Dominion Video Satellite Inc. v. Echostar Satellite Corp.

• Decision Date: 25 October 2001
• Docket Number: No. 01-1084,01-1084
• Parties: (10th Cir. 2001) DOMINION VIDEO SATELLITE, INC., Plaintiff-Appellee, v. ECHOSTAR SATELLITE CORPORATION; ECHOSPHERE CORPORATION, Defendants-Appellants
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1149

269 F.3d 1149 (10th Cir. 2001)

DOMINION VIDEO SATELLITE, INC., Plaintiff-Appellee, v. ECHOSTAR SATELLITE CORPORATION; ECHOSPHERE CORPORATION, Defendants-Appellants.

No. 01-1084

UNITED STATES COURT OF APPEALS TENTH CIRCUIT

October 25, 2001

Appeal from the United States District Court for the District of Colorado (D.C. No. 01-K-206) R. Nicholas Palmer, R. Nicholas Palmer Attorney at Law, L.L.C., Denver, Colorado; Mark D. Colley, Holland & Knight, L.L.P., Washington, D.C., for Plaintiff-Appellee.

Todd Jansen, Cockrell, Quinn & Creighton, Denver, Colorado; Mark A. Nadeau, Cynthia A. Ricketts, Squire, Sanders & Dempsey, L.L.P., Phoenix, Arizona; T. Wade Welch, Ross W. Wooten, T. Wade Welch & Associates, Houston, Texas, for Defendants-Appellants.

Before MURPHY, BALDOCK, Circuit Judges, and VAN BEBBER,^* Senior District Judge.

MURPHY, Circuit Judge.

I. INTRODUCTION

This interlocutory appeal arises from a contract dispute based on diversity jurisdiction that is currently in arbitration. Plaintiff-appellee Dominion Video Satellite, Inc. ("Dominion") brought a motion for a temporary restraining order and preliminary injunction in the United States District Court for the District of Colorado against defendants-appellants EchoStar Satellite Corporation and Echosphere Corporation (collectively "EchoStar"). After a hearing, the district court entered a temporary restraining order and preliminary injunction against EchoStar and set bond at $10,000. Both the district court and this court denied EchoStar's motions to stay the injunction pending appeal and to increase the bond. This court has jurisdiction under 28 U.S.C. 1292(a)(1).¹

EchoStar raises three issues on appeal. First, it claims the district court violated its due process and procedural rights by failing to give sufficient notice before granting appellee's preliminary junction. Second, addressing the merits, EchoStar argues that the court abused its discretion in issuing the preliminary injunction. Finally, EchoStar contests the amount of the bond set by the district court. Because this court concludes that the district court did not abuse its discretion in giving notice of the hearing or in issuing injunctive relief, it affirms the preliminary injunction order, but remands to the district court for factual findings as to the appropriate bond amount.

II. FACTUAL BACKGROUND

EchoStar owns and operates satellites and transmits direct broadcast programming under the "DISH Network" trade name. Dominion is a television and radio broadcaster of predominantly religious programming that operates the Sky Angel network.

Each of EchoStar's satellites houses multiple transponders, or devices that receive broadcast transmissions from Earth and retransmit them to individual dish antennas. Pursuant to a July 18, 1996 contract, EchoStar leased eight transponders on its satellites to Dominion for satellite broadcasting. In consideration, Dominion agreed to pay EchoStar cash fees and lease back three of the eight transponders to EchoStar. In addition, the contract provides for several offsets against Dominion's cash payments to EchoStar if certain conditions were met.

The contract defines a "Dominion Member" as a "Qualifying Residential Subscriber" ("QRS") meeting several requirements. A QRS, in turn, is an individual who purchases a receiver from EchoStar, orders a minimum level of programming from the DISH Network, and is a first-time subscriber. The term "Dominion Member" appears in several instances in Article 6.3 of the contract, which addresses "Offset of Cash Fees." "Dominion Member" also appears in Article 5.2.2, the provision governing "Dominion's Fulfillment Services."

Two other contract provisions are relevant in this case. Article 16.15includes a non-waiver provision.² Article 16.8 includes an arbitration provision.

EchoStar and Dominion signed an amendment to the contract on December 9, 1996. The amendment includes a provision that, if Dominion did not make certain payments to EchoStar, Dominion would automatically sublease three additional transponders back to EchoStar. In that event, Dominion would not have to pay certain cash fees, nor would it be entitled to "any further Offsets." Dominion elected not to make the specified payments to EchoStar, and the amendment became effective sometime before the current dispute arose.

Individuals wishing to view Sky Angel or DISH Network programming must first purchase and install a DISH Network receiver. The customer cannot view programming on either the DISH Network or Sky Angel unless EchoStar activates the customer's DISH Network receiver. Since the inception of Dominion's broadcasts of Sky Angel programming, those individuals who wanted to subscribe to Sky Angel contacted Dominion to order service. Dominion, in turn, contacted EchoStar to activate that particular customer's satellite dish.

On January 26, 2001, EchoStar sent Dominion a letter which stated, in part, that EchoStar would not activate any Dominion subscribers unless they purchased a minimum level of DISH Network programming, an unsubsidized satellite receiver directly from EchoStar, or a Dominion-specific smart card. The stated purpose of EchoStar's demands was to remedy the "problem" of "Dominion subscribers [] receiving subsidized prices without fulfilling their commitment to EchoStar which would make them eligible for those subsidies."

EchoStar views the January 26 letter as an attempt to enforce the QRS criteria in the original contract. Dominion contends, however, that the letter represents EchoStar's unauthorized attempt to impose new requirements before activating Dominion subscribers. The parties do not dispute that, before EchoStar's demand letter on January 26, 2001, EchoStar activated new Dominion subscribers without enforcing the QRS criteria.

On February 5, 2001, Dominion simultaneously filed a complaint and a "Motion for Temporary Restraining Order and/or Preliminary Injunction" in the United States District Court for the District of Colorado requesting that the court enjoin EchoStar from refusing to activate Dominion subscribers or from imposing the conditions set out in the January 26 letter. On the same day, Dominion faxed to EchoStar a notice of election of arbitration on several issues, including the activation of Dominion subscribers.

The hearing for injunctive relief took place on February 8. At the conclusion of the hearing, the district court orally issued a temporary restraining order against EchoStar and set the bond at $10,000, which Dominion duly submitted. Later that day, the district court entered the written order for a temporary restraining order and a preliminary injunction.

This appeal followed. The parties are currently in arbitration with hearings scheduled to begin on October 24, 2001.

III. DISCUSSION

A. Standards of Review

This court reviews the grant of a preliminary injunction for abuse of discretion. See Prairie Band of Potawatomi Indians v. Pierce, 253 F.3d 1234, 1243 (10th Cir. 2001). A district court abuses its discretion if it "commits an error of law, or is clearly erroneous in its preliminary factual findings." Id. A preliminary injunction will be set aside for abuse of discretion if the district court applied the wrong legal standard in deciding to grant a motion for a preliminary injunction. See SCFC ILC, Inc. v. Visa, USA Inc., 936 F.2d 1096, 1098 (10th Cir. 1991). This court reviews the issuance of a bond for abuse of discretion. See Cont'l Oil Co. v. Frontier Ref. Co., 338 F.2d 780, 783 (10th Cir. 1964).

B. Notice of Preliminary Injunction

On appeal, EchoStar claims the district court violated its due process rights by failing to give adequate notice that it was conducting a hearing for a preliminary injunction.³ EchoStar does not argue on appeal that it lacked adequate notice for a temporary restraining order hearing. Rather, EchoStar asserts that the one business day notice of the hearing was not enough time to prepare for a preliminary injunction hearing or conduct meaningful discovery. EchoStar asks this court to adopt the Fifth Circuit rule that imports the five business day notice requirement of Rule 6(d) of the Federal Rules of Civil Procedure into Rule 65(a)(1) hearings governing preliminary injunctions.⁴ See Parker v. Ryan, 960 F.2d 543, 544-45 (5th Cir. 1992).

Rule 65(a)(1) provides, in relevant part, that "[n]o preliminary injunction shall be issued without notice to the adverse party." Neither the Rule nor the advisory committee notes specify the form or amount of notice required. This court has not addressed the issue in a published opinion.

The district court did not abuse its discretion in setting the preliminary injunction hearing three days after Dominion filed its motion for injunctive relief. On February 5, 2001, Dominion filed a "MOTION FOR TEMPORARY RESTRAINING ORDER AND/OR PRELIMINARY INJUNCTION." At the very least, EchoStar thereby had notice that Dominion alternatively sought a preliminary injunction. Dominion also served notice of hearing on EchoStar on February 6. EchoStar never objected to the hearing date nor did it ask for more time to prepare. Indeed, EchoStar filed a written brief in opposition to the request for injunctive relief two days after Dominion filed the motion and one day after EchoStar was notified of the hearing date. In addition, EchoStar attached the declaration of Polly Dawkins, an EchoStar employee, in its brief opposing injunctive relief, thus indicating that it had enough time to include papers in support of its brief in opposition. Nothing in the record indicates that EchoStar directly or indirectly alluded to a notice problem in its brief in opposition. Furthermore, the record of the district court proceedings indicate that EchoStar conducted a thorough defense at the hearing. EchoStar argued its case at the hearing and conducted an extensive cross and re-cross examination of Robert Johnson, the chairperson and chief...