United States: It's Not An Illusion! DISH Not Required To Give Credit When Channels Go Dark

Expanded Basic. Choice. Choice Plus. Cable and satellite TV customers pay monthly fees for bundled channel packages of different sizes. The packages are becoming "skinnier," allowing you to customize your service from a set of modules (i.e., the Family package, the Sports package, various language packages, etc.). But each module is still a pre-set bundle of channels.

Economists and regulators have long-debated whether a switch to an a la carte model would be cheaper and better. See e.g., Report on the Packaging and Sale of Video Programming Services to the Public, FCC Media Bureau, Nov. 18, 2004; Further Report on the Packaging and Sale of Video Programming Services to the Public, FCC Media Bureau, Feb.9, 2006; Gregory S. Crawford and Ali Yurukoglu, " The Welfare Effects of Bundling in Multichannel Television Markets," The American Economic Review, Vol. 102, No.3, June 2012.

In the meantime, class action lawyers have launched a series of cases to try to "break the bundle." Antitrust attacks have had middling results. See e.g., Brantley and Cablevision. And now the Eighth Circuit has decisively rejected claims that bundled monthly services contracts are "illusory" or include an implicit guarantee to consistently provide the same channel lineup.

In Stokes v. DISH Network, LLC, customers brought a class action against DISH after Turner and FOX News channels went "dark" on DISH for about a month each during 2014-2015 license disputes. The customers argued that they had paid for the advertised bundle and, therefore, either (i) DISH was required to credit customers for the missing pieces of the bundle or (ii) the entire monthly service for fee contract was based on an illusory promise and, therefore, unenforceable.

This was legal jujitsu, trying to turn the bundled service model against the distributors. And the potential implications for the industry were enormous. Negotiations between networks and distributors are increasingly contentious, resulting in more and more temporary suspensions of channels (especially around major sporting events) –or sometimes dropping channels altogether.

The Stokes customers' creative move against the bundle met with initial success. The district court found that, under Colorado contract law, the standard monthly service agreement would be illusory if DISH were allowed to keep the entire monthly service charge when it did not provide all of the advertised channels in a package. The court reasoned that the contract could be saved, however, by reading in an obligation to credit customers for the missing channels under the implied covenant of good faith and fair dealing. The court rejected DISH's arguments that no such implied "credit" right could exist because the service agreement specifically prohibited refunds for service changes and interruptions.

The district court recognized the implications of its rulings and allowed DISH to take an immediate, interlocutory appeal. On October 4, 2016, an Eighth Circuit panel unanimously reversed the district court. Stokes v. DISH Network, LLC.

First, the Eighth Circuit sharply and quickly dispensed with the premise that the services agreement would be illusory if DISH were not required to provide a credit or refund for dropped channels. The Circuit called the theory a "classic red herring." The court reasoned that a promise is illusory only if it lacked consideration "from its inception." For example, a time share agreement was not enforceable where the purchasers of the shares already owned the property. By contrast, the court reasoned, it was undisputed that DISH had provided hundreds of channels, including the Turner and FOX News channels, for years before the 2014-2015 interruptions. Because DISH provided actual consideration through its partial performance, the fact that DISH theoretically retained unlimited discretion over the actual packages was irrelevant.

Second, the Eighth Circuit rejected the claim that DISH had an implied obligation to credit customers for missing channels under the covenant of good faith and fair dealing. The court stated that under Colorado law, the duty of good faith and fair dealing "does not obligate a party to assume obligations that vary or contradict the contract's express provisions, nor does it permit a party to inject substantive terms into the contract." The court observed that the services agreement expressly and repeatedly provided that DISH could change the channel lineup at any time and that DISH was not financially liable for any "interruption, delay or failure to perform" that might arise from termination of its carriage agreements with one – or all – networks. There was no allegation that DISH had exercised its discretion over channel lineup in bad faith. And, given the express provisions of the contract, the appeals court refused to add a new obligation to credit customers for dropped channels.

Finally, the Eighth Circuit chided the district court for misreading several provisions of the services agreement. The court found that the "force majeure" provisions did not limit the broader limitation of liability for interruptions due to contract disputes.(Pay attention to those semi-colons!) It also found that a provision for equipment failures was irrelevant to disputes about dropped channels. And it rejected the district court's fine-lined distinction between a right to a "refund" – which the agreement specifically disclaimed – and a right to a "credit," which the district court assumed to be inherent in the overall bargain. The Circuit Court readily concluded that the parties had "unambiguously precluded" any and all "monetary relief" for service interruptions and changes to the channel lineup.

The Eighth Circuit's decision gives comfort not only to traditional pay TV distributors, such as DISH, but to "new media" distributors of bundled content, such as Netflix.

It's Not An Illusion! DISH Not Required To Give Credit When Channels Go Dark

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions