Appendix — TCI Cablevision, Inc. v. Central Telecommunications, Inc.
Supreme Court brief1987
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No. 86- «ower i se
In THE | JAN 14 198T
Supreme Court of the United Bhakeseavor se
OcTOBER TERM, 1986 th —— —
TCI CaABLEVISION, INC., COMMUNITY TELE-COMMUNICATIONS,
INC., and TELE-COMMUNICATIONS, INC.,
Petitioners,
—against-
CENTRAL TELECOMMUNICATIONS, INC.,
Respondent.
PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
APPENDIX
STUART W. GOLD
(Counsel of Record)
ROBERT D. JOFFE
DouGL.as R. Cox
RONALD K. CHEN
Roy D. HOLLANDER
CRAVATH, SWAINE & MOORE
One Chase Manhattan Plaza
New York, New York 10005
(212) 422-3000
Counsel for Petitioners
HAROLD R. FARROW
FARROW, SCHILDHAUSE & WILSON
401 Grand Avenue, Suite 200
Oakland, California 94621
(415) 839-4500
JOHN M. DRAPER
TELE-COMMUNICATIONS, INC.
5455 South Valentia Way
Englewood Tech Center
Englewood, Colorado 80111
(303) 771-8200
Of Counsel.
January 14, 1987
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TABLE OF CONTENTS
Page
I MIND IN i cccitdicdicicsanciscssisvucpennnonilindenas la
District Court Opinion on Motion for Judgment Not-
withstanding the Verdict or for a New Trial................. 38a
District Court Opinion on Motion to Dismiss................... 72a
er a NE sini cosiccieicsasiivensnscsinbicsiincasersneviavosecs 82a
Eighth Circuit Order Denying Petition for Rehearing ..... 83a
District Court Judgment of January 25, 1985............0...... 84a
District Court Judgment of May 29, 1985 ............e ee. 85a
District Court Order of June 5, 1965..................ss0cessoessees 86a
District Court Judgment of June 5, 1985 00.0.0... 87a
TCI’s Complaint Filed on March 16, 1981, in TCI
Cablevision, Inc. v. City of Jefferson City, Missouri,
No. 81-4054-CV-C-W (W.D. Mo., C.D.) «0.0.00... 88a
Order Denying Defendant’s Motion to Dismiss in TCI
Cablevision, Inc. v. City of Jefferson City, Missouri,
No. 81-4054-CV-C-W (W.D. Mo., C.D. Feb. 16,
| PEE TAN eR sre OF te SO RAS OR aN) PORE OEE 94a
Central’s Complaint Filed on February 22, 1983, in
Central Telecommunications, Inc. v. City of Jefferson
City, Missouri and TCI Cablevision, Inc., No. 83-
SE 8 FW By Bg GF oes cniesiricccicescsnsccseccscees 95a
Constitutional and Statutory Provisions Involved............ 99a
Century Federal, Inc. v. City of Palo Alto, No. 85-2168
Ce Se Is Ui IP Siticedcecerecasrntsntedccncicccnstaumnnn 102a
Parent Companies, Subsidiaries and Affiliates of the
IIE i scachssadicesscsitsdalsccbunchoceiashovaioibedsbeeamwinciooauiiaes 126a
la
UNITED STATES COURT OF APPEALS
For THE EIGHTH CIRCUIT
No. 85-1805
CENTRAL TELECOMMUNICATIONS, INC.,
Appellee,
Appeal from the
United States
v. t District Court for the
Western District
of Missouri.
TCI CABLEVISION, INC.,
COMMUNITY TELECOMMUNICATIONS, INC..,
AND TELECOMMUNICATIONS, INC.,
Appellants.
Submitted: March 10, 1986
Filed: August 26, 1986
Before HEANEY and FaGG, Circuit Judges, and Woops,*
District Judge.
* The Honorable Henry Woops, United States District Judge
for the Eastern District of Arkansas, sitting by designation.
2a
HEANEY, Circuit Judge.
This antitrust-monopolization case arises out of com-
petition between TCI, Cablevision, Inc. (and two related
corporations, collectively TCI) and Central Tele-
communications, Inc. (Central), for a defacto’ exclusive cable
television franchise in Jefferson City, Missouri (the City).
I. FACTS.
TCI managed the City’s cable television system for the
Athena Cablevision Corporation from 1973 to 1978. In 1978, it
acquired the assets of Athena in the City and was then awarded
a three-year exclusive cable television franchise. Three months
before TCI’s franchise was scheduled to expire, the City
initiated a “Request for Proposals” (RFP), or bidding process,
to solicit bids to determine the recipient of the next franchise.
Two companies—Central and Teltran—submitted bids for
the franchise.2 TCI refused to participate, arguing that it had a
first amendment right to continue to provide cable television
services in the City, and that the City thus had no right to award
an exclusive franchise to another company. The City contended
that its cable television market was a “‘natural monopoly” and
that it could not create competition for its cable TV market
without offering an exclusive franchise.
TCI then began a campaign, accompanied by numerous
unethical and illegal acts, to coerce the City to grant it the
exclusive franchise. Nonetheless, after a preliminary vote in
January of 1982 in favor of Central, the City Council voted in
April, 1982, to grant the exclusive franchise to Central. Central
was obligated under this franchise to provide substantially
expanded services to subscribers at a cost less than they had
1 Although the franchises at issue in this case were nominally
termed “nonexclusive”, they were, in practical operation, exclusive.
Accordingly, we generally term the de facto exclusive franchises
simply “exclusive.”
2TCI ultimately also submitted an application, but the City
determined that the application could not be considered because it
failed to comply with the RFP.
3a
been paying. The mayor immediately vetoed this ordinance
and the City Council was unable to override it. An ordinance
was promptly submitted which proposed renewal of TCI’s
franchise. The Council deadlocked at a five-to-five vote and
the mayor then cast the tie-breaking vote in favor of TCI. The
TCI proposal provided fewer viewing channels and inferior
picture quality at a higher monthly rate than did the Central
proposal.
Central then brought this action against TCI, alleging that
TCI had unlawfully interfered with the RFP process to deny
Central the franchise and to retain an exclusive franchise for
itself. After thirty-one days of trial, the court granted Central’s
motion for a directed verdict on TCI’s counterclaims, and
submitted the case to a jury on three theories: |) that TCI had
unlawfully conspired with the mayor and other City officials to
retain its exclusive franchise in violation of Section One of the
Sherman Antitrust Act; 2) that TCI had undertaken illegal anti-
competitive actions to retain its monopoly of the Jefferson City
cable TV market in violation of Section Two of the Sherman
Antitrust Act; and 3) that TCI had tortiously interfered with
Central’s business expectancy in violation of the laws of the
State of Missouri. The jury ruled in favor of Central on all
three claims and awarded $10,800,000 in actual damages on its
antitrust and state law claims and $25,000,000 in punitive
damages on the state law claim. The court trebled the
$10,800,000 award, and entered judgment for $32,400,000 on
the antitrust claims and, in the alternative, $35,800,000 on the
state law claim. TCI appeals, raising seven issues, each of
which we deal with in turn.
II. DISCUSSION.
A. First Amendment Challenge to Exclusive Franchising
Scheme.
TCI’s first contention is that it has a first amendment right
to remain in the City’s cable television market with or without a
franchise from the City, and that, therefore, Central could not
have been damaged when it lost the exclusive franchise. We
4a
reject this argument. Before reaching the merits of this
argument, we note that there is a significant factual problem
with it. The district court found:
Defendants enjoyed every opportunity to produce evidence
and make arguments to persuade the jury that they were at
all times in favor of head-to-head competition in the
market place. * * * [However] the jury [ was not] swayed
by any of these arguments [and] factual findings implicit
in [its] verdict confirm that TCI’s endorsement of head-to-
head competition lacked sincerity. * * * There was
substantial evidence that defendants were engaged in a
calculated scheme to prevent plaintiff from entering the
Jefferson City market and to maintain a de facto exclusive
franchise for themselves. * * * The jury’s conclusion that
defendants * * * were responsible for plaintiff's exclusion
from the Jefferson City market * * * completely under-
mines any attempt to pass the blame on to the city by way
of an amorphous “First Amendment defense.”
Central Telecommunications, Inc. v. TCI Cablevision, Inc., 610
F. Supp. 891, 903 ( W.D. Mo. 1985).
Because we find substantial evidence in the over 7,000-page
record in support of this conclusion by trial judge and jury, we
think that TCI’s first amendment defense fails on its facts
because it did not seek to simply remain in the market but to
continue its monopoly.
Assuming atguendo that TCI was willing to compete head-
to-head with any competitor, we find TCI’s first amendment
defense to be without legal merit. The district court held:
[T]he grant of a single cable franchise is permissible only
if the physical and economic conditions of the relevant
market give rise to a “natural monopoly” situation. The
theory is that, where physical and economic factors render
3 Under the Supreme Court’s decision in Associated Press v.
United States, 326 U.S. 1, 19-20 (1945), a member of the commu-
nications industry who conspires or engages in predatory conduct for
the purpose of eliminating its competitors is fully liable under the
antitrust laws.
Sa
a market incapable of accommodating more than one
cable television system, the local governing body is in the
best position to determine which proposed system offers
the best service to the public for the lowest cost. Since only
one competitor can survive in the market, it makes sense to
allow the local government to choose the best[4] appli-
cant.
Central Telecommunications, 610 F. Supp. at 899-900 ( foot-
notes omitted ), citing Tele-Communications of Key West, Inc. y.
United States, 757 F.2d 1330, 1338 (D.C. Cir. 1985); Omega
Satellite Products Co. v. City of Indianapolis, 694 F.2d 119, 127
(7th Cir. 1982); and Community Communications, Inc. vy. City
of Boulder, 660 F.2d 1370, 1378-80 (10th Cir. 1981 ), cert.
dismissed, 456 U.S. 1001 (1982).
The Supreme Court has not directly addressed this issue.
In Miami Herald Publishing Co. v. Tornillo, 418 U.S. 241, 94
S. Ct. 2831, 41 L.Ed.2d 730 (1974), it rejected an argument
that the natural monopoly characteristics of the newspaper
market gave rise to a duty to provide public access to the press.
However, it has approved “far more intrusive regulation of
broadcasters than of other media [such as newspapers] * * *
because of the inescapable physical limitations on the number
of voices than can simultaneously be carried over the elec-
tromagnetic spectrum.” Quincy Cable T.V., Inc. v. F.C.C., 768
F.2d 1434, 1448 (D.C. Cir. 1985), citing, e.g., F.C.C. v. League
of Women Voters of California, 468 U.S. 364, 82 L.Ed.2d 278
(1984). Thus, the question is whether cable television should
be analyzed under the standards applicable to newspapers or
those applicable to broadcasters.
TCI contends that cable television is entitled to “coexten-
sive protection” with the press media. In its recent decision in
Los Angeles v. Preferred Communications, Inc., US.
, 106 S. Ct. 2034 (1986), the Court suggested that the
cable medium may be distinguishable from the newspaper
medium and that more government regulation of the cable
medium may be permissible because cable requires use of
* We note that there is no question here of content regulation in
determining who would be the “best” applicant.
6a
public ways and installation of cable systems may disrupt
public order. There, a cable television company sued the City
of Los Angeles and its cable franchising department, alleging
that the City violated its first amendment rights by refusing to
grant it a cable television franchise or to allow it access to cable
facilities on the ground that it had failed to participate in an
auction for a de facto exclusive franchise in the area. The
district court dismissed the complaint for failure to state a
claim. The United States Court of Appeals for the Ninth
Circuit then reversed and remanded for further findings on
whether the City’s exclusive franchising scheme violated the
first amendment where there was economic and physical capa-
city for more than one franchise. It stressed that the City’s only
defense was that allowing more than one cable operator would
overly burden and disrupt public property and order. The
Supreme Court affirmed, “on a narrower ground than the one
taken by [the Ninth Circuit],” 106 S. Ct. at 2036, and refused,
without development of a more detailed factual record, to set
forth the legal standard for assessing first amendment chal-
lenges to cable-franchising schemes. The Court simply held
that, given that the Los Angeles cable market was not a natural
monopoly and that the only alleged justification for limiting the
number of cable operators in the Los Angeles area entailed the
use and disruption of public property and order, a remand was
necessary for determination of whether the petitioner’s first
amendment rights outweighed the disruption alleged by the
City. Justice Blackmun, with whom Justices Marshall and
O’Conner joined, concurring, emphasized:
I join the Court’s opinion on the understanding that it
leaves open the question of the proper standard for judging
First Amendment challenges to a municipality’s restriction
of access to cable facilities. Different communications
media are treated differently for First Amendment pur-
poses. Compare, e.g., Miami Herald Publishing Co. v.
Tornillo, 418 U.S. 241, 94 S. Ct. 2831, 41 L.Ed.2d 730
(1974), with FCC v. League of Women Voters, 468 US.
7a
364, 381, 104S. Ct. 3106, 3118, 82 L.Ed.2d 278 (1984). In
assessing First Amendment claims concerning cable access,
the Court must determine whether the characteristics of
cable television make it sufficiently analogous to another
medium to warrant application of an already existing
standard or whether those characteristics require a new
analysis. As this case arises out of a motion to dismiss, we
lack factual information about the nature of cable tele-
vision. Recognizing these considerations, ante, at 5, the
Court does not attempt to choose or justify any particular
standard. It simply concludes that, in challenging Los
Angeles’ policy of exclusivity in cable franchising, respon-
dent alleges a cognizable First Amendment claim.
106 S. Ct. at 2038-39.
The Tenth and Seventh Circuits have held that, on the
facts before them, cable television is more analogous to broad-
casting than to newspapers, and that a “natural monopoly”
situation may justify an exclusive franchising scheme. In
Community Communications v. City of Boulder, 660 F.2d 1370
(10th Cir. 1981), Community Communications Corporation
(CCC) had been operating an exclusive cable television system
in certain neighborhoods of Boulder, Colorado, for many years.
After several other companies expressed interest in operating
cable TV franchises in other areas of the City, the City imposed
a moratorium on CCC’s expansion in order to provide other
companies the opportunity to make bids to service the remain-
ing parts of Boulder before CCC became so entrenched that
new entry would be impracticable. CCC alleged that the
moratorium violated the first amendment. The City contended
that cable television is a natural monopoly and that if it was
unable to grant de facto exclusive franchises for various
neighborhoods, CCC would remain the only cable television
operation in Boulder and its citizens would be denied access to
diversity and state-of-the-art programing. The Court of Ap-
peals reversed the district court’s order enjoining the City from
enforcing the ordinance, and ordered that all parties be frozen
in their current circumstances until trial on the merits. The
Court applied a balancing analysis, weighing the first amend-
ment concerns against the asserted justifications for the ex-
8a
clusive franchise scheme and held that “natural monopoly is a
constitutionally permissible justification for some degree of
regulation of cable operators.” 660 F.2d at 1379. The Court
emphasized that the extent of regulation permissible is nar-
rowly limited by, among other possible factors,
differences in (1) the degree of natural monopoly or
“scarcity” characterizing the medium, (2) the pace and
potential for technological change, or (3) the uses and
possible uses of the medium such as two-way cable commu-
nications or even interconnection, [which] might make
kinds of regulations constitutionally permissible in one
medium that would be forbidden in another. But we
caution: the power to regulate is not one whit broader than
the need that evokes it. [Footnote omitted. |
Id.
The next year, the United States Court of Appeals for the
Seventh Circuit also found that where a relevant cable tele-
vision market is a natural monopoly, an exclusive franchise may
be permissible consistent with the first amendment. In Omega
Satellite Products v. City of Indianapolis, 694 F.2d 119 (7th Cir.
1982), the City of Indianapolis awarded two de facto exclusive
cable television franchises for certain sections of the City. A
third cable operator also serviced certain apartment complexes
in the City. Because it operated simply by installing satellite
dishes at the complexes, and thus did not use any public way, it
was not subject to the City’s franchising ordinance. This
company then sought a franchise so it could interconnect
apartment complexes without the need to install new satellite
dishes at each complex. After the City failed’to act on its
application, the company connected two complexes with a
cable through a drainage culvert. The City ordered the
company to remove the cable and the company refused and
sought an injunction, on Sherman Act and first amendment
grounds, forbidding the City from removing the cable or
enforcing its franchising scheme. The district court denied the
request for an injunction and the Court of Appeals affirmed,
holding that on the first amendment challenge, “If Chapter
9a
8-1/2 is invalid under the First Amendment (a question we
emphatically do not decide) it is so because it lacks adequate
standards and procedures, not because a city may not limit the
entry of cable television companies.” Jd. at 129. It dis-
tinguished cable television from newspapers on the ground
cable requires use of public ways and because television enjoys
“universal access to the home * * * and [there is] a resulting
felt need to protect children.” Jd. at 127-28. Accordingly, it
stated that although natural monopoly is not a justification for
exclusive franchising for newspapers, ‘““The apparent natural
monopoly characteristics of cable television provide * * * an
argument for regulation of entry.” Jd. at 127-28. See also Tele-
Communications of Key West v. United States, 757 F.2d 1330
(D.C. Cir. 1985) (Holding that if cable company could show
that there were no practical reasons why two cable operators
could not serve Air Force base, Air Force’s exclusive franchis-
ing scheme would violate the first amendment.) But cf. Pre-
ferred Communications v. City of Los Angeles, 754 F.2d 1396,
1404-05 (9th Cir. 1985), aff'd and remanded on other grounds,
__US.__, 106 S. Ct. 2034 (1986) (Although the Court did
not reach the argument that natural monopoly justifies govern-
ment regulation of cable television because it assumed that
competition for cable services is economically feasible in the
Los Angeles area, it implied that “natural monopoly” is not a
justification for exclusive franchising. )
We recognize that there are profound first amendment
implications inherent in the regulation of cable operators.
Changes in technology such as were presented in the Omega
case may require a different approach to exclusive franchising
schemes. We are also aware of the difficulties inherent in the
regulation of cable television programming. See, e.g., Quincy
Cable TV, Inc. v. F.C.C., 768 F.2d 1434 (invalidating F.C.C.’s
“must carry” cable television regulations on first amendment
grounds). Cf. F.C.C. v. Midwest Video Corp., 440 U.S. 689,
59 L.Ed.2d 691 (1979) (invalidating as beyond F.C.C.’s
jurisdiction rules requiring cable operators to make channels
available for local access). Thus, we make clear, as did the
Supreme Court in Preferred Communications, that we are
10a
unwilling to decide any question which is not squarely before us
and on which there has not been a full development of the
record. We are not faced here with a challenge to the details of
Jefferson City’s franchise regulations,> and we, of course,
consider the “natural monopoly” question only in terms of the
competing technologies offered by TCI and Central. TCI’s
brief states the first amendment issue to be: “Did plaintiff,
which was seeking an exclusive cable television franchise that
would deny others equal access to speak through the cable
medium, have a protectable interest under federal antitrust or
state tort law when it was not awarded the exclusive franchise?”
We hold that Central did have a protectable interest
because it proved, to the satisfaction of the jury and the trial
judge, that the “natural monopoly” characteristics of the Jeffer-
son City cable market justified the City in offering a de facto
exclusive franchise in order to create competition for its cable
television market. There is substantial support in the record for
these factual findings. TCI gained its monopoly through an
SInherent in the City’s authority to choose the “best” cable
operator for the City is the issue of how the City may reach this
conclusion. In this connection, we note that the RFP terms are
directed toward providing the widest array of programing at the
lowest cost, and do not seek to prohibit the communication of any
message. Thus, the RFP deals primarily with rates, quality and
geographic breadth of service and states:
The City is establishing few requirements as it desires that all
applicants have maximum freedom to develop their own in-
novative proposals. * * * The City is interested in receiving
proposals for a system with the capacity of delivering at least 50
channels to subscribers and with * * * technical standards which
exceed current FCC requirements. * * * The City is not
interested in proposed capacity which will not be used or which
will necessitate unreasonably high subscriber rates. The City is
interested in a flexible system which can best accommodate the
present and future needs of institutional users without unduly
burdening the average subscriber.
6 See, e.g., plaintiffs exhibit (PX) 400 ( Touche Ross study); 19
T. 86 (Testimony of John Clair Smith, summarizing Touche Ross
study: ““The basic conclusion is that * * * a direct house-to-house
competition between two cable companies would not be financially
feasible in Jefferson City, that the market would not support sustained
house-to-house competition.” )
lla
earlier grant of a de facto exclusive franchise. Unless the City
opened up competition for the market, TCI would have re-
mained entrenched in its monopoly position. TCI refused to
provide other than an outmoded limited channel system where-
as Central proposed a state-of-the-art system with far more
channels at a lower cost, and, accordingly, more variety of
programming for the public. It is difficult for us to see how, on
this record, TCI’s position enhances first amendment values. It
is true that TCI has a first amendment interest in remaining as a
cable television “speaker,” but Central has a similar interest.
Because the evidence shows that given the technology offered
by the competing companies, there was economic capacity for
only one speaker, it seems clear that Central’s proposal went
further in advancing the first amendment interests of the
viewing public in the greatest variety of programming obtain-
able.
In sum, we reject TCI’s first amendment challenge for two
reasons. First, the evidence reveals that TCI was not sincere in
advocating competition in the market but simply sought to
retain a monopoly originally gained through the grant of a de
facto exclusive franchise. Second, the evidence reveals that the
City’s cable television market is currently a natural monopoly
which, under present technology, offers room for only one
operator at a time. Thus, we hold that the City could properly
offer a de facto exclusive franchise in order to create com-
petition fu. its cable television market.
B. Noerr-Pennington Defense.
TCI contends that all but two of its allegedly anticompeti-
tive actions, the threats of its corporate vice president to the
City’s consultant and a similar threat to a competitor, are
protected activity within the purview of the Noerr-Pennington
doctrine. This doctrine, derived from the cases of Eastern R.R.
Presidents Conference v. Noerr Motor Freight, Inc., 365 U.S.
127 (1961); United Mine Workers of Am. v. Pennington, 381
U.S. 657,(1965); and California Motor Transport Co. v.
Trucking Unlimited, 404 U.S. 508 (1972), exempts from anti-
12a
trust liability”? activities which are specifically designed to
procure favorable governmental action, even when the under-
lying motivation and effect of the activities is anti-competitive.
See generally 7 Von Kalinowski, Antitrust Laws and Trade
Regulation, § 46.04 (1982).
In early 1980, the City considered holding out its cable
franchise to competitive bidding. Shortly thereafter, TCI met
with the mayor and attempted to persuade him to renew its
franchise without a competitive bid process, so as to avoid a
“frontal attack” by competitors. In December, 1980, the City
issued its RFP, inviting any company, including TCI, to bid.
Thereafter, the City hired Elmer Smalling as a cable television
consultant to evaluate the various bids. TCI, upon learning that
the City had hired Smalling, publicly attacked his qualifications
in a defamatory manner.
On several occasions, from January of 1981 to the summer
of 1981, Paul Alden, TCI’s vice president and national director
of franchising, telephoned Robert Brooks, chief operating
officer of Teltran, a company which submitted a bid for the
City’s franchise, and threatened him that unless Teltran with-
drew from the bidding process, TCI would make trouble for
Teltran in Columbia, Missouri, where it operated a cable
television franchise. Teltran subsequently dropped out of the
bidding process on the ground there was a “distasteful environ-
ment” in Jefferson City.
In February, 1981, Alden and Harold Farrow, TCI’s
attorney, met with City officials and attempted to pressure them
7 The district court stated that “*[a]lthough the Noerr-Pennington
defense is most ofien asserted against antitrust claims, it is equally
applicable to many types of claims which seek[ __] to assign liability
on the basis of the defendant’s exercise of its first amendment rights.”
Central Telecommunications, 610 F. Supp. at 896 n.7. Although the
United States Supreme Court has not directly confronted this issue,
this Court has indicated that it agrees with the principle stated. See,
e.g., In Re IBP Confidential Business Documents Litigation, 755 F.2d
1300, 1312 (8th Cir. 1985). We reiterate our agreement with this
position—which is not challenged on appeal—at !east with respect to
the tortious interference claim at issue.
l3a
to abandon the RFP process and negotiate exclusively with
TCI. In March of 1981, Alden called the mayor and threatened
to turn the system off unless TCI’s franchise was renewed. That
same month, TCI filed a lawsuit against the City challenging
the RFP process. During the litigation, TCI served on officials
of the bank from which Central sought financing a subpoena
seeking a very wide range of potentially confidential records.
Central alleges that this was designed to destroy its financing.
In June of 1981, Alden approached Smalling and ex-
pressed TCI’s displeasure with Smalling’s participation in the
RFP process. Alden threatened Smalling with statements like:
““We know where you live, where your office is and who you
owe money to. We are having your house watched and we are
going to use this information to destroy you. You made a big
mistake messing with T.C.I. We are the largest cable company
around[.] We are going to see that you are ruined profes-
sionally.” PX 83. Smalling understood these statements to be a
threat to the lives of himself and his family. At this same time,
Warner-Amex (another large cable company) was a client of
Smalling’s. Alden contacted Warner-Amex about Smalling.
Following the threats, Smalling lost Warner-Amex as a client.
Smalling told City Attorneys Christopher Graham and Thomas
Utterback about Alden’s threats. PX 83. On July 6, 1981,
Utterback wrote the mayor and suggested that the RFP process
be abandoned because some of the parties were interfering with
the competitive bid process. PX 84. Utterback also expressed
these concerns in a memorandum to the City Council in which
he described TCI as a “relentless corporate bully.””» DX 17, T.
128.
In the fall of 1981, TCI met with Utterback and agreed to
negotiate privately for renewal of its franchise, although this
secret agreement and the subsequent private negotiations vio-
lated the RFP, which specified that all negotiations would be
open,® as well as Missouri’s “sunshine law.” Mo. Rev. Stat.
§§ 610.010-.030. After the City Council voted on January 25,
1982, to provisionally grant the franchise to Central, TCI
8 The RFP provides that “to insure that all negotiations will be
open, no applicant shall contact any City Councilman or the Mayor
outside the Council Chambers.” PX 84A at 20(a).
14a
refused to pay and withheld the prior year’s franchise fees
which were due and owing to the City in an amount exceeding
$60,000. It had no basis for this withholding other than an
attempt to subvert the RFP process.
Throughout this period, TCI continued to publicly an-
nounce that it would cut off service if it was not awarded the
franchise, and it announced that it would not sell ‘‘one bolt” of
its system to whoever received the new franchise and that it
would “rather have [its system] rot on the pole” than sell it to a
competitor at any cost. Further, TCI’s system manager in
Jefferson City told elderly residents of a senior citizens’ home
that TCI would cut off service if denied a franchise, and the
residents would be without television for two years pending
construction of a new system because the concrete walls of their
residence would not allow reception of over-the-air stations.
Additionally, TCI accompanied its franchise battle with
misstatements of fact. For example, in one City Council
meeting, Alden misrepresented to the Council that TCI was the
largest distributor of satellite dishes in the country, with an
“exclusive” in Missouri, both “facts” he later admitted were
untrue. TCI implied that only it could protect the City’s cable
system from destructive competition from satellite dishes. The
district court also stated that an implication of this statement
was that TCI would flood the City with satellite dishes unless it
received the franchise. 610 F. Supp. at 895.
By April 5, 1982, the City reached an agreement to award
the franchise to Central. At that point, the mayor, who had
recused himself from the cable television issue fer over a year
due to an alleged conflict of interest, announced that he was
reentering the cable television controversy, and he privately
advised council members that he would veto any ordinance
awarding a cable television franchise to Central. TCI and
certain City officials, including the mayor, then met privately to
negotiate a franchise for TCI. As part of the agreement, the
mayor agreed to veto any award of a franchise tc Central.
On April 20, 1982, the City Council passed the ordinance
awarding a franchise to Central. The vote was sixin favor and
four against. The mayor vetoed the ordinance. The council
then deadlocked five-to-five on awarding a franchise to TCI
{
15a
and the mayor cast the deciding vote in favor of that company.9
The next day, TCI dismissed its lawsuit against the City and
paid the withheld franchise fees.
TCI’s initial argument is that even though its agent, Alden,
may have made coercive threats to Smalling and Teltran, which
are not protected under Noerr-Pennington, these threats did no
harm to Central and thus cannot serve as a basis for imposing
liability. We disagree. The jury was given a proximate cause
instruction and informed that they could only base liability on
9The differences between Central’s and TCI’s proposals are
outlined in PX 285. The Central proposal was superior in numerous
respects. A few of the more significant advantages are summarized in
the following chart:
COMPARISON OF CENTRAL TELECOMMUNICATIONS, INC.,
PROPOSAL WITH REQUIREMENTS OF FRANCHISE
ORDINANCES NO. 9777 AND NO. 9778
{ Awarding franchise to TCI]
Central Telecommunications, Inc. Ordinance
Item Proposal No. 9777 & No. $778
Addressable Provided to All Subscribers Provided only to Subscribers
Converters Taking Expanded Service
Equipment Head end Equipment Installed None
for
Interactive
Services
System Single Residential Cable Present System Expanded From
Design (42 Channels Downstream Capacity, 12 Channels to 21 Channels
4 Channels Upstream Capacity ) Downstream Capacity Within 12
months
Single Institutional Network Cable No Institutional Cable
2 Satellite Earth Stations | Satellite Earth Station
Services Imported TV Stations— 13 Imported TV Stations— ||
and
Programming Pay TV Services—4 Pay TV Services—2
FM Radio Service —23 Stations FM Radio Service-
“in Excess of” 15 Stations
Initial Basic TV Service: Basic TV Service:
Rates Tier I (21 Channels )—$6.00/Month Tier 1 (12 Channels)
—$6.55/Month
Tier II (38 Channels )—$8.00/Month Tier II (21 Channels )
_ $8.55 ‘Month
Pay TV Service: Pay TV Service:
Home Box Office $7.95/Month Home Box Office $9.95/Month
Showtime $8.45/Month Showtime $9.95/Month
Cinemax $9.95/Month
Movie Channel $7.95/Month
l6a
acts which were not genuine efforts to influence City officials.
Giving Central the benefit of all reasonable inferences to be
drawn from the record, the jury may have concluded that TCI’s
heavy-handed tactics frightened the mayor and some members
of the City Council into awarding the franchise to TCI.
Additionally, TCI contends that even if Alden’s threats
harmed Central, the verdict must be set aside because we have
no way of knowing whether the jury relied on these threats or
on protected conduct in assessing liability against it. We reject
this argument for several reasons:
First, the parties agreed to submit the case to the jury ona
general verdict instruction and form, and there is evidence on
the record as a whole to support the verdict. Ybarra v.
Burlington Northern, Inc., 689 F.2d 147, 150 (8th Cir. 1982);
Bio-Rad Laboratories, Inc. v. Nicolet Instrument Corp., 739
F.2d 604, 607 (Fed. Cir. 1984), cert. denied, 105 S. Ct. 516
(1985) (“In the absence of special interrogatories we presume
the existence of factual findings and legal conclusions necessary
to support the verdict reached by the jury.’’).
Second, TCI was under no obligation to continue to
provide service to the residents of Jefferson City after its
franchise expired, and it certainly had the right to inform City
Officials, its customers and the public at large of its intent not to
do so. Likewise, TCI was under no obligation, except as
required by the franchise agreement, to sell its cable television
system to its successor, and it had a clear right to inform City
Officials, its customers and the public at large that it would not
do so. Cf. United States v. Otter Tail Power Co., 331 F. Supp.
54,61 (D. Minn. 1971), aff'd, 410 U.S. 366, 368 (1973); Aspen
Highlands Skiing Corp. v. Aspen Skiing Co., 738 F.2d 1509
(10th Cir. 1984), aff'd on other grounds, U.S. ——, 105 S.
Ct. 2847 (1985); Hecht v. Pro-Football, Inc., 570 F.2d 982, 992
(D.C. Cir. 1977), cert. denied, 436 U.S. 956 (1978).
Had TCI made a simple clear request that the jury be so
instructed, it would have been error to refuse the request. But it
appears from the record as a whole that TCI was not satisfied
with this approach. It rather wanted and requested a broader
instruction that would have immunized other conduct which the
—
17a
jury could well have found unlawful.1° The district court
refused to give TCI’s overly broad, long and confusing Noerr-
Pennington instructions, preferring more concise and under-
standable instructions and allowing TCI to argue at length
before the jury that all of its activities were genuine lobbying
10 TCI proposed the following Noerr-Pennington instructions:
NOERR-PENNINGTON —GENERAL
The Constitution ensures the right of all persons and corpo-
rations, whether acting individually or in concert, to petition govern-
ment for politica! action, recognizing that persons in the exercise of
these constitutional rights naturally will petition government for
political action that is favorable to their particular interests and
unfavorable to the interests of others. The Supreme Court has
declared that this right to petition government for political action is
paramount, and that the concerted effort of various parties genuinely
to influence public officials does not in any way violate the law
regardless of intent or purpose. Joint efforts truly intended to
influence public officials to take official action do not violate antitrust
laws even though the efforts are intended to eliminate competition.
Similarly, the Constitution protects a person’s right of access to
the courts for resolution of disputed issues. The antitrust laws are not
violated when a person files a suit, even if he hopes and intends that
the judge or jury will enter verdicts which will injure his competitors.
In short, activity which is intended to influence or cause official
governmental action— whether by an individual such as a mayor, by a
legislative body such as a City Council, or by judges and juries—does
not violate the law, regardless of the intentions of the persons
engaging in such activity.
NOERR-PENNINGTON=APPLICATION TO THIS CASE
To the extent that you find that defendants engaged in legitimate
efforts to influence governmental action or to seek redress for its
grievances through the courts, you are directed that you cannot find
the defendants liable for any of the claims asserted by plaintiff based
upon such activity. For example, if you were to find that all of
defendants’ actions about which plaintiff complains fit into this
category of legitimate attempts to influence official action or to
vindicate rights through the courts, then you could not find defendants
liable for any of the offenses charged. That is, if you should conclude
from a review of the evidence that defendants did nothing more in
this case than take actions for the purpose of persuading the City to
award them a cable television franchise on some basis, then you may
not find that defendants committed any of the offenses charged, even
if you believe that the purpose or necessary effect of such actions was
to exclude plaintiff from obtaining a franchise. On the other hand, if
you were able to find that none of defendants’ actions fit into that
category, then you would simply assess those actions under the
standards we have already discussed and without regard to this
18a
efforts protected under Noerr and the threat to turn off service
was lawful because TCI could not continue to provide service
without a franchise. Under these circumstances, it is difficult to
fault the district court judge for instructing the jury as it did and
in permitting TCI to argue that it was simply exercising its first
instruction. Finally, if you find that some of defendants’ actions were
legitimate attempts to influence governmental action but that some
were not, then when you decide whether the evidence establishes that
defendants committed any of the charged offenses, you must exclude
from your consideration those actions which you find did in fact fall
into that category, for they may not form the basis—in whole or in
part—for any liability.
NOERR-PENNINGTON-EXCEPTIONS
However, the activity we are discussing must consist of genuine
efforts to influence governmental action or to vindicate rights through
the courts. Protection does not extend to purported petitioning that is
a mere sham to cover what actually is nothing more than an attempt
to interfere directly with the business of a competitor. That is,
protection does not extend to activities that are merely a pretext for
infiicting on plaintiff an injury not caused by any government action.
Thus, you must consider whether defendants’ activities were not really
an attempt to influence an official to take official action, but instead
were an attempt to interfere directly with the business of plaintiff.
When deciding this question, you must consider the intent of defen-
dants in taking such actions. If you find that their intent was to obtain
some governmental action, no matter what the action was, then these
activities were genuine. The success of defendants’ efforts is evidence
of their genuineness.
In the context of defendants’ lawsuit against the City, about
which you have heard some evidence, you must decide whether
defendants filed the suit with the hope of obtaining a judicial ruling in
their favor, or whether the suit was only intended to directly injure
plaintiff in some manner. The extent to which a lawsuit involves
legitimately disputed issues is circumstantial evidence of the gen-
uineness of the suit. The knowledge that defense of the litigation
might impose burdensome costs upon the City would not be sufficient
to establish that defendants brought the suit in bad faith, in an
attempt to injure plaintiff.
Finally, the Constitution does not protect attempts to influence
governmental action by methods which are illegal in and of them-
selves; for example, by bribery of governmental officials. Such actions
are not legitimate attempts to petition the government.
In sum, you must decide whether all or some of defendants
activities were legitimate and genuine efforts to obtain a franchise
from the City. All such efforts must be excluded from your consid-
eration of this case because they cannot—as a matter of law—form
the basis of liability for any of the offenses charged.
19a
amendment rights when it engaged in the course of conduct
that it did.
Third, the trial court’s jury instructions adequately in-
formed the jury of the Noerr-Pennington doctrine and that it
could find that TCI’s activities were protected activities within
the parameters of this doctrine. Instruction Number 15 in-
formed the jury that it could “not consider TCI’s 1981 lawsuit
against Jefferson City to have been unlawful conduct even if it
was designed to eliminate competition.” Instruction Number 14
informed the jury:
In deciding whether defendants engaged in any
unlawful conduct in this case, you are instructed that you
may not consider defendant’s legitimate lobbying efforts
with the Jefferson City officials. The defendants are
entitled under the law to use genuine efforts to influence
public officials but if in fact defendant’s lobbying activities
included threats, intimidation, coercion or other unlawful
acts, then you may find that such activities were not
genuine efforts to influence public officials and you may
consider those acts to have been unlawful conduct.
TCI contends that Instruction Number 14 allowed the jury
to base its verdict on activities which were lawful under Noerr-
Pennington. We reject this argument because we find that the
instruction’s statement that Noerr-Pennington protects all “gen-
uine” lobbying efforts but does not protect “threats, in-
timidation, coercion, or other unlawful acts” which were “not
genuine efforts to influence public officials” was proper under
the case law, the facts of this case, and in light of the
instructions submitted by the parties.
In Noerr, the Court stated that when a “campaign, os-
tensibly directed toward influencing governmental action, is a
mere sham to cover what is actually nothing more than an
attempt to interfere directly with the business relationships of a
competitor * * * the application of the Sherman Act would be
justified.” Noerr, 365 U.S. at 144.11
'! The Noerr court noted, however, that the defendants’ activi-
ties—even though they included misrepresentations and unethical
conduct—-were not covered by the Sherman Act at least insofar as
those activities comprised mere solicitation of governmental action
with respect to the passage and enforcement of laws. 365 U.S. at 140-
20a
In Pennington, 381 U.S. 657, however, the Court cau-
tioned:
Joint efforts to influence public officials do not violate the
antitrust laws even though intended to eliminate com-
petition. Such conduct is not illegal, either standing alone
or as part of a broader scheme itself violative of the
Sherman Act. The jury should have been so instructed.
Id. at 670.
In California Motor Transport, 404 U.S. 508, the Court
first applied the so-called “sham exception” to the Noerr-
Pennington doctrine. There, the defendants maintained a trust
fund which they used to oppose all license applications by their
competitors with or without probable cause and regardless of
the merits of the applications. The Court affirmed the Ninth
Circuit’s reversal of a district court order dismissing plaintiffs
antitrust action on Noerr-Pennington grounds because it found
that the defendant’s activities may not have been genuine
efforts to influence the government but instead may have been
simply a “combination of entrepreneurs to harass and deter
their competitors from having “free and unlimited access’ to the
42. The unethical conduct referred to involved the defendants’ use of
the so-called “third-party technique”—a misrepresentation through
which the railroad defendants’ attempts to gain passage of laws
favorable to railroads and unfavorable to the plaintiff trucking
companies were made to appear as originating from independent
parties. However, even though the use of this third-party technique
involved misrepresentation as to the source of the petitioning, the
position advanced by the defendants—essentially that trucks were
harmful to the state’s highways and interfered with motorists’ rights
— was a legitimate one, “conducted along lines normally accepted in
our political system,” id. at 145, even though anti-competitive. The
case before us is distinguishable in that the jury could properly have
found, based on the facts and the court’s instructisns, that TCI’s
activities, more than being simply anti-competitive, were not genuine
lobbying activities at all but instead were heavy-handed attempts to
directly interfere with the business relationships of a competitor, to
disturb the political process and to coerce the City into extending
TCI’s monopoly position, even though Central offered a superior
cable system at lower cost. Much of TCI’s “lobbying” made no
attempt to provide the City with information on which to base a
reasonable choice but, instead, sought to subvert the franchising
process.
2la
agencies and courts, to defeat that right by massive, concerted,
and purposeful activities.” 404 U.S. at 515.
In Otter Tail Power Co. v. United States, 410 U.S. 366
(1973). [sic] the Court described California Motor Transport
holding
that the principle of Noerr may also apply to the use of
administrative or judicial processes where the purpose to
suppress competition is evidenced by repetitive lawsuits
carrying the hallmark of insubstantial claims and thus is
within the “mere sham” exception announced in Noerr.
Td. at 380.
This Court has on numerous occasions explored the mean-
ing of the Noerr-Pennington doctrine and its “sham” exception.
For example, in Mark Aero, Inc. v. Trans World Airlines, Inc.,
580 F.2d 288, 296-98 (8th Cir. 1978), we summarized the facts
and holdings in Noerr, Pennington and California Motor Trans-
port and then examined the meaning of the “sham exception:”
[T]he essential element of the sham exception, whether
employed in an adjudicative or nonadjudicative setting
[is] an absence of a genuine effort to influence government
but, rather, an intent to injure a competitor directly.
** * *
The fundamental question presented in each case
involving the “sham” exception, whether argued in a
nonadjudicative or an adjudicative setting, is the question
of intent. * * * As always in deciding questions of intent,
the court considers all of the surrounding circumstances
and assigns to each circumstance an appropriate weight,
dependent upon the function and significance of each.
Thus in California Motor the Court considered the “‘man-
ner of exercise of the right of associaiton and petition,” the
defendants’ other activities against competitors, and the
adamant stand taken in defendants’ opposition to other
applications, all to ascertain whether there was a true
intent to injure competitors directly rather than to influence
governmental action. The distillation of all of the appli-
cable factors in each case governs the decision as to true
intent, whether it is to directly injure competitors rather
than to influence governmental action. In California
22a
Motor a consideration of all of the factors lead the Court to
conclude that the allegations came within the sham ex-
ception in the Noerr case, “‘as adapted to the adjudicatory
process” in that the defendants’ purpose was to deny a
competitor “free and meaningful access to the agencies
and courts.”’'2
We also quoted with approval from an antitrust commentator
that “{c]Jonstruing the sham exception as enunciated in Noerr
to include all activity not genuinely designed to influence the
government is more consonant with the Court’s central ruling.”
580 F.2d at 296, citing D. Fischel, Antitrust Liability for
Attempts to Influence Government Action: The Basis and Limits
of the Noerr-Pennington Doctrine, 45 U. Chi. L. Rev. 80, 105
(1977).
In Westborough Mall v. City of Cape Girardeau, 693 F.2d
733 (8th Cir. 1982), cert. denied, 461 U.S. at 945 (1983), we
again elaborated on the “sham” exception to the Noerr-
Pennington doctrine. There we held:
{T]he defendants may not be protected by Noerr because
their legitimate lobbying efforts may have been accom-
panied by illegal or fraudulent actions. See Sacramento
Coca-Cola Bottling Co. v. Chauffeurs, Teamsters & Helpers
Local 150, 440 F.2d 1096, 1099 ( 9th Cir. ), cert. denied, 404
U.S. 826, 92 S. Ct. 57, 30 L.Ed.2d 54 (1971); Woods
Exploration & Producing Co. v. Aluminum Co. of America,
438 F.2d 1286, 1296-1298 ( Sth Cir. 1971), cert. denied, 404
U.S. 1047, 92 S. Ct. 701, 30 L.Ed.2d 736 (1972). The
Noerr-Pennington doctrine was not “intended to protect
those who employ illegal means to influence their repre-
sentatives in government.” Sacramento Coca-Cola Bottling
Co. v. Chauffeurs, Teamsters & Helpers Local 150, supra,
12 The plaintiff in Mark Aero was an air taxi operator who
wanted to reopen the Kansas City Municipal Airport for commercial
flights. Two of the plaintiffs competitors opposed the reopening by
conducting a publicity campaign and by exerting pressure on public
officials. No illegal activities were alleged, as in the case before us,
although Mark Aero did allege that the defendants “induced others to
make false and misleading statements” and used “economic coercion”
on City officials. We held that the defendants’ activities were
protected by Noerr-Pennington because “none of the defendants’
alleged wrongful acts constitute more than joint efforts to influence the
City officials’ decision in the airport controversy.” 580 F.2d at 296.
23a
440 F.2d at 1099. See generally 7 Von Kalinowski,
Antitrust Laws and Trade Regulation, supra, § 46.04[3] at
46-55. In Gorman Towers, Inc. v. Bogoslavsky, [626 F.2d
607 (8th Cir. 1980)] supra, we recognized that actions
beyond “traditional political activity” may not be protected
by the Noerr exemption. /d., 626 F.2d at 615. Because the
plaintiffs have presented facts that support an inference of
unlawful conduct—city officials may have been induced by
the May-Drury defendants by means other than legitimate
lobbying to illegally revert plaintiffs’ C-4 zoning—the
Noerr doctrine may not be relied upon to support the
district court’s grant of summary judgment. See Federal
Prescription Service, Inc. v. Pharmaceutical Ass’n, 663 F.2d
253, 266 (D.C. Cir. 1981), cert. denied, 455 U.S. 928, 102
S. Ct. 1293, 71 L.Ed.2d 472 (1982).13
693 F.2d at 746.
In the Sacramento decision cited in Westborough Mall, the
United States Court of Appeals for the Ninth Circuit stated:
[I]t does not seem to this Court that the doctrines of Noerr
and Pennington were intended to protect those who employ
illegai means to influence their representatives in govern-
ment. These doctrines were enunciated to see that the
antitrust laws did not impede the free flow of commu-
nication between the people and the government. But
there can be little reason to extend the special immunity of
Noerr and Pennington to a type of “communication” which
includes threats and other coercive measures. There is no
room for such tactics in a democratic system.
In the case before us it was alleged that the defendant
unions influenced the State Fair officials by means of
threats, intimidation and other coercive measures. The
doctrines of Noerr and Pennington are not, therefore,
applicable.
440 F.2d at 1099.
13 TCI alleges that the defendants in Westborough Mall at-
tempted to bribe public officials. However, our reading of that case
reveals that it did not invoke the sham exception on grounds of
bribery but on the ground that the plaintiffs might be able to prove an
illegal conspiracy between defendants and the City which included
illegal private negotiations such as those at issue in the case before us.
24a
See also In Re IBP Confidential Business Documents Litigation,
755 F.2d 1300, 1313 (8th Cir. 1985) ( Noerr-Pennington doc-
trine cannot be extended to “activities which, although ‘os-
tensibly directed toward government action,’ are actually noth-
ing more than an attempt to harm another” or to “false
communications” or to tortious, violent, defamatory or other
illegal acts [citations omitted ].).
We think that the trial court’s jury instruction adequately
informed the jury of the Noerr-Pennington doctrine and the
sham exception.14 The instruction does not have the problem
that the instruction which was disapproved in Pennington had.
It does not state that legal petitioning activities can be illegal if
accompanied by anti-competitive intent. Instead, it describes
the essence of the “sham” exception—were defendant’s peti-
tioning activities genuine attempts to influence government
action, or were they designed to directly interfere with the
business relationships of a competitor?
Finally, our review of the record reveals full support for
the jury’s and trial judge’s conclusion that TCI overstepped the
boundaries of Noerr-Pennington protection. Much of TCI’s
campaign was not directed at informing public officials or the
public of TCI’s position. Instead, TCI sought to distort the
process by refusing to participate in the RFP process, by
threatening the City’s consultant and one of its competitors, by
withholding the past due franchise fee, by attempting to
interfere with Central’s financing, and by coercing the City into
holding private negotiations in violation of the RFP terms and
Missouri’s sunshine laws. Indeed, TCI’s argument would
14 TCI also alleges that the trial court’s conspiracy instruction
“essentially negated” the Noerr-Pennington defense. We reject this
argument. First of all, TCI did not specifically raise this objection
below, and thus we could order a new trial on this basis only if the
alleged error is “plain error.” In any event, we find TCI’s oblique
argument to be completely without merit. We find nothing in the
conspiracy instruction which negates the Noerr-Pennington instruc-
tion. The jury was informed that “each * * * instruction is equally
binding upon-’you.” Conspiracy Instruction Number |1 read along
with Instructions Number 21 and Number 14 ( Noerr-Pennington)
fully informed the jury that before any antitrust liability could be
imposed, it had to find that TCI “knowingly entered into a com-
bination or conspiracy” and that in determining liability, it could not
consider TCI’s “legitimate lobbying efforts.”
25a
effectively repeal the sunshine laws and administrative laws
prohibiting ex parte contacts. TCI’s argument that Noerr-
Pennington allows them to engage in excessive and intimidating
conduct proved too much for the trial judge and jury, and it
proves too much for us.1'5
C. State Action Defense.
TCI contends that Central could not have a cause of action
under the antitrust laws because the City is immune under the
state action doctrine. Central contends that this argument is
without merit because there is no clearly and affirmatively
expressed policy of the Missouri legislature directing the City to
displace competition, and TCI’s agreement with the City is not
in furtherance of any such policy. Central also argues that, in
any event, TCI did not raise its “state action” argument in its
answer, motion to dismiss, motion for summary judgment,
pretrial filings, or its statement of issues in this Court. It points
out that, in fact, TCI took precisely the opposite position below,
stating in its j.n.o.v. motion that the City’s actions were not
“state action.” Although we doubt that TCI’s “state action”
argument has merit, we decline to reach it because “‘defenses
'S Central raises several other reasons why TCI’s conduct was not
protected under Noerr-Pennington. Although some of these argu-
ments may have merit, we need not reach them here. Central argues
that the Noerr-Pennington doctrine is inapplicable here because this
case involves a municipality acting in an essentially commercial rather
than in an executive, legislative or adjudicatory capacity. See, e.g.,
Sacramento, 440 F.2d at 1099; Hecht v. Pro-Football, Inc., 444 F.2d
931, 941-42 (D.C. Cir. 1971), cert. denied, 404 U.S. 1047 (1972);
George R. Whitten, Jr. v. Paddock Pool Builders, Inc., 424 F.2d 25, 33
(Ist Cir. ), cert. denied, 400 U.S. 850 (1970). Central also argues that
TCI’s conduct cannot be described as merely “political” in nature
because the ultimate act it sought from the City, the award of a cable
television franchise, is not protected “state action” because there is no
clearly and affirmatively expressed policy in Missouri authorizing
cities to displace competition in the cable television industry. See, e.g.,
Community Communications Co. v. City of Boulder, 455 US. 40
(1982). Finally, Central argues that the Noerr-Pennington doctrine is
inapplicable because the jury found that there was an illegal con-
spiracy between TCI and certain City officials, including Utterback
and the mayor. See, e.g., Affiliated Capital Corp. v. City of Houston,
735 F.2d 1555, 1566-67 (Sth Cir. 1984), cert. denied,—-U.S.— 106 S.
Ct. 788 (1986); Duke & Co. v. Foerster, 521 F.2d 1277, 1281-82 (3d
Cir. 1975).
26a
not raised or litigated in the trial court cannot be urged for the
first time on appeal.” Gardner v. Meyers, 491 F.2d 1184, 1190
(8th Cir. 1974).
D. Evidentiary Rulings.
TCI raises numerous objections to the trial court’s eviden-
tiary rulings and contends that the trial court gave improper
and confusing instructions to the jury. After a thorough review
of the record, the jury instructions as a whole, and the trial
court’s lengthy explanation of its evidentiary rulings and jury
instructions, we find that many of TCI’s objections were not
properly preserved for appeal and, in any event, that the trial
court did not abuse its discretion in its evidentiary rulings, that
the jury instructions adequately stated the law, and that the
court’s allowance of ninety minutes per side for closing argu-
ments was not an abuse of discretion.
E. Monopoly Power in a Regulated Market.
TCI contends that, as a matter of law, it could not have
possessed monopoly power because Jefferson City regulated
price and entry in the cable television business. We reject this
argument. Monopoly power is the power to control prices or
exclude competitors. United States v. Grinnell Corp., 384 U.S.
$63, 571 (1966). Here, TCI had the power to raise the price of
“premium” channels without the approval of the City. Most
significantly, TCI used its entrenched position and the various
unethical or illegal practices outlined in our Noerr-Pennington
discussion to exclude competition.
TCI miscites our decision in National Reporting Co. v.
Alderson Reporting Co., 763 F.2d 1020 (8th Cir. 1985), as
establishing that a company cannot possess monopoly power in
a regulated market. There, the United States Tax Court
contracted on a yearly basis for court-reporting services. The
court allowed contractors who performed satisfactorily to renew
their contract at the previous year’s rate. If, however, the
contractor wanted to raise his price, the court put the contract
out for bid. When National Reporting Company, which had
the current contract, requested a price increase, the court let the
contract out for bid. Alderson Reporting Company submitted a
|
27a
bid more than 300 percent lower than National’s bid, and
received the contract. National then brought an antitrust action
against Alderson, alleging that Alderson submitted a predatory
below-cost bid with the intent to drive competitors out of the
market and create a monopoly. We reversed a district court
judgment in favor of National, and held that Alderson could
not possess monopoly power because it did not have the power
to control prices or exclude competition. National’s theory was
that Alderson submitted a predatory bid and then would
increase prices the next year. However, we pointed out that as
soon as Alderson raised its price, the contract would be put out
for bid and that “[c]ompetition is alive and well in the relevant
market.” Jd. at 1023.
That factual situation is completely inapposite to our case.
Unlike TCI, Alderson had not threatened competitors into not
submitting bids, and it took no other action to destroy the
competitive bidding process. The mere fact that the Jefferson
City cable market is regulated cannot hide the fact that TCI had
monopoly power in the market, and it used that power and
other methods other than superior ability to exclude com-
petition. As the United States Supreme Court stated in United
States v. Otter Tail Power Co., 410 U.S. 366, 372 (1973),
“Activities which come under the jurisdiction of a regulatory
agency nevertheless may be subject to scrutiny under the
antitrust laws.”
c
F. Sufficiency of the Evidence on the Conspiracy Count.
TCI contends that we must overturn the jury’s verdict on
Section One of the Sherman Act because there is insufficient
evidence of a conspiracy or combination. Central contends that
TCI is merely repeating an argument rejected by the jury, and it
argues that if there is any evidence supporting the jury’s finding
of a conspiracy, the finding must be upheld. Citing Weiss v.
York Hospital, 745 F.2d 786, 814 (3d Cir. 1984), cert. denied,
105 S. Ct. 1777 (1985). TCI contends that it was selected
because this was the “‘best” business decision for the City, even
though Central offered a state-of-the-art system with a greater
number of channels and better picture quality at a lower price.
28a
TCI stresses that there would have been 4M interruption in
service if Central had been chosen, and fat the mayor and
other City officials were merely responding t© this eventuality.
“An inference of conspiracy is not warrante! Where the conduct
is at least as consistent with legitimate busit€Ss decisions * * *
as with [ anti-competitive joint action].” Ad”iral Theatre Corp.
v. Douglas Theatre Co., 585 F.2d 877, 884( 8th Cir. 1978).
Central contends that TCI’s argumert “emphasizes the
innocuous and ignores the ominous.” Core) ”: Cook, 641 F.2d
32,'35 (Ist Cir. 1981) (holding that conceted action by city
officials and a parking lot operator designec t0 subvert normal
commercial bidding and exclude the plain#ff violated Section
One of the Sherman Act). Central conter4s that the record
reveals abundant evidence that various ity officials were
coerced and pressured into an anti-compet!!Ve position. We
find this a difficult question. Nonetheless, ‘ter Sve ing the
lengthy record in detail, we believe that oviFturning the jury’s
conspiracy verdict would require us to revic¥ the evidence de
novo and to accord little respect for the verd¢t Of what the trial
judge termed was “an extremely attentive j!'¥. Central Tele-
communications, 610 F. Supp. at 894.
G. Damages.
1. Fact of Damage.
TCI contends that under Duff v. Kansas Star Co., 299
F.2d 320 (8th Cir. 1962), an unestablishe! business cannot
recover for injury to “business” under sectio! 4 Of the Clayton
Act. There, we stated that a plaintiff may né! Tecover antitrust
“damages by reason of loss of anticipated (OMtS !n an antici-
pated business.” Jd. at 323. However, this ‘t@tement must be
read in light of the facts in Duff. Duff had °Perated a small
weekly newspaper in Kansas City, Missouri. After eight years
of non-publication due to a newsprint short'8& during World
War II, he unsuccessfully sought to reent! the newspaper
business. He claimed that his inability to stat UP 4 N€wspaper
again was due to an attempt by defendant © MOnopolize the
market. The district court dismissed his antitUSt action on the
ground he had no “business or property” vhich could have
been injured. This Court affirmed, finding: ‘After eight years
Dial aiid
29a
of non-publication appellant possessed neither business nor
property, including goodwill, which could have been dam-
aged|.]” Jd. at 325. Stressing that Duff had not made any
large capital expenditures, did not own a copyrighted name for
a newspaper which had a value, and did not have subscription,
advertising, or financing commitments, the Court stated that
Duff “was in no different position than any stranger who might
arrive in Kansas City with the desire or wish to enter the
newspaper publishing field and who claimed that because of
appellees’ monopoly he was prevented from doing so.” /d. at
323.
Although neither the Supreme Court or this Court has had
occasion to expound on the meaning of Duff, at least seven of
the Circuit Courts of Appeal.’® as well as numerous district
courts,'7 and the Supreme Court by tmplication'® have ruled
16 Parks v. Watson, 716 F.2d 646, 659-60 (9th Cir. 1983); Grip-
Pak, Inc. v. Illinois Tool Works, Inc., 694 F 2d 466, 478 (7th Cir.
1982), cert. denied, 461 U.S. 958 (1983); Huron Valley Hospital Inc.
v. City of Pontiac, 666 F.2d 1029, 1033 (6th Cir. 1981): Hayes v.
Solomon, 597 F.2d 958, 973 (Sth Cir. 1978), cert. denied, 444 US.
1078 (1980): Hecht v. Pro-Foothall, Inc., 570 F.2d 982, 987-88 (D.C.
Cir. 1977), cert. denied, 436 U.S. 956 (1978); Triangle Conduit &
Cable Co. v. National Electric, 152 F.2d 398, 400 (3d Cir. 1945):
Pennsylvania Sugar Ref. Co. v. American Sugar Ref. Co., \66 F. 254
(2d Cir. 1908).
17 See, e.g., Bowl America, Inc. v. Fair Lanes, Inc., 299 F. Supp.
1080, 1095 (D. Md. 1969): Denver Reseade um Corp. v. Shell Oil Co.,
306 F. Supp. 289, 307 (D. Colo. 1969).
18 Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100,
126-28, 23 L.Ed. 1562 (1969) (On the related question of whether
the plaintiff, as a condition of maintaining a treble-damage action,
must prove that he made a demand for the excluded product or
service, the Court stated: “The issue is whether, once the embargo was
lifted, Zenith wanted to enter, had the capacity to do so, and was
prevented from entering by its inability to secure a patent license and
by other operations of the English patent pool. Section 4 of the
Clayton Act required that Zenith show an injury to its “business or
property by reason of anything forbidden in the antitrust laws.” If
Zenith’s failure to enter the English market was attributable to its lack
of desire, its limited production capabilities, or to other factors
independent of HRI’s unlawful conduct, Zenith would not have met
its burden under § 4.” (Footnote omitted. )
30a
that an unesiablished business can recover future lost profits
under the federal antitrust laws if a sufficiently advanced state
of preparation for entering a market has been achieved. For
example, the same year that Duff was decided, the United
States Court of Appeals for the Fifth Circuit rejected a con-
tention that Duff established that a business in the planning
stage may never recover anticipated profits under the federal
antitrust laws:
Defendant’s argument necessarily presupposes that
when Congress authorized treble damage suits it meant to
distinguish between the rights of persons who are put out of
business and the rights of persons who are kept out of
business by a conspiracy. It is unreasonable to suppose that
such a distinction was intended by Congress. The purpose
of the anti-trust laws is to promote competition and to
prevent its restraint. This purpose ts no less thwarted when
a person who intends and is prepared to embark in trade ts
stopped at the outset, than it is when a going business ts
brought to a standsull. It is as unlawful to prevent a person
from engaging in business as it is to drive him out of
business. Thomsen v. Union Castle Mail S. 8. Co., 2 Cir.,
1908, 166 F. 251, 253. The restriction which defendants
would place upon the meaning of the word “business” ts
unwarranted in the context of its Clayton Act usage.
* * * *
We see no conflict in the holding of the Duff case with the
decision reached here First, the Duff case presents facts
entirely different from those under consideration here.
Indeed, the trial court likened the plaintiff in Duff to a
stranger who might enter Kansas City “with the desire or
wish” to enter the newspaper publishing field; which is to
say that the “desire or wish” ts all the stranger had. No
property was involved. In effect, the court held that there
was no established business ( good will) to which the name
or trademark there involved attached.
* * * *
| By contrast, the plaintiff here] was guilty of no lethargy or
speculative assertion of a mere wish, desire or intention to
3la
engage in business. In July he bound himself by the terms
of a contract, which the evidence indicates would have
been in performance in December. The alleged conspiracy
stopped him cold in November. It is our opinion that
Young was “injured in his business or property”.
North Texas Producers Association v. Young, 308 F.2d 235, 243
(Sth Cir. 1962), cert. denied, 372 U.S. 929 (1963).
A respected commentator has aptly summarized the now-
established majority view:
The plaintiff will be deemed to have an existing “business”
if he has an intention to do so and has made a sufficient
degree of preparation toward entering the market or
industry. The four elements that the courts have consid-
ered in determining the degree of intention and pre-
paredness are:
(1) the plaintffs background and experience in his
prospective business;
(2) affirmative action on the plaintiffs part to engage
in the proposed business;
(3) his ability to finance the business and to purchase
the necessary equipment and facilities to engage therein:
and
(4) His consummation of contracts.
10 Von Kalinowski, Antitrust Laws and Trade Regulation,
§ 115.02[3][i] (1968) (footnotes omitted). See also e.g.,
Parks, 716 F.2d at 660.
We agree with the conclusion of the United States Court of
Appeals for the Fifth Circuit in North Texas Producers Associ-
ation that Duff is consistent with this majority view, but simply
holds that Duff had not shown sufficient business or property
interests to recover for injury to “business or property” under
section 4 of the Clayton Act.
The district court tracked this view by instructing the jury
that “[1]t is necessary that plaintiff cause you to believe from
32a
the evidence an intention and preparedness to enter the cable
television market in order to recover for its loss in this case.”
TCI does not challenge this instruction on appeal. Our review
of the record supports the jury’s conclusion that Central had
made sufficient preparations to enter the cable television busi-
ness to recover for injury to “business” under section 4 of the
Clayton Act. Central had experience and expertise in the cable
field, had raised over $300,000 in capital with commitments of
an additional $200,000 in capital, had secured financing com-
mitments in excess of $1.5 million, had submitted detailed
feasible plans for its cable system in Jefferson City and had
secured the vote of the City Council for an operating franchise.
TCI also contends that the tortious interference verdict
must be reversed because under Missouri’s tortious interference
law, an unestablished business cannot recover anticipated prof-
its unless plaintiff proves past income and expenses as the basis
for computing them. Citing Coonis v. Rogers, 429 S.W.2d 709,
713-14 (Mo. 1968). However, our review of Missouri law
reveals that this argument is too extreme. A more detailed,
accurate and recent description of Missouri law was provided in
Budget Rent-A-Car v. B & G Rent-A-Car, 619 S.W.2d 832, 836-
37 (Mo. App. 1981), where the court wrote:
| T]he loss of profits, whether past or future, claimed to
arise out of exclusion from a market is customarily not
susceptible of detailed or direct proof, and * * * unless
proof of an inferential character is permitted, the result
would be to immunize a defendant from the consequences
of his wrongful acts. That principle has been frequently
enunciated by the Supreme Court of the United States in
the context of actions to recover damages resulting from
violations of the Federal antitrust laws. * * * The principle
is equally applicable where the claim of lost profits arises
from a violation of fiduciary obligations or breach of
contract. * * *
* * * “The assessment of damages by a trial court sitting
without a jury will not be set aside unless manifestly
33a
erroneous; and may be upheld if it falls within the range of
estimates given by expert witnesses.”
[There has been an] evolution away from the de-
mand for proof of certainty in damages in actions of this
nature in * * * Missouri. * * * Anticipated profits were
generally not recoverable. Coonis v. Rogers, 429 S.W.2d
709, 714 (Mo. 1968), but note the further quote, “ ‘They
[ anticipated profits] may be recovered only when they are
made reasonably certain of proof of actual facts, with
present data for a rational estimate of their amount; and,
when this is made to appear, they may be recoverable.’ ”
** * “1 T]he law is also well settled that damages may be
recovered for loss of profits due to the breach of a contract
if the evidence is sufficiently certain and definite to warrant
the jury in estimating their extent.” * * * “It has been said,
however, that the amount of estimated loss of earnings
(and the same would apply to loss of prospective profits )
should, in the event of uncertainty, at least be supported by
the best evidence available.” * * *
** *& *
* * * “Where computation of damages is made uncertain
by the nature of the breach of contract, ‘[t]he most
elementary conceptions of justice and public policy require
that the wrongdoer shall bear the risk of the uncertainty
which his own wrong has created.’ * * * [.]” [Citations
omitted. |
Similarly, in Coach House of Ward Parkway v. Ward Parkway
Shops, 471 S.W.2d 464, 472-73 (Mo. 1971), the Court stated:
Defendant relies on a line of cases exemplified by
Coonis v. Rogers, Mo., 429 S.W.2d 709, and Anderson v.
Abernathy, Mo., 339 S.W.2d 817, for the general proposi-
tion of law to the effect that recovery of anticipated profits
of a commercial business are too remote, speculative to
warrant recovery except where they are made reasonably
certain by proof of actual facts with present data for a
rational estimate of their amount. This is and has been the
rule in Missouri. However, in Hargis v. Sample, Mo., 306
I eeslienienntreneemeaiiil
34a
S.W.2d 564, 569, also cited by defendant, this court in
speaking of the certainty with which loss of profits must be
shown said: ‘True, in some cases all that can be required ts
to produce all the relevant facts tending to show the extent
of damage and one is not to be excused for a breach of
contract resulting in damages simply because those dam-
ages may not be established with exact certainty. Wright
v. Ickenroth, Mo. App., 215 S.W.2d 43, 45. It has been
said, however, that the amount of estimated loss of earn-
ings (and the same would apply to loss of prospective
profits) should, in the event of uncertainty, at least be
supported by the best evidence available. Moss v. Mind-
lin’s, Inc., Mo., 301 S.W.2d 761, 773.”
We believe this case comes within [this] rule * * *
where if the breach exists, the experience of mankind is
convincing that a pecuniary loss has occurred while at the
same time the exact amount of damage is not susceptible
of being ascertained with certainty.
The Court in Coach House then held that damages for lost
profits could be recovered, on remand, on the basis of the
testimony of an expert witness on the estimated loss of business
due to the violation at issue.
We think this is the type of case where the damage award
was based on the best evidence available, and where the
estimate of loss is reasonable and thus is not too speculative
under Missouri law. In sum, we hold that Central has
sufficiently proved that it suffered damage to a protectable
interest under the federal antitrust law and the State of
Missouri’s law on tortious interference with a business ex-
pectancy.
2. Measure of Damages.
TCI contends that Central’s damage theory was “irratio-
nal” and overcompensatory because it allegedly failed to
deduct all the “start-up” costs of the business. Central’s theory
was that it should receive the fair market value of the lost
franchise, and this value was ascertainable through use of an
3Sa
“industry rule of thumb”—ten times cash flow in Central’s
proposed third year of operations. Central cites controlling
authority that the fair market value of a business has long been
a recognized measure of damages for a precluded plaintiff in
antitrust cases, see, e.g. Arnott v. American Oil Co., 609 F.2d
873, 887 (&th Cir. 1979), cert. denied, 446 U.S. 918 (1980);
Albrecht v. Herald, 452 F.2d 124 (8th Cir. 1971). See also
Affiliated Capital Corp. v. City of Houston, 519 F. Supp. 991,
1011 (S.D. Tex. 1981), rev'd on other grounds, 735 F.2d 1555
(Sth Cir. 1984). Central also cites to Malley-Duff & Associates,
Inc. v. Crown Life Ins. Co., 734 F.2d 133, 148 (3d Cir. ), cert.
denied, __ U.S. ___, 105 S. Ct. 564 (1984) where the Court
approved the use of an industry rule of thumb—a multiplier
times vested renewal income—to determine fair market value.
Central introduced a detailed damages study and extensive
supporting testimony. The jury arrived at an actual damage
amount of $10.8 million. Central points out that TCI itself
suggested that the fair market value of the Jefferson City cable
franchise was between $7.7 and $15 million. Although the
damage award is large, we have concluded that we are
obligated under controlling authority and the facts of the case
to affirm. First of all, the Supreme Court has repeatedly made
clear that once the fact of damage ts established, the amount of
damages requires a lesser degree of proof. See, e.g., J. Truett
Payne Co. v. Chrysler Motors Corp., 451 U.S. 557, 565-67
(1981) (“Our willingness to accept a degree of uncertainty in
these cases rests in part on the difficulty of ascertaining business
damages as compared, for example, to damages resulting from
a personal injury. * * * The vagaries of the marketplace usually
deny us sure knowledge of what plaintiffs situation would have
been in the absence of the defendant’s antitrust violation.” ) For
example, in Zenith Radio Corp. v. Hazeltine Research, Inc., 395
U.S. 100, 123-24 (1969), the Court held that antitrust damages
could be awarded on the basis of plaintiffs estimates of sales it
could have made absent the violation:
|D Jamage issues in these cases are rarely susceptible of
the kind of concrete, detailed proof of injury which is
36a
available in other contexts. The Court has repeatedly held
that in the absence of more precise proof, the fact-finder
may “conclude as a matter of just and reasonable inference
from the proof of defendants’ wrongful acts and their
tendency to injure plaintiffs’ business, and from the evi-
dence of the decline in prices, profits and values, not shown
to be attributable to other causes, that defendants” wrong-
ful acts had caused damage to the plaintiffs.
A respected commentator has summarized the law on the
measure of antitrust damages as follows:
The amount of damages may be established by evidence of
facts from which some calculation may be logically and
legally inferred. If the inference upon which the award is
based is reasonable, the plaintiff may recover a sum in
damages even if it is merely an approximation.
10 Von Kalinowski § 115.02[2] (1968) (footnotes omitted ).
Similarly, the United States Court of Appeals for the Seventh
Circuit has recently reiterated, in a decision affirmed by the
Supreme Court: “Because a plaintiff can seldom prove the exact
amount of antitrust damages, he may sustain. his burden with
circumstantial evidence and estimates of damages based on
reasonable assumptions.” Spray-Rite Service Corp. v. Monsanto
Co., 684 F.2d 1226, 1242 (7th Cir. 1982), aff'd in part, rev'd in
part on other grounds, 465 U.S. 752, 104 S. Ct. 1464 (1984).
The law of the State of Missouri is similar with respect to
damages for tortious interference with business expectancy.
See, e.g., Budget Rent-A-Car, 619 S.W.2d at 836-37.
Central presented an estimate of damages based on rea-
sonable industry assumptions, and the jury was entitled to infer
from the evidence actual damages in an amount of $10.8
million. Our review of the award fails to reveal any error,19 and
19 TCI] contends, in an argument not raised before the jury, that
Central’s damage estimate failed to adequately account for Central’s
Start-up costs. However, our review of the damages study reveals that
start-up costs of $1.6 million were accounted for. If TCI believed this
figure understated start-up costs, it should have introduced evidence
on this. Given that TCI failed to raise this argument before the jury,
and that there is no evidence to suggest that Central’s estimate is
37a
we could reduce the award only by acting as the de novo fact-
finder. This we may not do.
Perhaps most significantly, Central’s damage study and its
expert’s testimony was admitted without objection. TCI failed
to introduce evidence on damages, and did not argue damages
in its final argument before the jury. It is apparent that TCI
made a conscious decision to “go for broke,” claiming that
Central could simply not receive any damages at all because
TCI was not liable. The jury rejected this argument and was
forced to base its damage award on the evidence before it. TCI
first objected to the damages award and its method of calcu-
lation in its post-trial motion. This was too late. Accordingly,
the actual damages award of $10.8 million on the antitrust
(before mandatory trebling ) and tortious interference claims 1s
affirmed.
The jury also awarded $25 million in punitive damages on
the tortious interference claim. TCI does not challenge this
award on appeal other than contending that if the actual
damages award is reversed, the punitive damages award must
also be reversed. Accordingly, although the punitive damages
award is large, the award was based on a jury instruction on
punitive damages which was not objected to at trial or on
appeal and which, in any event, accurately set forth the law of
the State of Missouri. The record reveals substantial evidence
of intentional tortious conduct on which the punitive damages
award was based. Accordingly, we affirm the jury’s award.
Affirmed.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS,
EIGHTH CIRCUIT.
unreasonable, we assume that $1.6 million in estimated start-up costs
is reasonable.
TCI also suggests in passing that Central’s damages’ theory
erroneously uses its third year of operations as the base for determin-
ing fair market value. However, TCI failed to object to this method at
trial. Moreover, the third year coincided with the date of trial, and
thus had a reasonable basis.
tae caiman
38a
IN THE
UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF MISSOURI
CENTRAL DIVISION
)
CENTRAL TELECOMMUNICATIONS, INC... | Fite Stamp}
|
Plaintiff. |
ay No. 83-4068-CV-C-5
TCI CaBLeEvIsION, INC., et al,
Defendants.
ORDER
Pending before the Court are the following post-trial
motions: (1) defendants’ motion for judgment non obstante
veredicto; (2) defendants’ alternative motion for a new trial:
(3) defendants’ motion for clarification of the judgment; (4)
plaintiffs motion for enhancement of its attorney’s fees; and
(5) defendants’ motion for a stay of execution pending appeal.
For the reasons set forth below, the Court will make the
following rulings: (1) defendants’ motion for j.n.o.v., alterna-
tive motion for a new trial, and motion for a stay of execution
will be overruled; (2) defendants’ motion for clarification will
be sustained and the judgment in this case will be amended to
preclude the possibility of double recovery by plaintiff; and (3)
plaintiffs motion for enhancement of its attorney’s fees will be
overruled.
I. BACKGROUND
On January 22, 1985, the jury returned verdicts against
defendants of $10,800,000.00 on each of plaintiff's antitrust
39a
claims,' and $10,800,000.00 for actual damages and
$25,000,000.00 for punitive damages on plaintiffs state law
claim for tortious interference with a business expectancy.
These verdicts were rendered by an extremely attentive jury at
the conclusion of a thirty-one day triai.
Plaintiffs claims arose out of a dispute over cable tele-
vision franchise rights in Jefferson City, Missouri. In 1978,
defendants4 (hereinafter collectively referred to as “TCI’’)
bought the only existing cable television franchise5 in Jefferson
1 Plaintiff successfully submitted two antitrust claims to the jury:
actual monopolization and conspiracy to unreasonably restrain trade.
The $10,800,000.00 award is the amount of the verdict before
trebling.
2 Plaintiff concedes that it cannot recover both treble damages on
its antitrust claims and punitive damages on its tortious interference
claim. See Superturf, Inc. v. Monsanto Co. 660 F.2d 1275, 1283-84
(8th Cir. 1981); see also page [68a] infra.
3 Jefferson City provides a very attractive market for cable
television. Because the city is nestled in a hilly region on the south
bank of the Missouri River, broadcast television reception is extremely
poor. Only one broadcast television station is located in the city. As a
result of these factors, cable television’s market penetration has been
extremely high in Jefferson City.
4 There were three defendants in this case: TCI Cablevision, Inc.;
Community Telecommunications, Inc.; and Telecommunications, Inc.
TCI Cablevision and Community Telecommunications are wholly-
owned subsidiaries of Telecommunications, Inc. According to the
evidence in this case, the parent corporation controls approximately
1,000 local cable systems and is the largest cable television company
in the United States. The evidence also showed that the corporate
organization of the three defendants was extremely loose. Employees
authorized to act on behalf of one of the companies in reality acted on
behalf of all three companies. Consequently, the jury was instructed
to treat all three defendants as one entity for the purpose of returning
its verdicts.
5 A “franchise” is the term commonly used to describe the license
issued by a local governmental entity to a cable television operator to
build and maintain a cable system in the community. The original
purpose of licensing cable systems stemmed from the fact that a cable
operation, like any other public utility, needs easements across both
public and private property in order to gain access to individual
households. Thus, in the interest of preserving the integrity of the
public domain, a licensing or franchising process developed whereby
a city could demand assurances of responsible behavior from a
prospective cable operator.
40a
City. By its terms, the franchise which TCI purchased was
scheduled to expire in April, 1981.
As is customarily done in cities across the country, Jeffer-
son City initiated an RFP® process to solicit bids to determine
the recipient of the next cable television franchise. Being the
incumbent operator, defendants naturally enjoyed the inside
track in the competition for the next franchise. Nevertheless,
city officials remained open to the option of refusing to renew
TCI’s franchise, particularly in view of mounting consumer
dissatisfaction with existing service.
In 1980, a group of local investors formed the plaintiff
company (hereinafter referred to as ““Central’’) for the express
purpose of competing for a cable television franchise in Jeffer-
son City. Aware of the public’s dissatisfaction with the
incumbent operator, Central began arranging financing and
responded to the city’s RFP by offering expanded services for
less money. In contrast, defendants refused to participate
directly in the RFP process. Instead, TCI undertook various
tactics designed to ensure that it could not be displaced as the
sole cable television franchisee in Jefferson City. Many of these
activities were performed by Paul Alden, a “‘troubleshooter” in
defendants’ franchise renewal department. For example, Mr.
Alden threatened to destroy the career of Elmer Smalling, a
consultant who was evaluating the RFP responses for the city.
Mr. Alden also attempted to intimidate city officials by threat-
ening to flood the Jefferson City market with satellite dishes if
defendants’ franchise was not renewed. This threat, as it turned
out, was a complete fraud: Mr. Alden represented that his
company had exclusive control over the distribution of satellite
dishes in the Jefferson City area when, in fact, his company had
never participated in the satellite dish business. In addition,
TCI sent shock waves through the Jefferson City community by
announcing to the public that all cable television services would
be terminated unless its franchise was renewed. Defendants
6 The term ““RFP” is shorthand for “Request for Proposals.” An
RFP is, in essence, an advertisement for bids. In its RFP, the city sets
forth the minimum terms and specifications for a cable television
system which all prospective operators are expected to meet.
4la
applied additional pressure on city officials by refusing to pay
the city approximately $60,000.00 in past-due franchise fees
unless and until their franchise was renewed. Finally, on March
16, 1981, defendants filed a multi-count lawsuit against the city
and began to engage the city in protracted litigation. The
gravamen of this lawsuit was the claim that the First Amend-
ment prohibited the city from terminating an entrenched cable
television operator’s right to provide cable services in the
community.
Notwithstanding TCI’s efforts to subvert the RFP process
and retain its entrenched position, city officials continued to
review the bids submitted by plaintiff and other applicants.
The chief competitors in the RFP process were Central and
Teltran, a cable television operator based in Columbia, Mis-
sourl. The city’s consultant, Elmer Smalling, rated Central and
Teltran equally. In November, 1981, however, Teltran with-
drew its application, thus leaving plaintiff as the best candidate
for a new franchise. On January 25, 1982, the city council of
Jefferson City passed an ordinance authorizing the city attorney
to begin negotiating franchise documents with plaintiff. While
these negotiations were being conducted, defendants continued
pressuring the city to renew its franchise.
On April 16, 1982, after a series of secret meetings between
TCI and various city officials, Mayor Hartsfield announced that
an agreement had been reached whereby the city would renew
defendants’ franchise and defendants would dismiss their law-
suit against the city. Nevertheless, on April 20, 1982, the city
council voted by a 7-3 majority to award a non-exclusive
franchise to plaintiff. Mayor Hartsfield promptly vetoed the
ordinance granting a franchise to plaintiff. The next item on the
council’s agenda was a proposed ordinance which would renew
defendants’ franchise. The council was deadlocked at a 5-5
vote. The mayor cast the tie-breaking vote and, as a result, TCI
retained its position as the only cable television operator in
Jefferson City.
Contending that it had been wrongfully deprived of a
franchise, Central brought the instant lawsuit. TCI counter-
claimed. After thirty-one days of trial, the Court granted
42a
plaintiffs motion for a directed verdict on defendants’ counter-
claims. Central submitted its case to the jury on three theories:
(1) conspiracy to unreasonably restrain trade; (2) actual
monopolization; and (3) tortious interference with a business
expectancy. The jury feund for plaintiff under each theory.
The post-irial motions presently before the court ensued.
Il. MOTION FOR J.N.O.V.
TCI’s motion for j.n.o.v. advances two primary arguments
for overturning the jury’s verdicts. Only these two arguments
will be addressed herein; the other grounds raised by defend-
ants are rejected as being without merit.
A. Noerr-Pennington Defense
The first substantial argument raised by defendants is that
all of their allegedly wrongful conduct was protected activity
within the purview of the Noerr-Pennington doctrine. There are
two distinct components of the Noerr-Pennington doctrine, both
of which are based on the notion that civil liability should not
be imposed on persons for exercising their First Amendment
right to petition the government.’ The first prong of the Noerr-
Pennington defense is the protection of legitimate efforts to
lobby or influence public officials with respect to political
action, even if those efforts are designed to eliminate com-
petition. The second strand of the Noerr-Pennington defense is
7 Although the Noerr-Pennington defense is most often asserted
against antitrust claims, it is equally applicab] to many types of
claims which seek to assign liability on the basis —. the defendant's
exercise of its First Amendment rights. See In re IBP Confidential
Business Documents Litigation, 755 F.2d 1300, 1312 (8th Cir. 1985):
Westborough Mall v. City of Cape Girardeau, 693 F.2d 733, 747 (8th
Cir. 1982); First National Bank v. Marquette National Bank, 48?
F. Supp. 514, 524-25 (D. Minn. 1979), aff'd, 636 F.2d 195 (8th Cir.
1980), cert. denied, 450 U.S. 1042 (1981).
8 United Mine Workers v. Pennington, 381 U.S. 657, 670 (1965):
Eastern R.R. Presidents Conference v. Noerr Motor Freight, Inc., 365
U.S. 127, 144 (1961); see, e.g., First Am. Title Co. of S. Dakota vy.
South Dakota Land Title Ass’n, 714 F.2d 1439, 1445-47 (8th Cir.
1983), cert. denied, 104 S.Ct. 709 (1984); Westborough Mall v. City of
Cape Girardeau, 693 F.2d at 745-46; Alexander v. National Farmers
Org., 687 F.2d 1173, 1195 (8th Cir. 1982); see generally Annot., 71
A.L.R. Fed 723 (1985).
43a
the protection of genuine efforts to seek redress through the
judicial process, even if the outcome of such litigation is certain
to affect or eliminate competition.? Both the lobbying and
litigation aspects of the Noerr-Pennington doctrine are impli-
cated in the instant case.
1. Litigation
Under the Noerr-Pennington doctrine, participation in the
judicial process cannot be asserted as a basis for civil antitrust
liability “unless it may be characterized as a sham cover for
what is really just an attempt to directly interfere with the
business relations of a competitor.”"1° The fundamental question
underlying the issue of whether a lawsuit was a mere sham and
thus unprotected conduct is one of intent.1! In the instant case,
plaintiff introduced evidence concerning defendants’ 1981 law-
suit against Jefferson City wherein defendant had sought to
enjoin the city from displacing it as a cable television operator.
At first, plaintiff attempted to show that this lawsuit fell within
the sham exception to the Noerr-Pennington doctrine.'2 As the
trial progressed, however, plaintiff apparently had doubts about
the sufficiency of the evidence to support a finding that the 198]
lawsuit was a sham and, consequently, withdrew the issue from
the jury’s consideration. The withdrawal instruction expressly
directed the jury that it could not consider defendants’ 1981
lawsuit against Jefferson City to have been unlawful conduct.
This withdrawal instruction adequately informed the jury that
defendants’ 1981 lawsuit was protected litigation under the
9 California Motor Transport Co. v Trucking Unlimited, 404 US.
508, S10-S11 (1972); see, e.g., First Am. Title Co. of S. Dakota v.
South Dakota Land Title Ass'n, 714 F.2d at 1448; Alexander v.
National Farmers Org., 687 F.2d at 1200.
10 Alexander v. National Farmers Org., 687 F.2d at 1200; see
generally Razorback Ready Mix Concrete Co. v. Weaver, No. 84-1325,
slip op. at 4-7 (8th Cir. May 8, 1985).
11 See Mark Aero, Inc. v. Trans World Airlines, Inc., 580 F.2d
288, 297 (8th Cir. 1978).
12 Cf. Alexander v. National Farmers Org., 687 F.2d at 1200-04
(litigation designed to harass and intimidate third parties in order to
directly interfere with business relations of plaintiff held a mere
sham ).
44a
Noerr-Pennington doctrine.'3 It must be assumed that the jury
followed the Court’s instructions and did not rely on the 1981
lawsuit in arriving at its verdicts. Defendants’ arguments fo the
contrary'4 are contradicted by the piain language of the jury
instructions.
2. Lobbying
As noted above, the lobbying prong of the Noerr-
Pennington doctrine extends a cloak of immunity from civil
liability to legitimate efforts to influence public officials with
respect to political action.15 It bears emphasis, however, that
only /egitimate lobbying efforts are protected; conduct that
extends beyond “traditional political activity” may not be
protected.16 Thus, when accompanied by illegal or fraudulent
actions, efforts to influence public officials are not exempt under
the Noerr-Pennington doctrine. 17
In the instant case, defendants contend that the jury’s
verdicts should be overturned because all of their allegedly
anti-competitive conduct was protected activity within the
Noerr-Pennington doctrine. The Court must disagree. The
record clearly contained sufficient evidence to support the jury’s
finding that the wrongful conduct of defendants was either
“sham lobbying” or not lobbying at all. For example, Paul.
Alden’s threat to ruin the career of Elmer Smalling simply
cannot be characterized as “lobbying” in the first instance.
Smalling was not an elected public official, nor did his role in
‘3 Even though a lawsuit is “exempt conduct” under the Noerr-
Pennington doctrine, it nevertheless may be considered “to the extent
it tends to show the purpose or character of other, nonexempt
activity.” Alexander v. National Farmers Org., 687 F.2d at 1196. The
jury was so instructed in the instant case. See Instruction No. 15.
14 See Suggestions in Support of Defendants’ Motion for Judg-
ment Notwithstanding the Verdict or, in the Alternative, For a New
Trial, at pp. 10-11.
1S See note 8 supra; see also Affiliated Capital Corp. v. City of
Houston, 735 F.2d 1555, 1566-68 (Sth Cir. 1984); City of Kirkwood vy.
Union Elec. Co., 671 F.2d 1173, 1180-81 (8th Cir. 1982).
16 Westborough Mall v. City of Cape Girardeau, 693 F.2d at 746.
17 Id.
4Sa a
the city’s RFP process involve political action; instead, he was
merely a consultant to the city whose job was to evaluate a
mass of technical information. In addition, the jury clearly was
justified in believing that Paul Alden’s threat to flood the
Jefferson City market with satellite dishes was not legitimate
lobbying activity; instead, it was pure fraud. As Alden admit-
ted during his deposition, he knew that neither he nor his
former employer had ever been in the satellite dish business.
Finally, TCI’s refusal to pay past-due franchise fees to the city
unless the city renewed its franchise had nothing to do with
“genuine” political activity; instead, it was nothing short of
commercial blackmail. Although there was conflicting evidence
on the issue, the jury’s determination that TCI had strayed
beyond the bounds of legitimate lobbying activity is well-
supported by the record. Accordingly, defendants’ contention
that all of its conduct was protected by the Noerr-Pennington
doctrine must be rejected.
B. First Amendment Defense
The second frontal assault on the verdict is the argument
that defendants cannot be held liable for retaining their posi-
tion in the Jefferson City cable television market because the
First Amendment afforded them an absolute right to continue
their cable television operation free from government inter-
ference. Defendants claim that they are entitled to First
Amendment protection because their sole function is to transmit
information to the public. While defendants admit that they do
not produce original programming, they contend that their role
as a conduit for news, entertainment, and advertising is analo-
gous to that of Reader’s Digest.
Although it doubts that TCI’s First Amendment rights are
coextensive with those of the print media,'8 this Court acknowl-
edges that cable television operators are entitled to some
measure of First Amendment protection. For example, govern-
18 See Omega Satellite Products v. City of Indianapolis, 694 F.2d
119, 128 (7th Cir. 1982); Community Communications Co. v. City of
Boulder, 660 F.2d 1370, 1377-80 (10th Cir. 1981); Berkshire Cablevi-
sion of Rhode Island v. Burke, 57\ F. Supp. 976, 985 (D.R.I. 1983).
"
46a
mental entities may not discriminate against a cable television
operator on the basis of programming content.'° Nor may a
local governmental body artificially limit the number of cable
television operators in a given market.2° Nevertheless, it has
long been the law that the First Amendment does not afford
absolute immunity from antitrust liability to members of the
communications industry.2! Thus, if one cable television oper-
ator conspires or engages in predatory conduct for the purpose
of eliminating its competitors, it will be liable in an antitrust”
lawsuit to the same extent as any other competitor in any other
industry.
In essence, defendants’ First Amendment argument Is that
they were justified, as a matter of law, in resisting Jefferson
City’s RFP process because the city could not constitutionally
force an established cable television franchisee to cease oper-
ation at the conclusion of the franchise term.22 Defendants
further contend that, even if the Jefferson City market could
support only one cable system, the city could not con-
stitutionally displace the incumbent franchisee with a new
franchisee; instead, defendants argue, they had an absolute
First Amendment right to continue their operation either with
or without a franchise from the city.22 Thus, defendants’
19 See Preferred Communications, Inc. v. City of Los Angeles, 754
F.2d 1396, 1401 (9th Cir. 1985); Omega Satellite Products v. City of
Indianapolis, 694 F.2d at 127; Community Communications Co. v. City
of Boulder, 660 F.2d at 1376; Midwest Video Corp. v. FCC, 571 F.2d
1025, 1052-57 (8th Cir. 1978), aff'd on other grounds, 440 U.S. 689
(1979).
20 See Tele-Communications of Key West, Inc. v. United States,
757 F.2d 1330. 1336-38 (D.C. Cir. 1985): Preferred Communications,
Inc. v. City of Los Angeles, 754 F.2d at 1411.
21 Associated Press v. United States, 326 U.S. 1, 19-20 (1945).
22 Cf. Carlson v. Village of Union City, 601 F. Supp. 801, 809-12
(W.D. Mo. Mich. 1985) (dismissing First Amendment claim of cable
television operator whose franchise had been revoked by local
governmental entity ).
23 The inescapably ironic spectre implicit in this argument ts that
a cable system—such as TCI’s system in Jefferson City—which was
allowed to expand and prosper for years under the protective mantle
of an exclusive franchise can now use the First Amendment as a shield
to ward off competition and maintain its entrenched position.
47a
position is that Jefferson City’s RFP process was illegal as a
matter of federal constitutional law and that, consequently, all
of TCI’s efforts to retain its place in the Jefferson City cable
television market were lawful.24
If the Court agreed with defendants’ argument in its
entirety, plaintiff's complaint would have been dismissed a long
time ago. However, defendants’ argument misstates the appli-
cable law and misperceives the theory of the case that was
submitted to the jury.
|. The First Amendment and Cable Television
There are two primary areas of interface between cable
television and the First Amendment. First, there is the matter
of governmental regulation of programming content. It is well-
settled that, absent some compelling governmental interest,
such content regulation is impermissible.25 This aspect of the
First Amendment was not implicated in the instant case: there
was simply no evidence that Jefferson City engaged in content-
based regulation.
The second area of interface between cable television and
the First Amendment surrounds the franchising process where-
by local governmental entities regulate access to cable television
24 In support of its position, TCI draws an analogy to the print
media: just as the government has no authority to dictate who may or
may not run the sole newspaper in a community, see Miami Herald
Publishing Co. v. Tornillo, 418 U.S. 241, 254-58 (1974), TCI insists
that a city may not decide who may operate the sole cable television
system in a given market. As will be discussed infra, there are two
fundamental flaws in defendants’ argument: (1) the law applicable to
cable television differs from the law applicable to print media in that,
to the extent that a given market can support only one cable system, a
city does have the authority to select the best applicant for a de facto
exclusive franchise; and (2) regardless of whether or not a market can
support more than one system, a cable operator cannot use the First
Amendment as a shield when it engages in anticompetitive and
predatory conduct for the purpose of maintaining its monopoly power
over the market.
25 E.g., Cruz v. Ferre, 755 F.2d 1415 (11th Cir. 1985); Video-
phile, Inc. v. City of Hattiesburg, 601 F. Supp. 552 (S.D. Miss. 1985).
48a
markets. This area has provided fertile ground for litigation in
recent years.26 The only legal principle on which virtually all
courts have agreed is that local governmental entities have some
authority to regulate television operators in the interest of
minimizing the inevitable disruption of the public domain
occasioned by the installation of cable television systems.27 In
addition, it is noteworthy that federal law has acknowledged
the authority of a local governing body to “award one or more
franchises within its jurisdiction.”’28 Thus, it appears safe to say
that cities, such as Jefferson City, enjoy the power to license
cable television operators within their geographic spheres of
influence.
A more difficult problem arises, however, when a local
governmental entity seeks to place a limit of the number of
franchisees in its jurisdiction. Although the law in this area is
far from settled, the emerging answer appears to be that the
grant of a single cable franchise is permissible only if the
physical and economic conditions of the relevant market give
rise to a “natural monopoly” situation.29 The theory is that,
26 See, e.g., Tele-Communications of Key West, Inc. v. United
States, 757 F.2d at 1335-39; Preferred Communications, Inc. v. City of
Los Angeles, 754 F.2d at 1401-11; Omega Satellite Products v. City of
Indianapolis, 694 F.2d at 125-29; Community Communications, Inc. v.
City of Boulder, 660 F.2d at 1375-80; Carlson v. Village of Union City,
601 F. Supp. at 809-812; Century Federal, Inc. v. City of Palo Alto, 579
F. Supp. 1553, 1561-65 (N.D. Cal. 1984); Hopkinsville Cable TV, Inc.
v. Pennyroyal Cablevision, Inc., 562 F. Supp. 543, 547 (W.D. Ky.
1982).
27 E.g., Preferred Communications, Inc. v. City of Los Angeles,
754 F.2d at 1406: see also Community Communications, Inc. v. City of
Boulder, 660 F.2d at 1377-78 (“[sJome form of permission from the
government must, by necessity, precede such disruptive use of the
public domain’’).
28 Cable Communications Policy Act of 1984, Pub. L. No. 98-
$49, § 621(a)(1) (1984); see also id. § 621(b)(1) ( prohibiting
operation of cable television system without a franchise ); H. R. Rep.
No. 934, 98th Cong., 2d Sess. 59, reprinted in 1984 U.S. Code Cong.
& Ad. News 4655, 4696 (Cable Communications Policy Act of 1984
“grants to the franchising authority the discretion to determine the
number of cable operators to be authorized to provide service in a
particular geographic area”).
29 See Tele-Communications of Key West, Inc. v. United States,
757 F.2d at 1338: Omega Satellite Products v. City of Indianapolis,
694 F.2d at 127: Community Communications, Inc. v. City of Boulder,
a
49a
where physical and economic factors render a market incapable
of accommodating more than one cable television system, the
local governing body is in the best position to determine which
proposed system offers the best service to the public for the
lowest cost. Since only one operator can survive in the market.
it makes sense to allow the local government to choose the best
applicant.30 Otherwise, as a result of the enormous Start-up
costs of constructing a cable television system,31 no one would
dare compete in a natural monopoly-type market with an
incumbent operator even if the incumbent was providing poor
service to the consuming public. The initial investment would
be too great to risk on the hope of wresting the entire market
away from the incumbent. Thus, the incumbent operator
would remain in a firmly entrenched position regardless of the
quality of its system. Consequently, in a natural monopoly
situation, the First Amendment should tolerate a franchising
process whereby a city may periodically award an exclusive
franchise to the applicant which offers the best package to the
public. 32
660 F.2d at 1378-80. But cf. Preferred Communications, Inc. vy. City of
Los Angeles, 754 F.2d at 1404-05. A “natural monopoly” situation
exists where “a market has room for only one firm.” Omega Satellite
Products v. City of Indianapolis, 694 F.2d at 125: see generally Byars v.
Bluff City News Co., 609 F.2d 843, 853 n. 27 (6th Cir. 1979).
30 Allowing local governmental entities to select the most quali-
fied applicant is the most logical allocation of authority for two
reasons. First, because cable systems can operate profitably only in
areas of relatively high population density, each system typically
serves only one community. It would be extremely unusual for a cable
system to serve the rural area situated between two towns. Con-
sequently, the local governing body is not too small to handle the job
of regulating cable operators. Second, the local governing body is not
too big for the job. In contrast to a state or federal regulatory body,
which likely would respond to the idiosyncrasies of a particular
community with bureaucratic insensitivity, local governmental entities
are ideally sized to meet the needs of their constituents.
31 See Omega Satellite Products v. City of Indianapolis, 694 F.2d
at 126; Berkshire Cablevision of Rhode Island v. Burke, 57\ F. Supp.
at 986.
32 Such a scheme acknowledges that a local governmental entity
is not a competitor of cable operators, but “a representative of the
potential customers of these companies.” Omega Satellite Products v.
City of Indianapolis, 694 F.2d at 125-26. Although TCI insists that
the First Amendment was designed to allow each individual customer
S0a
On the other hand, if a given cable television market does
not have natural monopoly characteristics, the justification for
limiting the number of franchisees disappears. If the market
can support more than one cable system, it no longer makes
sense to force prospective operators to compete for a single
franchise. Nor does it make sense to allow the local govern-
mental body to act as the guardian of the public’s interest.
Instead, the surest method of determining which operator best
fulfills the needs of each consumer is to grant licenses to all
qualified applicants and to let them compete in the market-
place.
In a nutshell, then, the determinative factor with respect to
a city’s power to restrict the number of cable television fran-
chisees is whether economic and physical conditions in the
relevant market give rise to a “natural monopoly” situation. If
the market has room for only one firm, it makes sense to require
all prospective franchisees to compete “for” the market and to
allow the local governing body to make the decision as to which
cable system will best serve its constituents. But, ifa market has
room for more than one cable system, a city’s efforts to
artificially limit the number of operators would constitute a
prior restraint in violation of the First Amendment.
2. The Theories of the Case
In order to obviate TCI’s First Amendment concerns, the
jury instructions in this case were carefully tailored to ensure
that the jury could not return a verdict for plaintiff under
to choose which cable system to subscribe to, TCI’s concern for the
rights of consumers rings hollow. In a natural monopoly-type market.
individual consumers have no choice among competing systems.
Thus, the franchising process actually enhances the power of con-
sumers by allowing a local governing body to engage in a form of
collective bargaining with franchise applicants. Through the franchis-
ing process, consumers realize two principal advantages. First, the
franchise agreement imposes certain obligations on the cable operator
which must be performed upon penalty of termination. See Carlson v.
Village of Union City, 601 F. Supp. at 812. Second, the fact that a
franchise has an expiration date gives the franchisee incentive to
provide good service or risk losing its bid for renewal. Otherwise, as
the evidence showed in the instant case, the incumbent operator 1s
prone to become lackadaisical.
Sla
circumstances where defendants had a valid First Amendment
defense to plaintiffs claims. As stated in Instruction No. 20,
plaintiff submitted its case under two divergent theories. First,
the jurors were instructed that if they found that physical and
economic conditions in the Jefferson City cable television
market gave rise to a natural monopoly, they must focus on
whether defendants engaged in anti-competitive or predatory
conduct with respect to competition for the market. Second, the
jurors were instructed that if they found that a natural mono-
poly situation did not exist as of April, 1982, they must focus on
whether defendant engaged in anti-competitive or predatory
conduct with respect to competition in the market. Assuming
that the jury heeded this “‘fork-in-the-road” instruction as well
as all other instructions, it is apparent that all questions of fact
underlying defendants’ First Amendment argument were con-
sidered and resolved by the jury.33
(a) Natural Monopoly Theory
Under the “fork-in-the-road” jury instruction described
above, the jury was permitted to consider whether market
conditions gave rise to a natural monopoly situation. If it found
that a natural monopoly situation existed, the jury was further
instructed to determine whether defendants committed the
offense of actual monopolization with respect to competition for
the market. In other words, under this submission the jury was
told to consider whether defendants violatéd the antitrust laws
with respect to competition for the exclusive right to serve the
Jefferson City market.34
33 According to the Court’s research, this is the first case in which
the question of whether a natural monopoly situation exists with
respect to a cable television market has been submitted to a jury. Cf.
Omega Satellite Products v. City of Indianapolis, 694 F.2d at 125-28;
Carlson v. Village of Union City, 601 F. Supp. at 810 n. 8. The Court
is convinced that treating the natural monopoly issue as a question of
fact was proper; in each case, the issue will turn on a variety of
particularized factors ranging from the population density of a given
community to the age and height of its utility poles.
34 See Omega Satellite Products v. City of Indianapolis, 694 F.2d
at 127.
52a
This submission is not objectionable on First Amendment
grounds. As noted above, a local governmental entity has the
authority to select an exclusive franchisee when: (1) the local
market has room for only one cable television system; and (2)
the governing body makes its selection in the public interest.9°
If it proceeded under this branch of the “fork-in-the-road”
instruction, the jury necessarily would have found that the
Jefferson City market had room for only one cable system.
Moreover, to ensure that the jury focused on “the public
interest” as the standard by which the city awarded the
franchise, the Court specifically instructed the jury that anti-
competitive or predatory activity is conduct which operates to
the detriment of purchasers or consumers. Thus, in order to
return a plaintiff's verdict under this theory, the jury necessarily
would have made two factual findings: (1) that the Jefferson
City cable television market could only support one franchisee;
and (2) that, in retaining their position as the sole franchisee in
the Jefferson City market, defendants acted to the detriment of
the interests of the consuming public. Given these two factual
determinations, plaintiffs “natural monopoly” theory of the
case easily withstands defendants’ First Amendment attack.
(b) Open Market Theory
TCI’s First Amendment assault on plaintiffs “open mar-
ket” theory of the case is more difficult to analyze. Under the
second branch of the “fork-in-the-road” instruction described
above, the jury was permitted to find that-the Jefferson City
market had room for more than one cable television franchise.
If it found that the market had room for more than one
franchise, the jury was further instructed to determine whether
defendants committed the offense of actual monopolization
with respect to competition in the market. In other words,
under this submission the jury was told to focus not on
competition between rival cable television operators for a single
franchise, but on head-to-head competition in the marketplace.
This instruction effectively warned the jury that, notwithstand-
35 See notes 26-32 and accompanying text supra.
53a
ing the city’s intention to award only one franchise, it could not
assume that only one franchise should have been awarded. At
all times, it was within the province of the jury to determine
whether the physical and economic characteristics of the Jeffer-
son City market permitted head-to-head competition.
Defendants insist that plaintiff should not be allowed to
recover under its ““open market” theory for two reasons. First,
defendants argue that, once the jury determined that Jefferson
City had room for more than one cable system, the city’s RFP
process was illegal as a matter of law. Second, defendants
contend that the evidence of plaintiff's unwillingness to compete
head-to-head in the marketplace was so overwhelming as to
preclude recovery under an “open market” theory.
Despite the superficial appeal of these two arguments,
neither can withstand close scrutiny. It is true that TCI’s
publicly stated position in Jefferson City and at trial was that
they were willing to compete head-to-head with any com-
petitor. In accordance with this public posture, defendants
characterized the city’s RFP process as an illegal auction for an
exclusive franchise and refused to participate in the RFP. In
addition, defendants filed suit against the city in 1981, claiming
that any attempt to revoke or terminate its right to provide
cable television programming would be violative of the First
Amendment. Thus, on the surface, defendants’ contention that
it was at all relevant times a scrupulous proponent, not an
opponent, of open market competition appears to be true.
On closer inspection, however, it becomes apparent that
the sincerity of TCI’s publicly announced position was subject
to legitimate dispute. At trial, there was evidence that defen-
dants had taken a contrary position by defending a city’s right
to grant an exclusive franchise in other communities. In
addition, notwithstanding defendants’ criticism of plaintiff's
efforts to obtain a de facto exclusive franchise from the city,
there was substantial evidence that defendants were engaged in
a calculated scheme to prevent plaintiff from entering the
Jefferson City market and to maintain a de facto exclusive
franchise for themselves.
54a
Two factual findings implicit in the jury’s verdicts confirm
that TCI’s endorsement of head-to-head competition lacked
sincerity. First, the jury’s firing that defendants possessed
monopoly power — that is, the power to exclude competition in
the Jefferson City market — contradicts TCI’s argument that
the city was solely responsible for deciding who could operate a
cable system within that jurisdiction.36 Second, the jury’s
finding that “defendants caused Jefferson City to terminate the
business expectancy of plaintiff’37 directly contradicts defen-
dants’ argument that they were not responsible for keeping
plaintiff out of the Jefferson City cable television market.
Undisputed evidence showed that, on April 20, 1982, the city
council voted to grant an ostensibly nonexclusive franchise to
plaintiff. If defendants were truly sincere about competing
head-to-head with plaintiff in market, there was no need for
them to cause the Mayor of Jefferson City to veto plaintiffs
franchise. All that defendants needed to do was to press for a
nonexclusive franchise of their own. Yet, the jury specifically
found that TCI caused the city to withhold a franchise from
plaintiff. Thus, even under an “open market” theory, there
clearly was sufficient evidence to support the conclusion that
defendants violated the antitrust laws by effectively barring
plaintiff from the Jefferson City cable television market.
In sum, it was never necessary for the jury to frontally
consider defendants’ “First Amendment defense.” If the jury
had found that the city was solely responsible for artificially
limiting the number of franchisees in the Jefferson City market,
then a fortiori it would have found neither that defendants
possessed monopoly power nor that defendants caused the city
to veto plaintiffs franchise. Conversely, since the jury found
36 The verdict director on plaintiffs actual monopolization claim,
Instruction No. 22, required as its second element that “defendants
possessed or acquired monopoly power over the Jefferson City cable
television services market.” In turn, Instruction No. 18 defined
“monopoly power” as “the power to exclude competition or control
prices in the relevant product market or product sub-market.”
37 Instruction No. 23 (verdict director on plaintiffs tortious
interference claim ).
5Sa
that defendants possessed monopoly power and that defen-
dants caused the city to veto plaintiffs franchise, the Court is
compelled to conclude that defendants’ “First Amendment
defense” is nothing more than a red herring. Simply stated, the
jury could not have returned its verdict for plaintiff under an
“open market” theory unless it specifically found that defendants
engaged in anti-competitive and predatory conduct with respect to
competition in the market. Defendants had every opportunity
to produce evidence and make arguments to convince the jury
that plaintiff's exclusion from the Jefferson City market was the
result of either the city’s efforts to artificially limit the number of
franchisees or the plaintiff's unwillingness to compete head-to-
head with defendants in the market. Defendants also enjoyed
every opportunity to produce evidence and make arguments to
persuade the jury that they were at all times in favor of head-to-
head competition in the marketplace. If the jury had been
swayed by any of these arguments, it would not have found
against defendants. In short, the true issue in this case was
whether defendants were responsible for plaintiffs exclusion
from the Jefferson City market. The jury’s conclusion that
defendants were the responsible parties completely undermines
any attempt to pass the blame on to the city by way of an
amorphous “First Amendment defense” in this case.
III. MOTION FOR A NEW TRIAL
In support of its motion for a new trial, TCI asserts myriad
grounds for setting aside the jury’s verdict. Only seven of the
cited grounds will be addressed herein. The balance of the
points raised by TCI must be rejected as being without merit.
A. Opening Statement
First, defendants attack the Court’s refusal to allow them
to make legal arguments concerning the scope of a cable
television operator’s First Amendment rights during opening
statement. On more than one occasion, TCI’s attorney at-
tempted to interject gratuitous and inaccurate legal arguments
concerning the First Amendment in his opening remarks.
56a
Prompt objections by plaintiff's counsel were sustained.3& The
Court’s rulings are not subject to serious dispute. Opening
statements afford the parties an opportunity to outline what
their evidence will be. Legal arguments offered during the
course of an opening statement are improper. Accordingly, the
Court had no choice but to direct defendants’ attorney to
refrain from making references to principles of constitutional
jurisprudence during his opening statement, particularly where,
as here, his characterization of the law was either erroneous or
misleading.
B. Evidentiary Rulings
TCI’s second argument in support of its prayer for a new
trial consists of a challenge to various evidentiary rulings by the
Court. First, defendants contend that the Court erred in
excluding evidence concerning the “Boulder case.” The Court
stands by this ruling. During his examination of a number of
witnesses, TCI’s attorney attempted to elicit testimony con-
cerning the effect on the instant case of various rulings by the
federal district court, the court of appeals, and the United States
Supreme Court in the course of litigation between a subsidiary
of TCI and the City of Boulder, Colorado.39 In each instance,
38 Defendants also complain that, in the course of sustaining one
of plaintiff's objections, the Court stated that the First Amendment
had “nothing to do with this case.” If taken literally, this remark
would have been incorrect; as noted above, the First Amendment was
involved in this case by virtue of the Noerr-Pennington defense and in
connection with the natural monopoly question. See pages [42a-55a]
supra. Put in context, however, the true meaning of the Court’s
remark, as everyone present in the courtroom—including defendants’
attorneys—was aware, was that any reference to the First Amend-
ment had no place in an opening statement. Moreover, as the trial
progressed, TCI was afforded every opportunity to educate the jury
with respect to both its Noerr-Pennington defense and its claim that it
did not act as a monopolist but instead acted as a zealous defender of
the First Amendment. Thus, any overstatement by the Court during
defendants’ opening statement clearly did not taint the jury’s verdict.
39See Community Communications Co. v. City of Boulder, 485 F.
Supp. 1035 (D. Colo. 1980), rev'd, 630 F.2d 704 (10th Cir. 1981),
rev'd, 455 U.S. 40 (1982); Community Communications Co. v. City of
Boulder, 496 F. Supp. 823 (D. Colo. 1980), rev’d, 660 F.2d 1370
(10th Cir. 1981), cert. dismissed, 456 U.S. 1001 (1982).
57a
defendants’ attorney attempted to characterize the Boulder case
as a landmark establishing an absolute First Amendment right
for cable television systems to operate free from local govern-
mental regulation. Upon timely objections by plaintiff's coun-
sel, this evidence was excluded for two basic reasons. First,
TCI’s characterization of the Boulder case was deliberately
misleading. Of the three appellate decisions in the Boulder
litigation, only one4° contained any substantive discussion of
the First Amendment implications of local governmental cable
regulations, and that opinion does not merit characterization as
a landmark decision establishing an absolute First Amendment
right to operate a cable television system.41 Second, the Court
was concerned that any probative value to be derived from
evidence concerning the Boulder case was easily outweighed by
the potential risk of misdirection and confusion such an inquiry
would entail. For example, when defendants offered to in-
troduce a certified copy of a consent decree entered into by the
city and the cable operator in the Boulder case, this offer was
rejected on the ground that the jury might well misperceive the
importance of such a document and give it undue weight.
Another evidentiary ruling challenged by TCI is the
Court’s exclusion of the expert testimony of Arthur Lee. Mr.
Lee is a Vice President of Operations for TCI. Because Mr. Lee
was never designated as an expert in response to plaintiff's
interrogatory under Fed.R.Civ.P. 26(b)(4)(A)(i), plaintiff
assumed that he would be used by defendants as a lay witness
only. In the course of examining Mr. Lee at trial, defendant’s
counsel began asking the witness about the pole attachment
and pole replacement costs that would be involved in building a
brand new cable television system in Jefferson City. Plaintiff's
objection to this testimony was sustained on the ground that
this was a subject for expert testimony and that Mr. Lee had not
40 See 660 F.2d at 1375-80.
41 To the contrary, the Tenth Circuit overturned a preliminary
injunction in favor of the cable operator and remanded the case to the
district court, stating that the scope of the cable operator’s First
Amendment protection was a matter to be developed at trial. Jd. at
1380.
58a
been designated as an expert. TCI seeks to overturn this ruling
by characterizing Mr. Lee as an occurrence witness who merely
would have testified ‘‘as to his personal knowledge as a veteran
in the cable field.”42 Defendants’ argument misses the point.
Under Fed. R. Evid. 702, a witness may qualify as an expert by
virtue of his knowledge, experience, or training. The crucial
distinction between lay testimony and expert testimony is that
the subject of expert testimony “must be so distinctively related
to some science, profession, business, or occupation as to be
beyond the ken of the average layman.”43 Viewed in this
context, it is readily apparent that Mr. Lee’s proffered testimony
was expert testimony. According to defendants, the proffered
testimony would have dealt with “make-ready costs, pole
brackets and utility pole spacing.”44 These topics clearly are
beyond the understanding of an ordinary layman. Indeed,
defendants contend that Mr. Lee was qualified to give his
opinion “based on his extensive experience in the industry and
on his knowledge acquired as an executive officer of TCI
Cablevision.”45 This statement is, in effect, an admission by
TCI that Mr. Lee’s testimony concerned a technical subject
which only an expert, and not a layman, would not [sic] be
qualified to address. Therefore, it was proper to exclude Mr.
Lee’s testimony by reason of defendants’ failure to designate
him as an expert witness in response to plaintiff's interrogatory
under Fed.R.Civ.P. 26(b)(4)(A)(1i).
A third evidentiary ruling challenged by TCI which merits
discussion relates to the testimony of TCI’s expert economist,
Mr. Roy Weinstein. Before Mr. Weinstein began testifying,
plaintiff's counsel moved to exclude his testimony in its entirety
on the ground that he had been reading “daily copy” of the
42 Suggestions in Support of Defendants’ Motion for Judgment
Notwithstanding the Verdict or, in the Alternative, for a New Trial, at
page 38.
43 McCormick’s Handbook on the Law of Evidence § 13, at 29 (2d
ed. 1972).
44 Suggestions in Support of Defendants’ Motion for Judgment
Notwithstanding the Verdict or, in the Alternative, for a New Trial, at
page 39.
45 Id.
59a
trial transcript in violation of Fed.R.Evid. 615. Mr. Weinstein
acknowledged that he had been reading “daily copy.”
Although it would have been justified in excluding all of Mr.
Weinstein’s testimony under these circumstances,46 the Court
took a middle position and ruled that Mr. Weinstein could
testify concerning any information he had obtained and opin-
ions he had formed before, but not after, he had been deposed
by plaintiff in September, 1984. Defendants insist that this
ruling was an abuse of discretion. The Court disagrees. Mr.
Weinstein’s review of daily copy was a clear violation of Fed.
R. Evid. 615. If TCI had wanted to qualify Mr. Weinstein as a
person whose presence was essential to the presentation of its
case within the meaning of the rule, it should have so moved
when the rule was invoked at the start of trial. Moreover, the
Court believes that its ruling was correct under Fed. R. Civ. P.
26(e)(1)(B), which imposes an affirmative duty on parties to
supplement their interrogatory answers concerning the sub-
stance of anticipated expert witness testimony; it bears empha-
sis that Mr. Weinstein was precluded only from testifying with
respect to matters of substance which had arisen subsequent to
his deposition in September, 1984. Accordingly, the Court
stands by this ruling.
The final evidentiary point to be addressed herein concerns
the testimony of Clarence Blume. Mr. Blume, a member of the
Jefferson City City Council in the crucial period of 1981-82, was
called to testify by plaintiff. As a result of his testimony, the
Court for the first time became aware of how deeply involved
TCIs lead attorney, Mr. Harold Farrow, had been in TCI’s
efforts to retain its franchise in Jefferson City. During Mr.
Farrow’s cross-examination of Mr. Blume, the attorney and the
witness began debating over exactly what had transpired in
Jefferson City. When Mr. Blume directed questions at Mr.
Farrow, the attorney did not offer any objection or motion to
strike the witness’ “testimony” as being non-responsive. In-
stead, much to the Court’s astonishment, Mr. Farrow appeared
46 See Miller v. Universal City Studios, Inc., 650 F.2d 1365, 1372-
74 (Sth Cir. 1981).
60a
content to answer Mr. Blume’s questions. At times, the witness
and the attorney began arguing back and forth. On one
occasion, the situation had deteriorated to the point where the
Court intervened sua sponte and directed Mr. Blume to just
answer the questions asked. All the while, Mr. Farrow did not
object to nor move to strike Mr. Blume’s testimony; it was
obvious that Mr. Farrow believed he was “scoring points” with
the jury. The following day — after having had an opportunity
to confer with his associates and read the “daily copy” of the
trial transcript — Mr. Farrow finally offered a motion to strike
Mr. Blume’s testimony in its entirety. This motion was denied
as being untimely. Under Fed.R.Evid. 103(a)(1), a party
ordinarily may not challenge a ruling admitting evidence unless
he has made a timely motion to strike on the record. It bears
emphasis that Mr. Farrow is not a novice attorney who was
simply overwhelmed by a hostile witness; instead, it was quite
evident that Mr. Farrow refrained from objecting to Mr.
Blume’s testimony because he perceived that he was-creating a
favorable impression in the minds of the jurors. In addition,
the Court notes that the vast majority of Mr. Blume’s testimony
was not inadmissible in the first instance; thus, TCI’s motion to
strike all of the witness’ testimony was overbroad. Under these
circumstances, the Court is unwilling to set aside the contempo-
raneous objection rule. Accordingly, the Court stands by its
decision to overrule defendants’ motion to strike Mr. Blume’s
testimony.
C. Directed Verdict on Defendants’ Counterclaim
Defendants’ next argument in support of their request for a
new trial is that the Court erred in granting plaintiff's motion
for a directed verdict on defendants’ counterclaims. TCI’s
position on this issue clearly lacks merit. At trial, defendants
attempted to make a submissible case against plaintiff on the
following theories: (1) conspiracy to unreasonably restrain
trade; (2) attempt to monopolize: (3) conspiracy to violate
TCI’s constitutional rights; and (4) tortious interference with
TCI’s business relations. In attempting to prove their allegation
of a secret conspiracy between plaintiff and a host of state and
6la
local politicians, TCI repeatedly posed questions to the
politician-witnesses to the effect of: “Isn’t it true that you had a
secret arrangement with plaintiff to drive TCI out of Jefferson
City?” Without exception, TCI’s pointed accusations were
calmly denied. In short, there was absolutely no evidence of
any kind of unholy arrangement between plaintiff and govern-
mental officials. To the contrary, the evidence consistently
showed that plaintiff at all times remained within legitimate
lobbying channels in seeking a cable television franchise. After
all of the evidence was in, it became apparent that the
gravamen of TCI’s counterclaims was that the RFP process
initiated by the city was illegal and that plaintiff had somehow
violated TCI’s rights by participating in the RFP process.
Assuming arguendo47 that the RFP process was in fact illegal
and that plaintiff did in fact violate defendants’ rights by
participating in the RFP process, plaintiff still could not be held
liable for its conduct because of the Noerr-Pennington defense.
As noted above,4® the Noerr-Pennington doctrine affords a
cloak of immunity from civil damages liability to legitimate
efforts to lobby or influence public officials with. respect to
political action, even if those efforts are designed to eliminate
competition. Here, all of plaintiffs allegedly wrongful conduct
clearly falls within the purview of the Noerr-Pennington de-
fense;49 accordingly, it was proper to grant plaintiff's motion for
a directed verdict on all of TCI’s counterclaims.5°
47 Cf. pages [4Sa-Sla] supra.
48 See page [44a] supra.
49 See Hopkinsville Cable TV, Inc. v. Pennyroyal Cablevision,
Inc., 562 F. Supp. at 546-47; Metro Cable Co. v. CATV of Rockford,
Inc., 516 F.2d 220, 228 (7th Cir. 1975); see also First Am. Title Co. of
S. Dakota v. South Dakota Land Title Ass'n, 714 F.2d at 1445-47:
City of Kirkwood v. Union Electric Co., 671 F.2d at 1180-81; Mark
Aero, Inc. v. Trans World Airlines, Inc., 580 F.2d at 293-297.
5° As noted above, see note 7 supra, the Noerr-Pennington
defense is applicable to many types of claims even though it is most
commonly associated with antitrust claims. In particular, the Noerr-
Pennington defense is available with respect to the types of claims
asserted by TCI. See Gorman Towers, Inc. v. Bogoslavsky, 626 F.2d
607, 614-15 (8th Cir. 1980) ( Noerr-Pennington doctrine applicable to
§ 1983 claims); First National Bank of Omaha v. Marquette National
Bank, 482 F. Supp. at 521, 524-25 (Noerr-Pennington doctrine
applicable to § 1983 and tortious interference claims).
62a
D. Closing Argument
Defendants’ fourth assignment of error in their motion for
a new trial is that the Court did not allow their attorneys
sufficient time to make a proper closing argument. At the close
of all the evidence the Court conferred with the attorneys
concerning the amount of time they desired to make their final
appeal to the jury. Although the Court was inclined to allow
only an hour per side, it acceded to plaintiffs request for ninety
minutes per side. Counsel for TCI objected that this amount of
time was grossly inadequate in view of the length and com-
plexity of the trial. TCI’s request for additional time was
overruled. The Court stands by this ruling. There is no doubt
but that ninety minutes was adequate time for each side to
present its case to the jury. Although this trial was lengthy, it
was not particularly complex. The fundamental issues for the
jury were whether TCI kept plaintiff out of the Jefferson City
cable television market and, if so, whether TCI accomplished
that result by using illegitimate means. Unlike many antitrust
cases, the instant lawsuit did not turn on technical documentary
evidence and expert evidence; instead, the crucial evidence
concerned overt conduct. Thus, it was not necessary to allow
counsel a great amount of time to make the case under-
standable for the jury.
Moreover, the Court notes that counsel for TCI was not
particularly pressed for time during closing argument. Indeed,
there was sufficient time for TCI’s attorneys to tell the jury on
numerous occasions how little time had been allowed for
closing arguments and to extol the virtues of the Sixth [sic]
Amendment right to a jury trial in civil cases. There also was
sufficient time for TCI’s attorneys to describe at great length
how their client had been “hometowned” by plaintiff notwith-
standing the fact that there was virtually no evidence to support
this contention.5' Under these circumstances, the Court con-
cludes that the amount of time allocated for closing arguments
was more than adequate.
51 See pages [60a-6la] supra.
63a
FE. Jury Instructions
Defendants’ fifth argument in favor of a new trial is that
several of the jury instructions submitted by the Court were in
error. Only four of TCI’s challenges to the jury instructions will
be addressed herein; the remainder must be rejected as lacking
merit.
First, TCI insists that the Court’s Noerr- Pennington instruc-
tionS2 failed to set out the precise scope of that defense. The
Court disagrees. The instruction was based directly on West-
borough Mall v. City of Cape Girardeau, where the Eighth
Circuit explained that “actions beyond ‘traditional political
activity’ may not be protected by the Noerr exemption,”
particularly if the defendants’ lobbying efforts were ‘accom-
panied by illegal or fraudulent actions.’’53
TCI next challenges the verdict director for plaintiff's state
law tortious interference claim,54 asserting that the Court’s
instruction did not adequately define the elements of the tort.
This argument is wholly without merit. The instruction given
by the Court was based directly on a pattern instructionSS which
has been approved by the Missouri Supreme Court Committee
on Jury Instructions. The use of this instruction has been
mandatory in the state court system for years. It is beyond the
Court’s comprehension how the use of a pattern jury instruc-
tion, which must be used in state court, can constitute reversible
error with respect to plaintiffs state law claim.
Similarly, defendants’ challenge to the Court’s burden of
proof instruction5® must be rejected. Here again, the Court
used the pattern burden of proof instruction which has been
52 Instruction No. 14.
53 693 F.2d at 746.
54 Instruction No. 23.
°5 Mo. Approved Instr. 23.11 ,{ 1981 Revision]. The Court’s only
modification of the pattern instruction was the inclusion of an
additional element—‘Second, defendants knew of the business ex-
pectancy of plainuff’—upon the request of TCI.
56 Instruction No. 4.
64a
approved for use in the state court system.57 This burden of
proof instruction is clear and concise. Its use did not constitute
error.
Finally, defendants contend that the Court’s instruction on
natural monopoly5® theory was erroneous as a matter of law.
Specifically, defendants insist that “[t]he concept that the
Sherman Act protects competition for the right to enjoy a
natural monopoly is wholly without support in the law.”’59 The
Court must disagree. Contrary to TCI’s characterization, the
notion that the antitrust laws protect competition “for” the
market in a natural monopoly situation enjoys ample support in
the law.6° Moreover, the Court’s instruction correctly stated the
law in this area. Accordingly, defendants’ objections to the
Court’s jury instructions will be overruled.
F. Judicial Bias
Defendants’ sixth ground for a new trial is an allegation
that they “were denied a fair trial in this case due to the
57 Mo. Approved Instr. 3.01 [1981 Revision j.
58 Instruction No. 20. In the challenged portion of this instruc-
tion, the jury-was told:
* In a natural monopoly situation, competition in the market Is
not economically feasible: consequently, in a natural monopoly
situation, the purpose of antitrust laws is to protect competition
for the right to serve the market... . Keep in mind that the
purpose of the antitrust laws ordinarily is to protect competition
in the market; however, if a market has room for only one firm,
the antitrust laws are designed to protect competition for the right
to enjoy that natural monopoly position.”
59 Suggestions in Support of Defendants’ Motion for Judgment
Notwithstanding the Verdict or, in the Alternative, for a New Trial, at
page SO.
60 See Omega Satellite Products v. City of Indianapolis, 694 F.2d
at 127 (“the antitrust laws protect competition not only in, but for, the
market—that is, competition to be the firm to enjoy a_ natural
monopoly .. . and by a modest extension competition to replace the
existing natural monopolist”) (citation omitted ); see e.g., Otter Tail
Power Co. yv. United States, 410 U.S. 366, 369-70 (1973); United
States v. El Paso Natural Gas Co., 376 U.S. 651, 659-661 (1964);
Continental Cablevision v. American Elec. Power Co., 715 F.2d 1115,
1120-21 (6th Cir. 1983); Westborough Mall v. City of Cape Girardeau,
693 F.2d at 745 n. 7.
Pe DT aes
65a
partiality and bias of the Court in favor of plaintiff and against
defendants.”6' TCI specifically contends that the Court’s “‘con-
sistently pro-plaintiff rulings” conveyed the Court’s bias to the
jury and thus tainted the jury’s verdict.62 The short answer to
defendants’ accusations is that the Court simply was not biased
in favor of plaintiff and against defendants. Instead, the Court
made every effort to give this cause a fair and impartial hearing
and to manifest its sense of impartiality from the bench.
Moreover, to the extent that any comments made by the Court
suggested its view of the evidence, the jurors were expressly
instructed to “disregard all comments of the Court in arriving at
[their] own findings as to the facts.’’63
The longer answer to defendants’ charge of bias is this: the
rulings which were allegedly the result of the Court’s partiality
were in fact the result of the incompetence of defendants’ trial
attorneys. For example, TCI claims that the following rulings
were motivated by judicial bias: (1) the exclusion of Mr. Lee’s
expert testimony; (2) the limitation on Mr. Weinstein’s expert
testimony; and (3) the refusal to strike the testimony of
Clarence Blume. As explained above,®4 however, each of these
rulings was in fact necessitated by defense counsel’s insistence
on ignoring simple rules of evidence and procedure. In the case
of Mr. Lee, the exclusion of his testimony was required because
of counsel’s failure to designate him as an expert witness in
response to plaintiffs interrogatories. With respect to Mr.
Weinstein’s testimony, the Court’s ruling was based on coun-
sel’s failure to supplement interrogatory answers and failure
to abide by Fed. R. Evid. 615. Finally, concerning Clarence
Blume, the Court’s denial of defendants’ motion to strike was
based on counsel’s failure to heed the contemporaneous objec-
tion rule. In sum, the Court simply was not biased in ruling on
any of the issues in this case; TCI’s assertion to the contrary is
unfounded.
61 Suggestions in Support of Defendants’ Motion for Judgment
Notwithstanding the Verdict or, in the Alternative, for a New Trial, at
page 28.
62 Jd. at 29-32.
63 Instruction No. 3.
64 See pages [57a-60a] supra.
66a
Similarly, the Court’s comments during trial, which were
allegedly motivated by bias. were in fact attributable to the
discourteous and belligerent manner in which defendants’ trial
attorneys conducted themselves. On numerous occasions, de-
fense counsel responded to unfavorable evidentiary rulings by
muttering to themselves, rolling their eyes, and hurling pens
and legal pads at the counsel table with great force. All of these
childish antics were performed openly in the presence of the
jury, as if defense counsel was attempting to communicate to
the jury that their client was being “railroaded” by virtue of the
Court’s adverse evidentiary rulings. In order to maintain
control over the conduct of this trial, the Court admittedly was
required to reprimand defense counsel from time to time.
Nevertheless, the Court is certain that none of its comments,
whether or not made in the presence of the jury, was unwar-
ranted.65 Consequently, the Court is compelled to hold that
defendants’ allegations of judicial bias are without basis in fact.
G. Juror Misconduct
The seventh and final point in defendants’ motion for a
new trial which will be addressed herein is an allegation that
there was improper contact between one of plaintiffs attorneys,
Mr. Long, and a member of the jury, Ms. Shern, and that this
contact may have tainted the jury’s verdict. There are two short
answers to TCI’s argument. First, there is no indication that the
65 For example, after excusing the jury and overruling defen-
dants’ motion to strike the testimony of Clarence Blume, the Court felt
compelled to reprimand attorney Farrow for representing TCI in this
lawsuit in the first instance. The dialogue between Mr. Blume and
Mr. Farrow made it quite clear that Mr. Farrow was so intimately
involved in the events leading up to this litigation that he should
have appeared as a witness, not as an attorney. Disciplinary Rule
5-101(B) of the ABA Code of Professional Responsibility expressly
provides that a lawyer should refuse employment in a contemplated
or pending lawsuit if he knows that he ought to be called as a witness.
- Undoubtedly, defense counsei believed that the reprimand of Mr.
Farrow was merely a manifestation of the Court’s hostility. In reality,
however, the Court issued the reprimand to Mr. Farrow and a
warning that his conduct might result in a malpractice action because
this Court fully expects all attorneys practicing before it to live up to
acceptable standards of professional ethics.
67a
alleged contact between attorney Long and juror Shern related
to the merits of this case. Thus, in sharp contrast to the case
upon which TCI relies,66 there is no basis for concluding that
any improper communications related to merits of the case.67
Second, the Court notes that Ms. Shern was an alternate juror
who did not participate in the jury’s deliberations. On each day
of the trial, the jurors were instructed not to discuss the case
with each other. Thus, even assuming that juror Shern was
tainted by virtue of her alleged contact with attorney Long,
there is nothing which suggests that this taint spread to the
other jurors who actually deliberated over this case. In
conclusion, TCI’s bare allegation of prejudicial juror mis-
conduct has no support in the record. Accordingly, defendants’
motion for a new trial must be overruled.
IV. MOTION FOR CLARIFICATION OF THE JUDG-
MENT
The next item on the Court’s post-trial agenda is modi-
fication of the judgment in this case to reflect the fact that the
damage awards under each of plaintiff's claims are alternative,
not cumulative. Both plaintiff and defendants are in agreement
that plaintiff may recover either treble damages of $32.4 million
plus a reasonable attorney’s fee under plaintiffs antitrust
conspiracy claim or treble damages of $32.4 million plus a
reasonable attorney’s fee under plaintiff's actual monopoliza-
tion claim or actual and punitive damages totalling $35.8
million under plaintiff's tortious interference claim. The parties
further agree that plaintiff may not recover punitive damages
under the state law claim in addition to treble damages under
the antitrust laws. The Court concurs. Treble damages are
66 Mattox v. United States, 146 U.S. 140 (1892 .
®7 TCI also purports to rely on California Fruit Exchange vy.
Henry, 89 F. Supp. 580 (W.D. Pa. 1950). In Henry, however, the
district court ultimately refused to grant a new trial after noting that
[a] new trial should not be granted because of irregularities in the
conduct of a juror or counsel unless it is made to appear that the
alleged misconduct was prejudicial to one of the party litigants.” Jd. at
589. This Court concurs in the reasoning and result set forth in the
Henry opinion.
68a
designed “to punish past violations of the antitrust laws...
[and] to deter future antitrust violations.”’68 Punitive damages
have a similar purpose.69 Accordingly, it would be in-
appropriate to allow plaintiff to recover both treble damages
and punitive damages.7° The judgment in this case will be
modified to account for this fact.
Vv. MOTION FOR ENHANCEMENT OF PLAINTIFF'S
ATTORNEY’S FEES
The penultimate question before the Court concerns plain-
tiffs motion for enhancement of its attorney’s fees. As noted
above, plaintiff is entitled to an award of a reasonable at-
torney’s fee by virtue of its success on its antitrust claims.”' As a
result of negotiation, plaintiff and defendants have entered into
a stipulation as to the amount of attorney’s fees and expenses
incurred herein. The only issue remaining for the Court Is
whether plaintiff is entitled to any enhancement of the at-
torney’s fee award. Plaintiff seeks a three-fold increase in the
amount of its attorney’s fees.
In support of enhancement, plaintiff offers a three-part
argument. First, plaintiff contends that enhancement is appro-
priate because of the risk involved in pursuing this case.
Second, plaintiff maintains that enhancement Is warranted in
view of the uniformly favorable results obtained. Third,
plaintiff asserts that enhancement Is justified because of the
high quality of representation rendered by plaintiffs attorneys.
The Court is inclined to agree that the risks involved in
initiating this litigation were substantial and that the profes-
sional services rendered by plaintiff's attorneys were, for the
most part, of a high quality. Nevertheless, the Court will
68 American Soc. of Mech. Eng’rs v. Hydrolevel Corp., 102 S.Ct.
1935, 1947 (1982).
69 See Mo. Approved Instr. 10.01 [1983 Revision }.
70 See McDonald v. Johnson & Johnson, 722 F.2d 1370, 1381
(&th Cir. 1983); Superturf, Inc. v. Monsanto Co., 660 F.2d 1275,
1283-84 (8th Cir. 1981); Arnott v. American Oil Co., 609 F.2d 873,
888 (8th Cir. 1979).
71 See 15 U.S.C. § 15.
69a
decline to enhance plaintiff's attorney’s fees. It bears emphasis
that the moving party must meet a “heavy burden” to establish
its entitlement to fee enhancement.72 It also should be noted
that fee enhancement is warranted only in an exceptional
case.73
Turning to the instant case, the Court notes that plaintiff
and its attorneys have already been rewarded handsomely for
undertaking this litigation. Although plaintiff and its attorneys
admittedly undertook a substantial risk by bringing this lawsuit,
they knew that a favorable verdict almost certainly would be
accompanied by a damage award of approximately $10 mil-
lion. Thus, whoever took the risk of financing this lawsuit
apparently had calculated that the potential payoff justified the
initial investment.74
Finally, the Court notes that the quality of representation
factor has already been accounted for in calculating the base
attorney’s fee. The keystone of good lawyering is preparation.
Here, the generally high quality of representation afforded by
plaintiffs counsel is directly attributable to thorough prepara-
tion which, in turn, is directly reflected in the number of hours
that went into the calculation of the base fee. Consequently, in
the absence of any truly exceptional circumstances, the Court
will overrule plaintiff's motion for enhancement of its attorney’s
fees.
72 International Travel Arrangers, Inc. v. Western Airlines, Inc..
623 F.2d 1255, 1276 (8th Cir. 1980): see also Jorstad v. IDS Realty
Trust, 643 F.2d 1305, 1314 (8th Cir. 1981).
73 See Blum v. Stenson, 104 8. Ct. 1541, 1548-50 (1984).
74 It is irrelevant whether plaintiff or plaintiff's attorneys assumed
the risk of financing this case. If the attorneys were working on a
straight hourly fee, plaintiff knew that it would receive the entire
judgment in the event of a favorable verdict. On the other hand, if the
attorneys took this case on a contingent fee, they assumed the risk of
investing their time in this case for a chance at sharing in a
multimillion dollar judgment. In short, there was no lack of incentive
for the people who financed this case. Cf. Blum v. Stenson, 104 S.Ct.
at 1548 (a reasonable fee must be sufficient to attract competent
counsel but should not be a windfall ).
0a
VI.
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