Courtney Cates v. Crystal Clear Technologies, LLC, et al.

The three named plaintiffs brought a purported class action alleging

that the developers of their neighborhoods created agreements that violated both state and federal

law by requiring the neighborhoods’ homeowners to pay for basic telecommunications services

provided by Crystal Clear Technologies, LLC (“Crystal Clear”), an entity owned and controlled

by the developers. The district court dismissed the plaintiffs’ federal claims for failure to state a

claim and subsequently denied as futile the plaintiffs’ motion seeking leave to file an amended

complaint. We affirm in part and reverse in part the district court’s denial of the plaintiffs’

motion seeking leave to file an amended complaint.



I. FACTS AND PROCEDURAL HISTORY



The plaintiffs are homeowners in three centrally-planned neighborhoods in Thompson’s

Station, a small town in Williamson County, Tennessee. The three neighborhoods, Canterbury,

Bridgemore, and Tollgate, have hundreds of houses and over a thousand homeowners.

Carbine & Associates, LLC, developed the neighborhoods through affiliated companies,

Bridgemore Development Group, LLC, Tollgate Farms, LLC, and Hood Development, LLC.

The developers also established and controlled owners’ associations for the neighborhoods.

However, the developers have since transferred control of the owners’ associations to third-party

entities not controlled by either the developers or homeowners.



From 2006 to 2007, while under the developers’ control, the owners’ associations each

entered into communications services agreements (the “Agreements”) with Crystal Clear. The

Agreements grant Crystal Clear the right to provide telecommunications services to the



No. 16-6714 Cates, et al. v. Crystal Clear Tech., et al. Page 3



neighborhoods for twenty-five years, with an option for Crystal Clear to unilaterally renew for an

additional twenty-five years. In addition, the Agreements authorize Crystal Clear to be the

exclusive agent for homeowners in procuring services from any outside providers and grant

Crystal Clear the exclusive right to market services within the neighborhoods. Under the

Agreements, homeowners must pay the owners’ associations a monthly assessment fee, which

the associations then use to pay Crystal Clear for basic telecommunications services.

Homeowners must pay the fee whether they use Crystal Clear’s services or not. In addition,

homeowners must make a one-time payment of $1,500 to Crystal Clear for the cost of

constructing the telecommunications infrastructure in the neighborhoods. To facilitate the

infrastructure’s construction, Crystal Clear also obtained a non-exclusive franchise agreement

with Thompson’s Station that permitted Crystal Clear to use the service easements within the

neighborhoods.



Prior to executing the Agreements, Crystal Clear had no experience in the

telecommunications-services industry. To provide services to the neighborhoods, Crystal Clear

contracts with another provider, DirecTV, and charges a premium to homeowners in addition to

the rate negotiated with DirecTV. Further, Crystal Clear does not provide services outside of the

neighborhoods at issue in this case.



The plaintiffs brought this suit and subsequently filed their first amended complaint,

alleging both state and federal claims. The plaintiffs claimed that the Agreements constituted

self-dealing, unjust enrichment, unconscionability, unlawful tying, market allocation, and

unlawful exclusivity.





The defendants moved to dismiss, arguing that the first amended complaint failed to

assert allegations necessary for the federal claims and that the plaintiffs lack standing to bring

claims on behalf of the owners’ associations. The district court dismissed the first amended

complaint under Federal Rule of Civil Procedure 12(b)(6) without addressing the standing

argument and declined to exercise supplemental jurisdiction over the remaining state-law claims.

The plaintiffs then moved under Federal Rule of Civil Procedure 59 to alter or amend the

judgment and under Rule 15 for leave to file a second amended complaint that asserted the same



No. 16-6714 Cates, et al. v. Crystal Clear Tech., et al. Page 4



federal claims. The district court denied the plaintiffs’ motion after determining that the second

amended complaint would fail to survive a motion to dismiss and was thus futile. The plaintiffs

timely appealed from both the district court’s dismissal and its refusal to allow the second

amended complaint. However, the plaintiffs agree that the second amended complaint reflects

the plaintiffs’ most recent and developed pleading for purposes of this appeal. Accordingly, we

consider only whether the district court erred in refusing to allow the second amended complaint

under Rule 59 and Rule 15. Furthermore, the plaintiffs challenge only the district court’s

decisions regarding their tying and exclusivity claims. Therefore, we do not address the

dismissal of the market allocation claim.



II. ANALYSIS



A. Standard of Review



We review de novo the denial of a motion seeking to amend a complaint where the denial

is based on the determination that the amended complaint is futile because it would fail under a

motion to dismiss. Winget v. JP Morgan Chase Bank, N.A., 537 F.3d 565, 572 (6th Cir. 2008).

“To survive a motion to dismiss, a plaintiff must allege facts that state a claim to relief

that is plausible on its face and that, if accepted as true, are sufficient to raise a right to relief

above the speculative level.” Bickerstaff v. Lucarelli, 830 F.3d 388, 396 (6th Cir. 2016) (citation

and internal quotation marks omitted). “A claim has facial plausibility when the plaintiff pleads

factual content that allows the court to draw the reasonable inference that the defendant is liable

for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp.

v. Twombly, 550 U.S. 544, 556 (2007)). “This standard ‘does not impose a probability

requirement at the pleading stage; it simply calls for enough fact[s] to raise a reasonable

expectation that discovery will reveal evidence of illegal [conduct.]’” Ohio Pub. Emps. Ret. Sys.

v. Fed. Home Loan Mortg. Corp., 830 F.3d 376, 383 (6th Cir. 2016) (quoting Twombly, 550 U.S.

at 556). This court must “construe the complaint in the light most favorable to the plaintiff,

accept its allegations as true, and draw all reasonable inferences in favor of the plaintiff.”

Bickerstaff, 830 F.3d at 396 (citation omitted).



No. 16-6714 Cates, et al. v. Crystal Clear Tech., et al. Page 5



B. Unlawful Tying Under the Sherman Act



“A tying arrangement is defined as an agreement by a party to sell one product [a tying

product] . . . only on the condition that the buyer also purchases a different (or tied)

product . . . .” Mich. Division-Monument Builders of N. Am. v. Mich. Cemetery Ass’n, 524 F.3d

726, 732 (6th Cir. 2008) (quoting N. Pac. Ry. Co. v. United States, 356 U.S. 1, 5–6 (1958)).

“The typical tying case involve[s] a seller’s attempt to exploit its economic power over one

product or in one market to force a less desirable, tied product on a buyer.” Id. (internal

quotation marks omitted). “Illegal tying therefore occurs only if the seller has appreciable

economic power in the tying product market and if the arrangement affects a substantial volume

of commerce in the tied market.” Id. (internal quotation marks omitted). With regard to the

impact on the tied market, “the controlling consideration is simply whether a total amount of

business, substantial enough . . . so as not to be merely de minimis, is foreclosed to competitors

by the tie . . . .” Fortner Enter., Inc. v. U.S. Steel Corp., 394 U.S. 495, 501 (1969). This latter

requirement “makes no reference to the scope of any particular market or to the share of that

market foreclosed by the tie.” Id.



Under their tying claim, the plaintiffs allege that the developers used their market power

over the sale of homes in these neighborhoods to force the homeowners to purchase

telecommunications services from Crystal Clear, thereby harming competition for the provision

of telecommunications services and violating the Sherman Act, 15 U.S.C. § 1. The district court

found that the first amended complaint failed to state a tying claim because it did not define the

tying product market in alleging the defendants’ market power in the sale of homes. The second

amended complaint addressed this by defining the tying product market as centrally-planned

communities within Thompson’s Station. The district court then determined that the second

amended complaint alleges market power in a defined market, but that it is futile because it fails

to allege a substantial impact on the relevant tied market.



On appeal, the plaintiffs contest this, arguing that the second amended complaint pleads a

substantial impact on the tied market by alleging that the defendants harmed competition for the

provision of telecommunications services. The defendants contend that the plaintiffs only

pleaded a substantial impact on “telecommunications services in the Neighborhoods” rather than



No. 16-6714 Cates, et al. v. Crystal Clear Tech., et al. Page 6



“commerce in the general market within which [telecommunications services] [are] sold.”

(Crystal Clear Br. 19–20.)



This court must therefore determine whether the plaintiffs pleaded a substantial impact

within the relevant market for telecommunications services. In doing so, this court is mindful

that it must “construe the complaint in the light most favorable to the plaintiff . . . and draw all

reasonable inferences in favor of the plaintiff.” See Bickerstaff, 830 F.3d at 396. While the

plaintiffs allege that the arrangement “substantial[ly]” affected “the sale of telecommunications

in the Neighborhood[s],” the plaintiffs also allege more broadly that the arrangement “ha[s]

harmed competition for the provision of telecommunications.” (R. 99-1, ¶¶ 90, 94.) The exact

amount of commerce impacted by the tying arrangement is unclear at this stage, but the plaintiffs

have alleged that the neighborhoods, and thus the list of potential plaintiffs, include hundreds of

houses and over 1,000 homeowners subject to the arrangement.



We can reasonably infer that alleging harm to particular neighborhoods equates to

alleging harm to the general market that covers those neighborhoods. By alleging that the

Agreements forced each household to pay one-time infrastructure fees of at least $1,500 and

monthly assessment fees for Crystal Clear’s services, the plaintiffs have pleaded an amount of

commerce that would be substantial in both the neighborhoods and the telecommunications

services market that covers those neighborhoods in Thompson’s Station, Williamson County, or

beyond. See Fortner, 394 U.S. at 502 (“[W]e cannot agree with respondents that a sum of

almost $200,000 is paltry or ‘insubstantial.’”); Bell v. Cherokee Aviation Corp., 660 F.2d 1123,

1130 & n.8 (6th Cir. 1981) (holding that $140,000 over three years, “amount[ing] to little more

than $40,000 a year,” is not insubstantial); Thompson v. Metro. Multi-List, Inc., 934 F.2d 1566,

1578 (11th Cir. 1991) (holding that $30,000 to $70,000 is “clearly substantial”). We therefore

conclude that the plaintiffs have pleaded a substantial impact on the relevant tied market.

The defendants argue that, even if the plaintiffs sufficiently pleaded substantial harm on

the relevant tied market, the district court erred in concluding that the plaintiffs’ defined market

for the tying product (the sale of homes) is proper. The proper definition of a tying product

market and whether a defendant has market power within that market are fact-intensive questions

best addressed following discovery. Mich. Division-Monument, 524 F.3d at 733. This is



No. 16-6714 Cates, et al. v. Crystal Clear Tech., et al. Page 7



because the inquiry requires considering both the attributes of the product that make it unique

from others and the geographic market within which consumers may seek comparable products.

See id. The plaintiffs allege that the neighborhoods represent the majority of centrally-planned

neighborhoods that are located in a small-town setting in a county that is otherwise filled with

more densely populated communities. The plaintiffs further allege that the neighborhoods are

unique from others because they provide the homeowners with access to superior area schools

and local covenants that restrict home construction to houses typically purchased by middle to

upper-middle income households. As the district court correctly noted, the plaintiffs’ allegations

on the tying product market are plausible on their face.



C. Exclusivity Under the Federal Telecommunications Act



The Federal Communications Commission (“FCC”) has explicit authority to impose

regulations specifying exclusive conduct that the Federal Telecommunications Act prohibits.

See 47 U.S.C. § 548(c)(1); see also Nat. Cable & Telecomm. Ass’n v. FCC, 567 F.3d 659, 664–

65 (D.C. Cir. 2009). Pursuant to this authority, the FCC issued the 2007 “Exclusivity Order”

barring any cable distributor from “enforc[ing] or execut[ing] any provision in a contract that

grants it the exclusive right to provide any video programming service (alone or in combination

with other services) . . . .” In the Matter of Exclusive Service Contracts For Provision of Video

Services in Multiple Dwelling Units and Other Real Estate Developments, 22 FCC Rcd. 20235,

20251 (2007) (codified by 47 C.F.R. § 76.2000(a)) (hereinafter “Exclusivity Order”).



The plaintiffs allege that the Agreements violate the Exclusivity Order by making Crystal

Clear the exclusive provider of services for the neighborhoods. The district court dismissed this

claim, as alleged in the first amended complaint, noting that both the Agreements and the

allegations contradicted the plaintiffs’ claim that the Agreements were exclusive contracts.

As evidence of the arrangement’s exclusivity, the plaintiffs submitted with their proposed

second amended complaint the Agreements and a letter sent by MBSC, the new owner of the

Bridgemore development, stating that Crystal Clear refused “to give up its exclusive easements

that enable it to be the only provider in Bridgemore.” (Letter from MBSC, R. 99-7, PageID

1626.) The district court concluded that the second amended complaint reiterated the allegations



No. 16-6714 Cates, et al. v. Crystal Clear Tech., et al. Page 8



from the previous complaint and would therefore fail under a motion to dismiss. In addition, the

district court found that the second amended complaint and the plain text of the Agreements

contradicted the letter submitted by the plaintiffs.



“The law is clear that [courts] may consider [a document] which was attached to the

[c]omplaint . . . in determining whether dismissal is proper.” Williams v. CitiMortgage, Inc.,

498 F. App’x 532, 536 (6th Cir. 2012) (per curiam); see also In re Omnicare, Inc. Sec. Litig.,

769 F.3d 455, 466 (6th Cir. 2014). Further, “[w]hen a written instrument contradicts allegations

in the complaint to which it is attached, the exhibit trumps the allegations.” Williams, 498 F.

App’x at 536 (quoting N. Ind. Gun & Outdoor Shows, Inc. v. City of S. Bend, 163 F.3d 449, 454

(7th Cir. 1998) (stating that this rule is “well-settled”)).



The plaintiffs allege that the Agreements make Crystal Clear the exclusive provider by

creating unlawful and unreasonable barriers to entry, such as requiring homeowners to pay for

services regardless of usage, referencing Crystal Clear’s easements, and by granting Crystal

Clear the exclusive right to negotiate with providers about access to deliver services to the

neighborhoods. According to the plaintiffs, the cumulative effect of the barriers makes it both

economically and practically unfeasible for any other provider to offer its services. The

plaintiffs point to both the Agreements’ terms, which state that Crystal Clear will operate on an

exclusive basis, and the MBSC letter, which describes Crystal Clear’s easements as exclusive

and barring other providers.



As the district court noted, there are several contradictions amongst the plaintiffs’

allegations and the Agreements’ terms. The plaintiffs allege both that the Agreements make

Crystal Clear the exclusive provider and that Crystal Clear is not truly a provider, contracting

with DirecTV to be the actual provider. The plaintiffs note the Agreements’ terms describing the

arrangement as “exclusive,” but the Agreements’ terms mandate that homeowners must have

access to other providers. The plaintiffs’ allege both that Crystal Clear’s easements are

“exclusive” and that they are part of a non-exclusive franchise agreement. We conclude that

these contradictions foreclose the plaintiffs’ exclusivity claim.



No. 16-6714 Cates, et al. v. Crystal Clear Tech., et al. Page 9



The plaintiffs claim more than explicit exclusivity; they also claim that the structure and

cumulative effect of the arrangement creates an exclusive provider relationship. But such

allegations are insufficient to state an exclusivity claim. The prohibition imposed by the

Exclusivity Order is limited by its terms to “building exclusivity clauses.” Exclusivity Order,

22 F.C.C. Rcd. at 20236 n.2. Such clauses “appear in contracts between [multichannel video

programming distributors (“MVPDs”)] and [multiple dwelling unit (“MDU”)] owners or other

real estate developments” and “prohibit any other MVPD from any access whatsoever to the

premises of the MDU building or real estate development.” Id. Assuming Crystal Clear is an

MVPD, the plaintiffs do not allege facts sufficient to show that the Agreements prohibit any

other MVPD from “any access whatsoever” to the neighborhoods. Indeed, the Agreements

specifically mandate that alternative providers be given access to the neighborhoods.



The plaintiffs rely on a Fourth Circuit decision holding a defendant liable for violating

the Exclusivity Order, but that decision is inapposite. Lansdowne on the Potomac Homeowners

Ass'n, Inc. v. OpenBand at Lansdowne, LLC, 713 F.3d 187, 205–06 (4th Cir. 2013). As the

Fourth Circuit found, the relevant contract in that case contained explicit exclusivity clauses. Id.

Those clauses were contained in an easement that, unlike here, expressly granted the cable

provider the sole right to develop telecommunications infrastructure. Id. at 205. And applicable

state law required the court to construe the easement, along with a series of related agreements,

as a “single, intertwining contract” subject to the Exclusivity Order, notwithstanding the

defendant’s argument that easements are not “contracts” subject to the order. Id. Interpreting

the easement as part of a contract, the Fourth Circuit had “no difficulty” concluding that the

contract contained explicit exclusivity clauses in violation of the Exclusivity Order. Id. In this

case, by contrast, the plaintiffs do not allege facts sufficient to show that either the Agreements

or easements at issue contain explicit exclusivity clauses. We therefore conclude that the

plaintiffs have not sufficiently pleaded an exclusivity claim.



III. CONCLUSION



For the foregoing reasons, we reverse the district court’s denial of the plaintiffs’ motion

seeking leave to file the second amended complaint on plaintiffs’ tying claim; we affirm the

district court’s denial of the plaintiffs’ motion seeking leave to file the second amended



No. 16-6714 Cates, et al. v. Crystal Clear Tech., et al. Page 10



complaint on plaintiffs’ exclusivity claim; and we remand this action to the district court for

further proceedings consistent with this opinion.



No. 16-6714 Cates, et al. v. Crystal Clear Tech., et al. Page 11

_________________________________________________________

CONCURRING IN PART AND DISSENTING IN PART

_________________________________________________________

ALICE M. BATCHELDER, Circuit Judge, concurring in part and dissenting in part.

I concur with the majority’s opinion regarding Plaintiffs’ exclusivity claim. Plaintiffs have failed

to allege that the communications services agreements (the “Agreements”) grant Crystal Clear an

improper “exclusive right to provide” telecommunication services to the developments.

However, in my view, despite multiple opportunities to do so, Plaintiffs have failed to articulate

a suitable market in which the purported antitrust violation took place. Therefore, with respect to

Plaintiffs’ antitrust tying claim, I respectfully dissent from Part II.B of the majority’s opinion and

would hold that Plaintiffs have failed to state a claim upon which relief can be granted.1

I would find that Plaintiffs have failed to state an antitrust tying claim because they do

not allege that the purported tying arrangement “affects a substantial volume of commerce in the

tied market.” Mich. Div.-Monument Builders of N. Am. v. Mich. Cemetery Ass’n, 524 F.3d 726,

732 (6th Cir. 2008) [hereinafter Monument Builders] (citation omitted). With respect to the tied

market, Plaintiffs allege only that “[t]he amount of interstate commerce affected in the market

for the sale of lots in the Neighborhood and/or the sale of telecommunications in the

Neighborhood is substantial.” While the majority infers “that alleging harm to particular

neighborhoods equates to alleging harm to the general market that covers those neighborhoods,”

it cites no case, and I have found none, to support that conclusion.2 Plaintiffs must “defin[e] the

1As an initial matter, the antitrust and exclusivity claims come to us, in part, as an appeal of a postjudgment

motion to amend. “When a party seeks to amend a complaint after an adverse judgment, it thus must

shoulder a heavier burden. Instead of meeting only the modest requirements of Rule 15, the claimant must meet the

requirements for reopening a case established by Rules 59 or 60.” Leisure Caviar, LLC v. U.S. Fish & Wildlife

Serv., 616 F.3d 612, 616 (6th Cir. 2010) (citations omitted). Because I would find that the district court did not err

by dismissing Plaintiffs’ antitrust and exclusivity claims, I would also find that the district court did not abuse its

discretion by denying Plaintiffs’ motion to set aside judgment and amend the complaint.

2The Tenth Circuit recently rejected a similar argument as “an outdated view of the law,” while reviewing

a Federal Rule of Civil Procedure 50(b) motion in In re: Cox Enterprises, Inc., 871 F.3d 1093, 1098 (10th Cir.

2017). Specifically, the Cox plaintiffs argued that “because Cox makes a substantial amount of money on [the tied

product], the tie necessarily has the requisite potential for anticompetitive effects in the [tied] market.” Id. The

Tenth Circuit disagreed, explaining that “making money from a tying arrangement doesn’t violate § 1 of the

Sherman Act unless the defendant, by doing so, has actually or potentially foreclosed or injured competition in the

tied-product market.” Id. at 1106. “Because tying claims often present little or no potential to harm competition—

No. 16-6714 Cates, et al. v. Crystal Clear Tech., et al. Page 12

relevant product market and demonstrat[e] the defendant’s power in that market,” and they

“must also define the relevant geographic market and demonstrate that the defendant’s actions

produced anticompetitive effects in that defined area.” Id. at 733 (citing Found. for Interior

Design Educ. Research v. Savannah Coll. of Art & Design, 244 F.3d 521, 531 (6th Cir. 2001)).

“The selected geographic market must ‘both correspond to the commercial realities of the

industry and be economically significant.’” Id. (quoting Brown Shoe Co. v. United States,

370 U.S. 294, 336–37 (1962)).

“[T]he Neighborhood” is not a relevant geographic market. As the district court

explained, the relevant geographic market cannot be the area in which Crystal Clear allegedly

has exclusive control; it is self-evident that the purported tying arrangement would have a

substantial effect in the location where all purchasers of both the tying and tied product reside,

i.e. the neighborhoods. This is a facile “pleading maneuver[]” that artificially narrows the

broader economic and geographic market for telecommunication services to create a “fictitious

market” in which any sales by Crystal Clear would cause a substantial effect. Apani Sw., Inc. v.

Coca-Cola Enters., Inc., 300 F.3d 620, 633 (5th Cir. 2002). A geographic market must reflect

the commercial realities of the telecommunication-services industry and be economically

significant. Plaintiffs do not allege that the neighborhoods—three residential developments in

Thompson’s Station, a suburb of Nashville—correspond to the commercial realities of the

telecommunication-services market, which exists at least in Thompson’s Station if not in the

larger geographic area around Nashville. Nor have Plaintiffs alleged facts showing that the

telecommunication-services sales in those three residential developments are economically

significant in relation to the broader telecommunication-services market in Thompson’s Station

or nearby Nashville. See Monument Builders, 524 F.3d at 736; see also Wampler v. Sw. Bell Tel.

Co., 597 F.3d 741, 745 (5th Cir. 2010).

Many cases illustrate this rule. For example, in Monument Builders, 524 F.3d at 737, we

rejected a tying claim because the plaintiffs’ definition of the relevant geographic market was too

narrow. The Monument Builders plaintiffs alleged that the defendant cemeteries improperly

and thus, no antitrust concerns—plaintiffs alleging per se unlawful tying arrangements must do more to meet the

foreclosure element than point to a dollar amount.” Id. at 1106–07 (citing Jefferson Parish Hosp. Dist. No. 2 v.

Hyde, 466 U.S. 2, 15–16 (1984)).

No. 16-6714 Cates, et al. v. Crystal Clear Tech., et al. Page 13

required consumers to purchase a burial memorial from the cemeteries, once they had purchased

a burial plot. We rejected the plaintiffs’ allegation that the relevant geographic market was “each

individual cemetery,” id. at 734, because the “uniqueness of location is not in itself adequate to

establish market power,” id. at 733 (quoting Baxley-DeLamar Monuments, Inc. v. Am. Cemetery

Ass’n, 938 F.2d 846, 852 (8th Cir. 1991)). Moreover, we found that such a definition improperly

merged the geographic-market analysis and the product-market analysis into one determination

and made proof of a substantial effect on the relevant market unnecessary, holding that: “There

can be no competition for the sale of burial lots within a market that contains only one provider

of burial lots. Market power under these circumstances would be unavoidable.” Id. at 734–35;

see also Brokerage Concepts, Inc. v. U.S. Healthcare, Inc., 140 F.3d 494, 515 (3d Cir. 1998)

(finding that “non-contiguous, gerrymandered geographic market consisting solely of the areas

surrounding [certain] pharmacies in suburban Philadelphia,” without reference to a market

perceived by consumers and suppliers, failed as a matter of law (citing Tunis Bros. Co. v. Ford

Motor Co., 952 F.2d 715, 727 (3d Cir. 1991)).

In support of its holding, the Monument Builders court relied on Apani Southwest,

300 F.3d at 626–27, which addressed a plaintiff’s definition of a geographic market as twentyseven

City-owned facilities in Lubbock, Texas, where Coca-Cola was the exclusive provider of

nonalcoholic beverages. The Apani court characterized the plaintiff’s allegations as an attempt

“to artificially narrow a broader economic market” and rejected the tying claim because the

alleged geographic market “did not correspond to the commercial realities of the industry and

was not economically significant.” Id. at 633; see also Double D Spotting Serv., Inc. v.

Supervalu, Inc., 136 F.3d 554, 560–61 (8th Cir. 1998) (rejecting the trucker plaintiffs’ allegation

that the relevant geographic market for “unloading services” was “the Supervalu warehouse in

Urbandale, Iowa, which is a suburb of Des Moines,” because the “stated geographic market is

too narrow to support a claim of an antitrust violation”).

Finally, in the more recent case of Wampler v. Southwest Bell Telephone Co., 597 F.3d

741 (5th Cir. 2010), the Fifth Circuit rejected a Sherman Act conspiracy claim in which the

resident plaintiffs alleged that the relevant geographic market was a single multi-unit dwelling

(“MDU”) where AT&T had exclusive access to the communications infrastructure entering the

No. 16-6714 Cates, et al. v. Crystal Clear Tech., et al. Page 14

building. Id. at 743. The Wampler court held that an MDU was not a relevant geographic

market, because “given the competition that exists between MDU owners, the competition that

exists between service providers, and given the highly mobile nature of today’s society, . . . a

single MDU is [not] so segregated as to be economically significant and thus represent[] a

plausible geographic market.” Id. at 746; cf. E.I. du Pont de Nemours & Co. v. Kolon Indus.,

Inc., 637 F.3d 435, 444–47 (4th Cir. 2011) (finding sufficient Kolon’s allegation that “the

relevant geographic market was ‘worldwide supply of para-aramid fiber to commercial

purchasers in the United States,’” because Kolon “pled plausible reasons for limiting the

geographic market to the United States”).

Similarly, “the Neighborhood” is not a relevant geographic market for the tied product

(telecommunication services) at issue here. Plaintiffs do not allege that “the Neighborhood” has

any relationship to the commercial realities of the telecommunication-services industry or is

economically significant in the telecommunication-services market. Plaintiffs, therefore, have

failed to allege a relevant geographic market for the sale of telecommunication services, and

their allegations are insufficient to make out a tying claim.

For the foregoing reasons, I concur in part and dissent in part.

No. 16-6714 Cates, et al. v. Crystal Clear Tech., et al. Page 15

_________________________________________________________

CONCURRING IN PART AND DISSENTING IN PART

_________________________________________________________

KAREN NELSON MOORE, Circuit Judge, concurring in part and dissenting in part.

Because I believe that the plaintiffs have sufficiently pleaded an exclusivity claim, I would

reverse the district court’s denial of the plaintiffs’ motion seeking leave to file the second

amended complaint on this claim as well as on the plaintiffs’ tying claim. Therefore, I

respectfully dissent from Part II.C of the majority’s opinion.

I.

In its 2007 “Exclusivity Order” the Federal Communications Commission (“FCC”) found

that “the greatest harm that exclusivity clauses cause residents of MDUs [multiple dwelling

units] is that they deny those residents another choice of MVPD [multichannel video

programming distributor] service and thus deny them the benefits of increased competition.”

In the Matter of Exclusive Service Contracts for Provision of Video Services in Multiple

Dwelling Units and Other Real Estate Developments, 22 FCC Rcd. 20235, 20244 (2007)

(codified at 47 C.F.R. § 76.2000) (hereinafter “Exclusivity Order”). The FCC found that cable

operators protected by exclusivity clauses faced no pressure to hold down their prices, to provide

desired programming, or to offer low-cost bundles of video, voice, and Internet access services.

Id. at 20244–45. Furthermore, the FCC found that exclusivity clauses had the potential to act as

deterrents to competitors seeking to enter the marketplace. Id. at 20245. The FCC concluded

that these clauses are proscribed by 47 U.S.C. § 548 because “[t]hat Section prohibits unfair

methods of competition that have the purpose or effect of hindering significantly or preventing

MPVDs from providing ‘satellite cable’ and/or ‘satellite broadcast’ programming to subscribers

and consumers.” Id. at 20236. The FCC, therefore, prohibited cable operators or MVPDs from

“enforce[ing] or execut[ing] any provision in a contract that grants it the exclusive right to

provide any video programming service (alone or in combination with other services) to a

MDU.” Id. at 20251 (emphasis added). The situation in this case presents exactly the problems

the FCC sought to prevent in its Exclusivity Order.

No. 16-6714 Cates, et al. v. Crystal Clear Tech., et al. Page 16

II.

The plaintiffs argue that their factual allegations show that the cumulative effect of the

Communications Service Agreements’ (“CSAs”) provisions is to create a de facto exclusivity

arrangement in violation of the Exclusivity Order. Appellant Reply Br. at 7. The majority

rejects the plaintiffs’ premise that the Exclusivity Order can be violated by a de facto contractual

arrangement, and instead reads the prohibition as applying only to specific clauses that explicitly

create exclusivity standing alone. This interpretation of the regulation ignores the purpose of the

Exclusivity Order and the principles of Tennessee contract law that govern our interpretation of

the CSAs.

The CSAs are interpreted pursuant to Tennessee law. Cf. Ferro Corp. v. Garrison Indus.,

Inc., 142 F.3d 926, 935 (6th Cir. 1998). “Under Tennessee law . . . the ‘cardinal rule [in

interpreting contracts] . . . is to ascertain the intention of the parties and to give effect to that

intention, consistent with legal principles.’” Frizzell Constr. Co. v. Gatlinburg, L.L.C., 9 S.W.3d

79, 85 (Tenn. 1999) (second and third alteration in original) (quoting Bob Pearsall Motors, Inc.

v. Regal Chrysler-Plymouth, Inc., 521 S.W.2d 578, 580 (Tenn. 1975)). “In addition, a contract’s

provisions must be interpreted in the context of the entire contract, ‘viewed from beginning to

end and all its terms must pass in review, for one clause may modify, limit or illustrate another.’”

D&E Constr. Co. v. Robert J. Denley Co., 38 S.W.3d 513, 519 (Tenn. 2001) (quoting Frizzell

Constr. Co., 9 S.W.3d at 85).

The CSAs both contain an explicit exclusivity clause. R. 99-3 (Tollgate CSA at 1) (Page

ID #1492) (“Association has chosen Crystal Clear Technologies to operate and maintain the

System, and to provide Basic Services (as further defined below) to each home and multi-family

dwelling unit in Tollgate Village (‘Home’) on an exclusive basis consistent with the terms of this

Agreement and applicable law.” (emphasis added)); R. 99-4 (Bridgemore CSA at 1) (Page ID

#1527) (“Association has chosen Crystal Clear Technologies, LLC to operate and maintain the

System, and to provide Basic Services (as further defined below) to each home and multi-family

dwelling unit in Bridgemore Village (‘Home’) on an exclusive basis consistent with the terms of

this Agreement and applicable law.” (emphasis added)). The defendants argue that these

exclusivity clauses are “one-off phrase[s]” and the remaining provisions “mandate a nonNo.

16-6714 Cates, et al. v. Crystal Clear Tech., et al. Page 17

exclusive arrangement and homeowner access to other providers.” Corrected Br. of Appellees

Crystal Clear Techs., LLC and Carbine & Assocs., LLC, adopted by Appellees Tollgate Farms,

LLC and Bridgemore Dev. Grp., LLC at 14 n.6. The defendants are correct that the exclusivity

clauses must be interpreted in light of the other contract provisions, D&E Constr. Co., 38 S.W.3d

at 519, and that some of these provisions do contemplate the theoretical provision of MVPD

services by alternative providers, R. 99-3 (Tollgate CSA at 7) (Page ID #1498); R. 99-4

(Bridgemore CSA at 7) (Page ID #1533). In the context of the entire contract, however, these

exclusivity clauses are clearly designed to “prohibit any other MVPD from any access

whatsoever to the premises of the MDU building or real estate development.”1 Exclusivity

Order at 20236 n.2.

First, the CSAs refer to easements that Crystal Clear Technologies obtained in each

MDU. R. 99-3 (Tollgate CSA at 1) (Page ID #1492); R. 99-4 (Bridgemore CSA at 7) (Page ID

#1527). The plaintiffs allege that these easements are exclusive and prevent any alternative

provider from distributing services in the MDUs. R. 99-1 (Proposed Second Amended

Complaint at 27) (Page ID #1467). To support this factual allegation, the plaintiffs have

proffered a letter from the current owners of the Bridgemore development discussing the

exclusive easements. R. 99-7 (Gluck Letter at 3) (Page ID #1626). Under Tennessee law,

documents referred to in a written contract “may be properly considered in the construction of

the contract.” Lasco Inc. v. Inman Constr. Corp., 467 S.W.3d 467, 473 (Tenn. Ct. App. 2015)

(internal quotation marks omitted) (quoting McCall v. Towne Square Inc., 503 S.W.2d 180, 183

(Tenn. 1973)). Thus, the references to these exclusive easements support the plaintiffs’ claim

that the CSAs violate the Exclusivity Order.

1The majority relies on a footnote in the Exclusivity Order to construe narrowly the prohibition on

exclusivity clauses. It is true that the Exclusivity Order is limited to “building exclusivity clauses.” Exclusivity

Order at 20236 n.2. The FCC has defined building exclusivity clauses as clauses that “prohibit any other MVPD

from any access whatsoever to the premises of the MDU building or real estate development.” Id. Here, the

provisions in the CSAs create this outcome de facto and therefore must fall within the parameters of the Exclusivity

Order. In other words, the FCC has defined building exclusivity clauses as clauses creating outcome X. The clauses

here also produce outcome X. Therefore, these clauses must be subject to the Exclusivity Order because the

underlying purpose of 47 U.S.C. § 548 and the Exclusivity Order would be eviscerated if parties could avoid the

prohibition on exclusivity clauses by creating an exclusivity arrangement via the interaction of multiple contractual

clauses as opposed to one clause standing on its own.

No. 16-6714 Cates, et al. v. Crystal Clear Tech., et al. Page 18

Second, other contractual provisions limit the ability of homeowners to communicate

directly with alternate service providers, and vice-versa, and instead require communications to

be funneled through Crystal Clear Technologies.2 R. 99-3 (Tollgate CSA at 8) (Page ID #1499);

R. 99-4 (Bridgemore CSA at 8) (Page ID #1534). Third, the CSAs allow Crystal Clear

Technologies to charge alternative providers fees in order to offer services to homeowners.

R. 99-3 (Tollgate CSA at 8) (Page ID #1499); R. 99-4 (Bridgemore CSA at 8) (Page ID #1534).

Lastly, the CSAs bind the homeowners for twenty-five years and automatically renew for

another twenty-five years; the homeowners cannot terminate the agreements until after the first

twenty-five year period and must provide at least one year’s notice to do so. R. 99-3 (Tollgate

CSA at 16) (Page ID #1507); R. 99-4 (Bridgemore CSA at 17) (Page ID #1543). Collectively,

these provisions, coupled with the explicit exclusivity clauses, demonstrate that the cumulative

purpose and effect of the CSAs is to create a prohibited exclusivity arrangement.3

When viewing the CSAs as a whole, it is clear that “the purpose and effect of the

agreement is to bar competing cable video providers from delivering service to the development

by preventing them from ever building the infrastructure necessary to reach [the MDUs] in the

first place.” Lansdowne on the Potomac Homeowners Ass’n v. OpenBand at Lansdowne, LLC,

713 F.3d 187, 205–06 (4th Cir. 2013). The majority seeks to distinguish the facts alleged in this

case from the Fourth Circuit’s decision in Lansdowne in which our sister circuit concluded that a

contract very similar to the one in this case violated the Exclusivity Order. 713 F.3d at 207.

The majority points to differences that create no meaningful distinctions. Like the contested

2This is different from the exclusive marketing arrangements created by the CSAs, R. 99-3 (Tollgate CSA

at 6) (Page ID #1497); R. 99-4 (Bridgemore CSA at 6) (Page ID #1532), which are permitted by the FCC. In the

Matter of Exclusive Service Contracts for Provision of Video Services in Multiple Dwelling Units and Other Real

Estate Developments: Second Report and Order, 25 FCC Rcd. 2460, 2471–73 (2010) (hereinafter “Bulk Billing and

Exclusive Marketing Arrangements Order”).

3The plaintiffs also point to the provision in each CSA that requires them to pay Crystal Clear

Technologies regardless of whether they actually use the company’s services. Appellants Br. at 8; R. 99-3 (Tollgate

CSA at 10) (Page ID #1501); R. 99-4 (Bridgemore CSA at 10) (Page ID #1536). The FCC allows such mandatory

fees as part of acceptable bulk billing arrangements. Bulk Billing and Exclusive Marketing Arrangements Order at

2465. Thus, this provision on its own does not support the plaintiffs’ argument. The existence of a bulk billing

arrangement, however, does not immunize the CSAs from the Exclusivity Order. Bulk billing arrangements must

comply with the prohibitions articulated in the Exclusivity Order. Id. at 2465 & n.15. The FCC distinguished

acceptable bulk billing arrangements from prohibited exclusivity clauses because acceptable bulk billing

arrangements do not prevent alternative providers from providing services to homeowners nor do they stop

homeowners from purchasing services from other providers. Id. at 2468.

No. 16-6714 Cates, et al. v. Crystal Clear Tech., et al. Page 19

agreements at issue in Lansdowne, the CSAs here have explicit exclusivity clauses.

Furthermore, as in Lansdowne, when the CSAs are interpreted pursuant to applicable state law

the clear conclusion is that they create a prohibited exclusivity arrangement notwithstanding

some of the language in the CSAs to the contrary. When interpreted as a whole, the agreement

produces “precisely the type of anti-competitive monopoly that the FCC sought to prohibit.”

Lansdowne, 713 F.3d at 205.

III.

Defendants Tollgate Village Association Inc. and Bridgemore Village Owners’

Association Inc.—the respective homeowners’ associations of the MDUs—argue that the

plaintiffs lack standing to assert a derivative claim against them. Br. of Tollgate Vill. Ass’n Inc.

& Bridgemore Vill. Owners’ Ass’n Inc. at 29. The majority did not need to reach this argument.

I do, and conclude that the plaintiffs are bringing a direct claim—not a derivative claim—and

therefore this argument is inapposite.

Under Tennessee law, the difference between a direct and a derivative claim is premised

on “the nature of the wrong and to whom the relief should go.” Keller v. Estate of McRedmond,

495 S.W.3d 852, 876 (Tenn. 2016) (quoting Tooley v. Donaldson, Lufkin & Jenrett, Inc.,

845 A.2d 1037, 1039 (Del. 2004)). In a derivative suit, the wrong is suffered by the corporation

and the harm to the shareholder is “merely incidental to the wrong suffered by the corporation

and affects all stockholders alike.” Id. at 867 (internal quotation marks omitted). In contrast, in

a direct action, the shareholder is the one who suffered the injury and any recovery would go to

that injured shareholder. Id. at 868–69.

Here, the plaintiffs are asserting a direct action. They allege that they have directly

suffered injuries, as opposed to the homeowners’ associations. See, e.g., R. 99-1 (Proposed

Second Amended Complaint at 14) (Page ID #1454). Any recovery that the plaintiffs would win

would inure to their benefit and not to the benefit of the homeowners’ associations.

Consequently, this is a direct claim under Tennessee law, and the argument of the homeowners’

associations about the plaintiffs’ lack of standing to assert a derivative claim is misplaced.

No. 16-6714 Cates, et al. v. Crystal Clear Tech., et al. Page 20

IV.

For the foregoing reasons, I respectfully dissent from Part II.C of the majority’s opinion,

and I would reverse the district court’s denial of the plaintiffs’ motion seeking leave to file the

second amended complaint on the plaintiffs’ exclusivity claim as well as on the plaintiffs’ tying

claim.

For the foregoing reasons, we reverse the district court’s denial of the plaintiffs’ motion seeking leave to file the second amended complaint on plaintiffs’ tying claim; we affirm the district court’s denial of the plaintiffs’ motion seeking leave to file the second amended complaint on plaintiffs’ exclusivity claim; and we remand this action to the district court for

further proceedings consistent with this opinion.