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March 7, 2013

Stay Denied in Action Against Cable, Satellite Television Providers and Sports Leagues over "Out-of-Market" Sports Packages

By Jeffrey May, J.D.

Cable distributor Comcast and satellite distributor DirecTV were not entitled to a stay of antitrust claims brought by their subscribers pending a ruling of the U.S. Supreme Court in American Express Co. v. Italian Colors Restaurant on the enforceability of arbitration clauses barring class arbitration, the federal district court in New York City has ruled. Comcast and DirecTV failed to show that staying the case pending the Supreme Court decision would avoid significant prejudice to their rights to arbitrate claims with their subscribers. Staying the case would merely delay litigation and likely result in greater inefficiencies to the court and litigants than simply permitting the litigation to proceed on schedule (Laumann v. National Hockey League, March 6, 2013, Scheindlin, S.).

Comcast and DirecTV subscribers brought an action against their television providers as well as the National Hockey League (NHL), Major League Baseball (MLB), and others alleging conspiracies that forced the subscribers to buy unwanted programming in order to watch games of one particular team located outside of their local markets. In a December 5, 2012, decision (2012-2 Trade Cases ¶78,168), the court granted in part and denied in part a motion to dismiss. It dismissed for lack of standing the plaintiffs who merely subscribed to Comcast and DirecTV, but did not subscribe to an out-of-market sports package.

Comcast and DirecTV subsequently moved, on behalf of themselves and their affiliated regional sports networks that televise the games, to stay the claims of the remaining television subscriber plaintiffs. Pursuant to their contracts for television service, these plaintiffs had entered into arbitration agreements containing explicit class action waivers. Under governing Second Circuit law, the arbitration agreements are unenforceable.

The issue of the enforceability of arbitration clauses barring class arbitration is currently before the Supreme Court. On February 27, 2013, the Court heard argument regarding whether merchants alleging an antitrust violation by American Express Company were able to vindicate their rights under the Sherman Act if they were required to pursue individual arbitration as opposed to class arbitration. At issue is a decision of the U.S. Court of Appeals in New York City (667 F.3d 204, 2012-2 Trade Cases ¶78,125), holding unenforceable a class action waiver contained in the mandatory arbitration clause of their commercial contracts with American Express. American Express had invoked the clause in response to a lawsuit by the merchants challenging a purported illegal tying arrangement requiring merchants who accepted American Express's charge card to also accept all of American Express's credit cards.

Comcast and DirecTV argued that a stay was warranted because "'it would be an inefficient use of time and resources of the court and the parties to proceed' before the Supreme Court rules." In addition, they argued that a stay would not prejudice the plaintiffs.

The federal district court noted that Comcast and DirecTV might be correct in arguing that a Supreme Court decision reversing the Second Circuit in the American Express case could "drastically reduce [their] liability" by eliminating certain classes of claims against them. However, the TV providers offered no evidence that their role in the pretrial proceedings scheduled between now and the likely issuance of a decision by the Supreme Court would be significantly impacted by the outcome in that case, according to the court.

The court also rejected an "equally unrealistic solution" proposed by MLB to stay the entire case, which included claims asserted by subscribers to MLB and NHL Internet packages for baseball and hockey programming, pending the outcome of the Comcast and DirecTV subscribers' arbitration claims. MLB's "rationale rests on multiple layers of highly optimistic speculation," in the court's view. Under this scenario, the Supreme Court would have to reverse the American Express decision, the Comcast and DirecTV subscribers would have to pursue their claims in arbitration, and the district court would have to stay the entire antitrust case, including that of the Internet subscribers, against the alleged core participants in the agreements—the Leagues themselves—pending the outcome of plaintiffs' arbitration claims.

The case is 12 Civ. 1817 (SAS).

Kevin M. Costello (Klein Kavanagh Costello, LLP); Edward A. Diver (Langer Grogan & Diver, P.C.); Michael Morris Buchman (Pomerantz Haudek Block Grossman & Gross LLP); Alex Schmidt (Wolf Haldenstein Adler Freeman & Herz LLP); Robert LaRocca (Kohn, Swift & Graf, P.C.); and J. Douglas Richards (Cohen, Milstein, Sellers & Toll, PLLC) for plaintiffs. Andrew E. Paris (Alston & Bird LLP) for DirecTV, LLC. Arthur J. Burke (Davis Polk & Wardwell) for Comcast Corporation. Bradley I. Ruskin (Proskauer Rose LLP) for Office of the Commissioner of Baseball, Major League Baseball Enterprises Inc.

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

Main Story: TopStory Antitrust NewYorkNews

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