the plaintiffs nevertheless retain their unimpeded freedom to communicate whatever it is they wish to communicate to the citizens of Montgomery. If Storer Cable loses some of the programming it desires because its program suppliers choose to leave the market rather than comply with a valid law, "the statute results," at most, "in an infringement upon plaintiff's profits, not its First Amendment rights." National Market Reports, Inc. v. Brown, 443 F. Supp. 1301, 1304 (S.D.W.Va.1978).
C. Contracts Clause
In addition to their other constitutional claims, the plaintiffs assert that Ordinance 48-90 violates the contracts clause of the United States Constitution by invalidating the agreements in which Storer Cable is the exclusive exhibitor of certain programs in the Montgomery area. Unlike some of the other plaintiffs' other claims, this contention goes to the heart of the factual disputes between the parties and thus the court cannot resolve these questions on the present record.
Article I, § 10, clause 1 of the United States constitution prohibits state laws "impairing the Obligation of Contracts." As is well settled, the clause is not read literally to invalidate all state laws which have the effect of modifying the legal import of private contracts. Keystone Bituminous Coal Ass'n v. DeBenedictis, 480 U.S. 470, 502-03, 107 S. Ct. 1232, 1251, 94 L. Ed. 2d 472 (1987). Instead, contracts clause analysis hinges upon distinguishing between legitimate exercises of state police power and illegitimate attacks by the state on the private ordering of contractual obligations and remedies for the benefit, not of society, but of special interests. See Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U.S. 400, 412, & n. 13, 103 S. Ct. 697, 705, 74 L. Ed. 2d 569 & n. 13 (1983); Exxon Corp. v. Eagerton, 462 U.S. 176, 189-91, 103 S. Ct. 2296, 2305-06, 76 L. Ed. 2d 497 (1983). As the Supreme Court has explained: "The Contract Clause does not deprive the States of their 'broad power to adopt general regulatory measures without being concerned that private contracts will be impaired, or even destroyed, as a result.'" Id. at 190, 103 S. Ct. at 2305 (quoting United States Trust Co. v. New Jersey, 431 U.S. 1, 22, 97 S. Ct. 1505, 1517, 52 L. Ed. 2d 92 (1977)). Therefore, laws which pose generally applicable rules of conduct designed to advance a "broad societal interest" are of little constitutional concern under the clause, while rules "limited in effect to contractual obligations and remedies" must be examined more closely. Id. at 191, 103 S. Ct. at 2306 (citation omitted).
To assist courts in effectuating the values inherent in the contracts clause, the Supreme Court has devised a three-part test for evaluating state laws under the clause. First, the party bringing the constitutional challenge must clearly identify its contractual right which has been impaired and establish the degree of impairment to its contractual relationship. Keystone Bituminous, 480 U.S. at 504, 107 S. Ct. at 1251-52. Second, the state has the burden of establishing the law's purpose. Energy Reserves, 459 U.S. at 411-12, 103 S. Ct. at 704-05. In conducting the second step of the inquiry, courts employ a "sliding scale" of scrutiny in which the severity of the impairment found in step one increases the level of scrutiny to which the legislation will then be subjected in the step two. Id. at 411, 103 S. Ct. at 704. Should the legislation operate to "substantially" impair a contractual relationship, the legislation must be justified by a "significant and legitimate public purpose . . . such as the remedying of a broad and general social or economic problem." Id. at 411-12, 103 S. Ct. at 704-05 (citation omitted). If the state satisfies the second step, the next inquiry is whether the "adjustment of the rights and responsibilities of contracting parties [is based] upon reasonable conditions and [is] of a character appropriate to the public purpose justifying [the legislation's] adoption." Keystone Bituminous, 480 U.S. at 505, 107 S. Ct. at 1252 (quoting Energy Reserves, 459 U.S. at 412, 103 S. Ct. at 704) (alterations in original). Unlike in the second step, the court in the third step, when private contracts are involved, should "properly defer to legislative judgment as to the necessity and reasonableness of a particular measure." Keystone Bituminous, 480 U.S. at 505, 107 S. Ct. at 1252 (dating Energy Reserves, 459 U.S. at 413, 103 S. Ct. at 705). Therefore, regardless of the level of scrutiny employed in determining a statute's purposes, the legislature's choice of means must only be reasonable in relation to those goals. See Ass'n of Surrogates v. State of N.Y., 940 F.2d 766, 771 (2nd Cir. 1991), cert. denied, U.S. , 117 L. Ed. 2d 107, 112 S. Ct. 936 (1992).
1. Degree of Impairment
First of all, for the purposes of this analysis, the court will assume that Ordinance 48-90 does act to ban the components of the plaintiffs' licensing agreements which grant Storer Cable the exclusive rights to exhibit certain programming.
Even with this assumption, however, there is a significant factual dispute over the importance of these exclusivity clauses to the plaintiffs' overall contractual relationships. The plaintiffs have introduced testimony to the effect that, "In many cases, exclusivity is the cornerstone of successful programming because it establishes image
and desirability, viewer habit and loyalty, and predictability for advertisers." However, the plaintiffs have failed to present a detailed portrait of how critical the exclusivity provisions are to the contracts and relationships at issue in this case. Without this information the court cannot determine just how substantial a part of the contracts the exclusive licensing provisions are. See Keystone Bituminous, 480 U.S. at 504 n. 31, 107 S. Ct. at 1252 n. 31. The defendants, in this regard, point to the terms of the contracts themselves to demonstrate that the exclusivity provisions were not crucial elements of the parties' agreements. For example, they submit that the contracts make no mention of extra consideration paid in exchange for the exclusivity rights and that the contracts are completely severable, indicating that overall contractual relationships would be only marginally affected by the potential invalidation of the exclusivity provisions. Additionally, the defendants have raised the inference that the exclusive agreements were executed in haste because the plaintiffs were fully aware of pending federal legislation which would have barred their enforcement. See Energy Reserves, 459 U.S. at 411, 103 S. Ct. at 704 ("state regulation that restricts a party to gains it reasonably expected from the contract does not necessarily constitute a substantial impairment.") A more developed factual record is necessary before the court can fully evaluate how much Ordinance 48-90 upset the plaintiffs' reasonable expectations and the degree of impairment the ordinance imposes upon the contractual relationships in question.
2. Ordinance's Purpose
Because the degree of impairment determines the level of scrutiny applied to the statute's purpose, the court at this point cannot accurately evaluate the ordinance's justifications. For example, should the level of impairment be relatively slight, the court would be compelled to accept the ordinance's proffered statements of purpose. In contrast, a higher level of scrutiny would demand that the court look behind the city's purported purposes and seriously entertain the plaintiffs' allegations that Ordinance 48-90 was not intended to serve broad interests but rather was meant to break up previously valid contractual relationships in order to favor a particular party who had been excluded. These allegations go to the very heart of the contract clause's protections. See Energy Reserves, 459 U.S. at 412, 103 S. Ct. at 705 ("The requirement of a legitimate public purpose guarantees that the State is exercising its police power, rather than providing a benefit to special interests").
Should exacting scrutiny be necessary, it would best be conducted at trial.
3. Ordinance's Relation to its Public Purpose
Similarly, the court cannot evaluate the reasonableness of the means by which Ordinance 48-90 achieves its purposes when its poses have not yet been established.
D. Due Process Clause
The plaintiffs claim that Ordinances 9-90 and 48-90 violate the due process clause because they are too vague. This argument does not require extended discussion. "To find a civil statute void for vagueness, the statute must be 'so vague and indefinite as really to be no rule or standard at all.'" Seniors Civil Liberties Ass'n Inc. v. Kemp, 965 F.2d 1030, 1036 (11th Cir. 1992), (quoting Boutilier v. INS, 387 U.S. 118, 123, 87 S. Ct. 1563, 1566, 18 L. Ed. 2d 661 (1967)). In K-S Pharmacies, Inc. v. Amer. Home Products Corp., 962 F.2d 728 (7th Cir. 1992), the Court of Appeals for the Seventh Circuit considered a vagueness challenge to a Wisconsin statute which barred sellers of pharmaceuticals from engaging in Price discrimination.
The reasoning of that court is particularly applicable to this case:
"Is Wisconsin's law vague? Of course it is. No statute so compact as § 100.31(2) resolves a fraction of the problems that attend any attempt to regulate price differences. Weighty treatises on the Robinson-Patman Act attest to the many subtle issues that arise. . . . Is Wisconsin's law unconstitutionally vague? Of course it is not. It is no worse than the Robinson-Patman Act itself, which resolves few of the many questions . . . so vital to implementation. . . . If § 100.31(2) is unconstitutionally vague, then the entire common law is unconstitutional because courts revise this non-text as they go along, and all laws calling for "reasonable" behavior in one another fashion are forbidden. Yet for centuries courts have thought it sufficient that specificity may be created though the process of construction. Clarity via interpretation is enough even when the law affects political speech . . . Section 100.31(2) sets an intelligible benchmark (no price discrimination) and leave the details to be worked out."
Id. at 732. As discussed above, the disputed language of Ordinances 9-90 and 48-90 is lifted substantially from federal statutes whose constitutionality is beyond dispute--for example, the Robinson-Patman and Clayton Acts, 15 U.S.C.A. §§ 13,
the Sherman Act, 15 U.S.C.A. §§ 1, 2;
and 47 U.S.C.A. § 202(a).
California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508, 515, 92 S. Ct. 609, 614, 30 L. Ed. 2d 642 (1972). The challenged ordinances set the same "intelligible benchmarks" as the federal statutes they are modeled upon, and this court therefore concludes that they are not unconstitutionally vague in violation of the due process clause.
E. Equal Protection Clause
The plaintiffs attack Ordinance 9-90 on equal protection grounds. Their arguments take two different tacks. First, they argue that the ordinance, though neutral on its face, treats Storer Cable differently from the "similarly situated" Montgomery Cablevision by prohibiting competitive conduct that only Storer Cable, as the incumbent cable operator, is interested or capable of pursuing. Second, they argue that the ordinance, by applying only to cable television service providers, is underinclusive, that is, it does not apply to other elements of the media.
Neither of these arguments has merit. The first, that Ordinance 9-90 has a disparate effect on Storer Cable, is frivolous. As discussed above, the ordinance bans price discrimination and predatory pricing practices in the provision of cable services. Although the court may accept Storer Cable's contention that it is the only cable operator in Montgomery with the market power to engage in such practices, it certainly does not follow that the equal protection clause bars the city of Montgomery from banning them. Ordinance 9-90 does not create any "suspect" classifications; in fact it does not create any classifications within the cable industry at all. See Plyler v. Doe, 457 U.S. 202, 216-17 & n. 14, 102 S. Ct. 2382, 2394-95, 72 L. Ed. 2d 786 & n. 14 (1982). It may have a greater impact on Storer Cable, but all laws which proscribe certain activities burden those who wish to engage in them more heavily than those who do not. The ordinance also does not impinge on a "fundamental right." Not only do businesses not have a "fundamental right" to engage in anti-competitive trade practices, the legislature certainly has a legitimate interest in curtailing them. FTC v. Superior Court Trial Lawyers Association, 493 U.S. 411, 110 S. Ct. 768, 107 L. Ed. 2d 851 (1990). Given the circumstances of the Montgomery cable market in 1990, the city certainly could have reasonably and rationally viewed price discrimination and predatory pricing by Storer Cable as a threat to the interests of the citizens of Montgomery. Ordinance 9-90 appears to serve as a reasonable remedy for this perceived harm. See Pennell v. City of San Jose, 485 U.S. 1, 14, 108 S. Ct. 849, 859, 99 L. Ed. 2d 1 (1988) ("we will not overturn [a statute that does not burden a suspect class or a fundamental interest] unless the varying treatment of different groups or persons is so unrelated to the achievement of any combination of legitimate purposes that we can only conclude that the legislature's actions were irrational") (quoting Vance v. Bradley, 440 U.S. 93, 97, 99 S. Ct. 939, 943, 59 L. Ed. 2d 171 (1979)) (alteration in original).
The plaintiffs' second argument, that Ordinance 9-90 should be subject to "strict scrutiny" under the equal protection clause because it burdens a fundamental right by facially singling out one segment of the media for special treatment is simply a rehashing of the plaintiffs' first amendment contentions with regard to Ordinance 48-90. Admittedly, the Minneapolis Star line of cases "lie at the intersection of the First Amendment's protection of free speech and the Equal protection Clause's requirement that government afford similar treatment to similarly situated persons." News America Pub., Inc. v. FCC, 269 U.S. App. D.C. 182, 844 F.2d 800, 804 (D.C. Cir. 1988).
However, this does not mean that the plaintiffs get two bites at the apple. Either a law creates an impermissible burden on a class of speakers under Minneapolis Star and its progeny or its does not. The reasons the court gave in deflecting a first amendment challenge to Ordinance 48-90 apply equally to Ordinance 9-90. Ordinance 9-90 will therefore, not be subjected to strict scrutiny, and a "compelling justification" will not be demanded of it.
Accordingly, for the above reasons, it the ORDER, JUDGMENT, and DECREE of the court that the motions for summary judgment filed by the parties on February 25, 1991, January 4, 1991, and December 17, 1990, are granted in part and denied in part to the extent that it is DECLARED as follows:
(1) The court has subject-matter jurisdiction over the plaintiffs' federal and state claims.
(2) The eleventh amendment to the United States Constitution is not a bar to the plaintiffs' state-law claims.
(3) Section 7 of City of Montgomery Ordinance 48-90, to the extent it raises a presumption that exclusive licensing contracts are illegal, is preempted by the Copyright Act, 17 U.S.C.A. §§ 101, et seq.; otherwise, Ordinance 48-90 is not preempted by the act.
(4) Ordinance 48-90 is not preempted by the copyright clause of the United States Constitution.
(5) Ordinance 48-90 is not preempted by the Lanham Act, 15 U.S.C.A. §§ 1051, et seq.
(6) The following language from City of Montgomery Ordinance 9-90 is preempted, except to the extent that it applies to basic cable service, by the Cable Communications Policy Act of 1984, 47 U.S.C.A. §§ 521, et seq.:
"No rate established shall afford any undue preference or advantage among subscribers, but separate rates may be established for separate classes of subscribers and rates may reflect the increased cost of providing service to isolated or sparsely populated areas."
The following additional language from Ordinance 9-90 is preempted by the act:
"In no event shall rates be established so low for any class of subscriber or for any geographic location as to prevent, discourage, restrict, or diminish competition in the furnishing of cable services."
Otherwise, Ordinance 9-90 is not preempted by the act.
(7) Ordinance 48-90 is not preempted by the Cable Communications Policy Act of 1984, 47 U.S.C.A. §§ 521, et seq.
(8) Ordinance 48-90 is not preempted by the Sherman Act, 47 U.S.C.A. §§ 1, 2.
(9) Ordinance 48-90 was properly enacted pursuant to Alabama Code 1975 § 11-45-1.
(10) Ordinance 9-90 does not violate the commerce clause in the United States Constitution.
(11) Ordinance 48-90 does not violate the first amendment to the United States Constitution.
(12) Ordinances 9-90 and 48-90 do not violate the due process clause in the fourteenth amendment to the United States Constitution.
(13) Ordinance 9-90 does not violate the equal protection clause in the fourteenth amendment to the United States Constitution.
DONE, this the 9th day of October, 1992.
Myron H. Thompson
UNITED STATES DISTRICT JUDGE