Antitrust Law Daily Wrap Up, ANTITRUST—D.D.C.: Internet TV provider’s amended claims for termination of C-SPAN distribution rights fail, (Mar 31, 2014)

By Linda O’Brien, J.D., LL.M.

An Internet provider that delivers television content to subscribers using the subscribers’ high-speed Internet service failed to adequately allege antitrust claims against National Cable Satellite Corporation for terminating the Internet provider’s right to distribute reception of the C-SPAN television networks, the federal district court in Washington, D.C. has decided. The provider’s second motion for leave to conduct discovery was denied. However, the provider was granted leave to file a second amended complaint (Sky Angel U.S., LLC v. National Cable Satellite Corporation, March 28, 2014, Contreras, R.).

Sky Angel U.S., LLC operates FAVE-TV, a subscription service that distributes content of television networks in real time. In 2009, Sky Angel and National Cable Satellite Corporation, distributor of video of legislative proceedings via its C-SPAN networks, entered into an affiliation agreement under which C-SPAN granted Sky Angel a non-exclusive right to carry its networks by means of an Internet stream that would not allow for subsequent distribution. Shortly after the C-SPAN networks began airing on FAVE-TV, C-SPAN terminated the agreement.

In its suit against C-SPAN, Sky Angel alleged that C-SPAN was controlled by cable industry multichannel video programming distributors (MVPDs). The ten largest MVPDs purportedly held seats on C-SPAN’s board. According to Sky Angel, C-SPAN’s termination of their distribution agreement resulted from a conspiracy among C-SPAN’s cable MVPD board members to boycott Sky Angel, in violation of Section 1 of the Sherman Act. C-SPAN’s motion to dismiss the complaint was granted and Sky Angel’s motion for leave to conduct discovery was denied. Sky Angel then filed an amended complaint adding ten unnamed C-SPAN board members as defendants. Sky Angel also filed a second motion for leave to conduct discovery, seeking the identities of the C-SPAN board members. Subsequently, C-SPAN moved to dismiss the amended complaint.

The court determined that Sky Angel failed to plead sufficient facts to plausibly infer that an agreement actually existed among the C-SPAN board members. To establish a claim under Section 1 of the Sherman Act, a plaintiff must show: (1) the existence of a conspiracy; (2) the agreement unreasonably restrained trade in the relevant market; and (3) the restraint affected interstate commerce. The allegations in the amended complaint were merely conclusory and Sky Angel failed to plead specific facts to support claims of a concerted activity. In rejecting Sky Angel’s argument that an inference of concerted activity was plausible since C-SPAN had no legitimate reason for abruptly terminating the contract, the court noted that the allegations did not provide a plausible basis on which to infer that the board was involved in the termination of the contract for some nefarious purpose.

Additionally, Sky Angel’s second motion for leave to conduct discovery prior to a “meet and confer” conference pursuant to Federal Rule of Civil Procedure 26(f) was denied. Leave to conduct limited discovery is allowed for good cause where the party seeks to ascertain the identity of individuals who committed conduct already identified and alleged in the complaint. Since Sky Angel failed to state a claim against any defendant, the exception did not apply and the identification of the C-SPAN board members would be futile, the court concluded.

The case is No. 12-1834 RC.

Attorneys: Jonathan Laurence Rubin (Rubin PLLC) for Sky Angel U.S., LLC. Bruce Douglas Sokler (Mintz, Levin, Cohn, Ferris, Glovsky & Popeo PC) for National Cable Satellite Corporation.

Companies: Sky Angel U.S., LLC; National Cable Satellite Corporation

Cases: Antitrust DistrictofColumbiaNews