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LIBERTY CABLE CO. v. CITY OF NEW YORK

March 13, 1995

LIBERTY CABLE COMPANY, INC., SIXTY SUTTON CORP. and JACK A. VEERMAN, Plaintiffs, against THE CITY OF NEW YORK and RALPH A. BALZANO, Commissioner of Department of Information Technology and Telecommunications, THE NEW YORK STATE COMMISSION ON CABLE TELEVISION, WILLIAM B. FINNERAN, GERARD D. DI MARCO, BARBARA T. ROCHMAN, DAVID F. WILBUR, and JOHN PASSIDOMO, Defendants, THE UNITED STATES OF AMERICA, TIME WARNER CABLE OF NEW YORK CITY and PARAGON CABLE MANHATTAN, Defendants-Intervenors.


The opinion of the court was delivered by: LORETTA A. PRESKA

 LORETTA A. PRESKA, District Judge:

 Plaintiffs Liberty Cable Co., Inc. ("Liberty"), Sixty Sutton Corp. ("Sixty Sutton"), and Jack A. Veerman seek, inter alia, a declaratory judgment that 47 U.S.C. §§ 522(7) and 541(b) are unconstitutional. Before me now is their motion for a preliminary injunction against agencies and officials of New York State (the "State") and the City of New York (the "City") and defendants' motion to dismiss the complaint. For the reasons stated below, the complaint is dismissed as to certain claims and, as to the remainder, plaintiffs' motion for a preliminary injunction is denied.

 BACKGROUND

 I. The Statutory Scheme Governing Cable Television

 "Cable operators" in the City of New York are regulated on the federal, state, and city level. On the federal level, the Cable Communications Policy Act of 1984, 47 U.S.C. §§ 521 et seq. (the "Cable Act") regulates "cable operators." A "cable operator" is defined in pertinent part as "any person or group of persons . . . who provides cable service over a cable system and directly or through one or more affiliates owns a significant interest in such cable system." 47 U.S.C. § 522(5). A "cable system" is defined in pertinent part as:

 
a facility, consisting of a set of closed transmission paths and associated signal generation, reception, and control equipment that is designed to provide cable service which includes video programming and which is provided to multiple subscribers within a community, but such term does not include . . . a facility that serves only subscribers in 1 or more multiple unit dwellings under common ownership, control, or management, unless such facility or facilities uses any public right-of-way.

 47 U.S.C. § 522(7). The exclusion in the definition of a cable franchise has been referred to as the "private cable exemption."

 Aside from exceptions not relevant here, "a cable operator may not provide cable service without a franchise." 47 U.S.C. § 541(b). A "franchise" is "an initial authorization, or renewal thereof . . . issued by a franchising authority . . . which authorizes the construction or operation of a cable system." 47 U.S.C. § 522(9). A "franchising authority" is defined as "any governmental entity empowered by Federal, State, or local law to grant a franchise." 47 U.S.C. § 522(10). Thus, a cable operator must look to state and/or local authorities to obtain a franchise.

 However, not all types of cable systems need comply with this regulatory scheme. Under the "private cable exemption" of the Cable Act, a cable system is exempt from these franchising requirements if it meets two tests. First, it must be a system confined to commonly owned, controlled, or managed multiple unit dwellings. 47 U.S.C. § 522(7). Second, the system must not use any public right-of-way, for example, by placing coaxial cable or hard wire above or under public streets or rights of way. Id. Traditional cable systems, which are subject to regulation, deliver programming by means of coaxial cables that physically connect the cable operator with the subscriber and that generally are laid under city streets or along utility lines.

 Satellite master antenna television ("SMATV"), however, is a type of cable service that can fit within the private cable exemption and, when it does, need not obtain a franchise. See F.C.C. v. Beach Communications, 124 L. Ed. 2d 211, 113 S. Ct. 2096, 2099-2100 (1993) (citing In re Definition of a Cable Television Sys., 5 FCC Rcd 7638 (1990)). *fn1" SMATV provides cable service by means of a satellite dish and reception facilities installed on the grounds of private buildings. Under 47 U.S.C. § 522(7), a SMATV system that uses cable to link more than one multiple unit dwelling under common ownership, control, or management falls within the private cable exemption. However, a SMATV system that uses cable to link more than one multiple unit dwelling not under common ownership, control, or management does not fall within the private cable exemption and is subject to the regulation imposed by the Cable Act.

 After the federal regulations, the next levels of regulation a would-be cable operator in the City of New York must look to are the State and then the City. New York law provides that a cable television system may not commence or expand its operations without a franchise from the municipality in which it proposes to provide or expand service. N.Y. Exec. Law § 819(1) (McKinney 1982). In New York, a "cable television system" is defined as:

 
any system which operates for hire the service of receiving and amplifying programs broadcast by one or more television or radio stations or any other programs originated by a cable television company or by any other party, and distributing such programs by wire, cable, microwave or other means, whether such means are owned or leased, to persons in one or more municipalities who subscribe to such service.

 N.Y. Exec. Law § 812(2) (McKinney 1982 & Supp. 1995). New York law also authorizes municipalities to grant the franchises which are required of cable television systems:

 
A municipality shall have the power to require a franchise of any cable television system providing service within the municipality, notwithstanding that said cable television system does not occupy, use or in any way traverse a public street. The provision of any municipal charter or other law authorizing a municipality to require and grant franchises is hereby enlarged and expanded, to the extent necessary, to authorize such franchises.

 N.Y. Exec. Law § 819(2). Once a franchise has been awarded by the municipality, it must be confirmed by the New York State Commission on Cable Television ("NYSCC") to be effective. N.Y. Exec. Law § 821(1) (McKinney 1982).

 In New York City, the municipal franchising agency authorized by the New York City Charter to grant franchises to cable television systems is the Department of Information Technology and Telecommunications ("DOITT"), formerly the Department of Telecommunications and Energy. Chapter 48, § 1072(c). On October 13, 1993, the New York City Council authorized Resolution No. 1639 ("Resolution 1639"), which states in pertinent part that:

 
The Council authorizes the Department of Telecommunications and Energy to grant non-exclusive franchises for the provision of cable television services and the installation of cable television facilities and associated equipment on, over, and under the inalienable property of the City of New York.

 (Resolution 1639). *fn2"

 On February 24, 1995, after the plaintiffs had commenced the instant action, DOITT issued a notice of rulemaking regarding solicitations for franchises for the provision of cable service in a manner that does not use the inalienable property of the City (the "New Rulemaking"). (Second Bronston Aff. PP 1-2, Ex. A). *fn3" The notice stated, inter alia, that the public written comment period for the proposed rules will close on April 3, 1995, and a public hearing is scheduled for April 4, 1995. (Second Bronston Aff. P 3, Ex. A). The proposed rules also include deadlines for the submission of franchise applications, DOITT's review of such applications, and the preparation of agreements. (Second Bronston Aff. P 3, Ex. A). Agreements must be approved by the Franchise and Concession Review Committee and by the Mayor. (Second Bronston Aff., Ex. A, § 6-03).

 II. The Cable Services Provided By Liberty

 Liberty provides cable service in several different ways in the City, including the use of SMATV systems. (Price Aff. P 3). *fn4" Liberty receives satellite and broadcast television signals at its "head end" facility on East 95th Street in Manhattan. (Price Aff. P 5). These signals are processed and transmitted by microwave to reception antennae located on multiple unit buildings located throughout the greater metropolitan area. (Price Aff. P 5). Liberty's reception antennae deliver cable service to building residents using one of three configurations. (Price Aff. P 7).

 The first type of system employed by Liberty is known as the "Stand Alone System" configuration. The Stand Alone System utilizes a single microwave reception antenna to deliver cable service to the residents of the single building where the antenna is located. (Price Aff. P 8).

 The second system used by Liberty, referred to as the "Common System" configuration, utilizes a single microwave reception antenna located on the roof of a multiple unit dwelling to deliver cable service to two or more proximate multiple unit buildings under common ownership, control or management. (Price Aff. P 9). The building with the antenna is linked by coaxial cable to the other buildings, without using public property. (Price Aff. P 9).

 Under 47 U.S.C. § 522(7), Liberty's Stand Alone Systems and Common Systems are SMATV systems subject to the private cable exemption, not "cable systems." These two systems are classified as such because they meet the common ownership requirement set forth in that section and do not use the public right-of-way.

 The third system used by Liberty, and the one in controversy here, is Liberty's "Non-Common System" configuration. With the Non-Common System, a single microwave reception antenna is located on the roof of a multiple unit dwelling to deliver service to two or more multiple unit dwellings. (Price Aff. P 10). As with the Common Systems, the various buildings are linked with coaxial cable without using public property. Id. However, unlike Liberty's Common Systems, the Non-Common System links buildings which are not commonly owned, controlled, or managed. Id. Plaintiff Sixty Sutton is one such building. Id. The reception antenna that serves Sixty Sutton is located on River Tower, a building that is not commonly owned, managed, or controlled with Sixty Sutton. (Price Aff. P 11). Liberty constructed its Non-Common Systems, including the system at Sixty Sutton, during the period from January 1993 to August 1994. (Price Aff. P 12).

 III. The Administrative Proceeding

 On or about May 31, 1994, the NYSCC received a complaint from Time Warner Cable of New York City ("Time Warner") and Paragon Cable Manhattan ("Paragon") which requested an investigation into how Liberty provided cable service in Manhattan. (Grow Aff., Ex. 1). Time Warner and Paragon, both traditional cable system operators, alleged that Liberty, which represents itself as an SMATV company, was actually improperly operating as a "cable operator," as defined by the Cable Act, without a franchise in violation of state and federal law. Id.

 The NYSCC subsequently conducted an on-site investigation into Time Warner's charges against Liberty. Staff from the NYSCC conducted site inspections at two locations. At both locations, it was observed that a coaxial wire ran from one building to another, either across an alley or the rooftops of several other buildings. Each wire was also lashed to or ran alongside the wire of a franchised cable company. (Grow Aff. P 3, Ex. 3).

 In a letter to the NYSCC dated June 28, 1994, *fn5" Liberty acknowledged that Liberty was running cables among residential buildings on the same block. Liberty stated that many -- but not all -- of these buildings were under common ownership, management, or control. Liberty argued, however, that it was the City's policy that a franchise was unnecessary where cables did not use or cross public property and that because Liberty's cables did not use or cross public property, Liberty did not require a franchise. Liberty also stated that it wired its serviced buildings in such a fashion in reliance on the City's policy. (Grow Aff., Ex. 2).

 By Order to Show Cause dated August 23, 1994 (the "Order to Show Cause"), *fn6" the NYSCC directed Liberty to show cause by September 18, 1994, why it should not be determined to be a cable television system subject to the franchising and confirmation requirements of State law or, alternatively, why it should not be compelled to remove all interconnections by wire of buildings not commonly owned, controlled, or managed and be ordered to cease and desist from providing cable television services by means of such wires, until Liberty obtained a franchise and certificate of confirmation. The Order to Show Cause also provided that Liberty was entitled to be heard and present evidence relating to the allegations stated. (Grow Aff. P 7, Ex. 3).

 Liberty requested two extensions of time in which to respond to the Order to Show Cause, the first for a period of thirty days, extending Liberty's time to respond to October 19, 1994. (Grow Aff. P 8, Ex. 4). The request was granted. (Grow Aff. P 8, Ex. 5). Liberty's second request, made in a letter dated October 18, 1994, was for an extension of one hundred-eighty days. (Grow Aff. P 9, Ex. 6). Liberty explained that the reason for the extension was that Liberty was engaged in discussions with DOITT about obtaining a franchise and agreed not to construct any new Non-Common Systems during the one hundred-eighty day extension. Id. The NYSCC extended Liberty's time to respond to November 1, 1994. (Grow Aff. P 9, Ex. 7). On October 31, 1994, Liberty filed its Answer and Appearance to the Order to Show Cause, again requesting an adjournment in order to negotiate with DOITT. (Grow Aff. P 10, Ex. 9).

 Liberty, meanwhile, sent a letter dated October 28, 1994, to DOITT expressing Liberty's interest in applying for a franchise pursuant to Resolution 1639. (Grow Aff. P 10, Ex. 8). On October 31, 1994, DOITT informed the NYSCC that it was in receipt of Liberty's letter. (Grow Aff. P 11, Ex. 10). DOITT stated that it expected to issue a Request For Proposals ("RFP") *fn7" within the next few months. Id.

 On December 9, 1994, the first day of the administrative hearing, the NYSCC issued a standstill order (the "Standstill Order"). (Grow Aff. P 12). The Standstill Order required that:

 
there be no additional cable or closed transmission interconnections of buildings not commonly owned, controlled or managed and that in buildings where service was not currently being provided, that no new subscribers could be serviced through such hardware. Finally, Liberty was enjoined from energizing services at those buildings not commonly owned, controlled or managed presently connected by hard wire connecting that were not already energized.

 (Grow Aff. P 12, Ex. 11).

 IV. Proceedings In This Court

 On December 8, 1994, before the Commission's hearing began, Liberty, Sixty Sutton, and Bud Holman *fn8" filed a complaint in this Court which was subsequently amended on December 13, 1994. *fn9" On December 22, 1994, the plaintiffs applied for a temporary restraining order and preliminary injunction enjoining the defendants from enforcing or attempting to enforce 47 U.S.C. §§ 522(7) and 541 so as to require Liberty either (i) to cease serving subscribers in Liberty cable systems which serve more than one multiple unit dwelling not under common ownership, control or management and which do not use any public property or rights-of-way, i.e., Liberty's Non-Common Systems, or (ii) to obtain a City franchise as a condition of continuing to serve such Non-Common Systems. Liberty and Sixty Sutton also sought to enjoin defendants from continuing to enforce the Standstill Order. A temporary restraining order was granted which, by consent of the parties, was extended to and including March 10, 1995.

 In the meantime, Time Warner and Paragon moved to intervene in this action as defendants. The motion to intervene was granted on February 14, 1995. *fn10"

 The defendants have moved to dismiss the complaint on a variety of grounds, including ripeness and abstention. Extensive and useful oral argument was held on March 1, 1995 and March 3, 1995. For the reasons set forth below, defendants' motion to dismiss on the grounds of lack of ripeness is granted with respect to all of plaintiffs' claims except their equal protection claims; as to plaintiffs' equal protection claims, defendants' motions to dismiss are denied, and plaintiffs' motion for a preliminary injunction is denied. *fn11"

 DISCUSSION

 I. Ripeness

 The injunctive and declaratory remedies sought by Liberty and Sixty Sutton are "discretionary, and courts traditionally have been reluctant to apply them to administrative determinations unless these arise in the context of a controversy 'ripe' for judicial resolution." Abbott Laboratories v. Gardner, 387 U.S. 136, 148, 18 L. Ed. 2d 681, 87 S. Ct. 1507 (1967). Ripeness is a "constitutional prerequisite to exercise of jurisdiction by federal courts." Federal Election Comm'n. v. Central Long Island Tax Reform Immediately Comm., 616 F.2d 45, 51 (2d Cir. 1980) (citing Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240-41, 81 L. Ed. 617, 57 S. Ct. 461 (1937)). The rationale behind the requirement of ripeness is:

 
to prevent the courts, through avoidance of premature adjudication, from entangling themselves in abstract disagreements over administrative policies, and also to protect the agencies from judicial interference until an administrative decision has been formalized ...

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