Cates v. Crystal Clear Technologies, LLC
874 F.3d 530
| 6th Cir. | 2017Background
- Homeowners in three planned neighborhoods in Thompson’s Station, TN (Canterbury, Bridgemore, Tollgate) sued developers and Crystal Clear Technologies alleging agreements forced homeowners to pay for basic telecom services and infrastructure fees to Crystal Clear.
- Developers (and affiliated entities) executed 25-year communications services agreements (with unilateral renewal option) requiring homeowners to pay a $1,500 one-time infrastructure fee plus mandatory monthly assessments for service whether used or not.
- Crystal Clear had no prior telecom experience, contracted with DirecTV to supply services, and operated only within the subject neighborhoods; it obtained non-exclusive franchise/easement rights from the town and referenced easements in the Agreements.
- Plaintiffs asserted federal Sherman Act tying and Telecommunications Act/FCC Exclusivity Order claims; district court dismissed the federal claims and denied leave to file a second amended complaint as futile.
- Sixth Circuit reviewed de novo whether the proposed second amended complaint would survive dismissal and (1) reversed the denial as to the tying claim (allowing amendment) and (2) affirmed the denial as to the Exclusivity Order claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sherman Act tying: whether the Agreements unlawfully tied home purchases to telecom services by foreclosing competition in the tied market | Developers used market power in sale of homes in centrally‑planned neighborhoods to force purchase of Crystal Clear services; defined tying market as centrally‑planned communities in Thompson’s Station and alleged substantial foreclosure (hundreds of houses, >1,000 homeowners, $1,500 fees + monthly payments) | Market definition is improper/narrow (neighborhoods); plaintiffs pleaded harm only to telecom within the neighborhoods, not the broader tied market; alleged foreclosure is de minimis | Reversed: plaintiffs pleaded a plausible tying claim and substantial impact on the tied market such that amendment is not futile; market‑power/geographic‑market questions are fact‑intensive and for discovery |
| FCC Exclusivity Order (47 C.F.R. § 76.2000): whether the Agreements violate the prohibition on building exclusivity clauses by creating exclusive provider arrangements | The Agreements (and referenced easements and contractual structure) create de facto exclusivity—barriers to entry (mandatory payments, easements, exclusive negotiation/marketing, long terms) make it economically/practically infeasible for others to serve the neighborhoods | The Agreements and submitted documents contradict exclusivity; some provisions expressly require access to alternate providers and the franchise is non‑exclusive; plaintiffs’ allegations conflict with the written Agreements | Affirmed: contradictions between the Agreements and allegations (and attached documents) foreclose the exclusivity claim as pleaded; plaintiffs failed to allege an explicit building exclusivity clause or facts showing the Agreements bar any MVPD access whatsoever |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard: plausibility required)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (pleading standard and factual allegations must raise plausible claim)
- Fortner Enterprises, Inc. v. U.S. Steel Corp., 394 U.S. 495 (foreclosure/substantiality requirement in tying analysis)
- Mich. Division—Monument Builders of N. Am. v. Mich. Cemetery Ass’n, 524 F.3d 726 (6th Cir.) (tying‑market definition and geographic market guidance)
- Winget v. JP Morgan Chase Bank, N.A., 537 F.3d 565 (6th Cir. 2008) (standard for reviewing denial of leave to amend as futile)
- Lansdowne on the Potomac Homeowners Ass’n v. OpenBand at Lansdowne, LLC, 713 F.3d 187 (4th Cir.) (contract with explicit exclusivity/easement held to violate FCC Exclusivity Order)