Dish Network 1999 Annual Report Download - page 74

ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued
F–26
DirecTV
During February 2000 EchoStar filed suit against DirecTV and Thomson Consumer Electronics/RCA in the
Federal District Court of Colorado. The suit alleges that DirecTV has utilized improper conduct in order to fend off
competition from the DISH Network. According to the complaint, DirecTV has demanded that certain retailers stop
displaying EchoStar merchandise and has threatened to cause economic damage to retailers if they continued to offer
both product lines in head-to-head competition. The suit alleges that DirecTV has acted in violation of federal and
state anti-trust laws in order to protect DirecTV’s market share. EchoStar is seeking injunctive relief and monetary
damages. It is too early in the litigation to make an assessment of the probable outcome.
The News Corporation Limited
During February 1997, News Corporation agreed to acquire approximately 50% of the outstanding capital
stock of EchoStar. During late April 1997, substantial disagreements arose between the parties regarding their
obligations under this agreement. Those substantial disagreements led to litigation which the parties subsequently
settled. In connection with the News Corporation litigation, EchoStar has a contingent fee arrangement with the
attorneys who represented EchoStar in that litigation, which provides for the attorneys to be paid a percentage of any
net recovery obtained in the News Corporation litigation. The attorneys have asserted that they may be entitled to
receive payments totaling hundreds of millions of dollars under this fee arrangement. EchoStar is vigorously
contesting the attorneys’ interpretation of the fee arrangement, which it believes significantly overstates the
magnitude of its liability. EchoStar also believes that the fee arrangement is void and unenforceable because the
attorneys who represented EchoStar are seeking a fee that it believes is unreasonable and excessive, among other
things. If EchoStar is unable to resolve this fee dispute with the attorneys, it would be resolved through arbitration or
litigation. During mid-1999, EchoStar initiated litigation against the attorneys in the District Court, Arapahoe County,
Colorado, arguing that the fee arrangement is void and unenforceable. EchoStar has also asserted claims for breach
of fiduciary duty, constructive fraud, breach of the fee arrangement, and misappropriation of trade secrets against the
attorneys. In December 1999, the attorneys initiated an arbitration proceeding before the American Arbitration
Association. It is too early to determine the outcome of negotiations, arbitration or litigation regarding this fee
dispute.
WIC Premium Television Ltd.
During July 1998, a lawsuit was filed by WIC Premium Television Ltd., an Alberta corporation, in the
Federal Court of Canada Trial Division, against General Instrument Corporation, HBO, Warner
Communications, Inc., John Doe, Showtime, United States Satellite Broadcasting Company, Inc., EchoStar, and two
of EchoStar’s wholly-owned subsidiaries. The lawsuit seeks, among other things, an interim and permanent
injunction prohibiting the defendants from activating receivers in Canada and from infringing any copyrights held by
WIC. It is too early to determine whether or when any other lawsuits or claims will be filed. It is also too early to
make an assessment of the probable outcome of the litigation or to determine the extent of any potential liability or
damages.
During September 1998, WIC filed another lawsuit in the Court of Queen’s Bench of Alberta Judi cial
District of Edmonton against certain defendants, including EchoStar. WIC is a company authorized to broadcast
certain copyrighted work, such as movies and concerts, to residents of Canada. WIC alleges that the defendants
engaged in, promoted, and/or allowed satellite dish equipment from the United States to be sold in Canada and to
Canadian residents and that some of the defendants allowed and profited from Canadian residents purchasing and
viewing subscription television programming that is only authorized for viewing in the United States. The lawsuit
seeks, among other things, an interim and permanent injunction prohibiting the defendants from importing hardware
into Canada and from activating receivers in Canada, together with damages in excess of $175 million.
EchoStar filed motions to dismiss each of the actions for lack of personal jurisdiction. The Court in the
Alberta court action recently denied its Motion to Dismiss. The Alberta Court also granted a motion to add more
EchoStar parties to the lawsuit. EchoStar Satellite Corporation, EchoStar DBS Corporation, EchoStar Technologies
Corporation, and EchoStar Satellite Broadcast Corporation have been added as defendants in the litigation. The