[1]In 1983, the City of Los Angeles denied a franchise and license, including the opportunity to compete for one, to Preferred Communications, Inc., a firm founded by businessmen Carl and Clinton Galloway as Universal Cable Systems, Inc.[1] Preferred Communications, Inc. responded by filing suit against the city in the United States District Court for the Central District of California, seeking redress for the violation of its First Amendment right to free speech.

[2] Preferred Communications, Inc. appealed to the United States Court of Appeals for the Ninth Circuit, which reversed the District Court's decision with respect to the First Amendment argument, but affirmed its dismissal of the Anti Trust allegations made against city officials on the grounds that such officials possessed state immunity or qualified immunity.

The award of nominal damages in addition to the reluctant if much delayed striking down of the "one area, one operator" policy exercised by the city, was considered to be a "preamble to breakup of local cable franchising" schemes which did not serve the public interest in the 1980s and 90s.

The city maintained that the franchise for the South Central district was "non-exclusive" however proceeded to bar entry from new applicants, including Preferred Communications Inc.[6] The First Amendment became relevant for according to plaintiffs, the ability to transmit ideas (through the cable medium) constituted speech, and the right of way being denied belonged to the public and not one single, exclusive and private interest.

"[9] Text of City of Los Angeles v. Preferred Communications, Inc., 476 U.S. 488 (1986) is available from: Findlaw Google Scholar Justia Library of Congress Oyez (oral argument audio)