Dish Network 2004 Annual Report Download - page 124

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ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued
Enron Commercial Paper Investment Complaint
During November 2003, an action was commenced in the United States Bankruptcy Court for the Southern District of
New York, against approximately 100 defendants, including us, who invested in Enron’s commercial paper. The
complaint alleges that Enron’s October 2001 prepayment of its commercial paper is a voidable preference under the
bankruptcy laws and constitutes a fraudulent conveyance. The complaint alleges that we received voidable or
fraudulent prepayments of approximately $40.0 million. We typically invest in commercial paper and notes which are
rated in one of the four highest rating categories by at least two nationally recognized statistical rating organizations. At
the time of our investment in Enron commercial paper, it was considered to be high quality and considered to be a very
low risk. The defendants have moved the Court to dismiss the case on grounds that Enron’s complaint does not
adequately state a legal claim. Those motions are currently under consideration by the Court. 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.
Bank One
During March 2004, Bank One, N.A. (“Bank One”) filed suit against us and one of our subsidiaries, EchoStar
Acceptance Corporation (“EAC”), in the Court of Common Pleas of Franklin County, Ohio alleging breach of a
duty to indemnify. Bank One alleges that EAC is contractually required to indemnify Bank One for a settlement it
paid to consumers who entered private label credit card agreements with Bank One to purchase satellite equipment
in the late 1990s. Bank One alleges that we entered into a guarantee wherein we agreed to pay any indemnity
obligation incurred by Bank One. During April 2004, we removed the case to federal court in Columbus, Ohio. We
deny the allegations and intend to vigorously defend against the claims. We filed a motion to dismiss the Complaint
which was granted in part and denied in part. The Court granted our motion, agreeing we did not owe Bank One a
duty to defend the underlying lawsuit. However, the Court denied the motion in that Bank One will be allowed to
attempt to prove that we owed Bank One a duty to indemnify. The case is currently in discovery. It is too early in
the litigation to make an assessment of the probable outcome of the litigation or to determine the extent of any
potential liability against us.
Church Communications Network, Inc.
During August 2004, Church Communications Network, Inc. (“CCN”) filed suit against EchoStar Satellite L.L.C.
(“ESLLC”) in the United States District Court for the Northern District of Alabama. CCN contends that our
contractual relationship with Dominion Video Satellite, Inc., a direct broadcast provider that airs only Christian
programming, constitutes a breach of a commercial television services agreement between ESLLC and CCN (the
“CCN Agreement”). Further, CCN contends that our reluctance to disclose the confidential provisions of the
Dominion/EchoStar agreement warrant causes of action for negligent misrepresentation, intentional
misrepresentation, and non-disclosure. We filed a motion to dismiss CNN’s complaint, or alternatively to transfer
the case to a Colorado court. The Court denied our motion to dismiss, but granted our motion to transfer. As a
result, the action was transferred to the United States District Court for the District of Colorado. Thereafter, we
filed a motion to dismiss the case in the Colorado court. The motion to dismiss is currently pending before the
Court and the case is currently in discovery.
Although the CCN Agreement specifically limits damages to $500,000, CCN initially sought $1.5 million. As this
case progressed, CCN initially increased the amount of its alleged damages to over $3.0 million and has recently
indicated that it is now seeking damages in excess of $15.0 million. As this is currently in early discovery it is not
possible to make a firm assessment of the probable outcome of the litigation or to determine the extent of any
potential liability or damages.
F–44