OpenBand sues county, HOAs for $50 million; alleges unlawful conduct
In yet another twist to a nearly three year saga, telecommunications firm OpenBand on Oct. 10 filed a lawsuit against 15 defendants, alleging Loudoun Supervisors Ralph Buona and Shawn Williams acted beyond their lawful authority in attempting to force a compromise between the business and two homeowners associations.
In the lawsuit, OpenBand says Buona (R-Ashburn) and Williams (R-Broad Run) told the firm they must cut a deal with two HOAs already embroiled in a private legal battle with the firm in order to secure enough votes with fellow supervisors to approve a 2012 franchise agreement.
OpenBand is asking for not less than $50 million in compensatory damages to be determined by a jury as well as an order declaring that the Loudoun Board of Supervisor’s Sept. 18 denial of a franchise agreement exceeded the scope of legitimate authority granted by the Board of Virginia Code, among others.
The Loudoun Board of Supervisors, Buona, Williams, Lansdowne on the Potomac Homeowners Association and its board members as well Southern Walk at Broadlands Homeowners Association and its board members are all named as defendants in the lawsuit.
Buona declined to comment on the lawsuit, citing pending litigation. Williams could not be reached for comment prior to press deadline.
County Attorney John Roberts and Chairman Scott York did not return calls for comment.
Ben Young, director of government affairs for OpenBand said the firm filed the lawsuit with regret.
“It was filed with regret. We regret that it’s come to this but we would rather be spending our money on upgrading service then litigating. But this is the option we were given,” Young said.
In the lawsuit, OpenBand says Loudoun supervisors pressured and coerced them to relinquish a series of private contracts and real property rights agreed on in 2001 with developer Van Metre and to make cash payments to the HOAs as a precondition to the firm receiving a new franchise agreement that would have given them access to public right-of-ways.
OpenBand has an initial Telecommunications Service Agreement with the HOAs for 25 years, followed by four 10-year renewal periods, for a total of 65 years.
However, despite the private agreement, by county law telecommunications providers, such as Comcast and Verizon Fios, must have a franchise agreement that allows access to public-right-of-ways in order to provide service to communities.
“The Board’s egregious actions amounted to extortion. Rather than evaluate [OpenBand Multimedia’s] 2012 franchise application based on lawful criteria, the Board, specifically through Buona and Williams, refused to approve the 2012 franchise agreement unless [OpenBand Multimedia] acceded to the HOAs demands,” the lawsuit says.
These demands made by the HOAs and backed by the Board exceeded supervisors’ regulatory authority under state and federal law and the Loudoun County Open Video Systems (OVS) ordinance, according the lawsuit.
A ‘no’ from the start
Buona, the lawsuit says, met with OpenBand representatives in November where the supervisor indicated that if the firm reapplied for a franchise agreement, he would not judge the application on its merits. Even if the application was in full compliance with all applicable regulatory OVS recommendations, Buona allegedly said he would deny the franchise agreement unless OpenBand made concessions of their rights under the agreement made with Van Metre to provide exclusive cable, phone and Internet programming to the HOAs.
At the same time, Lansdowne on the Potomac and Southern Walk at Broadlands had lawsuits pending in federal courts, alleging OpenBand’s agreement with Van Metre for the private easements violated Federal Communication Commission laws.
OpenBand was denied a franchise agreement by the previous Board of Supervisors in November 2011. Less than 30 days later, the firm filed a lawsuit in Loudoun County Circuit Court, asking that the new supervisors be made to reverse the decision. That lawsuit is still pending.
The current Board agreed to take a new look at the franchise agreement, but ultimately denied it on Sept. 18 by a 5-3-1 vote – a day before the agreement was set to expire.
York (R-At Large), Ken Reid (R-Leesburg), Geary Higgins (R-Catoctin), Buona and Williams voted to deny the franchise agreement. Supervisors Matt Letourneau (R-Dulles), Eugene Delgaudio (R-Sterling) and Suzanne Volpe (R-Algonkian) were in favor of striking the deal with Open Band, while Janet Clarke (R-Blue Ridge) abstained.
The county denied the agreement even though OpenBand had never been found in violation of any service provisions within its original franchise agreement.
OpenBand says no board member identified any substantive deficiency with the 2012 franchise application. In fact, the board’s outside telecommunications counsel told the board that “compared to the franchises given to Comcast and Verizon, [OpenBand’s] proposed franchise agreement was more favorable to the county and to residents than the Comcast or Verizon agreements.”
Settle other litigation first
OpenBand alleges that while the 2012 franchise agreement was pending, Buona and Williams said they would not approve the application unless OpenBand settled their litigation with the HOAs and relinquished their rights under the Telecommunications Service Rights and easements.
Williams allegedly made such public announcements and voted on matters relating to the 2012 franchise agreement, despite also being a homeowner in the Southern Walk development and previously serving on its HOA board.
In a April 23 meeting at Buona’s invitation, OpenBand representatives met Jeff Chapman, president of the Lansdowne on the Potomac HOA and Jon Whitbeck, who serves on its board of directors.
During this meeting, Chapman is quoted in the lawsuit as repeatedly saying “You gotta give me something on price,” concerning OpenBand’s Telecommunications Service Rights and pricing.
The franchise agreement was placed on the Loudoun board’s agenda for a May 2 vote, but was delayed by more than a month in the hopes of getting the HOAs and OpenBand to settle their differences.
But Chairman York conceded during the May 2 meeting that linking the private battle between the HOAs and OpenBand and its public franchise agreement was improper and beyond the board’s authority.
“I hope that OpenBand, as well as the HOAs, will come to an agreement that revises the original agreement because quite frankly the difficulty we have if we turn this down is to explain to a court why we did not agree to a franchise agreement that is better than the other franchise agreements that we agreed to. We can’t explain that,” York is quoted as saying in the lawsuit.
In the weeks that followed OpenBand says Chapman, in a phone conversation with the firm’s representatives, demanded it reduce the price it charged under its Telecommunications Service Rights by 30 to 50 percent.
By the time of the June 12 vote on the firm’s franchise agreement, Buona is alleged to have asked OpenBand to put a price on the private easements. The easements are not owned by OpenBand Multimedia, the franchise applicant, but by the firm’s entities in Lansdowne and Broadlands, which did not have business before Loudoun supervisors.
Buona on June 12 got supervisors to agree to another delay on the franchise agreement vote, placing it for discussion during a Sept. 18 meeting. The idea was to give the HOAs more time to negotiate with OpenBand.
Free legal advice
The lawsuit says on June 18, Steven Fredley and Michael Nilsson, attorneys for the Lansdowne HOA, sent an unsolicited letter to the county’s attorney advising the county how to defend OpenBand Multimedia’s appeal from the denial of the 2011 franchise application.
Despite not being a party in the appeal, the Lansdowne HOA paid for legal advice and gave it to the county for free. The letter tells the county that OpenBand Multimedia’s appeal had no legal merit and the 2011 denial was not reviewable on appeal. It also said the Loudoun Board’s regulatory authority was subject to “no limitation at all.”
The lawsuit goes on to further allege that Buona in an Aug. 23 meeting with OpenBand’s representatives said the firm had to cut a deal with the Lansdowne HOA and he could get five votes in favor of the 2012 franchise application.
Buona, the lawsuit says, reasoned “You can’t divorce politics from it.” The supervisor also said that “If we can get this done, I have the ability to get five votes,” noting that he could “swing” York back and bring along Supervisor Letourneau, among others.
Further, Buona is quoted in the lawsuit as saying if an agreement between OpenBand and the HOAs was close but not final by the Sept. 18 board meeting, he would further manipulate the franchise process in order to secure concessions from OpenBand by moving to “kick it down the road” for another 20 to 30 days.
Two days later, attorneys for the Lansdowne HOA sent a letter to Buona and Williams containing the HOA’s settlement demands, which included amending OpenBand’s Telecommunications Service Rights to expire for all services in 10 years, relinquishing its easement rights in eight years and reducing its pricing by 35 percent from the rates charged by comparable providers.
In a Sept. 10 letter, the Southern Walk HOA sent a similar letter, demanding OpenBand’s Telecommunications Service Rights expire in five years and that the firm forfeit all of the option years. The HOA also demanded that the price charged to homeowners be reduced to $89 and that OpenBand provide an additional 10 percent discount on top of the proposed price reduction to “defray the costs Southern Walk incurs that are associated with foreclosed, vacant or delinquent lots.”
The Southern Walk letter told supervisors that if OpenBand agreed to the terms, it would withdraw its objection to a 2012 franchise agreement application.
Southern Walk HOA President Erika Cotti, who is also listed as a defendant in the lawsuit, declined to comment, saying she had not yet been served.
The defendants have 30 days to respond to the lawsuit in court.
Editor’s Note: OpenBand is a subsidiary of M.C. Dean, a Dulles-based engineering firm. M.C. Dean is the former owner of the Loudoun Independent, which merged with the Loudoun Times-Mirror in July 2010. Bill Dean, M.C. Dean CEO and president, holds a minority interest in Times Community Media and sits on its Board of Directors.