Prewitt Asks 5th Circuit to Restore Charter’s Cable Royalties Under 1964 Pact

Charter Communications continues to ignore the “actual text” of the “saving clause” in the 2005 Texas Cable Act and asks the 5th U.S. Circuit Appeals Court to interpret that provision in a manner that makes the saving clause “a nullity,” said Prewitt Management’s reply brief Thursday (docket 23-50419).

Prewitt is asking the 5th Circuit to reverse the district court’s declaratory judgment absolving Charter of any further royalty obligations under a 1964 revenue-sharing cable-permit agreement signed by the predecessor companies of Charter and Prewitt (see 2309060033).

Under the 1964 agreement, Charter’s predecessor acquired permits from Prewitt’s predecessor to provide cable service to three Central Texas cities. In return, Charter agreed to make quarterly royalty payments to Prewitt based on its gross revenue derived from cable services in those cities. The Texas Cable Act shifted authority for cable permits to the state from the cities.

Through the statute’s saving clause, argues Prewitt, Charter’s existing contractual obligations to pay Prewitt royalties were preserved, notwithstanding the change from city-issued cable permits to state-issued ones. Charter argues, and the district court agreed, that 1964 agreement expressly limited Charter’s payment obligations to the life of the city permits, which ended with the enactment of the Texas Cable Act.

Prewitt asks the 5th Circuit to reject Charter’s arguments and “enforce the plain text” of the saving clause “to save Charter’s contractual obligations to Prewitt, which is what it was meant to do,” said Prewitt’s reply brief. Charter’s Oct. 19 answering brief attempted “to minimize the statutory interpretation issue” because the language of the saving clause “is so clear and unambiguous that the only way to avoid its effect is by trying to duck the issue entirely,” it said.

But the language of the saving clause is “dispositive,” said Prewitt’s reply brief. If the 5th Circuit determines that the district court’s interpretation of that language was incorrect, “the appropriate remedy is to reverse and remand the case to determine the constitutional issues that the district court did not address or rule on in any substantive fashion,” it said.

The saving clause’s language “makes it clear that as a condition to the issuance and continuance of any state-issued certificate of franchise,” the holder of such certificates “must continue to pay any existing contractual royalty obligations,” said Prewitt’s reply brief. Through that language, the saving clause provides that Charter, as a condition to the issuance and continuance of its certificate covering the three Texas cities, “must continue to pay royalties to Prewitt for any monies generated by their cable operations in those cities as though they were still operating under the permits issued by those cities,” it said.

That obligation isn’t “forever,” as Charter contends, but only for so long as Charter operates cable systems in those cities under certificates covering the cities, said Prewitt’s reply brief. Charter “wholly ignores this statutory text in its brief and offers no cogent or reasonable alternative explanation for what it could mean,” it said.

Charter’s answering brief “leaves out entirely” the portions of the saving clause that require its royalty obligations to continue to be paid “as though they are operating under the prior city-issued permits,” said Prewitt’s reply brief. But that’s not “how statutory interpretation works,” it said.

Texas law requires, and Prewitt and Charter agree, that when a court construes a statute, it’s presumed that the entire statute “is intended to be effective,” and that the legislature “included every word in the statute for a specific reason,” said the reply brief. It’s “a well-established principle of statutory construction that each sentence, clause, phrase, and word is to be given effect if possible,” it said.

But Charter wants the 5th Circuit “to ignore the plain and unambiguous text” of the saving clause, “and substitute a reading that erases significant portions of the statute,” said the reply brief. The 5th Circuit “should reject that effort,” it said.

If the 5th Circuit accepts Charter’s interpretation of that plain and unambiguous text, and Charter isn’t required to continue making royalty payments under the 1964 agreement as long as it continues operating cable franchises in the three Texas cities, “then what does that statutory provision mean?” said the reply brief. Charter doesn’t offer “a plausible alternative interpretation of this language because there is none,” it said. The 5th Circuit “should give effect to this plain and unambiguous text” in the saving clause, it said.