Trial Begins in Dish Network's $150 Million Lawsuit Against ESPN

ESPN Logo - H 2012

ESPN Logo - H 2012

This week, a New York courtroom is the scene of a potentially revealing look at how carriage deals are made in the TV industry.

On Monday, a jury heard opening arguments in Dish Network's lawsuit against ESPN for allegedly breaching the terms of a licensing agreement. The satellite company is claiming more than $150 million in damages emanating from the Disney-owned sports division's deals with other pay-TV distributors like Comcast, DirecTV and TIme Warner Cable.

At the trial, Barry Ostrager, a lawyer for Dish Network, gave an overview of what Dish is alleging.

"In violation of this most-favored nation provision, ESPN provided more favorable terms to Dish's competitors and made the calculated decision not to offer those terms to Dish," said Ostrager, a partner at Simpson Thacher & Bartlett.

This is the third major piece of litigation involving Dish in the past year.

The other two cases involved the ongoing legal war with broadcasters over Dish's ad-skipping DVR AutoHop and the settled lawsuit over the termination of AMC's Voom HD Network on the Dish Network.

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This third case between Dish and ESPN, which has been pending in a New York federal court since 2009, might end up being most notable for shedding light on various confidential contracts throughout the TV industry.

To win on its claim that the MNF provisions of its contract was violated, Dish will need to show that others in the industry got more favorable treatment. And to prove that, jurors may be shown side-by-side comparisons of contracts and hear testimony from expert witnesses explaining the nuances of the business.

"This is a complicated case," said one of Dish's lawyers in a pre-trial hearing during this case. "These are not simple claims. There are 13 of them. They're based on 18 contracts; they're based on provisions that the parties have disputes over how to interpret language, not only in the DISH-ESPN agreement, but also the meaning of the terms in these other third-party contracts."

As for what exactly Dish believes that other distributors got but it didn't, the claims have been amended as the parties have engaged in discovery with each other.

Among the claims, Dish alleges that other carriers were able to unbundle ESPN's various channels (ESPNU, ESPN Classic, ESPN2, ESPN-HD…) onto different tiers and packages. Dish also alleges that a competitor like Comcast was able to distribute a channel like ESPNU to bars and taverns on an a la carte basis. There's also been the suggestion by Dish in the case that it is unhappy with how a competitor like Time Warner has been able to distribute ESPN on the internet without requiring subscribers to pay for that digital service.

Because the lawsuit involves confidential contracts, much of the proceedings until Monday have happened in secret thus far,and most court filings have been submitted under seal or with heavy redaction. Thus, it's not entirely clear how Dish is making its case.

But this week, that changes as both parties fight in open court.

The proceedings could influence the particulars of a new deal between Dish and ESPN, which reportedly is set to expire this year.

An attorney for ESPN told the jury on Monday that the trial shouldn't be an invitation for the satellite company to win better terms for itself in the midst of the current one.

Diane Sullivan, the Weil, Gotshal & Manges lawyer for ESPN, said, "Dish got a fair deal; they want a better deal."

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