Southern Walk at Broadlands Homeowners Assoc., Inc. v. OpenBand at Broadlands, LLC, No. 12-1331 and No. 12-2083

Decided: April 5, 2013

Consolidating two cases, the Fourth Circuit Court of Appeals affirmed the district court’s dismissal of Southern Walk’s declaratory judgment action, as well as OpenBand’s request for attorneys’ fees. However, to the extent that Southern Walk’s declaration request was dismissed with prejudice, the Fourth Circuit vacated and remanded with instructions to dismiss without prejudice.

In 2001, OpenBand, a wire-based video service provider, contracted with Southern Walk securing the exclusive right to provide wire-based video services to Southern Walk homeowners. Seeking a declaratory judgment, Southern Walk alleged that the 2007 Exclusivity Order issued by the FCC rendered the 2001 contract “null and void.” Based on lack of standing, the district court dismissed Southern Walk’s claim with prejudice. Subsequently, OpenBand moved for attorneys’ fees pursuant to a fee-shifting provision in the 2001 contract. That claim was also dismissed. On appeal, the two cases were consolidated.

The Fourth Circuit first addressed the standing issue, noting that Southern Walk had the opportunity to establish standing in its own right or as a representative of its members. The court first examined Southern Walk’s claim that it had standing in its own right and found that its alleged injury was non-redressable because it did not demonstrate personal harm that was traceable to the challenged contract or redresssable by the court. Specifically, Southern Walk claimed that it was harmed personally by a provision in the contract that required it to pay for all services from OpenBand for which its member households fail to pay. However, the court reasoned that regardless of the challenged exclusivity arrangement, the bulk billing provisions of the 2001 contract would still require payment. Thus Southern Walk would still be required to pay for OpenBand’s services regardless of the outcome of the case. Consequently, Southern Walk did not allege any economic injury to itself caused by the exclusivity arrangement.

Next, the Fourth Circuit examined Southern Walk’s standing as a representative of its members and found insufficient standing because Southern Walk failed to identify a single specific member. Citing a Supreme Court decision, the court noted that an organization must make specific allegations establishing that at least one identified member had suffered or would suffer harm in order to establish standing as a representative of its members. The court rejected Southern Walk’s contention that the identification requirement only applied to large, diverse advocacy groups with voluntary membership refusing to create an exception for smaller groups with mandatory membership, like homeowners’ associations. Similarly, Southern Walk’s alternative contention that it satisfied the identification requirement by alleging that each of its members were harmed by the exclusivity arrangement was also rejected because the complaint only alleged that the homeowners’ association was being harmed, not any of its individual members.

Finally, the court addressed OpenBand’s challenge to the district court’s refusal to grant attorneys’ fees pursuant to the fee-shifting provision in the 2001 contract. The fee-shifting provision authorized the prevailing party, in any litigation commenced in connection with the contract, to recover attorneys’ fees. Because a dismissal for lack of standing does not constitute a determination on the merits, the court held that OpenBand was not a “prevailing party.”

Full Opinion

– W. Ryan Nichols

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