DIRECTV 2003 Annual Report Download - page 26

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THE DIRECTV GROUP, INC.
claims regarding recoupment of fees and costs paid to date. The NRTC will no longer have the obligation to pay
DIRECTV’s costs of defense, including attorneys’ fees, of any litigation other than Pegasus’ current litigation
pending in the Central District of California, and the NRTC will not be required to indemnify DIRECTV for any
judgment entered in the Pegasus Development Corporation patent litigation described below unless and until a
court has entered final judgment that the NRTC has such obligation.
***
Independent Retailer Litigation. In April 2001, Robert Garcia, doing business as Direct Satellite TV, an
independent retailer of DIRECTV system equipment, instituted arbitration proceedings against DIRECTV U.S.
in Los Angeles, California regarding commissions and certain chargeback disputes. On October 4, 2001, Mr.
Garcia filed a class action complaint against DIRECTV U.S. in Los Angeles County Superior Court asserting the
same 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 U.S.
moved to dismiss and compel arbitration. On April 17, 2002, the Court entered an order compelling plaintiffs in
the purported class to pursue their individual claims in arbitration, but the court purported to retain jurisdiction to
determine whether there should be class treatment of dealer claims within the arbitration. DIRECTV U.S.
appealed the order which was denied by both the appellate court and the California Supreme Court. On June 23,
2003, the U.S. Supreme Court issued its decision in the case Bazzle v. Green Tree Financial Corp., finding that
whether an agreement to arbitrate permits class action arbitration is a decision for the arbitrator, not a court, to
make. On October 6, 2003, the U.S. Supreme Court granted DIRECTV U.S.’ writ of certiorari vacating the state
court decision and remanding the Garcia case for further proceedings consistent with the Bazzle decision. The
California Court of Appeals issued an opinion on January 28, 2004 in which it reversed the April 17, 2002 order
and remanded the case to the trial court with directions to remand the case to arbitration. On February 23, 2004,
the trial court compelled the matter to arbitration and relinquished all jurisdiction in connection with the case.
The matter is now pending before the American Arbitration Association.
***
On May 18, 2001, plaintiffs Cable Connection, Inc., TV Options, Inc., Swartzel Electronics, Inc. and Orbital
Satellite, Inc. filed a class action complaint against DIRECTV U.S. in Oklahoma State Court, alleging claims
similar to those in the above-described Garcia matter on behalf of all DIRECTV dealers. The plaintiffs seek
unspecified damages and injunctive relief. As in the Garcia matter, the trial court granted DIRECTV U.S.’ motion
to compel arbitration, but purported to retain jurisdiction to determine whether there should be class treatment of
retailer claims within the arbitration. On January 7, 2003, the Oklahoma State Supreme Court issued an order
permitting DIRECTV U.S. to proceed with an appeal of the trial court order. The appeal was stayed because of the
Bazzle case. Following the Bazzle decision, DIRECTV U.S. and plaintiffs stipulated to dismiss the appeal and treat
the matter in accordance with the Bazzle decision, but the Oklahoma State Supreme Court, in a communication
dated July 23, 2003, has decided to retain jurisdiction and has not yet issued any further orders. On March 12, 2004,
the plaintiffs served upon DIRECTV U.S. a Statement of Claim and Demand for Class Action Arbitration in Los
Angeles, California essentially repeating the allegations and demands made in the litigation.
***
Intellectual Property Litigation. On June 27, 2000, SuperGuide Corporation filed suit in the U.S. District
Court for the Western District of North Carolina against DIRECTV Enterprises, LLC, DIRECTV, Inc. and
DIRECTV Operations, LLC, which we refer to together in this paragraph as the DIRECTV defendants, the
Company, Thomson Consumer Electronics, EchoStar Communications Corporation, EchoStar Satellite
Corporation and EchoStar Technologies Corporation, alleging patent infringement and seeking unspecified
damages and injunctive relief. Gemstar Development Corp. was added as a third party defendant because it
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