Office
of Information Practices Opinion # 02-08
HTML
& DOC Updated 9/20/02
September
6, 2002
Ms.
Wendy Arbeit
President
The
Community Television
Producers
Association
P.O.
Box 23296
Honolulu,
Hawaii 96823
Ms.
Carol D. Bain
President
Kauai
League of Women Voters
P.O.
Box 1181
Lihue,
Hawaii 96766
Re:
‘Olelo: The Corporation For
Community Television and
Ho’ike: Kauai Community Television,
Inc.
Dear
Ms. Arbeit and Ms. Bain:
In
1998, The
Community Television Producers Association (“CTPA”), represented by Wendy
Arbeit,
asked the Office of Information Practices (“OIP”) to determine whether
‘Olelo: The
Corporation for Community Television (“’Olelo”)
is a state agency or a quasi public body.
In 2001, The League of Women Voters of Kauai, represented by
Carol D.
Bain, asked the OIP to reconsider its opinion that Ho’ike: Kauai
Community Television, Inc. (“Ho’ike”) is not subject to the
requirements of the
Uniform Information Practices Act (Modified), chapter 92F, Hawaii
Revised
Statutes (“UIPA”). Additionally, The League of Women Voters of
Kauai asked the OIP whether Ho’ike is subject to the Open Meetings Law,
chapter 92, Hawaii
Revised
Statutes. This second issue
regarding Ho’ike will be addressed separately.
ISSUE
PRESENTED
Whether
‘Olelo and Ho’ike are subject to the requirements of the UIPA.
BRIEF
ANSWER
Yes. The Director (“Director”) of the Department
of Commerce and Consumer Affairs (“DCCA”)
has required, as the local franchising authority, the cable franchisee
to set
aside public, educational and governmental access channels (“PEG access
channels”). A review of the totality of
circumstances indicates that both ‘Olelo and Ho’ike were originally
created by
the DCCA, notwithstanding their current corporate form, and are funded
almost
entirely through funds allocated pursuant to the Director’s authority
under the
Hawaii Cable Communications Systems Law, chapter 440G, Hawaii Revised
Statutes
(1993) (“HCCSL”).
The
OIP
concludes that although the DCCA has not exercised close control over
the
administration of the PEG access channels, the DCCA does have
significant and
direct control over ‘Olelo and Ho’ike through its appointment and
removal power
of the majority of appointees on the boards of those corporations. The OIP concludes that the DCCA exercises
indirect control over the existence of ‘Olelo and Ho’ike through the
contractual agreements designating both as the Director’s designee and
terminating their corporate existence when that designee status ends.
Finally,
the
OIP concludes that the DCCA performs a government function by providing
for PEG
access channels and that the administration of such channels, but not
editorial
control over the public portion of PEG access channels, is a government
function performed by ‘Olelo and Ho’ike by or on behalf of the DCCA.
Examining
the
totality of all the factors, the OIP is of the opinion that ‘Olelo and
Ho’ike
are corporations owned, operated, or managed by or on behalf of this
State as
set forth under section 92F-3
of the Hawaii Revised Statutes, and are, therefore, required to follow
the
UIPA. To the extent that this opinion
is in conflict with OIP Op. Ltrs. No. 93-18,
No. 94-23,
and No. 94-24,
those
opinions are rescinded by this opinion.
FACTS
In
1970, the
State of Hawaii enacted the HCCSL, amending it several times through
the
1980s. Under State[1]
and federal[2]
authority, the Director of the DCCA authorizes cable system franchises
for each
county. The Director has issued, by way
of Decisions and Orders (“D&Os”),[3]
cable franchises to certain entities (“Cable Operators”)[4]
at various times[5]
to operate cable systems including the laying of cable along public
places and
easements.[6] These D&Os note that such franchisees
derive economic benefit from such an authorization.[7] Under the HCCSL, the Director has
significant power to attach terms and conditions to the cable franchise.[8] Under State law, the Cable Operators must
set aside channels for PEG use.[9] The United States Supreme Court has stated
that:
[p]ublic,
educational, or governmental channels’ . . . are channels that, over
the years,
local governments have required cable system operators to set aside for
public,
educational, or governmental purposes as part of the consideration an
operator
gives in return for permission to install cables under city streets and
to use
public rights-of-way.
Denver
Area
Educational Telecommunications Consortium v. FCC, 518 U.S. 727, 116 S. Ct.
2374 (1996)
(“Denver Area”). State law[10]
authorizes the DCCA to require support of PEG access under federal and
State
law, and has imposed
that
obligation, as well as others, via
D&Os upon the Cable Operators.[11] Pursuant to these cable franchises, and
through specific contracts tied to the D&Os, entities were formed
for the
specific purpose of administering PEG access channels across the state
(“PEG
Access Organizations”).[12]
DISCUSSION
The
OIP has
previously issued opinions regarding the application of the UIPA to
Akaku –
Maui Community Television, Inc.,[13]
Ho’ike[14]
and Na Leo O’ Hawaii, Inc.[15] The request to revisit the issue of whether
Ho’ike is subject to the UIPA, and the new issue of whether ‘Olelo is
subject
to the UIPA, raises the question of what standard the OIP will follow
when
asked to revisit an issue settled in previous OIP opinions. The OIP therefore examines appellate court
standards for reconsideration of a specific ruling, and for overruling
prior
decisions, as a guide.
The
standard
used by courts for reconsidering a conclusion of law is that the
appealing
party must show the findings of fact are clearly erroneous or the
conclusions
of law are incorrect. Child Support
Enforcement Agency
v. Jane Roe, 96 Haw. 1, 13, 25 P.3d 60, 72 (2001) (citation
omitted). The
standard
for overruling a settled precedent, or stare
decisis, is “compelling justification.”
Hilton v. S. Carolina Pub. Rys. Cmsn., 502 U.S. 197, 202,
112 S.
Ct. 560, 565 (1991).
In
three
instances, the OIP has reconsidered prior opinions.
Although no standard for reconsideration was cited to, the
specific reasons for reconsideration in those opinions were a change in
the law
in two cases[16]
and a change in the facts in the third.[17] Based on prior OIP practice and on court
standards, the OIP will reconsider a prior opinion when at least one of
the
following is present: (1) change in the law, (2) change in the facts,
or (3)
other compelling circumstances.
In
the
requests before us, it is clear that the OIP has been provided with an
abundance of facts that substantially changes the context in which the
prior
opinions were issued, and therefore, the OIP will reconsider the OIP
Opinion Letter
Number 94-23,
on
Ho’ike.
When interpreting the UIPA,
the OIP is
required to apply and construe the chapter to promote its underlying
purposes
and policies. One of those policies is
to “enhance governmental accountability through a general policy of
access to
government records; . . .” Haw. Rev.
Stat. § 92F-2
(1993).
The
legislature declared that “[i]t is the policy of this State that the
formation
and conduct of public policy – the discussions, deliberations,
decisions, and
action of government agencies – shall be conducted as openly as
possible.” Id.
To enforce this policy, the legislature has required government
agencies
to “make government records available for inspection and copying during
regular
business hours.” Haw. Rev. Stat. § 92F-11(b). However, the UIPA applies only to the
inspection and copying of "government records" and, under the law,
“[g]overnment record means information maintained by an
agency in written, auditory, visual, electronic, or other
physical form." Haw. Rev. Stat. § 92F-3
(emphasis added). The term
"agency" is defined by the UIPA as:
any
unit
of government in this State, any county, or combination of counties;
department; institution; board; commission; district; council; bureau;
office;
governing authority; other instrumentality of state or county
government; or corporation or other establishment
owned, operated, or managed by or on behalf of this State or any
county, . . .
Id. (emphasis added).
Quite often, the issue of
accountability is raised when either a government agency has been
“privatized”
or an entity is so intertwined with government that the public
perceives that
entity to be engaged in governmental action.
In either event, the issue of accountability is raised. The question of who is accountable to the
public underlies the issue raised by the requesters of this opinion.
In
this
instance, The League of Women Voters of Kauai alleged in its request to
the OIP
that “a continuing movement away from part 1, Chapter 92 “Sunshine Law”
provisions by the Ho’ike board of Directors is apparent.
In recent months the board has
systematically stripped major elements of open governance and Sunshine
from the
Ho’ike By Laws.” [18]
The CTPA, through Ms.
Arbeit, claims
to have sought documents from ‘Olelo and been denied access to
“detailed fiscal
reports.” In its 1998 testimony to the
Senate Committee on Commerce, Consumer Protection and Information
Technology on
S.C.R. No. 51 and
S.R.
18, the CTPA detailed its frustration with ‘Olelo and alleged that the
legislature should require a third-party to do a fiscal and operational
audit
of ‘Olelo and alleged that an in-house audit would do nothing but
enable ‘Olelo
to “continue misappropriating public resources and curtailing the
public’s
First Amendment rights.”[19]
Thus, both requesters
indicate their
inability to obtain information from ‘Olelo and Ho’ike, and their
frustration
with the way in which these entities deal with issues of accountability. The requesters are asking that ‘Olelo and
Ho’ike be accountable to the public by asserting that ‘Olelo and Ho’ike
are
government agencies, and thus subject to the public records and
Sunshine laws.
The
issue
before the OIP is whether ‘Olelo and Ho’ike are subject to the UIPA by
virtue
of the definition of “agency.” In 1990,
the OIP had occasion to interpret and apply section 92F-3 of the Hawaii
Revised
Statutes, to the
Hawaiian Humane Society. In that
opinion, the OIP said:
Although
this definition of agency presents little difficulty when applied to
such
organizations as executive branch departments, boards, and commissions,
its
application becomes difficult when a UIPA request is directed either to
a
hybrid organization that bears only some characteristics of a state or
local
agency, or an entity that is not
commonly perceived as a government agency.
OIP Op. Ltr. No. 90-31, at
5 (Oct. 25,
1990) (emphasis added). In applying
this definition of “agency” to the Hawaiian Humane Society, the OIP
reviewed
the legislative history of the UIPA, looked for guidance to the
commentary
accompanying the Uniform Information Practices Code, upon which the
UIPA was
based,[20]
reviewed federal interpretation of section 552(f) of the Freedom of
Information
Act, and state court interpretations of state public records laws. The OIP concluded that the decision as to
whether an entity is subject to the UIPA must be determined on a
case-by-case
basis and must be based upon a review of the totality of circumstances.[21] However, it was clear that an entity is not
“operated on behalf of” the State or any
county . . . merely
[because it
contracts] with a government agency.[22] Nonetheless, the OIP declined to follow the
federal approach of requiring day-to-day control of the entity’s
operations by
the government agency and concluded that such a constrictive approach
to the
broader definition of agency found in the UIPA would be contrary to the
legislative intent behind the statute.[23]
In
the OIP
Opinion Letter Number 94-5,
(whether the Villages of Kapolei
Association was a
government agency) the OIP set forth the elements it would review to
determine
whether an entity is an establishment owned, operated, or managed by or
on
behalf of this State or any county. The
OIP wrote:
in
determining whether a nonprofit corporation is an "agency" for
purposes of the UIPA, it is necessary to examine
the
totality of circumstances surrounding the operation of the corporation. Such an examination should include a
consideration of whether the
corporation performs a governmental function, the level of governmental
funding, the extent of governmental regulation or control, and whether
the
entity was created by the government.
Id. at 1 (emphasis added).
Three
of
these elements of the UIPA test were used by the U. S. Supreme Court in
Lebron
v.
National Railroad Passenger Corp., 513 U.S. 374, (1995), to
determine
that Amtrak was, for purposes of individual rights, a governmental
entity. Despite the fact that Congress had
deemed
Amtrak to not be a government agency, the United States Supreme Court
noted:
[t]hat
Government-created and -controlled corporations are (for many purposes
at
least) part of the Government itself has a strong basis, not merely in
past
practice and understanding, but in reason itself. It
surely cannot be that government, state or federal, is able to
evade the most solemn obligations imposed in the Constitution by simply
resorting to the corporate form. On
that thesis, Plessy
v. Ferguson, 163 U.S. 537, 41 L. Ed. 256, 16 S. Ct. 1138
(1896), can be
resurrected by the simple device of having the State of Louisiana
operate
segregated trains through a state-owned Amtrak.
Id. at 397, 130 L. Ed. 2d 902,
921 115 S. Ct. 961, 973
(1995). The Lebron Court
reviewed Amtrak’s creation, whether Amtrak furthered government goals,
and the
extent of government control over Amtrak.
The Court noted that Amtrak:
is
established and organized under federal law for the very purpose of
pursuing
federal governmental objectives, under the direction and control of
federal
governmental appointees. It is in that
respect no different from the so-called independent regulatory agencies
such as
the Federal Communications Commission or the Securities Exchange
Commission,
which are run by Presidential appointees with fixed terms.
Id. at 397-99, 130 L. Ed. 2d
902, 922-23
115 S. Ct. 961, 974-75 (1995).
Thus,
as with
the U.S. Supreme Court’s test, the test used to distinguish the
corporation
subject to the UIPA from the corporation that simply provides goods or
services
to the government requires that there be at least four elements which,
on
balance and in their totality, show action by the entity that reflects
governmental action. See Demarest
v. Athol/Orange Cmty. T.V., Inc., 188 F. Supp. 2d 82, 90 (D.
Mass.
2002), (citing Evans
v. Newton, 382 U.S. 296, 299, 15 L Ed. 2d 373, 86 S. Ct. 486
(1965))
(AOTV, a municipally authorized and operated PEG access channel, held
to be a
state actor for purposes of evaluating First Amendment claims). The elements that the OIP will review
include: 1) whether the entities were created by government, 2) whether
the
functions performed by the entities are government functions, 3) the
level of
government funding and, 4) the extent to which government controls the
entities
themselves. The OIP will now examine the
totality of circumstances giving rise to these requests for an opinion.
We begin this analysis with
a review of the facts to
determine whether either ‘Olelo or Ho’ike was created by the
government. At the outset, ‘Olelo asserts
that it was not
created by “state constitutional provision, state statute, county
charter
provision, ordinance, administrative rule, or executive order.” ‘Olelo argues that it was not “created by
any State or county legislative or executive enactment or appointment
authority” and notes that it is not like other entities created by
statute or
charter.[24]
The OIP could find no
constitutional provision, statute,
administrative rule nor executive order that created either ‘Olelo or
Ho’ike. However, the records in the
public domain reflect such a close and strong nexus between the DCCA
and the
initial boards of both ‘Olelo and Ho’ike, that it is impossible to
agree with
‘Olelo’s assertions that “no government action was taken to create
‘Olelo.”
The
Director
has recognized in the D&Os covering both the Oahu and Kauai cable
franchises that there was a demand for public, educational and
governmental
access by the residents of these islands, and noted that the Director
intended
to create and implement a coordinated plan for cable access. In the D&Os establishing both
franchises, the Director noted[25]
that
“PEG access has been and
continues to
be an important issue for the State. In
establishing PEG access in Hawaii, the State viewed it as a means for
cable
subscribers to receive informational and educational programming that
in
general reflect the communities in which they reside.”
The
Cable
Operators were required to set aside activated channels for public,
educational
and governmental access,[26]
pay access fees,[27]
pay capital funds for facilities and equipment for PEG use on an annual
basis[28] and the Kauai Cable Operator was required
to work
with the Director’s staff, consultants, and others designated by the
Director
to develop a coordinated plan for the use of public, educational and
governmental access facilities and equipment on the island of Kauai.[29]
When
the
Director issued the D&Os that authorized the cable franchises for
the
islands of Oahu and Kauai (“enabling D&Os”), the power to designate
one or
more entities to “fund, control, manage or operate [a]ccess
[f]acilities and
[e]quipment” was reserved to the Director.[30] Indeed, the Director’s appointment power for
the majority of the board of directors of both designated entities is
set forth
in the enabling D&Os. D&O No.
255, renewing the cable franchises for the island of Kauai in 2000,
sets forth
that the majority of the board members of Ho’ike are appointed by the
Director.[31] D&O No. 154, which transferred the
cable
franchises for Oahu to Time Warner Entertainment Company, L.P. in 1993,
set
forth that “[a]ny designated entity shall have a governing board of
nine
members. Three of the members shall be
appointed by [the Cable Operator] and six shall be appointed by the
Director.”[32]
(emphasis added).
Once
the
franchises were established, the Director then appointed committees to
make
recommendations for the creation and implementation of a not-for-profit
organization to manage PEG access channels, facilities, equipment and
funding. For the island of Oahu, in
April 1989:
the
Director appointed a nine person Access Planning Committee to make
recommendations to the Director regarding the creation and
implementation of a
not-for-profit organization to manage public, education and government
access
channels, facilities, equipment and funding.
The
Corporation, ‘Olelo: the Corporation for Community Television, was
charted by
the State of Hawaii September, 1989. The
Board of Directors was appointed by the Director and the President
of [the
Cable Operator] in accordance with Section 5.5 of the franchise
agreement and
was seated on December 15, 1989.
Agreement
between DCCA and ‘Olelo, January 12, 1990, at 1 (emphasis added). For the island of Kauai, in July 1991:
the
Director appointed an eleven member Access Planning Committee to
develop and
implement a comprehensive plan for PEG access on Kauai.
The [PEG] Access Plan for the County of
Kauai (“Plan”) was submitted to the Director on June 15, 1992 and
approved for
implementation on August 28, 1992. The
Plan outlined a model for PEG access whereby a not-for-profit access
corporation called Ho’ike – Kauai Community Television, Inc. (“Ho’ike”)
would be
established to manage a centralized PEG access production facility and
to
facilitate public, educational and governmental access on Kauai.
Ho’ike
was
incorporated by the State of Hawaii on June 18, 1992 with members of
the Access
Planning Committee serving as the initial board of directors. The founding Board of Directors was
appointed by the Director and the general managers of [the Cable
Operators]
in accordance with Ho’ike’s Bylaws, and the first meeting of the Board
was held
on December 12, 1992.
Agreement
between DCCA and Ho’ike, October 13, 1993, at 1 (emphasis added). The Director then entered into contracts
with these organizations to administer and operate, on behalf of the
DCCA, the
PEG channels.
Given that the cable
franchise
enabling documents set forth the Director’s appointment power of the
majority
of the directors of the designated entities, given the payments
required by the
Director from the Cable Operator for the access fee and the capital
funds for
facilities and equipment for PEG access, and given the clear statement
of facts
within the agreements between DCCA and Ho’ike and ‘Olelo, the OIP
concludes
that the Director took governmental action and created ‘Olelo and
Ho’ike as
private not-for-profit corporations.
This conclusion is
supported by the
decision of the United States District Court for the District of
Massachusetts
in Demarest. The Court noted
that:
AOTV
was
created by the Town of Athol . . . through its license agreement with
Time-Warner Cable . . . Athol demanded the creation of AOTV as a
condition of
Time-Warner’s license renewal . . .
Pursuant to this agreement, Time-Warner paid the Board of
Selectmen of
the Town of Athol . . . , $15,000, followed by payments of $120,000 and
$30,000
so that the Board of Selectmen could form, organize, and maintain AOTV
and its
facilities . . . There can thus be no
doubt that AOTV was created by Athol, much like the Bank of the United
States
was created by the federal government.
188 F. Supp. 2d. at 90-91
(citations
omitted). As in the Demarest
case, the Director has created both ‘Olelo and Ho’ike, demanding
certain
payments from the Cable Operators to form, organize, and maintain these
corporations through the D&Os, and appointing the initial board.
The extent to which the
DCCA does or
does not control ‘Olelo and Ho’ike can be seen through the
establishment of
both direct and indirect methods of control.
Thus, the OIP now reviews the manner in which the DCCA is able
to
control either corporation.
a.
Direct Control of the Corporations –
Board
of Directors
When
the DCCA
formed ’Olelo in 1989 and Ho’ike in 1992, both non-profit, no-member
corporations, ‘Olelo’s initial board was composed of seven directors[33]
and Ho’ike’s initial board of nine directors.[34] These directors were appointed for the sole
purpose of forming the corporation.[35] The corporations were organized to “maintain
those cable channels dedicated to public, educational and governmental
use in a
manner that is free of censorship and control of program content,
except as
necessary to comply with state or federal law.”[36] Thereafter, appointments to the board were
to follow the scheme specified by the DCCA, which gave the Director
majority
control of the boards. For Ho’ike,
seven directors were to be appointed by the Director and two by each
Cable
Operator[37]
and for ‘Olelo, six directors were to be appointed by the DCCA and
three by the
Cable Operator.[38]
In OIP Op. Ltr. No. 94-5, the
OIP
determined that the Villages of Kapolei Association was not an agency
subject
to the UIPA because, although appointment of its initial board was made
by the
State of Hawaii, subsequent boards were elected by the Association’s
members. Here, unlike the Villages of
Kapolei
Association,[39] neither of the
corporations have
members and both boards continue to be controlled through the
Director’s
appointees.
The
bylaws of
both corporations provide that the nominating committees were to
prepare
recommended slates of directors for vacancies on the boards. While these slates were advisory to the DCCA
and the Cable Operators, both corporations’ bylaws required the DCCA
and Cable
Operators to “consult with the Board on any appointee not appearing on
the recommended
slate.”[40] This provision attempting to limit the
powers of the Director and Cable Operators was removed in the latest
version of
Ho’ike’s Bylaws.[41] With two exceptions,[42]
Ho’ike’s Bylaws all specified that the DCCA and the Kauai Cable
Operators had
removal power with respect to their respective board appointments. ‘Olelo’s Bylaws recognized the power of both
the DCCA and the Cable Operator to remove their board appointments as
well.[43]
Since
the
incorporation of ‘Olelo and Ho’ike, the DCCA has retained the power to
appoint
and remove a majority of the board of directors. While
both boards have attempted to have more say in the process
of appointment, through the bylaw requirement that the DCCA Director
and Cable
Operator confer with the board, it is clear that this requirement is
superfluous to the question of the DCCA’s ultimate ability to control
the
corporations. And, while the boards may
desire more independence, the DCCA has exercised its power to remove a
director
on at least one occasion with regard to Ho’ike’s Board.[44]
As
with any
corporation, administrative control and day-to-day management is rarely
exercised through its board of directors but through its corporate
officers who
have been hired by the board. Indeed,
both Ho’ike and ‘Olelo assert that “[t]he government does not become
involved
with any of the daily operations or services.”[45] These assertions are supported by the DCCA.[46] While the DCCA itself has at times made some
direct effort to influence the direction of policy at a PEG access
organization[47]
there is no indication that the DCCA has ever sought to be informed of
or to
control the day-to-day management of PEG access organizations. Nevertheless, application of the UIPA’s
definition of agency in this case does not require such an intimate
control of
the private entity. And, in fact, such
an approach was explicitly rejected by the OIP in OIP Op. Ltr. No. 90-31.[48]
While the Ho’ike board’s
action to
restrict the DCCA’s powers could generally be viewed as an effort to be
independent from the DCCA, thus reflecting reduction in governmental
control,
it is clear that the DCCA has direct control of the corporation through
the
ability to appoint and remove the majority of its board members. Thus, such board actions should be viewed
within the totality of circumstances and do not affect the conclusion
that it
is the Director of the DCCA who controls these corporations, through
the
appointment and removal power over a majority of the board.
b. Indirect
Methods of Control -
Designation of PEG Channels & Funding
Beyond
the
power of the DCCA to appoint and remove a majority of the directors on
both
boards, control over the corporations actually begins with the
Director’s
statutory power to direct that the Cable Operator set aside PEG access
channels
and pay certain fees related to the cable franchise, all as set out
under the
authority of the D&O.[49] Under federal law, while the Director may
not impose on the cable operator a franchise fee that exceeds 5% of the
cable
operator’s gross revenues,[50]
there are no other restrictions and thus the Director has the
discretion to
designate how that franchise fee will be expended or directed so long
as it is
in the public’s interest.
Thus,
the
most critical but indirect element of control is the Director’s power
to
designate the payment of funds from the Cable Operator directly to
other
entities. In some cases, designation of
these fees may be for purposes of PEG access support and management and
directed to her designees for PEG channel management, or to other
entities for
non-PEG channel purposes.[51] Discussion of this point will be dealt with
in the later provisions of this opinion.
Thus, whether and how much funding the PEG Access Organizations
will
receive is completely dependent upon the Director’s designation within
the
D&O.
c. Indirect
Methods of Control -
Designation of PEG Access Organizations
The
second
method of indirect control arises out of the Director’s power to
designate an
entity to operate PEG access channels on behalf of the State. It is abundantly clear that the DCCA has the
ability to choose – or not to choose – ‘Olelo or Ho’ike as its designee
for the
administration of PEG access channels for Oahu or Kauai.
And, supporting the Director’s ability to
choose the PEG access organizations, the most current agreements
between the
DCCA and the PEG Access Organizations[52]
(hereinafter referred to jointly as “Agreements”) include provisions
that
require the Director’s approval or require the corporations to provide
information to her. For example,
neither ‘Olelo nor Ho’ike are permitted to assign their rights nor
delegate any
duties, obligations, or responsibilities under the Agreements without
the
Director’s approval.[53] Both PEG Access Organizations are required
to file certain documents with the Director on a periodic basis.[54]
While
the
Director has chosen both ‘Olelo and Ho’ike as PEG Access Organizations,
it is
instructional to review the powers she has to terminate these
designations
under the Agreements.
If
the Cable
Operators’ franchises are terminated, then the Agreements with the PEG
Access
Organizations are “automatically terminated on the date such franchise
is
terminated.”[55] If the Agreements are terminated, the PEG
Access Organizations are required to immediately
relinquish any and all claims to the PEG Access Fees, Facilities and
Equipment
Fund, and the access facilities and equipment, and must provide a
verified
accounting, a current inventory, and transfer
the balance of accounts and facilities and equipment to the DCCA.[56] Disposition of any facility or equipment not
purchased or acquired from the Facilities and Equipment Fund, shall be
by
appropriate appraisal and allocation agreed to by the Director and the
PEG
Access Organizations.[57] If the Agreements are terminated, the
Director may then designate other entities as the successor of either
PEG
Access Organization.[58]
Under
usual
circumstances, when the government and an entity providing goods or
services
end a contractual relationship, the government has no contractual
ability to
affect the very existence of the entity.
Each is left to go their separate ways.
In this case, however, it is apparent from the terms of the
Agreements
that the very corporate existence of both ‘Olelo and Ho’ike will end
when the
Director no longer chooses them as her designees, whether through
termination
or otherwise. It is clear from the
language of the Agreements that the parties agreed that each of the PEG
Access
Organizations would, upon termination of the Agreements, wind down its
operations and end the corporation.[59]
In
summary,
the Director maintains majority control of the PEG Access
Organizations’ boards
through appointment and removal power; has indirect but significant
control
over the PEG Access Organizations through the Director’s ability to
designate
funding for PEG access support; has the ability to control the PEG
Access
Organizations’ major source of funding through her power to designate
the
amount of funding to any entity or to the PEG Access Organizations; has
the
ability to designate any entity as a PEG Access Organization because
when the
cable franchises end, the PEG Access Organizations Agreements terminate
automatically; and because upon termination, generally all assets
return to the
DCCA and PEG Access Organizations wind down their operations. Therefore, because the Director exercises
significant direct control over the board of directors, and thus over
the
policies to be followed by ‘Olelo and Ho’ike, as well as indirect
control over
the funding and existence of the corporations themselves, through its
exercise
of its powers as the local franchising authority, the OIP concludes
that the
DCCA exercises control over ‘Olelo and Ho’ike.
This conclusion does not mean that the DCCA exercises day-to-day
control
or management over the PEG Access Organizations.
We now review the extent to
which
‘Olelo and Ho’ike perform governmental functions. This
is a two-fold inquiry – first to determine what, if any,
governmental function the DCCA performs with regard to PEG access
channels and
second, whether the PEG Access Organizations perform those functions on
behalf
of the DCCA.
a.
The DCCA’s Function
In
the OIP
Opinion Letter No. 93-18,
the OIP wrote that “our research has not
revealed any
section of the Hawaii Revised Statutes that requires a government
agency to
provide ‘community’ broadcasting. Nor are
we aware of any legal authority that has found community broadcasting
to
constitute a governmental function.” Id.
at 4. This statement refers to a
function that has, as its base, the exercise of editorial control over
PEG
access channels, which is, in some circumstances, prohibited.
Clearly,
however, there is another function to be reviewed and that is the provision and administration of PEG access
channels. In this instance, references
to the
governmental function of providing and administering the PEG access
channels
are found within the federal and state laws.
To
start
with, the federal government allows the local franchising authority to
require
that Cable Operators set aside PEG access channels.[60] In doing so, Congress found that for a
variety of reasons, cable operators had garnered undue market power
compared to
consumers and video programmers and that the cable industry had become
vertically integrated.
Thus, Congress found that:
[t]here
is
a substantial governmental and First Amendment interest in promoting a
diversity of views provided through multiple technology media[;] . . .
in
ensuring that cable subscribers have access to local noncommercial
educational
stations[; and] . . . in making all nonduplicative local public
television services
available on cable systems . . . thereby advancing the Government’s
compelling
interest in educating its citizens . . . [and] provid[ing]
public
service programming that is responsive to the needs and interests of
the local
community. . .
Cable
Television
Consumer Protection and Competition Act of 1992, Pub. L. No. 102-385,
§ 2(a)(6)–(8), 106 Stat. 1460, 1461 (Potomac Publishing, LEXIS through
2000
legislation).
The
State
law, the HCCSL, evinces on its face a legislative intent that the
Director provide and administer the required
set-aside PEG access channels. The
HCCSL not only gives the Director the sole power to issue cable
franchises when
the Director “is convinced that it is in the public interest to do so,”[61]
but also requires the Cable Operator
to designate “three or more channels for public, educational, or
governmental
use.”[62] The HCCSL then allows the Director to
designate “any nonprofit organization . . . to oversee the development,
operation, supervision, management, production, or broadcasting of
programs for
any channels obtained under section
As
the
statute is clear on its face, the OIP concludes that the legislature
intended
that the DCCA provide for and administer PEG access channels.
b.
Function
Performed by ‘Olelo and Ho’ike
To
determine
whether the governmental function of overseeing “the development,
operation,
supervision, management, production, or broadcasting of programs” for PEG
access channels is being carried out by ‘Olelo or Ho’ike, the OIP
reviewed the
Agreements.
The
"whereas"
clauses in Agreements recite the Director’s provision of PEG access
pursuant to
the cable franchises,[64]
the Director’s requirements that the Cable Operators pay the annual PEG
Access
Fees, contribute to PEG capital funds for facilities and equipment, and
provide
interconnection among all cable systems on Oahu and Kauai.[65] Both Agreements note that, in accordance
with the recommendations made by an access planning committee appointed
by the
Director, ‘Olelo and Ho’ike were created to: 1) manage the PEG access
finances,
and 2) operate the PEG facilities, channels, and other resources for
the
islands of Oahu and Kauai.[66]
While
many of
the contractual requirements in the Agreements are similar to contracts
for the
provision of goods and services to the government, other provisions
indicate
that ‘Olelo and Ho’ike are carrying out governmental functions by
providing
services to the public through the
administration of the PEG access
channels. For example, as noted above,
the Agreements state that ‘Olelo and Ho’ike are “responsible for . . .
the PEG
access facilities and equipment including, but not limited to”
channels,
facilities and equipment, training of educational, governmental,
community
organizations and the general public, marketing, support services
and
insurance coverages.[67]
To
fulfill
these management and operational responsibilities, the DCCA requires
the PEG
Access Organizations to develop and update an annual operational plan
and
budget, and a strategic or long-range planning document.
And to determine how well these functions
are being carried out, the PEG Access Organizations must provide the
DCCA with
a summary of all channel outages, facility use by users, number of
persons
trained, a summary of complaints and actions taken, and a summary of
outreach
and marketing efforts.[68]
Nevertheless,
‘Olelo alleges that it operates under a typical fee-for-service
contract.[69]
In those types of contracts a vendor would have claims to funds
received
for work done. That this is not the
case here is shown by the contractual provisions that require all
funds,
equipment, and facilities held and used by Ho’ike and ‘Olelo for public
access
purposes, to be returned to the DCCA upon termination of the Agreements.[70] Thus, whether or not the contract was
performed
properly, it is clear that Ho’ike and ‘Olelo do not have any claims to
the PEG
Access Fees or the property purchased with those funds.
These provisions and others discussed
earlier show an intent that provision and administration of PEG access
would
continue to be provided through other designees if either ‘Olelo or
Ho’ike
defaulted on the contract or were terminated for other reasons.
Thus,
as
opposed to a vendor providing goods or services to government, the
Agreements require
that the PEG Access Organizations provide services, on the DCCA’s
behalf, to
educational, governmental, and community organizations, and the general
public. In fact, the DCCA has exercised
its power as the local franchising authority to ensure that the PEG
Access
Organizations provide those services to the public when the Cable
Division
Administrator advised ‘Olelo that it had received complaints about
‘Olelo and
was writing to remind it that the public’s right to public access not
be
hampered.[71]
The OIP opines that, in
combination,
congressional findings as to governmental interests, State legislative
intent
to provide for and administer the PEG access channels, and contractual
provisions within the Agreements, all set forth a clear State policy to
have
the DCCA operate, through PEG Access Organizations, cable channels for
the use
by the public and for educational and governmental uses.
Thus, the OIP concludes that both Ho’ike and
‘Olelo, as the Director’s designees, are performing the governmental
function
of providing and administering the PEG access channels.
This
conclusion is, in fact, supported by Ho’ike’s own argument that the
“fundamental purpose of Public Access . . . [is] to provide a voice to
the
public . . .”[72]
However, Ho’ike implies that as a private non-profit
organization it
cannot be a government agency because that would undermine its
self-described
function as a public voice. This
position as stated by Ho’ike may be a misstatement of its role, for
clearly,
under Demarest, Ho’ike and ‘Olelo themselves could face claims
for
damages resulting from their actions as state actors for any
unconstitutional
restrictions upon free speech.
While
the
federal law permits the franchising authority to have an ownership
interest in
a cable system,[73]
it limits the franchising authority’s editorial control over the cable
system
except for those channels designated for educational or governmental use, “unless such control is exercised
through an entity separate from the franchise authority.”[74] And, under the D&Os, for those channels
over which the public exercises its free speech rights, i.e., public
access
channels, the DCCA has prohibited editorial control by itself or the
Cable
Operator.[75] As the U.S. Court of Appeals for the Second
Circuit recognized:
the
[federal Cable Communications Policy Act] permits a locally accountable
body,
typically the local franchising authority, to control the operation of
public
access channels. However, a local
franchising authority may avoid liability in its exercise of editorial
control
of public access channel content only to the extent that it exercises
such
control within First Amendment boundaries.
McClellan
v. CableVision of Connecticut,
149 F.3d 161, 168 (2d Cir. 1998) (citation omitted).
Thus, while a local franchising authority can provide PEG access
channels as an exercise of its governmental function, its exercise
of editorial control over the PEG access channels must be
within an appropriate range in order to withstand judicial scrutiny.
While
in this
case the DCCA has prohibited itself from exercising editorial control,
the
question remains whether its designees – the PEG Access Organizations
– may
legitimately exercise editorial control over the PEG access channels.
Since
the
issuance of OIP Opinion Letter Numbers 93-18, 94-23, and 94-24, several
cases
have looked at whether Cable Operators or PEG Access Organizations are
State
actors when these entities have acted to censor programming on cable
channels,
whether they were cable channels, licensed channels, or PEG access
channels.
When
the U.
S. Supreme Court reviewed in Denver
Area the constitutionality of the Cable Television Consumer
Protection
and Competition Act of 1992,[76]
which permitted the private cable operator to prevent transmission of
“patently
offensive” programming on public access channels, thereby restricting
the
rights of PEG users, Justice Breyer said:
We
recognize that the First Amendment, the terms of which apply to
governmental
action, ordinarily does not itself throw into constitutional doubt
the
decisions of private citizens to permit, or to restrict, speech –
and this
is so ordinarily even where those
decisions take place within the framework of a regulatory regime such
as
broadcasting.
518
U.S. at 737 (first emphasis added). But
Justice Breyer also wrote that the judicial tradition “teaches that the
First
Amendment embodies an overarching commitment to protect speech from
government
regulation through close judicial
scrutiny.” Id.
at 742 (emphasis added). The United
States Supreme Court held that the federal statute that allowed the
cable
operator to censor programming on the PEG access channels
unconstitutionally
violated the PEG users’ First Amendment rights. Id.
at 766.
Whether
PEG
Access Organizations would be subject to the same
“close judicial scrutiny” as would action by a state, was the issue
raised in
two cases reviewed by the federal district courts for Massachusetts and
for the
Northern District of Georgia. Both
courts found that these PEG access organizations were state actors and
thus
subject to the same standards applied to government entities. These courts applied “close judicial
scrutiny” to the actions of the PEG access organizations.
Demarest, supra; Jersawitz v.
People TV, 71 F. Supp. 2d 1330 (N.D. Ga. 1999).
Additionally, as the Demarest court noted, “several
cases
have treated a PEG channel as a state actor without explicitly
addressing the
issue. See e.g. Horton v.
Houston, 179 F.3d 188, 190 n.3 (5th Cir. 1999) (parties did not
dispute
that PEG channel was state actor on appeal), cert. denied
528 U.S. 1021, 145 L. Ed. 2d 411, 120 S. Ct. 530
(1999); Coplin v. Fairfield, 111 F. 3d 1395, 1401-1402 (8th
Cir. 1997)
(assuming that public access television committee was state actor).” 188 F. Supp. 2d at 90.
In
analyzing
whether the PEG access organizations were state actors, the Jersawitz
and Demarest courts both followed the United States Supreme
Court’s Lebron
holding that when “the Government creates a corporation by special law,
for the
furtherance of governmental objectives, and retains for itself
permanent
authority to appoint a majority of the directors of that corporation,
the
corporation is part of the Government for purposes of the First
Amendment.” Jersawitz, at 1338,
and Demarest, at 90, both quoting Lebron
513 U.S. at 400.
In
Jersawitz
and Demarest, both courts found the PEG access organization to
have been
created by the government, both found the government retained
appointment power
over a majority of directors, and both found the organization furthered
governmental objectives.[77] The Demarest court, in particular,
found that the local franchise authority had created the PEG access
organization:
to
further
public objectives. The licensing
agreement provides that AOTV “may be used by the public,” and that “any
resident of the Town, or any organization or institution based in the
Town,
shall have the right to place locally produced programming on the
Access
Channel.” . . . The agreement further provides that the channel shall
be
managed “for the benefit of the community.” . . . Like the public park
in
Evans, AOTV “serves the community.”
Demarest at 91 (citing Evans,
supra,
at 302) (citations omitted).
While
a PEG access organization may perceive itself to be the public’s voice,
the PEG
access organization may be as liable as would the government in the
event it
improperly restricts First Amendment rights.
Thus, the OIP concludes that the governmental function carried
out by
the PEG Access Organizations, as to the public portion of PEG access,
includes
providing and administering access to the public on a first-come,
first-served
basis.
In
the OIP
Opinion Letter Number 93-18, the OIP assumed that payments by the Cable
Operator to public access cable organizations were not public funding
because
they came directly from the Cable Operator, and thus were not “taxpayer
funds.” Id. at 2-4.
See also OIP Op. Ltrs. No. 94-23
(Dec. 13, 1994) and No. 94-24 (Dec. 13, 1994).
However, since the issuance of the OIP’s earlier opinions,
federal
courts have treated PEG funding by a cable operator, at the direction
of
government, as public funds. As
discussed earlier, both the Jersawitz and the Demarest
courts considered
money provided by a cable operator for PEG access, as required by the
government, to be essentially public funding.
The OIP notes also that the U.S. Supreme Court’s discussion of
public
access cable organizations in Denver Area assumed without
discussion
that “franchise fees or other payments pursuant to the franchise
agreement”
constituted public funding for access channels and their management.
518 U.S.
at 762.[78] Based on the development of the law, the OIP
will reconsider the question of public funding.
As
previously
stated, D&Os issued by the Director to the Cable Operators
authorize that a
portion of the Cable Operators’ revenues be designated as funding for
local PEG
Access Organizations. The D&Os
require the Cable Operators to pay fees as a condition of the franchise. There is no dispute that all funding for
‘Olelo[79] and all operational
funding for
Ho’ike[80] come from these cable
franchises. Further, the Agreement
between ‘Olelo and the DCCA restricts the use of these funds to
operational, facility
and equipment purposes.[81]
In 1995, the Hawaii Legislative Reference Bureau’s Report No. 4,[82]
noted that, at that time, ‘Olelo was “by far the largest access
organization in
the State, and one of the largest in the country . . . [and was]
budgeted to
received [sic] over $2.6 million for operating expenses alone in 1995.”[83] On the other hand, Ho’ike is the smallest
access center in Hawaii, and in 1995 had an operating budget of
$150,000 for
PEG access, renting a 900 square foot building in Koloa, Kauai.[84]
Federal law appears to permit the cable operator to pass these fees on to the subscriber; the law allows the cable operators to inform subscribers of the various fees imposed on the operators by the local franchise authority and the amount of the total bill that represents these fees.