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NISHIMURA v. DOLAN

October 19, 1984

JAMES Y. NISHIMURA, et al., Plaintiffs, against CHARLES F. DOLAN, et al., Defendants.


The opinion of the court was delivered by: BARTELS

BARTELS, District Judge

This case involves a dispute between two cable television companies in Huntington, Long Island, in competition for subscribers to sports programs covering the games of the Yankees, the Mets, the Islanders, and the Nets. Huntington is a town of 54,000 homes, presenting an unusual situation in the cable television systems industry in that two "overbuilt" television systems have franchises and are competing head-to-head for subscribers to their respective systems. Plaintiffs, owning one of the systems, invoke the antitrust laws in challenging the conduct of its competitor-defendant in obtaining exclusive rights to cablecast the games of these four well-known New York professional sports teams. In doing so, the complaint joins the teams as well as the competing cable system operator in violating the antitrust laws. Specifically, the plaintiffs seek treble damages, under § 4 of the Clayton Act, 15 U.S.C. § 15, for violations of section 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1 and 2, allegedly arising from various conspiracies to restrain and monopolize competition for the provision of cable television services in Huntington, New York.

 The parties having completed extensive "first wave" discovery, defendants presently move for partial summary judgment, Fed.R.Civ.P. 56(b), dismissing the defendant sports teams from the action on the counts of the complaint predicated upon alleged conspiracies to deny plaintiffs access to "essential" cable television sports programming.

 At this stage of the litigation, the court is called upon to decide, in essence, whether the teams belong in this lawsuit. The defendants, in making this motion, argue that there are no genuine issues of material fact to be tried upon this issue and that the uncontradicted evidence shows no team participation in the allegedly anticompetitive conspiracies. In contrast, the plaintiffs vigorously argue that triable issues of material fact do exist and, alternatively, that further discovery is required in order to adequately support their position. Fed.R.Civ.P. 56(f).

 I. The Parties

 The individual plaintiff, James Y. Nishimura, is the alter-ego of the three corporate plaintiffs: Communication Systems Corp. ("CSC"), Huntington TV Cable Corp. ("HTVC"), and Home Entertainment Productions, Inc. ("HEP"). He and members of his family own 100% of CSC's outstanding stock, while CSC in turn is the sole parent company of HTVC and HEP. Nishimura is also president and a director of all three corporate plaintiffs. Since 1967 plaintiff HTVC has had a franchise in Huntington, New York, for the operation of a cable television system. In addition to offering its subscribers "basic" cable television service *fn1" HTVC offers several packages or tiers of "premium" programming services for an additional monthly fee. Plaintiff HEP was organized by Nishimura to purchase premium programming services from third parties for resale to HTVC and its subscribers.

 Defendant Charles F. Dolan can similarly be described as the alter-ego of the ten defendant corporations and partnerships listed in the margin. *fn2" For the sake of convenience and except where otherwise noted, these ownership-affiliated and commonly managed entities will be collectively referred to as "Cablevision." Its businesses include the operation of numerous cable television systems in the New York metropolitan area and the original production of television programming for cable television distribution to its own systems and non-Cablevision systems. The three remaining individual defendants -- Lawrence Meli, Robert J. Sullivan, and John Tatta -- are officers of one or more of the Cablevision entities.

 Two of those entities play the most important roles in this scenario. Defendant SportsChannel Associates is a partnership (of which defendant Dolan is one of three general partners) engaged in the original production of professional and amateur sporting-events programming. Since March, 1979, SportsChannel Associates has produced, marketed and distributed a premium cable television service, known as "SportsChannel," throughout the metropolitan area, which consists of a variety of television programs on a year-round basis featuring principally sports events participated in by New York area teams. SportsChannel Associates sells "SportsChannel" to cable system operators not controlled by Cablevision as well as to those owned by Cablevision. An important exception and the cause of this action, as will be discussed infra, is the refusal by SportsChannel Associates to sell "SportsChannel" to plaintiff HTVC.

 The second Cablevision entity of immediate importance is Cablevision of Huntington which, since December, 1981, has operated a cable television system in direct competition with HTVC in Huntington. Cablevision of Huntington offers "SportsChannel" to its subscribers as a premium service, having acquired the rights to do so from its sibling entity, defendant SportsChannel Associates.

 The remaining group of defendants of greatest significance for purposes of this motion consists of four New York area professional sports teams *fn3" (collectively referred to as "the teams"): Nassau Sports Ltd., which stages professional ice hockey games with its team, the New York Islanders ("Islanders"); Meadowlands Basketball Associates, which stages professional basketball games with its team, the New Jersey Nets, formerly known as the New York Nets ("Nets"); Doubleday Sports, Inc., and New York Yankees Partnership, both of which stage professional baseball games with their respective teams, the New York Mets and the New York Yankees ("Mets" and "Yankees"). At least since 1979, each of the teams has had an exclusive contractual relationship with Cablevision permitting a certain number of their games to be cablecast on "SportsChannel."

 II. The Complaint

 Plaintiffs' seventeen-count complaint is prolific in its charges and seeks relief under sections 1 and 2 of the Sherman Act (Counts I to XI) and also sets forth pendent state antitrust (Count XII) and common law tort claims (Counts XIII to XVII).Defendants' summary judgment motion addresses Counts I through IX and Count CII; the remaining counts neither involve the teams nor allege unlawful conduct in connection with the denial of access to sports programming. The claims contained in the subject counts will be collectively referred to as the "sports claims."

 The complaint contains a number of predicate allegations which are incorporated by reference into each of the sports claims. Among the most important of these, all found in paragraph 39 of the complaint, are that the "ability to cablecast to subscribers games of the . . . professional New York teams is essential to successfully compete in the cable television industry in Huntington"; that the games staged by each defendant team constitute "a distinct product for which there is strong demand among cable television subscribers in Huntington"; that these games have not adequate programming substitutes; and that "but for" Cablevision's exclusive control of the sublicensing of rights to cablecast the teams' games, Cablevision of Huntington would not have overbuilt HTVC's system.

 Counts I through IC of the complaint charge the defendants with violating §§ 1 and 2 of the Sherman Act by conspiring to restrain and monopolize horizontal competition in the cable television trade in Huntington. The alleged means employed by the defendants were the teams' grant of exclusive production and distribution rights to Cablevision followed by Cablevision's refusal to sublicense the teams' games to HTVC so that its own cable system could cablecast the games exclusively. Counts V through VIII charge various horizontal and vertical conspiracies among the defendants in violation of § 1 of the Sherman Act, the purpose of these conspiracies being the elimination of competition among the teams, and among the teams and Cablevision, in the production and sale of cablecast rights to the teams' games. In furtherance of such conspiracies defendants have allegedly agreed to limit the number of games available for cablecasting; have participated in a tying arrangement comparable to block booking; have agreed to produce and distribute the games through a single entity (Cablevision); and have refused to deal with plaintiffs and others similarly situated. Finally, Count IX alleges that, in violation of §§ 1 and 2, Cablevision conspired with the teams to misuse its monopoly power in its noncompetitive franchise areas within the New York metropolitan area to obtain exclusive production and sublicensing rights and especially to secure exclusive cablecasting rights in Huntington in order to establish a monopoly there.

 III. Background

 A. Cable Television Franchises in Huntington

 In late 1967, HTVC and the Town of Huntington entered into a non-exclusive franchise agreement for the construction and operation of a cable television system. When it commenced operating in 1971, HTVC was capable of serving eighty percent of Huntington'S 54,000 homes, the remainder being in areas where utility lines were underground and thus more costly to connect than where above-ground utility poles were available. Until 1981, HTVC had a de facto monopoly in the provision of cable television to residents in Huntington.

 The demise of HTVC's monopoly can be traced back to 1969, when the Town of Huntington awarded a co-franchise to Inter-County Television of Suffolk, Inc. ("Inter-County"). However, the latter took no steps to construct a cable television system, and its franchise remained fallow until Cablevision acquired Inter-County in 1973. Then Inter-County unsuccessfully sought confirmation of its franchise from the New York State Commission on Cable Television ("Cable Commission"), see N.Y. Exec. Law § 821 (McKinney 1982). Nonetheless, prompted by concern over HTVC's failure to connect homes not accessible by above-ground utility poles, in 1976 the Town of Huntington executed a new franchise agreement with Inter-County requiring it to serve homes in those areas and permitting it to "overbuild" *fn4" HTVC's existing system. In March, 1978, over the vigorous opposition of HTVC, the Cable Commission approved the new franchise agreement. After two years of construction, during and even after which time HTVC unsuccessfully brought six separate proceedings before the Cable Commission and in the state court to block construction and invalidate the franchise, Cablevision of Huntington began operating in December, 1981. Since that time HTVC and Cablevision of Huntington have been in direct competition for most of Huntington's existing and new subscribers.

 B. Excusive Contracts Between Cablevision and the Teams

 Since 1975 Cablevision has entered into a number of contracts with the teams granting it certain exclusive rights in connection with the productioon and distribution of sports programming for cablecasting the teams' games in the metropolitan area. It is important to note that the contracts covered the entire metropolitan area and not Huntington alone. Because these contracts are of the utmost importance the court believes that the essential features of the contracts shared by all the teams, as well as a summary description of the individual contracts on a team-by-team and chronological basis, should be set forth pointing out those terms governing duration and exclusivity.

 1. Essential Features of the Contracts

 The basic scheme of the several contracts, exceptions to which will be noted on a team-by-team basis, infra, was the grant to Cablevision of the exclusive license to produce the same programming and to sublicense cablecasting rights to operators of cable television systems within the teams' "home territory." Such systems would include those owned by Cablevision and those owned by others.Since 1979, when SportsChannel Associates created "SportsChannel," all of the teams' cablecast games have been sublicensed to cable operators as a part of the "SportsChannel" premium cable television service. The teams contracts almost invariably gave Cablevision the right to sublicense all cable system operators within a given territory (generally the New York metorpolitan area and in all cases inclusive of Huntington) but did not obligate Cablevision to sublicense all potential sublicensees. The language whereby Cablevision retained sublicensing discretion varied greatly from contract to contract. Some of the contracts specifically provided that Cablevision had no obligation to sublicense non-Cablevision owned systems (such as HTVC) which were competing in the same geographic area against Cablevision systems (such as Cablevision of Huntington). The teams, of course, in granting exclusive sublicensing rights to Cablevision, gave up all rights themselves to deal independently with third-party cable system operators seeking to cablecast the teams' games.

 Since the inception of "SportsChannel" in 1979, all of the contracts have provided that Cablevision be solely responsible for the production and origination of the sporting events carried on "SportsChannel" and the costs thereof. For the home games of two of the teams -- the Nets and the Islanders -- Cablevision has generally leased production facilities from an independent sports-programming producer. For the home games of the Mets and Yankees, Cablevision has leased the production facilities of two local broadcast stations which have separate agreements with those teams for the broadcasting of a certain number of the teams' games. *fn5" The Mets and Yankees agreements have provided that the teams would use their best efforts to make the broadcasters' facilities available for Cablevision's use. For those away games of the teams cablecast by Cablevision on ...


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