Appendix — Top Vision Cable Co. v. City of Owensboro

Supreme Court brief1973

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UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF KENTUCKY

Civil Action No. 2519

Top Viston Caste, Inc., a Kentucky Corporation - Plaintiff

Vv.

Ciry or Owenssoro, Kentucky, a Municipal

Corporation of the Second Class, and

Irvin Terri, Mayor,

Wairman C. Taytor, Commissioner,

Joun D. Minter, Commissioner,

Joun C. Fisuer, Commissioner,

Auton Puckett, Commissioner - - ~- Defendants

COMPLAINT FOR DECLARATORY JUDGMENT AND

INJUNCTIVE RELIEF

1. This is an action for declaratory judgment as au-

thorized by Section 2201 of Title 28 of the United States

Code, and is brought because there is an actual controversy

now existing between the parties of the above-entitled ac-

tion, as to which the Plaintiff seeks the judgment of this

Court.

2. The action arises under the Constitution of the

United States, Article I, Section 8, Clause III, as herein-

after more fully appears. The matter in controversy ex-

ceeds, exclusive of interest and costs, the sum of ten thou-

sand dollars.

3. Plaintiff is a corporation organized wnder the laws

of the State of Kentucky. Plaintiff is engaged in provid-

ing community antenna television service (CATV) to the

public within the corporate limits of the City of Owensboro.

In brief, Plaintiff’s business may be described as follows:

Signals of nearby and distant television broadcast stations

are received off the air by means of a master antenna

advantageously located to obtain maximum signal strength

and quality. These signals are relayed by means of coaxial

cable lines attached to utility poles through amplification

equipment to the residences of subscribing members of the

public for a fee. The cable is terminated in the home where

a connection is made to the subscriber’s privately owned

television receiver. The subscriber is thus enabled to re-

ceive television broadcasts which would not otherwise be

available or which would be received with lesser quality.

4. Defendant City of Owensboro is a municipal cor-

poration of the State of Kentucky, and Defendants Irvin

Terrill, Waitman C. Taylor, John D. Miller, John C. Fisher

and Alton Puckett are the members of the Board of Com-

missioners, the governing body of the City of Owensboro,

Kentucky.

5. On or about October 22, 1965, the Defendant City of

Owensboro, by and through its Board of Commissioners,

enacted Ordinance Number 63-65, authorizing the adver-

tisement and sale of a CATV franchise within the City of

Owensboro. A certified copy of said Ordinance is annexed

to this Complaint and is marked “Plaintiff’s Exhibit No. 1”,

and made a part hereof.

6. On or about December 17, 1965, the Defendant City

of Owensboro, by and through its Board of Commissioners,

adopted Resolution No. 36-65 confirming the sale of the

CATV franchise to Plaintiff and granted a CATV franchise

to the Plaintiff by way of a “Franchise Agreement”, (here-

inafter Agreement), described more particularly in and

comprising Section 3 of Defendants’ Ordinance No. 63-65,

referred to hereinabove. Under the terms of the Agree-

ment, Plaintiff must pay to the Defendant an annual gross

receipts tax equal to twenty-six percent (26%) of the gross

income received by the Plaintiff from all receipts derived

within the City of Owensboro from its CATV system. Cer-

tified copies of said resolution and said “Franchise Agree-

ment” are annexed to this Complaint marked “Plaintiff’s

Exhibit No. 2” and “Plaintiff's Exhibit No. 3”, respectively,

and made a part hereof.

7. By the terms of the Agreement the Plaintiff’s oper-

ations must be in accordance with the laws of the United

States of America (paragraphs 1 and 7).

8. On March 26, 1970, in the consolidated cases of

Wonderland Ventures, Inc. v. City of Sandusky, Wonder-

land Ventures, Inc. v. City of Fremont (hereinafter Won-

derland) (not yet reported), the United States Court of

Appeals for the Sixth Circuit in a controlling case in this

jurisdiction struck down the ordinances enacted by the De-

fendants. These ordinances attempted to impose a gross

receipts tax on the respective CATV systems there in-

volved. As in the instant case, the Fremont ordinance re-

quired each CATV applicant to submit a bid based upon a

percentage of gross receipts to be paid to the City for units

of 1,000 or more subscribers. The ordinance enacted by

the City of Fremont imposed precisely the same kind of

gross receipts tax as has been imposed by the Defendant

upon the Plaintiff. However, the tax therein involved was

only 3% of the gross receipts of the CATV system. The

Wonderland decision is, therefore, most relevant in its ap-

plication to the instant case. A true copy of the opinion of

the Court in this case is annexed to this Complaint ard is

marked “Plaintiff’s Exhibit No. 4” and is made a part

hereof.

9. In Wonderland, the Court of Appeals held the or-

dinances of both Sandusky and Fremont invalid, inter alia,

“ because they impose a gross receipts tax upon the

proceeds of interstate commerce in violation of the com-

merce clause of the Constitution of the United States” (at

page 5).

10. On or about May 23, 1970, representatives of the

Plaintiff appeared before a meeting of the Board of Com-

missioners of the Defendant City of Owensboro and re-

quested that Section 3 of the Agreement providing for a

26% gross receipts tax be renegotiated; Plaintiff's request

was founded upon its experience in operating the Owens-

boro system. Plaintiff explained that the 26% gross re-

ceipts tax payments to the city made it most difficult for

the Plaintiff to make its CATV system at Owensboro eco-

nomically viable. Moreover, Plaintiff stated its view that

should it be required to continue remitting said tax, it would

necessarily impair the quality of CATV service which the

Plaintiff would be capable of providing. In Section 3,

Paragraph II of the Owensboro Ordinance (Paragraph II

of the Agreement), any impairment in the quality of serv-

ice conceivably could work a forfeit of the Plaintiff’s legal

right to the franchise, and all rights inhering therein. It

was further stated that it was the considered opinion of

Plaintiff that Wonderland invalidated the gross receipts

tax imposed on the Plaintiff by the Defendant, City of

Owensboro.

11. Defendant, City of Owensboro, through its Board

of Commissioners has stated its refusal to renegotiate the

tax.

12. Therefore, even though the constitutional validity

of the 26% gross receipts tax imposed upon Plaintiff’s op-

eration is in substantial doubt, efforts to seek a judicial

determination by means other than through declaratory

judgment places Plaintiff in extreme jeopardy in the fol-

lowing ways:

(a) Defendant City of Owensboro, through its Board

of Commissioners has indicated its intention to treat the

entire franchise as void should Plaintiff fail to remit

the said 26% tax or if it be declared invalid. This means

_ —

that Plaintiff would lose its business and most likely the

$430,000.00 it has invested thus far in attempting in

good faith to provide CATV service to Owensboro.

(b) On information and belief, if the 26% tax is de-

elared invalid and if the provisions relating thereto were

determined by the Court to be severable from the re-

mainder of the Franchise, certain reprisals would never-

theless be taken by Defendants against Plaintiff. Plain-

tiff must complete construction of the entire system by

December 20, 1970, unless a further extension of time

within which to complete construction is granted by De-

fendant. The Plaintiff on information and belief ex-

pects that the Defendants would not permit any addi-

tional extensions of time within which to complete the

construction of the entire system, thus rendering all of

Plaintiff's right forfeited. The inequity of this situation

and Plaintiff's dilemma will be apparent to this Court

sinee in large part it is the existence of the 26% tax

which not only makes existing operation most difficult

but has rendered it virtually impossible to attract the

additional capital necessary to complete construction of

the system. Plaintiff may not decline to pay the tax nor

may it litigate the lawfulness of the tax without loss of

its franchise and most if not all of its investment in the

CATV system.

13. Therefore, absent the availability of a declaratory

judgment procedure and injunctive relief, Plaintiff is ef-

fectively foreclosed from seeking judicial review to amelio-

rate the deleterious effects of the burdensome 26% gross

receipts tax in view of Defendants’ position which threatens

Plaintiff with economic extinction, and is foreclosed from

seeking a judicial determination of the lawfulness under the

Constitution of the United States of said tax.

14. Plaintiff is willing to pay a lawful and reasonable

fee to the Defendant to defray costs which Defendant may

incur relative to the use of the rights of way by Defendant

and the privileges granted in the Agreement, and in regu-

lating the operations of Plaintiff. Plaintiff believes a fee

so determined to be lawful.

Wuenrerore, Plaintiff prays:

1. Judgment of this Court whether or not Section 3,

Paragraph 2 of Defendant’s Ordinance 63-65, referred to

previously and incorporated and made a part herein, is

constitutional under Article I, Section 8, Clause 3 of the

Constitutiton of the United States.

2. Should said Section 3, Paragraph 2 of Ordinance 63-

65 be determined unconstitutional, and the payment of the

gross receipts tax imposed therein is thereby judged con-

trary to law, judgment of this Court whether or not such

Section 3, Paragraph 2 is severable from the remainder of

Ordinance 63-65, thereby presefving said remainder’s va-

lidity.

3. Should said Section 3, Paragraph 2 of Ordinance 63-

65 be determined unconstitutional, and the payment of the

gross receipts tax imposed therein is thereby judged con-

trary to law, and that such Section 3, Paragraph 2 is not

severable from the remainder of Ordinance 63-65, that this

Court determine a lawful fee to be paid Defendant by Plain-

tiff consistent with Article I, Section 8, Clause III of the

Constitution of the United States.

4. Should said Section 3, Paragraph 2 be determined

to be so severable, that the Defendant City of Owensboro

and all officers thereof and their successors be restrained

from treating the remaining valid part of said Ordinance

as null and void and of no legal effect; from preventing or

attempting to prevent Plaintiff from operating its proposed

CATV system for the purpose of providing service to the

citizens of Owensboro by withdrawing said franchise, or

_——

otherwise taking reprisals against Plaintiff as a result of

its seeking this judicial determination.

McKinley and Howard

By (s) Joseph H. McKinley

100 St. Ann Building

Owensboro, Kentucky

EK. Stratford Smith

Smith, Pepper, Shack & L’Heureux

1776 K Street, N.W.

Washington, D.C. 20006

Attorneys for Plaintiff

Exhibits attached to this complaint are omitted.

MEMORANDUM AND ORDER—Entered Nov. 23, 1970

In October, 1965, the Board of Commissioners of the

City of Owensboro, Kentucky, enacted Ordinance No. 63-65

empowering the City Manager of Owensboro to advertise

and sell “a franchise authorizing the purchaser thereof to

use the public ways, streets, highways, bridges or public

places of the City of Owensboro, Kentucky, for the purpose

of supplying community antenna television and audio tele-

vision and radio signals to the public”. Consideration for

the franchise was to be a sum equal to the cost of adver-

tising and selling the franchise, plus a percentage of the

purchaser’s gross income derived from within the City of

Owensboro. Plaintiff, a Kentuckv Corporation, obtained

the franchise with a bid of 26% of its gross income. The

original contract between the parties called for substantial

completion of the CATV system within two years. How-

ever, on written application of plaintiff, the City extended

the completion date to December 20, 1970.

Early in 1970 the Court of Appeals for the Sixth Cir-

cuit held that two ordinances substantially similar to the

) —_

Owensboro Ordinance were unconstitutional because they

imposed a gross receipts tax upon proceeds from interstate

commerce. Wonderland Ventures, Inc. v. City of Sandusky,

Wonderland Ventures, Inc. v. City of Fremont, 423 F. 2d

548 (6th Cir. 1970). Thereafter, plaintiff filed an action

in this Court seeking a declaration that Ordinance 63-65 is

unconstitutional and a determination of the rights and lia-

bilities of the parties under the 1965 agreement.

On November 6, 1970, the Board of Commissioners of

the City of Owensboro approved Resolution No. 56-70

wherein it was conceded that the provision of Ordinance

No. 63-65 calling for payment to the City of a certain per-

centage of the franchise purchaser’s gross income “is in-

valid and unenforceable under Article I, Section 8, Clause

III of the Constitution of the United States”. Defendants

have now filed a motion to dismiss the complaint for lack

of jurisdiction over the subject matter on the ground that

there is no disagreement between the parties regarding the

only federal question raised by the complaint. In its re-

sponse to the motion to dismiss plaintiff urges us to declare

Ordinance No. 63-65 unconstitutional and to reach the ques-

tions of Kentucky law under the theory of pendent juris-

diction.

Section 2201 of Title 28, United States Code, requires

that in every suit for a declaratory judgment an actual

controversy exist between the parties. In this section the

term “controversy” is used in its constitutional sense. U. S.

Const. Art. III, §2, cl. 1; Public Service Commission of

Utah v. Wycoff Co., Inc., 344 U. S. 237 (1952); Muller v.

Olin Mathieson Chemical Corp., 404 F. 2d 501 (2nd Cir.

1968). It is hornbook law that a federal court has no power

to hear claims that do not satisfy the “case or controversy”

requirement of the Constitution. United Public Workers

of America (C.1.0.) v. Mitchell, 330 U. S. 75 (1947) ; Musk-

rat v. United States, 219 U. S. 346 (1911). If for any

eat EORRE CRATE PAO METER Cae ee a a ee ea oer she _ argent s ~ say

—_—_

reason a federal court lacks jurisdiction to hear the only

federal claim before it, absent diversity of citizenship it

cannot reach other questions of state law raised by the com-

plaint. United Mine Workers of America v. Gibbs, 383

U.S. 715 (1966) ; California Water Service Co. v. Redding,

304 U. S. 252 (1938).

Questions regarding the “case or controversy” require-

ment most commonly arise when the facts indicate that the

interests of the parties are not sufficiently adverse. Us-

ually it is clear from the pleadings that the parties disagree

on some point of law. In the case at bar, curiously enough,

the usual situation is reversed. While the pleadings and

motions clearly indicate that the interests of the parties

are adverse, both sides apparently are in complete agree-

ment regarding the only federal question raised.

Counsel have cited no cases directly on point in their

supporting memoranda, and we also have been unable to

find any. However, after careful consideration, we have

concluded that neither the framers of the Constitution nor

the Congress could have intended us to rule on a question

of constitutional law concerning which no disagreement

exists between the parties, merely for the purpose of reach-

ing additional state law questions under the theory of pen-

dent jurisdiction. State issues predominate in this case, anc

we think that their resolution should be left to the courts

of Kentucky. Accordingly, we hold that no actual contro-

versy exists between the parties as to the only federal ques-

tion raised by the complaint, and that therefore we lack

jurisdiction to rule on both the constitutionality of Ordi-

nance No. 63-65 and on the rights and liabilities of the par-

ties under Kentucky law.

In view of our disposition of this case it is unnecessary

to rule on defendants’ motion to dismiss for failure to state

a claim upon which relief can be granted. Defendants’ mo-

wee - ve - - o-* :

24 :

tion to dismiss for lack of jurisdiction over the subject

matter is SusTAINED.

November 19, 1970

(s) James F. Gordon

United States District Judge

Copies to:

Hon. Joseph H. McKinley

Hon. E. Stratford Smith

Hon. Hugh D. Moore

11-23-70

BS MOST PPC SONI IM TA OE ELE ONIN SHS oat RE wen Ne EC Ree eT Re

COURT OF APPEALS OF KENTUCKY

File No. V-63-71

City or Owrnsporo, Kentucky, Er Au. - Appellants

Top Vision Caste Co.or Ky. - - - - Appellee

APPEAL FROM DAVIESS CIRCUIT COURT

SECOND DIVISION

APPELLANT, CITY OF OWENSBORO’S, RESPONSE

TO APPELLEE’S PETITION FOR

REHEARING

APPELLANT’S COUNTERSTATEMENT OF QUES-

TIONS PRESENTED ON APPELLEE’S

PETITION FOR REHEARING

1. Did the Court overlook a material fact or a con-

trolling statute or decision, or misconstrue the issue, in

holding that the voiding of Top Vision’s obligation to pay

its bid of 26% of its CATV gross receipts vitiated the

franchise despite the severability clause contained therein?

2. Did the Court overlook a material statute or reg-

ulation in failing to consider the effect of the Federal Com-

munications Commission Regulations of March 31, 1972, in

deciding the intent of the City of Owensboro and Top Vi-

sion in executing the December 17, 1965, franchise contract?

| 7

COUNTERSTATEMENT OF THE CASE

Nothing in Appellee’s Statement of Case Requires a

Rehearing

Appellee’s Statement of the Case contains no showing

that Appellee is entitled to a rehearing. Nothing is stated

to show that this Court “overlooked a material fact in the

record or a controlling statute or decision . . .” or that

Your Honors “. . . misconceived the issues presented

under the appeal or the law applicable thereto.” R.C.A.

1.350.

Appellee Repeats Statement on Original Appeal, Omitting

Facts Fatal to Its Claims

The Statement of the Case in the Petititon for Rehear-

ing is addressed to the issues on the original appeal, rather

than to the issues now before the Court. It is simply a

repeat—largely en haec verba—of the Counterstatement of

the Case contained at pages 1-10 of Appellee’s original

brief. In common with such original Counterstatement of

the Case, it omits many vital record facts, including these

facts which are fatal to Appellee’s case:

1. As an express condition of the franchise, Appellee

was required to complete its CATV system“. . . to the

extent of making available community antenna service to

substantially all the citizens of Owensboro, Kentucky, on

or before two (2) years from the date . . .” of the fran-

chise, December 17, 1965, or the “. . . franchise shall be

and become null and void without notice or further act of

the Party of the First Part” (R. 26).

2. Appellee conceded that it had only constructed ap-

proximately one-third of the required CATV system within

the two year period (R. 35).

3. In two successive extensions (the first for one year,

and the second for two years) gratuitously granted by the

City to Appellee for the completion of its CATV system,

ff;

TN Bp TE Reh 2) mAs So Pan Nig at Ee eee RM a Te ae CI al ine Suk Ae aaa Cn cies pe HORER Sate haere a ane Maas ry se

Appellee made no additions to its system. On December

19, 1970, when Top Vision filed this suit—five years after

the granting of the franchise, three years after the initial

deadline for the completion of the system,—Top Vision still

claimed only to have constructed a CATV system adequate

for one-third of the citizens of Owensboro (R. 8).

4. The franchise made the granting of extensions for

the completion of the CATV system entirely a discretionary

matter with the City, to be exercised only upon written ap-

plication from the franchise holder “. . . at least sixty

days (60) priorto . . .” the deadline for the construction

of the system or any extension of such deadline. (Appel-

lee’s request for its third extension of time was not made

until November 4, 1970, or 14 days after the deadline fixed

by the contract R. 28).

The City exercised its discretionary legislative power

by declining to grant a third extension of time for com-

pliance with the contractual completion date (R. 28-29).

5. Appellee was selected as the highest and best bidder

at the public auction of the CATV franchise solely because

of its bid to pay the City 26% of the gross receipts of the

CATV business. All other terms and conditions of the

franchise offered by the City were fixed in the franchise

ordinance; competition between bidders was limited solely

to the percentage of gross receipts which the bidder was

willing to pay to the City (R. 18).

The City of Owensboro respectfully refers the Court

to pages 1-11 of its original brief for its Statement of the

Case on the issues presented in the original appeal.

City of Owensboro Accepts Statement of Facts in Court’s

Opinion

The City accepts the statement contained in the Court’s

opinion, pages 18 to 20 of the Appendix to the Petition for

Rehearing, as a fair and full statement of the case presented

on the original appeal, noting only that the Court decided

Bane AOS Y a .~ _— = = . en ™ - —

—_

the case before reaching the issue of Top Vision’s failure to

complete its CATV system within the contract term as

extended.?

Issues Now Pending

The issues now before the Court for decision are: (1)

Did the Court overlook a material fact or a controlling

statute or decision, or misconstrue the issue in holding that

the voiding of Top Vision’s obligation to pay its bid of 26%

of its CATV gross receipts vitiated the franchise contract,

despite the severability clause contained therein? and (2)

Did this Court overlook a material statute or regulation

in failing to consider the effect of the Federal Communica-

tion Commission’s regulations which became effective on

March 31, 1972, in deciding the intent of the City of Owens-

boro and Top Vision in executing the December 17, 1965

franchise contract?

The facts with respect to each of these issues will be

taken up in the City’s argument of the issues.

1Top Vision concedes its default in this respect. Its effort to

escape this default by estoppel against the City is untenable. Mary-

land Casualty Co. v. Magoffin, etc., Ky., 358 S. W. 2d 353 (1962),

Continental Illinois, etc. v. City of Middlesboro, Ky., 109 F. 2d 961

‘6th Cir., 1940), and cases there cited.

Te a eee at oe Ta, Oe a ee et a ie ce SS

ARGUMENT

THE COURT DID NOT OVERLOOK A MATERIAL

FACT OR A CONTROLLING STATUTE OR DECI-

SION OR MISCONSTRUE THE ISSUE IN HOLD-

ING THAT THE VOIDING OF TOP VISION’S

OBLIGATION TO PAY ITS BID OF 26% OF ITS

CATV GROSS RECEIPTS VITIATED THE FRAN-

CHISE DESPITE THE SEVERABILITY CLAUSE

CONTAINED THEREIN

Top Vision argues that the severability clause in the

franchise requires a holding that the parties intended that

the promise of Top Vision to pay 26% of its gross proceeds

to the City may be severed from the franchise and yet leave

the franchise in full force and effect.

The Court did not overlook the severability clause or

the law applicable to it; nor did it misconstrue the issue.

Indeed, Top Vision only claims that the Court “failed to

give adequate consideration” to it (Appellee’s Pet. for Reh.,

pp. 6-7).

The effect of the invalidation of Top Vision’s covenant

to pay the 26% of gross receipts in fee upon the remainder

of the franchise contract was hotly argued in the original

briefs (Appellant’s Brief, pp. 18-28; Appellee’s Brief, pp.

15-18). The Court’s Opinion evidences its careful consid-

eration of the issue. It recited the substance of the sever-

ability clause as a part of its review of all of the clauses in

the contract (Appendix to Pet. for Reh., pp. 18-19). It

resolved this issue against Top Vision in this language:

“The city further contends that the 26-percent clause

cannot be severed from the remainder of the agreement

without doing violence to one of the underlying pur-

poses of the franchise, to-wit, to provide revenue for

the city, and the elimination of the clause vitiated the

contract. This contention, we believe, is sound.”

osnstietetmeniil —

The City respectfully refers Your Honors to pages 18

to 28 of its original brief for a full treatment of this issue.

It asks indulgence in a short additional statement.

The Severability Clause is Part of the Entire Contract,

Which Must be Construed as a Whole

The severability clause in the franchise is only one of

many clauses in the contract between the City and Top

Vision. This contract must be construed as a whole, and

enforced in accordance with the intent of the parties as

gathered from the language used, the subject matter, the

parties’ situation, and the conditions under which the con-

tract was written. L & N v. Joseph, Ky. 1944, 183 S. W.

2d 953, Reese v. Greenlee, Ky. 1948, 214 S. W. 2d 262.

Test of Severability

The severability test is stated in Asher, supra, cited by

Top Vision, as follows:

“The usual test of severability is whether the consider-

ation is so segregated that it may be separately applied

to each independent covenant in the Contract.” 11

S. W. 2d 114, 115.

Am. Jur. defines a “divisible” contract as follows:

“On the other hand, a ‘divisible contract,’ using that

term correctly, is one contract and not several. It dif-

fers from other contracts, ordinarily, in one respect

only—that on performance by one side of each of its

successive divisions the party becomes liable for his

performance of that division. In other words, a ‘divis-

ible contract’ is one the performance of which is divided

into different grotss, each set embracing performances

which are the agreed exchange for each other.” 17 Am

Jur 2d Contracts, Sec. 324, p. 757.

Top Vision’s Promise to Pay 26%, Being Illegal, Voids the

Contract

: It is an unquestioned principle of law that if an im-

) portant part of the consideration for an indivisible contract

is illegal, the contract is invalid. Johnson v. McMillan, 178

Ky. 707, 199 S. W. 1070 (1918); Newport Rolling Co. v.

Hall, 147 Ky. 598, 144 S. W. 760 (1912); 17 Am Jur 2d,

Contracts, Sec. 231, p. 612; Re-Statement of the Law, Con-

tracts, Vol. 2, p. 1124 (1932).

A severability clause is but an aid to the construction

of acontract. As stated in 13 A C.J.S. Sec. 1335, page 313:

“However, a declaration in the contract that is divisible

is but an aid to construction and will not justify a court

in declaring a clause divisible when in considering an

entire contract, it obviously is not.”

In Dorchy v. Kansas, 264 U. 8S. 287, 44 S. Ct. 323, 68

L. Ed. 686 (1923), the Supreme Court considered the effect

of a severability clause in a Kansas statute, one portion of

which had been declared unconstitutional. In determining

the intent of the legislature, Mr. Justice Brandeis said:

“Section 28 of the Act (the severability clause) pro-

vides a rule of construction which may sometimes aid

in determining that intent. But it is an aid merely;

not an inexorable command.” 68 L. Ed. at 690.

The Supreme Court sent the case back to the Kansas

Court for a determination of whether Section 19 of the Act

then under consideration “. . . is so interwoven with the

system (of compulsory arbitration) that the section cannot

stand alone.”

Subject to the limitations imposed on cities by Sec. 164

of the Kentucky Constitution, the city agrees with Top Vi-

sion’s statement that “whether a contract clause may be

severed from the remainder of the contract without affect-

Re SAAS AO TRE Ue OU EET

. ie 5

ing the validity of that contract as a whole ‘involves an

ascertainment of the intention of the parties, which must

be deduced from the contract itself (Koppers Co. v. Asher

Coal Min. Co., 226 Ky. 492, 11 S. W. 2d 114, 115)’”. (Ap-

pellee’s Pet. for Reh., p. 7). The City of Owensboro—Top

Vision franchise contract contains an abundance of evidence

that the parties did not intend that the franchise should

remain valid, even though Top Vision was relieved of its

obligation to pay its bid price of 26% of its gross receipts.

There Were No Divisions of Performance

The franchise contained no divisions of performance by

Top Vision which could be set opposite items of perform-

ance due from the City. This being the case, the obligation

of Top Vision to pay the City 26% of the gross proceeds

from its franchised operations was not intended by the

parties to be a divisible undertaking.

Kentucky Constitution Requires Franchise be Let to

Highest and Best Bidder

The City and Top Vision entered into this franchise

contract uuder the mandate of Section 164 of the Kentucky

Constitution, which provides that:

“Befo . granting such franchise or privilege for a term

of years, such municipality shall first, after due adver-

tisement, receive bids therefor publicly, and award the

same to the highest and best bidder . . .”

Both parties thus knew that the City had no power to

negotiate the consideration which should be paid for the

franchise, and that this had to be fixed by public bidding.

Franchise Was Awarded to Top Vision Entirely on Basis

of Its 26% Bid

The franchise advertised and sold by the City fixed all

of the terms and conditions of the franchise, leaving blank

a ——

only che percent of gross receipts which should be paid by

the successful bidder. Thus, only the consideration to be

paid was submitted to competitive bidding and Top Vision

was awarded the contract solely because of its bid of 26%

of its gross receipts. Since this 26% covenant was the sole

basis for the award to Top Vision, the striking of this clause

removes the entire basis of the agreement between the

parties.

The Size of Top Vision’s Bid is Significant

The amount bid by Top Vision is in itself significant.

The Court has had municipally granted franchises before

it on many occasions; it will be taxed to recall any franchise

sold at a price as high © that bid by Top Vision. Neither

the Board of Commissioners of the City of Owensboro nor

the bidder could have regarded this bid as a nominal con-

sideration, or as anything other than an important source

of revenue to the City and a heavy burden to the bidder.

Indeed, Top Vision alleged that the existence of the 26%

provision “made it virtually impossible for the plaintiff to

attract either outside equity or working capital from in-

vestors. . . .” (BR. 8).

City Required to Consider Revenue to be Raised by

Franchise Grant

Top Vision errs in arguing that “there is nothing to

indicate that the authority to issue franchises was bestowed

upon municipalities for any purpose relating to the raising

of revenue” (Appellee’s Pet. for Reh., p. 8).

The Kentucky Constitution affords a short answer to

Top Vision’s argument. Section 164 requires the sale of

a franchise to be the “highest” as well as the “best” bidder.

Kentucky Utilities Co. v. Board of Commissioners of

the City of Paris, 254 Ky. 527, 71 S. W. 2d 1024 (1934),

in considering the reasons back of the twenty-year limita-

tion on franchises, emphasized the city’s interest in reve-

nues to be derived from a franchise sale:

“A reading of the Constitutional Debates reveals that

the main purpose behind this section 164 was to insure

that every so often the municipality should have the

opportunity of revising the terms of the franchise

which it had granted as to rates, quality, service, and

the like, and to have the advantage of obtaining from

time to time for the franchise its value which most

likely would be enhanced by the growth of population

and business. Thus, in the case of Hilliard v. George

C. Fetter Lighting & Heating Co., 127 Ky. 95, 105 S. W.

115, 118, 31 Ky. Law Rep. 1330, Judge Carroll, himself

a member of the Constitutional Convention of 1890,

speaking for the court on this point, said:

‘Further illustrating the intention of the section, the

limitation of 20 years upon the time for which fran-

chises might be granted was added, as what would be

an adequate price for a franchise granted to a public

utility corporation to use the streets of a city today

might be a mere pittance 20 years hence. The value to

the owners of the right granted would keep pace with

the growth, wealth, and population of the city, and un-

less at some future time the city had the right to obtain

additional compensation for the privilege it would give

the grantees of the franchise undue advantage, and

deny to the city the right to exact a consideration in

keeping with the value of the privilege bestowed.’ ”

(Emphasis added).

Other Clauses in Contract Show Severability Clause

Doesn’t Preserve Franchise When Vital

Part Is Invalidated

Many other clauses in the franchise agreement show

that the severability clause is “not an inexorable com-

mand”, but is a rule of construction which this Court prop-

erly applied to the Owensboro-Top Vision contract. For

BERIT LA RIL Eee AAR IN MERRIE RE NTT a Bp TENG POSED A AR AT TA

example, the term of the franchise is fixed at 15 years.

Suppose this term should be held invalid, or should be re-

duced to 3 years. Despite the severability clause, Top

Visiuz would not be required to construct a CATV system

for the entire city. The parties intended a grant of a term

adequate to make construction of the system economically

feasible. The term of the contract is thus so vital and so

interwoven with other covenants of the contract that it

cannot be stricken without destroying the contract.

But suppose that the covenant in the franchise requir-

ing Top Vision to provide one free drop to each parochial

school passed by the CATV cable is declared invalid. A

proper construction of the contract would require that this

covenant be severed from the remainder of the franchise.

Parochial schools are only one of a number of public build-

ings to which free drops must be supplied; the amount in-

volved in the covenant with respect to parochial schools is

small; it was not an item considered by the City in deter-

mining who should be the successful bidder; and its pres-

ence in the contract is not required by any constitutional

section.

To accept Top Vision’s argument that the severability

clause alone is determinative of the intention of the parties

leads to the absurd conclusion that all of Top Vision’s

obligations under the contract could be severed without

invalidating Top Vision’s franchise, i.e. leaving Top Vision

with all of the benefits with none of the burdens.

The 26% covenant is such an important part of the

franchise and is so interwoven with the franchise that the

parties did not intend that the franchise should survive the

striking of the 26% covenant. This Court was thus correct

in ruling that “. . . the 26-percent clause cannot be

severed from the remainder of the agreement without doing

violence to one of the underlying purposes of the franchise,

to-wit, to provide revenue to the City, and the elimination

of the clause vitiated the contract.”

. on

THIS COURT DID NOT OVERLOOK A MATERIAL

STATUTE OR REGULATION IN FAILING TO

CONSIDER THE FEDERAL COMMUNICATIONS

COMMISSION’S 1972 REGULATIONS IN DECID-

ING THE INTENT OF THE CITY OF OWENS.

BORO AND TOP VISION IN EXECUTING THE

DECEMBER 17, 1965 FRANCHISE AGREEMENT

Appellee argues that it is entitled to a rehearing because

the Court did not consider the effect of the Federal Com-

munications Commission’s regulations which became ef-

fective on March 31, 1972; that under these regulations

“(i)t is no longer legally permissible for a municipality

to use a CATV franchise to raise revenue for general

municipal purposes”, and that this Court’s decision “pre-

sumptively invalidates most existing CATV franchises in

Kentucky” (Pet. Reh. pp. 9-10).

These arguments are fallacious.

26% Fee Fell Under Wonderland v. Sandusky, and Not

Under FCC Regulations

The City of Owensboro and Top Vision agreed that Top

Vision’s 26% CATV franchise fee covenant “is invalid and

unenforceable under Article I, Section 8, Clause III, of the

Constitution of the United States” as construed in Wonder-

land Ventures, Inc. v. City of Sandusky, 423 F. 2d 548 (6th

Cir. 1970) (R. 31), which held such a covenant to be an

unlawful burden on interstate commerce. This agreement

was the basis of the dismissal of Top Vision’s suit against

the City of Owensboro in the United States District Court

for the Western District of Kentucky (R. 30-33). Thus,

Top Vision’s 26% covenant was not invalidated under any

FCC regulation.

Invalidation of Franchise Based on Construction of the

Contract and Not on FCC Regulations

This Court’s decision that Top Vision’s franchise falls

with the voiding of the 26% of gross profits franchise fee

RETIREE ERRAND ERE YP EEG INIA A BIEN LEER AOL ATES IIE! OE A IN LE MOR AOE TS BRE BLS A

covenant is based upon the intention of the parties as ex-

pressed in the December 17, 1965 franchise contract. The

FCC regulation which went into effect on March 31, 1972,

as quoted by Top Vision’s brief at page 10 of its Petition

for Re-hearing, casts no light on the intention of the City

of Owensboro and Top Vision as expressed in their 1965

contract.

FCC Regulations Do Not Forbid Use of CATV Fees for

General Municipal Purposes

Appellee mis-states the facts in saying that under the

1972 FCC regulations “(i)t is no longer legally permissible

for a municipality to use a CATV franchise to raise revenue

for general municipal purposes”. No such prohibition is

contained at any place in these regulations 76 C.F.R. 1-617.

These regulations require only that CATV franchise fees

“be reasonable” and suggest 3% to 5% of gross receipts as

a reasonable range (App. Pet. for Re-hearing, p. 10). While

this range is much less than the 26% bid in 1965 by Top

Vision, the granting of CATV franchises remains a lucra-

tive source of municipal revenue, as will be apparent when

the Court compares 3% to 5% of gross receipts with the fees

provided in other franchises coming before it.

Neither This Opinion Nor the 1972 FCC Regulations Pose

Any “Chaos” for Kentucky CATV

Top Vision is not warranted in arguing—entirely out-

side the record—that this decision (coupled with the 1972

FCC regulations) poses “chaos . . . for CATV through-

out Kentucky” or “presumptively invalidates most exist-

ing CATV franchises in Kentucky.”

As we have shown, this decision is not based on the FCC

regulations, but upon the Wonderland decision, and this

Court’s construction of the terms and conditions of the

particular contract between the City of Owensboro and Top

Vision. It is sheer speculation to forecast what intention

PLIES AS APCS

may be attributable to parties to other CATV franchise

agreements which are not before the Court.

The current Television Fact Book (recognized by the

City of Owensboro and Top Vision as authoritative in

Paragraph 10 of the franchise between them, R. 20), Serv-

ices Volume 1972-1973, Edition No. 42, pp. 465a to 473a lists

a total of 54 CATV systems in Kentucky for which fran-

chise fee information is published. Only one of these

franchise fees is shown as exceeding 5% of gross receipts—

the exception being the franchise in Paris, Kentucky, which

calls for a fee of 5.6% of gross receipts.

An existing CATV system is not required to comply

with FCC regulations affecting franchise fees until March

31, 1977, or the renewal of the franchise, whichever occurs

first (76 CFR 31(b)).

Section 7 of these regulations also provides liberal relief

for hardship cases:

“(a) Upon petition by a cable television system, an

applicant, permittee, or licensee of a television broad-

cast, translator, or microwave relay station, or by any

other interested person, the Commission may waive

any provision of the rules relating to cable television

systems, impose additional or different requirements,

or issue a ruling on a complaint or disputed question.”

76 CFR 7(a).

Top Vision is shaking scarecrows at the Court.

. sas

Cereb area 2. 7

CONCLUSION

The Petition for Rehearing should be denied.

Respectfully submitted,

Hvueu D. Moore

Ricuarp D. Giiu1aM, JR.

Gimut1am & Moore

324 St. Ann Street

Owensboro, Kentucky 42301

Attorneys for Appellant,

City of Owensboro, Kentucky

We ASE BRS

APPENDIX “A”

THE COMMONWEALTH OF KENTUCKY

DAVIESS CIRCUIT COURT

DIVISION II

No. 13298

Tor Vision Caste Co. or Ky., a Kentucky

Corporation - - - - - - - Plaintiff

Vv.

Crry or Owenssoro, Kentucky, a Municipal

Corporation of the Second Class, and

Irvin Territt, Mayor,

Wairman C. TayLor, Commissioner,

Joun D. Mitier, Commissioner,

Joun C. Fisner, Commissioner,

Auton Puckett, Commissioner - - = - Defendants

Be Ir Remembered, That heretofore to-wit, on the 19th

day of December, 1970, came the plaintiff, Top Vision Cable

Co. of Ky., a Kentucky corporation, by counsel, and filed its

Complaint for Declaratory Judgment and Injunctive Relief

herein, which is in words and figures as follows, to-wit:

COMPLAINT FOR DECLARATORY JUDGMENT AND

INJUNCTIVE RELIEF

1. This is an action for declaratory judgment as au-

thorized by Section 418.045 of the Kentucky Revised Stat-

utes, and is brought because there is an actual controversy

now existing between the parties of the above-entitled ac-

’

ern ats . :

VY DELLE GENES LION, BT OTTER ELLIO NE EEA BILE GENIN Be IY PAG BE EIEN BIS 5 OL SR FB

—

tion, as to which the Plaintiff seeks the judgment of this

Court.

2. This action arises under the provisions of a certain

Franchise Agreement, (hereinafter Franchise Agreement),

existing between the Plaintiff and the City of Owensboro,

et al. (hereinafter Defendants).

3. Plaintiff is a corporation organized under the laws

of the State of Kentucky. Plaintiff is engaged in providing

community antenna television service (CATV) to the public

within the corporate limits of the City of Owensboro. In

brief, Plaintiff’s business r:ay be described as follows: The

signals of nearby and distant television broadcast stations

are received off the air by means of a master antenna ad-

vantageously located to obtain maximum signal strength

and quality. By means of coaxial cable lines attached to

utility poles, these signals are relayed through amplifica-

tion equipment to the residences of subscribing members

of the public for a nominal monthly fee. The cable is ter-

minated in the home where a connection is made to the

subscriber's privately owned television receiver. The sub-

scriber is thus able to receive television broadcasts which

would not otherwise be available or which would be received

with lesser quality.

4. Defendant City of Owensboro, Kentucky is a munici-

pal corporation of the State of Kentucky and Defendants

Irvin Terrill, Waitman C. Taylor, John D. Miller, John C.

Fisher, and Alton Puckett are the members of the Board

of Commissioners, the governing body of the City of Owens-

boro, Kentucky.

5. On or about October 22, 1965, the Defendant City

of Owensboro, by and through its Board of Commissioners,

enacted Ordinance No. 63-65, authorizing the advertisement

and issuance of a CATV franchise within the City of Owens-

boro. A copy of said Ordinance is annexed to this Com-

plaint and is marked “Plaintiff's Exhibit No. 1”, and made

a part hereof.

— ° . . .

6. On or about December 17, 1965, the Defendant City

of Owensboro, by and through its Board of Commissioners,

adopted Resolution No. 36-65 confirming the issuance of the

CATV franchise to Plaintiff and granted a CATV franchise

to the Plaintiff under the terms of the Franchise Agreement

described hereinabove. Under the terms of the Agreement,

Plaintiff must pay to the Defendants an annual gross re-

ceipts tax equal to twenty-six percent (26%) of the gross

income received by the Plaintiff from all receipts derived

within the City of Owensboro from its CATV system.

Copies of said Resolution and said Franchise Agreement

are annexed to this Complaint, marked “Plaintiff’s Exhibit

No. 2” and “Plaintiff’s Exhibit No. 3”, respectively, and

made a part hereof.

7. By the terms of the Franchise Agreement, the Plain-

tiff’s operations must be in accordance with the laws of the

United States of America (See Paras. 1 and 7 thereof).

8. On March 26, 1970, in the consolidated cases of

Wonderland Ventures, Inc. v. City of Sandusky, Wonder-

land Ventures, Inc. v. City of Fremont, 423 F. 2d 548 (6th

Cir. 1970), (hereinafter Wonderland), the United States

Court of Appeals for the Sixth Circuit (which includes

Owensboro) struck down the ordinances enacted by the de-

fendant cities imposing a gross receipts tax on the respec-

tive CATV systems there involved.

9. In Wonderland, the Court of Appeals held the or-

dinances of both Sandusky and Fremont invalid, inter alia,

“|. because they imposed a gross receipts tax upon the

proceeds of interstate commerce in violation of the Com-

merce Clause of the Constitution of the United States. On

several occasions following this decision Plaintiff sought to

re-negotiate the percent of gross receipts payment with

Defendants to reflect compensation to the City of Owens-

boro on the basis of a fee covering the cost of the Defendant

City of the use by Plaintiff of the public right of ways

defen

Pears

| RAG

within the City of Owensboro. Defendants refused and

still refuse to negotiate in any manner whatsoever. Never-

theless, on August 31, 1970, some five months after the

decision in Wonderland, the City of Owensboro accepted a

payment of $2,241.47, which amount represented full pay-

ment of 26% of the gross receipts of Top Vision then due

for the preceding six months, ended June 30, 1970.

10. On September 22, 1970, Plaintiff filed an action for

a declaratory judgment in the United States District Court

for the Western District of Kentucky at Owensboro, nam-

ing as defendants therein the same defendants as are des-

ignated herein, and asking that the 26% gross receipts tax

provision of the Franchise Agreement be adjudged uncon-

stitutional under Article I, Section 8, Clause 3 of the Con-

stitution of the United States (hereinafter “Interstate Com-

merce Clause”) and the authority of the Wexderland de-

cision. The defendants therein answered plaintiff’s com-

plaint with a “Motion to Dismiss’, filed October 22, 1970,

and for the first time gave notice to Plaintiff of defendants’

agreement with Plaintiff’s position that the 26% gross re-

ceipts tax provision was unconstitutional under the Inter-

state Commerce Clause and the Wonderland decision.

11. Subsequently defendants, City of Owensboro, et.

al., filed a further pleading entitled “Reply to Response of

Plaintiff To Defendant’s Motion to Dismiss For Lack of

Jurisdiction and Failure to State Facts Upon Which Relief

Can Be Granted”, attaching to this further response a copy

of a certain “Resolution No. 56-70”. Said Resolution is

annexed to this Complaint, marked “Plaintiffs Exhibit No.

4” and made a part hereof. This Resolution, enacted sub-

sequent to the Plaintiff’s initiation of the declaratory judg-

ment action, officially conceded the constitutional invalidity

of the 26% gross receipts tax provision under the Inter-

state Commerce Clause. As is pointed out hereinafter in

said Resolution the defendants simultaneously refused

Plaintiff’s pending request for an extension of time within

—_— PER * RRA Srey SSR TAT FEELERS OMEN OE ARREST E RIT RPE OPES

eo yee : i SS : Se SN

—

which to complete construction of the system. Whereupon,

based upon the apparent agreement between the plaintiff

and the defendants in that proceeding respecting the inva-

lidity of the 26% gross receipts tax provision, the Court

found that no “actual controversy” existed between the

parties and therefore dismissed the Plaintiff’s action be-

cause of a lack of jurisdiction. The Court stated that since

state issues was most properly a matter for the courts of

Kentucky. A copy of that court’s “Memorandum and

Order”, is annexed to the Complaint, marked “Plaintiff's

Exhibit No. 5” and made a part hereof.

12. Paragraph 12 of the Franchise Agreement pro-

vides :

The party of the second part shall commence the con-

struction of the system herein at a reasonable time

from the securing of such permits, licenses and ap-

provals and shall prosecute such construction with due

diligence; it being understood, as a condition of this

franchise, that the construction of such system shall be

completed to the extent of making available community

antenna service to substantially all of the Citizens of

Owensboro, Kentucky, on or before two (2) years from

the date hereof or this franchise shall be and become

null and void without notice or further act by the party

of the first part. For cause, in its sole discretion, the

Board of Commissioners of the City of Owensboro,

Kentucky may extend said two (2) year deadline from

time to time upon written application for same by the

second party at least sixty (60) days prior to said

deadline or extension thereof.

13. As hereinbefore noted at Paragraph 11, by letter

dated October 20, 1970, Plaintiff officially requested of the

Defendants a further extension of time from and after

December 20, 1970, to complete construction of its CATV

a ee ee ee eee eee ee ee eee

yin Seis Lie

system in the City of Owensboro, such request being based

on the identical circumstances supporting the prior two

requests.' As stated at Paragraph 11 hereof, by Resolu-

tion No. 56-70 (Plaintiff's Exhibit No. 4 hereto) enacted

subsequent to Plaintiff’s initiation of its Federal Declara-

tory Judgment action, Defendants summarily denied Plain-

tiff’s request.

14. Commencing almost immediately after execution

of the Franchise Agreement, Plaintiff encountered unex-

pected, unforeseeable and severe hardships wholly beyond

its control in proceeding to complete construction of its

CATV system. Two basic factors unforeseen by Plain-

tiff have prevented completion of the system.

(1) FCC prohibition against importation of dis-

tant signals into the top 100 markets, resulted in a

severe loss of subscribers and a concomitant loss of

working capital needed for completion of the system.

It became an imperative of providing the service

needed by the people of Owensboro for Top Vision

to concentrate its funds and efforts toward seeking

relief at the FCC.?

(2) After the foregoing FCC action the existence

of the 26% tax provision made it virtually impossible

for the Plaintiff to attract either outside equity or

working capital from investors, said capital to have

been utilized as an alternative source of construction

capital to substantially complete the system.

1This request did, however, indicate that in addition to FCC problems,

Top Vision had been experiencing grave difficulty in getting potential

capital investors to commit funds in view of the 26% gross receipts tax

imposed upon the system. _

20wensboro, Kentucky is located within the primary service area of

television stations operating in Evansville, Indiana, one of the nation’s

largest television markets. Under FCC rules and policy adopted subse-

quent to issuance of the Top Vision Franchise, non-local television sta-

tions are not being authorized for carri by CATV systems operating

° ~ Bg largest television markets of which Evansville, Indiana is

e .

SETA OEY

15. Notwithstanding these serious difficulties, Plain-

tiff has to date expended in excess of $430,000.00 in con-

nection with its Owensboro CATV system, and cable serv-

ice is presently available to approximately one-third of the

citizens of the City.

16. In recognition of the extreme difficulty encountered

by Plaintiff from the FCC, Defendants have twice granted

extensions of time within which to complete the system.

Resolutions 60-67, dated October 6, 1967, and attached here-

to as Plaintiff's Exhibit No. 6, sets forth the first exten-

sion. This resolution specifically recognizes the fact that

the Commissioners “. . . deem said request for an ex-

tension of time to be reasonable; . . .” since“. . . the

Board of Commissioners is aware of the matters now pend-

ing between the Top Vision Cable Company and the Fed-

eral Communications Commission . . .” In the most re-

cent grant the Defendants by Resolution No. 66-68 adopted

December 20, 1968, granted a two year extension to and

including December 20, 1970. Therein the Defendants ex-

pressly stated that the City “. . . deem(s) the unfore-

seen stringent regulation of the Federal Communications

Commission now in force and the proposed proceedings

challenging them, sufficient cause for granting the written

application of Top Vision Cable Company, Inc. for an ex-

tension of time within which to complete its system within

the City.” A complete copy of Resolution No. 66-68 is at-

tached hereto as Plaintiff’s Exhibit No. 7.

17. The denial of the most recent extension request

by Defendants was an arbitrary abuse of discretion in view

of the fact that circumstances before the FCC are substan-

tially unchanged. Moreover, the Defendants have exhibited

bad faith insofar as they have contributed directly and

substantially to the very situation which has prevented

Plaintiff from completing construction by exacting an un-

lawful fee. Plaintiff has been given no fair and reasonable

opportunity to complete construction. Plaintiff was not

i SAAT SAAT LEO IR RFD RSE RCH DT SEES TRI ET oe See

notified until November 6, 1970, after it had filed its action

in Federal Court that Defendants would not grant a further

extension of time within which to complete construction.

Thus, it is impossible for Plaintiff to complete construction

by December 20, 1970 and Defendants by their own ac-

tions have forced a lapse of Plaintiff's Franchise in the

absence of relief by this Court through absolutely no fault

or omission by Plaintiff.

18. Defendants herein have asserted the position be-

fore the Federal Court and privately to Plaintiff that the

effect of the Wonderland decision is to cause forfeit of

Plaintiff's franchise since in Defendant’s view the gross

receipts tax is not severable from the remainder of the

Franchise Agreement. Defendants have sought to regulate

the operation of Plaintiff's CATV by ordinance and Fran-

hiss a public utility. Plaintiff has in the past sub-

jected itself voluntarily to the franchise procedure but in

so doing has not at any point conceded that such was a

necessary part of doing business in the City of Owensboro.

Plaintiff now denies that there exists statutory authority

vested in the City of Owensboro to permit that municipality

to so regulate its operations as a CATV system. In this

regard Plaintiff asserts that:

(a) The defendant City has no power or authority gen-

erally to franchise community antenna television

systems because they are not public utilities sub-

ject to municipal regulation and control.

Defendants have no power or authority to require

that the construction, operation and maintenance

of Plaintiff's system shall be dependent solely upon

permission of the defendant City.

Defendants have no power of authority to control

the time within which Plaintiff shall obtain permits

from any appropriate regulatory agency or com-

mence or complete construction of its facilities.

(d) Defendants have no power or authority to require

Plaintiff to donate a portion of its property to the

defendant City nor to provide free service to other

public and private bodies.

(e) Defendants have no power or authority to require

Plaintiff to bid with others for the right to engage

in a lawful business on the basis of the largest

cash payment and percentage of income to be paid

to defendant City.

(f) Defendants have no power or authority to grant a

so-called non-exclusive franchise for operation of a

community antenna television system in the City

of Owensboro which is to be awarded on the basis

of bids and will have the practical effect of creating

a government imposed monopoly in such business.

19. Therefore, even though the Defendants have con-

ceded the constitutional invalidity of the 26% gross re-

ceipts tax, Plaintiff remains in extreme jeopardy in the

following ways:

(a) Defendant City of Owensboro through its Board

of Commissioners has stated its intention to treat

the entire Franchise as void. This means that Plain-

tiff would lose its business and most likely the

more than $430,000.00 it has invested thus far in

attempting in good faith to provide CATV service

to Owensboro.

(b) The Defendant City of Owensboro through its

Board of Commissioners on November 6, 1970, re-

fused to grant Plaintiff’s request for extension of

time to complete construction. This was an arbi-

trary and abusive action taken as reprisal against

Plaintiff for raising a question as to the validity

of the 26% tax in view of the Wonderland decision.

The inequity of this situation and Plaintiff's di-

lemma will be apparent to this Court since it is in

large part the existence of the 26% tax which not

only renders existing operation most difficult but

has rendered it impossible to attract the additional

capital necessary to complete construction of the

system.

20. Plaintiff is willing to pay a lawful and reasonable

fee to the Defendants to defray costs which Defendants

may incur relative to the use of the right of ways by

Plaintiff. Defendants may not unreasonably withhold such

use of the right of ways from Plaintiff in connection with

the conduct of Plaintiff’s lawful and desirable business.

21. The damages which will be suffered by the Plain-

tiff unless equitable relief is granted are irreparable and

Plaintiff has no adequate remedy of law.

WHEREFORE, Plaintiff prays:

(1) For a judgment declaring and adjudicating that

Defendant City of Owensboro has no legislative authority

to require that local CATV operations be franchised by the

City.

(2) For a judgment declaring that Defendants may not

unreasonably withhold use of the public right of ways

from Plaintiff and that any charges made therefor be

reasonably related to the costs to Defendants of Plaintiff's

use.

(3) For a judgment in the alternative declaring and

adjudicating the rights and duties of the Plaintiff and

Defendants under the provisions of the Franchise Agree-

ment, including but not limited to, the following:

(a) That Section 3, Paragraph 2 of the Agreement is

severable from the remainder of the Agreement,

thereby preserving said remainder’s validity.

(b) That equity requires that Plaintiff be granted an

additional, sufficient and reasonable period within

(c)

(d)

(e)

which to complete construction of its CATV sys-

tem.

That the Court determine a reasonable fee to be

paid Defendant City by Plaintiff, to defray costs

which Defendants incur relative to the use of the

public right of ways consistent with the Interstate

Commerce Clause of the Constitution of the United

States.

That the Court order Defendants to refund to

Plaintiff all monies received from Plaintiff pur-

suant to the unlawful 26% gross receipts tax.

That the Court prohibit Defendants during the

pendency of this action from soliciting or consid-

ering bids or granting a Franchise for a CATV

operation within the City of Owensboro to any

party.

(f) That the Defendant City of Owensboro and all

Officers thereof and their successors be restrained

from treating the remaining valid part of said

Agreement as null and void and of no legal effect,

and from preventing or attempting to prevent Plain-

tiff from operating its CATV system for the pur-

pose of providing service to the citizens of Owens-

boro by withdrawing said franchise, or otherwise

taking reprisals against Plaintiff as a result of its

seeking this judicial determination.

Wyatt, Grafton & Sloss

Third Floor

Marion E. Taylor Building

Louisville, Kentucky 40202

/s/ Edgar A. Zingman

/s/ Stuart E. Lampe

McKinley & Howard

/s/ Joseph McKinley

Counsel for Plaintiff

Smith, Pepper, Shack & L’Heureux

1776 K Street, N.W.

Washington, D. C. 10008

Of Counsel

Complaint & Exhibits 1, 2, 3, 4, 5, 6 & 7, each filed.

Civil Summons & 6 copies issued to Daviess Co. Dec.

19, 1970.

Attest: James W. Clayton, Clerk

By: Jean P. Moure, D. C.

EXHIBIT 1

ORDINANCE NO. 63-65

AN ORDINANCE DIRECTING THE CITY MAN-

AGER OF THE CITY OF OWENSBORO, KEN-

TUCKY, TO ADVERTISE AND PUBLICLY SELL A

FRANCHISE AUTHORIZING THE PURCHASER

THEREOF TO USE THE PUBLIC WAYS,

STREETS, HIGHWAYS, BRIDGES, OR PUBLIC

PLACES OF THE CITY OF OWENSBORO, KEN-

TUCKY, FOR THE PURPOSE OF SUPPLYING

VISUAL AND AUDIO TELEVISION AND RADIO

SIGNALS TO THE PUBLIC.

BE IT ORDAINED BY THE BOARD OF COM-

MISSIONERS OF THE CITY OF OWENSBORO, KEN-

TUCKY, AS FOLLOWS:

SECTION 1. The City Manager of the City of Owens-

boro, Kentucky, is hereby authorized and directed to ad-

vertise and publicly sell, subject to the approval of the

Board of Commissioners, a franchise authorizing the pur-

chaser thereof to use the public ways, streets, highways,

bridges or public places of the City of Owensboro, Ken-

tucky, for the purpose of supplying community antenna

- a

television and audio television and radio signals to the

public.

SECTION 2. The notice of said sale of franchise shall

be posted on the public bulletin board at the City Hall and

shall be advertised at least once, said publication to be not

less than seven (7) days nor more than twenty-one (21)

days prior to said sale; said sale date shall be on Novem-

ber 16, 1965, at 10:00 A.M., CST, in the lobby of City Hall

and shall be made to the highest and best bidder at such

sale; however, the City retains the right to reject any and

all bids.

SECTION 3. The advertisement of sale shall contain

a description of the franchise to be sold. The terms and

conditions of said franchise to be granted in the event the

sale is confirmed shall be as follows:

This Franchise Agreement made and entered into

on this the day of , 1965, by and

between the City of Owensboro, Kentucky, a munici-

pal corporation of the second class, Party of the First

Part, and Party of the Second

Part.

WITNESSETH: That for and in consideration of

the public service to be rendered by the party of the

second part to the residents of Owensboro, Kentucky,

and the further consideration as more fully set out here-

in, the party of the first part does hereby grant unto

the party of the second part, its successors and assigns,

for a period of fifteen (15) years from the date hereof,

the franchise and privilege of using the public ways,

streets, highways, bridges or public places of the City

of Owensboro, Kentucky, for the supplying of visual

and audio television and radio signals to the public,

subject to the following terms, conditions and cov-

enants, to-wit:

—

1. The party of the second part, its successors or as-

signs, shall have the franchise, privilege, right and

power to erect, install, construct, re-construct, replace,

remove, repair, maintain and operate in or upon, under,

above, across and from the streets, avenues, highways,

sidewalks, bridges and other public ways, easements,

right-of-way and lands, as now existing and all ex-

tensions thereof and additions thereto, in the City of

Owensboro, Kentucky, all equipment, facilities, appur-

tenances and apparatus of any nature for the purpose

of receiving, amplifying, transmitting and distributing

therefrom radio, electrical and electronic energy, pic-

tures, sounds, signals, impulses and communication,

uni-directional and multi-directional of every nature

and description, audio and video, embracing any and

all of the frequencies of the electrical magnetic spec-

trum and to otherwise engage in the business, services

and activities generally known as and practiced now

and in the future by community antenna television and

audio communication services in accordance with the

laws of the United States of America, the Common-

wealth of Kentucky and the City of Owensboro, Ken-

tucky, for a period of fifteen (15) years from and after

the date hereof; but subject to the restrictions and pro-

visions herein contained.

2. The party of the second part, in consideration of

the terms of this franchise, agrees to pay to the party

of the first part a sum equal to the cost of the adver-

tising and selling of this franchise, upon proper billing

by first party to second party plus the sum of money

equal to % of the gross income received by the

party of the second part from all sources whatsoever

derived within the City of Owensboro, the payment of

which shall be payable one-half (1/,) thereof in semi-

annual payments. Said semi-annual payment dates

—

shall be the 30th day of June and the 31st day of

December of each year and each semi-annual payment

shall be made within 30 days thereafter. The party

of the second part shall keep complete records of ac-

counts showing dates and payments received and any

duly authorized agent of the City of Owensboro shall

have the right, power and authority to inspect the

gross monthly income records of the party of the sec-

ond part.

3. There is hereby granted to the party of the second

part, insofar as the City of Owensboro may legally

grant same, the further right, privilege and authority

to lease, rent or in any other manner obtain the use

of towers, poles, lines, cables and other equipment and

facilities from any city owned utility and any and all

holders of public licenses and franchises within the

corporate limits of the City of Owensboro, subject to

all existing and future ordinances, regulations and

laws of the City of Owensboro and the Commonwealth

of Kentucky. It is the stated intention of the party

of the first part that all holders of public licenses and

franchises within the corporate limits of the City of

Owensboro shall cooperate with the party of the second

part to allow party joint useage of their poles and

pole-line facilities whenever possible and whenever

such use does not interfere with the normal operations

of such poles and pole-lines. However, the party of

the second part shall own and have complete respon-

sibility for the maintenance and operation of the full

system and that responsibility shall not be divided.

Prior to the erection or installation of any such towers,

poles, guys and anchors on any municipal properties,

including public ways and easements, the party of the

second part shall secure approval of said location by

the City Manager of the City of Owensboro or any

—

other authorized person designated by the City and

also secure approval from any state or county official

of any locations on the properties, including public

ways and easements of the State of Kentucky and

County of Daviess. Such permission shall not be un-

reasonably withheld on the part of the City.

4. The party of the second part shall, during the ex-

istence of this franchise, furnish reasonable, adequate

and efficient community antenna reception service to

the subscribers connected to its system within the

corporate limits of the City of Owensboro and said

party of the second part agrees to construct and main-

tain its system in reasonable repair and working order,

said system to be constructed with top grade American

made equipment and second party shall provide ade-

quate facilities for maintenance of same. These main-

tenance requirements may be temporarily suspended

by disaster or emergency conditions or other circum-

stances beyond its reasonable control.

5. The party of the second part shall charge only

reasonable rates for the service rendered to its cus-

tomers, but shall not as to any rates, charges, service

facilities, rules, regulations or in any other respect

make or grant any preference or advantage to any per-

son or subject any person to any prejudice or disad-

vantage; provided, however, they shall not be deemed

to prohibit the establishment of a graduated scale of

charges and classified rate schedules to which any

customer, within such classification shall be entitled.

6. The party of the second part shall not directly or

indirectly engage in any phase of the business of tele-

vision receiving set sale, lease, repair or maintenance

within the City of Owensboro, Daviess County, Ken-

tucky, nor shall it use its community antenna televi-

sion, radio and audio communication services con-

structed under this franchise for the purpose of pay

television.

7. No privilege or exemption is granted or deferred

by this franchise except those specifically prescribed

herein. Any privilege claimed under this franchise in

any street, public way or easement shall be subordi-

nate to any prior lawful occupancy of the street and

to all laws, ordinances and regulations of the City of

Owensboro, State of Kentucky and the United States

of America. No rights, franchise or privileges herein

granted are to be exclusive.

8. The party of the second part shall at all times in-

demnify, protect and save harmless the City of Owens-

boro, any official, agency, commission or board thereof

from and against any and all liability, losses and phys-

ical damage to property and bodily injury or death

to persons, including payments made under Work-

men’s Compensation laws which may arise out of or

be caused by the erection, construction, replacement,

removal, maintenance and operations of the party of

the second part’s community antenna television and

audio communications service and resulting from or

by any negligent fault or misconduct on its part or by

its agents, officers, servants and employees and it shall

carry a policy or policies of liability insurance indem-

nifying all loss, damage or destruction of property to

the extent of $25,000.00 and as to any one person, city,

agency or board in the amount of $100,000.00 and as

to any one accident resulting in liability on account of

injury to or death of one person and in the amount of

$300,000.00 as to any one accident as it may relate to

damages to persons and property.

9. The party of the second part shall, in the case of

any opening or obstruction in the streets or other pub-

—

lic ways of the City of Owensboro made by it in the

course of construction, operation or removal of its in-

stallations, guard such activity by the placement of

adequate barriers, fences or boardings, the bounds of

which during the periods of dusk and darkness shall

be clearly designated by warning lights. In the case

of any disturbance or damage to any streets or public

ways occurring in the course of erection, installation,

construction, reconstruction, replacement, removal, re-

pair, maintenance or operation, the party of the second

part shall properly repair and restore same at its own

expense. In the event that at any time the party of

the first part shall lawfully elect to alter any street,

alley or other public way, the party of the second part

shall, upon reasonable notice, remove or relocate its

poles, wires, cables, conduits or other fixtures at its

own expense.

10. The party of the second part shall include in its

coverage to its customers any telecast originating from

a transmitter located within a forty (40) air mile radius

from the City of Owensboro, Kentucky, provided that

such telecasts effect either a Grade A, or Grade B, con-

tour in the City of Owensboro as indicated in the cur-

rent edition of Television Factbook, or any other au-

thoritative publication carrying such designation. It

is further agreed and understood that notwithstanding

any of the foregoing, the party of the second part shall

at all times include within its coverage to its customers

telecasts from all of the major networks.

11. The party of the first part may declare a forfeiture

of the franchise herein granted in the event of sub-

stantial violation of any of the terms hereof upon writ-

ten notice to the party of the second part specifying

the nature of the violation unless such violation is

corrected or ceases to exist within sixty (60) days from

the date of the written notice of same to the party of

the second part. Such forfeiture shall be by resolution

of the Board of Commissioners of the City of Owens-

boro, Kentucky.

12. The party of the second part shall, within sixty

(60) days from the date hereof, make proper applica-

tion to the Federal Communications Commission and to

any and all other governmental agencies, both state

and federal as is provided by law, for any permits, li-

censes or approvals necessary to construct, maintain

and operate the system. The party of the second part

shall commence the construction of the system hereia

at a reasonable time from the securing of such permits,

licenses and approvals and shall prosecute such con-

struction with due diligence; it being understood, as a

condition of this franchise, that the construction of

such system shall be completed to the extent of making

available community antenna service to substantially

all of the citizens of Owensboro, Kentucky, on or be-

fore two (2) years from the date hereof or this fran-

chise shall be and become null and void without notice

or further act by the party of the first part. For cause,

in its sole discretion, the Board of Commissioners of

the City of Owensboro, Kentucky, may extend said

two (2) year deadline from time to time upon written

application for same by the second party at least sixty

(60) days prior to said deadline or extension thereof.

13. The franchise, right, privilege and power herein

granted, together with all of the terms and conditions

hereof, shall extend and apply to the successors and

assigns of the party of the second part, however, no

assignment of same may be made, except by operation

of law, until said assignment has been approved by a

_—

resolution of the Board of Commissioners of the City

of Owensboro, Kentucky, which approval shall not be

unreasonably withheld. In the event such assignment

takes place with such consent, then immediately upon

the delivery to the City of Owensboro of the aforesaid

agreement of assignment, duly executed by the as-

signee, all of the rights, obligations and privileges

herein granted to the second party shall forthwith de-

volve upon the assignee who shall im all respects stand

in the place and stead of the original corporation here-

under. In the event the party of the second part, or its

successors or assigns shall be adjudged bankrupt or

placed in receivership, the party of the first part may,

at its option, declare the rights herein granted to be

forfeited and terminated.

14. As part of the consideration for the rights and

privileges herein granted, the party of the second part

agrees to provide one free drop, with no monthly serv-

ice charge to the City Hall building, fire and police sta-

tions, public library and to all public and parochial

primary and secondary schools located within the City

of Owensboro, Kentucky, which are passed by a cable.

15. It is agreed and understood that the party of the

second part shall not erect its receiving tower in an

area of Daviess County, Kentucky, that will interfere

in any manner with aircraft approaches to the Owens-

boro-Daviess County Airport and shall secure approval

of such location from the F.A.A. prior to constructing

such receiving tower.

16. In the event any section, clause, paragraph or pro-

vision of this grant shall be declared invalid by a

court of competent jurisdiction, such invalidity shall

not effect the validity of this grant as a whole, or any

part thereof, other than the part declared invalid.

IN TESTIMONY WHEREOFP, witness the signa-

tures of the parties hereto on this the day and date

first hereinabove written.

City of Owensboro, Kentucky

Attest: By

Mayor

City Clerk

SECTION 4. The City Manager shall report the sale

of said franchise to the Board of City Commissioners which

shall then either affirm or reject said sale. In the event

of the affirmation of the sale, said Board of Commissioners

shall direct the execution and delivery of the franchise to

the buyer by the Mayor and City Clerk.

SECTION 5. All ordinances or parts of ordinances in

conflict herewith are to the extent of such conflict hereby

repealed.

Introduced, publicly read and approved on first read-

ing this 15th day of October, 1965.

Publicly read and approved on second reading this 22nd

day of October, 1965.

/s/ Dugan Best

Mayor

Attest:

/s/ Adelle Shelton

City Clerk

STATE OF KENTUCKY

SCT.

CITY OF OWENSBORO

The undersigned as City Clerk of the City of Owens-

boro, Kentucky, hereby certifies that the above is a true

copy of said Ordinance as same appears on the records of

the City of Owensboro, of which records the undersigned is

legal custodian.

This July 24, 1970.

(s) Adelle Shelton, City Clerk

EXHIBITS 2 and 3

RESOLUTION NO. 36-65

RESOLUTION CONFIRMING SALE OF THE

CATV FRANCHISE TO TOP VISION CABLE

COMPANY, INC.

WHEREAS, by Ordinance No. 63-65, a Community An-

tenna Television Franchise was created and defined. Said

ordinance also directed the City Manager to advertise for

and sell said Franchise, and

WHEREAS, on November 16, 1965, the City Manager

of the City of Owensboro did make such sale of franchise

to the highest and best bidder, Top Vision Cable Company,

Ine. as indicated in his Report of Sale heretofore made to

the Board of Commissioners of the City of Owensboro.

NOW, THEREFORE, BE IT RESOLVED BY THE

BOARD OF COMMISSIONERS OF THE CITY OF

OWENSBORO, KENTUCKY, AS FOLLOWS:

SECTION 1. That the sale of the CATV Franchise

by the City Manager of the City of Owensboro, Kentucky,

to the highest and best bidder, the Top Vision Cable Com-

pany for 26% of the gross proceeds of its income as shown

on the report of such sale, be, and the same is hereby con-

firmed, ratified and approved.

SECTION 2. The Mayor and the City Clerk of the

City of Owensboro are hereby authorized and directed to

execute the Franchise Agreement as defined and created

by Ordinance 63-65 and deliver same to the said Top Vision

Cable Company, Inc.

ee”

—

Introduced, publicly read and finally approved on one

reading this 17th day of December, 1965.

/s/ Dugan Best

Mayor

Attest:

/s/ Adelle Shelton

City Clerk

CITY OF OWENSBORO

The undersigned as City Clerk of the City of Owensboro,

Kentucky, hereby certifies that the above is a true copy of

Franchise Agreement as same appears on the records of

the City of Owensboro, of which records the undersigned

is legal custodian.

This July 24, 1970.

This Franchise Agreement made and entered into on

this the 17th day of December, 1965, by and between the

City of Owensboro, Kentucky, a municipal corporation of

the second class, Party of the First Part, and TOP VI-

SION CABLE COMPANY, INC. OF KENTUCKY, Party

of the Second Part.

WITNESSETH: That for and in consideration of the

public service to be rendered by the party of the second

part to the residents of Owensboro, Kentucky, and the fur-

ther consideration as more fully set out herein, the party

of the first part does hereby grant unto the party of the

second part, its successors and assigns, for a period of

fifteen (15) years from the date hereof, the franchise and

privilege of using the public ways, streets, highways,

bridges or public places of the City of Owensboro, Ken-

tucky, for the supplying of visual and audio television and

radio signals to the public, subject to the following terms,

conditions and covenants, to-wit;

STATE OF KENTUCKY

SCT.

al ‘

1. The party of the second part, its successors or assigns,

shall have the franchise, privilege, right and power to erect,

install, construct, re-construct, replace, remove, repair,

maintain and operate in or upon, under, above, across and

from the streets, avenues, highways, sidewalks, bridges and

other public ways, easements, right-of-way and lands, as

now existing and all extensions thereof and additions

thereto, in the City of Owensboro, Kentucky, all equipment,

facilities, appurtenances and apparatus of any nature for

the purpose of receiving, amplifying, transmitting and dis-

tributing therefrom radio, electrical and electronic energy,

pictures, sounds, signals, impulses and communication, uni-

directional and multi-directional of every nature and de-

scription, audio and video, embracing any and all of the fre-

quencies of the electrical magnetic spectrum and to other-

wise engage in the business, services and activities gener-

ally known as and practiced now and in the future by com-

munity antenna television and audio communication serv-

ices in accordance with the laws of the United States of

America, the Commonwealth of Kentucky and the City of

Owensboro, Kentucky, for a period of fifteen (15) years

from and after the date hereof; but subject to the restric-

tions and provisions herein contained.

2. The party of the second part, in consideration of the

terms of this franchise, agrees to pay to the party of the

first part a sum equal to the cost of the advertising and

selling of this franchise, upon proper billing by first party

to second party plus the sum of money equal to 26% of the

gross income received by the party of the second part from

all sources whatsoever derived within the City of Owens-

boro, the payment of which shall be payable one-half (14)

thereof in semi-annual payments. Said semi-annual pay-

ment dates shall be the 30th day of June and the 31st day

of December of each year and each semi-annual payment

shall be made within 30 days thereafter. The party of the

—"

second part shall keep complete records of accounts show-

ing dates and payments received and any duly authorized

agent of the City of Owensboro shall have the right, power

and authority to inspect the gross monthly income records

of the party of the second part.

3. There is hereby granted to the party of the second part,

insofar as the City of Owensboro may legally grant same,

the further right, privilege and authority to lease, rent or

in any other manner obtain the use of towers, poles, lines,

cables and other equipment and facilities from any city

owned utility and any and all holders of public licenses and

franchises within the corporate limits of the City of Owens-

boro, subject to all existing and future ordinances, regula-

tions and laws of the City of Owensboro and the Common-

wealth of Kentucky. It is the stated intention of the party

of the first part that all holders of public licenses and fran-

chises within the corporate limits of the City of Owensboro

shall cooperate with the party of the second part to allow

party joint useage of their poles and pole-line facilities

whenever possible and whenever such use does not interfere

with the normal operations of such poles and pole-lines.

However, the party of the second part shall own and have

complete responsibility for the maintenance and operation

of the full system and that responsibility shall not be di-

vided. Prior to the erection or installation of any such

towers, poles, guys and anchors on any municipal proper-

ties, including public ways and easements, the party of the

second part shall secure approval of said location by the

City Manager of the City of Owensboro or any other au-

thorized person designated by the City and also secure ap-

proval from any state or county official of any locations

on the properties, including public ways and easements of

the State of Kentucky and County of Daviess. Such per-

mission shall not be unreasonably withheld on the part of

the City.

4. The party of the second part shall, during the existence

of this franchise, furnish reasonable, adequate and efficient

community antenna reception service to the subscribers

connected to its system within the corporate limits of the

City of Owensboro and said party of the second part agrees

to construct and maintain its system in reasonable repair

and working order, said system to be constructed with top

grade American made equipment and second party shall

provide adequate facilities for maintenance of same. These

maintenance requirements may be temporarily suspended

by disaster or emergency conditions or other circumstances

beyond its reasonable control.

5. The party of the second part shall charge only reason-

able rates for the service rendered to its customers, but

shall not as to any rates, charges, service facilities, rules,

regulations or in any other respect make or grant any pref-

erence or advantage to any person or subject any person

to any prejudice or disadvantage; provided, however, they

shall not be deemed to prohibit the es*ablishment of a grad-

uated seale of charges and classified rate schedules to which

any customer, within such classification shall be entitled.

6. The party of the second part shall not directly or in-

directly engage in any phase of the business of television

receiving set sale, lease, repair or maintenance within the

City of Owensboro, Daviess County, Kentucky, nor shall it

use its community antenna television, radio and audio com-

munication services constructed under this franchise for the

purpose of pay television.

7. No privilege or exemption is granted or deferred by this

franchise except these specifically prescribed herein. Any

privilege claimed under this franchise in any street, public

way or easement shall be subordinate to any prior lawful

occupancy of the street and to all laws, ordinances and reg-

ulations of the City of Owensboro, State of Kentucky and

the United States of America. No rights, franchise or priv-

ileges herein granted are to be exclusive.

- tone

—

8. The party of the second part shall at all times indem-

nify, protect and save harmless the City of Owensboro, any

official, agency, commission or board thereof from and

against any and all liability, losses and physical damage to

property and bodily injury or death to persons, including

payments made under Workmen’s Compensation laws which

may arise out of or be caused by the erection, construction,

replacement, removal, maintenance and operations of the

party of the second part’s community antenna television and

audio communications service and resulting from or by any

negligent fault or misconduct on its part or by its agents,

officers, servants and employees and it shall carry a policy

or policies of liability insurance indemnifying all loss, dam-

age or destruction of property to the extent of $25,000.00

and as to any one person, city, agency or board in the

amount of $100,000.00 and as to any one accident resulting

in liability on account of injury to or ‘death of one person

and in the amount of $300,000.00 as to any one accident as

it may relate to damages to persons and property.

9, The party of the second part shall, in the case of any

opening or obstruction in the streets or other public ways

of the City of Owensboro made by it in the course of con-

struction, operation or removal of its installations, guard

such activity by the placement of adequate barriers, fences

or boardings, the bounds of which during the periods of

dusk and darkness shall be clearly designated by warning

lights. In the case of any disturbance or damage to any

streets or public ways occurring in the course of erection,

installation, construction, reconstruction, replacement, re-

moval, repair, maintenance or operation, the party of the

second part shall properly repair and restore same at its

own expense. In the event that at any time the party of

the first part shall lawfully elect to alter any street, alley

or other public way, to party of the second part shall, upon

reasonable notice, remove or relocate its poles, wires, cables,

conduits or other fixtures at its own expense.

—

10. The party of the second part shall include in its cov-

erage to its customers any telecast originating from a

transmitter located within a forty (40) air mile radius from

the City of Owensboro, Kentucky, provided that such tele-

casts effect either a Grade A, or Grade B, contour in the

City of Owensboro as indicated in the current edition of

Television Factbook, or any other authoritative publication

carrying such designation. It is further agreed and under-

stood that notwithstanding any of the foregoing, the party

of the second part shall at all times include within its cov-

erage to its customers telecasts from all of the major net-

works.

11. The party of the first part may declare a forfeiture of

the franchise herein granted in the event of substantial vio-

lation of any of the terms hereof upon written notice to the

party of the second part specifying the nature of the viola-

tion unless such violation is corrected or ceases to exist

within sixty (60) days from the date of the written notice

of same to the party of the second part. Such forfeiture

shall be by resolution of the Board of Commissioners of

the City of Owensboro, Kentucky.

12. The party of the second part shall, within sixty (60)

days from the date hereof, make proper application to the

Federal Communications Commission and to any and all

other governmental agencies, both state and federal as is

provided by law, for any permits, licenses or approvals

necessary to construct, maintain and operate the system.

The party of the second part sha!l commence the construc-

tion of the system herein at a reasonable time from the

securing of such permits, licenses and approvals and shall

prosecute such construction with due dilligence; it being

understood, as a condition of this franchise, that the con-

struction of such system shall be completed to the extent

of making available community antenna service to substan-

tially all of the citizens of Owensboro, Kentucky, on or be-

fore two (2) years from the date hereof or this franchise

shall be and become null and void without notice or further

act by the party of the first part. For cause, in its sole

diseretion, the Board of Commissioners of the City of

Owensboro, Kentucky, may extend said two (2) year dead-

line from time to time upon written application for same by

the second party at least sixty (60) days prior to said dead-

line or extension thereof.

13. The franchise, right, privilege and power herein

granted, together with all of the terms and conditions

hereof, shall extend and apply to the successors and assigns

of the party of the second part, however, no assignment of

same may be made, except by operation of law, until said

assignment has been approved by a resolution of the Board

of Commissioners of the City of Owensboro, Kentucky,

which approval shall not be unreasonably withheld. In the

event such assignment takes place with such consent, then

immediately upon the delivery to the City of Owensboro

of the aforesaid agreement of assignment, duly executed by

the assignee, all of the rights, obligations and privileges

herein granted to the second party shall forthwith devolve

upon the assignee who shall in all respects stand in the place

and stead of the original corporation hereunder. In the

event the party of the second part, or its successors or

assigns shall be adjudged bankrupt or placed in receiver-

ship, the party of the first part may, at its option, declare

the rights herein granted to be forfeited and terminated.

14. As part of the consideration for the rights and priv-

ileges herein granted, the party of the second part agrees

to provide one free drop, with no monthly service charge

to the City Hall building, fire and police stations, public

library and to all public and parochial primary and secon-

dary schools located within the City of Owensboro, Ken-

tucky, which are passed by a cable.

15. It is agreed and understood that the party of the sec-

ond part shall not erect its receiving tower in an area of

Daviess County, Kentucky, that will interfere in any man-

ner with aircraft approaches to the Owensboro-Daviess

County Airport and shall secure approval of such location

from the F.A.A. prior to constructing such receiving tower.

16. In the event any section, clause, paragraph or provi-

sion of this grant shall be declared invalid by a court of

competent jurisdiction, such invalidity shall not effect the

validity of this grant as a whole, or any part thereof, other

than the part declared invalid.

IN TESTIMONY WHEREOF, witness the signatures

of the parties hereto on this the day and date first herein-

above written.

City of Owensboro, Kentucky

By /s/ Dugan Best

Mayor

Attest:

/s/ Adelle Shelton

City Clerk

(Seal)

Top Vision Cable Company, Inc.

of Kentucky

By /s/ Harold R. Sagraves

Vice-President

STATE OF KENTUCKY

SCT.

CITY OF OWENSBORO

The undersigned as City Clerk of the City of Owensboro,

Kentucky, hereby certifies that the above is a true copy of

Franchise Agreement as same appears on the records of the

City of Owensboro, of which records the undersigned is

legal custodian.

This July 24, 1970.

/s/ Adelle Shelton

City Clerk

EXHIBIT 4

RESOLUTION NO. 56-70

RESOLUTION DENYING REQUEST FOR EX.

TENSION OF TIME TO COMPLETE SYSTEM

AND CONCEDING THE INVALIDITY OF SEC.

TION 2 OF THE FRANCHISE AGREEMENT OF

TOP VISION CABLE COMPANY, INC. PROVID-

ING FOR PAYMENT OF 26% OF ITS GROSS

PROCEEDS.

WHEREAS, the Top Vision Cable Company, Ine. of

Kentucky agreed to complete the construction of a CATV

system in the City of Owensboro to the extent of making

available to substantially all the citizens of Owensboro

CATV service on or before December 17, 1967, and,

WHEREAS, the City of Owensboro, pursuant to writ-

ten application of Top Vision Cable Company, Inc., has

extended the time for completion of said system to Decem-

ber 20, 1970, and,

WHEREAS, on the 4th day of November, 1970, the said

Top Vision Cable Company, Inc. did deliver to the City a

written request bearing date of October 20, 1970, for an

extension of an additional one year period from December

20, 1970, for the completion of said system, and,

WHEREAS, the City of Owensboro does not deem fur-

ther extension of time for the completion of said system

to be in the interests of the citizens of Owensboro, and,

WHEREAS, the City of Owensboro wishes to officially

concede and agree with the position taken by Top Vision

Cable Company, Inc. that the agreement of said company

to pay the City 26% of the gross income of the Top Vision

Cable Company, Inc. derived in the City of Owensboro in

consideration of the franchise agreement it holds is invalid

under the interstate commerce clause of the United States

Constitution,

—

NOW, THEREFORE, BE IT RESOLVED BY THE

BOARD OF COMMISSIONERS OF THE CITY OF

OWENSBORO, KENTUCKY, AS FOLLOWS:

SECTION 1. The request of Top Vision Cable Com-

pany, Inc. for an extension of time from and after Decem-

ber 20, 1970, for the substantial completion of its CATV

system in the City of Owensboro is hereby denied.

SECTION 2. The City of Owensboro does hereby of-

ficially declare its concession to and agreement with the

position of Top Vision Cable Company, Ine. that its agree-

ment to pay to the City 26% of the gross proceeds realized

by it from the operation of a CATV system in the City of

Owensboro is invalid and unenforceable under Article I,

Section 8, Clause III of the Constitution of the United

States.

Introduced, publicly read, rule suspended, and finally

adopted this 6th day of November, 1970.

/s/ Irvin Terrill

Mayor

Attest:

/s/ Adelle Shelton

City Clerk

STATE OF KENTUCKY

COUNTY OF DAVIESS

I, Adelle Shelton, City Clerk of the City of Owensboro,

Kentucky, hereby certify that the above is a true copy of

Resolution No. 56-70 as finally approved by the Board of

Commissioners of the City of Owensboro, Kentucky, on

November 6, 1970, as same appears of record in my office,

of which records I am legal custodian.

This November 10, 1970.

/s/ Adelle Shelton

City Clerk

EXHIBIT 5

In the

UNITED STATES DISTRICT COURT

For the Western District of Kentucky

at Owensboro

Civil Action No. 2519

Tor Vision Casuz,Inc. - - - - - Plaintiff

Crry or Owenssoro, Kentucky, Er Au. - Defendants

MEMORANDUM AND ORDER

In October, 1965, the Board of Commissioners of the

City of Owensboro, Kentucky, enacted Ordinance No. 63-65

empowering the City Manager of Owensboro to advertise

and sell “a franchise authorizing the purchaser thereof to

use the public ways, streets, highways, bridges or public

places of the City of Owensboro, Kentucky, for the purpose

of supplying community antenna television and audio tele-

vision and radio signals to the public”. Consideration for

the franchise was to be a sum equal to the cost of advertis-

ing and selling the franchise, plus a percentage of the pur-

chaser’s gross income derived from within the City of

Owensboro. Plaintiff, a Kentucky Corporation, obtained

the franchise with a bid of 26% of its gross income. The

original contract between the parties called for substantial

completion of the CATV system within two years. How-

ever, on written application of plaintiff, the City extended

the completion date to December 20, 1970.

Early in 1970 the Court of Appeals for the Sixth Circuit

held that two ordinances substantially similar to the Owens-

boro Ordinance were unconstitutional because they imposed

a gross receipts tax upon proceeds from interstate com-

meree. Wonderland Ventures, Inc. v. City of Sandusky,

Wonderland Ventures, Ine. v. City of Fremont, 423 F. 2d

548 (6th Cir. 1970). Thereafter, plaintiff filed an action in

this Court seeking a declaration that Ordinance 63-65 is

unconstitutional and a determination of the rights and lia-

bilities of the parties under the 1965 agreement.

On November 6, 1970, the Board of Commissioners of

the City of Owensboro approved Resolution No. 56-70

wherein it was conceded that the provision of Ordinance

No. 63-65 calling for payment to the City of a certain per-

centage of the franchise purchaser’s gross income “is in-

valid and unenforceable under Article I, Section 8, Clause

III of the Constitution of the United States”. Defendants

have now filed a motion to dismiss the complaint for lack

of jurisdiction over the subject matter on the ground that

there is no disagreement between the parties regarding the

only federal question raised by the complaint. In its re-

sponse to the motion to dismiss plaintiff urges us to declare

Ordinance No. 63-65 unconstitutional and to reach the ques-

tions of Kentucky law under the theory of pendent juris-

diction.

Section 2201 of Title 28, United States Code, requires

that in every suit for a declaratory judgment an actual con-

troversy exist between the parties. In this section the term

“eontroversy” is used in its constitutional sense. U. S.

Const. Art. III, §2, el. 1; Public Service Commission of

Utah v. Wycoff Co., Inc., 344 U. S. 237 (1952); Muller v.

Olin Mathieson Chemical Corp., 404 F. 2d 501 (2nd Cir.

1968). It is hornbook law that a federal court has no power

——

74 "

to hear claims that do not satisfy the “ease or controversy”

requirement of the Constitution. United Public Workers of

America (C.1.0.) v. Mitchell, 330 U. S. 75 (1947) ; ; Muskrat

v. United States, 219 U. S. 346 (1911). If for any reason

a federal court lacks jurisdiction to hear the only federal

claim before it, absent diversity of citizenship it cannot

reach other questions of state law raised by the complaint.

United Mine Workers of America v. Gibbs, 383 U. S. 715

(1966) ; California Water Service Co. v. Redding, 304 U.S.

252 (1938).

Questions regarding the “case or controversy” require-

ment most commonly arise when the facts indicate that the

interests of the parties are not sufficiently adverse. Usu-

ally it is clear from the pleadings that the parties disagree

on some point of law. In the case at bar, curiously enough,

the usual situation is reversed. While the pleadings and

motions clearly indicate that the interests of the parties are

adverse, both sides apparently are in complete agreement

regarding the only federal question raised.

Counsel have cited no cases directly on point in their

supporting memoranda, and we also have been unable to

find any. However, after careful consideration, we have

concluded that neither the framers of the Constitution nor

the Congress could have intended us to rule on a question

of constitutional law concerning which no disagreement

exists between the parties, merely for the purpose of reach-

ing additional state law questions under the theory of

pendent jurisdiction. State issues predominate in this case,

and we think that their resolution should be left to the

courts of Kentucky. Accordingly, we hold that no actual

controversy exists between the parties as to the only federal

question raised by the complaint, and that therefore we lack

jurisdiction to rule on both the constitutionality of Ordi-

nance No. 63-65 and on the rights and liabilities of the par-

ties under Kentucky law.

In view of our disposition of this case it is unnecessary

to rule.on defendants’ motion to dismiss for failure to state

a claim upon which relief can be granted. Defendants’

motion to dismiss for lack of jurisdiction over the subject

matter is SUSTAINED.

November 19, 1970

/s/ James F. Gordon

United States District Judge

Copies to:

Hon. Joseph H. McKinley

Hon. E. Stratford Smith

Hon. Hugh D. Moore

EXHIBIT 6

RESOLUTION NO. 60-67

RESOLUTION AUTHORIZING EXTENSION OF

TIME FOR COMPLETION OF CATV SYSTEM

IN OWENSBORO.

WHEREAS, the Top Vision Cable Company, holder of

a CATV Franchise for the City of Owensboro, has re-

quested the Board of Commissioners by letter dated Oc-

tober 5, 1967, that the two year period provided for in its

franchise during which its CATV system shall be com-

pleted, be extended for an additional twelve months due to

its operations being halted by hearing currently pending

with the Federal Communications Commission; and

WHEREAS, the Board of Commissioners is aware of

the matters now pending between the Top Vision Cable

Company and the Federal Communications Commission and

deem said request for an extension of time to be reasonable ;

NOW, THEREFORE, BE IT RESOLVED BY THE

-BOARD OF COMMISSIONERS OF THE CITY OF

OWENSBORO, KENTUCKY, AS FOLLOWS:

SECTION 1. That the request of the Top Vision Cable

Company for a twelve (12) month extension of the time

within which the construction of its system shall be com-

pleted to the extent of making available community antenna

service to substantially all of the citizens of Owensboro be,

and the same is hereby granted.

Introduced, publicly read, rules suspended and finally

approved on one reading this October 6, 1967.

(s) Irvin Terrill

Mayor Pro Tem

Attest:

(s) Adelle Shelton

City Clerk

October 5, 1967

Board of Commissioners

City of Owensboro, Kentucky

Max N. Rhoads, City Manager

Re: CATV Franchise

Completion Date

Gentlemen:

Referring to Article 12 in our Franchise granted Decem-

ber 17, 1965, it states “that the construction of such sys-

tem shall be completed to the extent of making available

community antenna service to substantially all of the citi-

zens of Owensboro, Ky., on or before two (2) years from the

date hereof or this franchise shall be and become null and

void without notice or further act by the party of the

first part. For cause, in its sole discretion, the Board of

Commissioners of the City of Owensboro, Kentucky, may

extend said two (2) year deadline from time to time upon

written application for sarae by the second party at least

sixty (60) days prior to said deadline or extension thereof.”

Due to circumstances beyond our control, a situation

you gentlemen are well aware of has hindered us from con-

struction work as we had planned. At the present time we

have 55 miles of system in operation and have another 100

miles to complete.

As per the provision made in our franchise, we are ask-

ing for an extension of 12 months from the date the FCC

grants us @ permanent waiver.

Very truly yours,

Drexel V. Bates

Chairman of the Board

DVB:jd

EXHIBIT 7

RESOLUTION NO. 66-68

RESOLUTION GRANTING EXTENSION OF TIME

TO DECEMBER 20, 1970 FOR CONSTRUCTION OF

CATV SYSTEM WITHIN CITY OF OWENSBORO,

KY.

WHEREAS, the City of Owensboro has heretofore

granted to Top Vision Cable Company, Inc. the Franchise

created by Ordinance No. 63-65, which provides for the op-

eration of a CATV system in the City of Owensboro, and

WHEREAS, Section 12 of said Franchise provides that

the Board of Commissioners of the City of Owensboro may,

in its discretion for cause, extend the time therein specified

for the completion of said system within the City, and

WHEREAS, since the granting of said Franchise the

Federal Communication Commission has adopted regula-

tions which would adversely affect the contemplated op-

eration of said system within the City, and

WHEREAS, the said Top Vision Cable Company, Inc.

has agreed to institute proceedings before the Federal Com-

munication Commission in an effort to relieve the CATV

System in the City of Owensboro from the operation of

certain restrictive regulations of said Commission, said pro-

Bs 2

ceedings being novel in character and constituting a “test

case”, and

WHEREAS, the Board of Commissioners deem the un-

foreseen stringent regulation of the Federal Communica-

tion Commission now in force and the proposed proceedings

challenging them, sufficient cause for granting the written

application of Top Vision Cable Company, Inc. for an ex-

tension of time within which to complete its system within

the City.

NOW, THEREFORE, BE IT RESOLVED BY THE

BOARD OF COMMISSIONERS OF THE CITY OF

OWENSBORO, KENTUCKY, AS FOLLOWS:

SECTION 1. Top Vision Cable Company, Inc. is hereby

granted an extension of time to and including December

20, 1970, to substantially complete construction of a CATV

system within the City of Owensboro as provided in the

Franchise from the City for said system heretofore granted.

Introduced, publicly read and approved on one reading

this December 20, 1968.

/s/ C. Waitman Taylor, Jr.

Mayor

Attest:

/s/ Adelle Shelton

City Clerk

October 5, 1967

Board of Commissioners

City of Owensboro, Kentucky

Max N. Rhoads, City Manager

Re: CATV Franchise

Completion Date

Gentlemen:

Referring to Article 12 in our Franchise granted De-

cember 17, 1965, it states “that the construction of such

system shall be completed to the extent of making avail-

able community antenna service to substantially all of the

citizens of Owensboro, Ky., on or before two (2) years from

the date hereof or this franchise shall be and become null

and void without notice or further act by the party of the

first part. For cause, in its sole discretion, the Board of

Commisioners of the City of Owensboro, Kentucky, may

extend said two (2) year deadline from time to time upon

written application for same by the second party at least

sixty (60) days prior to said deadline or extension thereof.”

Due to circumstances beyond our control, a situation you

gentlemen are well aware of has hindered us from con-

struction work as we had planned. At the present time we

have 55 miles of system in operation and have another 100

miles to complete.

As per the provision made in our franchise, we are

asking for an extension of 12 months from the date the

FCC grants us a permanent waiver.

Very truly yours,

Drexel V. Bates

Chairman of the Board

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.