A US appeals court ruling today said that cable companies do not have a First Amendment right to discriminate against minority-run TV channels.

Charter, the second-largest US cable company after Comcast, was sued in January 2016 by Byron Allen's Entertainment Studios Networks (ESN), which alleged that Charter violated the Civil Rights Act of 1866 by refusing to carry TV channels run by the African-American-owned ESN. Allen, a comedian and producer, founded ESN in 1993 and is its CEO; the lawsuit seeks more than $10 billion in damages from Charter.

Charter argued that the case should be dismissed, claiming that the First Amendment bars such claims because cable companies are allowed "editorial discretion." But Charter's motion to dismiss the case was denied by the US District Court for the Central District of California, and the District Court's denial was upheld unanimously today by a three-judge panel at the US Court of Appeals for the 9th Circuit.

UPDATE: The appeals court also ruled against Comcast in a similar civil rights case in which ESN seeks more than $20 billion. Comcast had argued in a brief that "the First Amendment prohibits plaintiffs from suing to alter Comcast's selection of a programming lineup." But today's ruling allows ESN's lawsuit against Comcast to proceed as well.

Charter must not discriminate

Charter argued that ESN's "claim is barred by the First Amendment because laws of general applicability cannot be used 'to force cable companies to accept channels they do not wish to carry,'" the appeals court panel noted.

But while cable companies do have some First Amendment speech protections, they are not free to discriminate based on race, the panel said. Section 1981 of US law, which guarantees equal rights in making and enforcing contracts, "does not seek to regulate the content of Charter's conduct, but only the manner in which it reaches its editorial decisions—which is to say, free of discriminatory intent," the judges wrote.

"Section 1981 prohibits Charter from discriminating against networks on the basis of race," judges also wrote. "This prohibition has no connection to the viewpoint or content of any channel that Charter chooses or declines to carry."

Whether Charter violated civil rights law with its treatment of ESN is still to be decided. Today's court decision allows ESN to continue its case against Charter in US District Court.

Besides rejecting Charter's First Amendment defense, the appeals court also concluded that "the plaintiffs' allegations regarding the defendant’s treatment of the African-American-owned operator, and its differing treatment of white-owned companies, were sufficient to state a viable claim pursuant to [Section] 1981." Judges "held that a plaintiff need not plead that racism was the but-for cause of a defendant’s conduct, but only that racism was a factor in the decision not to contract such that the plaintiff was denied the same right as a white citizen."

Charter vowed to continue its defense. "This lawsuit is a desperate tactic that this programmer has used before with other distributors," Charter said in a statement provided to Ars. "We are disappointed with today's decision and will vigorously defend against these claims."

The appeals court ruling summarized some of the claims made against Charter:

In addition to recounting Entertainment Studios' failed negotiations with Charter, Plaintiffs' amended complaint also included direct evidence of racial bias. In one instance, [Charter VP of programming Allan] Singer allegedly approached an African-American protest group outside Charter's headquarters, told them "to get off of welfare," and accused them of looking for a "handout." Plaintiffs asserted that, after informing Charter of these allegations, it announced that Singer was leaving the company. In another alleged instance, Entertainment Studios' owner, Allen, attempted to talk with Charter's CEO, [Tom] Rutledge, at an industry event; Rutledge refused to engage, referring to Allen as "Boy" and telling Allen that he needed to change his behavior. Plaintiffs suggested that these incidents were illustrative of Charter's institutional racism, noting also that the cable operator had historically refused to carry African-American-owned channels and, prior to its merger with Time Warner Cable, had a board of directors composed only of white men. The amended complaint further alleged that Charter's recently pronounced commitments to diversity were merely illusory efforts to placate the Federal Communications Commission (FCC).

ESN's eight networks are Cars.TV, Comedy.TV, ES.TV, JusticeCentral TV, MyDestination.TV, Pets.TV, Recipe.TV, and The Weather Channel.

Ruling against Comcast

In the separate ruling against Comcast, appeals court judges said the US District Court improperly dismissed ESN's complaint against Comcast and remanded the case back to District Court. The District Court should have allowed ESN's suit against Comcast to continue because "Plaintiffs needed only to plausibly allege that discriminatory intent was a factor in Comcast’s refusal to contract, and not necessarily the but-for cause of that decision," appeals court judges wrote.

The ruling against Comcast relied heavily upon the reasoning in the Charter decision. "For the reasons discussed at length in our opinion in Charter Communications, we also conclude that the First Amendment does not bar Plaintiffs’ § 1981 claim [against Comcast]," judges wrote.

"These two decisions against Comcast and Charter are very significant, unprecedented, and historic," Allen said in an announcement.

In a statement to Deadline, Comcast said, "We respectfully disagree with the court's decision, and are reviewing the decision and considering our options."

1st Amendment not a “tool for deregulation”

The ruling against Charter's First Amendment claim was applauded by consumer advocacy group Public Knowledge, which previously filed a brief disputing Charter's argument.

"Charter put forth arguments that, if taken to their logical conclusion, would mean that the Constitution barred nearly all regulation of cable companies and broadband providers, as their services are a conduit for speech," Public Knowledge Senior Counsel John Bergmayer wrote today.

Bergmayer noted that broadband providers have also claimed that the First Amendment should nullify net neutrality rules that prohibit them from discriminating against websites.

"The First Amendment is a tool for promoting free expression," Bergmayer wrote. "Too often, though, courts have turned it into a tool for deregulation, arguing that the purported free speech interests of billion-dollar companies outweigh the rights of citizens to be informed, to communicate, and to participate in the public sphere. Even now, broadband providers are arguing that they have a First Amendment right to block websites or interfere with users' rights to use lawful online services."

Disclosure: The Advance/Newhouse Partnership, which owns 13 percent of Charter, is part of Advance Publications. Advance Publications owns Condé Nast, which owns Ars Technica.