proprictary enterprises of municipalities” 435 U.S, at 422.
A briel review of recent state-action immunity opinions au-
thored by the Chief Justice belies any intention on his part
to vest municipalities with blanket immunity when acting
in their non-proprictary Capacity,
‘The first major state-action opinion following Parke)
v. Brown, 317 U.S. S41 (1943), was Goldfarb v. Virginia
State Bay, (21 U.S, 77% (1975), an opinion authored by
Chief Justice Burger:
The threshold inquiry... is whether the activity
is required by the State acting as sovereign. [cita-
tions|.... It is not enough that... . anticompeti-
tive conduct is prompted by state action; rather
anticompetitive activities must be compelled by
direction of the State acting as a sovereign.
Id, at 790-91,
16
Thereafter, in Cantor v, Detroit Edison Co., 428 U.S.
579 (1976), the Chief Justice authored a concurring opinion
reiterating his view that “the threshold inquiry in deter-
mining if an anticompetitive activity is state action . . . is
whether the activity is required by the State acting as sov-
ereign.” /d. at 604. He concurred with the majority's find-
ing of liability predicated on the absence of a statewide
policy in the field, /d. at 604-05,
In fact, the City of Lafayette concurrence in no way
signals a retreat from Chief Justice Burger's Goldfarb and
Cantor opinions. Discussing exemptions from the Sherman
Act, the Chief Justice said:
To allow the defenses asserted by the petitioners
in this case would inject a wholly arbitravy vari-
able into a “fundamental national economic pol-
icy,” [citations omitted) which strongly disfavors
immunity from its scope.
435 U.S. at 419-20.
This view is reflected in his criticism of the inquiry
which the City of Lafayette plurality directed the District
Court to make upon remand. After repeating his Goldfarb
test, the Chief Justice stated:
I would therefore remand directing the District
Court to take an additional step beyond merely
determining — as the plurality would — that any
area of conflict between the State's regulatory
policies and the federal antitrust laws was the
result of a ‘‘state policy to displace competition
with regulation or monopoly public service.”
This supplemental inquiry would consist of de-
termining whether the implied exemption from
federal law ‘“‘was necessary in order to make the
regulatory Act work, and even then only to the
minimum extent necessary.”
435 U.S. at 425-26 (citations omitted) .
17
In a footnote to the City of Lafayette concurrence, the
Chief Justice expressed further dissatisfaction with the
plurality’s test, arguing that it does not go sufficiently far
to ensure that an exemption is not improperly granted. In
fact, he expressed his reservations as to the sufficiency of
the “contemplation” language used by the plurality. 435
U.S. at 426 n.6. Nothing in the passage suggests a per se
immunity for governmental activity:
Id.
To say that the Chief Justice favors per se immunity
While I agree with the plurality that a State may
cause certain activities to be exempt from the
federal antitrust laws by virtue of an articulated
policy to displace competition with regulation,
I would require a strong showing on the part of
the defendant that the State so intended. Thus,
I would not be satisfied, as the plurality and
Court of Appeals apparently are, that the highest
policymaking body in the State of Louisiana
merely “contemplated” the activities being under-
taken by the cities. See ante, at 415. I would in-
sist, as the Court did in Goldfarb v. Virginia State
Bar, 421 U.S. 773 (1975), that the State compel
the anticompetitive activity. Moreover, I would
have the Cities demonstrate that the exemption
was not only part of a regulatory scheme to super-
sede competition, but that it was essential to the
State’s plan. Consequently, I do not disagree with
the terms of the plurality’s remand as such. |
would simply ask for a stronger showing on the
part of the Cities. I join the judgment, however,
and the directions of the remand, because they
represent at minimum what I believe we should
demand of petitioners.
for non-proprietary conduct thus does not square with his
18
opinions in state action cases, City of Lafayette in particu-
lar. In fact, his opinion demonstrates the greatest reluctance
to grant any blanket immunities.
Assuming arguendo that the state action immunity
test for municipalities does require proprietary conduct,
the ‘Tenth Circuit erred in classifying Boulder’s morato-
rium on Petitioner's cable construction as non-proprictary.
The Tenth Circuit offered no explanation for summarily
classifying the conduct of the City of Boulder as govern-
mental, rather than proprietary.
B. BOULDER’S CONDUCT WAS PROPRI-
ETARY AS THAT TERM HAS BEEN GEN-
ERALLY DEFINED.
Under Colorado law, it is well-settled that the enact-
ment and enforcement of municipal ordinances like those at
issue here are exercises of proprietary conduct, for two rea-
sons: (1) the ordinances involve access to the city’s rights of
way; and (2) the ordinances involve the procurement of a
service for the citizenry. The Boulder ordinances, by their
terms, revoked a prior ordinance granting Petitioner the
right to use city streets and rights-of-way for stringing cable,
and then granted Petitioner the same rights subject to
geographical restriction.
The granting of the right by the city to a public
service corporation to use the streets of the mu-
nicipality, or the granting by the General Assem-
bly to such a corporation of the right to use the
highways of the state, is the exertion of the pro-
prietary power of the sovereign.
City & County of Denver v. Mountain States Telephone
& Telegraph Co., 67 Colo, 225, 230, 184 P. 604, 607 (1919),
overruled on other grounds, People v. Mountain States
Telephone & Telegraph Co., 125 Colo. 167, 243 P.2d 397
(1952); see J. Banks, CoLorapo Law or Cities & CounTIES
§ 2.8, at 35 (3d ed. 1979).
19
Moreover, a line of cases applying the Noerr-Penning-
ton doctrine in the First Amendment context have held
that action like Boulder’s herein is proprietary.’
The Boulder ordinances did involve the procurement
of cable television service for the local citizenry.” “Obtain-
ing for a municipality and its inhabitants of water, light,
or similar service involves the exercise of proprictary or
business powers of the municipality and not its govern
mental functions... ." 2 E. MeQuitiin, THe Law or
“See, eg., General Anovaft Corp. v. Aw America, Inc, 482. ¥.
Supp. 3 (D.D.C. 1979) (purchase of aircraft by CIA held pro-
prictary); In Re Airport Car Rental Antitrust Litigation, 474
KF. Supp. 1072 (N.D. Cal. 1979) (leasing by airports of space to
rental car companies held proprietary); Kurek v, Pleasure Drive-
way and Park District, 557 ¥.2d 580 (7th Cir, 1977), vacated & ve-
manded, 435 U.S, 992, aff'd per curiam on remand, 583 F.2d $78
(7th Cir.), cert. denied, 439 U.S, 1990 (1978) (leasing of space in
City golf courses to concessionaires held proprietary); Hecht v.
Pro-Foothball, Inc,, 444 F.2d 931, OAL (D.C, Cir), cert, denied,
404 U.S, 1047 (1971) (leasing football stadium by Armory Board
held proprietary); Sacramento Coca-Cola Bottling Co. v. Chauf-
feurs, Teamsters © Helpers, Local No, 150, 440 F.2d 1096 (9th
Cir.) cert. denied, 401 U.S, 826 (1971) (awarding of soft-drink con-
cession held proprietary); George R, Whitten, Jr., Inc. v. Paddock
Pool Builders, Inc., 124 F.2d 24, 1-34 (Ist Cir.) , cert denied, 400
U.S. 850 (1970) (requesting bids, soliciting specifications tor pub-
lic swimming pool held proprictary) .
‘The procedure followed by Boulder, as well as the substance of
the conduct, evidenced proprictary character. The City Attorney
advised the City Council, by memorandum dated December 8,
1979, that the city could not unilaterally revoke petitioner's
license and should, therefore, enter into a new contract with peti-
tioner, In accordance with such advice, section 12 of Ordinance
No, 4472, the moratorium ordinance, provides in part: ‘The
grantee shall signify its acceptance of the terms hereof by con-
tinuing to provide service to any customers presently served by
the grantee.” As Judge Markey noted in his dissent: ‘The city's
‘ordinances’ are, in fact and intent, contracts, reflecting a pro-
prietary interest.” 630 F.2d at 719.
By the request for bid process, the City Council intended to select
the “best monopolist for the city. /d, at 709, 710 n.1 (Markey,
C.J., dissenting) .
20
MunicivaL Corvorations, § 4.154, at 231 (3d ed. 1979) ;
accord, Perl-Mack Enterprises Co. v. City & County of
Denver, 194 Colo. 4, 9, 568 P.2d 468, 472 (1977) (city’s
contract with developer for sewage treatment service was
proprietary) ; National Food Stores, Inc. v. North Washing:
ton Street Water & Sanitation District, 163 Colo, 192, 429
P.2d 285 (1967) (agreement by water district re provision
of sewage treatinent was “within the proper exercise of pro-
prictary and business powers of a municipal corporation” ).
Furthermore, the model cable television ordinance, to
which any prospective licensee would be contractually
bound, evidenced the proprietary character of the City’s
acts,”
IV. Under A Proper Application of City of Lafayette,
The City Of Boulder Is Not Entitled To Anti-
trust Immunity In This Case.
The ‘Tenth Circuit should have applied the test tor
state action antitrust immunity for political subdivisions
as exemplified by the doctrine of City of Lafayette. The
City of Lafayette Court held that municipalities must sat-
isfy two conditions in order to avail themselves of state
action immunity, First, the municipality must be acting
pursuant to a clearly articulated, affirmatively expressed
“state policy to displace competition with regulation or
monoply public service,” 435 U.S. at 413. Second, the
municipality must demonstrate “from the authority given
... {the municipal government by the state legislature) to
operate in a particular area, that the legislature contem-
plated the kind of action complained of.” /d. at 415, quot-
ing City of Lafayette v. Louisiana Power & Light Co.,
532 F.2d 431, 434 (5th Cir. 1977).
*'The ordinance included the following terms: an increase in per:
mit price from 2, to 5°, of the licensee's annual gross revenues;
the city’s reservation of the right to approve every contract nego-
tiated by the licensee, including contracts on program content;
and the city’s unconditional right to buy out and assume control
of the licensee.
21
A. THE STATE POLICY REQUIREMENT WAS
NOT SATISFIED.
Colorado has no statutory, administrative or constitu.
tional policy in clear, affirmative terms to displace compe-
tition in the cable television industry with regulation or
monopoly public service. he most charitable characteriza-
tion of state policy on competition within the cable tele-
vision industry is that it is neutral.’
Finding no statutory” or administrative | expression
of policy, the Tenth Circuit identified the 1912 Home
Rule Amendment of the Colorado Constitution, Coro,
"But see Colorado Antitvust Statute, Goto, Riv. STAT. 88 O-1- LOT,
6-4-102 (1974 & Supp. 1979) which establishes a general policy
of competition throughout the State of Colorado.
"A velated statute is one granting Colorado municipalities au
thority to regulate municipal streets and rights-of-way, Coro.
Rev. Star. § 31-15-702 (1)(ay(VE) (1974). The statute is silent
on cable television and competition, Broad statutory authorisa-
tion has been held inadequate to express a policy to displace
competition in a particular area of the marketplace. See, ¢.g.,
Duke & Co, v. Foerster, 521 F.2d 1277, 1281 (Sd Cir, 1975) (stat
utory authority to establish and operate airport, auditorium, and
stadium did not express policy to boycott certain suppliers);
Grendel's Den, Inc. v. Goodwin, 195 F. Supp. 761, 769 (D. Mass.
1980) (statute granting church and school officials veto power
over liquor license applications did not express anticompetitive
policy); Guthrw Aircraft, Inc. v. Genessee County, 494 F. Supp.
950, 956 (W.D.N.Y. 1980) (statutory authority to establish and
operate airport did not express policy to revoke license of fixed
base operator and grant monopoly license to competitor) ; Mason
City Center Associates v. City of Mason City, Lowa, 468 ¥. Supp.
737, 742 (N.D. lowa 1979) (general authority to zone did not
express anticompetitive policy) .
The absence of an administrative policy is clear from the refusal
of the Colorado Public Utilities Commission to regulate cable
television systems absent legislative direction. Re The Mountain
States Telephone & Telegraph Co., 73 P.U.R.3d 161, 174-75 (Colo.
Pub. Util. Comm, 1968). See Mobilfone of Northeastern Penn-
sylvania, Inc, v. Commonwealth Telephone Co., 571 F.2d 141
(3d Cir, 1978); TV Pix, Inc. v. Taylor, 301 F. Supp. 159 (D. Nev.
1968) , aff'd per curiam, 396 U.S. 556 (1970),
22
Const. art. XX, § 6, as the basis for a state policy to elim-
inate competition in the cable television industry: ‘The
[state] policy was affirmatively expressed through the
language of the [municipal home rule} ordinance.” 630
F.2d at 708.
The Home Rule Amendment provides, in pertinent
part:
[Sjuch [home rule] city or town, and the citizens
thereof, shall have the powers set out in sections
1, 4 and 5 of this article, and all other powers
necessary, requisite or proper for the government
and administration of its local and municipal
matters, including power to legislate upon, pro-
vide, regulate, conduct and control:
a. The creation and terms of municipal officers,
agencies and employments . . . ;
b. The creation of police courts... ;
c. The creation of municipal courts... . ;
d. All matters pertaining to municipal elections
e. ‘The issuance, refunding and liquidation of all
kinds of municipal obligations . . . ;
f. The consolidation and management of park
or water districts .. . ;
g. ‘The assessment of property . . . and collec-
tion of taxes thereon... ;
h. The imposition, enforcement and collection
of fines and penalties for the violation of any of
the provisions of the charter, or of any ordinance
adopted in pursuance of the charter.
It is the intention of this article to grant and
confirm to the people of all municipalities com-
ing within its provisions the full right of self-
23
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.
* * *
This article shall be in all respects self-executing.
Coto. Const. art. XX, § 6 (emphasis added) .
First, the only state policy expressed by the Home
Rule Amendment is that home rule municipalities shall
have authority to declare municipal policy, i.e., policy
over ‘local and municipal matters.” Assuming arguendo
that the regulation of the conduct of a cable television busi-
ness is a “local and municipal matter’’ and that Boulder’s
conduct was a lawful exercise of municipal home rule
authority, it does not follow that Boulder’s conduct ex-
presses state policy. ‘‘[I]t cannot be maintained that every
municipal act that meets the lawful-under-state-law stan-
dard necessarily comports with any reasonably defined
notion of state ‘policy.’”” The State Action Antitrust De-
fense for Local Governments: A State Authorization Ap-
proach, 12 Urs. Law. 325 (1980) [hereinafter cited as
a State Authorization Approach); accord, City of Lafayette,
435 U.S. at 414 n.44, 415 n.45; New York State Electric &
Gas Corp. v. Federal Energy Regulatory Commission, No.
79-4185 (2d Cir. Sept. 30, 1980); see City of Fairfax v.
Fairfax Hospital Association, 562 F.2d 280, 285 (4th Cir.
1977), vacated & remanded on other grounds, 435 U.S.
992 (1978) ; In re Airport Car Rental Antitrust Litigation,
24
474 F.Supp. 1072 (N.D. Cal. 1979). If lawful conduct by
a home rule municipality always expressed state policy,
then a home rule ordinance declaring Tuesdays and Fri-
days as garbage pick-up days would proclaim state policy,
as would an ordinance requiring leashes on pets.'?
Second, since the state legislature has authority to ex-
press state policy on cable television but has elected not
to do so, state policy is neutral. See Cantor v. Detroit Edi-
son Co., 428 U.S. 579, 585 (1976). The Colorado Public
Utilities Commission has acknowledged the state legisla-
ture’s authority to express state policy on cable television.
Re The Mountain States Telephone & Telegraph Co., 73
P.U.R. 3d 161, 174-75, (Colo. Pub. Util. Comm. 1968).
The state legislature has authority to express some cable
television policy, because the subject is of a mixed national,
state, and local concern.'’ Although no Colorado Court
has had occasion to characterize cable television regulation
as purely local, purely state, or mixed state and local,'* it
is clear that the mixed state and local classification would
attach, given that off-air signals and microwave signals
from television programs originating outside of Boulder
'? Mere state acquiescence or approval is inadequate to demonstrate
a clearly articulated, affirmatively expressed state policy. See Can-
tor v. Detroit Edison Co,, 428 U.S, 579, 585 (1976) ; Interconnect
Planning Corp. v. American Telephone & Telegraph Co., 465
F. Supp. 811, 813 (S.D.N.Y. 1978).
'2The ‘Tenth Circuit erroneously intimated that cable television
licensing was a purely local concern. If the Tenth Circuit cor-
rectly classified cable as a purely local concern, then under state
law, there could be no state policy. See Vela v. People, 174 Colo.
465, 484 P.2d 1204 (1971). Manor Vail Condominium Associa-
tion v. Town of Vail, ...... Colo. ...., 604 P.2d 1168 (1980), relied
upon by the ‘Tent!: Circuit, did not classify cable as a purely
local concern. ‘The holding of Manor Vail was two-fold: (1) that
the appellant, a cable television subscriber, was estopped from
challenging a 1968 ordinance that set different rates for different
classes of cable television subscribers, where it had known of the
subscriber classification from the enactment of the ordinance,
paid the charges, accepted service, and refrained from filing suit
until the 1974 rate revision; and (2) that the 1974 ordinance
25
are transmitted across the municipal boundaries of Boul-
der, and are re-transmitted to Boulder residents by coaxial
cable strung on utility poles belonging to an instrumental-
ity that has been classifed as a purely state concern. People
v. Mountain Staies Telephone & Telegraph Co., 125 Colo.
167, 243 P.2d 397 (1952). Since urban blight is a subject
of mixed state and local concern, Denver Urban Renewal
Authority v. Byrne, 9 Colo. Law. 743, Colo. ,
. P.2d ..... (Oct. 27, 1980), surely cable television, a
telecommunications medium affecting interstate com-
merce, United States v. Southwestern Cable Co., 392 U.S.
157 (1968), is a mixed state and local concern as well.
Third, the potential variety of cable television policies
among Colorado’s home rule municipalities belies the ex-
pression of a state policy. See generally A State Authoriza-
tion Approach, supra at 333. The City of Lafayette plu-
rality declared that when cities are “equally free to ap-
proach a policy decision in their own way, . . . [state policy
is] neutral.” 435 U.S. at 414-15; accord, Kurek v. Pleasure
Driveway & Park District of Peoria, Illinois, 557 F.2d 580,
590 (7th Cir. 1977), vacated & remanded, 435 U.S. 992,
which revised rates but maintained the practice of setting differ-
ent rates for different classes of cable television subscribers did
not violate the due process clause or the equal protection clause
of the fourteenth amendment. Nor did TP Pix, Inc. v. Taylor,
relied upon by the Tenth Circuit, hold the licensing of cable
companies to be a purely local concern. ‘he holding of TV Pix
was that a Nevada statute declaring cable television a public
utility subject to regulation by the Nevada Public Service Com-
mission was not per se an unconstitutional burden on interstate
commerce, 304 F, Supp. at 464.
'4The classification of a subject as a purely local, purely state, or
mixed state-local concern determines the relative authority of the
state and local governments over such subject. On subjec\. of
purely local concern, the municipal ordinance governs. On sub-
jects of purely state concern, the state statute governs. And on
subjects of mixed state-local concern, a statute and ordinance
may co-exist; but if they. conflict, the statute prevails. See, e.g.,
DeLong v. City & County of Denver, 195 Colo. 27, 31, 576 P.2d
537, 540 (1978).
26
aff'd per curiam on remand, 583 F.2d 378 (7th Cir.) , cert.
denied, 439 U.S. 1090 (1978).
B. THE STATE MANDATE REQUIREMENT
WAS NOT SATISFIED.
To satisfy the state mandate test, the municipality
must demonstrate “from the authority given . . . [the
municipal government by the state legislature] to operate
in a particular area, that the legislature contemplated the
kind of action complained of.” 435 U.S. at 415. Such legis-
lative contemplation “may be demonstrated by explicit
language in state statutes, or may be inferred from the
nature of the powers and duties given to a particular gov-
ernment entity.”” Duke & Co. v. Foerster, supra, 521 F.2d
at 1280.
The Colorado Legislature has never explicitly con-
templated municipal restraints on cable television com-
petition. Cable television is not among the eight enum-
erated powers in the Home Rule Amendment. Nor is there
any explicit reference in the Home Rule Amendment to
any anti-competitive municipal conduct, much less anti-
competitive conduct related to cable television. See Prince-
ton Community Phone Book, Inc. v. Bate, 582 F.2d 706,
717 (3d Cir.) , cert. denied, 439 U.S. 966 (1978) (New
Jersey Supreme Court rule barring attorney advertising ex-
pressly contemplated anti-competitive effect); Shrader v.
Horton, 471 F. Supp. 1236, 1242 (W.D. Va. 1979), aff'd
per curiam, 626 F.2d 1163 (4th Cir. 1980) (state law
expressly directed mandatory water hook-up ordinance) ;
Beckstein v. Hartford Electric Light Co., 479 F. Supp. 417,
421 (D. Conn. 1979) (Connecticut Public Utilities Com-
mission expressly orderd public utility to increase rates) ;
Caribe Trailer Systems, Inc. v. Puerto Rico Maritime
Shipping Authority, 475 F. Supp. 711, 722 (D.D.C. 1979)
(Puerto Rico Legislature expressly directed monopoliza-
tion of shipping trade) .
27
Nor has the state legislature implicitly contemplated
municipal restraints on cable television competition. Out-
side of the enumerated powers, the Home Rule Amend-
ment is such a broad mandate that it contemplates nothing
with particularity. The City of Boulder engages in reductio
ad absurdum, if it argues that by contemplating nothing,
the Home Rule Amendment contemplated all. See Note,
65 Gro. L. J. 1547, 1589 (1977); A State Authorization Ap-
proach, supra at 335. If the Court were to accept this posi-
tion, state legislatures would have the authority to endow
all municipalities with blanket immunity, precisely the
result the Court sought to avoid in City of Lafayette. See
Woolen v. Surtran Taxicabs, Inc., 461 F. Supp. 1025, 1031
(N.D. Tex. 1978).
Lower courts have been unwilling to infer from such a
broad mandate an intent to immunize particular acts from
antitrust scrutiny. Indeed, post-City of Lafayette decisions
have construed the state mandate test as requiring contem-
plation of (1) a particular kind of act and (2) the anti-com-
petitive effects flowing from such act. See, e.g., United
States v. Texas State Board of Public Accountancy, 592 F.2d
919, 920 (5th Cir. 1979), cert. denied, 444 U.S. 832 (1980)
(“the connection between this granted power and the
Board's use of it is too tenuous to permit the conclusion that
the legislature intended its scope of activity to encompass
an anti-competitive regulation”); Feminist Women’s Health
Center, Inc. v. Mohammad, 586 F.2d 530, 550 (5th Cir-
1978), cert. denied, 444 U.S. 924 (1980) (Director of
Florida Board of Medical Examiners was not acting within
the intended scope of his statutory authority by pressuring
doctors to cease practice absent unethical or illegal conduct
by doctors); Guthrie Aircraft, Inc. v. Genesee County,
494 F. Supp. 950, 956 (W.D.N.Y. 1980) (state statute grant-
ing county broad power to operate airport did not contem-
plate the county awarding defendant exclusive rights as
28
fixed base operator) ; Pinehurst Airlines, Inc. v. Resort Atr
Services, Inc., 476 F. Supp. 543, 554 (M.D.N.C. 1979) (same
holding as Genesee County); Star Lines, Ltd. v. Puerto
Rico Maritime Shipping Authority, 541 F. Supp. 157, 166
(S.D.N.Y. 1978) (“the legislature must direct its instrumen-
tality to engage in a particular type of anti-competitive ac-
tivity”); Virginia Academy of Clinical Psychologists v. Blue
Shield of Virginia, 624 F.2d 476, 482 n.10 (4th Cir. 1980),
petition for cert. filed, 49 U.S.L.W. 3456 (Dec. 28, 1980)
(No. 80-930) (state law assigning territories to insurers did
not contemplate insurers’ agreement restricting insurance
coverage for psychological services to such services which
are ordered, supervised, and billed by physicians) .
Colorado's Home Rule Amendment contemplates
neither the kind of act at issue here, revocation of cable
permit by enactment of municipal ordinances, nor the
anti-competitive effects of such act, geographical restriction
upon and potential monopolization of the market.’
“(There is no indication that the state required, or even
suggested, the manner in which,” /n re Airport Car Rental
Litigation, 474 F, Supp. at 1096, the home rule authority
would be exercised. See Woolen v. Surtran Taxicabs, Inc.,
461 F. Supp. 1025, 1035 (N.D. Tex. 1978).
In view of the incorporation of the Colorado Antitrust
Statute, Coto, Rev. Stat. §§ 6-4-101, 6-4-102 (1974 and
Supp. 1979), into the Home Rule Amendment, Boulder's
'S There are only two cases involving home rule cities where lower
courts have found the state mandate test satisfied: Pueblo Air-
craft Service, Inc. v. City of Pueblo, Colorado, 498 F. Supp. 1205
(D. Colo, 1980), which expressly relies upon the Court of Ap-
peals decision in the instant case; and Glenwillow Landfill, Inc.
uv. City of Akron, 185 F. Supp. 671 (N.D. Ohio 1979). Glenwillow
Landfill is distinguishable from the instant case, in that the state
courts had construed the statutes governing solid waste disposal
as authorizing municipalitics to regulate “the collection and dis-
posal of solid waste within their borders — by monopoly if the
city finds it appropriate.” /d. at 677 (citations omitted).
29
anticompetitive conduct was not reasonably contem-
plated by the amendment. State antitrust “statutes evidence
a state policy to subject cities to antitrust liability and
make it impossible for a city to invoke the state action
exemption absent clear, specific legislation authorizing the
anticompetitive municipal conduct in question.” Thomas,
City of Lafayette’s State Action Test Reformulated: A
Meaningful Standard of Antitrust Immunity for Cities,
1980 Ariz. St. L.J. 345, 380 n. 154 (1980) .'® Although
the Home Rule Amendment did not expressly subject
home rule municipalities to state and federal antitrust
laws, like the statute at issue in Woolen v. Surtran Taxi-
cabs, Inc., 461 F. Supp. 1025, 1031 (N.D. Tex. 1978) ,'’ the
amendment did declare that “[t]he statutes of the state of
Colorado, so far as applicable, shall continue to apply to
such'cities and towns. . . .”’ Coto. Const. art XX, § 6.
Since cable television regulation is a subject of mixed state
and local concern, the Colorado Antitrust Statute is appli-
cable.
‘Broader procompetitive language than that included in the Colo-
rado Antitrust Statute has been the basis for two decisions in
which the state mandate test was not satisfied. See Guthrie Air-
craft, Inc. v. Genesee County, 494 F. Supp. at 955-56 (statute au-
thorizing county control of airports provided that such airports
must be operated “for the general use of the public and for the
benefit of such city, county, village or town"); Pinehurst Airlines,
Inc. v. Resort Air Services, Inc., 476 F. Supp. at 554 (statute
authorizing county control of airports provided that in awarding
concessions, the county may not “[deprive] the public . . . of its
rightful, equal, and uniform use thereof"). But see Pueblo Air-
craft Service, Inc. v. City of Boulder, Colorado, 498 F. Supp. 1205
(D. Colo, 1980) .
'? The statute at issue in Woolen was the Municipal Airport Act,
Tex. Civ. Stat. ANN, arts. 46d-1 to 46d-22 (Vernon 1969), which
granted municipalities the authority to operate airports. Article
46d-7 (b) of the Act provided that “[nJo ordinance, resolution,
rule, regulation or order by a municipality pursuant to this Act
shall be inconsistent with, or contrary to, any Act of the Congress
of the United States or laws of this State, or to any regulations
promulgated or standards established pursuant thereto.”
30
CONCLUSION
The Tenth Circuit decision wreaks chaos and confus-
ion. Against the silence of the City of Lafayette plurality,
and Chief Justice Burger's long record of strictly constru-
ing the state-action exemption, the Tenth Circuit has
immunized all cities from antitrust liability so long as the
challenged conduct is governmental rather than _pro-
prietary. Against the admonition by the City of Lafayette
majority that the »narochial economic interest of cities
should not be permitted to overrule the national economic
policy of free competition, the Tenth Circuit held that
actions of home rule municipalities were to be treated
as state action and entitled to blanket immunity under
Parker v. Brown. Henceforth, so long as actions by city
departments in home rule cities reflect municipal policy
to displace competition, they are presumably to be immune
from the antitrust laws. The Tenth Circuit's decision cries
out for review.
Wherefore, premises considered, Petitioner prays that
that the Supreme Court of the United States grant the
petition for a writ of certiorari to review the judgment and
opinion of the United States Court of Appeals for the
Tenth Circuit.
Respectfully submitted,
Tuomas A, SEATON
35 Embarcadero Cove
Oakland, California 94606
(415) 261-4100
Haroip R. Farrow Counsel for Petitioner
35 Embarcadero Cove
Oakland, California 94606
STEPHEN M. Bretr
2900 First of Denver Plaza
Denver, Colorado 80202
Of Counsel
A-l
APPENDIX
COMMUNITY COMMUNICATIONS
COMPANY, INC.,,
Plaintiff-Appellee,
v.
CITY OF BOULDER, COLORADO, etal.,
Defendants-A ppelants.
No. 80-1348.
UNITED STATES COURT OF APPEALS,
TENTH CIRCUIT.
May 28, 1980.
Rehearing Denied October 1, 1980.
Before SETH, Chief Judge, SEYMOUR, Circuit
Judge, and MARKEY, Judge’.
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 T'V business entity. Some cleven 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 solicit-
ing other cable TV business to engage in business under a
proposed model ordinance. One of the causes of action as-
serted 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 restriction 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.
*Honorable Howard T. Markey, Chief Judge, United States Court
of Customs and Patent Appeals, sitting by designation.
A-2
Before this court the central issue is whether the City is
exempt from the anti-trust laws.
There were two principal actions taken by the City
which were considered by the trial court without really
differentiating betwecn them. One was the 90-day mora-
torium 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 im-
posed by the City by a general ordinance and by the enact-
ment of an ordinance directed specifically to the non-
exclusive 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 fol-
lowing 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 ob-
taining new customers for three months while poten-
tial competitors submit proposals for serving those
same customers. The motivation may be to foster com-
petition in the long run, but the direct and imme-
diate 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 sub-
stantial and continuing factor.
Of the model ordinance and the solicitation, the court
was critical of the method or the way the matter was han-
dled. 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
A-3
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.
$15, contentions. The court of this said:
“Assuming that Boulder does have the claimed author-
ity 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 com-
panies, the approach taken is not an appropriate ex-
ercise and articulation of a policy of regulation. It is
not characteristic of utility regulation for the regu-
lating 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 cri-
teria for cable companics to do business in the City,
with such other regulations as the City government
might believe to be necessary and proper in the ex-
ercise of police power, and then to confront the con-
tention that such an ordinance has an anticompetitive
effect. This 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 so-
licitation and negotiations was somehow improper or be-
yond 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 con-
sidered, and the Colorado Supreme Court found nothing
to comment on. In Manor Vail Condominium Ass'n v.
A-4
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 estab-
lished for rate making under the Constitution. ‘The Colo-
rado 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 peo-
ple of each city or town of this state, having a popula-
tion 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.
A-5
“Such charter and the ordinances made pursuant
thereto in such matters shall supersede within the ter-
ritorial 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 here-
in 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 ap-
plicable, 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, Boul-
der 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 representa-
lives 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 situa-
tions where an ordinance may even supersede a state statute
A-6
as to matters of purely local concern. See also Service Oil
Co. v. Rhodus, 179 Colo. $35, 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 Colo-
rado. Under these circumstances there is no interaction of
state and local regulation. We have only the action or ex-
ercise 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.), Securily Life and Accident Co. v.
Temple, 177 Colo. 14, 492 P.2d 63, and Four-County
Met. C.1, Dist. v. Board of County Com'rs., 149 Colo, 284,
$69 P.2d 67. In the Four-County Metro case the court
stated that the home rule cities in Colorado as to local mat-
ters 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 opin-
ion 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. Tay-
lor, 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 sys-
tem was a local business and did not constitute an inter-
ference 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
A-7
any way, and whether by contract or police power the action
is an exercise of governmental authority, ‘There is no cle-
ment of proprietary interest of the City.
{1} We must hold that under the Colorado Constitu-
tion 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 cir-
cumstances the regulation here concerned was the only
control or active supervision exercised by state or local gov-
ernment, 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 accom-
panying the ordinances, ‘he City adopted a policy of foster-
ing 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, Who-
ever obtained the franchise or the additional franchise
would be required to operate under the model ordinance.
The ordinance had been formulated after hearings, discus-
sions and negotiations. ‘he City had a consultant to give
advice on the matter.
[2] 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 competi-
tion 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.
A-8
The trial court here apparently concluded that Lafay-
elle v. Louisiana Power & Light Co., 435 U.S, 389, 98 S.Ct.
1123, 55 L.Ed.2d 364, was controlling, However, in Lajay-
ette the City was authorized to own and operate its clectric
utility. Louisiana Power & Light was sued by the City for
anti-trust violations, and the utility counter-claimed under
the Sherman Act for alleged anticompetitive activities. A
divided Supreme Court ruled that the City was not im-
mune from antitrust liability, The decision, considering the
several opinions, was grounded on the fact that the action
was net 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 proprictary in-
terest of the City is here involved. In any event, the state-
ment of policy requirement in Lafayette has been met as
indicated in the home rule discussion herein.
The Supreme Court holding in California Retail Li-
quor Dealers Ass'n, v. Midcal Aluminum, Inc. —— US.
——, 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 ‘ac-
tively supervised’ by the State itself.” (-— U.S. at ——,
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 morato-
rium was ignored,
A-9
We conclude that City of Lafayette is not applicable
to a situation wherein the governmental entity is asserting
a governmental rather than properietary 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 tem-
porary 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.
[3] 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. Rom-
ney, 485 F.2d 752 (D.C.Cir.) said after referring to the
broad discretion of the trial court as to the equities, ir-
reparable 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 erro-
neous. We conclude that underlying the District
Court’s conclusion of law, that plaintiff is likely to suc-
ceed 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
A-10
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 di-
rected to the plaintiff.
MARKEY, Chief Judge, dissenting.
With the greatest respect, I dissent. Though these re-
marks will not affect the course of Western Civilization,
they are compelled by a conviction that the judgment below
was eminently sound and unequivocally correct. Because, as
set forth in its Memorandum Opinion and Order, the trial
court committed no abuse of discretion, and because its
judgment order is fully supportable on at least First Amend-
ment grounds, I would affirm.
The Facts
In 1964, Boulder entered a 20-year, non-exclusive li-
cense-contract with a predecessor of plaintiff Community
Communications Company (CCC), under which CCC was
licensed to string cable throughout the city and to supply
cable television (CATV) communications, that is, news, in-
tormation, and entertainment, to Boulder’s citizens. The
contract is cancellable at will by the city. CCC has indis-
putably and at all times complied with that contract.
In 1973 and 1974, the city unsuccessfully sought bids
tor a cable operator to serve the entire city, to buy oui CCC,
and to submit to extensive regulation by the city.
In July of 1979, “Boulder Communications Company”
(BCC), wrote the city, saying it had been formed by six
citizens of Boulder, tendering a resolution under which it
would receive a permit to build its system, stating that it
would if permitted build its system, “whatever action the
city takes in regard to [CCC},” stating its plan for stock-
holders of BCC to be Boulder citizens, and promising to
supply Boulder with “the best that cable has to offer.”
A-1]
The city, though at all times fully free to do so, de-
clined and still declines to grant BCC, or any other com-
pany, a non-exclusive license to compete with CCC in the
cable market in Boulder. Though advised by its consultant
that modern technology made open and free cable competi-
tion teasible, the city persisted in its position that only one
cable operator could serve Boulder.
CCC’s announcement of expenditures for expansien in
Boulder were warmly applauded by the city’s officials in
May of 1979.
However, in the summer of 1979, the city re-launched
its 1973-74 effort to find and install a cable operator which
would serve the entire city and which would submit to
broad control of its business by city officials.
The city decided that open competition would not
produce the “best” cable TV operator, that it and not Boul-
der’s cable consumers would decide which was “best,” that
there could be only one, and that the one must adhere to
rigid controls by the city.
The city’s Attorney advised that it lacked authority to
impose those controls by regulations, but could do so using
a bid-contract process in which the chosen company would
agree to those controls.
The city drafted a “model ordinance” (contract) of
twenty-two pages, to be entered by the one successful bid-
der, and giving the city pervasive controls of the selected
cable operator's business, including its programming.
Among the salient features of the model contract are:
The city’s right to purchase the cable company, ata
price excluding good-will and limited to depreciated
investment; the city’s right of prior approval of every
company contract; rate regulation; the city’s right to
A-12
change rates at any time; a 5%, franchise fee (two and
one-half times the present fee) ; a requirement for five
leased access channels; a compliant procedure mon-
itored by the city manager, with a liquidated damage
provision; a requirement to upgrade company facilities
continually to state-of-the-art conditions; and a re-
quirement for renegotiation, at specified intervals, of
rate structures, free or discounted service, services
provided, programming offered, and human rights.
In November, 1979, BCC again wrote the city, saying
it was best qualified to serve Boulder, claiming support
from citizen groups, stating a preference for an immediate
permit under the city’s “new policy ordinance.” BCC. ac-
cepted the “request for bid” situation, but warned that
requesting bids would not solve legal “problems of an anti-
trust nature.” BCC said the bid procedure would require
that CCC’s license be revoked, or that CCC agree not to
expand (saying economics precluded more than one cable
operator), Again denying the necessity for bids, BCC re-
peated its earlier offer to submit to the city’s controls, and
suggested that the city revoke CCC’s license, offering in that
event to purchase CCC’s system. BCC closed with assurance
that “there is no question that we are best suited to bring
cable services to Boulder.”
In December, 1979, fearing possible frustration of its
plans, the city enacted ordinance 4473, imposing a 90-day
moratorium on CCC’s expansion, and ordinance 4472, re-
pealing and reenacting CCC’s license contract, with a sec-
tion making CCC’s continued operation in its existing area
an “acceptance” of the 90-day moratorium and of the geo-
graphic restriction.
A-18
When CCC continued building, city authorities ar-
rested its construction crews and tore down its cables.’
The city sought an injunction against CCC’s expan-
sion. An injunction was denied by Judge Neighbors, of
the Boulder District Court. City of Boulder v. Community
Communications Company, Inc., No, 80-CV-0198. Noting
that the federal court had assumed jurisdiction, Judge
Neighbors added that he was not convinced the city
would prevail on the merits, that the equities did not
favor the city and that significant First Amendment issues
were present.
In the present case, the district court issued this Order:
ORDERED, that so long as the plaintiff, Com-
munity Communications Company, Inc., operates
within the terms and conditions of Ordinance No.
2846, enacted October 6, 1964, [the original contract}
the city of Boulder and all of its officers, agents, ser-
vants, employees, and attorneys are enjoined from tak-
ing any unilateral action to restrict, limit, or revoke
the authority of the plaintiff to conduct its cable tele-
vision business in the City of Boulder.
' It is not necessary to question the sincerity of the city’s officials,
acting in the belief that they were better able than Boulder’s
cable consumers to determine which cable operator was the
“best” for Boulder's citizens. The refusal to permit individual
consumers to decide among competitors in open competition has
here spawned delay in service of new consumers, arrests, equip-
ment tear-down, two law suits, an appeal, continuing litigation,
and the concomitant expense to all local and federal taxpayers.
- That harm may be caused by the sincere who would do good
is but a price to be paid, lest no good be ever done. In this
particular case, however, the circumstances tend to confirm the
wisdom animating the Sherman Act, its national policy insist-
ence on open, free competition, and its prohibition against un-
necessary interference therewith.
A-14
The First Amendment
The judgment below will be affirmed on appeal if any
basis for affirmance, whether or not relied on below, ap-
pears in the record. Carpenters District Council v. Brady
Corp., 513 F.2d 1, 4 (10th 1975); see SEC v. Chenery
Corp., 318 U.S. 80, 88, 63 S.Ct. 454, 459, 87 L.Ed. 626
(1943); Casto v. Arkansas-Louisiana Gas Co., 597 F.2d
1323, 1825 (10th Cir. 1979); Lindsey v. Dayton-Hudson
Corp., 592 F.2d 1118, 1124 (10th Cir. 1979); Fleming
Building Co. v. Northeastern Oklahoma Building and
Construction Trades Council, 532 F.2d 162, 166 (10th
Cir. 1976).
In my view, just such a basis for affirmance, compelling
in its force and thrust, lies in the city’s violation of the rights
of speech and press guaranteed to CCC, and to the citizens
of Colorado and of the United States who reside in Boulder,
by the First Amendment.’
Though both the state and federal trial judges ex-
pressed concern over violation of First Amendment rights
here, the former disposed of the city’s requested injunction
primarily on jurisdictional grounds and the latter granted
CCC's requested injunction primarily on Sherman Act con-
siderations.
? Affirmance on First Amendment grounds avoids the constitu-
tionality-risking interpretation of the Colorado constitution’s
“home rule” provisions found necessary by the majority to sup-
port absolute immunity of Colorado cities from the Sherman
Act. Further, affirmance on First Amendment grounds avoids
the concern expressed by Mr. Justice Blackmun in City of
Lafayette for the effect on municipalities and their citizens of
the Sherman Act's treble damage provisions,
The Colorado Attorney General's brief for Amicus State of
Colorado, concentrating on Sherman Act considerations, “as-
sumed arguendo that the first amendment may limit, but does
not wholly prohibit” Boulder's authority.
A-15
That CATV is engaged in interstate commerce is clear.
United States v. Southwestern Cable Co., 392 U.S. 157,
168-169, 88 S.Ct. 1994, 2000-01, 20 L.Ed.2d 1001 (1968).
That Boulder’s reach for massive control of the CATV
market within its borders is an interference with that com-
merce is to me equally clear, But, as recognized by the fed-
eral trial court, another “wider concern” is that for the First
Amendment.’
Looking at the proposed model contract ordinance as
the source of First Amendment concerns, and noting that
the city had not yet engineered an acceptance of that con-
tract, the trial court deemed its effect merely prospective and
contented himself with a warning.* In my view, as injurious
* Cable TV is a First Amendment speaker. See Midwest Video
Corp. v. FCC, 571 F.2d 1025 (8th Cir, 1978) (aff'd on other
grounds sub nom. FCC v, Midwest Video, 440 U.S, 689, 99 S.Ct.
1435, 59 L.Ed.2d 692 (1979); Home Box Office, Inc. v. FCC,
567 F.2d 9, 46 (D.C.Cir. 1977) cert. den. 434 U.S. 829, 98 S.Ct.
111, 54 L.Ed.2d 89 (1977); Greater Fremont, Inc. v. City of
Fremont, 302 F.Supp. 652 (N.D.Ohio 1968) aff'd sub nom. Won-
derland Ventures, Inc, v. City of Sandusky, 423 F.2d 548 (6th
Cir. 1970) ; Weaver v. Jordan, 64 Cal.2d. 235, 49 Cal.Rptr. 537,
411 P.2d 289 (1966), and Television Transmission, Inc. v. Pub-
lic Utilities Commission, 47 Cal. 2d 82, 301 P.2d 862, 865 (1956) .
* Concerning the First Amendment, the trial judge said:
Obviously there are wider concerns, including interstate com-
merce, giving rise to some uncertainty about the power of the
state government in this regard, both in terms of an obstruction
to interstate commerce, and with respect to the First Amend-
ment rights of communicators.
There are two other aspects of this case which are deserving
of preliminary observations at this time. The plaintiff has at-
tempted to use the shield of the First Amendment to avoid any
interference from City government. That is an obvious over-
statement of the law and an attempt to escape the reality that
the messages it chooses to transmit must pass through a medium
which is subject to some control by the City.
A-16
to First Amendment freedoms as the model would be, the
90-day moratorium was itself an impermissible prior re-
straint on the right to speak and hear.
In effect, by its “ordinances” 4473 and 4472, the city
has said to CCC, “Thou shall not speak your truth to any
Boulder citizens residing outside your present area of opera-
tion for 90 days.” To Boulder citizens in those areas, the
city has said, “Thou shall not for 90 days hear CCC's
speech.”* It is difficult to imagine a more flagrant and chill-
ing inroad on cherished First Amendment freedoms.
While the defendant Boulder readily concedes that the First
Amendment would prohibit its control of the content of these
transmissions it does assert both the right and the responsibility
for restricting the use of the public ways in this communications
system. The question, of course, is what are the limits of that
authority? If controlling content of the programs is beyond those
limits, is it different, either in degree or in kind, for the City
government to prescribe the number, variety, and scope of pro-
gramming and services to be offered? And, is it appropriate for
the City administration to say that the acceptability of a cable
company rests on its willingness to contribute free services to
that government or to such institutions or groups as may be
considered to be in need of benefit or reward? Stated bluntly,
may the City exact tribute for its favor?
While these questions are not now ripe for decision, they are
potential problems in this developing situation. It is inappro-
priate to ascribe any illegal or improper intent to action which
has not yet been taken, but it may be helpful to give caution
about the potential consequences of that which may be contem-
plated. The City should carefully consider the need to exercise
its authority by narrowly drawn regulations which do not un-
necessarily interfere with First Amendment freedoms, as the
Supreme Court has cautioned in Village of Schaumburg v. Citi-
zens for a Better Environment, 441 U.S. 922, S.Ct. 2029, 60
L.Ed.2d 395.
* The trial court referred to “interested persons who are not be-
fore the court.”
A-17
It is further difficult to visualize a valid defense to a
charge in this case of violating CCC's First Amendment
rights, and those of Boulder’s citizens outside CCC's present
operating area. Absence of concentration on the issue below
would appear of little or no moment here, where there is no
issue of material fact, and all relevant facts are of record.
Before the moratorium, CCC had the right to speak outside
its area. During the moratorium it did not. When it tried
to speak, it was arrested and its cables were torn down.
There is no police-power suggestion of concern for the
public safety and welfare in CCC's use of Boulder’s rights-
of-way. Nor could there be, that factor being handled by
the public utility, with whom CCC contracts for poles on
which to string its cables.
On appeal, the city’s sole defense is to pretend, disin-
geniously and contrary to the extensive, uncontradicted tes-
timony and the specific findings of the trial judge, and con-
trary to its own City Attorney's advice, that cable is a
“natural monopoly.” ‘The city’s sole argument in this case is
that because there can be only one cable operator in Boul-
Nor is CCC likely, under the city’s plan, ever to speak again
outside its present arca. The city, after receiving the majority
opinion, signaled its intent to impose a second moratorium. In
its briefs here it repeated, ad nauseam, that its 90-day mora-
torium was merely “a one-time, temporary” delay in CCC's ex-
pansion. The city refused, however, to assure Judge Matsch that
it would not impose second and continuing moratoriums if he
denied the injunction. The city appealed the injunction inter-
locutorily, and moved to expedite, even though the moratorium
expired the day after the injunction issued. Moreover, a failure
to impose continuous moratoriums might, as the city elsewhere
argues, allow CCC to “wire the entire city” and thus defeat
the city’s plan to grant either one monopoly for the entire city,
or a number of monopolies, cach in a specified district. Hence,
the city must either abandon its present plan or it must continue
to impose moratoriums on CCC's right to speak outside its
present area.
A-18
der,’ the moratorium was necessary to prevent CCC from
“wiring the entire city” before the city could conduct its bid
process and select what it considered the “best” company to
enjoy that monopoly. Not to put too fine a point on it, that
argument is today simply fallacious. As the trial judge
found, and as the record makes clear, modern technology
makes free and open competition both practically and
economically available to the city by at least four competing
cable communicators.°
Though the city may have difficulty getting a commu-
nicator who is not granted a monopoly of all or part of the
city to submit to the massive controls of its “model ordi-
nance,” that fact could hardly justify the infringement of
First Amendment freedoms inherent in its 90-day mora-
torium upon CCC's right to speak.’
Moreover, a desire to dictate who shall monopolize
CATV communications in Boulder cannot serve as the
articulated, compelling state or governmental interest re-
quired to justify an otherwise constitutionally prohibited
silencing of the right of free speech and free press. ‘That
is true whether the awful sound of silence lasts for 9 days or
90 or 900.
? The city says it considered, and may still consider, “districting,”
i.e., parceling out areas of the city to different cable operators.
The effect on the First Amendment, however, is the same, for
the city would be restraining each operator from speaking out-
side his assigned area, and would be dictating each consumer's
choice, limiting it to the one cable operator chosen by the city
to speak to that consumer.
® The trial court said:
Under the present technology, more than one cable company can
be on the same poles without adversely affecting the public
ways. While there certainly are finite limits to overbuilding,
those limits are something beyond two companies.
and again:
I disagree that the evidence shows that cable television is such
A-19
The city says the moratorium does not regulate pro-
gram “content,” but a stifling of all content is the ultimate
in content regulation.
The city says the trial court rejected CCC's “claim that
the moratorium violated the First Amendment” as “an
obvious overstatement of the law’ —but it was an allegation
that the First Amendment precluded “any interference”
that was so characterized by the trial court, Note 4, supra.
There may, of course, be limited compelling government
interests permitting some interference, as the cases have
shown, As above indicated, however, an insistence on main-
tenance of monopoly is not such an interest,
The city cites NBC v, United States, 319 U.S. 199,
226, 63 S.Ct. 997, 1014, 87 L.Ed. 1344 (1943), wherein the
FCC's denial of a broadcasting license was affirmed, for-
getting that the FCC is statutorily empowered and required
to parcel out scarce airwaves, in the physically limited
broadcast spectrum, as the Court so clearly stated, ‘Vhat
situation is entirely different from the one betore us, Cited
also are Conley Electronics Corp, v. FOC, 394 F.2d 620
(10th Cir. 1968); United States v. Southwestern Cable Co.,
392 U.S. 157, 88 S.Ct. 1994, 20 L.Ed.2d 1001 (1968) ;
Great Falls Community Cable Co, uv. FCC, 416 F.2d 238,
240 (9th Cir, 1969); Black Hills Video Corp, v. FOC, 399
a natural monopoly that the only feasible competition is in the
process of currying favor with the City Council to obtain a per-
mit to operate. To the contrary, the evidence is that there can be
competition in the marketplace, with the choice of price and
service let to the consumers,
* ‘The city and Colorado's Attorney General cite the refusal of BOC
and 2 other potential cable operators to compete unless they are
granted a monopoly over all or part of the city as “evidence”
that “economics” preclude open competition, That the opera:
tions of multiple competitors may result in one getting more
customers than another, however, is an inherent element of, not
an economic barrier, to competition, United States v, Alcoa, 148
F.2d 416, 430 (2d Cir, 1945),
A-20
F.2d 65, 69 (8th Cir. 1968) ; and Buckeye Cablevision, Inc.
v. FCC, 387 F, 2d 220, 225 (D.C. Cir. 1967) , for the propo-
sition that courts have upheld intrusions “greater than
that posed here.” It is answer enough that all of those
cases involved FCC controls over re-transmission of broad-
cast signals, and none involved the egregious choking off
of a licensee's contractually-based right to speak to more
people within its licensed area.”
Even in respect of the broadcast medium, where scar-
city of broadcast channels both requires and justifies reg-
ulation, the Supreme Court has jealously guarded the First
Amendment, saying, for example, “It is the right of viewers
and listeners, not the right of the broadcasters, which is
paramount, It is the purpose of the First Amendment to
preserve an uninhibited marketplace of ideas in which
truth will ultimately prevail, rather than to countenance
monopolization of that market, whether it be by the Gov-
ernment itself or a private licensee.’ Red Lion Broadcast-
ing Co. v. FCC, 395 U.S. 367, 399, 89 S.Ct. 1974, 1806
'0 The city correctly says it cannot be forced to grant a license to
“every operator that applies,” but that is not to say that the city
can unilaterally stifle the voice growth of an operator already
licensed, for the sole purpose of enabling the city to choose a
favorite monopolist or series of neighboring monopolists. Nor,
assuming financial integrity and willingness to comply with po-
lice power regulations relating to use of the city’s rights of way
on the part of applicants, no reason is seen or cited why licenses
should not be granted to those applicants,
-
The city's brief repeats, in reference to the First Amendment,
that its moratorium was to prevent CCC's monopolization and
“to foster competition in” the marketplace, But the city could
have done all that with ease by merely granting additional non-
exclusive licenses. As established in the record, found by the
trial judge, and not denied by the majority the moratorium, and
its continuation, is critical to the city's effort to prevent compe:
tition and to insure monopolization, albeit by the monopolist
its considers “best.”
The record of this interlocutory appeal reflects no intent by
city officials beyond a desire to grant monopoly licenses to one
A-2]
23 L.Ed.2d 371 (1969) (citations omitted). Here the
city’s actions, whether or not well-intentioned, reflected a
callous and total disregard of “the right of the viewers
and listeners,” by preventing the 80-90%, of Boulder’s
citizens outside CCC's operating area from receiving any
cable communicator’s ideas, until the city decides which
one monopolist’s ideas they will be permitted to hear,’
When, as studies show, the majority of our people get
their news from television, I cannot, in First Amendment
jurisprudence, and concerning action to still a growing
voice, distinguish the dissemination of news and informa-
tion by cable ‘T'V from that by newspapers.'* Surely, an at-
tempt by a city to use control of its streets and ways as a
bludgeon to deny delivery of a newspaper to new sub-
scribers for 90 days would be rapidly struck down on First
Amendment grounds, ‘The more so when it became clear
that the denial was but a first step in a plan to insure the
presence of only one newspaper, approved by the city and
operating under the city's rigid control of its contracts and
content,'’
or more “best” monopolists, An absolute freedom to stifle uni-
laterally the growth of a licensed communicator, because city
officials disliked its programming or its editorial position in an
upcoming election, for example, could certainly chill the exer-
cise of that communicator’s First Amendment rights. Like the
power to tax, a unilateral, arbitrary power to stunt can also be
the power to destroy.
'* Colorado's constitution speaks of city autonomy in “local and
municipal matters.” “The trial court and majority here reter
to “local concern.”” CATV is not merely a local matter, United
States v. Southwestern Cable Co,, 392 U.S, at 168-169, 88 S.Ct.
at 2000-01, but if it were, that fact would be irrelevant to First
Amendment implications, It is difficult to imagine a more local
enterprise than a newspaper composed, edited, printed, and dis-
tributed within any of the thousands of communities like
Boulder in the United States, Moreover a Colorado city’s au-
thority in relation to non-communication type activities must
be carefully circumscribed when it is applied to restrict First
Amendment rights.
A-22
Even when then-extant technology indicated that
CATV might be a natural monopoly, the court said in
Home Box Office, Inc. v. FCC, 567 F.2d 9 at 46:
In any case, scarcity which is the result solely of eco-
nomic conditions is apparently insufficient to justify
even limited government intrusion into the First
Amendment rights of the conventional press, see Mi
ami Herald Publishing Co, v. Tornillo, 418 U.S, 241,
247-256, 94 S.Ct. 2831, 2834-38, 41 L.Ed.2d 730 (1974),
and there is nothing in the record before us to suggest
a constitutional distinction between cable television
and newspapers on this point,
Further, in Midwest Video v. FCC, 571 F.2d 1025,
1053 (8th Cir, 1978) the court said:
Government control of business operations must be
most closely scrutinized when it affects communication
of information and ideas, and prior restraints in those
circumstances are presumptively invalid, See Bantam
Books, Inc. v. Sullivan, 372 U.S, 58, 70, 83 S.Ct. 631,
639, 9 L.Ed.2d 584 (1963).
All the injunction on review prohibited was unilateral
restriction by the city of CCC’s right to “conduct its cable
television business." In my view the quoted phrase is a
synonym for CCC’s right to “speak.” I would affirm the in-
junction on First Amendment grounds,
The Contract Approach
It should be remembered that we deal here also with
contractual rights. All of the involved “ordinances” are,
in fact and by their terms, contracts. The trial court found
that the city “finessed” an apparent “lack of regulatory au-
thority” by “use of a contract approach,” in the 90-day mora-
torium “ordinance” 4472, CCC and the city are parties to
the original license contract. It is not even argued that CCC
has failed to pay the city's fee or breached its original con-
A-23
tract in any way. All the present injunction does is to re-
quire that the city honor its existing contract so long as it
is honored by CCC. The injunction could be sustained on
that ground alone, without injection of either First Amend-
ment or antitrust considerations.
Though the original contract is terminable at will by
the city, the city did not terminate it, the city’s attorneys
having advised that it could not do so absent breach by
CCC, The city does not here argue that its power to ter-
minate justified the 90-day moratorium on CCC’s effort to
serve more consumers under its contract. Nor, would it
seem, can the city be heard to assert a right to unilaterally
amend the contract, from one covering the right to serve
the 82,000 residents of Boulder to one covering only the
right to serve 10-20% of those residents presently offered
service by CCC.
Though the parties may acquire, after trial, an answer
respecting the city’s liability or immunity under the Sher-
man Act, we are here confronted with the sole question of
whether this court should affirm the injunction against
unilateral action by the city to prevent CCC from carrying
out its lawful business under its original and continuing
contract. Common principles of contract law and equity
would appear to impel affirmance.
As the trial court said:
In summary, the plaintiff has established the need for
a preliminary injunction for the protection of its business
from irrevocable injury which could occur pending the
final resolution of this dispute, under the standards set
forth in Continental Oil Company v. Frontier Refining
Co., 338 F.2d 780 (10th Cir. 1964) .'
'4 That the trial court may have founded its judgment primarily
on reasons deemed erroneous by the majority on appeal is not
controlling. It is a judment we review, not reasons.
A-24
The Sherman Act'*
Beginning at the beginning, that is, with the Constitu-
tion, Article VI, Clause 2, reads in pertinent part:
This Constitution, and the laws of the United States
which shall be made in Pursuance thereof . . . shall be
the supreme Law of the Land; and the Judges in every
State shall be bound thereby, anything in the Constitu-
tion or Laws of any State to the Contrary notwithstand-
ing.
It would seem hardly arguable that the federal anti-
trust law is among “‘the laws of the United States” and was
made “in Pursuance” of the Constitution. Nor would it
seem that federal judges appointed under the Constitution
are any less “bound thereby” than “the Judges” who pre-
ceded them chronologically “in every State.” Nor can I
believe that the 55 cities of Colorado, or the many thou-
sands of cities in the United States, are any less bound than
state and federal judges. Nor can I believe that a city ordi-
nance can do what “the Constitution or Laws of any State”
cannot do, namely the creation of new immunities from
“the supreme Law of the Land.”
In 1942, concentrating on whether Congress intended
the Sherman Act to apply to state legislative action, the
Supreme Court held in Parker v. Brown, 317 U.S. 341,
63 S.Ct. 307, 87 L.Ed. 315, that nothing in the Act or its
'S The city has not yet been found guilty of violating the antitrust
laws. We deal only with whether a city like Boulder may be
enjoined from unilaterally restricting, limiting, or revoking
plaintiff's lawful, contractual rights to operate its business.
Though in my view the city’s actions did violate the Sherman
Act, and will probably be shown at trial to have done so, the
majority opinion rests on immunity from suit, the violation
being presumed. The brief of the Attorney General of Colorado
argues persuasively against immunity, but is mistaken on the
facts and therefore unpersuasive in arguing that there was no
violation.
A-25
legislative history so indicated. Article VI not having been
mentioned, it must be assumed that the Court, 38 years
ago, considered the supremacy clause inapplicable in the
absence of congressional intent that it be applied, in the
particular case of the Sherman Act, to state legislation.
Presumably, the alternative being nullification, the clause
would require the states to avoid interference with applica-
tion of the Act to “persons” and “corporations” within
their borders. Indeed, unlike the facts here, the Court in
Parker found no agreement or contract involved, and “no
question of the state or its municipality becoming a partci-
pant in a private agreement or combination by others for
restraint of trade.”’ /d. at 351-52, 63 S.Ct. at 314.
Emphasizing our federalism, the Court in Parker
said, “In a dual system of government in which, under the
Constitution, the states are sovereign, save only as Congress
may constitutionally subtract from their authority, an un-
expressed purpose to nullify a state’s control over its offi-
cers and agents is not lightly to be attributed to Congress.”
Id. at 351, 63 S.Ct. at 313.
Whatever may or may not be said of the relationship,
if any, between Article VI and the 1942 holding of the
Court in Parker, it would appear clear that Parker created
an exception. That exception is limited to state legislative
action. Indeed, the Court said in Parker: “True, a state
does not give immunity to those who violate the Sherman
Act by authorizing them to violate it, or by declaring that
their action is lawful,” citing Northern Securities Co. v.
United States, 193 U.S. 197, 332, 344-47, 24 S.Ct. 436, 454,
459-61, 48 L.Ed. 679 (1904), 317 U.S. at 351, 63 S.Ct. at
314.
Thirty-two years after Parker, the Court decided Gold-
farb v. Virginia State Bar, 421 U.S. 773, 95 S.Ct. 2004, 44
L.Ed.2d 572 (1975), saying, “anticompetitive activities must
be compelled by direction of the State acting as a sovereign,”
A-26
Id. at 791, 95 S.Ct. at 2015. In Cantor v. Detroit Edison Co.,
428 U.S. 579, 96 S.Ct. 3110, 49 L.Ed.2d 1141 (1976), the
Court reaffirmed that to be exempt anticompetitive ac-
tivity must implement a statewide policy. Id. at 585, 96
S.Ct. at 3115. In Bates v. State Bar of Arizona, 433 U.S.
350, 97 S.Ct. 2691, 53 L.Ed.2d 810 (1977), the Court said
antitrust immunity can exist where a policy requiring anti-
competitive conduct is part of a comprehensive regulatory
scheme, clearly articulated, affirmatively expressed as state
policy, and actively supervised by the state as policymaker.
Id. at 362, 97 S.Ct. at 2698. In City of Lafayette v. Louisi-
ana Power & Light Co., 435 U.S. 389, 98 S.Ct. 1123, 55
L.Ed.2d 364 (1978), the Court addressed state action im-
munity for cities. After noting the strong presumption
against implied immunity, /d. at 398, 98 S.Ct. at 1129, the
Court ruled that municipalities are not automatically im-
mune solely because they are governmental entities, Jd.
at 411, 98 S.Ct. at 1136, and that it must appear “that the
legislature contemplated the kind of action complained
of.” Id. at 415, 98 S.Ct. at 1138.'°
In my view, Colorado home rule cities do not have anti-
trust immunity under City of Lafayette standards. No state
policy whatsoever exists in relation to cable TV. The sub-
ject is not mentioned in Colorado's Constitution or in
'6 Post Lafayette jurisprudence has been in accord. See e¢. g., United
States v. Texas Board of Public Accountancy, 464 F.Supp. 400
(W.D. Tex. 1978), aff'd per curiam, 592 F.2d 919 (5th Cir.),
cert. denied, 444 U.S. 925, 100 S.Ct, 262, 62 L.Ed.2d 180 (1979)
(no immunity, prohibiting accountants from competitive bid-
ding was neither directed by nor within contemplation of state
Accountancy Act, authorizing rules for maintaining high stand-
ards for accountants) ; Mason City Center Associates v. City of
Mason City, 468 F.Supp. 737 (N.D.lowa 1979) (no immunity,
anticompetitive agreement in exercise of city’s zoning power
was not within direction or contemplation of state statute con-
ferring zoning powers and authorizing zoning mechanisms) ;
Pinehurt Airlines, Inc. v. Resort Air Services, Inc., 476 F.Supp.
543 (M.D.N.C. 1979) (no immunity, county board's statutory
A-27
any state statute. The Colorado Public Utilities Commis-
sion has declined to exercise jurisdiction over cable tele-
vision. See In re Investigation and Suspension of First Re-
vised Sheet No. 6 of Colorado PUC No. 5 of Mountain
States Telephone & Telegraph Company, decision No.
70749, 19 (January 25, 1968). With no policy whatever on
regulation of cable ‘TV, by cities or otherwise, it can hardly
be said that Colorado has a state policy “to displace compe-
tition” in cable ‘TV with regulation or monopoly public
service. Much less can it be said that Colorado has a com-
prehensive, clearly articulated, affirmatively expressed, and
actively state supervised anticompetitive policy for cable
TV.
Hear [sic) the majority says that because Colorado has
done nothing and because Colorado constitution gives its
cities “home rule,” the 55 cities of Colorado are free of the
Sherman Act, that they are within their borders “sovereign,”
that they are to be treated as states and thus within the
exception of Parker. ‘The majority also says that California
Retail, in which a city was controlled by a state, is applic-
able here, where a city is controlling itself. But the dual
government, state sovereignty approach of Parker and Cali-
fornia is inapplicable here. We are a nation not of “‘city-
states” but of States.
authority over airport did not authorize its prevention of air-
line becoming fixed base operator) ; Whitworth v. Perkins, 559
F.2d 378 (5th Cir, 1977), vacated and remanded sub nom. City
of Impact v. Whitworth, 435 U.S, 992, 98 S.Ct. 1642, 56 L.Ed.2d
81 (1978), cert. denied, 440 U.S, 911, 99 S.Ct. 1224, 59 L.Ed. 2d
460 (1979) (no immunity, city zoning ordinance allegedly part
of conspiracy in restraint of trade) ; Kurek v. Pleasure Driveway
& Park District, 557 F.2d 580 (7th Cir, 1977), vacated and re-
manded, 435 U.S, 992, 98 S.Ct. 1642, 56 L.Ed.2d 81 (1978) , retn-
stated on remand, 583, F.2d 378 (7th Cir. 1978) cert. denied, 439
U.S. 1090, 99 S.Ct. 873, 59 L.Ed.2d 57 (1979) (no immunity,
park district's statutory authority over golf courses did not ex-
empt price fixing not Within direction or authorization of the
governing statute.
A-28
Not mentioned by the majority is City of Denver v.
Sweet, 138 Colo. 41, 329 P.2d 441 (1958), in which the
Colorado Supreme Court rebuked home-rule cities which
“think of themselves as being like medieval city-states with
plenary powers,” adding, at 444-445:
The United States Constitution provides for a national
system of states. All powers not expressly granted to
the federal government are reserved to the states or
to the people. . . . Clearly our federal system does
not envisage as a part thereof city-states. It therefore
allows that home rule cities can be only an arm or
branch of the state with delegated power. (emphasis in
original)
“(Ajnything in the Constitution [of Colorado} to the
Contrary notwithstanding,” I think the Sherman Act must
be applied to Boulder, if we would not have the pieces of
the pie be larger than the pie.'’
The majority interprets the Court’s denial of immun-
ity in City of Lafayette as occasioned by the presence there
of proprietary interest and the absence there of direction
or authorization by the state pursuant to state policy to
displace competition with regulation or monopoly public
service. It then dismisses City of Lafayette by calling Boul-
der’s contractual activity “an exercise of governmental au-
thority” (a label applicable to any and all action by any
government), and by substituting, in reliance on Boulder's
“home rule” status, the city’s policy, which it describes as
“fostering competition to receive a franchise,” for the re-
quired-but-absent state policy “to displace competition.”
'? The Colorado constitution, as broadly and literally interpreted
by the majority, would appear to render Boulder immune from
the Sherman Act, and any other Act of Congress, at least insofar
as the matter were viewable as one of “local concern,” even if
the state’s policy was to encourage competition, and if state legis-
lation prescribed adherence to the particular Act of Congress
under review.
A-29
In City of Lafayette, the city owned and operated its
electric utility. The plurality declined, however, the in-
vitation to decide on that basis in the Chief Justice's con-
curring opinion. As Mr. Justice Marshall's concurring
opinion emphasized, and the majority here appears to
recognize, the “test established’ in City of Lafayette is
whether a city’s action is “directed or authorized by the
state ‘pursuant to state policy to displace competition with
regulation or monopoly public service.’ ”
If the city’s direct enagagement in entreprencurial
activity had been so influential in City of Lafayette, the
plurality would not, presumably, have required 22 pages
to say so; nor would it have been required to explicate its
“state policy to displace competition” rationale, nor would
it have included the strong warnings against the implication
of immunity.
Whatever guidance may be lurking in the lacuna of
the five opinions in City of Lafayette, the key to its dis-
missal by the majority here appears to lie in the view that
CATV is solely a matter of local concern. If that be so,
the majority’s literal interpretation of the Colorado con-
stitution, its treatment of city action as state action, and
its holding of absolute immunity from the reach of the
Sherman Act, would display a surface logic. But, as the
trial judge said, “there are wider concerns.” The widest,
as above indicated, is concern for First Amendment free-
doms. ‘The wider concern for the national policy of free
and open competition should stay the hand of the courts
in adding an exception for cities to the exception for states
arising from Parker v. Brown. 1 would affirm the injunc-
tion, if necessary, on the grounds cited as a primary basis
by the trial court, that is, that the city’s conduct “in reason-
able probability will be declared to be unlawful under the
antitrust laws.”’
A-30
The Majority Opinion
The majority opinion is rooted in a perceived absolute
immunity of the city from the federal antitrust laws, and,
understandably, treats only that question. I remain sorely
troubled, however, by what to me is a gnawing presence of
negative pregnants.
First, the majority faults the trial judge for not differ-
entiating between the “two principal actions” of the city.'*
But there was no reason to differentiate. The city’s actions,
like a man’s legs, were of equal dimension and importance
in the city’s scheme. Moreover, as the majority recognizes,
the moratorium expired the day after the injunction issued
and the tria! judge did differentiate, in considering the
model ordinance and refusal to deny an intent to repeat the
moratorium as substantial and continuing factors, which, as
discussed above, they were and are.
Next, the majority faults the trial judge for objecting
to the way things were done, not to what was done. But in
its quote from the opinion below, the trial judge is point-
ing out that what was done was not “regulation,” that
what was done was not an exercise of the police power,
and that what was done was an employment of the city’s
contracting function, which it unquestionably was.
The majority says the authority of the city is not an
issue, but elsewhere says that whether the authority of
the city encompasses an unlimited freedom to violate the
'© There were actually three actions: (1) Ordinance 4473, the 90-
day moratorium and its enforcement; (2) Ordinance 4472, mak-
ing plaintiff's continued service an acceptance; and (3) creation
and offering the proposed model ordinance, giving the city total
control-by-contract of the cable TV business in Boulder, as well
as the right to eventual ownership of that business. The city
was specifically and repeatedly advised by its attorneys that
only by use of its contracting power might it escape a charge of
antitrust violation.
A-31
Sherman Act is the central issue. The majority then cites
the Colorado Supreme Court's Manor Vail decision, find-
ing it pregnant with possible relation to this case, though
the court nowhere mentions the Sherman Act in that
decision. '°
The majority then visualizes cable TV as purely a local
matter, a view in conflict with the directly contrary holding
of the Supreme Court in United States v. Southwestern
Cable Co., 392 U.S. 157, 168-169, 88 S.Ct. 1994, 2000-01,
20 L.Ed.2d 1001 (1968).?°
Whatever may have been meant by dismissing the
“differences between control by conrtact or police power”
(the differences are substantial and on ocassion critical) ,
the city is by its challenged ordinances very much “in the
television business.’’ The city’s “ordinances” are, in fact
and intent, contracts, reflecting a proprietary interest. In
my view, as in that of the trial judge, the challenged ac-
tions of the city had nothing to do with public safety, the
control of its ways being merely the weapon used to control
'* The nature of the activity under review is important. Rates
applicabie to all similarly situated were set by the city in Mano
Vail. in the present case, some citizens were permitted service
by CCC, while others were denied that service, and the city’s
actions were specifically designed and intended to insure a
monopoly.
20 ‘The majority's citation of TV Pix, Inc. v. Taylor, 396 U.S. 556,
90 S.Ct. 749, 24 L.Ed.2d 746, as involving a situation comparable
with this case appears strained. In TV Pix, the Supreme Court,
by order and without comment, affirmed a judgment in which
the district court, 304 F.Supp. 459 (D.C.Nev.), stated that
cable TV was in interstate commerce but that its limited equip-
ment regulation as a utility by the State did not unconstitu-
tionally interfcre with that commerce. That regulation was vastly
different from the market control-by-contract attempted by the
city here. Again, the federal antitrust law is nowhere mentioned
in TV Pix.
A-32
entry to the cable market. Its actions were not govern-
ment actions and were not an exercise of “governmental”
authority. On the contrary, the city’s “proprietary interest,”
and its desire to acquire a greater proprietary interest, per-
meated and dictated all of its actions here involved.
The majority then asserts that the city held discussions
and hearings, stated its purposes, and employed a consul-
tant, but elsewhere asserts that the issue is not the way
things were done but what was done. And what was done
was an apparent violation of the federal antitrust laws,
as the majority confirms in its statement that “The city
adopted a policy of fostering competition to receive a fran-
chise, ... '’ (my emphasis) that is, a competition for the
market, not competition in the market. ‘The relevance of
the phrase, “again a nonexclusive franchise,” like the city’s
insistence on calling its actions “pro-competitive’’, is dif-
ficult to understand in light of the city’s unquestioned
freedom at all times to grant additional non-exclusive fran-
chises and its continued refusal to do so. The phrase may
also be misunderstood if considered in any way related to
the challenged city actions, which were an attempt to
“restrict the lawful business” of plaintiff, having the “di-
rect and immediate effect” of ‘a restraint of trade and an
artificial and unreasonable geographical market alloca-
tion,” as the trial judge correctly found.
As discussed above, 1 most respectfully disagree with
the majority's effective adoption of the dissent in City of
Lafayette. Nor can I find support for the result here in
California Retail, which would permit immunity only
when the restraint is “clearly articulated,” ‘affirmatively
expressed” and “actively supervised” by the state. The
home rule status of Colorado cities, and the negative fact
that state articulation, expression, and supervision are
totally absent, cannot in my view make California Retail
pregnant with pertinence here.
A-33
Lastly, though ! agree that the trial court focused pri-
marily on “the antitrust factor,” this court should, as above
indicated, take a broader view of the case.”'
‘Treating the city’s argument that it had the power ol
a state over local concerns, the trial court said:
Obviously there are wider concerns, including inter-
state commerce, giving rise to some uncertainty about
the power o: the state government in this regard, both
in terms of en obstruction to inverstate commerce, and
with respect to the First Amendment rights cf com-
municators,
Recognizing that the city’s total-control ordinance had
not yet found a cable ‘TV enierprise to accept it, but also
recognizing the critical relationship of the moratorium and
the model contract, the trial court cautioned:
The City should carefully consider the need to exer-
cise its authority by narrowly drawn regulations which
do not unnecessarily interfere with First Amendment
freedoms, as the Supreme Court has cautioned in lil-
lage of Schaumburg v. Citizens for a Better Environ:
ment, 441 U.S. 922, 99 S.Ct, 2029, 60 L.fd.2d 395
(1979).
Attempting to follow this court's concern for equity in
such circumstances, the trial court found CCC injury irre-
parable and balanced the equities, saying:
2
If this lawsuit is finally decided in favor of the
defendant City of Boulder, any injury which it may
The majority recognizes that the first morator'um terminated
long ago, yet appears to focus solely on that action. Though |
view that action alone as impermissible on First Amendment
grounds (and note its intended and inevitable repetition by the
city following issuance of the majority opinion), I submit that
it cannot be viewed in a vacuum.
A-34
sustain can be remedied by removal of the cables in-
volved in the extension of the plaintiff's plant.
In balancing the equities, the trial court did indicate
that the city’s “conduct” was such that it “in reasonable
probability will be declared unlawful under the antitrust
laws,” but took a broader look:
What equity requires here is that the plaintiff be pro-
tected in the exercise of the lawful rights which it had
prior to the conduct which in reasonable probability
will be declared to be unlawful under the antitrust
laws. In considering the public interest and how it may
be affected by this injunction, it is necessary to look be-
yond Boulder to the national policy of protecting free
market competition,
In reversing the judgment below (i.c., in vacating the
injunction order) the majority effectively holds that the
city is at liberty to unilaterally prevent the exercise of plain-
ulf’s lawful contract rights, and cannoi be stopped from
doing so to the irreparable harm of plaintiff, regardless of
equity, even pending completion of trial. Moreover, as I
view the outcome here, the city can do so without citing
a single valid basis or reason.
Convinced that the city has shown no basis for its in-
fringement of CCC's and Boulder’s citizens’ freedom of
press and speech, of CCC's contract rights, and of CCC's
right to compete freely and fairly in the marketplace, |
must, with reluctance and with full recognition of personal
capacity for error, respectfully decline to join the majority
opinion.
Conclusion
The city of Boulder's interference with the lawful
business of plaintiff, as part of a plan to manipulate and
control the market for cable TV services in Boulder, with
inherent and concomitant infringement of CCC's and cable
A-35
consumers’ First Amendment rights, fully justified the in-
junction. I would set aside Sherman Act considerations on
this appeal and affirm the injunction order on First Amend-
ment grounds.
A-36
COMMUNITY COMMUNICATIONS COMPANY,
INC., a Colorado Corporation, doing business as
Boulder Cable T.V.,
Plaintiff,
v.
CITY OF BOULDER, COLORADO, a Municipal Corpo-
ration, Boulder Communications Co., a partnership,
Thomas Cross, Jack Kerner, Michael Thompson, Don-
ald Passalaqua, Barry Telleen, and Dennis DuBe,
Defendants.
Civ. A. No. 80-M-62.
UNITED STATES DISTRICT COURT,
DENVER, COLORADO
March 17, 1980.
MEMORANDUM OPINION AND ORDER
MATSCH, District Judge.
The plaintiff, Community Communications Company,
Inc., (CCC), moved for a preliminary injunction to prevent
the City of Boulder from restricting or revoking the rights
which it claims from a revocable, nonexclusive permit
granted to a predecessor company in 1964. That permit was
issued in the form of an ordinance enacted by the Boulder
City Council, as a franchise to use public ways in that city
to string cables for a community antenna system, or cable
television. The geographical area involved was the entire
City of Boulder and the permitted use of public ways was
for a period of twenty years, with the power to terminate
reserved in the following language:
SECTION 2. That the right, permit and privi-
lege herein granted is subject to revocation by the City
Council, at its pleasure, at any time . . . (Plaintiff's
Exhibit No, 22)
A-37
Under that ordinance, CCC has provided cable tele-
vision service to the University Hill area of Boulder, an
area comprising approximately 20% of the City’s residential
units and blocked off from normal reception of Denver
television stations. Up to February 1980, CCC provided
basically only retransmission of television signals from Den-
ver and from one station in Cheyenne, Wyoming. In Feb-
ruary 1980, CCC established an earth station for the recep-
tion of remote channels via satellite. The result is a greatly
increased access to a variety of programming, including
movies, sports, and channels from distant major cities.
Up to late 1975, cable television throughout the coun-
try was concerned. primarily with retransmission of televi-
sion signals to areas which did not have normal reception,
with some special local weather and news services originated
by the cable operators. During the late 1970's however,
satellite technology impacted the industry and prompted
a rapid, almost geometric rise in its growth. As earth stations
became less expensive, and “Home Box Office” companies
developed, the public response to cable television greatly
increased the market demand for such expanded services.
The “state of the art” presently allows for more than
35 channels, including movies, sports, FM radio, and educa-
tional, children’s, and religious programming. ‘The institu-
tional uses for cable television are fast increasing, with tech-
nology for two-way service capability. Future potential for
cable television is referred to as “blue sky”, indicating that
virtually unlimited technological improvements are still
expected.
In May 1979, CCC wrote to the Mayor of Boulder
advising her of its plans to expand cable television service
to other areas of the City and to establish an earth station
for satellite pick-up. ‘To expand to new areas, CCC must
contract with the public utilities for the use of their poles.
Many such poles are jointly owned by the Public Service
Co. and Mountain Bell Telephone Co., and a certain
A-38
amount of “communications space” is left available by
them for use by cable companies. The utilities grant a
license to the company, under which it must make advance
payments if rearrangement of the poles is necessary to
make room for the cables. This “pole rearrangement” is
done by the utility company, after which CCC is free to
string its cables. Contracts and pole rearrangements were
being negotiated by CCC from May through the end of
1979.
Shortly after CCC's letter to the Mayor, a newly
formed business organization, Boulder Communications
Company (BCC), codefendant herein, expressed an in-
terest in obtaining a permit and competing with CCC. In
a letter to the City Manager, BCC outlined a proposal for
a new system, acknowledging the presence of CCC in Boul-
der but stating that “(w)hatever action the City takes in
regard to TCI, it is the plan of BCC to begin building its
system as soon as feasible after the City grants BCC its
permit.” (Plaintiff's Exhibit 9)
The Boulder City Manager and City Council reacted
to this development by initiating a review and reconsid-
eration of cable television in view of the many changes in
the industry since the 1964 ordinance. Accordingly, they
hired a consultant, Robert Sample, and held a number of
study meetings to develop a governmental response to
these changes. The primary thrust of Sample’s advice was
that the City should be concerned about the tendency of
a cable system to become a natural monopoly. Much dis-
cussion in the City Council centered around a supposed
unfair advantage that CCC had because it was already op-
erating in Boulder. Members of the Council, and the City
Manager, expressed fears that CCC may not be the best
cable operator for Boulder, but would nonetheless be the
only operator because of its head start in the area. The
Council wanted to create a situation in which other cable
companies could make offers and not be hampered by the
A-39
possibility that CCC would build out the whole area before
they even arrived.
The result of this process was enactment of an “emer-
gency” ordinance on December 19, 1979 (Ordinance No.
4473), unilaterally amending the 1964 Ordinance under
which CCC had been operating, by restricting CCC from
expanding its area of service for a period of three months.
On the same day, the Council enacted Ordinance No.
4472, which revoked the 1964 Ordinance and _ re-enacted
it to include the same three month restriction. Both ordi-
nances expressly stated that the purpose of this moratorium
on construction was to give other cable companies an op-
portunity to make proposals to provide service to the City.
The Boulder Council had accepted the view that such a
restriction was necessary to prevent CCC from obtaining
a competitive advantage by connecting up to new custo-
mers during the proposal and negotiation process. Addi-
tionally, while the Boulder Council was persuaded that
it had some responsibility to regulate cable television, it
had received legal advice which cast doubt upon its author-
ity and which particularly cautioned about the possibility
of violations of antitrust laws
Apparently upon the view that any lack of regulatory
authority could be finessed by the use of a contract ap-
proach, the City included the following language in Ordi-
nance No. 4472:
SECTION 12. The grantee shall signify its ac-
ceptance of the terms hereof by continuing to provide
service to any customers presently served by the grantee
... (Plaintiff's Exhibit No. 27)
As a part of the process of soliciting applications from
interested cable companies, the City drafted a proposed
model ordinance and submitted it to the cable television
industry with the request that those who wished to make
proposals to enter the Boulder market should give their
A-40
comments on that draft, ‘The objective of the total process
was to select those applications meeting the City’s criteria,
apparently including acceptance of regulatory powers, and
then enter into a period of negotiation culminating in an
agreed ordinance which could not later be attacked by the
permittee.
The plaintiff claims that the revocation of its permit
and the enactment of the new ordinance, with the mora-
torium, have adversely affected its business in ways which
generate several claims for relief, ‘The contention which is
of primary importance for this motion for preliminary in-
junction is that the City has violated Section | of the
Sherman Act (15 U.S.C, § 1). ‘The plaintiff asserts that
Boulder and BCC are engaged in a conspiracy to restrict
competition by replacing the plaintiff with BCC, While the
plaintiff has gathered some circumstantial evidence which
might indicate such a conspiracy, that evidence is insufli-
cient to establish a probability that the plaintiff will pre-
vail on this claim,
What CCC has shown is that to influence competition
Boulder unilaterally prevented further expansion of the
geographical area of the plaintiff's business, Whether the
intent is to promote new competition by assuring other
cable companies that most of Boulder will remain available
to them for possible first service, and then to permit com:
peting companies to overbuild in the same geographical
areas, or whether there is a more insidious motive to sup:
plant CCC with a de facto monopoly, the motion for in-
junctive relief requires consideration of the impact on CCC,
Is Boulder’s action in imposing a moratorium an unlawtul
interference with the plaintiff's business and with free
market competition?
The plaintiff concedes that it does not have an exclu
sive license and it recognizes that the City has the right to
grant additional licenses to compete in the same geo-
graphical area, Under the present technology, more than
A-4l
one cable company can be on the same poles without ad:
versely alfecting the public ways, While there certainly are
finite limits to overbuilding, those limits are something
beyond two companies,
(1.2) The City contends that its conduct here cannot
be violative of the antitrust laws because it is exercising
police powers and has immunity under the doctrine ol
Parker v. Brown, SV7 US. S41, 68 S.Ct. 807, Ld. S15
(1948), ‘Phat assertion requires an inquiry into the extent
of Boulder's governmental authority, Clearly, the City has
the right and responsibility to control and regulate the use
of public ways, Phat is not disputed here, Accordingly, the
City may impose such restrictions on the hanging of cables
as may reasonably be necessary to protect the public and
other franchise users of such property, Cable companies
are entirely dependent upon their ability to use public
ways for the cables necessary to transmit their programs,
That obviously gives the City some leverage by controlling
access to the consumer market, Phe scope of that leverage
and the legality of its use are difficult: questions,
Boulder is a home rule city under Article NX ob the
Colorado Gonstitution and claims broad regulatory power
because there isa vacuum resulting from inaction by federal
and state governments, Broadly stated, the people of Colo-
rado have granted home rule cities autonomy ino matters
of local concern, Accordingly, though it is a municipality,
the City of Boulder contends that it should be considered
to have the power of state government as to such matters
within its geographical area, Phere is no Colorado case
which characterizes the operations of cable television com
panies as a matter of local concern, Obviously there are
wider concerns, including interstate commerce, giving rise
to some uncertainty about the power of the state govern
ment in this regard, both in terms of an obstruction to in-
terstate commerce, and with respect to the First: Amend:
ment rights of communicators,
AA
In City of Lafayette v. Louisiana Power & Light Co.,
435 U.S, 389, 98 S.Ct. 1123, 55 L.BEd.2d 364 (1978), the
Supreme Court held that both cities and states come within
the reach of proseriptions of the Sherman Act and that the
immunization under Parker v. Brown, supra, is limited to
governmental acts, In the very recent opinion deciding
California Retail Liquor Dealers Assoc, v0, Midcal Alum-
inum Ince., == US, ——, 100 S.Ct. 987, 68 L.Ed.2d 238
(1980), the Court emphasized that antitrust immunity can
be claimed for governmental action only when the action
is taken pursuant to a clearly articulated and alfirmatively
expressed policy, actively supervised by the state,
(3) 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 dratt ordinance which was sub
mitted to the plainuil and other cable companies, the ap:
proach taken is not an appropriate exercise and articula:
tion of a policy of regulation, It is not characteristic ol
utility regulation for the regulating authority to negotiate
with those to be regulated and then formulate the tinal
policy by exercising legislative power through an otfer and
acceptance mechanism, Te might well be a different case
if Boulder had enacted an ordinance articulating quality
ing 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 exercis. of police
power, and then to confront the contention that such an
ordinance has an anticompetitive effect, Phat is not this
case, Here, upon the present record, Parker vu. Brown is
wholly inapplicable and Boulder is subject to antitrust li
ability under City of Lafayette v. Louisiana Power & Light,
Supra tor actions which it has taken,
{4} Boulder does not claim that CCC has violated any
of the terms and conditions of its operating authority under
the 1964 or the 1979 ordinances, ‘The City has also con-
A-4S
ceded that while it may have the right to revoke the plain-
tifl’s permit without cause, it may not take that action tor
an unlawlul purpose,
What has happened up to this time in this case is not
unlike those cases in which there is a unilateral retusal
to deal unless certain anticompetitive conditions are met,
See, Sahay, Ved Oil Co,, 402 F.2d 69 (LOth Cir, L968) and
Milsen Co. uv. Sutherland Corp, Ad F2d 868) (7th Ci,
1971). There is also a similarity with those cases in which
retailers or distributors were coerced into unlawlul con
ditions or restrictions by their suppliers, the suppliers
claiming that a contractual right to terminate allowed them
to cancel a previous agreement and impose new terns, J
terphoto Corp. v, Minolta, 295 F.Supp. 711 (SADLN LY. 169)
and Continental Distributing Co, vu, Somerset Importers,
411 F.Supp. 754 (NDT T1976). See also, Permadite Mua
flers, Ine, vu. International Party Corp, 392 US. sd, 88
S.Ct, 1981, 20 LL. Bd2d O82 (1968), Most simply stated,
Boulder has attempted te restrict the lawlul business of
CCC by preventing it from obtaining new customers tor
three months while potential competitors submit proposals
lor serving those same customers, Phe motivation may be
to foster competition in the long run, but the direct and
immediate effeet is a vestraint of trade and an artilicial and
unreasonable geographical market allocation,
(5,6) Lam in agreement with the detendants’ conten:
tion that the record does not establish any agreement on
conduct whieh can be considered to be a per se violation of
the antitrust laws, Accordingly, the rule of reason is ap:
plicable here, I disagree that the evidence shows that cable
television is such a natural monopoly that the only feasible
competition is in the process of currying favor with the
City Council to obtain a permit to operate, To the con:
trary, the evidence is that there can be competition in the
marketplace, with the choice of price and service lett to the
consumers,
A-44
There are two other aspects of this case which are de-
serving of preliminary observations at this time. ‘The plain-
tiff has attempted to use the shield of the First Amendment
to avoid any interference from City goverment, ‘That is an
obvious overstatement of the law and an attempt to escape
the reality that the messages it chooses to transmit must
pass through a medium which is subject to some control by
the City.
(7) While the defendant Boulder readily concedes
that the First Amendment would prohibit its control of the
content of these transmissions, it does assert both the right
and the responsibility for restricting the use of the public
ways in this communications system. The question, of
course, is what are the limits of that authority? If controlling
content of the programs is beyond those limits, is it differ-
ent, either in degree or in kind, for the City government to
prescribe the number, variety, and scope of programming
and services to be offered? And, is it appropriate for the
City administration to say that the acceptability of a cable
company rests on its willingness to contribute tree services
to that government or to such institutions or groups as may
be considered to be in need of benelit or reward? Stated
bluntly, may the City exact tribute for its favor?
While these questions are not now ripe for decision,
they are potential problems in this developing situation.
It is inappropriate to ascribe any illegal or improper intent
to action which has not yet been taken, but it may be
helpful to give caution about the potential consequences
of that which may be contemplated. ‘The City should care-
fully consider the need to exercise its authority by nar-
rowly drawn regulations which do now unecessarily inter:
fere with First: Amendment freedoiis, as the Supreme
Court has cautioned in Village of Schaumburg wv. Citizens
for a Better Environment, —— U.S. ——, 100 S.Ct. 826, 6%
L.Fd.2d 73 (1979).
A-45
(8. 9) In summary, the plaintiff has established the
need for a preliminary injunction for the protection of its
business from irrevocable injury which could occur pend-
ing the final resolution of this dispute, under the standards
set forth in Continental Oil Company v. Frontier Refining
Co., 338 F.2d 780) (Oth Cir. 1964). The final outcome ol
this matter is far from predictable given the difficult ques-
tions which I have discussed in this opinion, and given the
fact that the Boulder City Council has not yet acted on the
applications which have been submitted in the proposal
process. While the primary function of a preliminary in-
junction is to preserve the status quo until a final deter-
mination of the rights of the parties, that cannot mean that
the parties are frozen in the positions they occupied imme-
diately prior to the filing of the complaint. ‘The circum-
stances surrounding this case are very fluid and there are
interested persons who are not before the court. What
equity requires here is that the plaintiff be protected in the
exercise of the lawful rights which it had prior to the con-
duet which in reasonable probability will be declared to be
unlawful under the antitrust laws. In considering the public
interest and how it may be affected by this injunction, it is
necessary to look beyond Boulder to the national policy of
protecting free market competition.
If this lawsuit is finally decided in favor of the defen-
dant City of Boulder, any injury which it may sustain can
be remedied by the removal of the cables involved in the
extension of the plaintilf’s plant. It is not necessary to re-
quire the posting of a bond in an amount sufficient to
cover the cost of that removal because the City already has
that protection under the 1964 ordinance, Accordingly, only
a bond to meet the jurisdictional requirements of Rule 65
need be posted, in the nominal amount of $100.00,
Upon the foregoing, it is
ORDERED, that so long as the plaintiff, Community
Communications Company, Inc., operates within the terms
A-46
and conditions of Ordinance No, 2846, enacted October 6,
1964, the City of Boulder and all of its officers, agents,
servants, employees, and attorneys are enjoined from taking
any unilateral action to restrict, limit, or revoke the author-
ity of the plaintiff to conduct its cable television business in
the City of Boulder.
A-47
Constitutional Provisions, Statutes,
And Ordinances {nvolved
The Colorado Home Rule Amendment, Coo, Const,
art. XX, § 6:
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.
Proposals for charter conventions shall be submitted
by the city council or board of trustees, or other body in
which the legislative powers of the city or town shall then be
vested, at special elections, or at general, state or municipal
elections, upon petition filed by qualified electors, all in
reasonable conformity with section 5 of this article, and all
proceedings thereon or thereafter shall be in reasonable
conformity with sections 4 and 5 of this article.
From and after the certifying to and filing with the
secretary of state of a charter framed and approved in rea-
sonable conformity with the provisions of this article, such
city or town, and the citizens thereof, shall have the powers
set out in sections 1, 4 and 5 of this article, and all other
powers necessary, requisite or proper for the government
and administration of its local and municipal matters, in-
cluding power to legislate upon, provide, regulate, conduct
and control:
a. ‘The creation and terms of municipal officers,
agencies and employments; the definition, regulation
A-48
and alteration of the powers, duties, qualifications and
terms or tenure of all municipal officers, agents and
employees;
b. The creation of police courts; the definition
and regulation of the jurisdiction, powers and duties
thereof, and the election or appointment of police
magistrates therefor;
c. ‘The creation of municipal courts; the detini-
tion and regulation of the jurisdiction, powers and
duies thereof, and the election or appointment of the
officers thereof;
d. All matters pertaining to municipal clections
in such city or town, and to electoral votes therein on
measures submitted under the charter or ordinances
thereof, including the calling or notice and the date ol
such election or vote, the registration of voters, nomi-
nations, nomination and election systems, judges and
clerks of election, the form of ballots, balloting, chal-
lenging, canvassing, certifying the result, securing the
purity of elections, guarding against abuses of the elec-
tive franchise, and tending to make such elections or
electoral votes non-partisan in character;
e. ‘The issuance, refunding and liquidation of all
kinds of municipal obligations, including bonds and
other obligations of park, water and local improvement
districts;
f. ‘The consolidation and management of park or
water districts in such cities or towns or within the
jurisdiction thereof; but no such consolidation shall be
effective until approved by the vote of a majority, in
each district to be consolidated, of the qualified
electors voting therein upon the question;
g- ‘The assessment of property in such city or
town for municipal taxation and the levy and collection
of taxes thereon for municipal purposes and special
A-49
assessments for local improvements; such assessments,
levy and collection of taxes and special assessments to
be made by municipal officials or by the county or
state officials as may be provided by the charter:
h. ‘The imposition, enforcement and collection
of fines and penaltics for the violation of any of the
provisions of the charter, or of any ordinance adopted
in pursuance of the charter,
It is the intention
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