April 04, 2013 11:23am PT by Eriq Gardner
ESPN Spent $5 Million in Legal Fees Defending Its Licensing Contracts
When two big media companies do battle, the big winners are the lawyers. As for the "loser," that's for a judge to decide.
At the end of February, a jury ordered ESPN to pay $4.86 million to the Dish Network for allowing DirecTV, Verizon and Time Warner Cable to have lower subscription rates on ESPN Deportes in violation of a "most favored nation" provision.
Dish had demanded a lot more: $153 million. The satellite giant was unsuccessful on 12 of its 13 claims including that ESPN had breached a contract by granting Time Warner Cable the ability to distribute its networks on the Internet without imposing a subscription fee.
Now, ESPN is waving the victory flag and has submitted a motion to collect nearly $5 million in legal fees.
The current licensing agreement between Dish and ESPN expires in six months. In the meantime, there's plenty of courtroom fighting to come between the two companies.
While many people might imagine that litigation draws to a conclusion soon after the jury reads its verdict, the truth is a lot more messy. For instance, in 2002, Dish's EchoStar unit filed a $2 billion lawsuit against News Corp.'s NDS unit for allegedly hiring hackers to help pirate satellite television. In 2008, a jury found NDS liable for a minor count and awarded just $1,500. The case then continued another four years, and NDS eventually was able to recover almost $19 million in legal costs from EchoStar after being deemed the prevailing party.
At the time of the Dish-ESPN trial verdict, there might have been some confusion about who actually was victorious.
The answer isn't just for news writers; there is multimillion-dollar significance.
The contract between Dish and ESPN states that if "either party should bring an action against the other in order to enforce any other provision of this Agreement, the prevailing party shall be entitled to recover its reasonable attorneys' fees in addition to any other remedy it may have."
ESPN now is looking to enforce this provision, saying that it beat back nearly all of Dish's claims, including a $130 million one for allegedly permitting Comcast to remove packaging requirements mandating ESPN Classic on the most widely distributed tier.
"ESPN is clearly the prevailing party here," says the network in a motion filed Tuesday.
As a result, ESPN looks to recover all the expense that went into litigating a 3 1/2-year (and counting) legal battle. Specifically, it wants $4,968,932.68 in "reasonable attorneys' fees," which it says has been reduced by 12.5 percent to reflect Dish's "limited success" on the Deportes claim.
For those wondering how a legal bill gets up to $5 million, ESPN says that its lead trial counsel Diane Sullivan of Weil, Gotshal & Manges charges $855 per hour and that co-counsel David Yohai was charging $697.50 per hour. (Other contract attorneys also worked on the case and charged less.)
That's called a "reasonable hourly rate" because, among other things, it's pointed out that 16 different law firms in the nation have partner billing rates of $855 per hour and that Dish's lead trial counsel Barry Ostrager reportedly charges at least $1,000 per hour.
ESPN also implies that Dish spent even more on this case than Disney did.
According to its motion, "Dish's trial team was as large or even larger than ESPN's, as Dish had no less than three partners from two separate law firms and at least three associates at the trial at all times, as well as additional paralegals and other litigation support staff."
A judge now will decide who pays the hefty bill. And the price tag on this expensive case is climbing. This week, Dish appealed the verdict up to the Second Circuit.
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