Paragould Cablevision, Inc. v. City of Paragould

Citations: 1991 Ark. LEXIS 267; 305 Ark. 476; 809 S.W.2d 688Docket: 90-153

Court: Supreme Court of Arkansas; May 13, 1991; Arkansas; State Supreme Court

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Morton Gitelman, Special Justice, addressed an appeal from the Greene County Chancery Court, which granted summary judgment dismissing the complaint of Paragould Cablevision, Inc. Cablevision holds a non-exclusive franchise to operate a cable television system in Paragould, Arkansas, where it has served approximately 6,000 subscribers since 1963. Its current franchise is set to expire on December 9, 1993. Following a 1983 franchise renewal, local citizens expressed dissatisfaction with Cablevision's services and rates, prompting the City to explore the establishment of a city-owned cable system. In June 1986, voters authorized this initiative, leading to the City delegating operational responsibilities to the Paragould Light and Water Commission. After a municipal election in October 1989, the City planned to issue $3.22 million in Capital Improvement Bonds to finance the system.

On January 18, 1990, Cablevision filed for an injunction against the bond issuance and argued that the Commission lacked authority to operate a cable system, claiming such delegation by the City was ultra vires and constituted an illegal exaction under the Arkansas Constitution. The chancellor ruled that the City had the authority under Act 328 of 1987 to construct and operate a cable system and to issue bonds for its financing. Additionally, the chancellor found that the delegation of authority to the Commission was valid, being a permissible administrative function rather than a legislative one, thereby negating the claim of illegal exaction. The court affirmed these findings. Cablevision acknowledged the authority of Arkansas cities to own and operate cable systems and to issue financing bonds, recognizing the public interest aspect of cable television as distinct from other municipal entrepreneurial activities.

Prior to federal regulation, courts addressed legal issues pertaining to Community Antenna Television (CATV) enterprises by applying property law and unfair competition principles due to a lack of statutory guidance. This is illustrated by various cases, including Intermountain Electronics, Inc. v. Tintic School Dist. and Cable Vision, Inc. v. KUTV, Inc. In contrast, the Cable Act of 1984 established a national framework for cable television, clarifying that cable systems are neither common carriers nor public utilities, allowing for municipal ownership, and not mandating exclusive franchises.

Cablevision contends that while the City can operate a competing cable system, it cannot delegate authority to the Commission, which it views as limited to powers expressly granted by its enabling act. The Commission was created by the City in 1941 under Act 70 of 1941, which allowed municipalities to form a board for managing municipal light and power plants, explicitly prohibiting the sale or rental of operational rights to such equipment. Although Act 70’s validity may be questioned under the Arkansas Constitution, it was later validated by Act 562 in 1953, which allowed cities of the first class to create such commissions. The City reestablished its power commission under Act 562 and subsequently expanded its control to include water and sewer systems in 1984.

Cablevision asserts that the Commission is a separate entity from the City, established by Act 562 of 1953, and argues that its operation of a cable television system would be ultra vires, as the Act only empowers commissions to manage electric, water, and sewer plants. The City, however, argues that the Commission functions as an agency of the City, efficiently managing municipal utilities and possessing the necessary infrastructure, including vehicles and light poles, to facilitate cable signal distribution. Cablevision did not present independent evidence to support its claim of the Commission's distinct status, relying instead on the text of Act 562 to argue against the Commission's capability to operate a cable system. The court must interpret the legislative intent of Act 562, which suggests that the legislature did not intend to create independent entities outside of municipal control. Sections of the Act indicate that the Commission can only operate within the scope defined by the City Council, which includes the potential operation of a cable system. Cablevision's reliance on the precedent set in Portis v. Board of Public Utilities is noted, where it was determined that powers related to municipal utilities remained with the town rather than the created board. Overall, the powers and limitations outlined in Act 562 appear directed towards the cities, rather than establishing the Commission as a distinct entity with limited powers.

Cablevision's theory is unsupported in this case based on two key findings. First, the holding in Portis establishes that Act 95 did not revoke a municipality's power to issue revenue bonds, affirming that the intention of the legislature was to preserve this power exclusively for municipalities. The ruling emphasized that only the municipality itself should have the authority to issue such bonds, not the Public Utilities Board of Lepanto, which lacks comparable status to the Paragould Light and Water Commission. Second, although the 'Dillon Rule' was discussed in the Portis case, which limits municipal corporations to powers expressly granted or implied by statute, the Commission at issue here was created by the City under permissive legislation (Act 562 of 1953) and is not a successor to a municipal corporation like the Board of Utilities. The argument that the 'Dillon Rule' was repealed by Act 266 of 1971 does not impact the current case, as the Commission is not a separate legal entity from the City regarding the operation of a cable television system. The precedent set in Adams v. Bryant further supports this conclusion, affirming that commissions created by city ordinances act as agents of the city rather than distinct municipal corporations.

The Clarksville plant, established by an improvement district, allows the city to delegate utility operations to a commission of three appointed members instead of five elected ones, as per Act 95 of 1939. In the Adams case, plaintiffs sought an injunction against the utility commissioners for engaging in activities unrelated to utility operations, such as investing in an industrial park and promoting the dairy industry; this request was denied, indicating that cities can assign additional duties to their utility commissions. 

The document addresses Cablevision's claim that the Paragould ordinances and franchise agreement improperly delegate legislative power. It clarifies that the Commission is not a separate municipal entity but created under permissive legislation, and its powers are administrative or ministerial rather than legislative. Following the lawsuit, the Paragould City Council adopted a resolution to ensure the franchise agreement granted only administrative or ministerial duties to the Commission while reserving legislative powers for the city council. 

Evidence supporting this conclusion includes the city issuing bonds for the cable system, controlling subscriber rates, and a citizen's advisory committee selecting programming. The Commission is deemed the appropriate agency to manage the cable system due to its resources and infrastructure. Furthermore, under the federal Cable Act of 1984, a city must award a franchise for cable operation, which does not imply that the Commission is separate from the City. Ultimately, the court determined that the Commission acts as an agency of the City, retaining all legislative power related to the cable system, thus rejecting Cablevision's claims of constitutional or statutory violations. The decision was affirmed, with dissenting opinions noted.