Antitrust Law Daily Wrap Up, ANTITRUST—S.D.N.Y.: Not all claims over access to televised sporting events subject to arbitration in suit against leagues, service providers, (Nov 26, 2013)

By Tobias J. Gillett, J.D., LL.M.

In an antitrust action against the National Hockey League, Major League Baseball, and various entities involved in televising NHL and MLB games, the federal district court in New York City has granted the motion of Comcast Corporation to compel arbitration as to certain plaintiffs for the purpose determining whether their claims were subject to Comcast’s arbitration clause, but denied it as to other plaintiffs, and denied DIRECTV, LLC’s motion to compel arbitration against one plaintiff (Laumann v. National Hockey League, November 25, 2013, Scheindlin, S.).

The plaintiffs filed suit against the NHL, MLB, various clubs within the leagues, regional sports networks (RSNs) that televise the games, and multichannel video programming distributors (MVPDs) Comcast and DIRECTV. They alleged that consumers could only obtain out-of-market games through television packages sold by MVPDs or Internet packages available directly through the leagues. Both methods required the purchase of all out-of market games, even if a consumer only wanted to watch the games of one team, and neither local games nor nationally televised games were available through those packages, allegedly to protect the RSNs’ regional monopolies and insulate the MVPDs from Internet competition.

The purchasers challenged the defendants’ “agreements to eliminate competition in the distribution of baseball and hockey games over the Internet and television by dividing the live-game video presentation market into exclusive territories, which are protected by anticompetitive blackouts,” and by “colluding to sell the ‘out-of-market’ packages only through the League which exploits its illegal monopoly by charging supra-competitive prices.” Comcast and the Comcast RSNs moved to compel arbitration against five plaintiffs, and to stay the claims of all plaintiffs. DIRECTV filed a motion to compel arbitration against one plaintiff.

Comcast’s motion. Comcast moved to compel arbitration against plaintiffs Thomas Laumann, Derek Rasmussen, and Robert Silver on the basis that they received Comcast cable or Internet service and agreed to the arbitration clause in their agreement with Comcast. However, the court observed that it first had to decide whether the parties had agreed to submit the question of arbitrability to the arbitrator. Under the clause in Comcast’s agreement, “any colorable dispute about the scope or validity of the arbitration clause must be referred to the arbitrator.”

Here, Laumann and Rasmussen watched their Internet packages using Comcast’s Internet service, and both purchased a separate cable service from Comcast to view blacked-out games. Therefore, there was at least a colorable argument that their claims were subject to the arbitration clause, and the court referred the question of arbitrability to the arbitrator. However, the court observed that, with respect to Silver, “the sole nexus between his claims and his Comcast service is the allegation that his DIRECTV package contained material produced by the Comcast RSNs.” The court found “no genuine dispute requiring referral to the arbitrator,” considering the “attenuated relationship” between Silver’s claims and his agreement with Comcast.

Comcast also moved to compel arbitration against Silver and Vincent Birbiglia pursuant to the arbitration clauses in their contracts with DIRECTV. The court observed that Silver and Birbiglia had not clearly agreed to arbitrate the question of arbitrability with Comcast, a non-signatory to the DIRECTV agreement, and therefore the court proceeded to decide that issue.

The court found that the DIRECTV agreement did not expressly cover claims against Comcast. Although the agreement encompassed “any claim” related to “programming,” and the Comcast RSNs produced some of the programming in DIRECTV’s packages, the court found this “tangential reference” to be insufficient to create an agreement to arbitrate between the plaintiffs and Comcast. Moreover, a statement in the agreement that both DIRECTV and programming providers retained the right to prosecute rebroadcasting violations in court did not “support the conclusion that programming providers can otherwise invoke the arbitration clause against DIRECTV customers.”

Nor could Comcast enforce the DIRECTV arbitration clause against Silver and Birbiglia on a Nevada or Pennsylvania state law estoppel theory, in the court’s view. Silver and Birbiglia had not asserted claims against Comcast pursuant to the DIRECTV agreement, and their claims were not “inextricably intertwined with it.” A similar analysis applied under federal law, under which estoppel was appropriate if the claims were inextricably intertwined with the agreement, and the relationship between the parties was such that not requiring arbitration would be inequitable. Comcast and DIRECTV were competitors, and thus did not have a close corporate relationship. Moreover, “Comcast was not mentioned in the DIRECTV agreement, and the plaintiffs had no reason to believe that they were entering into any agreement with Comcast, or to know that Comcast RSNs may have produced some of the programming they were viewing.”

The plaintiffs did not dispute Comcast’s motion as to plaintiff Garret Traub, and therefore Comcast’s motion was granted as to him. However, as to plaintiffs Marc Lerner and David Dillon, Comcast only argued that their claims should be stayed because they involved “the same facts and issues as the claims against the Comcast Defendants that are subject to individual arbitration.” Since the court had only granted Comcast’s motion as to some of the other plaintiffs, “compelling arbitration against Lerner and Dillon would not simplify the case or preserve judicial resources.” Therefore, the court denied Comcast’s motion as to Lerner and Dillon.

DIRECTV’s motion. The court also denied DIRECTV’s motion to compel arbitration against Lerner based on his household’s DIRECTV cable subscription, which was in the name of his wife. Lerner’s statements in interrogatory responses that he “would prefer not to have to subscribe to pay television” and that “Plaintiff has subscribed to MLB Extra Innings” did not constitute admissions that he was bound by the DIRECTV agreement, in the court’s view. The first statement did not mention a specific cable provider, and the interrogatories defined “plaintiff” to include “immediate families,” and therefore the second statement did not “indicate that Lerner himself signed the contract.” The fact that he had watched DIRECTV’s service also did not constitute an admission that he was bound by the agreement.

Lerner was also not bound to the arbitration agreement through estoppel under Mississippi law. Lerner had not asserted claims on the basis of his cable subscription, and he derived his standing from his purchase of Internet service directly from the League, not from DIRECTV. Without asserting some benefit or right pursuant to the terms of the contract, he was not bound to its terms.

Finally, Lerner was not bound to the agreement as a third party beneficiary, according to the court. Under Mississippi law it was “not enough that the individual received a benefit under the contract, or that the parties foresaw such a benefit, if the terms of the contract [did] not expressly reflect that intent.” Here, the DIRECTV contract did not mention Lerner by name or as part of a group of intended beneficiaries. The court considered the contract’s contemplation that family members and guests could view the service to be “more incidental than direct.” In addition, the contract did not indicate any intent to confer rights or obligations on those individuals because they watched the service.

The cases are Nos. 12 Civ. 1817 (SAS) and 12 Civ. 3704 (SAS).

Attorneys: Edward A. Diver (Langer Grogan & Diver, P.C.) for Thomas Laumann. Shepard Goldfein (Skadden, Arps, Slate, Meagher & Flom LLP) for National Hockey League. Andrew E. Paris (Alston & Bird LLP) for DIRECTV, LLC. Arthur J. Burke (Davis Polk & Wardwell) for Comcast Corp.

Companies: National Hockey League; Major League Baseball; DIRECTV, LLC; Comcast Corp.

Cases: Antitrust NewYorkNews