LANSDOWNE ON THE POTOMAC HOA v. OPENBAND AT LANSDOWNE
(2013) No. 12-1925
United States Court of Appeals, Fourth Circuit.
ARGUED: Sanford M. Saunders, Jr., GREENBERG TRAURIG, LLP, Washington, D.C., for Appellants.
Christopher J. Wright, WILTSHIRE & GRANNIS, LLP, Washington, D.C., for Appellee.
ON BRIEF: Robert P. Charrow, Laura Metcoff Klaus, GREENBERG TRAURIG, LLP, Washington, D.C., for Appellants.
Steven A. Fredley, Mark D. Davis, WILTSHIRE & GRANNIS, LLP, Washington, D.C., for Appellee.
Sean A. Lev, General Counsel, Peter Karanjia, Deputy General Counsel, Jacob M. Lewis, Associate General Counsel, Matthew J. Dunne, Counsel, FEDERAL COMMUNICATIONS COMMISSION, Washington, D.C., for Amicus Supporting Appellee.
Before WILKINSON, MOTZ, and THACKER, Circuit Judges.
Affirmed by published opinion. Judge Wilkinson wrote the opinion, in which Judge Motz and Judge Thacker joined.
WILKINSON, Circuit Judge.
on the Potomac Homeowners Association sued OpenBand, a group of
interlocking entities that provides cable services to the Lansdowne on
the Potomac real estate development.1
The homeowners association alleged that OpenBand entered into a series
of contracts that conferred upon Open-Band the exclusive right to
provide video services to the development, in violation of an order of
the Federal Communications Commission prohibiting such exclusivity
arrangements. The district court agreed, declaring the challenged
provisions null and void and permanently enjoining their enforcement.
Because the contract provisions prohibit competing cable providers from
accessing the Lansdowne development in patent violation of the FCC's
Order, we affirm the judgment of the district court.
1992, Congress enacted the Cable Television Consumer Protection and
Competition Act ("1992 Cable Act"), Pub. L. No. 102-385, 106 Stat. 1460.
Congress made several findings in passing the Act, among them that
"most cable television subscribers have no opportunity to select between
competing cable systems"; that this lack of competition had led to
"undue market power for the cable operator as compared to that of
consumers"; and that cable prices were rising almost three times faster
than the rate of inflation. 1992 Cable Act § 2(a)(2), (1), 106 Stat. at
1460. The Act accordingly made it unlawful for a cable operator to
engage in "unfair methods of competition or unfair or deceptive acts or
practices, the purpose or effect of which is to hinder significantly or
to prevent" any other operator from providing services to consumers. 47
U.S.C. § 548(b). The Act also authorized the FCC to "prescribe
regulations to specify particular conduct that is prohibited by" this
provision. Id. § 548(c)(1).
to that authority, the FCC issued a notice of proposed rulemaking in
March 2007 soliciting comments on the propriety of a practice popular
among cable operators: the use of "exclusivity clauses" that grant the
operator exclusive access for providing video services within a
particular multipled welling unit ("MDU"). Exclusive Service Contracts for Provision of Video Services in Multiple Dwelling Units and Other Real Estate Developments,
22 FCC Rcd. 5,935 (proposed Mar. 27, 2007). In response, the FCC
received comments revealing that exclusivity clauses "have the clear
effect of barring new entry into MDUs by wire-based" video providers and
that such clauses were "widespread" and increasing in their use. Exclusive Service Contracts for Provision of Video Services in Multiple Dwelling Units and Other Real Estate Developments, 22 FCC Rcd. 20,235 ¶¶ 10, 15 (Nov. 27, 2007) ("Exclusivity Order").
Commenters also highlighted the injuries that exclusivity clauses
inflict upon consumers, such as increased prices, lower quality, and a
reduced menu of cable channel options. See id. ¶ 17-23. The FCC
thus concluded that "exclusivity clauses cause significant harm to
competition and consumers" and that "the harms of [such] clauses
outweigh their benefits." Id. ¶ 26.
Based on this record, the FCC unanimously adopted the Exclusivity Order
at issue in this case. The order sets forth the following rule: "[N]o
cable operator . . . shall enforce or execute any provision in a
contract that grants it the exclusive right to provide any video
programming service (alone or in combination with other services) to a
MDU. Any such exclusivity clause shall be null and void." Exclusivity Order ¶ 31 (codified at 47 C.F.R. § 76.2000(a)).
1999, a partnership of Virginia land developers created the Lansdowne
Community Development ("LCD"), a limited liability company with the
purpose of developing a residential community known as Lansdowne on the
Potomac in Loudoun County, Virginia. The Lansdowne development comprises
roughly 850 acres of land, upon which some 2,155 individual homes are
built. Although Lansdowne residents own their own homes, all residents
share an interest in common areas that require central management. LCD
therefore created appellee, the Lansdowne on the Potomac Homeowners
Association ("LHOA" or "the homeowners association"), to provide for the
management of the development and amenities such as video, phone, and
process of planning the development, LCD engaged M.C. Dean, Inc., a
Virginia technical services contractor, to design and install
telecommunications systems in the community. For its part, according to
M.C. Dean's CEO, the company sought from LCD the "exclusive right to
provide . . . telecommunication services" to Lansdowne. M.C. Dean
created a number of corporate entities and entered into a series of
contemporaneous, interlocking contractual arrangements to achieve this
structure of this whole enterprise was a convoluted one. With respect to
the corporate entities, M.C. Dean formed OpenBand at Lansdowne ("OBL"),
a limited liability company with the purpose of developing and
administering telecommunication services at Lansdowne. OBL had two
members: a wholly owned subsidiary of M.C. Dean's called OpenBand SPE
("OBS"), which M.C. Dean created for the purpose of holding its interest
in OBL, and a subsidiary of LCD's called LCD Communications.2
M.C. Dean also formed OpenBand Multimedia, LLC ("OBM"), which is an
FCCcertified open video system operator that provides video and internet
services to Lansdowne and other Virginia communities. Lastly, M.C. Dean
formed OpenBand of Virginia ("OBV"), which provides phone service to
Virginia communities, including Lansdowne. OBL, OBS, OBM, OBV, and M.C.
Dean are all defendants and appellants in this case (collectively,
respect to the contractual arrangements, three are of particular
relevance. First, LCD granted a deed of easement to OBL on May 14, 2001,
entitled the "Exclusive Easement for Telecommunications Services at
Lansdowne on the Potomac." LHOA is named as a party to the deed as the
"Future Owner" of the Property. LHOA ratified the easement acting
through its then-president (who was also president of LCD, which
controlled LHOA at the time).4
By its express terms, the deed grants to OBL "exclusive easements for
the purpose of constructing, operating, maintaining, adding to,
altering, or replacing (collectively `Administering' or `Administer')
[telecommunications infrastructure] for the collection, provision, and
distribution of video, telephonic, internet, data services, or other
communications, data or media (collectively `Utilities')." The deed
provides that "the exclusive easements" shall be "deemed to reserve
solely to [OBL] the rights to Administer Utilities on, under and across
the Property such that . . . no other person or entity shall be entitled
to Administer any Utilities on, under or across the Property without
the written consent of [OBL]." The deed also prohibits LHOA from
"grant[ing] any easement to Administer any Utilities on, under or across
the Property" to any other party.
second arrangement at issue is the Covenants, Conditions, and
Restrictions for Lansdowne on the Potomac (the "CC&Rs"), dated June
18, 2001. The CC&Rs include a provision expressly recognizing OBL's
"exclusive easements for access to and the installation, construction,
[and] operation. . . of a private utility and telecommunication system."
The CC&Rs refer to OBL's exclusivity in several other places,
including a provision declaring that OBL's "rights with respect to the
private utility system . . . and the services provided through such
private utility system are exclusive, and no other Person may provide
such services to the Property."
OBL entered into a contract with the homeowners association on July 24,
2001, entitled the "Agreement to Obtain Telecommunication Services"
("TSA"). Under the TSA, LHOA engaged OBL to provide "platform services,"
or basic video, phone, and internet services that homeowners receive,
as well as optional "premium services." The TSA grants OBL the right to
"provide[ ] or arrange for the provision of the Platform Services to
Homeowners so that [LHOA] shall not engage any other provider of
Platform services." The TSA also incorporates the CC&Rs (which
incorporate the easement as described above) by prohibiting LHOA from
"amend[ing] the CC&Rs such that the amendment would . . . have a
materially adverse effect on OBL."
terms of its actual delivery of telecommunications services, OBL
purchases services from its affiliates—video and internet from OBM and
telephone from OBV—and resells them to Lansdowne homeowners. OBL also
separately sells its services to LHOA itself for purposes of the Potomac
Club, a community center and office space that the homeowners
association maintains on the property. In accordance with the terms of
the easement, CC&Rs, and TSA described above, no wire-based cable
provider other than OBL has the infrastructure necessary to deliver
services to the development. As one M.C. Dean executive explained, "the
entire agreement was set up so that we could have our infrastructure in
that fashion," that is, through a blanket easement over the Lansdowne
OBL began providing cable to Lansdowne, residents began complaining
about the quality of its service. One homeowner, Marvis Aleem, noted
that OBL's "picture quality was frequently pixilated and the channel
line-up, both in terms of quantity and high-definition offerings—was
inferior to those of other video providers." Another homeowner, Tim
McCoy, complained of OBL's "poor picture quality, channel line-up,
equipment technology, and customer service." McCoy described a number of
specific problems with OBL's video service. For example, during the
second half of the 2012 Super Bowl, portions of his screen pixilated, or
froze, despite the fact that McCoy had complained to OBL about
pixilation problems previously. McCoy also experienced synchronization
problems, where a particular channel would display the correct video
feed accompanied by a different channel's audio feed.
response to these complaints, the homeowners association began
investigating alternative providers in 2010. One member of LHOA's board
of directors had discussions with Verizon, which demonstrated an
interest in providing services to the development. However, a Verizon
employee subsequently emailed the LHOA board member expressing concern
that OBL's "exclusive easements" would prevent it from "build[ing] out
on or otherwise access[ing] the property." Another competing video
service provider, Comcast, is contractually required to make cable
services available to Lansdowne residents under the terms of its
franchise agreement with Loudoun County. The franchise agreement excuses
this requirement, however, in developments like Lansdowne that "are
subject to claimed exclusive arrangements with other providers." It is
undisputed that neither Verizon nor Comcast has formally asked OBL to
grant it a subeasement to build its own infrastructure. However, as one
M.C. Dean official testified, "would we object to [Verizon] coming into
the community and running their infrastructure? I would say that we
August 2011, LHOA filed suit against OpenBand in the Eastern District of
Virginia, alleging a variety of claims under federal and state law.
OpenBand moved to dismiss, and the district court agreed as to all of
the federal counts but one: the homeowners association's claim that
certain clauses in OpenBand's contractual arrangements provide it with
the exclusive right to deliver video services in violation of the FCC's
2007 Exclusivity Order.5
Following discovery, the parties filed cross-motions for summary
judgment on this claim. On June 27, 2012, the district court ruled in
favor of the homeowners association. The court thus issued an order
permanently enjoining OBL, OBM, OBS, and M.C. Dean from enforcing any
video service exclusivity provision against LHOA or Lansdowne residents,
and declaring all such provisions null and void.
then filed the instant appeal. We review the grant of summary judgment
de novo, asking whether, viewing the facts in the light most favorable
to OpenBand, there is no genuine dispute as to any material fact and
LHOA is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a).
reaching the merits of LHOA's claim, we must first address some
threshold questions of justiciability. For "[i]f a dispute is not a
proper case or controversy, the courts have no business deciding it, or
expounding the law in the course of doing so." DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 341 (2006). OpenBand claims both that LHOA lacks standing to bring this action and that the suit is not ripe for our review. See id. at 352 (noting that standing and ripeness both "originate in Article III's `case' or `controversy' language").
The "irreducible constitutional minimum of standing" consists of three requirements. Lujan v. Defenders of Wildlife, 504 U.S. 555,
560 (1992). First, the plaintiff must show that it has suffered an
"injury in fact" that is concrete and imminent; second, the injury must
be "fairly traceable" to the defendant's challenged conduct; and third,
it must be likely that the injury will be "redressed by a favorable
decision." Id. at 560-61 (internal quotation marks and
alterations omitted). OpenBand asserts that LHOA cannot satisfy any of
these requirements, but for the reasons that follow, we disagree.
respect to the element of injury, LHOA is a direct consumer of OBL's
video services, which LHOA purchases for the Potomac Club. Although
OpenBand does not dispute that a cognizable injury would exist if it
were actually to prohibit LHOA from contracting with a competing
provider, OpenBand contends that LHOA has suffered no injury here
because "[n]othing in the TSA or other agreements precludes LHOA from"
doing so. Appellants' Br. 19.
contention is impossible to square with the plain terms of the
challenged agreements. To start, OBL's deed of easement unambiguously
bars LHOA from engaging another provider of video services. In fact, the
deed blockades other providers from accessing the property to build the
infrastructure necessary for delivering service in the first place. To
that end, OBL owns "exclusive easements for the purpose of constructing
[or] operating" infrastructure for the "provision, and distribution of
video [services]." The deed states that these "exclusive easements"
shall be "deemed to reserve solely to [OBL] the right[ ] to" construct
infrastructure for such services and that "no other person or entity
shall be entitled to" do so without OBL's consent. And the deed
expressly prohibits LHOA from "grant[ing] any easement" to any other
party for the purpose of building such infrastructure.
CC&Rs likewise prevent LHOA from contracting with a competing video
provider. For example, the CC&Rs state that OBL's "rights with
respect to the private utility system. . . and the services provided
through such [system] are exclusive, and no other Person may provide
such services to the Property." Moreover, the exclusivity clauses in the
CC&Rs are incorporated into the TSA, which prohibits LHOA from
"amend[ing] the CC&Rs such that the amendment would . . . have a
materially adverse effect on OBL."
has also admitted that the whole purpose of its agreements was to
preclude LHOA from contracting with competing cable providers—the very
result that OpenBand now seeks to disclaim. For example, OpenBand
conceded in the district court that OBL's easement "effectively bar[s]
other providers of wired services from Lansdowne." Defs.' Br. in Supp.
of Mot. to Dismiss 22. M.C. Dean's Executive Vice President testified
that "nobody else has infrastructure within the community to deliver
wireline service." When asked why that was so, the executive candidly
answered, "[b]ecause the entire agreement was set up so that we could
have our infrastructure in that fashion."
the futility of its contention that its various arrangements do not bar
the homeowners association from engaging competing providers, OpenBand
changes tack and raises a second argument as well: that "the mere
existence of an exclusivity clause" gives rise to no injury at all
unless the clause is actually enforced. Appellants' Reply Br. 5-6. That
would be surprising news to the FCC, which enacted the Exclusivity Order
based on its express finding that "exclusivity clauses cause
significant harm," in particular that they deny consumers the benefits
of "lower prices," "more channels," and improved "quality of service." Exclusivity Order
¶ 26, 17 & n.50. Significantly, the FCC found that these injuries
occur not only where exclusivity clauses are actually enforced, but
rather by virtue of their very existence because such clauses "deter new entrants" from even "attempting to enter the market." Id.
¶ 19 (emphasis added). As the FCC explained, "[a] rule that left
exclusivity clauses in effect would allow the vast majority of the harms
caused by such clauses to continue for years." Id. ¶ 35. It is
for this reason that the order declares "any" exclusivity clause "null
and void" without regard for whether it has been enforced. Id. ¶ 31.
OpenBand's exclusivity clauses preclude LHOA from engaging an alternate
provider of video services for its club house, producing the precise
injuries that the FCC identified in enacting its Exclusivity Order, we hold that LHOA has suffered a cognizable injury for purposes of Article III standing.
second element of standing requires a plaintiff to demonstrate that its
injuries are fairly traceable to the challenged conduct of the
defendants. Lujan, 504 U.S. at 560. OpenBand argues that any
injury suffered by LHOA is not caused by it, but rather by the
independent, intervening actions of third parties not before the
court—to wit, the decisions by competing companies not to offer video
service to Lansdowne.
argument ignores the reason why competing cable providers have not
offered services to LHOA: the existence of OpenBand's exclusivity
clauses. OpenBand's mistake, in other words, is to "equate[ ] injury
`fairly traceable' to the defendant with injury as to which the
defendant's actions are the very last step in the chain of causation." Bennett v. Spear, 520 U.S. 154,
168-69 (1997). But as the Supreme Court has explained, the causation
element of standing is satisfied not just where the defendant's conduct
is the last link in the causal chain leading to an injury, but also
where the plaintiff suffers an injury that is "produced by [the]
determinative or coercive effect" of the defendant's conduct "upon the
action of someone else." Id. at 169.
what has occurred here. The record is replete with evidence that OBL's
exclusivity arrangement caused competing cable providers not to offer
LHOA their services. For starters, an LHOA board member testified that
during her discussions with Verizon, the company indicated that it
"wanted to come down into Lansdowne and lay cable and service the
Lansdowne residents." To that end, Verizon sent the homeowners
association a letter identifying the services it could offer along with
pricing options. Yet after Verizon analyzed OBL's exclusive easement,
the CC&Rs, and the TSA, the company concluded that it could not
provide service to Lansdowne because "nothing [Verizon has] seen would
give us a green light to build out on or otherwise access the property."
LHOA produced the franchise agreement between Loudoun County and
Comcast. Under that agreement, Comcast is required to make service
available to "all residential dwelling units" in the county, with the
exception that it "shall not be required to serve potential Subscribers
in developments" like Lansdowne that "are subject to claimed exclusive
arrangements with other providers." Thus, as with Verizon, Comcast's
decision not to offer video to Lansdowne is fairly traceable to
OpenBand's challenged exclusivity arrangements. And although it took
place before the FCC issued the Exclusivity Order, we also note that
when Adelphia sought to provide service to Lansdowne in 2001, OBL denied
its request, citing its exclusive easement. See UCA, LLC v. Lansdowne Cmty. Dev., LLC, 215 F.Supp.2d 742, 747 (E.D. Va. 2002). We therefore hold that LHOA has established the second element of the Article III standing inquiry.
to the third standing requirement of redressability, our task is to
determine if it is "`likely,' as opposed to merely `speculative,' that
the injury will be `redressed by a favorable decision.'" Lujan, 504 U.S. at 561 (quoting Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26,
38, 43 (1976)). OpenBand contends that it is "entirely speculative"
whether an order nullifying OBL's exclusivity clauses will redress
LHOA's injuries because the courts cannot "order any alternative
provider to provide service or even negotiate with LHOA." Appellants'
Br. 21, 20.
not agree. The record reveals that an order declaring OBL's exclusivity
clauses null and void and enjoining OBL from enforcing them would indeed
be likely to redress the lack of competition and accompanying quality,
price, and menu of channel harms that LHOA currently suffers. As
discussed above, Comcast's franchise agreement with Loudoun County requires
it to "make Cable Service available to all residential dwelling units"
in the county. Comcast has not fulfilled this obligation because its
franchise agreement excuses the requirement in cases where a development
is "subject to claimed exclusive arrangements with other providers."
Thus, once OBL's exclusivity arrangement is eliminated, so too will be
Comcast's reason for declining to provide service to Lansdowne. A
favorable court ruling here is therefore not only "likely" to redress
LHOA's injuries, but will necessarily do so. Having successfully
established injury-in-fact, causation, and redressability, LHOA has
standing in this case.6
next to a second Article III threshold question: whether this dispute
is ripe for adjudication. "The doctrine of ripeness prevents judicial
consideration of issues until a controversy is presented in clean-cut
and concrete form." Miller v. Brown, 462 F.3d 312,
318-19 (4th Cir. 2006) (internal quotation marks omitted). To determine
if a case is ripe, we "balance the fitness of the issues for judicial
decision with the hardship to the parties of withholding court
consideration." Id. at 319 (internal quotation marks omitted).
respect to the fitness criterion, it is settled that a case is "fit for
judicial decision when the issues are purely legal and when the action
in controversy is final and not dependent on future uncertainties." Id.
OpenBand protests that this case is not fit for resolution because
"there is no proof that OBL denied access to its easement or refused to
grant a subeasement to anyone." Appellants' Br. 16. OpenBand asks this
court to wait to decide this case because OpenBand might yet decide in
the future to relinquish its claim to the exclusive right to provide
video services at Lansdowne.
argument fails for two reasons. To begin, OpenBand's position is
unsupported by the record. The homeowners association has produced
evidence that OpenBand has no intention of voluntarily abandoning its
exclusivity. As already mentioned, an M.C. Dean executive stated on the
record twice that OBL would, if asked, deny Verizon access to its
easement. Another executive testified that the entire purpose of OBL's
contractual arrangements was so that "nobody else [would have]
infrastructure within the community to deliver wireline service."
Eliminating the exclusive easement, the executive stated, would place
"our entire business model . . . at risk."
face of these undisputed statements, we find Open-Band's claim of
factual uncertainty completely untenable. OpenBand's argument amounts to
little more than a formalistic contrivance. The case is not ripe, it
complains, because it may at some point in the future gratuitously
renounce its claim of exclusive access to the development. Yet OpenBand
has fought this entire litigation to preserve that very exclusivity,
stating repeatedly on the record that it has no intention of giving it
even if there were some reason to think that OBL might abandon its
exclusivity and allow competitors to access Lansdowne, that future
prospect "would not assist our resolution of the" actual issue before
this court. Babbitt v. United Farm Workers Nat'l Union, 442 U.S. 289, 301 (1979). As noted earlier, the question here is whether OBL's exclusivity clauses, as written, violate the Exclusivity Order.
Whether OBL enforces those clauses in the future is of no consequence
because the order declares "any provision in a contract that grants [a
cable operator] the exclusive right to provide any" video service "null
and void." Exclusivity Order ¶ 31. Thus, whether OBL's clauses
unlawfully grant it the exclusive right to provide video service is a
legal question that is, in a sense, frozen in time: the answer does not
change no matter how actively or passively OBL chooses to exercise that
to the hardship prong of the ripeness inquiry, we find this to be a
straightforward case. "The hardship prong is measured by the immediacy
of the threat and the burden imposed on the [plaintiff]." Charter Fed. Sav. Bank v. Office of Thrift Supervision, 976 F.2d 203,
208-09 (4th Cir. 1992). Here, the hardship could not be any more
immediate: because of OBL's exclusivity, LHOA and its residents are presently unable to avail themselves of the quality, price, and menu of channel advantages of a competing provider. See Miller,
462 F.3d at 321 (finding hardship prong satisfied where challenged
action of the defendants had already caused "immediate harm" to
is the burden imposed substantial. Each day that passes without judicial
resolution is another day that LHOA and its homeowners go without the
opportunity to obtain service from a competitor, despite the fact that
the Exclusivity Order declares that any exclusivity clause "shall
be null and void." While cable service may not be a matter of life and
death, it is an important aspect of life for many Americans. Consider
the plight of Lansdowne homeowner Tim McCoy, who, unable to contract
with a competing provider and having already paid OBL for his service,
watched the second half of the 2012 Super Bowl in a state of
apprehension that the video feed would freeze at any moment, as had
happened before. Such homeowner concerns, especially in the absence of
any need to await further factual developments, render this case ripe
for our review.
that Article III poses no obstacle to suit, we next consider OpenBand's
argument that LHOA's claim falls outside the scope of the private right
of action conferred by 47 U.S.C. § 401(b). That provision states: "[i]f
any person fails or neglects to obey any order of the Commission
. . . any party injured thereby . . . may apply to the appropriate
district court of the United States for the enforcement of such order."
47 U.S.C. § 401(b) (emphasis added).
The district court held that LHOA may sue under this provision, reasoning that the Exclusivity Order
qualifies as an "order of the Commission" because it "specifically
defines the rights and obligations that a litigant can enforce."
OpenBand argues that this was error for two reasons. First, it contends
that § 401(b) permits enforcement of only adjudicatory orders, not
rulemaking orders. In the alternative, OpenBand asserts that even if §
401(b) permits enforcement of some rulemaking orders—viz., those that define the rights and obligations of litigants—the Exclusivity Order is not such an order. Again, however, we find OpenBand's arguments unpersuasive.
begin with the question of whether § 401(b) ever permits parties to sue
for enforcement of FCC rulemaking, as opposed to adjudicatory orders.
OpenBand suggests that the answer is "no" because while the plain terms
of § 401(b) authorize enforcement of "any order of the Commission," the
Administrative Procedure Act defines the term "order" to mean "the whole
or a part of a final disposition . . . of any agency in a matter other than rule making," 5 U.S.C. § 551(6) (emphasis added).
not persuaded. To begin, the APA's definition of an "order" does not
control in this context because § 401(b) predates the APA by nearly
twelve years, and the APA's definitions are only mandatory in the
context of the APA itself. See 5 U.S.C. § 551 (definitions apply "[f]or the purpose of this subchapter"). Moreover, as the Ninth Circuit explained in Hawaiian Telephone,
827 F.2d at 1271, when Congress wanted to incorporate APA definitions
into the Communications Act, it did so expressly—for example, explicitly
defining the term "adjudication" by reference to the APA three times in
47 U.S.C. § 409(a)-(c). That Congress did not do so with regard to the
term "order" in § 401(b) shows that it did not intend for the APA's
limited definition of that term to apply here.
the phrase "any order of the Commission" in § 401(b) to encompass
rulemaking orders also respects the venerable principle of statutory
construction that "identical words and phrases within the same statute
should normally be given the same meaning." Powerex Corp. v. Reliant Energy Servs., Inc., 551 U.S. 224, 232 (2007). In CBS, Inc. v. United States,
the Supreme Court construed the exact phrase at issue here, "any order
of the Commission," to include some FCC rulemaking orders in the context
of 47 U.S.C. § 402(a), which provides a right of action for setting
aside an FCC order. 316 U.S. 407,
416-19 (1942). OpenBand has offered no persuasive explanation for why
this interpretation of "any order of the Commission" should not also
apply in the context of § 401(b), the immediately prior provision. We
thus hold that § 401(b)'s right of action to enforce "any order of the
Commission" can encompass both FCC adjudicatory and rulemaking orders.
In so holding, we align ourselves with a majority of circuits to
consider the question. See, e.g., Alltel Tenn., Inc. v. Tenn. Pub. Serv. Comm'n, 913 F.2d 305, 308 (6th Cir. 1990); Hawaiian Tel. Co. v. Pub. Utils. Comm'n, 827 F.2d 1264, 1270-72 (9th Cir. 1987). But see New England Tel. & Tel. Co. v. Public Utils. Comm'n, 742 F.2d 1, 4-7 (1st Cir. 1984).
Our holding that § 401(b) can extend to rulemaking orders does not, however, end the analysis. As we explained in CGM, LLC v. Bellsouth Telecommunications, Inc.,
not all rulemaking orders are created equal for purposes of § 401(b)'s
private right of action; only those that "require[ ] a defendant to take
concrete actions" may be enforced. 664 F.3d 46,
53 (4th Cir. 2011) (internal quotation marks omitted). The reason for
this rule is self-evident: if a rulemaking order merely announces agency
findings or broad policy considerations without actually imposing
specific obligations on identifiable entities, a § 401(b) action to
enforce that order would present a court with nothing but generic
abstractions to enforce.
Thus, for example, in CGM,
we rejected a plaintiff's attempt to enforce under § 401(b) a
rulemaking order that laid out "policy considerations [and] public
feedback." Id. at 54. In fact, the order at issue in CGM
made clear that parties were free to voluntarily contract around the
relevant FCC rules and that state regulatory commissions (not the FCC)
had the final authority to create binding obligations on the parties. Id. In light of these facts, we had no choice but to conclude that the plaintiff in CGM had "no rights" and the defendant "no duties" under the FCC order involved in that case. Id. at 55.
OpenBand contends that the same result should obtain here because the Exclusivity Order
"impose[s] no obligation on any named party, confer[s] no rights to any
named party, and, in fact, name[s] no parties or entities at all."
Appellants' Br. 25. This argument misses the mark. For one, OpenBand
badly misconstrues the controlling legal principle by focusing on
whether the order expressly names the precise parties involved in this
litigation. No court has taken such a crabbed view of the rulemaking
orders subject to § 401(b). And for good reason. The crucial distinction
between adjudication and rulemaking is that "adjudications resolve
disputes among specific individuals in specific cases, whereas
rulemaking affects the rights of broad classes of unspecified
individuals." Yesler Terrace Cmty. Council v. Cisneros, 37 F.3d 442,
448 (9th Cir. 1994). To require a rulemaking order to expressly (and
presciently) name the parties in advance would fatally undercut the
FCC's power to regulate via general and prospective rules, 47 U.S.C. §
Consequently, as we explained in CGM,
the ultimate test is simply whether the FCC order in question sets
forth "specific rights and obligations of the[ ] litigants." 664 F.3d at
54. The Exclusivity Order satisfies this test. The order
identifies the precise actions that OpenBand is prohibited from taking:
no "operator of an open video system" may "enforce or execute any
provision in a contract" granting it the "exclusive right to provide any
video programming service." Exclusivity Order ¶ 51, 31. It
defines OpenBand's rights in such exclusivity clauses accordingly:
"[a]ny such exclusivity clause shall be null and void." Id. ¶ 31.
The order likewise identifies the rights of LHOA and homeowners as part
of a "centrally managed residential real estate development[ ]" that
shall not be the subject of any exclusivity clause. Id. ¶ 7, 31. We therefore hold that the Exclusivity Order is sufficiently specific in defining the "rights and obligations of these litigants" to be enforceable under § 401(b). CGM, 664 F.3d at 54.7
arrive at last at the question of whether the challenged clauses in the
easement, CC&Rs, and TSA actually run afoul of the FCC's order.
Resolving this question involves two-steps. First, we must decide
whether OBL is an "open video system operator" such that its agreements
are subject to the order to begin with. Exclusivity Order ¶ 51.
If it is, we must then ask whether the challenged clauses are
"provision[s] in a contract" granting OBL an "exclusive right to
provide" video service in violation of the order. Id. ¶ 31.
asserts that the answer to both of these questions is "no," but its
arguments as to why ring hollow. OBL seeks first to evade the FCC's
definition of an "open video system operator" by structuring its
business operations among several related, interlocking entities in a
kind of elaborate corporate shell game. OBL likewise seeks to avoid the Exclusivity Order's
flat prohibition on exclusivity clauses in any contract by splitting up
its exclusive arrangement into an assortment of interconnected
sub-agreements and placing its critical exclusivity provisions in a deed
of easement that it contends is not a "contract" reached by the FCC's
proscription. For the reasons that follow, we reject both of these
efforts to circumvent the plain terms of the Exclusivity Order.
start with the question of whether OBL is an operator of an "open video
system," or "OVS," within the meaning of the FCC's order. The answer
matters because the order renders null and void exclusivity clauses that
are entered into by "entities that are subject to [47 U.S.C. § 548],"
among which OVS operators are included. Exclusivity Order ¶ 30, 51; 47 U.S.C. § 573(c)(1)(A) (stating that OVS operators are subject to § 548). Our inquiry is limited to whether OBL
satisfies the definition of an OVS operator because OBL is the only
defendant-appellant that is party to the agreements at issue.
decide whether OBL is an OVS operator, we begin with the applicable
regulatory definition. The FCC has defined an "[o]pen video system
operator" to include:
person [defined by 47 U.S.C. § 522(15) to include corporations] or group
of persons who provides cable service over an open video system and
directly or through one or more affiliates owns a significant interest
in such open video system, or otherwise controls or is responsible for
the management and operation of such an open video system.
C.F.R. § 76.1500(b). Openband does not dispute that OBL satisfies most
of this definition. Its sole contention is that OBL cannot be said to
"provide[ ] cable service" either as a "person" in its own right or as
part of a "group of persons." 47 C.F.R. § 76.1500(b). The district court
ruled against OBL in both respects, and we agree for the reasons below.
argues first that OBL is not itself a "person" who "provides cable
service" because the cable service in question is actually that of its
affiliate, OpenBand Multimedia, or "OBM", who OpenBand concedes is an
FCC-certified OVS operator. OpenBand therefore contends that it is only
OBM who "provides" cable service to LHOA and the homeowners; OBL merely
"arranged for the provision of" that service by purchasing it from OBM
and reselling it to Lansdowne. Appellants' Br. 8.
cannot accept OpenBand's argument. To start, because neither Congress
nor the FCC have defined the term "provide," we give the term its
ordinary meaning. See Schindler Elevator Corp. v. United States ex rel. Kirk, 131 S.Ct. 1885, 1891 (2011). The ordinary meaning of "provide" is "to make available" or to "furnish." Random House Dictionary of the English Language
1556 (2d ed. 1987). OBL satisfies this definition because it is
undisputed that OBM sells video service to OBL, which then uses its own
connection lines, cables, and other infrastructure to transmit that
video into Lansdowne, thereby "making available" or "furnishing" it to
OpenBand's argument to the contrary is premised on the misguided view that the entity that is the initial
link in a chain of delivery is the only one that can be said to
"provide" the thing delivered. But that is not what "provide" means: if
Angela tells Bob how to drive to the park, and Bob relays those
instructions to Carmen, all would agree that Bob, no less than Angela
(and perhaps more) has "provided" instructions to Carmen. Furthermore,
OpenBand's argument refutes itself, since OBM (who OpenBand admits
provides cable service) is not actually the initial link in the delivery
chain— OBM instead contracts with video content providers who deliver
programming that OBM in turn transmits to OBL. We therefore hold that
OBL qualifies as an OVS operator under 47 C.F.R. § 76.1500(b) because it
is itself an entity that "provides" cable service.
even if OBL is not itself a person that "provides" cable service, it is
undoubtedly part of a "group of persons" that does. 47 C.F.R. §
76.1500(b). In defining an OVS operator to include not just individual
entities, but also groups of entities that provide cable service, the
FCC's definition appears to envision precisely this type of scenario,
where a corporate parent like M.C. Dean divides up the functions of an
OVS operator across its subsidiaries such as OBM and OBL. Thus, as
already described, OBM is able to deliver video to OBL's end customers
in Lansdowne only by using OBL's physical infrastructure. OBM also has
no direct contact with those customers; it is instead OBL who has
contracted with customers to resell OBM's services. OBL and OBM thus
operate together, functionally and contractually, in an integrated
manner as a "group of persons who provides cable service over an open
video system," 47 C.F.R. § 76.1500(b).
responds that treating OBL and OBM together as an OVS operator under
the "group of persons" prong of the FCC's definition proves too much
because under such an approach, "LHOA and its members also are OVS
operators." Appellants' Reply Br. 19. OpenBand is mistaken. For one
thing, LHOA and its homeowners are not a part of the same "group of
persons" as OBM and OBL because unlike OBM and OBL, LHOA and the
homeowners are not affiliated subsidiaries of M.C. Dean. For another,
there is no evidence that LHOA or its homeowners satisfy the
definitional requirement of "own[ing] a significant interest" in the
OVS. 47 C.F.R. § 76.1500(b). Nor is there any evidence that LHOA or the
homeowners somehow "control[ ]" or are "responsible for the management
and operation" of the OVS. Id. Put simply, there is no reason to
read the FCC's "group of persons" definition of an OVS operator so
broadly as to sweep up individual homeowners; the definition is instead
designed to fit exactly the kind of division of labor that exists here
between corporate affiliates like OBL and OBM.
OpenBand tosses up one final contention as to why OBL should not be bound by the Exclusivity Order:
that the regulatory definition of an OVS operator in 47 C.F.R. §
76.1500(b) does not matter anyway. This is so, OpenBand suggests,
because 47 U.S.C. § 573(a)(1) directs OVS operators to obtain
certification from the FCC. Thus, in OpenBand's view, "only an entity
that has received [such] certification can be an open video system
operator." Appellants' Br. 34 n.14.
Yet again, OpenBand is mistaken. Its error this time is to ignore the obvious difference between a definition and a duty.
The statutory obligation that an entity should certify with the FCC as
an OVS operator is plainly the latter: 47 U.S.C. § 573(a)(1) does not
purport to define what an OVS operator is, but rather identifies something that an OVS operator should do.
Thus, § 573(a)(1) states that "[a]n operator of an open video system
shall qualify for reduced regulatory burdens. . . if the operator of
such system certifies to the Commission that [it] complies with the
to read § 573(a)(1)'s certification requirement as somehow delimiting
the kinds of entities that constitute an OVS operator would lead to
absurd results. It would permit, for example, an entity to avoid all
regulations applicable to OVS operators simply by refusing to certify
with the FCC. In addition to defying logic, such a result cannot be
squared with the text of the very statute that OpenBand relies on, which
entitles an "operator of an open video system" to "qualify for reduced regulatory burdens" if it certifies with the FCC, not more. 47 U.S.C. § 573(a)(1) (emphasis added).
we reject OpenBand's attempt to circumvent the FCC's definition of an
OVS operator. OpenBand's arguments hinge, at bottom, on the belief that
it can evade unambiguous federal regulations by playing a shell game in
which it divides up corporate functions so that one entity obtains
certification from the FCC as an OVS operator, while a separate entity
enters into otherwise-unlawful exclusivity agreements. We reject the
notion that the Exclusivity Order may be defeated through such a
meaningless expedient. To allow that outcome would create a blueprint
for regulatory circumvention, effectively enabling every OVS operator to
engage in exactly the kind of exclusive access arrangement that the FCC
found to deter competition and cause consumers considerable harm. We
decline OpenBand's invitation to be a party to that result.
decided that OBL is an OVS operator bound by the FCC order, we consider
finally whether OBL's arrangements contravene that order. We start with
the language of the order, which states that no OVS operator "shall
enforce or execute any provision in a contract that grants it the
exclusive right to provide any video programming service (alone or in
combination with other services) to a MDU. Any such exclusivity clause
shall be null and void." Exclusivity Order ¶ 31. Open-Band has
conceded, at various points, that most of this definition is satisfied.
OpenBand does not dispute, for instance, that Lansdowne is an MDU
protected by the order. OpenBand also admitted before the district court
that its easement (though not the TSA) "effectively bar[s] other
providers of wired services from Lansdowne." Defs.' Br. in Supp. of Mot.
to Dismiss 22.
Notwithstanding these concessions, OpenBand claims that it has not violated the Exclusivity Order.
Its argument involves two steps. First, OpenBand asserts that each of
the challenged arrangements—the TSA, CC&Rs, and easement— should be
segregated and considered separately from one another before determining
whether any of them actually violates the order. Second, OpenBand
contends that none of the individual agreements actually does so. As we
explain further below, OpenBand is incorrect at both steps of its
shall first consider whether the TSA, CC&Rs, and easement should be
considered separately for the purpose of determining whether the
agreements include exclusivity clauses that run afoul of the order.
OpenBand argues that we must consider these arrangements in isolation.
This is because the order applies to exclusivity provisions contained in
a "contract," and, by evaluating each agreement separately, OpenBand
hopes to cordon off the exclusivity clauses in the easement (which it
claims is not a contract), and focus the court's attention instead on
the TSA (which it concedes is a contract, only one that it says contains
no exclusivity clause).
divide-and-conquer approach must be exposed for what it really is: a
sleight of hand designed to preserve precisely the type of
anti-competitive video monopoly that the FCC sought to prohibit. We
decline to permit this machination for a straightforward reason: under
Virginia law, "contemporaneous written agreements executed as part of
the same transaction will be construed together as forming one
contract." Va. Hous. Dev. Auth. v. Fox Run Ltd., 497 S.E.2d 747, 752 (Va. 1998) (internal quotation mark omitted); see James v. Circuit City Stores, Inc., 370 F.3d 417,
421-22 (4th Cir. 2004) ("[I]nterpretation of private contracts is a
question of state law."). The TSA, CC&Rs, and easement easily
satisfy this standard because they were each entered into within a short
window of time in 2001, and each concerns the same basic transaction:
OBL's agreement to provide telecommunications services to Lansdowne.
the documents were designed to function together as a single agreement
is further confirmed by the fact that the terms of each document
"clearly contemplate the application of terms in the other[s]," such
that the terms "may be viewed together as representing the complete
agreement of the parties." Va. Hous. Dev. Auth., 497 S.E.2d at
752-53. Indeed, the very thing that ties the agreements together is
OpenBand's unabashed desire to secure exclusive access to the
development. For example, the CC&Rs incorporate the terms of the
easement, confirming that OBL enjoys "exclusive easements for access to
and the installation [and] operation" of telecommunications systems. As
discussed, the easement promises OBL the sole right to build and operate
video infrastructure in Lansdowne such that "no other person or entity
shall be entitled to" do the same. And tying together the entire
arrangement, the TSA explicitly incorporates the terms of the CC&Rs
by forbidding LHOA to "amend the CC&Rs such that the amendment would
. . . have a materially adverse effect on OBL." Significantly, it is
undisputed that if LHOA were to amend its CC&Rs to permit it to
grant an easement to another video provider, that would have a
"materially adverse effect" on OBL and therefore breach the TSA.
considering the TSA, CC&Rs, and easement together as the single,
intertwining contract that it actually is, we have no difficulty
concluding that it contains provisions granting OBL the "exclusive right
to provide" video service to Lansdowne, in violation of the order. Exclusivity Order
¶ 31. As noted earlier, the purpose and effect of the agreement is to
bar competing cable video providers from delivering service to the
development by preventing them from ever building the infrastructure
necessary to reach Lansdowne in the first place. See ante at
10-11. Thus, the provisions are among the type that the FCC identified
as the "most exclusionary exclusivity clauses," as they "prohibit any
other [provider] from any access whatsoever to the premises." Id. ¶ 1 n.2. All of the clauses effectuating this exclusive video arrangement are therefore "null and void." Id. ¶ 31.
Even if we were to agree with OpenBand that the easement, CC&Rs, and TSA should be evaluated separately under the Exclusivity Order,
we would nevertheless conclude that each agreement is independently a
contract containing exclusivity provisions prohibited under the order.
With regard to the easement at the crux of this dispute, OpenBand raises a variety of arguments for why it does not violate the Exclusivity Order
when considered in isolation. First, OpenBand argues that the order
does not apply to exclusivity clauses in easements because easements are
not contracts. As an initial matter, this argument is forfeited because
OpenBand failed to argue it in the district court. Muth v. United States, 1 F.3d 246,
250 (4th Cir. 1993). In fact, Open-Band actually conceded the opposite
before the district court, admitting that it is "undisputed" that
"easements are contracts." Defs.' Reply in Supp. of Mot. to Dismiss 18; see also
Tr. of Summ. J. Hr'g 26 (admitting that OpenBand "ha[s] a contractual
provision in the form of a real property agreement that provides an
exclusive right of enjoyment of the property"). Moreover, even if we
were to consider the argument on appeal, we would find OpenBand's
initial concession correct: a deed of easement is a contract. See Cantrell v. Appalachian Power Co., 139 S.E. 247, 248-49 (Va. 1927) (describing document granting an easement as a "contract"); see also, e.g., United States v. Sea Gate, Inc., 397 F.Supp. 1351, 1360 (E.D.N.C. 1975) ("[A] deed creating an easement by express reservation is a contract.").
Undeterred, OpenBand next argues that the Exclusivity Order
is not meant to interfere with easements because the order is "explicit
in limiting its reach to exclusivity clauses in contracts for video
services, not real property rights." Appellants' Br. 31. Specifically,
OpenBand points to Paragraph 37 of the Exclusivity Order, which
states that "the rule we adopt today does not require that any new
entrant be given access to any MDU. A MDU owner still retains the rights
it has under relevant state law to deny [access to] a particular
provider." But this paragraph quite obviously does not assist OpenBand's
position because it protects the right of property owners to
deny a cable provider access to their property, not the right of a cable
provider to exclude its competitors. Nor is OpenBand aided by its
reliance on Paragraphs 55 and 57 of the order, which state that the
order "does not involve the permanent condemnation of physical property"
and that video providers need not "jettison" use of their existing
wires. Those provisions simply make clear that video providers are not
required to give up or affirmatively share their existing
infrastructure; the provisions in no way permit providers to completely
exclude their competitors from accessing a property.
contention that the FCC's order does not extend to easements is also
considerably undermined by the fact that the order specifically
references two easements, attached to comments filed by AT&T, as
"examples of exclusion." Exclusivity Order ¶ 10 & n.27. It
would have been odd —to say the least—for the FCC to refer to two
exclusive easements as illustrations of exclusivity clauses if, as
OpenBand asserts, the FCC in fact intended not to reach such easements.
OpenBand defend the illogical result that would arise were we to accept
its position that easements are exempt from the order. If OpenBand is
correct, any cable provider would be able to frustrate the FCC's
unequivocal prohibition on exclusivity clauses simply by structuring its
exclusive arrangement in the form of an easement. An exception of such
huge proportions would render the FCC's order nugatory, the dangers of
which this very case makes clear.
makes one last argument for why the easement does not violate the FCC's
order. Retreating from its prior admission that the easement bars
access by other cable providers, OpenBand argues now on appeal that the
easement does not "absolutely" bar access to Lansdowne after all because
"OBL has the right to grant subeasements." Appellants' Br. 30. To
begin, this argument is also forfeited because OpenBand never raised it
in the district court. Muth, 1 F.3d at 250. Moreover, even if not
forfeited, the argument is belied by the record, for OpenBand has never
represented that it would grant a subeasement to a competitor of its
own good will. In point of fact, as already mentioned, an M.C. Dean
executive testified in a deposition that, "would we object to [Verizon]
coming into the community and running their infrastructure? I would say
that we would."
even if the argument were not forfeited, and even if it were supported
by the record, we would reject it in any event. The mere fact that OBL
may voluntarily relinquish its exclusivity by granting a subeasement
cannot mean that the easement is untouched by the FCC order. If that
were so, the FCC order would never render any exclusivity clause null
and void, since a party could always theoretically give up its claim of
exclusivity. But that is not how the FCC order is written: the order
instead prohibits "any provision in a contract that grants it the
exclusive right to provide" video services to an MDU. Exclusivity Order
¶ 31 (emphasis added). The easement grants OBL exactly that right,
regardless of its future intentions. All provisions in the easement
granting OBL the exclusive right to provide video services are therefore
null and void, as are any such clauses in the TSA and CC&Rs.8
seeking to defend its exclusive access arrangement, OpenBand has engaged
in what amounts to an elaborate game of regulatory subterfuge featuring
an array of procedural defenses, the use of various corporate entities
to escape the definition of an OVS operator, and an artifice to evade
the FCC order by structuring its exclusive arrangement using a web of
sub-agreements. The district court correctly pierced these arguments to
recognize that OpenBand had set up just the kind of non-competitive
video service monopoly—with all the attendant dangers of high prices and
poor service—that the FCC banned in the Exclusivity Order. We accordingly affirm the grant of summary judgment in LHOA's favor.
lest there be any doubt, we underscore that in declaring null and void
and enjoining enforcement of all exclusivity clauses in the challenged
agreements as those clauses relate to the provision of wire-based cable
services, the district court's order renders the clauses unenforceable
against the homeowners association and individual homeowners alike. To
endorse a contrary result would be to foster the very anti-competitive
injuries in terms of price, quality, and choice of service that prompted
the FCC to enact the Exclusivity Order in the first place.
For the foregoing reasons, the judgment of the district court is affirmed.
We use the name "OpenBand" to refer collectively to all of the
defendants (now appellants) in this case: OpenBand at Lansdowne,
OpenBand Multimedia, OpenBand SPE, OpenBand of Virginia, and their
common corporate parent, M.C. Dean, Inc.
2. Prior to this suit, LCD Communications transferred its interest in OBL to OBS, leaving it the sole member of OBL.
The developer, LCD, and its subsidiary LCD Communications were
initially named as defendants but were dismissed voluntarily under
Federal Rule of Civil Procedure 41(a)(1)(A)(i).
The easement was actually granted to OBL through a two-step process
involving an initial grant of the easement by the developer LCD to its
subsidiary LCD Communications, followed by a second grant from LCD
Communications to OBL.
The district court declined to exercise supplemental jurisdiction over
the state law claims, dismissing them without prejudice.
LHOA also has associational standing to sue on behalf of its members
because it introduced at the summary judgment stage two affidavits from
individual members demonstrating that they suffered injuries in their
own right. That fact differentiates this case from our decision in Southern Walk at Broadlands Homeowner's Ass'n v. OpenBand at Broadlands, LLC,
No. 12-1331, at *11-13 (4th Cir. Apr. 5, 2013), where we found
associational standing lacking at the motion to dismiss stage because
the complaint did not allege any such individual injuries, much less
include affidavits to that effect. LHOA thus enjoys standing both
directly and on behalf of its members.
We also find OpenBand's statute of limitations argument to be without
merit, as "[s]tatutes of limitations are not controlling measures of
equitable relief." Holmberg v. Armbrecht, 327 U.S. 392, 396 (1946). In this case, equitable relief is all that the homeowners association has sought.
Thus, for example, the TSA expressly provides that LHOA "shall not
engage any other provider of Platform services." In addition, as
explained above, the TSA contains a clause that guarantees OBL exclusive
access to Lansdowne by preventing LHOA from amending its CC&Rs to
permit other cable providers from building infrastructure in the
development. The CC&Rs similarly provide that OBL's "rights with
respect to the private utility system . . . and the services provided
through such private utility system are exclusive, and no other Person
may provide such services to the Property.