National Association of African American-Owned Media v. Charter Communications, Inc.

          Argued and Submitted October 9, 2018 Pasadena, California

          Appeal from the United States District Court for the Central District of California D.C. No. 2:16-cv-00609-GW-FFM George H. Wu, District Judge, Presiding

          Patrick Francis Philbin (argued), Devin S. Anderson, Jeffrey S. Powell, and Paul D. Clement, Kirkland & Ellis LLP, Washington, D.C.; Mark C. Holscher, Kirkland & Ellis LLP, Los Angeles, California; for Defendant-Appellant.

          Erwin Chemerinsky (argued), Boalt Hall, University of California, Berkeley, California; David W. Schecter, J. Mira Hashmall, Brian A. Procel, and Louis R. Miller, Miller Barondess LLP, Los Angeles, California; for Plaintiffs-Appellees.

          John Bergmayer, Public Knowledge, Washington, D.C., for Amicus Curiae Public Knowledge.

          Gregory G. Garre and Charles S. Dameron, Latham & Watkins LLP, Washington, D.C.; Daryl Joseffer and Jonathan Urick, U.S. Chamber Litigation Center, Washington, D.C.; for Amicus Curiae Chamber of Commerce of the United States of America.

          Before: MARY M. SCHROEDER, MILAN D. SMITH, JR., and JACQUELINE H. NGUYEN, Circuit Judges.

         SUMMARY^[*]

         Civil Rights

         The panel filed (1) an order withdrawing its prior opinion and denying, on behalf of the court, a petition for rehearing en banc, and (2) a superseding opinion affirming the district court's denial of a cable television-distribution company's motion to dismiss a claim that its refusal to enter into a carriage contract with an African American-owned operator of television networks was racially motivated, and in violation of 42 U.S.C. § 1981.

         In the superseding opinion, reconsidering the court's approach to the causation standard for § 1981 claims under Metoyer v. Chassman, 504 F.3d 919 (9th Cir. 2007), following the Supreme Court's decisions in Gross v. FBL Fin. Servs., Inc., 557 U.S. 167 (2009), and Univ. of Tex. Sw. Med. Ctr. v. Nassar, 570 U.S. 338 (2013), the panel held that a plaintiff need not plead that racial discrimination was the but-for cause of a defendant's conduct, but only that racial discrimination was a factor in the decision not to contract such that the plaintiff was denied the same right as a white citizen. The panel concluded that Gross and Nassar undercut Metoyer's approach of borrowing the causation standard of Title VII's discrimination provision. The panel instead looked to the text of § 1981, and it held that mixed-motive claims are cognizable under § 1981.

         The panel held that the plaintiffs' allegations regarding the defendant's treatment of the African American-owned operator, and its differing treatment of white-owned companies, were sufficient to state a viable claim pursuant to § 1981.

         The panel also held that plaintiffs' § 1981 claim was not barred by the First Amendment. The panel concluded that the fact that cable operators engage in expressive conduct when they select which networks to carry did not automatically require the application of strict scrutiny. The panel concluded that at most intermediate scrutiny applied, and § 1981 would satisfy intermediate scrutiny because it was a content-neutral statute and was narrowly tailored to serve a significant government interest in preventing racial discrimination.

         The panel remanded the case for further proceedings.

         ORDER

         Defendant-Appellant's petition for panel rehearing is GRANTED. The opinion filed November 19, 2018, and reported at 908 F.3d 1190, is hereby withdrawn. A superseding opinion will be filed concurrently with this order.

         Judge M. Smith and Judge Nguyen vote to deny the petition for rehearing en banc, and Judge Schroeder so recommends. The full court has been advised of the petition for rehearing en banc, and no judge of the court has requested a vote on it. Fed. R. App. P. 35. The petition for rehearing en banc is DENIED. No further petitions for panel rehearing or rehearing en banc will be entertained.

          OPINION

          M. SMITH, CIRCUIT JUDGE

         Plaintiff-Appellee Entertainment Studios Networks, Inc. (Entertainment Studios), an African American-owned operator of television networks, sought to secure a carriage contract from Defendant-Appellant Charter Communications, Inc. (Charter). These efforts were unsuccessful, and Entertainment Studios, along with Plaintiff-Appellee

         National Association of African American-Owned Media (NAAAOM, and together with Entertainment Studios, Plaintiffs), claimed that Charter's refusal to enter into a carriage contract was racially motivated, and in violation of 42 U.S.C. § 1981. The district court, concluding that Plaintiffs' complaint sufficiently pleaded a § 1981 claim and that the First Amendment did not bar such an action, denied Charter's motion to dismiss. The court then certified that order for interlocutory appeal. We have jurisdiction pursuant to 28 U.S.C. § 1292(b), and we affirm.

         FACTUAL AND PROCEDURAL BACKGROUND

         I. Factual Background

         Entertainment Studios is a full-service television and motion picture company owned by Byron Allen, an African-American actor, comedian, and entrepreneur. It serves as both a producer of television series and an operator of television networks, and currently operates seven channels and distributes thousands of hours of programming.

         Entertainment Studios relies on cable operators like Charter for "carriage contracts"; these operators, which range from local cable companies to nationwide enterprises, carry and distribute channels and programming to their television subscribers. Although Entertainment Studios managed to secure carriage contracts with more than 50 operators-including prominent distributors like Verizon, AT&T, and DirecTV-it was unable to reach a similar agreement with Charter, the third-largest cable television-distribution company in the United States, despite efforts that began in 2011.

         From 2011 to 2016, Charter's senior vice president of programming, Allan Singer, declined to meet with Entertainment Studios representatives or consider its channels for carriage. Plaintiffs alleged that, instead of engaging in a meaningful discussion regarding a potential carriage contract, Singer and Charter repeatedly refused, rescheduled, and postponed meetings, encouraging Entertainment Studios to exercise patience and proffering disingenuous explanations for its refusal to contract. Although Singer stated that Charter was not launching any new channels and that bandwidth and operational demands precluded carriage opportunities, Plaintiffs claimed that Charter nonetheless negotiated with other, white-owned networks during the same period, and also secured carriage agreements with The Walt Disney Company and Time Warner Cable Sports. Charter allegedly communicated that it did not have faith in Entertainment Studios' "tracking model," despite contracting with other white-owned media companies that used the same tracking model. Plaintiffs also asserted that Singer blocked a meeting between Entertainment Studios and Charter CEO Tom Rutledge because the latter "does not meet with programmers," despite the fact that Rutledge regularly met with the CEOs of white-owned programmers, such as Viacom's Philippe Dauman. Singer was allegedly steadfast in his opposition to Entertainment Studios, saying, "Even if you get support from management in the field, I will not approve the launch of your network."

         Plaintiffs claimed that they finally managed to secure a meeting with Singer in July 2015. However, during the meeting at Charter's headquarters in Stamford, Connecticut, Singer once again made clear that Entertainment Studios would not receive a carriage contract, citing a series of allegedly insincere explanations for this decision. For example, Singer informed Entertainment Studios that he wanted to wait and "see what AT&T does," despite the fact that AT&T already carried one of Entertainment Studios' networks. Charter also mentioned its purported lack of bandwidth, even though at that time, it expanded the distribution of two lesser-known, white-owned channels into major media markets: RFD-TV, a network focused on rural and Western lifestyles, and CHILLER, a horror channel.

         In addition to recounting Entertainment Studios' failed negotiations with Charter, Plaintiffs' amended complaint also included direct evidence of racial bias. In one instance, Singer allegedly approached an African-American protest group outside Charter's headquarters, told them "to get off of welfare," and accused them of looking for a "handout." Plaintiffs asserted that, after informing Charter of these allegations, it announced that Singer was leaving the company. In another alleged instance, Entertainment Studios' owner, Allen, attempted to talk with Charter's CEO, Rutledge, at an industry event; Rutledge refused to engage, referring to Allen as "Boy" and telling Allen that he needed to change his behavior. Plaintiffs suggested that these incidents were illustrative of Charter's institutional racism, noting also that the cable operator had historically refused to carry African American-owned channels and, prior to its merger with Time Warner Cable, had a board of directors composed only of white men. The amended complaint further alleged that Charter's recently pronounced commitments to diversity were merely illusory efforts to placate the Federal Communications Commission (FCC).

         II. Procedural Background

         Plaintiffs initiated this action on January 27, 2016, asserting both a claim against Charter under § 1981 and a claim against the FCC under the due process clause of the Fifth Amendment.^[1] After learning of the derogatory racial comments allegedly made by Singer and Rutledge, Plaintiffs sought leave to file a first amended complaint (FAC), which the district court granted. The ...