CNN Gets Partial Win in Lawsuit Over Reduced License Payments

CNN Atlanta Headquarters - H 2013

A New York federal judge has ruled that Dish Network wrongfully withheld $20 million in license payments to CNN. However, thanks to ambiguity about what constitutes "news," CNN can't claim full victory against the satellite TV giant.

This court fight began rather mysteriously two years ago when CNN (via Turner Network Sales, a corporate shell) filed a sealed complaint against Dish. A New York judge subsequently drew a line on secrecy, and as a result, the dispute has been gaining clarity.

At issue is a provision of the parties' affiliation agreement, signed in 2009 and renewed in 2015, that allowed Dish to distribute CNN on its service. The deal spelled out how Dish would calculate monthly license fees for CNN. Specifically, the agreement permitted Dish to pay for CNN based on CNN subscribers, rather than total Dish subscribers, unless another 24-hour per day news service came along that was more widely distributed on Dish's satellite service. If that happened, CNN would get payments based on total Dish subscribers. (The provision appears to have been a way for CNN to guarantee some superiority over rivals in the news business.)

In 2017, Dish informed CNN that it had been overpaying. Dish believed it was only obligated to pay for CNN subscribers rather than total subscribers. How come? Dish suddenly made the contention that The Weather Channel, more widely distributed than CNN, wasn't a 24-hour per day news service.

To recover $20 million, Dish engaged in self-help. CNN went two accounting months without any license payment from Dish. After that, Dish paid reduced monthly fees for CNN until it had fully recovered the claimed overpayment. Dish then resumed paying the full CNN monthly license fee, but using the number of CNN subscribers instead of the number of total Dish subscribers in the calculation.

In a summary judgment, U.S. District Court Judge Ronnie Abrams first focuses on Dish's attempt at recoupment.

She writes that Dish "cannot now claim, after years of voluntary payments, that it is entitled to recoup fees that it was solely responsible for calculating based on its own understanding of its obligations under the Agreement."

Rejecting Dish's attempt at claiming an excusable mistake, the judge gives CNN what essentially amounts to a $20 million win.

But then moving onto the controversy about what Dish has been paying since April 2017, the judge finds some ambiguity about what the contract means.

"[I]t is not clear how much news a service must broadcast in order to qualify as a '24-hour per day national news service,'" writes Abrams. "Must the channel air news exclusively for each of the 24 hours per day that it is on the air? Or might a service qualify as a '24-hour per day national news service' if it airs mostly news, but also broadcasts the occasional movie, talk show, or reality program?"

The judge's questions about the nature of "news" don't end there. 

"It also is not clear from the contract language what type of news the service must air in order to qualify as a '24-hour per day national news service,'" she continues. "Does 'news' refer exclusively to breaking news, headline news, or national news? Or does it also encompass other information about recent events, such as the latest developments in sports, entertainment, or the weather? What if a channel — like ESPN, E!, or The Weather Channel — airs only a specific subset of the news, and therefore appeals to a different set of viewers than some of the more traditional news services? These and other ambiguities are readily apparent when one pauses to consider whether the term 'other 24-hour per day national news service' has a 'definite and precise meaning.'"

The judge looks at extrinsic evidence about the parties' understanding of "news" throughout their relationship. She turns to industry custom and usage. The journey still doesn't provide her an answer. So CNN's summary judgment motion on this is denied in a ruling that could set the stage for a trial on the meaning of "news service."

The full ruling is here, which also covers other claims and counterclaims. For instance, the judge rejects Dish's contention that CNN violated a Most Favored Nation provision while allowing Dish to move forward on the claim that it was wrongfully denied contractually guaranteed promotional time on CNN to hype its service.