February 28, 2013 1:15pm PT by Eriq Gardner
ESPN Ordered to Pay Dish Network $4.86 Million for Breach of Contract
After a day of deliberation, a federal jury gave a mixed verdict in Dish Network's lawsuit against ESPN for allegedly breaching the terms of a 2005 licensing agreement. Dish has been awarded $4.86 million after prevailing in one of its four breach-of-contract claims.
The satcaster spent nearly three weeks in a New York federal courtroom attempting to prove that ESPN had violated a "most favored nation" clause in an eight-year licensing agreement. The contractual provision entitled Dish to be given the opportunity to receive equal treatment on subscriber rates and packaging conditions when ESPN gave Dish's competitors better deals.
Specifically, Dish accused ESPN of allowing Comcast to remove packaging requirements that allowed ESPN Classic to be distributed beyond its most widely distributed tier; of allowing DirecTV, Verizon and Time Warner Cable to have lower subscription rates on ESPN Deportes; and allowing others a la carte rights on ESPNHD, ESPN Classic, ESPNU and ESPN2.
Additionally, Dish brought a fourth breach-of-contract claim against ESPN for granting Time Warner Cable the ability to distribute its networks on the Internet without imposing a subscription fee.
Dish had alleged that the damages added up to more than $150 million, but the jury said that a lot less was due in order to make the satellite distributor whole. Dish won only the claim over ESPN Deportes. Under its original agreement, Dish was obligated to pay a monthly subscriber fee of 35-47 cents for ESPN Deportes between 2007 and 2013, but then TWC got a deal for 8-18 cents and Verizon got a deal for 3 cents.
The trial was marked by intense detail of contracts that typically are closely guarded secrets.
At trial, Dish presented ESPN as being careless when it came to looking after its contractual obligations and not promptly making "MFN" offers when they were due. Dish also showcased internal ESPN emails that calculated how licensing negotiations with other MVPDs impacted the money that was owed to Dish and how to "finesse" the obligations for financial advantage.
On the witness stand, ESPN's executives denied that Dish was robbed of the benefit of making its 2005 agreement and made the case that calculating "MNF" offers was complicated and took time. The ESPN execs said offers eventually were made to Dish and that the company was credited with the benefit retroactively.
Dish's current carriage deal with ESPN expires in September.
Dish was represented by lead lawyer Barry Ostrager at Simpson Thacher. ESPN was represented by Diane Sullivan at Weil, Gotshal & Manges.
ESPN said in a statement, "We are gratified that the jury rejected all but one of Dish’s claims and all but $4.8 million of the more than $153 million in damages they were seeking.“
Dish has also put out a statement from its general counsel Stanton Dodge, saying the company would "remain vigilant in our efforts to ensure that programmers honor their contractual commitments."
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