AIR COMMUNICATION v. ECHOSTAR SATELLITE, No. 01SA188.
| Decision Date | 22 January 2002 |
| Docket Number | No. 01SA188. |
| Citation | 38 P.3d 1246 |
| Parties | In re AIR COMMUNICATION AND SATELLITE INC., individually and on behalf Of all others similarly situated, Plaintiff, v. ECHOSTAR SATELLITE CORPORATION, Defendant. |
| Court | Colorado Supreme Court |
Hill & Robbins, P.C., Robert F. Hill, Laura J. Donson, Denver, CO, Purvis, Gray & Gordon, LLP, John A. Purvis, Beth Morrison Klein, Boulder, CO, Attorneys for Respondent Air Communication & Satellite, Inc.
The Overton Law Firm, Thomas J. Overton, Denver, CO, Attorney for EchoStar Satellite Corporation.
We issued a rule to show cause in this original proceeding under C.A.R. 21 to review the District Court's order in a pending class action case under C.R.C.P. 23. On October 6, 2000, plaintiff Air Communications & Satellite, Inc. (ACS) filed an action against defendant EchoStar Satellite Corporation (EchoStar) on behalf of itself and allegedly similarly situated retailers. Upon learning of a communication by EchoStar to putative class members affecting the litigation, the Arapahoe County District Court (District Court) issued an order on March 23, 2001:(1) prohibiting EchoStar from communicating in the future with putative class members, absent District Court prior review of the communication, about matters relating to the litigation; and (2) requiring the mailing of a corrective notice, at EchoStar's expense, to members of the putative class with whom EchoStar had communicated after ACS filed the class-action complaint.
We hold that the District Court did not abuse its discretion in ordering the mailing of a corrective notice regarding EchoStar's prior communication affecting the litigation. We hold, however, that the District Court abused its discretion in requiring, during the pre-certification period, prior review of future communications between EchoStar and retailers who are putative class members. We direct the District Court to vacate the section of its order that imposed the prior review requirement. Because the proposed corrective notice would notify the putative class members about the prior review requirement, we direct the District Court to delete this portion of the notification before its mailing. Accordingly, we discharge the rule in part and make the rule absolute in part.
EchoStar sells satellite television receivers, subscriptions to its "DISH" Network Programming, and related equipment and service to consumers through a network of retailers (Retailers). ACS and the putative class members are current and former Retailers who entered into standardized form agreements EchoStar prepared authorizing them to sell EchoStar products and services. On October 6, 2000, ACS filed a class-action complaint against EchoStar in the Arapahoe County District Court alleging breach of contract, damages, and asserting other claims for relief on behalf of itself and others similarly situated.
ACS sought certification of a class constituting all Retailers who had signed the EchoStar "Non Commissioned Retailer Agreement" and the "Exclusive Bounty Hunter Agreement." ACS alleged that it had signed both of these agreements, that EchoStar had breached the terms of these agreements and their implied covenants of good faith and fair dealing, that EchoStar had systematically failed to pay sums due to it and all other Retailers who had signed those agreements, and that EchoStar had engaged in other illegal conduct designed to impair Retailers' rights under the agreements and tortiously interfered with their business relationship with customers.
Those agreements provided for court litigation of disputes in the Federal District Court for Colorado or in a State of Colorado district court, in the event that the federal court lacked jurisdiction. The complaint alleged that EchoStar had its principal place of business in Colorado, that ACS was a Florida corporation that had suffered less than $75,000.00 in damages, and that jurisdiction and venue were proper in the District Court for Arapahoe County.
The complaint ACS filed described the class as follows:
The complaint alleged that the nation-wide class consisted of approximately 20,000 persons or entities and that common questions of law and fact predominated over any questions solely affecting individual class members. These questions centered on allegedly illegal contract provisions and improper actions EchoStar took to reduce the number of its retailers, including denying them compensation they had earned and enforcing a non-competition provision. ACS asserted its ability to represent the class fairly and effectively. The complaint requested compensatory damages to ACS and the class members, an injunction against EchoStar's allegedly illegal conduct, and a declaratory judgment voiding the non-compete and attorneys' fees provisions of the "Bounty Hunter Agreement."
EchoStar requested extensions of time to answer and then filed a Motion to Dismiss or for a More Definite Statement. Shortly thereafter, EchoStar sent information packets and a new agreement, the "Distributor and Retail Non-Incentivized Agreements" (the Communication) to Retailers. As a condition for continuing their business relationship with Echostar, the Communication required each Retailer to waive any claims or causes of action Retailers had or might have against EchoStar, except for claims and causes of action it listed with EchoStar within thirty days of executing the Communication. The Communication also granted EchoStar the right to examine Retailers' books and records in connection with any claims or causes of action. Paragraph 2.7.2 of the Communication provided:
Retailer and its Affiliates hereby acknowledge and agree that they do not, as of the date of this Agreement, have any claims or causes of action against EchoStar or any of its Affiliates for acts or omissions that may have occurred prior to the date of this Agreement and, in consideration of Retailer being appointed as an Authorized retailer hereunder by EchoStar, Retailer and its Affiliates hereby agree to waive any and all such claims and causes of action, with the sole exception of any claims and causes for which Retailer provides written notice to EchoStar in the same form required for a Notice of Claim under Section 14.5 below (including proper signature and notary) within thirty (30) days after Retailer executes this Agreement. EchoStar shall have the same rights with respect to requests for additional information and access to Retailer's books and records in connection with any such claims and causes of action as EchoStar has under Section 14.5 below. Failure to strictly comply with the provisions of this Section 2.7.2 with respect to a particular claim and/or cause of action shall constitute a waiver by Retailer and its Affiliates with respect to the relevant claim and/or cause of action.
(Emphasis added.)
In addition, paragraph 14.4.2 of the Communication required binding arbitration of all disputes arising out of "the relationship between the parties" in the event negotiation failed. EchoStar did not accompany the Communication with any notice of, or reference to, the class action complaint ACS had filed against EchoStar in the District Court.
ACS filed a Motion for Emergency Relief under C.R.C.P. 23(d) requesting the District Court to supervise EchoStar's future communications with putative class members affecting the litigation and to require the mailing of a corrective notice regarding the Communication at EchoStar's expense. ACS asserted that the Communication misled and coerced Retailers into waiving their claims and causes of action, harming the putative class members and impairing the viability of the class action, contrary to C.R.C.P. 23.
The District Court agreed with ACS. It determined that the Communication seriously impaired, or eliminated, the court's ability to "protect both the absent class and the integrity of the judicial process by monitoring the actions before it."1 The District Court concluded that it had authority under C.R.C.P. 23(d) to supervise future communications between EchoStar and putative class members and imposed a prior review restraint on future communications:
Accordingly, it is the order of this court that all future communications from EchoStar to the putative class members, excluding normal business communications unrelated to the matters involved in this litigation, are prohibited unless approved by prior order of this court.
The District Court also ordered ACS to prepare for its approval a proposed corrective notice regarding the Communication for mailing to all putative class members at EchoStar's expense. The proposed corrective notice-not yet sent because we assumed jurisdiction under C.A.R. 21-recites in full:
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