author: SPELLMAN, District Judge.

text:
    William U. PAYNE; Flora A. Payne and Lowell E. Payne, Plaintiffs, v. UNITED STATES FIDELITY AND GUARANTY COMPANY; and Maryland Casualty Co., Defendants.
    No. 84-1443-CIV-EPS.
    United States District Court, S.D. Florida, Miami Division.
    Nov. 21, 1985.

      John Wilcox, Miami, Fla., for plaintiffs. William Flynn, Miami, Fla., for USF & G. James Blecke, Miami, Fla., for Maryland.
   MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFFS’ MOTION FOR PARTIAL SUMMARY JUDGMENT AGAINST DEFENDANT USF & G

SPELLMAN, District Judge.

This CAUSE comes before the Court on the Plaintiffs’ and Defendant’s Motions for Summary Judgment on the question of whether the insurer is obligated to defend the Plaintiffs against the actions filed by the United States Environmental Protection Agency (EPA) and the Florida Department of Environmental Regulation (DER). The parties are not here seeking a determination of the insurer’s obligations to indemnify the Plaintiffs for any potential liability in the main case and acknowledge that questions of fact remain to be resolved'as to coverage for any damages.

The Plaintiffs herein obtained a policy of Comprehensive General Liability Insurance from the Defendant, United States Fidelity and Guaranty Company (USF & G), covering their interest in a parcel of property in Medley, Florida, for the term beginning May 24, 1974 and ending May 24, 1977. During this period, Pepper’s Steel and Alloy Company rented adjacent property to operate a metal recovery business. Pepper’s was engaged in recycling metals from transformers and wire purchased from Florida Power and Light. In 1982 an analysis of the soil in this vicinity and of the water revealed an intense anomaly of oil layers with substantial concentrations of polychlorinated biphenyls and other pollutants. In July 1983, the EPA and DER filed separate and independent suits against the Plaintiffs identifying them as potentially responsible parties. In essence, the Complaints alleged that the Plaintiffs herein had not undertaken an effort to control or contain the spread of the PCBs at the site and refused to grant the EPA and its contractors access to the site to undertake remedial action. The suits initiated enforcement action and sought cleanup and other relief.

In September 1983, the Plaintiffs notified USF & G of the suits and demanded a defense pursuant to the terms of their policy. When the insurer denied coverage, the Plaintiffs filed a declaratory action seeking an interpretation of their rights and the insurer’s duties under the policy. At the initial status conference, the parties agreed that as to the duty to defend, there appeared to be no triable issues of fact, and the Court invited the parties to file Motions for Summary Judgment on this issue. After having reviewed and considered the Motions for Summary Judgment, the Memoranda of law, the pleadings, and the affidavits, and after having heard and considered oral argument of counsel, this Court GRANTS the Plaintiffs’ Motion for Partial Summary Judgment against the Defendant, USF & G. Because this is a case of first impression in Florida, the issues herein warrant extended analysis.

II.

The construction and effect of a written contract of insurance is a matter of law to be determined by the court. St. Paul Mercury Insurance Co. v. Huitt, 336 F.2d 37 (6th Cir.1964). Since the jurisdiction of this Court is based on diversity and since the insurance contract was issued in Florida, this Court must look to Florida law in its interpretation of the policy. Id. USF & G’s duty to defend the Plaintiffs herein rests entirely upon the meaning of the provisions of the policy and its legal effect. Such a determination is most appropriate for summary judgment. See Buckner v. Physicians Protective Trust Fund, 376 So.2d 461 (Fla.Dist.Ct.App.1979).

The pivotal sections of the insurance policy are as follows:

Coverage

The Company will pay on behalf of the insured all sums which the Insured shall become legally obligated to pay as damages because of ... bodily injury ... property damage ... to which this insurance applies, caused by an occurrence, and the Company shall have the right and duty to defend any suit against the Insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient.

Occurrence

“Occurrence” means an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the Insured.

Property Damage

(1) physical injury to or destruction of tangible property which occurs during the policy period, including the loss of use thereof at any time resulting therefrom, or

(2) loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence during the policy period.

Pollution Exclusion

This insurance does not apply ... to bodily injury or property damage arising out of the discharge, dispersal, release or escape of smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, liquids or gases, waste materials or other irritants, contaminants or pollutants into or upon land, the atmosphere or any watercourse or body of water; but this exclusion does not apply if such discharge, dispersal, release or escape is sudden and accidental.

III.

The Defendant contends that the allegations set forth in the Complaints filed by the EPA and the DER fail to allege facts requiring USF & G to provide a defense for the Plaintiffs. The policy only covers pollution if such “discharge, dispersal, release or escape is sudden and accidental.” The Defendant then argues that the Plaintiffs herein knew that Pepper’s was draining the oil and consented to this activity. From there, USF & G concludes that such knowledge and consent on the part of the Plaintiffs amount to “intent,” and that intentionally allowing the release of hazardous substances precludes classifying this discharge as “sudden and accidental” within the embrace of the policy.

To bolster this line of reasoning, the Defendant cites American States Insurance Co. v. Maryland Casualty Co., 587 F.Supp. 1549 (S.D.Mich.1984). American States was a declaratory judgment action brought by an insurance company against its insured and other insurance carriers. The precise issue before the court was which, if any, of the carriers owed the insured, National Drum, a duty to defend it in four underlying lawsuits arising out of the dumping of toxic waste materials. The insurance policy at issue contained an exclusion clause identical to the one in the instant case.

The Michigan court in American States found that none of the insurers had a duty to defend the insured. This decision rested upon the court’s determination that the release of the toxic materials was “continuous” and not “sudden or accidental.” The court in so concluding emphasized the fact that in the suits filed against National Drum, it was alleged that the Defendant “entered into agreements to unlawfully dispose of the toxic materials” and was “the originator or producer” of the toxic wastes. Id at 1551. It is crucial to note that in the suits filed against the Plaintiffs herein, it is nowhere alleged that the insured have generated or produced the hazardous substances. Nowhere is it alleged that the Plaintiffs disposed of toxic waste as a natural and usual part of its business. The Plaintiffs herein own a parcel of property contiguous to commercial real property on which Pepper’s operates its business. It has not been suggested that the Plaintiffs have any active involvement in the production of PCBs or in the dumping of such pollutants into the environment.

In American States, the court relied in part on policy considerations delineated by the court in Niagara County v. Utica Mutual Insurance Co., 80 A.D.2d 415, 439 N.Y.S.2d 538, (1981). Niagara County was a suit brought by the insured, a county, against an insurance company for a declaratory judgment with respect to the duty of the insurer to defend the county in the “Love Canal” litigation. The court found that the county was entitled to a defense by the insurer notwithstanding the provision in the policy excluding coverage against liability for pollution or contamination unless such was sudden and accidental. The court stressed that the objective of the pollution exclusion clause was to buttress environmental protection standards. The New York legislature, in mandating such a clause, feared that commercial or industrial enterprises would circumvent adherence to environmental standards by simply purchasing insurance to insulate themselves from any liability arising from their pollution. The court concluded that the clause, identical to the one before this Court, was intended to apply to only actual polluters. Undeniably this Court’s interpretation of the policy as providing coverage to the Plaintiffs herein, property owners who are not the originators of the toxic substance, who are not commercial or industrial enterprises, will not frustrate the objectives behind the inclusion of such “pollution clauses” in insurance contracts.

IY.

One of . the earliest cases to define the term “sudden and accidental” in the pollution exclusion clause was Lansco, Inc. v. Department of Environmental Protection, 138 N.J.Super. 275, 350 A.2d 520 (1975). In Lansco, unknown persons opened the valves on two storage tanks at the insured’s business. The DEP ordered the insured to clean-up the spill. The insured then filed a declaratory judgment action to establish coverage under a comprehensive general liability insurance policy for costs incurred in the cleaning up. The court found the exclusion clause inapplicable in such a case. The court found that “the words used by the insurer must be interpreted in accordance with the plain, ordinary and commonly understood meaning of the language employed.” Id. 350 A.2d at 523. Further, the court found that whether an “occurrence is accidental must be viewed from the standpoint of the insured.” Id at 524. Since the spill was neither expected nor intended by the insured, it followed that it was “sudden and accidental.” Id.

Buckeye Union Insurance Co. Inc. v. Liberty Solvents & Chemicals Co., 17 Ohio App.3d 127, 477 N.E.2d 1227 (1984) is another case in which the court interpreted the pollution exclusion clause and compelled the insurer to assume the defense of its insured even though the policy holder was an industrial entity. In Buckeye Union, the Complaint alleged that generators of hazardous waste contracted with Chem-Dyne Corporation for the disposal of hazardous waste, that the waste was discharged when Chem-Dyne ruptured the containers, and that this spill resulted in the pollution of the environment in and around the disposal site. The generator of hazardous waste requested that its insurer defend the actions under the terms of the policy. The court of appeals reversed the trial court and found that the insurer was required to defend the insured because there were no allegations in the complaint compelling a conclusion that the insured intended or expected releases of such chemical substances into the environment.

The facts of the instant case do fall within the ambit of the decisions in other jurisdictions which have construed the pollution exclusion clause. The Complaints filed against the Plaintiffs herein by the EPA and DER are devoid of allegations compelling the conclusion that the Plaintiffs herein intended or expected the discharge of PCBs into the environment by a commercial enterprise operating on a parcel of adjacent land.

V.

The Defendant has accurately cited State Farm Fire and Casualty Co. v. Edgecumbe, 471 So.2d 209 (Fla.Dist.Ct.App.1985) for the proposition that whether an insurance company owes a duty to provide an insured with a defense to proceedings initiated against him must be determined from the allegations of the Complaint. In addition, it has been firmly embedded in the jurisprudence of this State that contracts of insurance should be construed most favorably to the insured. Gulf Life Insurance Co. v. Nash, 97 So.2d 4 (Fla.1957). In other jurisdictions, courts have particularly applied such canons of construction to the pollution exclusion:

Where the terms of an insurance policy are ambiguous or are subject to more than one reasonable construction, the policy must be construed most favorably to the insured and strictly against the insurer____ This is particularly so as to ambiguities found in an exclusionary clause. Niagara County v. Utica Mutual Insurance Co. [80 A,D.2d 415], 439 N.Y.S.2d 538, 541 (N.Y.App.Div.1981), citations omitted. See also, Buckeye Union Insurance Co. Inc. v. Liberty Solvents & Chemicals Co. [17 Ohio App.3d 127], 477 N.E.2d 1227 (Ohio Ct.App.1984).

In light of these principles, this Court is persuaded that the pleadings state facts which bring the insured within the coverage of the policy.

VI.

In conclusion, the construction and effect of a written contract of insurance is a matter of law within the province of the court. Because the pollution did not result from the regular course of the insured’s business and because there are no allegations in the EPA or DER Complaints compelling the determination that the insured intended or expected the release of PCBs into the environment or the damages that such releases could cause, this Court GRANTS the Plaintiffs’ Motion for Partial Summary Judgment against USF & G. This Court finds as a matter of law that the insurer may not avoid its obligations to defend the Plaintiffs against the actions filed by the EPA and the DER.


source: Caselaw Access Project

license: Public Domain

text:
    STORER COMMUNICATIONS, INCORPORATED, an Ohio corporation, Dade Cable Television, Inc., a Florida corporation, Storer Cable TV of Florida, Inc., a Florida corporation, and Hollywood Cablevision, a Florida joint venture, Plaintiffs, v. Ron MOGEL and Robert E. McDonough, Defendants.
    Civ. A. No. 85-6822-Civ-EPS.
    United States District Court, S.D. Florida, Broward Division.
    Nov. 26, 1985.
    Terry Bienstock, Frates, Bienstock & Sheehe, Miami, Fla., for plaintiffs.
    Stuart Stein, Fort Lauderdale, Fla., for defendants.
   ORDER GRANTING PRELIMINARY INJUNCTION

SPELLMAN, District Judge.

THIS CAUSE came to be heard for an evidentiary hearing on November 21, 1985, on plaintiffs’, STORER COMMUNICATIONS, INCORPORATED (“STORER”), DADE CABLE TELEVISION, INC., STORER CABLE TV OF FLORIDA, INC. and HOLLYWOOD CABLEVISION (“STORER CABLE”), Motion for a Preliminary Injunction pursuant to Rule 65, Federal Rules of Civil Procedure.

Plaintiffs seek to enjoin the defendants from the continued sale, distribution, provision of instructions for installation and actual installation, in Broward and Dade Counties and elsewhere, of devices and equipment designed, adapted, used and/or intended to be used for, or capable of, the unauthorized interception and reception of plaintiffs’ cable television services (hereinafter “unauthorized cable television equipment”). The action arises under the federal Communications Act of 1934, 47 U.S.C. § 553; the federal R.I.C.O. Act, 18 U.S.C. § 1962; the Florida R.I.C.O. Act, § 895.03, Florida Statutes; the Florida Trespass and Larceny of Cable Television Service Statute, § 812.14, Florida Statutes; Florida Theft Statute, § 812.014(1), Florida Statutes; the Florida Unfair and Deceptive Acts or Practices Statute, § 501.204, Florida Statutes; and common law remedies for conversion and unfair competition. Although only the claims for relief under 47 U.S.C. § 553 and Florida Statutes, Section 812.14 were argued at the hearing, plaintiffs fully briefed the claim for relief under Florida Statutes, Section 812.014(1).

This Court has jurisdiction under 28 U.S.C. §§ 1331 and 1338 over the federal claims and pendent jurisdiction over the state law claims.

The issues raised have been briefed and this Court has reviewed evidence, heard testimony of witnesses and argument of counsel. This Court concludes that the plaintiffs are entitled to preliminary injunctive relief, and hereby makes and enters the following Findings of Facts and Conclusions of Law.

FINDINGS OF FACT

1. Plaintiff, Storer Communications, Incorporated (“Storer”), is an Ohio corporation authorized to do business in Florida. STORER is engaged in the distribution of cable television. Cable television, as used herein, refers to television programming transmitted via coaxial cables, for which the receiver pays a subscription fee.

2. Plaintiffs, Dade Cable Television, Inc., Storer Cable TV of Florida, Inc., corporations duly organized under the laws of the State of Florida, and Hollywood Cablevision, a Florida joint venture between Storer Cable TV of Florida, Inc. and Hollywood Cable TV, Inc., own and operate cable television systems in Dade and Broward Counties, Florida, where the instant claims arose. Hereinafter, Dade Cable Television, Inc., Storer Cable TV of Florida, Inc., and Hollywood Cablevision will be referred to collectively as “Storer Cable.”

3. Defendant, Ron Mogel, is an individual residing in Fort Lauderdale, Florida.

4. Defendant, Robert E. McDonough, is an individual residing in Hollywood, Florida.

5. Defendants are doing business within Broward and Dade Counties.

6. Storer is engaged in the business of acquiring exhibition rights to programming for distribution via its cable television system. Storer pays the originators of the programming for such exhibition rights. Storer’s cable television programming is supplied to customers in Dade and Broward Counties through its wholly owned Storer Cable subsidiaries. Under the terms of the authorization granted to plaintiffs by the localities in the Dade and Broward County areas, the plaintiffs are obligated to pay a portion of subscription fees to those localities.

7. As cable system operators, Storer Cable provides basic cable services to subscribers for a monthly fee. These basic cable services include local broadcast channeis, imported signals (distantly broadcast-ed television channels), and other programming.

8. Additionally, Storer Cable transmits certain premium programming services acquired by Storer in an encrypted form via coaxial cable to subscribers who are provided with the equipment necessary to receive and decode the transmissions for reception on the subscribers’ television receivers. Storer Cable provides such premium programming at an additional charge to basic service subscribers who desire this programming.

9. The premium programming consists primarily of feature films and special entertainment events. Through various contractual agreements, Storer Cable has acquired the rights to provide such programming to its customers.

10. Storer Cable provides to its customers the equipment necessary to receive and decode the programming transmitted by Storer. Ownership of the cable equipment is retained by Storer Cable, which ensures that the equipment they provide is maintained in good working condition. Customers pay Storer Cable an installation charge, a nominal monthly charge for the equipment and a monthly charge for the programming.

11. Storer Cable maintains a staff of service personnel that performs equipment maintenance and provides service to its customers at no additional charge. Storer Cable also has undertaken an extensive and costly advertising campaign to promote its cable television systems in Dade and Bro-ward Counties.

12. Storer Cable provides subscribers with services different from those provided by “free” standard television broadcasting. The cable transmissions are intended for use only by plaintiffs’ customers and are not transmitted for the benefit of or use by the general public.

13. Defendants have been engaged in the advertisement, offer for sale, sale, provision of instructions for installation and actual installation of one or more types of cable television equipment. Testimony was heard clearly establishing that McDonough is employed by Mogel for the purpose of installing the equipment sold by Mogel from his home and from a booth at the Thunderbird Swap Shop in Broward County. These sales and installations were made on a cash-only basis and spanned over a one-year period. Such equipment is used and intended to intercept and receive Storer Cable’s transmissions of programming and to decode those transmissions for reception on a standard television receiver, all without consent or authorization of plaintiffs. The testimony concerning plaintiffs’ investigation into defendants’ activities revealed that defendants sell, provide instructions for installation and install basic converters and decoder boxes for premium programming, which when attached to the cable lines and equipment installed by Storer Cable, allow the reception of plaintiffs’ cable television services, without payment being reported or made to plaintiffs. By sale and installation of this equipment, defendants enabled purchasers both with and without basic cable service to intercept plaintiffs’ transmissions. Those purchasers who were not subscribers to plaintiffs’ basic cable service, were enabled to receive and use both basic and premium programming services as a result of defendants’ sale and installation of the equipment. Purchasers who were already receiving plaintiffs’ basic cable service and who in fact may have been paying basic subscribers, were additionally enabled by defendants to receive the premium programming services transmitted by plaintiffs. In both situations, plaintiffs were deprived of compensation to which they were entitled for their services from defendants’ customers.

14. The Court finds that defendants provide this equipment with the specific knowledge and intent that said equipment can and will be used to receive plaintiffs’ transmissions without the purchasers subscribing to and paying for the services, thereby evading compensation to Storer Cable for the reception and use of its cable television services. Testimony was heard that on nine separate occasions, plaintiffs’ investigator met or spoke with Mogel regarding the purchase and installation of one or more converters and decoders, and at no time did Mogel advise the investigator to contact plaintiffs or any other cable company to report the services for payment. To the contrary, it was always made clear by defendants that the purpose of purchasing their cable equipment was to enable the purchaser to avoid payment for the cable services received. On two separate occasions, McDonough installed equipment sold by Mogel to plaintiffs’ investigator and on each occasion McDonough acknowledged that what they were doing was illegal. McDonough also advised his customers on ways to ensure that the cable operator did not discover the unauthorized reception of cable services.

15. Evidence at trial established defendants receive a flat fee, between $150 and $250 in cash, for such equipment and/or installation and deprive plaintiffs of the subscription fees for their cable television services.

16. Defendants’ purpose and intent in selling, providing instructions for installing and installing cable television equipment, is to secure a private financial gain for commercial purposes by assisting, aiding and abetting the purchasers of such equipment to appropriate plaintiffs’ transmissions while avoiding compensation to Storer Cable.

17. Defendants’ activities are done without the permission of plaintiffs. No part of the proceeds received from the sale of the cable television equipment has been paid to Storer Cable, which has neither authorized nor entitled any persons to receive or to intercept its transmissions of programming without payment therefor.

18. The persons to whom defendants have sold cable television equipment would otherwise be able to secure Storer Cable’s cable television services only by contractual arrangement with Storer Cable, and would therefore likely become paying customers of Storer Cable’s cable television services but for defendants’ unauthorized sale and installation of said equipment.

19. Defendants' conduct causes substantial damage to plaintiffs. The monthly charge paid by Storer Cable’s customers for the basic and premium programming is the primary source of revenue for Storer Cable.

CONCLUSIONS OF LAW

SECTION 553 OF THE FEDERAL COMMUNICATIONS ACT

1. Section 553(a)(1) of the federal Cable Communications Policy Act of 1984, 47 U.S.C. § 553(a)(1), effective December 29, 1984, prohibits any person from intercepting, receiving or assisting in the interception or reception of any communications service offered over a cable system unless specifically authorized to do so by a cable operator. 47 U.S.C. § 553(a)(2) provides that the phrase “assist in intercepting or receiving” shall include the manufacture or distribution of equipment intended by the manufacturer or distributor for unauthorized reception of any communications service offered over a cable system in violation of subparagraph (1). The Act empowers this Court to entertain a civil action by anyone aggrieved by a violation of § 553(a)(1) and to grant preliminary injunctive relief.

2. Plaintiffs allege that defendants’ actions violate Section 553 of the federal Communications Act in that:

(a) Defendants willfully intercept, receive or assist in intercepting and receiving the communications services of Storer Cable, cable operators, without authorization; and

(b) Defendants willfully distribute, sell, provide instructions for installing and install equipment intended for unauthorized reception of a communications service offered by cable systems for commercial advantage and private financial gain.

3. Although there is no decisional law under this new statute, it is apparent that Congressional intent was to prohibit theft of cable service. According to the House report:

Theft of service is depriving the cable industry of millions of dollars of revenue each year which it should otherwise be receiving. The Committee [on Energy and Commerce] believes that theft of cable service poses a major threat to the economic viability of cable operators and cable programmers, and creates unfair burdens on cable subscribers who are forced to subsidize the benefits that other individuals are getting by receiving cable service without paying for it.

H.R.Rep. No. 98-934, 98th Cong., 2d Sess. 83, reprinted in 1984 U.S.Code Cong. & Ad.News 4655, 4720. The legislative history further states that “paragraph (a)(2) is primarily aimed at preventing the ... distribution of so-called black boxes and other unauthorized converters which permit reception of cable service without paying for the service.” H.R.Rep. No. 98-934, 98th Cong., 2d Sess. 84, reprinted in 1984 U.S. Code Cong. & Ad.News 4655, 4721.

4. Congress intended that the phrase “any communications service” contained in Section 553(a)(1) include “audio, video, textual, data or other service offered over a cable system, including any material transmitted to or from any subscriber over a cable system that has interactive capability.” H.R.Rep. No. 98-934, 98th Cong., 2d Sess. 83, reprinted in 1984 U.S.Code Cong. & Ad.News 4655, 4720. Thus, this Court finds that plaintiffs’ services are the type of services sought to be protected by the new statute.

5. This Court finds that defendants’ sale, provision of instructions for installation and actual installation of cable television equipment, with the specific knowledge and intent that such equipment would be used, and in fact was used to intercept plaintiffs’ services without payment therefor, is precisely the type of conduct that Congress sought to proscribe when it enacted Section 553.

6. Defendants’ unauthorized provision of instructions for installation and actual installation of the cable television equipment used to intercept plaintiffs’ services, is clearly conduct which “assists in receiving or intercepting” plaintiffs’ protected transmissions in violation of Section 553. No intent or specific knowledge is required under § 553 for this type of activity. The conduct herein done demonstrates a violation of the Act. Nonetheless, the Court finds that defendants acted with the intent and specific knowledge that their customers would avoid payment to plaintiffs for their services.

7. As to defendants’ sales of such equipment, the finding of intent and specific knowledge is more significant. The legislative history of § 553 states that if “a distributor intends that equipment he distributes ... be used for interception or reception of services provided over a cable system, such person should be liable for assisting such activities.” H.R.Rep. No. 98-934, 98th Cong., 2d Sess. 83-84, reprinted in 1984 U.S.Code Cong. & Ad. News 4655, 4720-21. Thus, when distributors of cable television equipment “provide the equipment with the intent or specific knowledge that it will be used for the unauthorized reception of cable service, they are liable under the act.” H.R.Rep. No. 98-934, 98th Cong., 2d Sess. 84, reprinted in 1984 U.S.Code Cong. & Ad.News 4655, 4721.

8. This Court finds that such specific knowledge or intent is apparent under the facts of this case. Defendants’ conduct herein clearly demonstrates that when they sold the cable television equipment, they had the requisite knowledge or intent that their customers would not contact plaintiffs to arrange for payment for their programming services. This intent is demonstrated by providing instructions for installing and actually installing the equipment and advising customers not to contact their local cable companies for payment for the services. Testimony was heard that McDonough specifically stated that what he and Mogel were doing was illegal. In fact, this Court finds that defendants’ entire business of distribution, sale and installation of cable converters and decoders has been structured around this very premise.

9. Decisional support for finding violations under Section 553 is found in a long series of federal pay-television theft of service cases in which the provider of the service has sued distributors of equipment under similar federal and state theft of service laws. Prior to the enactment of Section 553, the federal statute which proscribed theft of over-the-air pay television services was Section 605 of the federal Communications Act of 1934. Section 705 of the Cable Communications Policy Act of 1984 redesignated former Section 605 as Section 705(a), effective December 29, 1984, and added, inter alia, the remedies set forth in § 705(d). In relevant part, Section 705(a) provides:

No person not being authorized by the sender shall intercept any radio communications and divulge or publish the existence, contents, substance, purport, effect, or meaning of such intercepted communication to any person. No person not being entitled thereto shall receive or assist in receiving any interstate or foreign communication by radio and use such communication (or any information therein contained) for his own benefit or for the benefit of another not entitled thereto.

47 U.S.C. § 605(a) (1984).

10. Several federal appellate courts have had no difficulty in concluding that the unauthorized sale and installation of pay-TY equipment for the interception of over-the-air transmissions violates Section 605 even though, as distinguished from Section 553, there is no specific prohibition. See, e.g., ON/TV of Chicago v. Julien, 763 F.2d 839 (7th Cir.1985); California Satellite Systems v. Seimon, 767 F.2d 1364 (9th Cir.1985); National Subscription Television v. S & H TV, 644 F.2d 820 (9th Cir.1981); Chartwell Communications Group v. Westbrook, 637 F.2d 459 (6th Cir.1980). In addition, federal and state courts have uniformly held that the unauthorized sale and installation of devices to intercept and receive over-the-air pay television transmissions is a clear violation of various federal and state laws. See, e.g., Subscription Television of Greater Washington v. Kaufmann, 606 F.Supp. 1540 (D.C.D.C.1985); Ciminelli v. Cablevision, 583 F.Supp. 158 (E.D.N.Y.1984); Cox Cable Cleveland Area, Inc. v. King, 582 F.Supp. 376 (N.D.Ohio 1983); U.S. v. Stone, 546 F.Supp. 234 (S.D.Tex.1982); American Television, etc. v. Western Techtronics, 529 F.Supp. 617 (D.Colo.1981); Home Box Office, Inc. v. Advanced Consumer Technology, et al., 549 F.Supp. 14 (S.D.N.Y.1981); U.S. v. Westbrook, 502 F.Supp. 588 (E.D.Mich.1980); American Television and Communications Corp. v. Pirate T. V., Inc., et al., Case No. 81-969 (S.D.Fla.1981).

11. The Court finds the decisions in Cox Cable Cleveland Area, Inc. and Ciminelli to be persuasive. In Cox Cable Cleveland Area, Inc. v. King, supra, plaintiff, an operator of a cable television system, obtained preliminary injunctive relief under Section 605 to prevent defendant’s continued sale, installation and use of cable television equipment to illegally intercept plaintiffs transmissions. The court held that defendant’s advertisement, offer for sale, installation and use of devices, consisting of converters, decoders and descramblers, capable of, used for and intended to be used for unauthorized interception of and reception of plaintiff’s cable transmissions, violated § 605. The court further stated that:

defendant’s activities in selling [and installing] decoders to purchasers who use them for viewing plaintiff’s signals constitutes a prohibited divulgement or publication within the meaning of § 605 ... [and] assist third parties in receiving communications to which they are not entitled.

582 F.Supp. at 380.

12. Similarly, in Ciminelli v. Cablevision, supra, the court held that sales of decoders and descramblers, capable of receiving cable television transmissions, and made for the purpose of assisting the unauthorized reception of such wire communications, constitute a prohibited divulgement or publication within the meaning of Section 605. The Court further stated that the “act of viewing a program on a television set equipped with an unauthorized decoder amounts to disclosure of the existence, contents, substance, purport, effect, or meaning of ... signals to nonsubscribers.” 583 F.Supp. at 164. The court further stated that:

In addition, defendants’ acts assist others in receiving interstate radio communications, premium services, they’re not entitled to. Since this is done for the benefit of defendants and for the benefit of the purchaser as well, it too violates Section 605.

Id.

13. Thus, this Court concludes that based on the evidence presented, defendants herein, by such unauthorized sale, provision of instructions for installation, and actual installation of converters, decoders or other cable television equipment, coupled with the specific knowledge or intent that such equipment be used to intercept plaintiffs’ services without payment therefor, “assist in receiving” plaintiffs’ protected transmissions, in violation of Section 553. The Court further concludes that defendants’ defense that only the use of such equipment is illegal, rather than its sale or distribution, is totally Without merit.

FLORIDA STATUTES SECTION 812.14: TRESPASS AND LARCENY OF CABLE TELEVISION SERVICE

14. Section 812.14, Florida Statutes, makes it unlawful to:

(a) willfully alter or tamper with equipment belonging to a cable television service so as to cause loss or damage;

(b) make or cause to be made any connection in such a manner as to use, without the consent of the cable television service, any service, or to cause to be supplied any service from a cable television service without such service being reported for payment; and

(c) use or receive the direct benefit from the use of cable television service knowing, or under such circumstances as would in-, duce a reasonable person to believe, that such direct benefits have resulted from any tampering with, altering of or injury to equipment owned, operated or controlled by a cable television service, for the purpose of avoiding payment.

15. There is also very little decisional law under this statute, except the Florida Supreme Court’s decision in State v. Petruzzelli, 374 So.2d 13 (Fla.1979), where the court stated that the intent of the legislature under this statute was to prohibit larceny of a service or trespass to the fixtures of a supplier thereof.

16. Recently, though, several circuit courts in Dade and Broward Counties, Florida, have granted, preliminary and permanent injunctions under similar facts as herein on the basis of Section 812.14, Florida Statutes. See Storer Cable Communications, Inc. v. Seidner, No. 83-12087(22) (April 25, 1983); Storer Cable Communications, Inc. v. Haselton, No. 83-07075 CL (October 25, 1984); Storer Cable Communications, Inc. v. Rodriguez, No. 18572(25) (March 21, 1984). In Storer Cable Communications, Inc. v. Seidner, supra, plaintiffs sought preliminary injunctive relief to prevent the continued unauthorized sale, installation and use of cable television equipment. The court found that the defendant knowingly sold and installed such equipment with the representation to prospective purchasers and intent that the equipment was capable of and would be used to receive plaintiffs’ transmissions, without the purchasers reporting and paying for the services. In its Final Judgment for Permanent Injunction and Damages, the court held that a sale of such equipment violates Section 812.14, Florida Statutes:

A sale of such equipment ‘cause[s] to be supplied’ plaintiffs’ service and such service has not been reported for payment by any purchaser thereof ...

17. This Court concludes that Florida Statutes, Section 812.14 applies not only to the purchasers and users of such equipment who fail to report for payment reception of the programming services to cable companies, but also to the providers and installers of such equipment. The testimony established that on two separate occasions, McDonough actually made the necessary physical connections between defendants’ equipment and Storer Cable’s cable wires, in order to enable defendants’ purchasers to receive plaintiffs’ cable services. Based on the testimony heard, defendants have violated Section 812.14, Florida Statutes, by selling, providing instructions for installing and actually installing cable television equipment, with the knowledge and intent that it would be used to intercept and receive plaintiffs’ cable television services, thereby:

(a) making or causing to be made connection with plaintiffs’ equipment in such a manner as to directly cause the use of plaintiffs’ cable television services without plaintiffs’ consent; and

(b) causing plaintiffs’ cable television services to be supplied without such services being reported for payment; and

(c) assisting, aiding and abetting third parties to use plaintiffs’ cable television services without plaintiffs’ consent and without such services being reported for payment; and

(d) willfully altering or tampering with the cable and other apparatus or devices belonging to plaintiffs in such a manner as to cause loss or damage to plaintiffs; and

(e) making connection with plaintiffs’ equipment in such a manner as to directly cause the use of plaintiffs’ cable television services without plaintiffs’ consent.

FLORIDA STATUTES SECTION 812.014(1): THEFT AND CONVERSION

18. Although no argument was heard at the hearing concerning this statute, its applicability was fully briefed by plaintiffs and merits resolution herein.

19. Section 812.014(1), Florida Statutes, prohibits any person from knowingly obtaining, using or endeavoring to obtain or to use the property of another with intent to: (a) deprive the other person of a right to the property or a benefit therefrom; or (b) appropriate the property to his own use or to the use of any person not entitled thereto.

20. Plaintiffs allege that defendants have violated Section 812.014(1), Florida Statutes, by intentionally, knowingly, willfully and wantonly selling, installing and using cable television equipment to intercept, obtain and use plaintiffs’ cable television services, without plaintiffs’ authorization or consent.

21. The property right which has been taken includes plaintiffs’ programming, exhibition and distribution rights via coaxial cables in certain areas within Dade and Broward Counties. Additionally, plaintiffs’ cable television services are “property” within the meaning of Section 812.014, Florida Statutes.

22. In Storer v. Seidner, supra, the court granted permanent injunctive relief and held that defendant’s activities in selling, installing and using unauthorized cable television equipment violated Section 812.-014(1), Florida Statutes, stating:

Defendant’s activities also violate Section 812.014(1), Florida Statutes. This theft statute prohibits any person from knowingly obtaining, using, or endeavoring to obtain or to use, the property of another____ “Property” includes the private communication services which plaintiffs supply. See Fla.Stat. § 812.-012(5).
Defendant has violated Section 812.-014(1) by selling, installing, and using equipment which intercepts and receives plaintiffs’ cable television service. By defendant’s actions, plaintiffs are deprived of their property and defendant appropriates plaintiffs’ property in the form of exhibition and distribution rights to programming, rights to collect fees therefor, and plaintiffs’ cable television service.

Id., slip op. at 7.

23. This Court concludes that based on the evidence presented, defendants have violated Section 812.014(1), Florida Statutes, by intentionally and knowingly selling, providing instructions for installing, actually installing and using cable television equipment to intercept; obtain and use plaintiffs’ cable television services, without plaintiffs’ authorization or consent.

INJUNCTIVE RELIEF

24. Under 47 U.S.C. § 553(c)(2)(A), this court is specifically empowered to “grant temporary and final injunctions on such terms as it may deem reasonable to prevent or restrain violations of subsection (a)(1).” See also Section 812.014, Florida Statutes.

25. In order to obtain a preliminary injunction, the movant must generally establish: (1) the likelihood of plaintiff's ultimate success on the merits; (2) irreparable injury to the plaintiffs in the event the interim relief is denied; (3) irreparable injury to other parties in the event such relief is granted; and (4) the public interest. Cate v. Oldham, 707 F.2d 1176 (11th Cir. 1983); Productos Carnic, S.A. v. Central American Beef and Seafood Trading Company, 621 F.2d 683 (5th Cir,1980). Under 47 U.S.C. § 553, a movant need only prove a violation of § 553(a)(1) in order to request an injunction under § 553(c)(2)(A).

26. As discussed previously, plaintiffs have proven a likelihood of success on the merits under 47 U.S.C. § 553, and Sections 812.14 and 812.014, Florida Statutes. As a result, it is not necessary to reach the remaining claims asserted by plaintiffs.

27. Plaintiffs have also met their burden of proving that they are irreparably injured by defendants’ conduct. It should be noted that several courts have held that absence of justification for violation of clear statutory rights virtually eliminates the necessity of showing irreparable harm. See Home Box Office, Inc. v. Pay TV of Greater N.Y., 467 F.Supp. 525 (E.D.N.Y.1979). In Home Box Office, Inc., supra at 529, the court stated:

where, as here, a defendant shows no justification for continuing to violate a plaintiff’s clear statutory rights, there is no reason to withhold preliminary relief even without a showing of the same quantum of “irreparable” damage as would be required where plaintiff’s ultimate success was more doubtful____

See also American Television and Communications Corp., v. Pirate T.V., Inc., Case No. 81-969-Civ-EBD (S.D.Fla.1981) (“In the area of Section 605 violations a certain laxness has been recognized in evaluating the movant’s proof of irreparable harm.”). '

28. Defendants’ conduct causes irreparable injury because plaintiffs’ ability to retain existing subscribers, to enlist new subscribers, to acquire suitable programming and to remain in the cable business depends directly on their reputation as the sole source of the cable programming that plaintiffs provide. As the court noted in Cox Cable Cleveland Area, Inc., “if equipment necessary to receive, convert and decode [plaintiffs’] scrambled signals can be purchased from defendants without payment to [plaintiffs], the public will no longer see any advantage in paying [plaintiffs] to obtain premium programs.” 582 F.Supp. at 381. Additionally, in Subscription TV of Greater Washington, the court aptly stated that, “plaintiffs’ ... business will not survive if plaintiffs lose their credibility as the exclusive source of their programming.” 606 F.Supp. at 1546. Thus plaintiffs have clearly shown that they have, and will continue to, suffer irreparable injury, in absence of the granting of the requested relief.

29. The irreparable nature of the damage to plaintiffs clearly indicates that the threatened injury, to plaintiffs outweighs that injury which an injunction may cause to the defendants. The testimony and other evidence has established that defendants have engaged in surreptitious and secretive behavior, and that they possess approximately 1000 cable converters and decoders, some of which may have been stolen from the inventories of several local cable operators. Defendants’ past conduct and the likelihood of their engaging in similar unlawful conduct in the future without intervention by this Court, clearly demonstrates that the risk of denial of injunctive relief is too great, and is substantially outweighed by the irreparable harm it would cause plaintiffs.

30. The alleged illegal activities of the defendants are not worthy of any protection by this Court. Even if defendants’ primary business is the distribution, sale and installation of equipment for unlawfully intercepting plaintiffs’ cable television programming, and even if defendants would be deprived of substantially all of their revenue if they are enjoined, the defendants have no vested right to earn money by violating the law. Defendants will suffer no harm if an injunction is issued which simply requires them to obey the law. See Cox Cable Cleveland Area, Inc., 582 F.Supp. at 381; and Home Box Office, Inc., 467 F.Supp. at 529.

31. The final factor needed to be established for this Court to grant a preliminary injunction is likewise demonstrated. To enforce an act of Congress is hardly contrary or adverse to the public interest. 47 U.S.C. § 553 promotes express Congressional policy to proscribe theft of cable television services and injunctive relief is declared appropriate under the statute to restrain violations of the Act. 47 U.S.C. § 553(c)(2)(A).

32. Also, the municipalities and localities which have granted to plaintiffs franchises to provide cable television services have a public interest in protecting their right to franchise such services. Not only will an injunction protect a source of revenue for these municipalities and localities, but it will also ensure the quality and availability of services that the franchise agreements are intended to secure. See Cox Cable Cleveland Area, Inc., 582 F.Supp. at 381.

33. Additionally, individual members of the public, namely those subscribers to plaintiffs’ services who obey the law and do not utilize defendants’ equipment to unlawfully intercept plaintiffs’ signals, have an interest in seeing that the subscriber base does not shrink and that' they are not, consequently, forced to bear a disproportionate share of the costs of maintaining the local cable television systems. The legislative history of Section 553 of the federal Communications Act provides that:

theft of cable service ... creates unfair burdens on cable subscribers who are forced to subsidize the benefits that other individuals are getting by receiving cable service without paying for it.

H.R.Rep. No. 934, 98th Cong., 2d Sess. 83, reprinted in 1984 U.S.Code Cong. & Ad. News 4655, 4720.

34. Finally, ruination of plaintiffs' businesses is adverse to the public’s interest, as it threatens the availability of pay cable television to thousands who pay for and desire the services. As the court stated in National Subscription Television v. S & H TV:

Appellees’ activities threaten the economic activity of the STV industry, and thus run counter to ... the public interest. Specifically, the inability of STV operations to control public viewing of their signals reduces their income, which in turn prevents them from obtaining attractive programs on their systems and discourages the investment of capital in STV enterprises.

644 F.2d at 825.

35. Plaintiffs have requested that this Court issue a preliminary injunction to prevent the destruction, transfer or concealment of defendants’ records, including customer lists, sales receipts, invoices and other documents and defendants’ unauthorized cable television equipment. These records and equipment will be appropriate and necessary for this Court to render a meaningful final decision on the merits. Injunctive relief is, therefore, appropriate to prevent the destruction, transfer or concealment of such books, records and equipment. See Meis v. Sanitas Service Corp., 511 F.2d 655 (5th Cir.1975); Zuckerman v. Professional Writers of Florida, 398 So.2d 870 (Fla. 4th DCA 1981).

Accordingly, it is hereby ORDERED and ADJUDGED that:

1. Plaintiffs’ Motion for Preliminary Injunction against defendants, Ron Mogel and Robert E. McDonough, is hereby GRANTED.

2. The defendants, Ron Mogel and Robert E. McDonough, and their partners, officers, agents, representatives, servants, employees, attorneys, privies and all persons in active concert or participation with them are enjoined, during the pendency of this action from:

(a) intercepting, receiving or using plaintiffs’ communications or cable television services without authorization from plaintiffs;
(b) assisting, aiding, abetting or conspiring with any person to intercept, receive or use plaintiffs’ communications or cable television services without authorization from plaintiffs;
(c) manufacturing, assembling, providing instructions for installing, installing, possessing, using, selling, giving or otherwise displaying, promoting, soliciting customers, distributing, leasing, marketing, furnishing, advertising or offering for sale or installation any device or plans or parts of any device designed, adapted, used, capable of, intended to be used or represented as capable of use, to intercept and receive plaintiffs' cable television services;
(d) destroying, transferring or concealing any records, customer lists, sales receipts, documents, memoranda, purchase orders, invoices, bank records, books or ledgers, diagrams, advertisements or equipment used in or pertaining to the purchase, sale, lease, design, installation or advertisement or other use or application of unauthorized cable television equipment; and
(e) disposing of, concealing or removing from this jurisdiction proceeds from any sale or installation of any unauthorized cable television equipment described herein.

3. The Defendants, Ron Mogel and Robert E. McDonough, shall provide to plaintiffs all customer lists, receipts, purchase orders and other information concerning the identity and whereabouts of any purchasers of unauthorized cable television equipment of which defendants have knowledge, within 20 days from the date of this Order.

4. The plaintiffs shall post adequate security bond in the amount of $25,000.00 in accordance with Rule 65(c), Federal Rules of Civil Procedure.

      . Section 553 was originally enacted as Section 634 and the legislative history of the Cable Communications Act refers to it as such. Section 634 was redesignated as Section 633 and was subsequently recodified in United States Code Annotated as Section 553.


author: BRIMMER, Chief Judge.

text:
    AT & T COMMUNICATIONS OF the MOUNTAIN STATES, INC., Plaintiff, v. The PUBLIC SERVICE COMMISSION of Wyoming, the Mountain States Telephone and Telegraph Company, and United Telephone Company of the West, Defendants.
    No. C85-0254-B.
    United States District Court, D. Wyoming.
    Nov. 26, 1985.

      William A. Davis, II, Rebecca B. Decook, Denver, Colo., W. Perry Dray, Cheyenne, Wyo., for plaintiff.
    Roger C. Fransen, Asst. Atty. Gen., State of Wyo., Cheyenne, Wyo., for Public Serv. Com’n.
    W. Douglas Hickey, Cheyenne, Wyo., for Mt. States.
    Ann McElhenny, J. Richard Smith, Overland Park, Kan., Keith Kautz, Sawyer, Warren and Kautz, Torrington, Wyo., for United Telephone.
    Francis Lee Pico, Asst. U.S. Atty., Dist. of Wyo., Cheyenne, Wyo., for F.C.C. amicus curiae; Jack D. Smith, John E. Ingle, F.C.C. Washington, D.C., on briefs.
   ORDER ON CROSS-MOTIONS FOR SUMMARY JUDGMENT

BRIMMER, Chief Judge.

The above-entitled matter came before the Court pursuant to cross-motions for summary judgment. The Court, having reviewed the pleadings and the evidence offered, and now being fully advised in the premises, FINDS and ORDERS as follows:

This case arises from a February 21, 1985 ruling by the Public Service Commission of Wyoming (PSC) that AT & T Communications of the Mountain States, Inc., (AT & T) must pay a tariff to Mountain Bell and United Telephone of one percent of all its billings, for both interstate and intrastate calls, to cover the costs of local disconnect service. The PSC contends that the February 21 Order is well within its jurisdiction. AT & T counters that the Order exceeds the jurisdiction of the PSC and conflicts with orders of the Federal Communications Commission (FCC), and thus violates the Supremacy Clause of the Constitution.

The parties have agreed that the issues in this ease should be decided by the Court as a matter of law. The parties have filed a Joint Stipulation of Facts, which provides:

“1. AT & T Communications of the Mountain States, Inc. (‘AT & T Communications’) is a corporation organized and existing under the laws of the State of Colorado and authorized to do business in the State of Wyoming. Its principal offices are located at 1875 Lawrence Street, Denver, Colorado 80202.

“2. The Public Service Commission of Wyoming (‘Wyoming Commission’) is a legislatively created state agency with a statutory mandate to regulate and supervise public utilities within the state, as provided in Wyoming Statutes, Sections 37-1-101(a)(vi)(H) and 37-2-112. Defendants Mountain States Telephone and Telegraph Company (‘Mountain Bell’) and United Telephone Company of the West (‘United’) are public utilities regulated by the Wyoming Commission.

“3. Jurisdiction over this matter arises under the Constitution of the United States, Article I, Section 8, Clause 3 and Article VI, Section 2; and under the United States Code, Title 28, Sections 1331, 1651, and 2201.

“4. AT&T Communications is engaged in the business of providing certain interexchange telecommunications services on an intrastate and interstate basis in Wyoming. With respect to its intrastate operations, AT&T Communications is subject to the regulatory authority of the Wyoming Commission. In this regard, AT&T Communications has on file with the Wyoming Commission tariffs relating to its intrastate operations. AT&T Communications provides interstate telecommunications services pursuant to the regulatory authority and oversight of the Federal Communications Commission (‘FCC’). Tariffs on file with the FCC govern the provision of interstate telecommunications services by AT&T.

“5. The divestiture of the former Bell System transpired on January 1, 1984, pursuant to the Modification of Final Judgment (‘MFJ’) in United States v. AT&T, entered by the U.S. District Court for the District of Columbia on August 24, 1982, and the court-approved Plan of Reorganization (‘Plan’). Following divestiture, the former Bell Operating Companies provide service within geographical areas known as Local Access and Transport Areas (‘LATAs’); service between LATAs is provided by AT&T Communications and by other interLATA carriers, who obtain access to the local exchange carriers’ facilities to enable customers to originate and terminate interLATA calls. The State of Wyoming has a single LATA. However, AT&T Communications provides intrastate service in Wyoming between the Wyoming LATA and portions of other states’ LATAs which are situated within Wyoming’s border.

“6. The MFJ authorized the Bell Operating Companies to provide billing and collection services to AT&T following divestiture. Under the MFJ and Plan, the assets, facilities and personnel within the Bell System necessary to the provision of billing and collection service were transferred to (or remained with) the former Bell Operating Companies, such as Mountain Bell.

“7. AT&T Communications does not currently have the capability generally to perform billing functions for its customers; thus, it is dependent on exchange carriers, such as Mountain Bell and United, to provide such services. Billing and collection services are provided for AT&T Communications’ interstate services pursuant to the interstate ‘Access Service’ tariffs filed with the Federal Communications Commission by the divested Bell Operating Companies, including Mountain Bell. A copy of Section 8 (‘Billing and Collection Services’) of the Mountain Bell federal Access Service tariff is included in the Appendix as Exhibit A. Such billing and collection services (intrastate as well as interstate) are also governed by a contractual agreement between Mountain Bell and AT&T Communications. A copy of the agreement is included in the Appendix as Exhibit B. The FCC, pursuant to Part 69 of its Rules, 47 C.F.R. § 69.3, has, in addition, required independent telephone companies, such as United, to file federal Access Service tariffs. United provides billing and collection services to AT&T Communications under its interstate Access Service tariffs; a copy of Section 8 (‘Billing and Collection Services’) of this tariff is included in the Appendix as Exhibit C.

“8. In connection with the collection portion of the billing and collection process, Mountain Bell and United purchase from AT&T Communications the accounts receivable generated from interstate billings under AT&T’s interstate tariffs filed with the FCC. Mountain Bell and United collect on these receivables from customers and retain the proceeds. The payments made by Mountain Bell and United to AT&T Communications for the receivables are subject to an adjustment to reflect the ‘uncollectible’ rate for the customer accounts; under the adjustment formula, these payments are inversely related to the rate of uncollectibility.

“9. The FCC addressed generally the Access Service tariffs submitted by the exchange carriers in its Memorandum Opinion and Order released on February 17, 1984, in CC Docket No. 83-1145, Phase I, In the Matter of Investigation of Access and Divestiture Related Tariffs. A copy of pertinent portions of this order is included in the Appendix as Exhibit D.

“10. In a subsequent order released on April 27, 1984 in CC Docket No. 83-1145, the FCC required deletion of the ‘local service cut-off’ provisions of the Access Service tariffs but provided that exchange carriers could seek temporary waivers to offer disconnection for nonpayment service. A copy of the order is included in the appendix as Exhibit E. By order dated May 16, 1984, the FCC granted a temporary waiver (of the provisions of its April 27, 1984 order) to allow disconnection of local service for nonpayment of interstate toll charges where permitted by state authority. A copy of the order is included in the Appendix as Exhibit F.

“11. On May 15, 1984, the FCC issued its Memorandum Opinion and Order in CC Docket No. 83-1145 and CC Docket No. 78-72. The FCC limited the local exchange carriers’ earnings on interstate billing and collection services to a maximum 12.75 percent rate of return. A copy of this order is included in the Appendix as Exhibit G.

“12. Mountain Bell and United subsequently filed revisions to their interstate Access Service tariffs in response to the FCC’s orders of May 15,1984, and April 27, 1984, concerning rate of return for billing and collection and local service cut-off.

“13. On April 9, 1985, the FCC released a Notice of Proposed Rulemaking initiating an investigation to consider detariffing billing and collection services and to consider the local service cut-off issue. A copy of the notice is included in the Appendix as Exhibit H.

“14. On August 15, 1983, the Public Service Commission of Wyoming instituted a generic investigation of intrastate access charges. Such charges relate to access by AT&T Communications (and other similar carriers) to local exchange carriers’ facilities for intrastate, interLATA service, and are subject to regulation by the state commissions. Subsequently, Mountain Bell and United filed proposed intrastate access tariffs. In addition to Mountain Bell, United and AT&T Communications, Consumer Representative Staff intervened in the hearings before the Wyoming Commission.

“15. On February 21, 1985, the Wyoming Commission issued its Memorandum Opinion, Findings and Order on the proposed intrastate Access Service tariffs of Mountain Bell and United. A copy of the order is included in the Appendix as Exhibit I. In ordering paragraph 10 of its February 21st order (at p. 23), the Wyoming Commission required Mountain Bell and United to file new tariff provisions with respect to ‘disconnection for nonpayment of telecommunications services’; specifically, the Wyoming Commission required that these tariff provisions ‘incorporate a discount for the purchase of accounts receivable (or a charge) of 1% of, or based upon, the total billings’.

“16. On March 25, 1985, AT&T Communications filed with the Wyoming Commission a petition for rehearing of the February 21st Order pursuant to Wyoming Statutes, Section 37-2-214. A copy of the petition is included in the Appendix as Exhibit J. On June 12, 1985, the Wyoming Commission issued its decision denying AT&T Communications’ Petition for Rehearing. A copy of the decision is included in the Appendix as Exhibit K.

“17. Mountain Bell and United have filed revised tariff pages designed to implement the requirements of the Wyoming Commission’s February 21st Order. Mountain Bell issued its revised tariff page (page 405) on March 1, 1985, with a proposed effective date of March 5. United filed its revised tariff page (page 580) on March 1, with a proposed effective date of March 1. Copies of Section 8 (‘Billing and Collection Services’) of the Mountain Bell and United intrastate Access Service tariffs are included in the Appendix as Exhibits L and M, respectively. Pursuant to Wyoming Statutes, Section 37-2-214, the Order was stayed during the pendency of AT&T Communications’ Petition for Rehearing with respect to matters raised therein.

“18. Local exchange companies such as Mountain Bell and United are responsible for the provision, and for the disconnection, of local service. At present, neither the local exchange carriers nor AT&T Communications has the technical ability to screen and block interstate calls separately from intrastate calls. Moreover, the local exchange companies do not (given their current accounting and billing systems) account for, process and terminate separately for interstate service.

“19. Had the Wyoming Commission’s Order of February 21, 1985 been in effect in 1984, based on the results for that year (prior to adjustments), a one percent charge on AT&T Communications’ interstate billings in Wyoming would have amounted to approximately $665,000. AT&T Communications’ total Wyoming intrastate revenues for 1984 were approximately $1.7 million.”

It is beyond dispute that interstate telecommunications service is normally outside the reach of state commissions and within the exclusive jurisdiction of the FCC. In the landmark decision of Smith v. Illinois Bell Tel. Co., 282 U.S. 133, 51 S.Ct. 65, 75 L.Ed. 255 (1930), the Supreme Court required the separation of intrastate and interstate matters. The Court stated:

The separation of the intrastate and interstate property, revenues, and expenses of the Company is important not simply as a theoretical allocation to two branches of the business. It is essential to the appropriate recognition of the competent governmental authority in each field of regulation. Id. at 148, 51 S.Ct. at 68.

The Smith Court went on to say that the interstate tolls were not a matter for determination by state commissions, but rather were exclusively federal matters. The lower courts have consistently interpreted Smith and its progeny as did the Second Circuit in Ivy Broadcasting Co. v. American Tel. & Tel. Co., 391 F.2d 486, 491 (2d Cir.1968):

[Qjuestions concerning the duties, charges and liabilities of telegraph or telephone companies with respect to interstate communications service are to be governed solely by federal law ... and the states are precluded from acting in this area.

The Court agrees with the PSC that AT&T cannot successfully argue that solely because the PSC Order affected it, and interstate carrier, the exclusive jurisdiction of the FCC is thereby invoked. Simpson v. Shepard, 230 U.S. 352, 33 S.Ct. 729, 57 L.Ed. 1511 (1913). Nevertheless, because the PSC has ordered AT&T to file a tariff based on its total billings, which include interstate calls, it would appear that the PSC has indeed violated the jurisdictional separations, mandated by the Smith Court and 47 U.S.C. § 152(a); 201-205, 221(c). However, the PSC contends that because the FCC temporarily deferred the question of whether or not to allow local disconnect service, it thereby deferred to the states regarding under what circumstances disconnect service should be allowed. In the Matter of Investigation of Access and Divestiture Related Tariffs, CC Docket No. 83-1145, Phase I, May 16, 1984. This argument is not convincing, because deferral on a “yes or no” question of whether or not to allow local disconnect service does not constitute approval of an attempt to condition the “yes” answer on payment of a portion of AT&T’s interstate profits.

Exclusive FCC jurisdiction over interstate matters is well-established, absent a clear, express deferral. But, in this matter there was not a clear or an express deferral. In fact, the FCC, in its amicus brief, has categorically denied that it intended to defer such power to the state commissions:

The FCC has not deferred to the states so as to permit the Wyoming commission to set this rate for interstate service. The FCC did leave to the states the decision whether to allow service cutoffs at all. That was in recognition of the legitimate interest of state regulators in not having local and intrastate service terminated for nonpayment of interstate service bills without having a say in the matter.
It is not inconceivable that the FCC could acquiesce in some form of state regulation of a nondiscriminatory charge for service termination, if that would be consistent with the FCC’s own primary jurisdiction over the application of such a charge to interstate services. See, e.g., Diamond Intern. Corp. ¶. FCC, 627 F.2d 489, 492-94 (D.C.Cir.1980). But there has been no such acquiescence here; indeed, the separate charge here is inconsistent with current separations and with the FCC’s prescription of a ceiling on interstate billing and collection charges. FCC Brief at 19-20.

The FCC’s construction of its own order is entitled to great deference by this Court. Diamond Intern. Corp. v. F. C. C., 627 F.2d 489 (D.C.Cir.1980). Historically, the FCC has been quite protective of its jurisdiction; it has constantly, and successfully, protested whenever the state commissions have attempted to gain any say whatsoever over interstate calling. See, e.g., National Ass’n of Regulatory Util. Com’rs. v. F.C.C., 746 F.2d 1492, 1498 (D.C.Cir.1984), holding for the FCC that “purely intrastate facilities and services used to complete even a single interstate call may become subject to FCC regulation to the extent of their interstate use.” The Court must conclude that if the FCC had truly intended to allow the state commissions to set tariffs based in part on interstate billings, a matter traditionally within its exclusive jurisdiction, the FCC would have done so expressly, clearly, and not by a vague implication or inference.

Moreover, the PSC Order interferes with current FCC rulings. In Investigation of Access and Divestiture — Related Tariffs, MTS and WATS Market Structure, CC Docket Nos. 83-1145 (Phase I) and 78-72 (Phase I) (FCC 84-201), May 15, 1984, the FCC ordered as follows:

[W]e will ... require all local exchange carriers to charge rates which earn a return of no more than 12.75 percent upon billing and collection services ... no rate may lawfully be charged whether under tariff or contract, which earns above 12.75 percent return. Id. at 35.

Mountain Bell and United have already filed tariffs allowing them the maximum 12.75% return rate. Therefore, if local disconnect service is a part of the billing and collection rate element, Mountain Bell’s and United’s collection of the extra one percent of total billings as payment for that service means collection of a return of “more than 12.75 percent upon billing and collection services.”

The PSC argues, however, that the FCC does not consider local disconnect service to be a part of the billing and collection rate element. In Detariffing of Billing and Collection Services, CC Docket No. 85-88; FCC 85-146; April 9, 1985, the FCC observed that:

Billing and collection, [in the context of the proposed detariffing], refers to a service provided by a local exchange carrier to an interexchange carrier (IC), whereby the former bills and collects from end users subscribing to an IC’s service. More specifically, this service includes recording IC message detail, aggregating the details to create individual messages (a completed call originated by an IC’s end user), applying the IC’s rates to such messages, processing these rated messages into customer invoice form, mailing bills, collecting payments, accepting customer deposits, handling customer inquiries and investigating billing evasion activities.

Local disconnect service is not mentioned in this list, and because of this and other FCC orders, the PSC concludes that disconnect service is not a part of the billing and collection element. Under the doctrine of inclusio unius est exclusio alterius (the inclusion of one is the exclusion of another), the PSC would seem to have a valid argument. However, in its amicus brief the FCC has made it clear that it does consider local disconnect service to be included within the billing and collection category.

The FCC’s statement [in its May 16, 1984 Order] that state rules would apply during the interim period meant only that state procedures would govern such matters as when service would be cut off, notice, and penalties for nonpayment. It did not suggest that state agencies could set separate rates for this feature of billing and collection service in addition to the charges for that service which already were set forth in federal tariffs. FCC Brief at 19, (emphasis added).

The Court again notes that the FCC’s interpretation of its own order is entitled to deference. Diamond Intern. Corp., supra. The Court concludes that the FCC intended to include local disconnect service as one of the billing and collection services covered by its May 15, 1984 Order limiting charges for billing and collection services to 12.75 percent. The PSC Order therefore conflicts with the FCC Order by allowing Mountain Bell and United Telephone to collect a return of more than 12.75 percent. Under the Supremacy Clause of the United States Constitution, state laws which conflict with overriding federal laws, must give way. See e.g. National Ass’n of Regulatory Util. Com’rs. v. F.C.C., 746 F.2d 1492, 1498 (D.C.Cir.1984).

Finally, the PSC contends that if it cannot order AT&T to pay for the disconnect service, AT&T will in effect be getting the service for free, thus allowing the interstate carrier to have a “free ride” at the expense of the intrastate ratepayers. Again the PSC is mistaken. As the FCC explains:

The costs of billing and collection services, including service termination features, already are allocated among interstate and intrastate jurisdictions pursuant to separations; and the interstate portion of those costs, which is all that can properly be charged against AT&T’s interstate operations, is the basis for the FCC’s billing and collection rate that is included in interstate tariffs. AT&T already is paying for this interstate service, and any attempt to impose additional costs on AT&T as an interstate carrier would require it to pay two times for the same thing. FCC Brief at 20.

The FCC has exclusive jurisdiction over interstate tariffs, and has set what it considers a fair rate, 12.75%, for charges involving billing and collection services. This Court cannot allow the PSC, through the medium of a tariff on total billings, to interfere with the FCC’s decision.

The Court sympathizes with the PSC’s observation that the recent AT&T divestiture has favored interstate over intrastate calls, and densely populated over more rural states. It clearly does and in the Court’s opinion was neither in the public interest nor the nation’s interest but it nevertheless would violate federal statutory and case law for this Court to allow the PSC to set off intrastate costs by increasing, even partially, interstate rates. New York Tel Co. v. F.C.C., 631 F.2d 1059 (2d Cir.1980). The remedy for such costs must come from the FCC in which the Congress has vested jurisdiction over such problems. Because it includes interstate billings, a local disconnect charge based on total billings was beyond the scope of the PSC’s authority to impose. Furthermore, the PSC Order conflicts with FCC rulings. Therefore, it is

ORDERED that defendant PSC’s motion for summary judgment be, and the same hereby is, denied. It is further

ORDERED that plaintiff AT & T’s motion for summary judgment be, and the same hereby is, granted, and that defendant PSC be, and the same hereby is, enjoined from enforcing the one percent tariff based on total billings as set forth in its February 21, 1985 order. It is further

ORDERED that unless and until the FCC should provide to the contrary, the defendants, Mountain Bell and United Telephone, are required to repay to plaintiff all funds collected pursuant to. the above said PSC Order, together with interest thereon as provided by law.


author: GRADY, District Judge.

text:
    Michael ZWARTON, et al., Plaintiffs, v. CITY OF CHICAGO, et al., Defendants.
    No. 85 C 4326.
    United States District Court, N.D. Illinois, E.D.
    Nov. 26, 1985.
    Michael Bradley, Midlothian, 111., for plaintiffs.
    Bertina Lampkin, City of Chicago, 111., for defendants.
   GRADY, District Judge.

ORDER

This is a civil rights action brought pursuant to 42 U.S.C. § 1983. Plaintiffs claim that on December 7, 1984, the defendant Graham, a Chicago detective, and other unknown Chicago police officers, subjected them to “strip searches” and body searches, “all without warrant and legal justification.” The City of Chicago is joined as a defendant on the basis of plaintiffs’ allegation:

9. That the defendant City of Chicago, a Municipal Corporation, did make it a practice, by and through their police officers as agents, servants and employees to strip search various parties from time to time and to search parties from time to time without warrants allowing same and have in the past and most likely in the future will continue to make these unreasonable strip searches and other searches in violation of the laws heretofore set forth, and the City of Chicago in the past have been enjoined from continuing to strip search citizens who have been arrested or as in this particular case, citizens who are not under arrest in violation of the injunction heretofore issued by this court and in willful violation of the rights of its citizens.

Complaint, Count II, 11 9. Defendant City of Chicago has moved to dismiss the claim against it for failure to allege the necessary custom, policy or practice. Monell v. New York City Dept. of Social Services, 436 U.S. 658, 98 S.Ct. 2018, 56 L.Ed.2d 611 (1978). Plaintiffs contend that the policy and practice allegations of the complaint are sufficient to meet the Monell test. We disagree. Plaintiffs have alleged only a single specific incident, namely their own, and that is not enough to establish a custom or policy. That the City “in the past has been enjoined from continuing to strip search citizens” does not tend to show that the practice persisted after the date of the injunction. Paragraph 9, quoted above, is something of a grammatical puzzle, but apparently plaintiffs are attempting to charge that the City has been violating the injunction. Such a conclusory allegation is insufficient, as is the allegation that the City “did make it a practice” to commit the kinds of acts involved in plaintiffs’ own encounter with the police. Experience has shown that general allegations of this kind can be made without adequate basis. Municipalities have been put to great expense in defending against such complaints only to be granted summary judgment at the close of discovery. The better and fairer practice is to require plaintiffs to allege specific facts which show the existence of a custom. Strauss v. City of Chicago, 760 F.2d 765, 770 (7th Cir.1985); Rodgers v. Lincoln Towing Service, Inc., 771 F.2d 194, 202 (7th Cir.1985). If they do not have those facts, they should not join the City as a defendant. Rule 11 of the Federal Rules of Civil Procedure provides that the signature of an attorney on a pleading constitutes a certificate that he has read the pleading and that “to the best of his knowledge, information, and belief formed after reasonable inquiry, it is well grounded in fact and is warranted by existing law----” This requires that the specific factual basis for municipal liability exist at the time the municipality is joined in the action. There is no reason not to state in the complaint what that factual basis is.

Discovery in a case against individual defendants may well turn up evidence which will justify amending the complaint to join the municipality. (Plaintiffs’ investigation need not, of course, be limited to formal discovery in a lawsuit; there is such a thing as independent investigation prior to and independent of a lawsuit.)

What particular allegations might satisfy Monell depends on the facts of the case. What is necessary is a factual allegation which, if proven, would support a finding that the conduct complained of was in the “execution of a government’s policy or custom, whether made by its lawmakers or by those whose edicts or acts may fairly be said to represent official policy____” Monell v. New York City Dep’t of Social Services, 436 U.S. 658, 694, 98 S.Ct. 2018, 2037, 56 L.Ed.2d 611 (1978). Obviously, there is no exclusive formula. Plaintiff might be able to allege a sufficient number of specific similar incidents to justify the inference that the municipality had approved of the practice. There could be statistical facts which strongly imply a policy or custom. There could even be admissions by responsible officials of the municipality. Conceivably, a single incident, the very one complained of, could occur under circumstances warranting an inference of official approval; but those circumstances would have to be pleaded with particularity

This action is dismissed as against the defendant City of Chicago for failure to state a claim. Plaintiffs have leave to amend their complaint to rejoin the City of Chicago as a defendant if and when they are able to allege specific facts to show that their injuries were the result of an official policy, custom or practice.