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09/30/96 CARRIE BASS v. PRIME CABLE CHICAGO

September 30, 1996

CARRIE BASS, INDIVIDUALLY, AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS-APPELLANTS,
v.
PRIME CABLE OF CHICAGO, INC., A DELAWARE CORPORATION, DEFENDANT-APPELLEE.



Appeal from the Circuit Court of Cook County. Honorable Robert D. Ericsson, Judge Presiding.

Released for Publication November 18, 1996.

The Honorable Justice Burke delivered the opinion of the court: Hartman, P.j., and DiVITO, J., concur.

The opinion of the court was delivered by: Burke

JUSTICE BURKE delivered the opinion of the court:

Plaintiff Carrie Bass appeals from an order of the circuit court granting defendant Prime Cable of Chicago, Inc.'s motion for summary judgment pursuant to section 2--1005 of the Illinois Code of Civil Procedure. 735 ILCS 5/2--1005 (West 1992). On appeal, plaintiff contends that the trial court erred in: (1) finding that no genuine issue of material fact existed regarding certain cable television related charges by defendant to its customers; (2) finding that federal law preempted it from deciding that defendant's practice of "passing through" three city-imposed expenses to plaintiff, related to television service fees, constituted breach of contract and violation of the Illinois Consumer Fraud and Deceptive Business Practice Act (Consumer Fraud Act) (815 ILCS 505/2 (West 1992)); and (3) granting summary judgment in defendant's favor (a) with respect to plaintiff's claim that defendant's discontinuation of a "free" cable guide constituted breach of contract and (b) with respect to plaintiff's Consumer Fraud Act claim regarding the "free" cable guide. Plaintiff's arguments concerning these three charges to defendant's customers, of which plaintiff was one, are based on plaintiff's contention "that these charges were, in fact, impermissible 'pass throughs' rather than rate increases preemptively permitted by federal law." For the reasons stated below, we affirm.

In 1985, plaintiff Carrie Bass entered into a contract for television cable services with Group W Cable Associates of N.W. Chicago (Group W), defendant's predecessor in interest, which was governed by an agreement entered into between the City of Chicago (City) andGroup W (franchise agreement). Pursuant to the contract, Group W agreed to provide, in addition to cable service, a monthly cable television guide at no charge. The contract did not provide a date, time or event when it was to terminate. In June 1990, defendant Prime Cable of Chicago, Inc. acquired Group W, assumed all of its cable service contracts, including the one at issue in this case, and became governed by the franchise agreement between the City and Group W. It was undisputed that the City is not permitted to regulate defendant's rates under the Cable Communications Policy Act of 1984 (47 U.S.C. ยง 521 et seq.) because defendant was subject to "effective competition."

Under the franchise agreement, defendant was required to pay the City a franchise fee of not less than 5% of defendant's annual gross revenues pursuant to the City of Chicago Communications Ordinance (ordinance). This franchise fee is in consideration for the privilege of operating a cable franchise within the public ways of the City. Until June 1991, defendant had paid the franchise fee out of its operating revenues. In June 1991, defendant began to pass the cost of the franchise fee directly to its cable customers as a separate line item on its customers' bill for cable services. Prior to passing this cost on to its cable customers, however, defendant, in May 1991, notified plaintiff and its other customers by letter of the new franchise fee charge on their bill for cable services, stating:

"Effective with your June 1991 billing, we will 'pass through' the franchise fee as a separate line item on your cable bill. If, for example, your cable bill is $20.00, you will see an additional 5% or $1.00 added to your bill. This $1.00 fee will be paid to the City and is not income to us. Your rates for cable television service will remain the same."

In June 1991, plaintiff received a cable bill from defendant with the 5% franchise fee charge on her bill. Plaintiff paid the bill and thereafter continued to pay the franchise fee which appeared as a separate line item on her monthly cable bill. In May 1992, defendant also notified plaintiff that the cable guide would no longer be provided free of charge. Defendant's notice stated:

"Beginning June 1st, your cableview entertainment guide will be $.99 a month. Unless we hear from you by May 15, 1992, May will be your last issue of the Cableview guide."

Plaintiff did not respond to defendant's notice and, as a consequence, defendant cancelled plaintiff's cable guide subscription. Nonetheless, plaintiff continued to receive and pay for cable services and, in October 1992, ordered the cable guide for the additional charge of $.99.

All franchise grantees were also required to pay a further fee to the Chicago Access Corporation (CAC), a not-for-profit corporation created under the City's ordinance for the purpose of promoting and developing maximum community involvement in the use of cable access channels. The franchise agreement between the City and defendant required that defendant pay directly to CAC an initial capital investment plus 1% of its annual gross revenues (not to exceed an annual cap of $1,000,000). In September 1992, defendant began to pass this 1% charge directly to its customers. Prior to this time, defendant had paid the CAC fee out of its operating revenues. Defendant provided plaintiff with written notice of this charge in August 1992, which stated that her bill would "begin to reflect an additional charge of $.38 per month." Plaintiff paid this bill and thereafter continued to pay the CAC fee which appeared as a separate line item on her monthly cable bill.

On October 6, 1992, the City of Chicago's Cable Commission adopted a resolution which directed defendant to "cease the itemization and collection of [the] 'CAC Assessment' until such time as the Corporation Counsel has issued its opinion on this matter." Defendant continued charging this fee to its customers. On February 9, 1993, the Commission adopted a second resolution which rescinded the October 6, 1992, resolution.

On April 8, 1993, plaintiff filed a six-count amended class action complaint against defendant alleging that (1) defendant's discontinuation of the free cable television guide and (2) defendant's passing through of the franchise and CAC fees to plaintiff were in breach of contract and in violation of the Consumer Fraud Act.

On September 29, 1993, defendant filed a motion for summary judgment, arguing that by including the three additional charges on its customers bills, defendant was modifying a terminable at-will contract and that plaintiff, by continuing to pay for and receive cable services, ratified the modifications. The trial court granted summary judgment in favor of defendant on all counts, finding that no genuine issue of material fact existed, that federal law preempted a State or local authority from prohibiting a "pass through" charge and that the additional charges were modifications of a "terminable at will" contract which plaintiff ratified by continuing to pay for and receive cable service. This appeal followed.

Plaintiff contends that the trial court erred in granting summary judgment in defendant's favor because a genuine issue of material fact existed regarding whether the billing charges for the franchise and CAC fees were rate increases or "pass throughs" of existing fees. More specifically, plaintiff argues that the charges for the franchiseand CAC fees did not constitute a rate increase, "preemptively permitted by federal law" prohibiting local restrictions on rate increases, but rather impermissible pass through fee charges to her, which are not preempted by federal law. Plaintiff further contends that additional questions of fact remain regarding whether defendant continued to pass the CAC charge to its subscribers following the Chicago Cable Commission's October 6, 1992, resolution directing defendant to cease this practice and, "if the billing changes ...


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