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Dish Network L.L.C. v. WLAJ-TV, L.L.C.

United States District Court, W.D. Louisiana

November 2, 2018

DISH NETWORK L.L.C.
v.
WLAJ-TV, L.L.C.

         SECTION: “J” (3)

          ORDER AND REASONS

          CARL J. BARBIER UNITED STATES DISTRICT JUDGE.

         Before the Court is a Motion to Dismiss or, in the Alternative, Motion for Summary Judgment (Rec. Doc. 27) filed by Defendant, WLAJ-TV. At the direction of the Court, Defendant clarified in a pocket brief (Rec. Doc. 30) that it believed that this matter could be disposed of via 12(b)(6), because cited to exhibits were referenced implicitly in the Complaint. Plaintiff filed an opposition (Rec. Doc. 32), to which Defendant replied (Rec. Doc. 34). Having considered the Motion and legal memoranda, the record, and the applicable law, the Court finds that Defendant's Motion should be DENIED.

         FACTS AND PROCEDURAL BACKGROUND

         Plaintiff, DISH Network L.LC., is a major subscription-television provider in the United States, which delivers its services to its customers via satellite transmissions. In order to provide content to its subscribers, DISH contracts with local television stations. On August 31, 2012, DISH executed a re-transmission consent agreement (the “Sinclair Agreement”) with the Sinclair Broadcast Group for re-transmission of content produced by 82 of Sinclair's TV stations. (Rec. Doc. 27-6). Among the stations was WLAJ-TV, a station assigned to the Lansing, Michigan market area. WLAJ is currently owned by Defendant, WLAJ-TV, LLC. (Rec. Doc. 15 at 1-2).

         The Sinclair Agreement was deemed to be effective on August 16, 2012. (Rec. Doc. 27-6 at 1). Per its terms, DISH agreed to pay Sinclair a fee for each of the stations that it would rebroadcast. The fee was on a per subscriber basis and would depend on the affiliated network. Also, among the Sinclair Agreement's terms was a “More Favorable Fee” provision, which acted as a “most favored nation” (“MFN”) clause. (Rec. Doc. 15 at 2). In section 22 of the Sinclair Agreement, Sinclair promised that if it granted a re-transmission fee more favorable to certain re-transmitter-competitors of DISH, by more than half a cent per subscriber than that paid by DISH, Sinclair would offer DISH the benefit of the more favorable fee. The Sinclair Agreement was set to expire on August 15, 2015. However, section 23 provides:

Audit Right. During the term and for one (1) year thereafter, each party will have the right, upon reasonable, prior notice, to conduct an audit of the other party's books and records that are reasonably necessary to verify the accuracy of the Re-transmission Fees paid by DISH and/or verify Operator's compliance with its obligations under Section 22.

(Rec. Doc. 27-6 at 14). Additionally, section 24 states:

Survival. Any provision of this Agreement which logically would be expected to survive termination or expiration of the Agreement shall survive termination or expiration.

(Rec. Doc. 27-6 at 14). On November 13, 2012, Sinclair sent a notice to DISH indicating that Sinclair intended to sell WLAJ-TV to Defendant, with an assurance that Defendant would “assume all of Sinclair's obligations under the Agreement as they relate to WLAJ-TV.” (Rec. Doc. 39-4 at 2). The Sinclair Agreement states that subject to such notice, “DISH hereby consents . . . in the case of assignment or transfer of control of one or more, but less than all of the Stations then operated by [Sinclair], to the assignment of such portion of this Agreement as may then be applicable to such Station.” In April of 2013, Defendant's parent company notified DISH that it had acquired substantially all of the assets to WLAJ and that Defendant had “assumed certain Station contracts, including the [Sinclair] Agreement.” (Rec. Doc. 39-5 at 2).

         However, Defendant claims that when it gave notice it was assuming the Sinclair Agreement, Sinclair had presented Defendant only with a redacted version of the Sinclair Agreement (the “Redacted Sinclair Agreement”), which lists a section 22 among its numbered items, but omits its content. (Rec. Doc. 27-4 at 13). While the substance of section 22 has been whited out, the Redacted Sinclair Agreement does not in any way obscure the audit right described in section 23. (Rec. Doc. 27-6 at 12-13). Rather, the Redacted Sinclair Agreement clearly states that DISH may employ an audit to “verify Operator's compliance with its obligations in section 22 hereof.”

         On October 29, 2015-after the expiration of the Sinclair Agreement, but during the 1-year grace period-DISH notified Defendant that it intended to conduct an audit to ensure compliance with the MFN clause. Defendant refused to comply with the audit. On December 7, 2015, DISH gave notice of breach of contract and on June 22, 2016, DISH filed suit against Defendant, alleging breach of the Sinclair Agreement.

         On July 8, 2016, DISH and Defendant entered into a new re-transmission broadcast agreement (the “WLAJ Agreement”) (Rec. Doc. 27-7). The agreement was made retroactively effective as of August 16, 2015. Notably, the WLAJ Agreement includes the following passage:

Integration. This Agreement, together with any documents and exhibits specifically referred to in this Agreement, constitutes the entire agreement between the Parties to this Agreement. . . . Upon execution of this Agreement, all prior agreements and understandings between the Parties related to the Stations will be null and void. Each of the Parties specifically acknowledges that there are no unwritten side agreements or oral agreements between the Parties that alter, amend, modify or supplement this Agreement.

(Rec. Doc. 27-7 at 20). In April of 2018, Defendant filed its Motion. On July 26, 2018, this matter was transferred to the undersigned judge. The Court heard oral argument on the matter on October 24, 2018 and took the matter under advisement.

         PARTIES' ARGUMENTS

         Defendant argues it is entitled to dismissal or summary judgment on three grounds: “[1] The assigned re-transmission agreement on which DISH bases its case is now null and void; [2] The more favorable fee provisions of the null and void retransmission agreement were never assigned to WLAJ anyway; and, [3] Even if the agreement were not null and void, and even if the ‘more favorable' fee provision had been part of the assigned agreement, it would not be applicable here, where DISH seeks to apply it to WLAJ on a station-by-station basis in conflict with the averaging language of the Sinclair agreement.” (Rec. Doc. 27-1 at 2).

         Plaintiff counters that the WLAJ agreement did not extinguish Plaintiff's right to enforce the Sinclair Agreement. (Rec. Doc 32-1 at 16-19). Plaintiff argues that the “null and void” language is nothing more than a merger provision, which seeks to make clear that there are no other oral or written agreements binding the Parties. In other words, the language is intended to require a court to enforce the parol evidence rule. Plaintiff argues that the words “null and void” at most terminated the Sinclair Agreement, but did not rescind it. The distinction being that plaintiffs can seek to enforce prior breaches of a terminated contract, but not a rescinded contract. Further, Plaintiff argues that the audit provision survived termination pursuant to the to the survival provision of the Sinclair Agreement. Thus, Plaintiff had a right to audit Defendant in order to determine whether Defendant had complied with the MFN provision prior to contract termination. To the extent that “null and void” is ambiguous, Plaintiff offers evidence that Parties had considered but ultimately did not agree to a “clean slate” provision.

         Second, Plaintiff argues that Defendant explicitly agreed to assume the Sinclair Agreement and did so without reservation. (Rec. Doc. 32-1 at 4). Plaintiff argues that Sinclair's alleged redaction of a provision had no effect on Defendant's assumption of the entire agreement, and that Defendant failed to do due diligence before assuming the Sinclair Agreement. Finally, Plaintiff argues that summary judgment is ...


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