GILMORE, District Judge.
In this action, plaintiff Consolidated Television Cable Service, Inc. (Consolidated), a private for-profit corporation engaged in the business of providing cable television (CATV) service for the City of Frankfort, Kentucky, alleges that defendants, The City of Frankfort (City), Electric and Water Plant Board of the City of Frankfort, Kentucky, (Board), and Community Service, Inc. (Community), have violated the Federal Anti-Trust Laws and 42 U.S.C. § 1983. The antitrust claim is essentially that defendants have unlawfully conspired to prevent free competition between Consolidated and Community, and have conspired to and have created an unlawful monopoly for the provision of CATV services. The § 1983 claim alleges numerous civil rights violations, including denial of due process and infringement of First Amendment Rights.
Community is a nonprofit, nonstock corporation that also provides CATV service in Frankfort. In fact, since the early 1950's, Consolidated, or its predecessors, and Community have both serviced Frankfort. Since its inception, however, Community has had a special relationship with the City and the Board. Consolidated has long desired to be placed on an equal footing with Community.
This is actually the seventh lawsuit brought by Consolidated since 1960 in connection with the provision of CATV services in Frankfort, and the second time the dispute has been before this Court.
The district court granted summary judgment for defendants, dismissing the action, and holding that: 1) Consolidated's claim under 42 U.S.C. § 1983 is res judicata; 2) prior litigation estops Consolidated from arguing that Community is not an agency of the City and the Board, and the record reveals that Community is a de facto agency; and 3) defendants are immune from the antitrust claims under the state action exemption of Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943).
The district court summarized the pertinent facts as follows:
With reference to the § 1983 claim, the district court held that it was barred by collateral estoppel, if not by res judicata. We affirm on grounds of res judicata rather than on grounds of collateral estoppel.
Consolidated has had only one contract with the Board, which lasted from 1959 to 1965, and which was never renewed or extended. That contract gave Consolidated the right to use poles owned by the Board to erect its CATV system to service only that portion of the City known as East Frankfort. In 1960, Consolidated wanted to expand farther, but its request for a contract to allow it to use poles in other areas of the City that were being serviced by Community was turned down. Consolidated then filed suit in state court alleging that, by allowing Community to use all of the Board's poles in the City and denying the same right to Consolidated, the Board had acted in an arbitrary, capricious, and discriminatory manner. Eventually, the
Consolidated Television Service, Inc. v. Leary, 382 S.W.2d 78, 81 (Ky.1964).
In 1971, an agreement was entered into by Community and the Board to allow Community to extend its operations into East Frankfort, where previously Consolidated had operated exclusively, and to use poles owned by the Board. This precipitated a suit in the United States District Court for the Eastern District of Kentucky by Consolidated against the Board, the City, and Community, alleging unconstitutional impairment of contract, and violation of the due process and equal protection clauses of the Fourteenth Amendment. The action sought injunctive relief.
The district court dismissed the complaint, and this Court affirmed, stating: "[W]e agree with Judge Moynahan that the City's operation of its own CATV system does not violate any rights of Consolidated protected by the Constitution of the United States." Consolidated Television Cable Service, Inc. v. City of Frankfort, 465 F.2d 1190, 1193 (6th Cir.1972).
In the present action, Consolidated alleges that defendants denied Consolidated access to telephone poles so as to prevent it from offering cable television service in Frankfort, in violation of 42 U.S.C. § 1983, and the First, Fifth, and Fourteenth Amendments to the United States Constitution. The suit was filed in 1982, prompted by defendants' refusal to grant Consolidated's request for permission to expand its pole attachments throughout the City. According to Consolidated, a similar request had been rejected in the late 1970's on the grounds that defendants would not grant a contract to Consolidated in light of the ongoing litigation between the parties. Thus, Consolidated repeated its request in 1982, once all pending litigation was resolved.
The preclusive effect of a prior state court judgment is determined by looking to the law of that state. Kremer v. Chemical Construction Corp., 456 U.S. 461, 102 S.Ct. 1883, 72 L.Ed.2d 262 (1982). Similarly, the scope of a prior federal court judgment is governed by federal law. Cemer v. Marathon Oil Co., 583 F.2d 830 (6th Cir.1978). However, Kentucky courts and this Circuit define the doctrine of res judicata, also known as claim preclusion, essentially the same. Kentucky courts will find an action res judicata under the following circumstances:
Newman v. Newman, 451 S.W.2d 417, 419 (Ky.1970). (emphasis added). Or, as this Court stated in Vinson v. Campbell County Fiscal Court, 820 F.2d 194, 197 (6th Cir.1987), under res judicata, "a final judgment on the merits bars further claims by the parties on the same cause of action ..." including "issues which could have been but were not litigated in the [prior] proceeding ..."
Here, Consolidated for the first time raises a First Amendment claim, and again raises its Fifth and Fourteenth Amendment claims, albeit in a slightly different form. These claims could have been raised in the prior litigation in the two suits mentioned above in Federal and state court. Consolidated claims that defendants' treatment of
Consolidated's claim that it could not have brought its § 1983 claims in the prior litigation because it was not until the Supreme Court's Monell
The circumstances between the parties have not really changed over the past 35 years. Consolidated keeps asking for a contract to use the Board's poles and, except for the 1959-1965 contract, the Board has consistently rebuffed Consolidated. Two courts have looked at this matter, and have concluded there is no denial of constitutional rights. At some point, litigation must come to an end. Therefore, Judge Bertlesman's ruling that Consolidated's § 1983 action is res judicata is affirmed.
The district court next held that Community was a municipal agent, as opposed to a purely private actor, on three grounds: 1) collateral estoppel; 2) judicial estoppel based on the fact that Consolidated had actually argued in previous litigation that Community was an agent, and 3) that, as a matter of fact and law, Community is an agent, and cannot prove otherwise. This determination is critical to determining whether Community is entitled to state action immunity from the antitrust allegations. We agree with the district court that Community was a municipal agent, and not a purely private actor. We make this determination upon undisputed facts.
It is undisputed that the Board is a municipal corporation and that the Board, in the early 1950's, created Community. Since then, Community's form and method of operatiom has beem dictated by the City through the Board. It is true that the Board leaves "day-to-day" operations in the hands of those who run Community. But it is also a fact that Community exists at the pleasure of the Board, and the Board appoints one-half of Community's board of directors. In almost every lawsuit it has filed, Consolidated itself has admitted in its allegations that the contracts between the Board and Community recite that the Board "is the owner, and has ultimate control, of the television cable system." It is not for this Court to parse Kentucky state law to determine whether the Board and the City are permitted to provide for CATV service to citizens in Frankfort precisely in this manner. Kentucky law clearly authorizes municipal regulation of CATV services. Under the facts of this case, it is clear that the Board has ultimate control of Community, and that Community is a municipal agent and should be treated as such for
The district court ruled that all three defendants are entitled to state action immunity from the antitrust allegations. We agree.
The state action immunity doctrine was established in 1943 in Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943). There, the Court upheld, against an antitrust challenge, a California law establishing a cartel of private raisin producers. The Court recognized the anticompetitive nature of the state's program, but found it outside the reach of the federal antitrust laws because:
Id. at 352, 63 S.Ct. at 314.
In Town of Hallie v. City of Eau Claire, 471 U.S. 34, 105 S.Ct. 1713, 85 L.Ed.2d 24 (1985), the Court held that anticompetitive conduct by a municipality is protected by the state action exemption where the city's actions are authorized by state law even though the state does not compel or actively supervise the anticompetitive conduct, or expressly assert that the law is intended to have an anticompetitive effect. The municipality's actions need only be pursuant to a clearly articulated amd affirmatively expressed state policy. The Court said:
471 U.S. at 38-39, 105 S.Ct. at 1716-17 (citations omitted).
In Hallie, the Court found a sufficiently clear articulation of state authority for the City of Eau Claire to displace competition with local regulation in the language of the state's enabling legislation for local sewage systems. A group of unincorporated townships alleged that the City had violated the antitrust laws by monopolizing sewage treatment in the area, and by providing sewage treatment only to areas that were willing to be annexed by the city, and use its sewage collection services. However, the state legislation specifically allowed cities to refuse to provide sewer service to unincorporated areas. The Hallie court found the City immune under the Parker doctrine even though the statute did not expressly state that it authorized anticompetitive conduct since such conduct was a foreseeable result of giving the city power to refuse to serve unannexed areas.
Additional clarification of the doctrine has come from this Court in Riverview Investments, Inc. v. Ottawa Community Improvement Corp., 769 F.2d 324 (6th Cir.1985), modified 774 F.2d 162 (6th Cir.1985). The Court noted that the Supreme Court in Hallie, supra, and Southern Motor Carriers Rate Conference, Inc. v. United States, 471 U.S. 48, 105 S.Ct. 1721, 85 L.Ed.2d 36 (1985), had actually developed a two-prong test for state action immunity:
769 F.2d at 329 (emphasis in original). Of course, the second prong is not applicable in the instant case because we agree with the district court that, as a matter of law, all three defendants are municipal entities. See Section III, supra. In Riverview Investments, plaintiff challenged the denial of its application for industrial revenue bonds on antitrust grounds. This Court held that the statute granting cities authority to issue such bonds constituted clearly articulated state policy to displace competition, and, therefore, satisfied the first prong of the test "because decisions increasing or restricting competition, though not explicitly stated or recognized in the Ohio statute, are a logical and necessary outcome of the authority to grant industrial revenue bonds for the purpose of protecting jobs." Id.
In contrast, the state action exemption was found inapplicable in Community Communications Co., Inc. v. City of Boulder, Colorado, 455 U.S. 40, 102 S.Ct. 835, 70 L.Ed.2d 810 (1982) where the Court held that the Colorado Constitution's Home Rule provision conferring general authority to govern local affairs on municipal governments did not constitute a sufficiently "clear articulation" of a state policy to authorize anticompetitive municipal conduct so as to immunize such conduct in connection with awarding of a cable TV franchise. The Court emphasized: [T]he requirement of `clear articulation and affirmative expression' is not satisfied when the State's position is one of mere neutrality respecting the municipal actions challenged as anticompetitive...." Id. at 55, 102 S.Ct. at 843 (emphasis in original).
In this case, we find there exists under Kentucky law a "clearly articulated and affirmatively expressed" state policy to allow municipal regulation of the provision of CATV service, and, foreseeably, to displace competition. Unlike the mere Home Rule provision in Community Communications, supra, Kentucky law is not neutral, and clearly contemplates the type of anticompetitive conduct that is alleged in this case.
To begin with, Section 163 of the Kentucky Constitution requires public utilities to obtain a franchise, stating that a municipal utility must obtain "consent of the proper legislative bodies or boards of such city or town," before it may "construct its tracks, lay its pipes or mains, or erect its poles, posts or other apparatus along, over, under or across the streets, alleys or public
Although these constitutional and statutory provisions do not explicitly refer to CATV services, the highest court of Kentucky has interpreted them to cover services other than "railway, gas, water, steam heating, telephone, or electric light," Sec. 163, supra, including CATV services. In Ray v. City of Owensboro, 415 S.W.2d 77, 79 (Ky.1967), the court held these provisions "should not be restricted to those utilities enumerated, but applies to all utilities and services which might today be proper subjects for control, when the original intent and purpose of the act is considered...." Thus, in Ray, the court held the city had authority under the state constitution to prohibit operation of an ambulance service without first obtaining a franchise. And soon after Ray, the same court held that, pursuant to these provisions of the Kentucky constitution "the right to operate a community antenna television service [cable TV] in a city is a subject for franchise...." City of Owensboro v. Top Vision Cable Co., 487 S.W.2d 283, 287 (Ky.1972), cert denied, 411 U.S. 948, 93 S.Ct. 1926, 36 L.Ed.2d 410 (1973).
This Court has previously relied on the interpretation of state law by the courts of that state in concluding that a defendant is entitled to state action immunity from antitrust allegations. In City of North Olmsted v. Greater Cleveland Regional Transit Authority, 722 F.2d 1284 (6th Cir.1983), cert. denied, 467 U.S. 1205, 104 S.Ct. 2387, 81 L.Ed.2d 345 (1984), this Court held that the alleged monopolization of municipal bus lines by a regional transit authority was protected under the Parker doctrine, stating:
Id. at 1288. Moreover, displacement of competition in the provision of CATV service — and many other services other than those specifically enumerated in the constitutional provisions — is a foreseeable result of granting the city power to franchise public utilities or own and operate a municipal plant. See Hallie, supra; Riverview Investments, supra.
We conclude that defendants' actions in providing CATV service for the residents of Frankfort primarily through Community, although obviously having an anticompetitive effect to the detriment of Consolidated and others, are pursuant to "clearly articulated and affirmatively expressed" Kentucky state law. Therefore, we affirm the district court's ruling that defendants are entitled to state action immunity from antitrust allegations under Parker.
We reject Consolidated's argument that defendants are not entitled to state action immunity because they are not acting pursuant to state law in that they are not following the letter of the law by issuing a franchise.
This argument is unavailing. First, under KRS 96.010(2), supra, the Kentucky legislature has dispensed with the need to issue a franchise "if ... the city owns or desires to own and operate a municipal plant to render the required service...." Secondly, the argument overlooks the rationale for the state action exemption doctrine. Instead of denying state action immunity on grounds that the state legislature
The heart of the Parker doctrine is federalism — a desire to allow states as separate sovereigns to proceed unfettered by federal laws restricting their actions when they act within their proper sphere. As the Supreme Court observed in Hoover v. Ronwin, 466 U.S. 558, 574, 104 S.Ct. 1989, 1998, 80 L.Ed.2d 590 (1984), "The court did not suggest in Parker, nor has it suggested since, that a state action is exempt from antitrust liability only if the sovereign acted wisely after full disclosure from its subordinate officers...."
The Ninth Circuit has twice rejected the argument that state action immunity should be denied because defendants' action represented a misapplication of state law. Llewellyn v. Crothers, 765 F.2d 769 (9th Cir.1985); Boone v. Redevelopment Agency of City of San Jose, 841 F.2d 886 (9th Cir.1988). The court said in Llewellyn: "`Ordinary errors or abuses in the administration of powers conferred by the state should be left for state tribunals to control.' A contrary rule would tempt aggrieved parties to forego available state corrective processes in the hopes of obtaining the treble damages remedy conferred by the Sherman Act ..."
The foundation for immunity is federalism, and the sovereignty of state action must be respected without reference to the subjective motivations of persons implementing the state's policy. Any other analysis would unacceptably erode the state action doctrine, since plaintiff would only need to present a claim of bad faith to escape the doctrine. As one eminent commentator has observed:
Areeda, Antitrust Immunity for "State Action" after Lafayette, 95 Har.L.Rev. 435, 449-50 (1981).
As this Court has already indicated, whether the state authorizes provision of CATV service precisely as the arrangement among defendants contemplates is better left to the determination of state courts. Consolidated Television Cable Service, Inc. v. City of Frankfort, 465 F.2d 1190 (6th Cir.1972). Moreover, we conclude here that, under state constitutional and statutory provisions, defendants' manner of providing CATV services to the residents of Frankfort is reasonably foreseeable. Therefore, defendants are entitled to state action immunity from the antitrust allegations.
For the foregoing reasons, we affirm the district court's grant of summary judgment in favor of all three defendants.
WELLFORD, Circuit Judge, concurring.
The prior decision of this court authored by Chief Judge Harry Phillips, held, in effect, that the City of Frankfort, through its agent, Community, was operating a CATV system in that city, and held:
Consolidated Television Cable Service, Inc. v. City of Frankfort, Ky., et al., 465 F.2d 1190, 1192 (6th Cir.1972) (emphasis added).
The suit in that case by Consolidated did not take issue with the fact that, in effect, it was the City of Frankfort, through its agency, Community, that operated the CATV system competing with Consolidated. Constitutional challenges were raised in the earlier case to the actions of the City through extension of CATV services into the area previously served exclusively by Consolidated. I concur, therefore, with the holding that principles of res adjudicata bar this action by Consolidated. (I admit some difficulty, however, with the holding in Norrell v. Electric and Water Plant Board, 557 S.W.2d 900 (Ky.App.1977) that plaintiffs were similarly barred from challenging the City's authority to operate a CATV system under Kentucky law.)
I also concur with Judge Gilmore's decision that the district court was not in error on this record that Community was, in fact, an agent of the City of Frankfort for purposes of considering the Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943) state action immunity doctrine. I further agree that Kentucky law permits regulation of CATV service, and permits the municipality to subject CATV operations to a franchise arrangement. City of Owensboro v. Top Vision Cable Co., 487 S.W.2d 283 (Ky.1972), cert. denied, 411 U.S. 948, 93 S.Ct. 1926, 36 L.Ed.2d 410 (1973). I am not sure, however, that there is clearcut Kentucky law that deals with municipal supervision over, or ownership of, CATV operations, that is "clearly articulated and affirmatively expressed" within the meaning of Parker. There is authority from a United States district court in Kentucky that awarding an exclusive franchise to a CATV operator falls within the" `state action' exemption ... created in Parker v. Brown." Hopkinsville Cable TV, Inc. v. Pennyroyal Cablevision, Inc., 562 F.Supp. 543, 545 (W.D.Ky.1982).
The City of Frankfort has doubtless, for whatever reasons, seen fit to make Consolidated's position in that city very difficult. Consolidated has rigorously pursued legal claims in state and federal courts to seek to indicate its asserted rights. While I concur in the result reached in this case, I find the issues unclear and I fail to find authoritive Kentucky state decisions that confirm the right of municipal ownership and/or operation of a CATV system in Kentucky. See Consolidated Television Service, Inc. v. Leary, 382 S.W.2d 78 (Ky.1964).
In its 1971 federal court complaint, Consolidated affirmatively alleged: "Community Service, Incorporated ... since March 25, 1967, has been under the control of the Plant Board and now is an agency of that Plant Board ..." (App. 356).
This Court took special note of that allegation in its 1972 opinion, observing, "It seems to be undisputed that the actions of Community referred to in this opinion, in substance and practical effect, are the acts of the municipal corporation, the City of Frankfort." 465 F.2d 1190, n. 2. The allegation was necessarily accepted by this Court before reaching the merits of Consolidated's claims of constitutional violation by Community, together with the City and the Board, just as it is necessary to allege state action for a Section 1983 action.
Furthermore, in Norrell v. Electric & Water Plant Board, 557 S.W.2d 900 (Ky.App.1977), the state court affirmed judgment for these same defendants in an action alleging that the City and the Board lacked authority to own and operate a CATV system. The Norrell court concluded that plaintiffs were judicially estopped from asserting this claim in light of their allegation in federal court that "the City does have the power to run a CATV system itself as a part of its electrical plant facility, "and their contradictory, but often changing, allegations in state court. The Norrell court felt that plaintiffs were amending their allegations on this crucial issue to suit their current litigational aim and should no longer be permitted to "play fast and loose with the courts." This prior ruling of the state court that judicial estoppel precludes raising the issue of the legal status of Community as a municipal agent provides the basis for ruling, as did the district court, that Consolidated is collaterally estopped from raising that issue in this lawsuit.