Calif. Court Overturns Charter Decision

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The county of Santa Cruz acted reasonably and lawfully when it denied the
transfer of its cable system to Charter Communications Inc., citing concerns
that the new operator would raise basic rates to cover its acquisition costs,
according to a California appeals court.

Late Friday, the U.S. Court of Appeals for the Ninth Circuit reversed a
lower-court victory for Charter and canceled the legal fees it was awarded by
the lower court.

It was a decision closely watched by city officials who will likely cite the
decision, at least in Western states, as authority for asking for information
beyond the traditional limits of legal, technical and financial
qualifications.

Charter sued in 1998 when the county refused to accept it as the new local
operator. Officials expressed concern the per-subscriber price paid by Charter
investor Paul Allen was too high and that the operator would recover its costs
in part by raising basic rates. The operator won the case in U.S. District Court
in Northern California, but this has been vacated by the Ninth Circuit
ruling.

The appeals panel noted that Allen submitted a personal balance sheet to the
county to prove his personal net worth. However, those assets weren't
contractually pledged to support the local system, and officials were reasonable
to be concerned about the financial viability of the local
operation.

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