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TELEPROMPTER OF ERIE, INC. v. CITY OF ERIE

July 12, 1983

TELEPROMPTER OF ERIE, INC., a corporation
v.
THE CITY OF ERIE, a municipal corporation, and its elected officials, officers and agents, THE COUNCIL OF THE CITY OF ERIE, a legislative body, LARRY D. MEREDITH, President of the Council of the City of Erie in his representative capacity and as an individual, ERIE TELECOMMUNICATIONS, INC., a corporation, and GREATER ERIE ECONOMIC DEVELOPMENT CORPORATION, a corporation



The opinion of the court was delivered by: WEBER

[EDITOR'S NOTE: The page numbers of this document may appear to be out of sequence; however, this pagination accurately reflects the pagination of the original published document.]

 ORDER [July 12, 1983]

 AND NOW this 12th day of July, 1983, in accordance with the accompanying Opinion, IT IS ORDERED as follows:

 (1) Plaintiff's and Defendants' Motions for Summary Judgment are DENIED with respect to the Due Process Claim of Count I and Defendants' Motion for Summary Judgment is DENIED with respect to the Equal Protection Claim of Count I.

 (2) Defendants' Motion for Summary Judgment is GRANTED with respect to Count II.

 (3) Defendants' Motion for Summary Judgment is GRANTED with respect to Count III.

 (4) Plaintiff's Due Process and Equal Protection claims are estopped to the extent that they relate to events occurring after the negotiation and selection sessions of the Erie City Council of October 28 and 29, 1980.

 (5) The parties shall be restricted to a consideration of the Due Process and Equal Protection claims of Count I, upon which summary judgment has been denied, only to the extent those claims arise in the context of the events of October 28 and 29, 1980.

 (6) In accordance with the court's ruling respecting Counts II and III, complete summary judgment is ENTERED in favor of Defendants Larry D. Meredith in his individual capacity and Greater Erie Economic Development Corporation, and as such the action against them is DISMISSED.

 (7) In accordance with Local Rule 5-II, the parties are instructed to adhere to the following pretrial schedule:

 A. Plaintiff's Pretrial Narrative shall be filed on or before September 1, 1983.

 B. Defendants' Pretrial Narrative shall be filed on or before September 20, 1983.

 C. A Pretrial Conference will be scheduled thereafter.

 WEBER, D. J. [July 13, 1983]

 This lawsuit arises out of the award of a cable television franchise in Erie, Pennsylvania. The plaintiff Teleprompter of Erie is a Pennsylvania corporation that unsuccessfully competed for the cable franchise and thereafter brought this action against the City of Erie, the City Council of the City of Erie, City Council President Larry Meredith, The Greater Erie Economic Development Corporation, and the successful bidder, Erie Telecommunications, Inc. (hereinafter "ETI"). The Erie City Council (hereinafter "Council") manifested its intention to procure a cable communication system destined to return substantial revenue to the city coffer by passing the Erie Cable Communications Franchise Agreement Ordinance on May 7, 1980. *fn1" The franchise was ultimately awarded on October 29, 1980. It is the process employed in making the award, as well as more particularized allegations of impropriety, that gives rise to this civil rights action. The defendants have moved for summary judgment with respect to all counts of plaintiff's complaint. The plaintiff has filed a cross-motion for partial summary judgment.

 I. Factual Background

 Pursuant to the Cable Franchise Ordinance, the City Clerk of the City of Erie issued to interested parties a Request for Proposals for the purpose of soliciting bids for the design and installation of a cable television system. The City of Erie opened the registered applicants' sealed envelopes on June 16, and in August 1980 public hearings were held at which each of six applicants made a formal and public presentation of their proposals. The City Council adopted a resolution on August 13, 1980, which set the date of August 25, 1980, as the deadline beyond which no further information from applicants would be accepted.

 On October 15, 1980, because of some confusion with the balloting procedure used previously, Council rescinded the resolution that selected ETI as the successful applicant. On October 22, 1980, ETI and the plaintiff Teleprompter were selected as successful bidders. On October 28, meetings were held between the City Council and representatives of both Teleprompter and ETI. On October 29, 1980, the City Council by a 4 - 3 vote selected ETI as the successful bidder and awarded it the cable television franchise. A cable franchise agreement was eventually executed between the City of Erie and ETI on November 11, 1980.

 A distinct, collateral, yet related set of facts relevant to this lawsuit took place over the course of the City Council's consideration of the proposed bids. In July of 1980, Messrs. Rush, Wiley, and Roy, Officers and Directors of the Greater Erie Community Action Corporation (hereinafter "GECAC") met with Erie Mayor Louis Tullio to discuss the potential for a testimonial in honor of City Council President, Larry Meredith. *fn2" Councilman Meredith later joined the four men at the meeting and consented to the idea of a testimonial. The affair was subsequently held at the home of Mayor Tullio on October 29, 1980.

 The complaint, filed on January 22, 1981, was originally presented in four counts. Plaintiff alleges that the City of Erie and the City Council awarded the cable communications system contract in a discriminatory, arbitrary, and unlawful manner in violation of its constitutional rights to due process and equal protection of the laws as guaranteed by the Fourteenth Amendment (Count I). Plaintiff charges that ETI, GEEDC, and Meredith deliberately conspired in a scheme of bribery to award the cable contract to ETI in further violation of plaintiff's constitutional rights (Count II). The district court dismissed alleged violations of RICO (18 U.S.C. § 1961 et seq.) (Count III) by reason of plaintiff's failure to allege a series of unlawful acts needed to sustain a cause of action under the "pattern of racketeering activity" requirements of RICO. Teleprompter of Erie, Inc. v. City of Erie, 537 F. Supp. 6, 12-13 (W.D. Pa. 1981). Finally, plaintiff alleges various pendant state claims. (Count IV).

 On February 25, 1982, the defendant ETI filed its motion seeking summary judgment as to the remaining Counts I, II, and IV of plaintiff's complaint. Defendant's motion has been adopted by the remaining defendants. Defendants, the City of Erie, the City Council of the City of Erie, and GEEDC filed similar motions on February 26 and March 11, 1980. The defendant Larry Meredith, in his motion for summary judgment filed on March 17, 1982, specifically references the motion filed on behalf of ETI and adopts the arguments contained therein as his own.

 Accordingly, we will more fully address the challenges to plaintiff's complaint raised by the defendant ETI. In addition to its claim for summary judgment, defendant ETI asserts two affirmative defenses, and a blanket challenge to the substantive basis of plaintiff's summary judgment claims on the basis of the court's order of December 24, 1981, by which certain Requests for Admission were granted.

 On March 8, 1982, this court ordered plaintiff to file a consolidated response to defendants' motion. The plaintiff filed various responses on April 5, 1982, along with its cross-motion for partial summary judgment.

 The issues have been fully briefed by the parties and are ripe for the court's consideration. The inquiry begins with a review of the affirmative defenses since our ruling on these could obviate the need to proceed with an analysis of all or part of the substantive claims.

 II.

 (1) The Defense of Estoppel.

 It has been said that one who is silent when he ought to speak will not be heard to speak when he ought to be silent. Morgan v. Chicago & A.R. Co., 96 U.S. 716, 720, 6 Otto 716, 24 L. Ed. 743 (1877).

 Defendants challenge plaintiff's claims under Count I and Count IV, those counts alleging the illegality of the selection process utilized by the City in awarding its CATV franchise, on the grounds that plaintiff must now be estopped from challenging a process to which it had been a willing participant.

 The defendants adhere to the doctrine of quasi-estoppel which is regarded as a species of equitable estoppel. The purpose of the doctrine is to forbid one to speak against his own "act, representations, or commitments to the injury of one to whom they were directed and who reasonably relied thereon." 28 Am.Jur.2d Estoppel and Waiver § 27 (1966). To claim the benefit of the bar it must be demonstrated that the party to be estopped 1) by word or deed, concealed or misrepresented material facts; 2) with an intent that such conduct be acted upon; and 3) that such conduct was engaged in with actual or constructive knowledge of the real facts. The estoppel defense may be sustained where a party, with sufficient notice and means of knowledge, remains inactive, acquiesces, or otherwise abstains from impeaching a contract or challenging a transaction. 28 Am.Jur. 2d § 57. Again, there can be no acquiescence where there is no knowledge, the acquiescence must have been with actual or constructive knowledge of the facts.

 We consider first whether in the context of this case, the alleged prior inconsistent position taken by plaintiff was with full knowledge of the material facts. Our essential inquiry is what plaintiff knew and when it knew it.

 Council passed a series of resolutions on May 7, 14, and 28, 1980, to facilitate the submission of bids by prospective applicants. The selection of Comcast as the successful bidder was made on September 10, 1980. Thereafter, Council began negotiations and it was discovered that certain inconsistencies existed in the statements made by Comcast's representatives. Plaintiff had no notice of any impropriety in the selection process up to this point in time since the selection and subsequent rejection of Comcast was not the result of any individualized negotiations. The rejection of the Comcast bid and the joint selection of Teleprompter and Erie Telecommunications as successful bidders occurred on October 22, 1980. As of this date plaintiff was without notice that further efforts to "negotiate" a cable franchise agreement would be inconsistent with the concept of competitive bidding.

 In addition, we do not find plaintiff's participation prior to October 22, 1980, in a procedure which anticipated future negotiations to be fatal to its present claim. We find evidence that "negotiations" as referred to by counsel was the process by which council intended to finalize details with a contracting party once that party had been selected from among the pool of applicants. The complexity of the contract subject matter lends credence to such an interpretation. We do not find the concept of individualized negotiations, or the willingness to participate in a process which anticipated them, immediately suspect where the competition among applicants insures equal treatment and where the negotiations take place only after the selection of the most responsible bid. This is a matter to which we shall return.

 Any knowledge attributable to plaintiff concerning possible irregularities in the bidding process must arise in the context of the negotiations subsequently carried out with Teleprompter and ETI after notice of their joint selection as successful bidders on October 22, 1980. After this selection, the City Council scheduled private meetings with both parties for October 28, 1980, and a day later ETI was selected as the successful bidder and awarded the cable television franchise. Initially, we find the lapse of time between the date setting negotiations, October 22, 1980, and the date on which ETI was selected as the successful bidder insufficient to have made it incumbent upon the plaintiff to have objected to the fairness of the process employed during the final pre-selection period. *fn3"

 Second, and more importantly, Article IV of the Request for Proposals compelled plaintiff's participation at the October 28, 1980 negotiation session under the threat of rejection of its bid. The negotiations became tainted, if at all, at a crucial stage in the protracted selection process and at a time when it appeared that a decision was at hand and when a challenge to the process would likely have prejudiced the plaintiff. We also note that certain reservations about the propriety of the final day of negotiations were actually communicated by the plaintiff's lawyers to representatives of the City negotiating team. *fn4" The circumstances surrounding the final day of negotiations sufficiently militate against plaintiff's obligation to object to the negotiation process employed.

 We find this holding consistent with the court's reasoning in KTVB, Inc. v. Boise City, 94 Idaho 279, 486 P.2d 992 (1971), relied upon by the defendant. The court in KTVB, Inc. while upholding the estoppel bar under the facts before it, noted a distinction between ...


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