Amicus Curiae Brief — Leathers v. Medlock

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Nos. 90-29, 9 joanet F. SPANIOL, JR.

In The

Supreme Court of the United States

October Term, 1990

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JAMES C. PLEDGER, COMMISSIONER

OF REVENUES OF ARKANSAS,

Petitioner,

DANIEL L. MEDLOCK, ET AL.,

Respondents.

No. 90-29

[Caption In No. 90-38 On Inside Cover]

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On Certiorari To The Arkansas Supreme Court

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BRIEF AMICI CURIAE OF THE COMPETITIVE

CABLE ASSOCIATION AND THE MEDIA INSTITUTE

IN SUPPORT OF RESPONDENTS IN NO. 90-29

AND PETITIONERS IN NO. 90-38

——@—

Haroip R. Farrow

Counsel of Record

Sot SCHILDHAUSE

Rosert M. BrRaMson

FarRROw, SCHILDHAUSE & WILSON

2125 Oak Grove Road 1400 Sixteenth Street, N.W.

Suite 120 Suite 501

Walnut Creek, CA 94598 Washington, D.C. 20036

Telephone: (415) 945-0200 Telephone: (202) 328-1800

Attorneys for The a Cable

Association and The Media Institute

COCKLE LAW BRIEF PRINTING CO., (800) 225-4964

OR CALL COLLECT (602) 342-2831

DANIEL L. MEDLOCK, ET AL.,

Petitioners,

JAMES C. PLEDGER, COMMISSIONER

OF REVENUES OF ARKANSAS,

Respondents.

CITY OF FAYETTEVILLE, ARKANSAS,

Intervenor.

No. 90-38

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TABLE OF CONTENTS

Page

Ee i

pr FB Re iy) 0 yy | ERR ii

eke cdcncccccccésesccccecs 1

SUMMARY OF ARGUMENT....................... 2

eens cokes ccccceneccccscencese 4

I. DISCRIMINATORY TAXATION AMONG THE

MEDIA SHOULD NOT BE PERMITTED

ABSENT COMPELLING JUSTIFICATION;

EMERGING ELECTRONIC FORMS OF THE

MEDIA SHOULD NOT BE RELEGATED TO

Sete CLASS STATUS. ....... 2.0. cceeeee: 4

Il. THE COURT SHOULD NOT ASSUME THE

ACCURACY OF THE ARKANSAS COURTS’

DISCUSSION OF CABLE TELEVISION’S

“USE” OF PUBLIC PROPERTY OR THE

“NEED FOR A FRANCHISE”................ 9

SIT Wns oe R6bnceadeqneccccccccceccestes 14

ii

TABLE OF AUTHORITIES

CASEs:

Allied Stores v. Bowers, 358 U.S. 522 (1959).....

Arkansas Writer’s Project, Inc. v. —. 481

Ce. Ge GEDED ce cccenvcsseccesecnsenovscqness

California v. Central Pacific Railway Co., 127 U.S.

G GE hac cubids nctcduccekiccekisnbaccesece.

Century Federal, Inc. v. City of Palo Alto, 710 F.

Supp. 1559 (N.D. Cal. 1988) ..................

City of Los Angeles v. Preferred <saepagueentions,

GS WE, Ge ee on cccwsnvecapanisctescceess

—- v. City of San. Diego, 15 Cal.App.3d 984

BOF ows cacqunienaepgnd scwues cpap eeeh eves.

County of Sacramento v. Pacific Gas & Electric

Co., 193 Cal.App.3d 300, 238 Cal.Rptr. 305

CUSED nw vv ecctdépenvecneccedhesabenndseveanesss

Erie Telecommunicatiors, Inc. v. City of Erie, 659

F. Supp. 580 (W.D.Pa. 1987), aff’d on other

grounds, 853 F.2d 1084 (3rd Cir. 1988)........

Grosjean v. American Press Co., ‘297 US. 233

ORE vac ngcental KnctPdesnesessabncseecce ce sive

Group W. Cable, Inc. v. City of Santa Cruz, 679 F.

Supp. 977 (N.D. Cal. 1988) ...................

Kahn .. Shevin, 416 U.S. 351 (1974).............

Mills v. Alabama, 384 U.S. 214 (1966)...........

Minneapolis Star & Tribune Co. v. Minnesota

Commissioner of Revenue, 460 U.S. 575 (1983)

New York Times v. Sullivan, 376 U.S. 254 (1964)

4, 6,9

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TABLE OF AUTHORITIES - Continued

Page

Pacific West Cable Co. v. City of Sacramento, 672

F. Supp. 1322 (E.D. Cal. 1987) ...........-0--00-+- 10

Preferred Communications, Inc. v. City of Los

Angeles, 754 F.2d 1396 (9th Cir. 1985), aff'd, 476

Te osc k cs che 64 6b0 66SE SR 2 co ccece 12

Southwestern Promotions, Ltd. v. Conrad, 420

ns cies co cde ebsbbseeeteveceees 7

STATUTES:

ae eben ces cvbeteceedecceseeccsconad 11

a re 12

MISCELLANEOUS:

Black’s Law Dictionary (Sth Ed.) (1979) ............. 12

Pool, Technologies of Freedom (1983) .............--. 7

Cable Television Regulation, Part 2: Hearings

Before the Subcom.m. on Communications of the

Senate Comm. on Commerce, Science, and

Transp., 97th Cong., 2d Sess. (1982)..............-. 7

Federal Communications Commission, Report No.

90-276 (“In the Matter of Competition, Rate

lation and the Commission’s Policies

Relating to the Provision Of Cable Television

Service’), July Si, 1990 ........ccccccccccccecccee- 10

INTEREST OF AMICI

The Competitive Cable Association is a non-profit

association whose members are committed to establishing

and supporting First Amendment rights for the operators

of cable television and other video distribution systems.

The Association is opposed to unreasonable limits upon

or barriers to the entry of multichannel video providers,

and stands for the right to compete in the supply of such

video services. In connection with its professed goals, the

Association holds seminars, participates in proceedings

before the Federal Communications Commission and

other federal agencies, publishes materials, testifies

before congressional and other legislative bodies, and

participates in select court cases.

The Media Institute is an independent, non-profit,

tax exempt research organization supported by a wide

range of foundations, corporations, associations, and

individuals. In 1987, the Institute created the First

Amendment Center For The New Media to study speech

rights connected with the development of new informa-

tion services. Through its First Amendment Center, the

Institute participates in select cases, conducts research

projects, and sponsors publications relating to the genera-

tion, distribution, and receipt of electronically transmit-

ted information. The right to engage in these three

activities is integrally related to the Institute’s research

activities.

Both Amici believe that the emerging electronic mem-

bers of the media, such as cable television, are entitled to

full First Amendment protection from governmental

1

restraint, and that the continuing vitality of our demo-

cratic process depends, in part, upon our ability to con-

tinue the balance struck between government and the

mass media as electronic communication overtakes print

as the dominant form of mass media in our society. Amici

support the position that the First Amendment to the

United States Constitution precludes the imposition of

taxes upon cable television services where the imposition

discriminates between forms of the media without com-

pelling justification.

Amici also believe that this case is not an appropriate

vehicle for consideration by the Court of the broader

issues relating to appropriate governmental regulatory

responses (if any) to specific perceived differences in the

method of delivery of speech between various members

of the mass media. Amici wish to urge the Court that care

be taken not to appear to address issues of regulation, as

opposed to taxation, of cable television the resolution of

which should await a more fully developed and better

focused factual record.

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SUMMARY OF ARGUMENT

1. This Court’s decisions which interpret the First

Amendment to preclude differential taxation of the press,

absent a showing that the government interest outweighs

the burden and cannot be achieved by means that do not

infringe First Amendment rights as significantly, should

be equally applied to taxation which discriminates

between different forms of the mass media. The conclu-

sion of the court below that different forms of media can

be taxed differently so long as they do not deliver “sub-

stantially the same service” should be rejected as lacking

a logical connection to the governmental purpose to be

achieved — the raising of revenue.

A blending of the technological differences between

various forms of mass media is occurring and will con-

tinue to occur, and the emerging forms of electronic

media, such as cable television, should not be relegated to

a lesser status under the First Amendment. Cable televi-

sion has a unique potential to participate in the demo-

cratic process through journalistic coverage of and

comment upon local governmental activities. This poten-

tial makes cable television an important member of the

media, as well as rendering it vulnerable to taxation for

retaliatory or censorial reasons.

2. Because of the lack of a fully developed factual

record as well as a lack of adversity, the Court should not

resolve issues relating to the appropriate regulatory

responses of local government to particular perceived

attributes of cable television or other multi-channe: video

providers, outside of the taxation area. There are serious

and substantial questions about several “facts” contained

in the Arkansas Supreme Court decision, which should

not be adopted by this Court without careful legal and

factual examination. The Court should await a later case

to address these issues, and should explain in its decision

that it does not reach them in this case.

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ARGUMENT

I. DISCRIMINATORY TAXATION AMONG THE

MEDIA SHOULD NOT BE PERMITTED ABSENT

COMPELLING JUSTIFICATION; EMEP GING

ELECTRONIC FORMS OF THE MEDIA SHOULD

NOT BE RELEGATED TO SECOND CLASS STA-

TUS

Past decisions of the Court make clear that the gov-

ernment may not differentially tax members of the press

absent a compelling justification for the differing treat-

ment. Arkansas Writer's Project, Inc. v. Ragland, 481 U.S.

421 (1987) (hereinafter “Ragland”); Minneapolis Star & Tri-

bune Co. v. Minnesota Commissioner of Revenue, 460 U.S.

575 (1983) (hereinafter “Minneapolis Star”). The govern-

ment’s general interest in raising revenue, while compel-

ling, will not suffice to save a differential tax scheme in

this context. Rather, such a taxing scheme is consistent

with First Amendment principles only if “the government

interest outweighs the burden and cannot be achieved by

means that do not infringe First Amendment rights as

significantly.” Minneapolis Star, supra, 460 U.S. at 586 n.7.

Two related constitutional questions appear to be

raised by this case: (1) “When taxing the electronic media,

can the First Amendment guarantees set forth in Min-

neapolis Star and Ragland be avoided merely by the asser-

tion of differences between members of the media, where

those differences are unrelated to the governmental pur-

pose of the taxation?” (2) “Is differential taxation of dif-

ferent forms of the mass media subject only to the

minimal! judicial scrutiny which is applied where funda-

mental interests are not implicated?” See, Kahn v. Shevin,

416 U.S. 351, 355 (1974); Allied Stores v. Bowers, 358 U.S.

522 (1959). Amici believe the answer to both questions

should be in the negative. Amici believe that the purposes

of the First Amendment require that government be held

to the same standards for differential taxation between

the media as among the same medium.

The court below, in effect, “split the baby.” It rejected

the trial court’s contention that cable television’s pre-

sumed “use of public rights-of-way” justified different

tax treatment for cable television than for other media,’

since the governmental interest asserted (raising revenue)

was unrelated to the perceived difference. However, the

court also decided that the type of dissemination pro-

vided through print and by cable television could be

characterized differently, anc concluded that differential

taxation is permissible under the First Amendment, as

long as the differentially taxed media do not deliver

“substantially the same service”. The court below ruled

that cable television and satellite television provide “the

same service”, but impliedly found that cable television

and the print media do not.? The decision does not indi-

cate whether the court believed that any difference it

perceived in the services offered by print and cable televi-

sion was related to the governmental interest in raising

revenue, or whether the court merely deferred to a legis-

lative judgment on that question.

1 See, Petition for Certiorari in No. 90-29 at C-10.

2 Id. at A-3.

3 Id. at A-5 — A-6.

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Amici believe that the court below erred in failing to

focus upon the question of linkage between the “differ-

ence” it found between the services offered by print and

cable television and the interest in raising revenue sought

to be served by the taxes imposed. Amici also believe that

the court erred if it deferred to legislative judgments in

this context. Finally, the court appeared to uphold dis-

criminatory taxation based upon criteria intertwined with

content, contrary to this Court’s holding in Ragland,

supra. If this Court affirms the analysis of the Court

below, the First Amendment concerns raised in Min-

neapolis Star, Ragland and Grosjean v. American Press Co.,

297 U.S. 233 (1936), will provide only limited protection

against taxes upon the emerging electronic media, and a”

a practical matter, will likely relegate those forms oi

media to a “second class” status, subject to far more

taxation than is the print medium.

The ultimate question is whether traditional First

Amendment freedoms are to be recognized when most

communication, including that of the traditional press, is

already - or will soon be — produced, transmitted and

received electronically. In the words of one commentator:

The issue of the-handling of the electronic media

is the salient free speech problem for this

decade... . [G] . . . The onus is on us to

determine whether free societies in the twenty-

first century will conduct electronic communica-

tion under the conditions of freedom established

for the domain of print through centuries of

struggle, or whether that great achievement will

become lost in a confusion about new technolo-

gies.

Pool, Technologies of Freedom 10 (1983). Mark S. Fowler,

former Chairman of the Federal Communications Com-

mission, has noted that the “functional differences

[between newspapers and cable television] are merging

into one and the same technology” and that “[iJt cannot

be acceptable . . . that the protections created by the First

Amendment should dwindle and the balance struck

between government and the free press should be

undone, whether by direct or indirect means.” Cable

Television Regulation, Part 2: Hearings Before the Sub-

comm. on Communications of the Senate Comm. on Com-

merce, Science, and Transp., 97th Cong., 2d Sess. 203-04

(1982).

While this Court has often noted that specific differ-

ences in method of communication may justify different

governmental responses (Southwestern Promotions, Ltd. v.

Conrad, 420 U.S. 546, 557-58 [1975]), the Court has

required a particularized factual showing that the differ-

ential treatment was properly tailored to a specific and

peculiar problem presented by the conduct connected to

the form of communication at issue:

Only if we were to conclude that live drama

is unprotected by the First Amendment - or

subject to a totally different standard from that

applied to other forms of expression — could we

possibly find no prior restraint here. Each

medium of expression, of course, must be

assessed for First Amendment purposes by stan-

dards suited to it, for each may present its own

Us on ue oh Joseph Burstyn, Inc. v. Wilson, 343

S. 495, 503 (1952); see, Red Lion Broadcasting

Co. v. EC.C., 395 U.S. 367 (1969). By its nature,

theater usually is the acting out — or singing out

- of the written word, and frequently mixes

speech with live action or conduct. But that is no

reason to hold theater subject to a drastically

different standard. For, as was said in Burstyn,

supra, at 503, when the Court was faced with

the question of what First Amendment standard

applies to films:

“[T}he basic principles of freedom of speech and

the press, like the First Amendment’s command,

do not vary. Those principles, as they have fre-

a been enunciated by this court, make

reedom of expression the rule. There is no justi-

fication in this case for making an exception to

that rule.”

Id. Amici submit that the “basic principles of freedom of

speech and the press” do not “vary” between emerging

electronic media, such as cable television, and the more

traditional print media. Having made the decision to

exempt the print media from the taxation at issue, a

compelling showing should be required of the State of

Arkansas to justify different treatment of cable television.

Cable television is the medium of mass communica-

tion most suitable for coverage of local governmental

activities, and journalistic commerit upon such activities.

Unlike the broadcast medium, cable television can be

effectively “narrow-casted” to residents within the

boundaries of a particular local governmental unit, thus

permitting political coverage and commentary to be

directed only to those most likely to have an interest in

receiving it. Unlike the print medium, cable television

permits video coverage (either live or tape-delayed) of

local governmental activities, televised interviews, and

“call-in shows” or similar opportunities for public partici-

pation.

This potential for cable television to play a role in the

democratic process* - particularly at the local level -

engenders precisely the same free speech concerns which

require invalidation of special taxes upon newspapers,

and makes the need for First Amendment protection from

the threat or reality of retaliatory governmental taxation

as important for cable television as for the printed press.

See, Grosjean, supra, at 245-50.

Il. THE COURT SHOULD NOT ASSUME THE ACCU-

RACY OF THE ARKANSAS COURTS’ DISCUS-

SION OF CABLE TELEVISION’S “USE” OF

PUBLIC PROPERTY OR THE “NEED FOR A

FRANCHISE”

Amici’s unique perspective in this case is its particu-

lar interest in promoting the ability of multi-channel

video providers, including cable television, to compete

with each other. The taxation issue before the Court is an

important one in this regard, since the imposition of taxes

such as the one at issue here can have a deleterious effect

upon the economic viability of fledgling competition in

this area. The taxation issue appears fully presented and

* See, New York Times Co. v. Sullivan, 376 U.S. 254, 270

(1964); Mills v. Alabama, 384 U.S. 214, 219 (1966).

5 Though Legislative motive is not a necessary inquiry in

the taxation context (Minneapolis Star, supra, 460 U.S. at 592-93),

the Court should be aware of the potential for differential

taxation among the media to be utilized as a means of prevent-

ing viable competition between cable television companies or

other multi-channel video providers. The Federal Communica-

tions Commission earlier this year noted the prevalent ten-

dency of local governments to utilize both direct and indirect

(Continued on following page)

10

ripe for decision. However, Amici are concerned that the

Court might accept as true certain factual or legal prem-

ises espoused by the court below which, if reflected in a

decision by this Court, could have an unintended effect

upon consideration by the lower courts of the First

Amendment issues raised by governmental regulation of

(Continued from previous page)

means to impede such competition. See, Federal Communica-

tions Commission, Report No. 90-276 (“In the Matter of Com-

petition, Rate Deregulation and the Commission's Policies

Relating to the Provision Of Cable Television Service”), July 31,

1990 at 9131-142.

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138 . . . While exclusive franchising is not the only

impediment to the growth of second competitive

systems, it is clear that the number of competitive

systems would grow at a more rapid pace if local

franchise authorities were unable to discourage or

forbid such systems... .

« * *

141. We recommend that Congress amend the

Cable Act to forbid local franchise authorities from

unreasonably denying a franchise to applicants that

are ready and able to provide service. Congress

should also make it clear that local authorities may

not pass rules whose intent or effect is to create

unreasonable barriers to the entry of potential com-

peting multi-channel video providers. Franchise

requirements should be limited to appropriate gov-

ernmental interests, such as establishing require-

ments concerning public health and safety, repair

and good condition of public rights-of-way, and the

posting of an appropriate construction bond.

Id., 79138, 141 (fn. omitted). See also, Pacific West Cable Co. v.

City of Sacramento, 672 F. Supp. 1322, 1328 (E.D. Cal. 1987).

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cable television (outside of the taxation context), partic-

ularly regulation at the local level through the issuance of

“franchises”. See, City of Los Angeles v. Preferred Communi-

cations, 476 U.S. 488, 490 n.1 (1986).

The Court below asserted that “cable television uses

public property and must obtain a franchise to do so,”

and that “a cable television enterprise pays a franchise

fee for the use of the rights-of-way.” The “facts”

embraced in the quoted portion of the Arkansas court's

decision are, in Amici’s view, incorrect as a general matter,

and should not be accepted without careful examination.”

Amici urge the Court to await a case with a more fully

developed factual record on these issues before address-

ing them.®

Cable television companies generally string their

wires upon existing public utility facilities, located in

public utility easements which have long been dedicated

to the provision of public utility services. The provision

of “pole attachment services” by public utilities to cable

television companies is defined by federal and some state

laws as constituting a “public utility service.” 47 U.S.C.

6 Petition for Certiorari in No. 90-29 at A-3.

? Amici have no intimate knowledge of the particular cir-

cumstances surrounding cable television in Pulaski County,

Arkansas. However, because the Arkansas court spoke gener-

ally, Amici are concerned with the possibility that such gener-

alities might be adopted by this Court without comment.

8 In City of Los Angeles v. Preferred Communications, supra,

the Court specifically noted its desire to obtain a fully devel-

oped record about “the present uses of the public utility poles

and rights-of-way and how Respondent proposes to install and

maintain its facilities on them.” 476 U.S. at 495.

12

§224. See, e.g., Cal. Pub. Util. Code §767.5. Since many

public utility easements are acquired directly from pri-

vate land owners, there is doubt as to the extent of the

property interest held by local governments in these

rights-of-way, at least in some circumstances. See, Century

Federal, Inc. v. City of Palo Alto, 710 F. Supp. 1559, 1563-68

(N.D. Cal. 1988); County of Sacramento v. Pacific Gas &

Electric Co., 193 Cal.App.3d 300, 238 Cal.Rptr. 305 (1987).

Moreover, to the extent that the word “franchise” is

understood to refer to a “special privilege conferred by

government on individual or corporation, and which

does not belong to citizens of country generally of com-

mon right” (Black’s Law Dictionary [5th ed.}] ai 592

[1979]),? Amici believe that the same is inconsistent with

the exercise of free speech activities. Amici do not believe

that the First Amendment permits governmental selection

of particular persons to engage in the “privilege” of

conducting free speech activities, as opposed to the set-

ting forth of uniform requirements designed to meet

legitimate health and safety needs. See, Preferred Commu-

nications, Inc. v. City of Los Angeles, 754 F.2d 1396, 1409

(9th Cir. 1985), aff’d., 476 U.S. 488 (1986).

Finally, if and to the extent that cable television does

utilize public property, substa tial questions are raised as

to the extent of autho7ity for imposition of a “franchise

fee” or other payment in exchange for that use. Compare,

Century Federal, supra, with Group W. Cable, Inc. v. City of

% See also, California v. Central Pacific Railway Co., 127 U.S.

1, 40 (1888); Copt-Air v. City of San Diego, 15 Cal.App.3d 984,

987, 988-89 (1971).

13

Santa Cruz, 679 F. Supp. 977 (N.D. Cal. 1988) and Erie

Telecommunications, Inc. v. City of Erie, 659 F. Supp. 580

(W.D.Pa. 1987), aff'd. on other grounds, 853 F.2d 1084 (3rd

Cir. 1988).

These are difficult issues which merit consideration

upon a more fully developed factual record than is pre-

sented to the Court in the instant case. This is particularly

true where, as here, the parties before the Court had no

incentive below to represent the interests of affected third

parties — those persons interested in competing in local

cable television markets on a competitive basis. The

“franchise system” of regulating cable television has been

commonly utilized to preclude entry of competition.’

The incumbent cable television operators, having already

obtained such franchises, understandably are not eager to

challenge the circumstances which make competition

with them unlikely. Obviously, the local governmental

bodies which now control the “franchising process” have

no incentive to challenge it. Thus, while the parties before

the Court are appropriately adverse to litigate the taxa-

tion issue, the Court should await another case before

adjudicating (explicitly or implicitly) the underlying

questions regarding the manner and extent to which

cable television typically utilizes public property and the

appropriate regulatory responses to that use.

-

10 See, n. 5, supra.

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CONCLUSION

For the reasons stated above, that portion of the

decision of the Arkansas Supreme Court raised by the

petition in Docket No. 90-38 should be reversed, and that

portion raised by the petition in Docket No. 90-29 should.

be affirmed. However, this Court’s decision should not

reach - and should explain that it does not reach — the

underlying questions as to appropriate regulatory

responses of local government to the particular attributes

of cable television or other multi-channel video pro-

viders, outside of the taxation area.

Respectfully submitted,

Haroip R. Farrow

Sor SCHILDHAUSE

Rosert M. BrRAMSON

By: Harotp R. Farrow

Counsel of Record

Dated: November 15, 1990