DIRECTV 2002 Annual Report Download - page 32

HUGHES ELECTRONICS CORPORATION
protest. DIRECTV filed a counterclaim on February 21, 2001 seeking a declaratory judgment that the
NRTC is indeed responsible for the defense and indemnity of DIRECTV.
On September 19, 2001, the NRTC filed a fourth lawsuit against DIRECTV in the United States
District Court of the Central District of California, seeking a declaration from the court that the NRTC is
not required to defend and indemnify DIRECTV for the Pegasus Development Corporation and
Personalized Media Communications, LLC lawsuit pending in the United States District Court for the
District of Delaware. The NRTC has been paying and continues to pay DIRECTV’s legal fees in that
matter under protest. DIRECTV filed a counterclaim on October 26, 2001 seeking a declaratory
judgment that the NRTC is indeed responsible for the defense and indemnity of DIRECTV. The NRTC
and DIRECTV each filed cross motions for summary judgment in this lawsuit in January 2002. On
July 1, 2002, the court entered an order granting the motion of DIRECTV for partial summary judgment
on the NRTC’s duty to defend, and denying the NRTC’s motion for summary judgment on all claims.
The NRTC’s two indemnity cases have been consolidated with each other, but are proceeding
separately from DIRECTV’s other litigation with the NRTC, Pegasus and Golden Sky, and the class,
described above. The court has stayed further proceedings in the indemnity cases until determination
of the merits of the other, underlying cases.
***
In April 2001, Robert Garcia, doing business as Direct Satellite TV, an independent retailer of
DIRECTV®system equipment, instituted arbitration proceedings against DIRECTV, Inc. with the
American Arbitration Association in Los Angeles, California regarding his commissions and certain
chargeback disputes. The parties have been proceeding with the arbitration, though no hearing date
has been set. On October 4, 2001, Mr. Garcia filed a class action complaint against DIRECTV, Inc. and
Hughes in Los Angeles County Superior Court asserting the same chargeback/commissions claims
and a Consumer Legal Remedies Act claim. Mr. Garcia alleges $300 million in class-wide damages
and seeks certification of a class of plaintiffs to proceed in arbitration with court oversight. DIRECTV,
Inc. and Hughes moved to dismiss and compel arbitration, which motion was heard on April 12, 2002.
On April 17, 2002, the Los Angeles County Superior Court entered an order compelling plaintiffs in the
purported class action of retailers to pursue their individual claims in arbitration. The court’s order
purported to retain jurisdiction, however, to determine whether the prerequisites for class treatment of
dealer claims within an arbitration are met. The court intends to set a schedule for class discovery and
a class certification hearing. DIRECTV, Inc. and Hughes disagreed that the court could properly retain
jurisdiction to conduct class proceedings, and believed that the court’s order effectively denied
DIRECTV, Inc. its contractual right to resolve individual dealer claims in arbitrations conducted under
the Federal Arbitration Act. On May 2, 2002, DIRECTV, Inc. and Hughes filed a notice of appeal of the
order. On December 11, 2002, the appellate court denied DIRECTV, Inc.’s appeal, thus permitting the
trial court to set a schedule for class discovery and a class certification hearing. DIRECTV, Inc. and
Hughes have petitioned the California Supreme Court for review of the order, and intend to oppose
certification due to the individual nature of the claims involved, and to vigorously defend against
plaintiffs’ allegations.
***
On May 18, 2001, in Oklahoma State Court, plaintiffs Cable Connection, Inc., TV Options, Inc.,
Swartzel Electronics, Inc. and Orbital Satellite, Inc. filed a class action complaint against DIRECTV,
Inc. and Hughes. All four plaintiffs purport to be independent retailers of satellite equipment (three
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