National Rural Telecomm. Co-Op. v. Directv
| Decision Date | 22 May 2003 |
| Docket Number | No. CIV.00-2117 LGB.,No. CIV 00-8672 LGB.,No. CV 99-5666 LGB(CWX).,No. CV 00-00368 LGB.,No. CIV 01-6220 LGB.,CV 99-5666 LGB(CWX).,CV 00-00368 LGB.,CIV.00-2117 LGB.,CIV 00-8672 LGB.,CIV 01-6220 LGB. |
| Citation | 319 F.Supp.2d 1059 |
| Parties | NATIONAL RURAL TELECOMMUNICATIONS COOPERATIVE, Plaintiff, v. DIRECTV, INC., Hughes Communications Galaxy, Inc. Defendants. |
| Court | U.S. District Court — Central District of California |
John I. Lazar, Leonard D. Venger, Sam S. Puathasnanon, Manatt, Phelps & Phillips, Sharon Douglass Mayo, David S. Eisen, John J. Quinn, Jr., James D. Layden, Arnold & Porter, Elizabeth D. Mann, James T. Grant, McDermott, Will & Emery, Steven A. Ellis, Sidley, Austin, Brown & Wood, Los Angeles, CA, Dustin F. Hecker, Joseph P. Crimmins, Jon C. Cowen, Posternak, Blankstein & Lund, Boston, MA, Abbe David Lowell, Chadbourne & Parke, Thomas H. Yancey, Joseph R. Guerra, Thomas C. Green, Michael D. Warden, Michael A. Levy, Jennifer Tatel, Sidley, Austin, Brown & Wood, Washington, DC, Larry R. Feldman, Joel N. Klevens, Fogel, Feldman, Ostrov, Ringler & Klevens, Gregory A. Nylen, Jeffrey E. Scott, Raymond B. Kim, Greenberg Traurig, Santa Monica, CA, Michael Anthony Lindsay, Scott Stearns, Dorsey & Whitney, Minneapolis, MN, for Plaintiffs.
Michael E. Baumann, Steven E. Bledsoe, R. Alexander Pilmer, April L. Ammeter, Mark T. Cramer, Peter F. Smith, Richard K. Welsh, Christopher Lynn Frost, Robyn Eileen Bladow, Kirkland & Ellis, David S. Eisen, Ingrid V. Eagly Arnold & Porter, Los Angeles, CA, Lawrence C. Jones, Fogel, Feldman, Ostrov, Ringler & Klevens, Santa Monica, CA, for Defendant.
ORDER GRANTING IN PART AND DENYING IN PART DIRECTV'S SUMMARY JUDGMENT MOTION NO. 2
This matter involves five cases dealing with DIRECTV, Inc. ("DIRECTV") that have been consolidated before this Court.1 Presently before the Court are four summary judgment motions filed by DIRECTV. By this Order, the Court addresses DIRECTV's second summary judgment motion ("Motion No. 2") dealing with the claims alleged by Pegasus Satellite Television, Inc. and Golden Sky Systems, Inc.2 in case no. CV 00-368 and by the North Central Telephone Cooperative ("NCTC") and the Iowa Lakes Cooperative ("ILC") in case no. 00-2117.3
In April of 1992, the National Rural Telecommunications Cooperative ("NRTC") entered into an agreement, the DBS Distribution Agreement (the "DBS Agreement" or "Agreement"), with DIRECTV's predecessor-in-interest, Hughes Communications Galaxy, Inc. ("HCG"). Declaration of Alexander Pilmer in Support of DIRECTV's Summary Judgment Motions ("Pilmer Decl."), Exh. 10, Agreement. Under the Agreement, HCG agreed to provide NRTC with the rights to the Premium Services.5 Declaration of Michelle Morris King in Support of NRTC's Opposition to DIRECTV's Summary Judgment Motions ("King Decl."), Exh. 193, Ramo Depo. at 323:14-25; Exh. 169, Hartenstein Depo. at 331:17-332:4; see also Pilmer Decl., Exh. 10, Agreement § 2.07. After signing the Agreement, HCG commenced negotiations with the providers of the Premium Services, e.g., HBO and Showtime, so that such services would be available to NRTC and HCG in their respective territories. King Decl., Exh. 193, Ramo Depo. at 331:2-7; Exh. 149, Chapman Depo. at 103:19-105:12. In 1993, the United States Satellite Broadcasting Company ("USSB"), a competitor of HCG and NRTC, executed an exclusive agreement with the providers of Premium Services. King Decl., Exh. 176, Hubbard Depo. at 410:18-411:4. During 1993, HCG tried unsuccessfully to obtain access to the Premium Services by negotiating with USSB. King Decl., Exh. 193, Ramo Depo. at 334:19-335:21, 336:14-17, 336:22-337:19 and 338:3-25.
HCG's inability to obtain the rights to the Premium Services led to negotiations between NRTC and HCG, which resulted in the 1994 Amendment to the Agreement (the "1994 Amendment"). The 1994 Amendment states in part that:
[i]f HCG acquires the rights, in its sole discretion, to distribute HBO, Showtime, the Movie Channel or Cinemax, NRTC shall have the option, in its sole discretion, to substitute such programming for any one of the services listed on Exh. A on a service by service basis.
Pilmer Decl., Exh. 11, 1994 Amendment at ¶ 1.
In 1996, HCG assigned its rights and liabilities under the Agreement to DIRECTV, pursuant to a restructuring wherein DIRECTV Enterprises, Inc., the parent of DIRECTV, became a wholly owned subsidiary of Hughes Electronics. Pilmer Decl., Exhs. 73 & 74, Dun & Bradstreet Report re DIRECTV Enterprises, Inc. In December of 1998, General Motors, Hughes Electronics and USSB entered into a merger agreement (the "Merger Agreement"). Pilmer Decl., Exh. 16. Pursuant to the Merger Agreement, USSB was merged into Hughes Electronics. Id. Upon the completion of the merger, Hughes Electronics succeeded to all the rights and obligations set forth in USSB's service contracts with the various providers of Premium Services, including HBO and Showtime. Pilmer Decl., Exh. 16, Merger Agreement at § 1.4. Hughes Electronics and DIRECTV entered into a Sales Agency Agreement, signed in December of 1999, which "authorizes and grants DIRECTV the non-exclusive right to market, sell and transmit" the Premium Services, previously distributed by USSB. Pilmer Decl., Exh. 15.
After the merger between USSB and Hughes Electronics in December of 1998, NRTC met with DIRECTV to discuss NRTC's purported substitution rights under the 1994 Amendment. King Decl., Exh. 192, Phillips Depo. at 575:10-579:17. DIRECTV took the position that NRTC's contingent right under the 1994 Amendment to substitute the Premium Services never vested because Hughes Electronics — and not DIRECTV — acquired USSB's rights to the Premium Services. Accordingly, DIRECTV declined to provide those services to NRTC. NRTC subsequently filed suit against DIRECTV.
Pegasus and the Class are members of NRTC and are in the business of distributing direct broadcast satellite television services to rural America. King Decl., Exh. 3, Member Agreement. Following the execution of the DBS Agreement and with the approval of HCG, NRTC entered into separate "NRTC/Member Agreements for Marketing and Distribution of Direct Broadcast Service" ("Member Agreements") with its members and affiliates, such as Plaintiffs,6 pursuant to which NRTC passes through the programming and distribution services to its Members. Id. The Members sell and distribute the DBS services to subscribers in their territories entering into separate Subscriber Agreements for this purpose. King Decl., Exh. 114, Subscriber Agreement.
Plaintiffs filed the instant suits against DIRECTV following the latter's refusal to pass on to NRTC, and thus to NRTC's Members, including Plaintiffs, the Premium Services it recently gained access to after the merger with USSB.
DIRECTV's Motion No. 2 is directed to case nos. 00-368 and 00-2117. In case no. 00-368, Pegasus v. DIRECTV and HCG,7 Pegasus alleges the following claims against DIRECTV: 1) intentional interference with contractual relations, specifically the Member Agreements between NRTC and Pegasus, 2) intentional interference with prospective economic relationship as between Pegasus and existing and future subscribers, 3) intentional interference with contractual relations with equipment dealers, 4) intentional interference with prospective economic advantage as between Pegasus Satellite Television, Inc. and equipment distributors and dealers,8 5) violation of California Business and Professions Code § 17200, 6) misappropriation of trade secrets,9 7) declaratory relief as to the term of the DBS Distribution Agreement, 8) declaratory relief as to the status of DIRECTV-1R as a successor satellite and NRTC's right of first refusal, 9) declaratory relief as to Pegasus' proportionate share of the Launch Fees NRTC may receive from DIRECTV, 10) declaratory relief as to subscriber information, and 11) declaratory relief as to the Class's exclusive rights to distribute the Advanced Services in NRTC territories. See Second Amended Complaint in case no. 00-368, filed June 20, 2001 ("SAC 00-368").
In case no. 00-2117, NCTC v. DIRECTV, the Class alleges the following claims against DIRECTV: 1) intentional interference with contractual relations, specifically the Member Agreements between NRTC and the Class, 2) intentional interference with prospective economic relationship as between the Class and existing and future subscribers, 3) violation of California Business and Professions Code § 17200, 4) misappropriation of trade secrets,10 5) declaratory relief as to the term of the DBS Distribution Agreement, 6) declaratory relief as to the status of DIRECTV-1R as a successor satellite and NRTC's right of first refusal, 7) declaratory relief as to the Class's proportionate share of the Launch Fees NRTC may receive from DIRECTV, 8) declaratory relief as to subscriber information, and 9) declaratory relief as to the Class's exclusive rights to distribute the Advanced Services in NRTC territories. See Second Amended Complaint in case no. 00-2117, filed June 20, 2001 ("SAC 00-2117").
In Motion No. 2, DIRECTV requests partial summary judgment on the following claims: 1) claim 1 in case nos. 00-368 and 00-2117 (the "Interference with Member Agreements Claims")11 and claim 2 in case nos. 00-368 and 00-2117 (the "Interference with Subscribers Claims")12 and 2) claim 5 in case no. 00-368 and claim 3 in case no. 00-2117 (the "Section 17200 Claims").13 DIRECTV also moved for summary judgment as to claims 3 and 4 in case no. 00-368. However, since those two claims were subsequently voluntarily dismissed by Pegasus, DIRECTV's summary judgment motion as to those two claims is deemed moot.
DIRECTV filed its moving papers in support of M...
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