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ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
F-39
Court’s ruling on EchoStar’s Motion for Attorney’s Fees. It is not possible to make a firm assessment of the probable
outcome of the appeal or to determine the extent of any potential liability or damages.
State Investigation
During April 2002, two state attorneys general commenced a civil investigation concerning certain of
EchoStar’s business practices. Over the course of the next six months, 11 additional states ultimately joined the
investigation. The states allege failure to comply with consumer protection laws based on EchoStar’s call response
times and policies, advertising and customer agreement disclosures, policies for handling consumer complaints, issuing
rebates and refunds and charging cancellation fees to consumers, and other matters. EchoStar has cooperated fully in the
investigation and is currently in settlement discussions with the states. It is not possible to determine the extent of any
damages or injunctive relief which could result in the event a settlement is not reached.
Retailer Class Actions
EchoStar has been sued by retailers in three separate purported class actions. During October 2000, two
separate lawsuits were filed in the Arapahoe County District Court in the State of Colorado and the United States
District Court for the District of Colorado, respectively, by Air Communication & Satellite, Inc. and John DeJong, et al.
on behalf of themselves and a class of persons similarly situated. The plaintiffs are attempting to certify nationwide
classes on behalf of certain of EchoStar’s satellite hardware retailers. The plaintiffs are requesting the Courts to declare
certain provisions of, and changes to, alleged agreements between EchoStar and the retailers invalid and unenforceable,
and to award damages for lost incentives and payments, charge backs, and other compensation. EchoStar intends to
vigorously defend against the suits and to assert a variety of counterclaims. The United States District Court for the
District of Colorado stayed the Federal Court action to allow the parties to pursue a comprehensive adjudication of their
dispute in the Arapahoe County State Court. John DeJong, d/b/a Nexwave, and Joseph Kelley, d/b/a Keltronics,
subsequently intervened in the Arapahoe County Court action as plaintiffs and proposed class representatives. EchoStar
has filed a Motion for Summary Judgment on all counts and against all plaintiffs. The plaintiffs have filed a Motion for
Additional Time to Conduct Discovery to enable them to respond to EchoStar’s motion. The Court has not ruled on
either of the two motions. It is too early to make an assessment of the probable outcome of the litigation or to determine
the extent of any potential liability or damages.
Satellite Dealers Supply, Inc. (“SDS”) filed a lawsuit in the United States District Court for the Eastern District
of Texas during September 2000, on behalf of itself and a class of persons similarly situated. The plaintiff was
attempting to certify a nationwide class on behalf of sellers, installers, and servicers of satellite equipment who contract
with EchoStar and who allege that EchoStar: (1) charged back certain fees paid by members of the class to professional
installers in violation of contractual terms; (2) manipulated the accounts of subscribers to deny payments to class
members; and (3) misrepresented, to class members, who owns certain equipment related to the provision of satellite
television service. During September 2001, the Court granted EchoStar’s Motion to Dismiss for Lack of Personal
Jurisdiction. The plaintiff moved for reconsideration of the Court’s order dismissing the case. The Court denied the
Plaintiff’s Motion for Reconsideration. The trial court denied EchoStar’s Motions for Sanctions against SDS. Both
parties have now perfected appeals before the Fifth Circuit Court of Appeals. It is not possible to make a firm
assessment of the probable outcome of the appeal or to determine the extent of any potential liability or damages.
PrimeTime 24 Joint Venture
PrimeTime 24 Joint Venture (“PrimeTime 24”) filed suit against EchoStar during September 1998 seeking
damages in excess of $10 million and alleging breach of contract, wrongful termination of contract, interference with
contractual relations, trademark infringement and unfair competition. EchoStar denied all of PrimeTime 24’s allegations
and asserted various counterclaims. EchoStar has reached a settlement agreement with PrimeTime 24 pursuant to which
the parties agreed to release all parties from any liability and dismiss the case with prejudice. The settlement amount
was not material.