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TELSAT v. ENTER. & SPORTS PROG. NET.

December 11, 1990

FORT WAYNE TELSAT, PLAINTIFF,
v.
ENTERTAINMENT AND SPORTS PROGRAMMING NETWORK, DEFENDANT.



The opinion of the court was delivered by: Leisure, District Judge:

ORDER AND OPINION

This is an action by Fort Wayne Telsat ("Telsat") against ESPN, Inc. ("ESPN"),*fn1 for violations of the federal antitrust laws, and for pendent state law claims of unfair competition and interference with prospective business relations. ESPN has now moved to dismiss the complaint in this action, pursuant to Fed.R.Civ.P. 12(b)(6), for failure to state a claim upon which relief can be granted.

BACKGROUND

This case involves the distribution of programming for "subscription television." Subscription television, unlike broadcast television, requires individual viewers to pay a fee to receive programming. Cable television, which is distributed to individual viewers by means of a cable or wire, is a common form of subscription television. Another method of subscription television is known as "multichannel multipoint distribution service" ("MMDS"), which employs microwave transmission to distribute programming to viewers.

In general, there are three links in the chain of distribution of subscription television. At the beginning of the chain are "programmers," who assemble programming by creating their own television programs or by purchasing the rights to motion pictures, other television programs, or other events, such as sporting events. Programmers are, in effect, the manufacturers and wholesale distributors of subscription programming. The second link is constituted by the "operators," local companies that receive subscription programming from the programmers and, then, much like retailers, distribute the programming of various programmers to the viewers.*fn2 With respect to operators using cable technology, in most instances a single operator serves an area under an exclusive franchise granted by the local municipal or county authority. The final link of the chain is made up of "subscribers," i.e., industry parlance for viewers, who pay the operator a monthly subscription fee to receive the programming.

DISCUSSION

"The court's function on a Rule 12(b)(6) motion is not to weigh the evidence that might be presented at a trial but merely to determine whether the complaint itself is legally sufficient." Festa v. Local 3 International Brotherhood of Electrical Workers, 905 F.2d 35, 37 (2d Cir. 1990); see also Ryder Energy Distribution Corp. v. Merrill Lynch Commodities, Inc., 748 F.2d 774, 779 (2d Cir. 1984) ("The function of a motion to dismiss `is merely to assess the legal feasibility of the complaint, not to assay the weight of the evidence which might be offered in support thereof.'" (quoting Geisler v. Petrocelli, 616 F.2d 636, 639 (2d Cir. 1980))).

Thus, a motion to dismiss must be denied "unless it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974) (citing Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957)); see also Morales v. New York State Dep't of Corrections, 842 F.2d 27, 30 (2d Cir. 1988). In deciding a motion to dismiss, the Court must accept the plaintiff's allegations of fact as true, together with such reasonable inferences as may be drawn in his favor. Papasan v. Allain, 478 U.S. 265, 283, 106 S.Ct. 2932, 2943, 92 L.Ed.2d 209 (1986); Murray v. Milford, 380 F.2d 468, 470 (2d Cir. 1967); Hill v. Sullivan, 125 F.R.D. 86, 90 (S.D.N.Y. 1989) ("all allegations in plaintiffs' amended complaint must be accepted as true and liberally construed."); see also Scheuer, supra, 416 U.S. at 236, 94 S.Ct. at 1686. Federal Rule of Civil Procedure 8(a) requires only a "`short and plain statement of the claim' that will give the defendant fair notice of what plaintiff's claim is and the ground upon which it rests." Conley, supra, 355 U.S. at 47, 78 S.Ct. at 102 (quoting Fed.R.Civ.P. 8(a)).

Nevertheless, the complaint must set forth enough information to suggest that relief would be based on some recognized legal theory. Telectronics Proprietary, Ltd. v. Medtronic, Inc., 687 F. Supp. 832, 836 (S.D.N.Y. 1988) (Leisure, J.). "The District Court has no obligation to create, unaided by plaintiff, new legal theories to support a complaint." District of Columbia v. Air Florida, Inc., 750 F.2d 1077, 1081-82 (D.C. Cir. 1984). "In practice `a complaint . . . must contain either direct or inferential allegations respecting all the material elements necessary to sustain a recovery under some viable legal theory.'" Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (7th Cir. 1984) (quoting Sutliff, Inc. v. Donovan Cos., 727 F.2d 648, 654 (7th Cir. 1984) (Posner, J.) (emphasis in original) (quoting French Quarter Apartments Ltd. v. Georgia-Pacific Corp., 655 F.2d 627, 641 (5th Cir. 1981), cert. dism'd, 462 U.S. 1125, 103 S.Ct. 3100, 77 L.Ed.2d 1358 (1983))), cert. denied, 470 U.S. 1054, 105 S.Ct. 1758, 84 L.Ed.2d 821 (1985).

Having set forth the standards for evaluating motions under Rule 12(b)(6), the Court now addresses the sufficiency of Telsat's claims.

First Claim: Monopolization of Market for Subscription Television

Telsat's first claim is brought under § 2 of the Sherman Act, 15 U.S.C. § 2,*fn3 alleging monopolization by ESPN of the "market for subscription television programming services for quality sports programming in the United States." Complaint ¶ 43. "The offense of monopolization under § 2 of the Sherman Act consists of two elements: (1) the possession of monopoly power in the relevant market; and (2) the willful acquisition or maintenance of that power, as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident." Volvo North America Corp. v. Men's International Professional Tennis Council, 857 F.2d 55, 73 (2d Cir. 1988) (citing Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 596 n. 19, 105 S.Ct. 2847, 2854 n. 19, 86 L.Ed.2d 467 (1985) (quoting United States v. Grinnell Corp., 384 U.S. 563, 570-71, 86 S.Ct. 1698, 1703-04, 16 L.Ed.2d 778 (1966)); National Association of Pharmaceutical Manufacturers v. Ayerst Laboratories, 850 F.2d 904, 915 (2d Cir. 1988)); see also Delaware & Hudson Railway Co. v. Consolidated Rail Corp., 902 F.2d 174, 178 (2d Cir. 1990).

Section 2 of the Sherman Act is "aimed . . . at the acquisition or retention of effective market control." United States v. Griffith, 334 U.S. 100, 107, 68 S.Ct. 941, 945, 92 L.Ed. 1236 (1948). It is designed to prevent "a pernicious market structure in which the concentration of power saps the salubrious influence of competition." Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 272 (2d Cir. 1979), cert. denied, 444 U.S. 1093, 100 S.Ct. 1061, 62 L.Ed.2d 783 (1980). Ordinarily, the Court may infer the existence of monopoly power from a predominant share of the relevant market. United States v. Grinnell Corp., 384 U.S. 563, 571, 86 S.Ct. 1698, 1704, 16 L.Ed.2d 778 (1966). Here, Telsat has alleged in its complaint that "ESPN, by far the largest sports programming service abusively dominates the market." Complaint ΒΆ 13. Although inartfully punctuated, this allegation, immediately following an allegation that the relevant market "is the market for subscription television programming services for ...


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