DISH Network L.L.C. v. Cox Media Grp., LLC
| Decision Date | 20 July 2020 |
| Docket Number | No. 20 C 570,20 C 570 |
| Parties | DISH NETWORK L.L.C., Plaintiff, v. COX MEDIA GROUP, LLC et al., Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
MEMORANDUM OPINION AND ORDER
This case involves a contract dispute over the rates DISH Network must pay to retransmit television stations that Defendant Terrier Media Buyer, Inc. purchased from Defendant Cox Media Group. DISH moved for a preliminary injunction so that it may continue to retransmit the stations at issue during this litigation at rates previously agreed upon with Cox. R. 91. For the following reasons, DISH's motion is denied.
The Court begins with a brief description of the parties. Plaintiff DISH Network is a satellite multichannel video programming distributor. Defendant Cox Media Group is a media conglomerate that owned the television broadcast stations at issue in this case. R. 84 ¶ 2. Defendant NBI Holdings, LLC ("NBI"), through its subsidiary Northwest Broadcasting, Inc. ("Northwest"), owned a different group of television broadcast stations. Id. ¶ 40. Defendant Apollo Global Management ("Apollo") is a private equity firm and the parent company of Defendant Terrier Media Buyer, Inc. ("Terrier"). Id. ¶ 46.
In March 2019, DISH entered into a three-year contract with Cox that permitted DISH to retransmit 13 Cox television stations in ten major U.S. markets (the "Cox Retransmission Agreement"). Id. ¶ 29. DISH had a separate retransmission agreement with Northwest to retransmit 18 broadcast stations that was set to expire on December 31, 2019 (the "Northwest Retransmission Agreement"). Id. ¶¶ 40, 42. Under the Cox and Northwest Retransmission Agreements, DISH paid retransmission fees based on a predetermined monthly rate per DISH customer receiving each Cox or Northwest station. Id. ¶ 32.
On February 14, 2019, Terrier entered into separate agreements to acquire the Cox stations (the "Cox Purchase Agreement") and the entities owning the Northwest stations (the "Northwest Purchase Agreement"). R. 84 ¶¶ 47, 49. The strategy of these transactions was widely reported: "Apollo would seek to use some of Northwest Broadcasting's contracts, which have higher fees than Cox's, to hike up fees from the cable operators[.]" R. 108-31 at 5 (). Apollo's internal communications confirm that increasing the retransmission rates was a significant part of its plan. See R. 95 at 10.
On March 4, 2019, the parties to the Cox and Northwest Purchase Agreements filed public applications with the FCC seeking consent for the transactions. R. 108-20. The Northwest application describes that Id. at 1. The application further states that it Id. at 2.
The transactions were designed to trigger the Cox Retransmission Agreement's "Station Change in Control" and the Northwest Retransmission Agreement's "After-Acquired Station" provisions. The Cox Retransmission Agreement provides that a "Station Change in Control" occurs either when 1) an entity gains the ability to control a majority of the board or the voting interests for the Cox stations or to direct the stations' management; or 2) an entity becomes the FCC-authorized assignee or transferee of the broadcast licenses of the Cox stations. R. 95 at 10; R. 109-2 § 17(b). The impact such a change in control has on the Agreement depends on the identity of the acquiring entity. If the acquiring entity has a preexisting retransmission agreement with DISH, the Cox stations become subject to that agreement, and if not, the Cox Retransmission Agreement continues to control. R. 95 at 9-10; R. 109-2 § 17(b).
Meanwhile, the Northwest Retransmission Agreement's "After-Acquired Station" clause establishes that notwithstanding any preexisting agreement, theAgreement's terms will govern any "After-Acquired Station." R. 84 ¶ 45; 109-1 § 17(c). In turn, the Agreement defines "After-Acquired Station" as "a local television broadcast station not listed in Exhibit A as of [June 6, 2018] . . . of which [Northwest Broadcasting] (or a [Northwest Broadcasting] Affiliate) subsequently becomes the owner or licensee. R. 109-1 § 17(c).
Thus, Terrier's plan was first to acquire NBI and assume the Northwest Retransmission Agreement. R. 108-2 ¶ 32(a). Next, Terrier would transfer the ownership of Camelot Media Buyer (one of Terrier's subsidiaries to which the Cox Purchase Agreement had previously been assigned such that Camelot would directly acquire the Cox stations) to NBI. Id. ¶¶ 9, 32(b). Finally, Camelot would acquire the Cox stations. Id. ¶ 32(c). The relevant corporate ownership chart appears as follows:
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Defendants contend that the Cox and Northwest transactions closed as planned on December 17, 2019, and thus the Cox stations became After-Acquired Stations governed by the rates set by the Northwest Retransmission Agreement. DISH contends that the Cox transaction closed before the Northwest transaction, and thus Terrier did not have a preexisting retransmission agreement when it acquired Cox, and the Cox Retransmission Agreement's rates remain in effect.
Beginning in December 2019, counsel for NBI informed DISH that the Cox stations were subject to the Northwest Retransmission Agreement. R. 84 ¶ 61. After DISH disagreed, Defendants began to run a crawl message on the Cox stations stating that DISH would lose the stations on January 14, 2020 because "it has refused to agree to reasonable terms for the valuable programming we provide." Id. ¶ 68.
On January 15, 2020, DISH filed this case in the Circuit Court of Cook County and moved for a TRO to prevent Defendants from interfering with its right to retransmit Cox stations, which the state court granted ex parte.1 On January 24, Defendants removed the case to federal court. DISH subsequently filed a motion to remand, which this Court denied. See R. 57. On February 17, DISH moved for leave to add nondiverse defendants to the case, and on February 19 the parties agreed toextend the TRO indefinitely pending resolution of whether this Court had subject matter jurisdiction. See R. 59.2 The Court denied DISH's motion to add nondiverse defendants on April 10 and concluded it had subject matter jurisdiction to hear this case. The Court subsequently permitted the parties to undertake limited discovery for purposes of DISH's preliminary injunction motion. See R. 80; R. 83. That motion was fully briefed as of June 26, 2020.
A preliminary injunction is an "extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief." Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 22 (2008). To prevail on a motion for a preliminary injunction, "the moving party must make an initial showing that (1) it will suffer irreparable harm in the period before final resolution of its claims; (2) traditional legal remedies are inadequate; and (3) the claim has some likelihood of success on the merits." BBL, Inc. v. City of Angola, 809 F.3d 317, 323-24 (7th Cir. 2015) (citing Girl Scouts of Manitou Council, Inc. v. Girl Scouts of U.S. of Am., Inc., 549 F.3d 1079, 1086 (7th Cir. 2008)). "If the moving party makes this showing, the court weighs the factors against one another, assessing whether the balance of harms favors the moving party or whether the harm to other parties or the public is sufficiently weighty that the injunction should be denied." Id. at 324 (citing ACLU of Ill. v. Alvarez, 679 F.3d 583, 589 (7th Cir. 2012)). "This balancing involves a sliding scale analysis: the greater [the movant's] chance of success on the merits, the lessstrong a showing it must make that the balance of harm is in its favor." Foodcomm Intern. v. Barry, 328 F.3d 300, 303 (7th Cir. 2003) (citing Storck v. Farley Candy Co., 14 F.3d 311, 314 (7th Cir. 1994)).
In determining whether a party has a reasonable likelihood of success on the merits, "the court must find that the petitioner's chances are 'better than negligible,' no matter how heavily other equities weigh in her favor." Kinney for & on Behalf of N.L.R.B. v. Int'l Union of Operating Engineers, Local 150, AFL-CIO, 994 F.2d 1271, 1278 (7th Cir. 1993) (quoting Ill. Council on Long Term Care v. Bradley, 957 F.2d 305, 307 (7th Cir. 1992)). DISH asserts seven claims, including: a declaratory judgment that the Cox Retransmission Agreement remains valid and enforceable (Count I); specific performance of the Cox Retransmission Agreement (Count II); breach of the Cox Retransmission Agreement against Cox and Camelot (Counts III and IV); breach of duty of good faith and fair dealing against Cox (Count V); tortious interference with the Cox Retransmission Agreement against all Defendants (Count VI); and unfair competition against all Defendants (Count VII).
Turning first to the contract claims, DISH contends that the "only issue is whether the Cox stations are after-acquired stations subject to the Northwest retransmission agreement." R. 95 at 15. The Cox Retransmission Agreement is governed by New York law and the Northwest Retransmission Agreement isgoverned by Colorado law. R. 109-1 at § 18(a) (...
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