Mediacom Communications v. Sinclair Broadcast

Decision Date24 October 2006
Docket NumberNo. 4:06-cv-491.,4:06-cv-491.
Citation460 F.Supp.2d 1012
PartiesMEDIACOM COMMUNICATIONS CORPORATION, Plaintiff, v. SINCLAIR BROADCAST GROUP, INC., Defendant.
CourtU.S. District Court — Southern District of Iowa

Richard Bruce Beckner, Fleischman & Welsh LLP, Washington, DC, Mark McCormick, Belin Lamson McCormick Zumbach Flynn, Des Moines, IA, for Plaintiff.

J. Campbell Helton, Jaki K. Samuelson, Whitfield & Eddy, PLC, Des Moines, IA, Richard Liebeskind, Kathryn Schmeltzer, Pillsbury Winthrop Shaw Pittman LLP, Washington, DC, for Defendant.

ORDER ON MOTION FOR PRELIMINARY INJUNCTION

PRATT, Chief Judge.

Plaintiff, Mediacom Communications Corporation ("Mediacom"), brings this action against Defendant, Sinclair Broadcast Group, Inc. ("Sinclair"), asserting violation of the Sherman Antitrust Act (15 U.S.C. § 1), tortious interference with contracts and business expectations, and unfair competition. Clerk's No. 1. The Court has before it Plaintiff's Motion for Preliminary Injunction and Request for Expedited Relief, filed on October 11, 2006 (Clerk's No. 4) pursuant to Federal Rule of Civil Procedure 65(b), and Sinclair's Motion to Strike or, in the Alternative, to Grant Leave to Respond to Mediacom's Reply, filed on October 23, 2006 (Clerk's No. 34). Mediae-com is seeking to enjoin Sinclair from terminating the existing retransmission agreement which allows Mediacom to carry Sinclair's broadcast stations, and from initiating any active marketing campaign designed to induce Mediacom subscribers to discontinue services with Mediacom. Sinclair filed a Resistance on October 17, 2006. Clerk's No. 18. Oral arguments on the Motion for Preliminary Injunction were heard on October 18, 2006. Clerk's No. 27. Additional briefing followed the preliminary injunction hearing. See Clerk's Nos. 28, 31-33. The matter is fully submitted. For the reasons discussed below, Mediacom's Motion for Preliminary Injunction is DENIED.1

I. FACTUAL BACKGROUND

Mediacom owns franchised cable television systems which provide multiple television services in a number of metropolitan areas. Pl.'s Mem. of Law Supp. Mot. for Prelim. Inj. (hereinafter "Pl.'s Mot.") at 3; Compl. ¶ 1. Essentially, Mediacom provides cable television services to consumer viewers. Sinclair is a television broadcasting business which focuses on acquisition, development, and operation of television stations in small and medium sized markets in the U.S. Compl. ¶ 2. Sinclair owns major, and non-major, network affiliated television stations. Pl.'s Mot. at 2. Both companies operate in the following television Designated Market Areas ("DMAs"): St. Louis, Des Moines-Ames, Cedar Rapids, Lexington, Mobile-Pensacola, Champaign-Springfield-Decatur, Madison, Greenville-Spartanburg-Ashville, Peoria-Bloomington, Nashville, Tallahassee, Paducah-Cape Girardeau, Minneapolis, Milwaukee, Birmingham, and Norfolk. Id. at 3-4. Mediacom has approximately 625,000 households that receive Sinclair's broadcast stations, of which 325,000 are households in Iowa. Supp. Decl. of John Pascarelli (hereinafter "Pascarelli Supp.") ¶ 5.

Under Section 325(b) of the Communications Act of 1934, as amended, Sinclair, as a broadcast station, must elect a "retransmission consent" or a "must-carry" status with cable operators. Pl.'s Mot. at 2 n. I. Once Sinclair makes an election, it is effective for three years and cannot be changed until the following three year cycle. Id. "Retransmission consent" is a federally created statutory right in a television station's broadcast signal, as opposed to the contents of the signal (which are protected by copyright) that broadcasters may attempt to sell in that station's local market. Id. If Sinclair elects "retransmission consent" status with a cable operator, the parties will negotiate in good faith for the retransmission rights. Pl.'s Mot. Ex. C (Decl. of James A. Levinsohn, hereinafter "Levinsohn") at 10. If Sinclair elects "must-carry" status with a cable operator, the cable operator is required to carry the television station's broadcast signal, without any compensation to either Sinclair or the cable operator. See Pl.'s Mot. at 2 n. 1; Levinsohn at 11. Thus, popular stations generally elect "retransmission consent," and less popular stations elect "must-carry," since cable operators would not otherwise choose to carry the less popular stations without compensation. Levinsohn at 11.

On September 29, 2005, Sinclair informed Mediacom that it had elected "retransmission consent" status for all twenty-two Sinclair stations currently carried by Mediacom. Pl.'s Mot. at 4. Mediacom initially carried Sinclair's stations pursuant to a retransmission agreement signed on December 23, 2002. Id. at n. 2. The 2002 retransmission agreement, which remains in effect, contains an extension clause that allows Mediacom to carry Sinclair's stations on a month-to-month basis. Id. The extension clause automatically renews on a monthly basis, and is subject to termination with respect to one or more stations by either party, with 45 days advance written notice. Id.; Pl.'s Mot. Ex. A (Decl. of John Pascarelli, hereinafter "Pascarelli"), Exs. 2, 3.

In October of 2005, Mediacom contacted Sinclair to initiate negotiations for the retransmission rights for the January 1, 2006 to December 31, 2008 cycle. Pascarelli ¶ 4. During negotiations, Sinclair stated that it expected to be paid cash for retransmission rights for each of its twenty-two stations. Pl.'s Mot. at 4. Traditionally, Sinclair allowed cable companies, including Mediacom, to carry analog signals for free, and generally sought compensation only for new digital signals. Decl. of Barry Faber (hereinafter "Faber") ¶ 7. However, Sinclair realized that satellite companies, who competed with cable companies, were willing to pay for the same analog signals. Id. ¶ 9. Sinclair also became increasingly aware of the amount cable companies routinely paid for other non-broadcast stations, e.g., TNT, HGTV, and Animal Planet. Id. ¶ 10. Thus, for the first time in 2005, Sinclair began actively seeking compensation for analog signals from cable companies. Id. ¶ 11.

Mediacom responded by stating that it would only consider purchasing the retransmission rights for the thirteen Sinclair stations which were affiliated with major networks. Pl.'s Mot. at 4. These thirteen stations consisted of: KBSI, KDNL, KDSM, KGAN, WDKY, WEAR, WICD, WICS, WLOS, WMSN, WYZZ, WZTV, and WTWC (collectively referred to as "the Tying Stations"). Mediacom informed Sinclair that it was not interested in negotiating retransmission rights for the other nine stations: WUCW, WMYA, WCGV, WVTV, WDBB, WDKA, WNAB, WUXP, and WTVZ (collectively referred to as "the Tied Stations").2 Id. at 4-5. Mediacom explained that carrying the Tied Stations was of little value due to low subscriber demand, and believed that freeing up the channels currently occupied by the Tied Stations would benefit Mediacom. Id. at 5, Ex. B (Decl. of Jane Bedford, hereinafter "Bedford") ¶ 3. Throughout negotiations, Sinclair continued to refuse any offers made by Mediacom that were anything less than a "global agreement" for all twenty-two stations. See Pascarelli ¶ 12.

After almost eight months of unsuccessful negotiations, in June of 2006, Sinclair threatened to terminate the existing retransmission agreement. Id. ¶ 13. On June 14, 2006, Sinclair allegedly informed Mediacom that Sinclair had entered into an agreement with a Direct Broadcast Satellite ("DBS") company, either DirecTV or The Dish Network, both are direct competitors of Mediacom. Id. ¶ 18. Under the terms of Sinclair's agreement with the DBS company, Sinclair allegedly would be reimbursed for any lost advertising revenue due to any interruption or termination of its relationship with Mediacom, and Sinclair would receive consideration, monetary or otherwise, for each Mediacom subscriber that switched to the DBS company as a result of the same (the "Bounty Payment Agreement"). Id. Sinclair claims that the "agreement" between itself and the DBS company is mischaracterized. See Faber ¶¶ 59-61. Sinclair states that in late August or early September of 2006, unrelated to its negotiations with Mediacom, the Chairman of the FOX Affiliate Board completed a customer referral agreement with DirecTV, which allowed FOX affiliated stations to be compensated for new customers that were referred to DirecTV as a result of commercials DirecTV aired on the participating FOX stations.3 Id. ¶ 61.

Regardless, after further negotiations between Mediacom and Sinclair failed, on September 28, 2006, Mediacom received written notice from Sinclair terminating the 2002 retransmission agreement. Pascarelli ¶ 25. The notice required Mediacom to terminate carriage of all twenty-two Sinclair stations by midnight, November 30, 2006. Id. Pursuant to Federal Communications Commission ("FCC") regulations, Mediacom, in turn, must provide subscribers with thirty days advance notice of changes in its programming services. Id. ¶ 26 Accordingly, if Mediacom's requested injunction is not granted, Mediacom must provide notice to its subscribers regarding the termination of carriage of the Sinclair stations no later than November 1, 2006. Id.

II. LAW AND ANALYSIS4

The purpose of issuing a preliminary injunction in a lawsuit is to preserve the status quo and to prevent irreparable harm until the parties have a chance to conduct discovery and the court has an opportunity to hold more extensive hearings on the lawsuit's merits. See Granny Goose Foods, Inc. v. Teamsters, 415 U.S. 423, 439, 94 S.Ct. 1113, 39 L.Ed.2d 435 (1974); Devose v. Herrington, 42 F.3d 470, 471 (8th Cir.1994). Federal Rule of Civil Procedure 65 authorizes the court to enter a preliminary injunction where appropriate. See Fed.R.Civ.P. 65(a). It is well established that a party is entitled to equitable relief only if there is no adequate remedy at law. Taylor Corp. v. Four Seasons Greetings, LLC, ...

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