$10 Billion Racial Discrimination Lawsuit Against Charter Survives First Amendment Scrutiny

2012-03 BIZ NATPE Byron Allen H
Gari Lamar Askew

Byron Allen says he could sell his company for $1 billion.

Twenty years ago, the U.S. Supreme Court determined that parade organizers in Boston couldn't be compelled to include the participation of a gay group. The Hurley opinion concluded that to force the parade to include the gay group would constitute an intrusion on the organizers' First Amendment rights to express the message they wished to convey. Since then, there's been quite a bit of legal and social debate on the intersection between liberty and discrimination, but media companies have generally enjoyed latitude on decisions relating to creative endeavors. For example, a Tennessee judge in 2012 rejected a proposed class action lawsuit over allegedly biased casting decisions for the ABC reality series The Bachelor.

Now, however, comes a new decision from a California federal judge who, for the moment, is drawing a line in the sand when it comes to full First Amendment immunization for cable companies over the channels they wish to carry. On Monday, U.S. District Court judge George H. Wu moved forward a $10 billion lawsuit against Charter Communications for alleged discrimination in contracting in violation of section 1981 of the Civil Rights Act.

The lawsuit on behalf of African-American-owned media networks is being spearheaded by Byron Allen, a comedian and executive who runs Entertainment Studios Networks. In the past few years, Allen has been trying to get his channels licensed by major cable operators through FCC filings, litigation and coordinated press releases. He's had mixed success. One judge threw out his racial discrimination lawsuit against Comcast as implausible. On the other hand, he was able to secure carriage for a few of his channels on DirecTV through a settlement with AT&T after bringing suit.

In the Charter action, Allen's company brought forth allegations not only that Charter refused offers (10 cents a subscriber) far below what the cable giant was paying white-owned programmers, but also that Charter's executives had made racist comments. For example, Charter's former senior vp programming Allan Singer is alleged to have told protesters outside the company's headquarters to "get off welfare." (Singer later left the company*.)

In deciding whether the lawsuit survived the pleading stage, Judge Wu looked at Charter's "innocent explanations" for refusing carriage to Allen's networks — i.e., limited bandwidth, a decision not to do "basic" launches, problems with ESN's model, timing issues — but decides he won't stop the lawsuit at this time for those reasons.

"If Singer's and [Charter CEO Tom] Rutledge's alleged arguably-racist statements were all that Plaintiffs could muster, the Court would likely agree with Defendant that they were insufficient to satisfy even a 'motivating factor' standard at the pleading stage," writes Wu. "But when they are viewed in combination with the several-year effort made by ESN and the — viewed most-favorably to Plaintiffs — continued stonewalling and provision of excuses that do not match up with Defendant's practices with non-African American-owned media companies, the Court believes Plaintiffs have validly stated a claim under Section 1981. Plaintiffs are entitled to proceed to discovery on their claim."

The analysis doesn't end there and arguably becomes more important on the issue of the First Amendment. First, though, another few words about that AT&T case.

Before it was settled, a magistrate judge in that dispute reviewed the 1996 Supreme Court opinion on gay individuals excluded from a parade and raised hypothetical questions based on an alternative result: Could the parade organizers charge the gay individuals more money for their participation? Would the First Amendment bar courts from examining contracts between parade organizers and white and black participants? The judge certified an interlocutory appeal to the 9th Circuit on the question of whether the First Amendment bars an action alleging a cable operator has refused to contract on the basis of race.

A federal appeals court never provided an answer, and now Wu steps in with his own analysis after the plaintiffs urge him to pay heed to a different Supreme Court opinion, Turner Broadcasting (1994), which concluded that the First Amendment doesn't stop cable companies from having to include on their systems local programming pursuant to a 1992 federal law. Wu cites the high court's opinion that "there appears little risk that cable viewers would assume that the broadcast stations carried on a cable system convey ideas or messages endorsed by the cable operator," and for this reason, creates some space with the forced association and speech issues articulated in the Boston parade case.

Wu also addresses the decision in The Bachelor racial discrimination dispute, noting it specifically dealt with "casting decisions for a single program" and had a "much-more-direct impact on the content of the speech at issue and, simultaneously, a much more direct association between the defendants and the impacted speech."

The judge sums it up by writing that the case is more similar to Turner Broadcasting than the others.

"As a result, while Defendant's ultimate carriage/programming activity is entitled to some measure of First Amendment protection, the Court does not believe that Defendant has identified and applied the proper method of analyzing the First Amendment impact of an application of Section 1981 to the contracting activity in question here," he writes.

A footnote hints that Charter could get an opportunity to appeal, and if the case doesn't go the way of AT&T and settle, there may be some big issues headed to the 9th Circuit.

Not just how the First Amendment factors, but also the pleading standards on a racial discrimination case of this nature. Wu's ruling, after all, also provides some analysis on Charter's proposition that discrimination has to be shown to be the "but for" cause of a decision not to contract with Allen's company. Stated another way, Charter argued that even if discrimination played a factor, as long as it had a "mixed-motive" via other rationales for refusing to carry Allen's networks, Charter should be given a pass. In support, Charter pointed to decisions by federal appeals courts throughout the country explicitly blessing the "mixed-motive" theory, and a couple of Supreme Court opinions that may have implicitly held this, but unfortunately for the cable giant, Wu seizes on one 2007 opinion from the 9th Circuit (which covers California) that rejected a "mixed-motive" defense. 

For now, Allen has survived, appears headed to discovery and has newfound leverage to strike a licensing deal with Charter. Here's the judge's tentative ruling, which according to plaintiffs, was adopted by Wu after a hearing

(Update: The story originally reported that Singer was let go. According to Charter, the decision to leave was Singer's alone based upon the relocation of the company's offices and had nothing to do with this matter.)