Multi-Channel TV Cable Co. v. Charlottesville Quality Cable Operating Co.

Citations: 108 F.3d 522; 1997 WL 115820Docket: No. 95-3021

Court: Court of Appeals for the Fourth Circuit; March 16, 1997; Federal Appellate Court

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The court affirmed in part and vacated in part the magistrate judge's ruling regarding Charlottesville Quality Cable (CQC) in a dispute over cable franchise rights in Charlottesville, Virginia. The appeal, led by Judge Hamilton with Chief Judge Wilkinson and Judge Michael joining, upheld the magistrate's finding of CQC's civil liability for statutory conspiracy under Virginia law, as well as the damages awarded to MultiChannel TV d/b/a Adelphia, except for the punitive damages, which were vacated.

Adelphia and CQC are competing cable providers in Charlottesville. Adelphia established its cable distribution systems in multi-dwelling units (MDUs) starting in 1981, allowing personalized cable service for tenants. In 1993, CQC secured an exclusive agreement with Alcova, the property manager for certain MDUs, which included a kick-back arrangement where Alcova received a consultant fee based on CQC's revenues. CQC subsequently installed its own cable distribution system, which involved cutting Adelphia’s existing wires and terminating its service to tenants without prior notice. Adelphia discovered the disruption during a routine inspection and filed a lawsuit in December 1993 against CQC, Alcova, and various MDU owners, alleging multiple claims, including statutory conspiracy and violations of the Virginia Residential Landlord Tenant Act.

Adelphia filed a motion on December 3, 1993, seeking a preliminary injunction to prevent the named defendants from operating under a kick-back agreement and to allow Adelphia to serve cable to MDU tenants during litigation. A preliminary injunction was granted on December 16, 1993, prohibiting CQC and MDU owners from the kick-back agreement and from expressing cable provider preferences to tenants, permitting reconnection of Adelphia's services to tenants preferring Adelphia, enjoining CQC from using Adelphia’s equipment for tenants not reconnecting, and allowing Alcova to enter leases reserving the right to choose cable providers. The preliminary injunction was affirmed on April 14, 1994, with the exception of the prohibition on expressing preferences. Adelphia's request for modification was denied, and this decision was affirmed in July 1995. 

In February 1995, the magistrate judge granted Adelphia summary judgment on claims including breach of license and tortious interference, awarding $68,000 for conversion of cable wires and $219,887 for tortious interference and violations of the Landlord Tenant Act. The judge also enjoined the kick-back agreement and vacated CQC’s exclusive access rights resulting from it, which was affirmed on September 18, 1995.

Subsequently, a trial addressed Adelphia’s claims of conversion and conspiracy. The magistrate judge found CQC liable for statutory conspiracy under Virginia law, while Alcova and MDU owners were liable for common law conspiracy without the requisite malice for statutory liability. Damages awarded included $8,200 for conversion, $143,300 in lost profits, treble damages against CQC, and $10,000 in punitive damages. The kick-back agreement was voided, and the defendants were enjoined from similar agreements in the future. CQC is appealing these decisions.

CQC's first four arguments against the magistrate judge’s conclusion of a violation of Virginia's civil statutory conspiracy law (Va. Code Ann. 18.2-499(B)) are unsubstantiated. Under this statute, liability arises when a party attempts to procure others to willfully and maliciously injure another's reputation or business. A plaintiff must establish their case with clear and convincing evidence (Va. Code Ann. 18.2-500; Tazewell Oil Co. Inc. v. United Va. Bank). CQC can be held liable if evidence shows: 1) an attempt to conspire to harm Adelphia; 2) legal malice toward Adelphia; and 3) resultant damages to Adelphia. 

CQC's claim of lacking requisite malice is rejected; the Virginia Supreme Court in Greenspan v. Osheroff clarified that liability exists even when a defendant has legitimate motives, as long as the intent to harm is primary. This was reaffirmed in CBS, which stated that the statutory requirement is for legal malice—not actual malice—meaning intentional actions without lawful justification suffice. 

CQC also argues it cannot be liable for attempting to conspire, but the statute explicitly includes attempts to procure others for conspiracy. Furthermore, CQC posits that it cannot be liable due to the absence of evidence showing another party conspired with it with legal malice. This is incorrect, as the statute only necessitates that one party conspire with another while acting with legal malice, which is established by evidence of CQC's collusion with Alcova and the MDU owners to harm Adelphia.

CQC contends that the evidence is insufficient to prove a violation of Virginia’s statutory conspiracy law. However, the evidence presented at the bench trial showed that CQC aimed to eliminate Adelphia from the Charlottesville cable market through aggressive tactics, including negative advertising, property destruction, unauthorized service cut-offs, and illegal kick-backs to Alcova. This constituted clear and convincing evidence of conspiracy that harmed Adelphia’s business reputation and resulted in damages. The magistrate judge found CQC liable and awarded Adelphia $151,500 in damages, which included $143,300 for lost profits due to tortious interference, trebled because of the conspiracy, and $8,200 for damages to tangible property that was not trebled. Additionally, $10,000 in punitive damages was awarded against CQC, and the kick-back agreement with Alcova was voided with an injunction against future similar agreements.

CQC argues against the damages awarded, claiming that once the kick-back agreement was voided, Adelphia suffered no further damages and could compete equally. This argument was previously rejected in a related case, affirming that it was reasonable to link Adelphia’s business expectancy to its franchise rights. CQC also argues that the injunctive relief awarded alongside the damages represents double recovery. However, this claim is dismissed, as the adverse effects of CQC’s actions persisted despite the injunction, indicating that the damages awarded were justified and not duplicative. CQC’s actions resulted in sustained harm to Adelphia throughout its franchise period, warranting both compensatory and treble damages.

CQC contends that the magistrate judge incorrectly awarded $10,000 in punitive damages after trebling damages of $143,300 against it. The appellate court agrees, stating that the trebling of damages serves a punitive purpose and is disfavored, thus rendering the additional $10,000 punitive damages award erroneous as it constitutes double recovery for Adelphia's statutory conspiracy claim. Consequently, the punitive damages award is vacated. The court affirms the magistrate judge's ruling that CQC violated Virginia's statutory conspiracy law and upholds all awarded damages to Adelphia, except for the punitive damages. Virginia's statutory conspiracy laws impose both criminal penalties and civil liability for the same actions, with Section 18.2-499(A) outlining the requirements for proving a criminal statutory business conspiracy, which is classified as a Class 1 misdemeanor. Section 18.2-499(B) addresses civil and criminal liability for those attempting to engage others in a conspiracy. The magistrate judge awarded Adelphia treble damages, including lost profits and attorney’s fees, along with injunctive relief against CQC and Alcova. CQC's cited cases regarding the necessity of an overriding purpose to injure Adelphia's business are deemed outdated. At the time of the trial, Adelphia had six years left on its cable franchise license, which the magistrate judge extended by five years, reflecting potential future profits over an eleven-year period. This case's damages were calculated based on a 9.5-year expectancy, combining the remaining license duration with a probable five-year renewal.