Lansdowne on the Potomac Homeowners Association, Inc., v. OpenBand at Lansdowne, LLC, No. 12-1925

Decided:  April 5, 2013

Affirming the United States District Court for the Eastern District of Virginia, the Fourth Circuit held that OpenBand violated an order of the Federal Communications Commission by including exclusivity provisions in telecommunications contracts with Lansdowne on the Potomac Homeowners Association.  The Fourth Circuit therefore found OpenBand’s various contracts with Lansdowne null and void and enjoined their enforcement.

In 2001, the land development partnership Lansdowne Community Development (“LCD”) and the Lansdowne on the Potomac Homeowners Association (“the homeowners association” or “association”) entered into telecommunications contracts with OpenBand—a group of affiliated cable service providers—to obtain telecommunications services for a residential development in Loudoun County, Virginia.  LCD granted an exclusive easement to an OpenBand affiliate for the purpose of, inter alia, building and maintaining the telecommunications infrastructure.  The homeowners association, which was named as a party to the deed, ratified the easement.  Furthermore, certain Covenants, Conditions, and Restrictions (“CC&Rs”) for the residential development incorporated the easement and recognized the OpenBand affiliate’s exclusive right to install and provide services to the development.  Lastly, the homeowners association entered into a contract with the OpenBand affiliate titled “Agreement to Obtain Telecommunication Services” (“TSA”), which incorporated the CC&Rs and granted the affiliate the exclusive right to administer certain telecommunications services.  When residents complained about the quality of OpenBand’s services, the homeowners’ association began searching for another telecommunications company; however, due to the exclusivity provisions described above, the association could not obtain another provider.  In August 2011, the homeowners’ association filed suit in federal court.  The association claimed that, inter alia, OpenBand’s contractual arrangements violated a 2007 Exclusivity Order of the Federal Communication Commission (“FCC”). providing that “[n]o cable operator . . . shall enforce or execute any provision in a contract that grants it the exclusive right to provide any video programming service . . . to a [multiple dwelling unit].  Any such exclusivity clause shall be null and void.”  47 C.F.R. § 76.2000(a).  The district court granted summary judgment to the homeowner’s association, enjoining OpenBand from enforcing any exclusivity provision against the association or the Lansdowne residents, and declaring the provisions null and void.

On appeal, the Fourth Circuit first addressed two challenges to the justiciability of the case, holding that the housing association had standing to sue and that the suit was ripe for review.  With regard to standing, the court found that the housing association had met the requirements of injury in fact, causation, and redressability.  The court also found the case ripe for review, as the issues were fit for judicial decision and the hardship to the association was immediate and substantial.

The Fourth Circuit then decided that the right of action provided by the relevant statute, 47 U.S.C. § 401(b), covered the housing association’s claim.  Under this statute, a party injured when “any person fails or neglects to obey any order of the Commission” may ask a federal district court to enforce the order.  OpenBand contended that § 401(b) only applied to adjudicatory orders, as the Administrative Procedure Act (“APA”) excludes agency rulemaking from its definition of “order.”  In the alternative, OpenBand argued that, even if this provision did cover certain rulemaking orders, the Exclusivity Order would still fall outside the scope of § 401(b) because the Order did not confer rights or duties on the parties.  The Fourth Circuit rejected both assertions.  First, the court noted that, inter alia, the APA’s definitions are only mandatory within the APA itself, and that the Supreme Court construed the word “order” in the preceding statutory provision to include some rulemaking orders.  Second, the court found that the Exclusivity Order did confer rights and duties on the parties: It forbade OpenBand from creating exclusivity arrangements, described OpenBand’s contract rights in the event of such arrangements, and gave the housing association the right to remain free of exclusivity clauses.

Lastly, the Fourth Circuit found the OpenBand affiliate to be an “open video system operator” (“OVS operator”) subject to the Exclusivity Order, and that the relevant contract clauses violated the Order.    OpenBand argued that it could not be considered a “provider” of cable services.  The Fourth Circuit disagreed, asserting that OpenBand had merely “attempt[ed] to circumvent the FCC’s definition of an OVS operator” by “playing a shell game” involving multiple affiliated business associations.  OpenBand also argued that the easement, CC&Rs, and TSA had to be considered separately as independent contracts.  The Fourth Circuit rejected this argument as well:  Under Virginia law, “contemporaneous written agreements executed as part of the same transaction will be construed together as forming one contract,” and OpenBand’s cumulative contractual arrangement gave it the exclusive right to bring video service to Lansdowne.  The court also noted that, even if it did consider each contract separately, each contract would still violate the Exclusivity Order.

Full Opinion

-Stephen Sutherland

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