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CIMINELLI v. CABLEVISION

February 22, 1984

ROBERT CIMINELLI d/b/a SMITHTOWN ELECTRONICS, SMITHTOWN ELECTRONIC, INC., Plaintiffs, against CABLEVISION, BROOKHAVEN CABLE TV SERVICE, INC., VIACOM CABLEVISION OF LONG ISLAND, INC., HUNTINGTON CABLE, INC., GROUP W. CABLE CORP., COX CABLE NEW YORK, INC., ADAMS RUSSELL CABLE VISION NASSAU, INC., LONG ISLAND CABLE TV COUNSEL, NEWSDAY CHANNEL, NEWSDAY, INC., DENNIS DILLON and PATRICK HENRY, Defendants.


The opinion of the court was delivered by: ALTIMARI

MEMORANDUM AND ORDER

ALTIMARI, D.J:

 By complaint dated June 10, 1983, plaintiff Robert Ciminelli d/b/a Smithtown Electronics (hereinafter "Ciminelli"), commenced the instant action against seven cable television companies operating on Long Island (hereinafter collectively referred to as the "cable companies"), Newsday, Inc., Newday Channel, the Long Island Cable T.V. counsel, and Dennis Dillon and Patrick Henry, respectively the District Attorneys of Nassau and Suffolk Counties.

 Pursuant to leave of the Court granted on January 10, 1984, on January 24, 1984, plaintiff amended his complaint to add two new causes of action, change the legal underpinning of one "old" cause of action, and otherwise conform his pleadings to his position in his papers and at oral argument before the Court. In addition, the amended complaint reflects the addition of Smithtown Electronics, Inc., as a plaintiff.

 THE AMENDED COMPLAINT

 For a first cause of action, plaintiffs allege that the cable companies require subscribers to "accept and use only those cable accessories provided by [them] on a rental basis." Comp. par. 220. This, they allege, "constitutes an illegal tying arrangement or requirement, the tying product being the cable and the tied product being the cable accessory." Par. 222. Plaintiffs allege that this arrangement "affords the cable companies a monopoly in the retail cable accessory market . . . thereby totally eliminating competition in the market and plaintiff of entry into and participating in the cable accessory market. . . ." Par. 224. This conduct is alleged to be violative of 15 U.S.C. sections 1, 14 and 15. For a second cause of action, plaintiffs allege that Ciminelli, as a subscriber to Viacom Cablevision of Long Island, Inc. ("Viacom"), is "permitted to use his privately owned converter and descrambler [but] nevertheless [has] to pay the same rate as subscribers who [are] provided cable accessories to rent from the cable companies." Par. 228. Plaintiffs allege that this conduct is violative of 15 U.S.C. Sections 1 and 14. Pars. 229, 102 and 103.

 For a third cause of action, plaintiffs allege that on or about April 12, 1983, Ciminelli, doing business as Smithtown Electronics, entered into a contract with Newday Channel, leasee of channels from other cable companies including Cablevision, Viacom, and Brookhaven, to purchase advertising for the cable accessories it offered for sale. Pars. 228-30, 232. These commercials subsequently were aired on May 1st, 2nd and 3rd of 1983. Plaintiffs allege that "[a]fter telecasting these commercials on [May 1st, 2nd and 3rd], the Newsday Channel refused to telecast them and canceled their advertising contract notwithstanding the fact that the contract . . . had in excess of 51 weeks before its expiration." Par. 234. Plaintiffs further allege that in January of 1984 they "sought to purchase advertising on the Viacom system for the sale of cable accessories at issue in this action, but excluding descramblers and decoders and was refused such permisison." Par. 235. Plaintiffs claim that "[t]he actions of Newsday, the Newsday Channel, Cablevision and Viacom" are the result of a conspiracy among said defendants to engage in a concerted refusal to deal with plaintiff for purposes of advertising for sale cable accessories in order to restrain competition between plaintiff as a competitor of Cablevision and Viacom in the cable accessory market." Par. 236.Plaintiffs allege that the above actions "constitute a conspiracy to impose a group boycott of plaintiff as the target of a conspiracy to restrain trade in the cable accessory market and is a per se violation of Section 1 of the Sherman [Act], 15 U.S.C. Section 1." Par. 237.

 For a fourth cause of action, plaintiffs allege that effective September 1, 1983, "[t]he legislature of the State of New York has enacted certain statutes which make it a crime to engage in the retail sale of cable accessory equipment," and which casts plaintiffs in criminal jeopardy for engaging in such sales." Pars. 239-40. Plaintiffs assert that the penal statute "eliminates the market for private purchase of cable accessories giving the cable companies a monopoly in the market for cable accessories," par. 242, and, therefore, is violative of the Supremacy and Commerce Clauses of the United States Constitution, and the Federal Antitrust Laws. Par. 250.

 For a fifth cause of action, plaintiffs allege that Smithtown Electronics, as a retailer of cable accessories, has been damaged by the cable companies' policy of not allowing a rate reduction to subscribers who use their own private cable accessory equipment. Plaintiffs allege that the above constitutes price discrimination in violation of Section 3 of the Clayton Act as amended by the Robinson Patman Act, 14 U.S.C. Section 13(a). Finally, plaintiffs' sixth cause of action alleges that Ciminelli failed to receive a price reduction from Viacom when he subscribed to its full line of service on the condition that he use his own cable accessory equipment. "Instead, [he] was charged the same rate as subscribers using accessories provided by the cable companies." Par. 266. Plaintiffs claim that the above constitutes price discrimination in violation of Section 3 of the Clayton Act as amended by the Robinson Patman Act, 15 U.S.C. Section 13(a).

 On the first and second causes of action, plaintiffs seek an injunction against the further enforcement of the alleged bying arrangement as well as, in the first cause of action, money damages. On the third cause of action, they seek damages for loss of reputation and good name, as well as loss of profit.On the fourth cause of action, plaintiffs seek a declaration that N.Y. Penal Law section 165.15(4) is violative of their civil rights and an injunction enjoining enforcement of the same. On the fifth and sixth causes of action, they seek injunctive and monetary relief. In addition, plaintiffs purport to bring the action, specifically counts one, two, five and six, on behalf of a class of which they are members.

 On January 10, 1984, the parties appeared in court for payment of all pending motions. Since we granted plaintiff leave to amend his complaint at that time, we also noted that to the extent appropriate, the pending motions would be deemed directed against the amended complaint. This memorandum and order constitutes our decision of the cross-motions for summary judgment on the fourth cause of action and the motions of defendants Henry and Dillon to dismiss.

 I.

 THE PARTIES" CROSS MOTIONS FOR SUMMARY JUDGMENT ON THE FOURTH CAUSE OF ACTION.

 The parties cross-move for summary judgment pursuant to Rule 56, Fed.R.Civ.P., with respect to plaintiffs' fourth cause of action which seeks a judgment declaring New York Penal Law section 165.15(4), as recently amended, pre-empted by the Sherman Act and the FCC's regulation of the cable industry. See 10A Wright, Miller and Kane, Federal Practice and Procedure, § 2768 at 753-54 (1983) ("Summary judgment is as available in [declaratory judgment] actions as in any others.") As for their relief, plaintiffs ask that the Court grant an injunction enjoining defendants Dillon and Henry from enforcing that law.

 In both their memorandum of law and at oral argument on January 10th, plaintiffs abandoned their claims that New York Penal Law § 165.15(4) deprived them of due process or equal protection of the laws, violated the Commerce Clause of the U.S. Constitution, and gave rise to a cause of action under the Civil Rights Act, 42 U.S.C. § 1983. Plaintiffs now maintain that in direct conflict "with the policies of Congress as expressed in the Sherman Act and Clayton Act antitrust laws, as well as the regulatory scheme imposed by the Federal Communications Commission," the statute grants the cable companies an unrestricted and unsupervised monopoly in the market for cable accessories. See also, Affidavit of Robert Ciminelli dated September 20, 1983, paragraphs 70-71, ("The provisions of Renal Law Section 165.15 sub. 4. . . . is alleged to be unconstitutional under the supremacy clause of the United States Constitution as being violative of the antitrust laws. . . . Plaintiff also seeks injunctive relief against prosecutions by the Nassau/Suffolk District Attorney. . . .") They suggest, therefore, that the statute cannot withstand attack under the Constitution's Supremacy Clause. It was in light of the above arguments that the Court granted plaintiff leave at oral argument to amend the complaint to conform to the claims actually being pursued.

 In response to plaintiffs' motion and in support of their cross-motion, defendants argue that "Section 165.15(4) represents an entirely appropriate exercise of the sovereign powers of the State of New York, and because that exercise of power in no way conflicts with any federal law or policy, plaintiff's motion should be denied and defendants' cross-motion for summary judgment dismissing the fourth claim granted."

 A. FACTS

 A concise description of the practices of and services offered by the cable companies is provided by the affidavit of Joshua Noah Koenig, Vice President and counsel to the New York State Cable Television Association and attorney for defendant Long Island Cable Television Council. (Affidavit of Joshua Noah Koenig in opposition to plaintiff's motion for class certification par. 1, hereinafter "Koenig Aff.").

 The cable companies in this action are in the business of offering television programming services to home subscribers pursuant to franchises granted by local municipalities and villages. (Koenig Aff. par. 4; N.Y. Exec. Law § 819 (McKinney 1982)).

 Subscribers are free to select the level and combination of services they wish to receive from the cable company, based, of course, on their viewing preferences and, more likely, on how much they wish to spend. To this end, the cable companies offer, as a minimum level of service, what is referred to as basic service. While the content of basic service varies from one cable company to another, it generally consists of local broadcast television signals, and local government and public access programming. (Koenig Aff. par. 7). It may also include distant broadcast stations and, moreover, news, sports, music and weather channels, and a channel for financial market reports. [Id. ] Finally, a number of cable companies install the subscriber's converter, see p.14 infra, as part of a basic service package. (Id.)

 For those subscribers who seek greater television viewing pleasure, additional or optional tiers of programming services are available, albeit at an additional charge. (Koenig Aff. par. 8). Thus, subscribers may purchase so-called premium or pay channels, such as Home Box Office or Cinemax. These pay services offer programs and features not otherwise available to television viewers, such as first-run movies, special entertainment programs, boxing and other programs. The available premium services vary from cable company to company. Moreover, subscription to these optional tiers necessitates, in most circumstances, installation of a converter, if heretofore no converter was had for basic services, or a different type of converter than that which was installed and used for proper reception of basic service. (Koenig Aff. par. 8-10).

 It is critical to understand the manner in which services are delivered or transmitted to subscribers. The cable companies furnish to home subscribers within their franchise area television programs by way of a network of coaxial cable. As described by Mr. Koenig:

 "The system begins at the headend, which is the central transmission point of each companies' cable system, from which cable television programming is disseminated to subscribers. The final branches of this cable network are the drop cables and other related equipment that run onto the subscriber's premises and link subscribers's television receivers to the system for those subscribers who request and pay for some level of cable television service."

 (Koenig Aff. par. 11). Included within the other related equipment category are devices commonly referred to as converters, decoders and descramblers. A converter increases the channel capacity of the standard television receiver beyond channels 2-13. Thus, it enables the subscriber's television set to receive a number of additional channels. More importantly, the converter also electronically screens out channels for which the subscriber has not so subscribed. In defendants' words, it "filters out" channels which the subscriber has not made a request and paid for. (Koenig Aff. par. 12).

 In addition, certain premium programming is transmitted by way of a scrambled or encoded signal. For reception of an intelligible picture, the subscriber requires, in addition to a converter, a device termed a decoder or descrambler. When a subscriber initially is hooked up to a cable system, the company installs the cable and equipment commensurate with the services that have been subscribed to. Therefore, as can be clearly gathered from the above, when a subscriber wishes to subscribe either to a higher or lower tier of programming, he must exchange his existing equipment for new equipment necessary for reception of the level of service that has been requested. (Koenig Aff. par. 13-14).

 B. NEW YORK PENAL ...


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