The firm awarded the District's cable television franchise, faced with financial problems stemming from a lawsuit, said yesterday it will not ratify the franchise agreement unless the city grants further concessions relieving it of certain financial liabilities in case of delays in the project.
Lawyers for District Cablevision Inc. told a U.S. District Court judge that the antitrust suit brought by a competitor has had a "chilling effect" on the firm's ability to arrange the $50 million in financing needed for the project.
Later, the lawyers said in an interview that District Cablevision needs the additional concessions, including relief from having to pay certain fees to the city within three months of signing the contract, because of the uncertainty caused by the lawsuit.
"Our position is that if we are involved in a lawsuit, we are going to need relief from the city in the form of a moratorium on payments," said Tyrone Brown, a major shareholder in District Cablevision and a lawyer who is helping to represent the firm.
The firm's statements provided the most compelling evidence to date that the franchise agreement is in serious trouble and that the D.C. government could have to reopen bidding for the city's cable television franchise. Earlier this month, Mayor Marion Barry and other city officials expressed concern that the agreement was in jeopardy.
The mayor signed the franchise agreement late last month. District Cablevision has until mid-March to also sign or the agreement automatically expires.
However, the firm could lose millions of dollars if it signed the 15-year agreement and did not start work promptly.
The lawsuit, filed by Capital City Cable, one of three firms that competed for the cable franchise, will take many months to resolve in court -- long after the deadline for District Cablevision to sign the agreement.
Brown said his company notified the city it was seeking further concessions from the city based on a provision in the agreement that says the company would not be subject to penalties or sanctions for failing to meet its obligations because of serious unforeseen or uncontrollable events, such as civil emergencies, labor unrest or acts of God.
But City Council member Betty Ann Kane (D-At Large), chairman of the council's Cable Television Committee, said the lawsuit would not qualify for that provision.
"I think the request has no basis," Kane said.
Richard Maulsby, executive director of the D.C. Office of Cable Television, said, "We have seen nothing from them formally requesting the kind of relief they are talking about."
The $125.7 million suit filed by Capital City Cable alleges that there was a conspiracy, in restraint of trade, to award the franchise to District Cablevision and the Chesapeake & Potomac Telephone Co., that would leave C&P with a monopoly to construct cable facilities and to provide cable services in Washington.
Defendants in the suit include District Cablevision and C&P, which, under the agreement, would construct and own the transport lines for the cable system; the D.C. government, including all 13 members of the City Council and the mayor; Maulsby, and former city administrator Elijah B. Rogers, a one-time private consultant to District Cablevision.
Yesterday, Judge Gerhard A. Gesell denied Capital City Cable's request for an injunction to halt the franchise agreement.
He also dismissed the District and the council members as defendants in the antitrust part of the suit.
Gesell ruled that city officials were immune to legal action under the federal antitrust laws. However, the city will continue as a defendant in the portion of the suit asserting that Capital City Cable was denied due process.
The judge stressed that Capital City Cable must show "a gross deviation from the procedures" and show a violation of "constitutional proportions having a significant effect on the final result."
Based on a preliminary schedule issued by the judge, a nonjury trial on a portion of the suit would begin April 1, with hearings on other portions of the suit set for some time after April 30.
Gesell asked lawyers for Capital City Cable for a clarification of a rumor that one of the major investors in the firm, Viacom International Inc., has pulled out and is no longer a party to the suit. "You better get your house in order," the judge said.
William R. Hyde Jr., a Capital City official, said Viacom is still a partner in the venture.
Brown, the lawyer for District Cablevision, said he was "very pleased" with the outcome of yesterday's court proceedings.
"When you dismiss the city as a defendant , it destroys a lot of the antitrust argument because it is built on the idea that there was a conspiracy involving the city," he said.
On the other hand, Hyde said he was pleased that the judge retained the city as a defendant on the issue of due process.