Free Motion to Consolidate Cases - District Court of Colorado - Colorado

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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 05-cv-1295 EWN-PAC DOMINION VIDEO SATELLITE, INC., Plaintiff, v. ECHOSTAR SATELLITE L.L.C., Defendant. ______________________________________________________________________________ BRIEF IN SUPPORT OF DOMINION'S MOTION FOR TEMPORARTY RESTRAINING ORDER AND PRELIMINARY INJUNCTION IN AID OF ARBITRATION ______________________________________________________________________________ INTRODUCTION It is with utmost regret that Plaintiff Dominion Video Satellite, Inc. ("Dominion") returns again to this Court to request preliminary injunctive relief in order to preserve the status quo with respect to its contract with Defendant EchoStar Satellite, L.L.C. ("EchoStar"), while Dominion initiates a third arbitration to remedy EchoStar's latest refusal to honor the parties' contract. EchoStar has threatened to terminate its contract with Dominion, and refuses to defer that step to preserve the status quo while the parties' disagreements are arbitrated. Without an injunction ordering EchoStar to continue performance pending arbitration, EchoStar intends to terminate the agreement and Dominion will go out of business, making the arbitration nothing more than a hollow formality.

Exhibit 3

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Under the parties' Agreement, in addition to its predominantly Christian-themed programming, Dominion is allowed to broadcast up to 15 channels of secular, "family-friendly" programming, provided that EchoStar is first afforded the opportunity to broadcast such a unique "Family Pack" exclusively to Dominion's subscribers, and opts not to pursue that arrangement. Dominion gave EchoStar the required notice and opportunity, but EchoStar declined, and raised no objection to the programmers Dominion proposed. In reliance, Dominion then entered into long-term programming commitments with several programmers and started broadcasting certain family-friendly channels. In response, EchoStar blocked routine updates to Dominion's electronic-programming guide (to reflect the new channels) and then declared, without any prior discussion, that Dominion was in breach and that unless cured, EchoStar would terminate the Agreement. EchoStar's notice of breach does not question Dominion's right to air the Family Pack, but instead seeks to dictate the pricing and content of programming that Dominion would offer to its own subscribers at its sole expense. Dominion depends on its lease of satellite capacity from EchoStar to broadcast its "Sky Angel" network. If the lease terminates, then Dominion's sole programming outlet disappears, its customers' television screens will go dark, and Dominion will go out of business. To prevent this irreversible and irreparable harm, Dominion requests a temporary restraining order and preliminary injunction to preserve the status quo pending arbitration.

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FACTUAL AND PROCEDURAL BACKGROUND A. Contractual Relationship

Dominion is licensed by the Federal Communications Commission ("FCC") to operate DBS high-power television frequencies. These DBS frequencies permit delivery of television and radio programming directly to homes, churches, schools, and businesses throughout the continental United States for reception with a small 18-inch parabolic antenna. (See attached Declaration of Robert W. Johnson, Jr. ("R. Johnson Decl.") ¶ 5.) Dominion employs its FCC license to operate a television-programming network known as "Sky Angel." Sky Angel broadcasts predominantly Christian religious, minority and educational programming to homes and churches. (Id. ¶ 6.) Dominion broadcasts Sky Angel programming from two transponders1 on a satellite owned by EchoStar, pursuant to a July 18, 1996 "Direct Broadcast Service Transponder Lease, Channel Use and Programming Agreement" between the parties (the "Agreement"). (Id. ¶¶ 8 ­ 9 and Exhibit 1 thereto.)2 EchoStar, like Dominion, is also an FCC-licensed DBS provider. EchoStar operates the DBS system known as the "DISH Network." EchoStar broadcasts the DISH Network and other programming from other transponders on the EchoStar satellite, as well as from transponders on other satellites.

1

Transponders are the devices on satellites that receive signals from earth and retransmit them over a broad coverage area for reception by individual customer's antenna. The original parties to the Agreement also included Directsat Corporation, Direct Broadcasting Satellite Corporation and Direct Broadcast Satellite Corporation, which have all since been merged into EchoStar Satellite L.L.C.. 3
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Dominion's FCC license authorizes it to broadcast from eight frequencies on a satellite at the 61.5 degree orbital location, where the EchoStar satellite is situated. Under the Agreement as amended, EchoStar leases eight transponders on the EchoStar satellite to Dominion, and in return Dominion subleases back to EchoStar six of its frequencies together with the FCC license rights, which permits EchoStar to employ those six frequencies for its own broadcasting for the 12 ­ 14 year life of the EchoStar satellite. (R. Johnson Decl. ¶¶ 7 ­ 8.) The Agreement contains certain restrictions on the programming genres that EchoStar may include on the DISH Network and that Dominion may include on Sky Angel (the "Exclusivity Provisions"). (Exhibit 1 to R. Johnson Decl., §§ 8.1-8.3.) Under the Exclusivity Provisions, subject to certain exceptions, EchoStar is prohibited from transmitting channels with predominantly Christian programming on the DISH Network except pursuant to arrangements already in place at the time the Agreement was executed. (Id.) Dominion is similarly restricted from broadcasting non-Christian channels of programming. B. Current Dispute

The Agreement's programming-exclusivity restriction on Dominion includes an exception, which allows Dominion to broadcast up to 15 channels of family-friendly secular programming (the "Family Pack"), provided that Dominion gives EchoStar 60-days notice of its intent to offer such programming, and EchoStar elects not to provide this programming package directly to Dominion's subscribers at EchoStar's sole expense. (Id. § 8.2 and Amendment I, § 10.) The Family Pack was an integral part of the original vision for Sky Angel, and was viewed as the key to expanding the market for Sky Angel subscriptions. (R. Johnson Decl. ¶ 11.)

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Dominion has discussed the prospect of EchoStar offering a Family Pack of programming to Dominion's subscribers for years, but EchoStar has never been willing to proceed. (Id.) On November 12, 2004, Dominion provided EchoStar with the required 60-day notice, stating its intent to exercise its rights under Agreement Section 8.2, and offered EchoStar the opportunity to broadcast Family Pack to Dominion's customers. (Exhibit 2 to R. Johnson Decl.) In the November 12 letter, Dominion listed the 15 programmers that it wanted to be broadcast to Dominion subscribers in the Family Pack.3 (Id.) On January 13, 2005, Dominion followed up with an e-mail to EchoStar President Charlie Ergen, again indicating Dominion's intention to proceed with Family Pack. (Exhibit 3 to R. Johnson Decl.) By e-mail dated January 20, 2005, 69 days after the notice to EchoStar, Ergen responded, without expressing any EchoStar interest in or intent to pursue Family Pack broadcasts, stating that "we have not [sic] deal except the one we have, so we understand you will want to continue to look at all your options." (Id.)4 Ergen did not express any EchoStar desire to broadcast Family Pack itself, and did not object to Dominion's proposed broadcast of this programming package or any of the proposed terms, including the substitution of programmers. (Id.) In reliance on EchoStar's decision to not exercise its option to pursue Family Pack broadcasts to Dominion's subscribers, or to object to any of the terms or programmers set forth in Dominion's letter, Dominion negotiated long-term contracts with certain programmers, including

3

Certain programmers were substituted for those listed in the Agreement that have since stopped broadcasting. Neither Ergen nor anyone at EchoStar objected to the specific channels listed, nor to Dominion's substitution of programmers that might be included in the Family Pack. (Exhibit 1 to R. Johnson Decl. § 5.1.) 5
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Fox News, Hallmark, and Home and Garden Television ("HGTV"). (R. Johnson Decl. ¶ 16.) On May 10, 2005, Dominion began broadcasting Fox News. (Id. ¶ 17.) On May 28, 2005, it began broadcasting the Hallmark Channel, and on June 2, 2005, the Hallmark Movie Channel. (Id. ¶ 17.) On June 17, 2005, it entered into a programming agreement with HGTV, which is scheduled to begin airing in August, 2005. Consistent with the Parties' practice for all

programming changes since Dominion began broadcasting, Dominion substituted the new channels into the programming transmittals to EchoStar's facility for "uplink" to the satellite.5 EchoStar did not block or otherwise object to the changed programming being broadcast on Sky Angel. (Id. ¶ 18.) As part of the Parties' normal business procedure, when Dominion makes programming changes, it also updates the identifying and programming data for each channel so that the Electronic Programming Guide ("EPG") correctly reflects the program schedule being broadcast on each channel. (Id. ¶ 19.) The EPG is the customary information transmitted for every DBS channel identifying for viewers the programming on that channel.6 This is accomplished by Dominion giving program information to a third-party vendor, Tribune Media Services, ("Tribune"), which also manages the EPG for EchoStar's DISH Network broadcasts. Tribune makes the relevant changes in the programming data and transmits that data to EchoStar to be uplinked along with the programming. (Id. ¶ 20.) This has been the arrangement and practice with EchoStar ever since the Agreement was signed in 1996, and has never been a source of

5 6

The "uplink" facility transmits signals to the satellite for retransmission to earth.

The EPG data is "uplinked" to the satellite along with the programming and conditional access signals as a customary and inherent part of the DBS operations, and falls within the uplinking services that are part of the Agreement. (See Exhibit 1 to R. Johnson Decl., § 5.1.) 6

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disagreement. (Id. ¶ 21.) Indeed, changes to the EPG information for Dominion's Sky Angel channels have been made routinely by Tribune -- and uplinked by EchoStar -- no fewer than 60 times since the Agreement was signed. (Id. ¶ 21.) Daily program schedules are refreshed routinely. (Id.) On June 15, 2005, EchoStar flatly declared Dominion to be in breach and stated that EchoStar "will terminate the Agreement." (Exhibit 4 to R. Johnson Decl.)7 EchoStar also terminated all updates to the EPG for the family-friendly programming package, refusing for the first time ever to permit the changed data to be uplinked with the programming. (Id. ¶ 22.) EchoStar has stated that, because it considers the manner in which Dominion is broadcasting Family Pack to be inconsistent with the Agreement, it has blocked uplink of the updated EPG information. (Exhibit 4 to R. Johnson Decl.) Consequently, old and outdated EPG information for earlier programming appears on the screens of viewers who tune in to any of the new Family Pack channels, which may violate Dominion's contractual commitment to its programmers to have accurate EPG information for the channels.8 This type of "self help" conflicts with a previous arbitration ruling that EchoStar does not have the right to refuse contract services "in

7

The Agreement provides that Dominion shall be in breach and default if Dominion fails to observe the Agreement's terms after notice from EchoStar and a thirty day right to cure. (Exhibit 1 to R. Johnson Decl., § 11.1.1 (a)). EchoStar may then terminate the Agreement upon such an "Event of Default," subject to further opportunities to cure. (Id., § 12.2.2.)

In addition, this prevents viewers from knowing in advance what programs are going to be broadcast, engaging parental locks, or arranging to record programs. 7

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order to enforce its view of its rights under the Agreement ...." (Exhibit 5 to R. Johnson Decl., p. 3.)9 Dominion has attempted to address EchoStar's objections, first in written

communications and then by sending its representatives to Colorado to meet with EchoStar's General Counsel. (See attached Declaration of Thomas G. Scott, Esq. ("T. Scott Decl.") ¶¶ 5-7.) Dominion asked EchoStar to confirm that it would comply with its obligations under the Agreement by: (i) not terminating the Agreement without further written notice and a 90-day opportunity to cure as provided in Agreement Section 12.2.2; (ii) continuing performance under the Agreement pending completion of arbitration proceedings if the parties did not achieve a negotiated resolution of their differences; and (iii) ceasing to interfere with Dominion's programming by blocking current EPG information on Sky Angel channels. (Id. at ¶ 8.) Despite Dominion's request and the Agreement's termination provisions, EchoStar has taken the position that it is entitled to terminate the Agreement on July 15, 2005 (thirty days after it unilaterally declared Dominion in breach).10 (Id. at ¶¶ 7-9.) EchoStar also has declined to agree to continue

Indeed, EchoStar's self-help tactics are even more egregious than the ones that this Court described as "heavy handed" in 2001 when granting Dominion's requested injunction in the aid of arbitration. In that case, rather than initiate arbitration, EchoStar threatened to stop activating all new Sky Angel subscribers if Dominion did not pay more than $7 million in alleged subsidies (which an arbitration panel ultimately ruled that EchoStar was not entitled to recover). Now, rather than simply stopping Dominion from adding subscribers, EchoStar is threatening to stop broadcasting Sky Angel programming altogether.
10

9

EchoStar's counsel did offer to continue broadcasts for 90 days, but only if Dominion gave EchoStar additional consideration -- 14-days written notice before seeking a temporary restraining order or commencing any other legal proceeding against EchoStar. (T. Scott Decl. at 8

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performance under the Agreement pending arbitration by broadcasting Dominion programming and the correct EPG data. (Id. at ¶¶ 8-9.) ARGUMENT Injunctive relief is appropriate to preserve the status quo pending arbitration. Dominion asks that the Court enter an injunction to preserve the status quo pending another arbitration between the parties. Injunctive relief is appropriate to protect and preserve the status quo pending arbitration. Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dutton, 844 F.2d 726, 728 (10th Cir. 1988); Hughley v. Rocky Mountain Health Maint. Orgs., Inc., 927 P.2d 1325, 1330 (Colo. 1996) (en banc) ("[A] trial court has the authority to grant preliminary injunctive relief to preserve the status quo pending the outcome of arbitration."). In Hughley, the court recognized that preliminary injunctive relief may be necessary to prevent an agreement to arbitrate from becoming a "hollow formality or result in a futile endeavor." 927 F.2d at 13291330. Under the familiar injunction standard of Rule 65, Dominion is entitled to a preliminary injunction pending arbitration if it can show: (1) (2) (3) (4) irreparable harm unless the injunction is issued; that the threatened injury to Dominion outweighs any harm that the preliminary injunction may cause EchoStar; that the injunction will not adversely affect the public interest; and a substantial likelihood of prevailing on the merits.

¶ 7.) This would have exposed Dominion to having its broadcasts shut down before it could even prevent that outcome. 9

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Fed. R. Civ. P. 65. See also Fed. Lands Legal Consortium v. United States, 195 F.3d 1190, 1194 (10th Cir. 1999). If the first three elements are met, Dominion does not need to show a

substantial likelihood of success on the merits. Rather, an injunction to preserve the status quo pending arbitration rests on the need to protect the arbitration process and to avert irreparable injury. See Hughley, 927 P.2d at 1329-1330, 1332. Thus, "[w]hen a party seeking a preliminary injunction satisfies the first three requirements, the standard for meeting the fourth `probability of success' prerequisite becomes more lenient." Resolution Trust Corp. v. Cruce, 972 F.2d 1195, 1198 (10th Cir. 1992). In those circumstances, "the movant need only show `questions going to the merits so serious, substantial, difficult and doubtful, as to make them a fair ground for litigation.'" Id. at 1199. A. If EchoStar is permitted to terminate the Agreement pending arbitration, Dominion will go out of business and the arbitration process will become an empty formality, causing Dominion irreparable injury.

Unless the Court issues an injunction compelling EchoStar to continue performing its contract obligations pending another arbitration, Dominion will suffer immediate and irreparable injury; it will go out of business. "A threat to trade or business viability may constitute

irreparable harm." Tri-State Generation and Transmission Ass'n, Inc. v. Shoshone River Power, Inc., 805 F.2d 351, 356 (10th Cir. 1986) (citing Roso-Lino Beverage Distributors, Inc. v. CocaCola Bottling Co., 749 F.2d 124, 125-26 (2d Cir. 1984)). In Tri-State, the Tenth Circuit held that in the absence of an injunction, the defendant -- which had entered into a requirements contract under which plaintiff purchased electric power from defendant -- would almost certainly sell all its assets, causing a default of the requirements contract and essentially putting the plaintiff out of business while the litigation progressed. Id. The court found that even if the plaintiff eventually 10

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won a trial on the merits, it would be an "empty victory" because while the dispute was being resolved, the company would have gone out of business. Id. Under those circumstances, an injunction was appropriate to prevent the asset sale and preserve the plaintiff's business viability pending a trial on the merits. Id. See also Valdez v. Applegate, 616 F.2d 570, 572 (10th Cir.

1980) (a person forced out of business may be considered to be irreparably harmed); John B. Hull, Inc. v. Waterbury Petroleum Prods., Inc., 588 F.2d 24, 28-29 (2d Cir. 1978) (possibility of going out of business is irreparable harm); Great Salt Lake Minerals and Chemicals Corp. v. Marsh, 596 F. Supp. 548, 557 (D. Utah 1984) (irreparable injury exists where plaintiffs ran a substantial risk of being put out of business by the contract breach). In the arbitration context, courts hold that irreparable injury arises where a plaintiff suffers non-compensable harm during the arbitration proceedings. Because the plaintiff cannot be compensated for this injury, even if they ultimately win on the merits through arbitration, courts will issue a preliminary injunction in aid of arbitration to protect the integrity of the arbitration process itself. For example, in Hughley, the court found that "preliminary relief is particularly appropriate where resort to arbitration may prove futile if the status quo is not preserved ...." 927 P.2d at 1330. In that case, a cancer patient asked that the court compel her HMO to continue paying for medical treatment while the parties arbitrated the coverage of certain requested treatments. Id. at 1328. Because there was a substantial risk that the plaintiff's health might deteriorate or she might die during arbitration proceedings, the Colorado Supreme Court found that even should she "prevail at arbitration, she may otherwise be denied an effective remedy because the status quo was not maintained." Id. at 1330.

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Similarly, in the collective-bargaining context, the Tenth Circuit has held that irreparable injury exists where failure to issue injunctive relief would "undermine the integrity of the arbitration process by making an eventual award only an `empty victory.'" Oil, Chemical and Atomic Workers Int'l Union v. Amoco Oil Co., 885 F.2d 697, 704 (10th Cir. 1989) (quoting Lever Bros. Co. v. Int'l Chemical Workers Union, Local 217, 554 F.2d 115, 122 (4th Cir. 1976)). In Amoco, the Union sought to enjoin the employer's drug-testing program pending arbitration under the relevant collective-bargaining agreement. Id. The Amoco court found that permitting random drug testing to continue pending arbitration would subject employees to an invasion of privacy, stigmatization, and humiliation which could not be compensated in money damages after an arbitrator ruled on the merits. Id. at 707. Because any subsequent arbitration award could not make them whole, such an award would be an "empty victory," and the purpose of the arbitration provision itself would be undermined. Id. Thus, injunctive relief was appropriate to prevent irreparable harm to the integrity of the arbitration process. Id. See also Communications

Workers of Am. v. U.S. West Communications, 744 F. Supp. 1031, 1033 (D. Colo. 1990) (injunctive relief is proper to prevent injury to integrity of the arbitration process by making eventual award an "empty victory." ) (quoting Amoco, 885 F.2d at 704)). Here, if EchoStar is permitted to terminate the Agreement while Dominion seeks a ruling on the merits from an arbitration panel as required by the contract, Dominion will no longer have any means to broadcast its Sky Angel network and the company will essentially shut down. Under the Agreement, EchoStar is obligated to broadcast Dominion's programming from two of the transponders located on the EchoStar satellite. This is Dominion's sole means of airing the Sky Angel network to its subscribers, who pay monthly charges for the service. (R. Johnson 12

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Decl. ¶ 27.) If EchoStar terminates the Agreement, then Dominion will no longer be able to broadcast, and its customers will not be receiving the television programming for which they pay Dominion. As such, termination of the Agreement will effectively end Dominion's existence as a business while it seeks to arbitrate the underlying dispute. Dominion is a small business that cannot afford to remain idle or place its workforce and facilities into a "stand-by" posture. (R. Johnson Decl. ¶ 29.) Nor could it expect its customers simply to "wait and see" what happens. (Id.) Even if Dominion were later to prevail, and have its Agreement rights confirmed, the lost business and harm to its good will and reputation from having the Sky Angel Network simply go "dark" during extended arbitration proceedings would be irreparable (assuming Dominion had sufficient viability remaining to attempt to resume operations). And even if an arbitration panel eventually finds in Dominion's favor, without requiring that EchoStar continue to perform, it will be a purely symbolic victory because EchoStar will have used the process to put Dominion out of business. This is the quintessential situation where injunctive relief in aid of arbitration is appropriate. Moreover, the Parties have contractually stipulated that their respective rights are unique, that no adequate remedy at law exists for their breach, and that such a breach causes irreparable injury. (Exhibit 1 to R. Johnson Decl. § 12.3.1.) Although the Tenth Circuit has held that, standing alone, this contractual provision does not support a preliminary injunction, Dominion Video Satellite, Inc. v. EchoStar Satellite Corp., 356 F.3d 1256, 1266 (10th Cir. 2004), it also noted that it is appropriate to consider such a stipulation where other factors also establish that the harm is irreparable. Id. (citing North Atlantic Instruments, Inc. v. Haber, 188 F.3d 38, 49 (2d Cir. 1999); Ticor Title Inc. Co. v. Cohen, 173 F.3d 63, 68-69 (2d Cir. 1999); True North 13

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Communications Inc. v. Publicis S.A., 711 A.2d 34, 44-45 (Del. Ch. 1998)). Indeed, the contract specifically provides that either party may obtain a preliminary injunction "in aid of the exercise of any power or right granted in this Agreement ...." (Exhibit 1 to R. Johnson Decl. ¶ 12.3.1.) When considering a similar clause stipulating to continued performance while pursuing arbitration, the Eighth Circuit has held that the movant need not show irreparable injury to obtain a status-quo injunction in aid of arbitration. See Peabody Coalsales Co. v. Tampa Elec. Co., 36 F.3d 46, 48 (8th Cir. 1994) ("[W]e disagree with [the] assertion that a showing of irreparable harm is necessary to support an order requiring performance pending arbitration."). Thus, while not dispositive, the Court should still consider the parties' agreement to a preliminary injunction in aid of arbitration when considering whether irreparable injury exists. In this case, without injunctive relief, Dominion will have no protection against EchoStar's termination of the Agreement and destruction of Dominion's business; effectively allowing EchoStar to litigate Dominion out of existence while arbitration proceeds. This is the exact result that this Court attempted to avoid when it issued Dominion's requested injunction in aid of arbitration in 2001. Dominion's relationship, reputation, and goodwill with its customers, including those who have already paid for lifetime subscriptions, will also be imperiled. To protect Dominion's existence and standing, as well as the integrity of the arbitration process, the Court should once again issue an injunction maintaining the status quo while the parties submit their disputes to arbitration.

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B.

The balance of the harms favors entering injunctive relief pending arbitration.

Allowing EchoStar to terminate the Agreement while arbitration is pending would effectively end Dominion's existence. As such, failure to enjoin EchoStar's termination of the Agreement and to order its continued performance in aid of arbitration would be devastating to Dominion. See Tri-State, 805 F.2d at 357 (possible threat to plaintiffs' existence outweighs any harm to defendants' inability to proceed with asset sale). In contrast, the impact on EchoStar of an injunction requiring that it continue to operate in the same manner that it has for the past nine years will have no adverse impact. EchoStar has more than eleven-million DISH Network subscribers, and about 20,000 employees. www.dishnetwork.com. See

It has over 500 different channels, which cover nearly every

conceivable subject matter. Id. A requirement that EchoStar continue to perform under the Agreement will not impact its business, in contrast to the potential devastation Dominion faces if an injunction is not entered. C. An injunction will not adversely affect the public interest.

It is in the public interest for EchoStar to continue to perform its contract obligations pending arbitration. See Union Nat. Life Ins. Co. v. Tillman, 143 F. Supp. 2d 638, 646 (N.D. Miss. 2000) ("[T]he public has an interest in not allowing parties to unilaterally breach binding contracts ...."); Home Shopping Club, Inc. v. Roberts Broad. Co. of Denver, 961 P.2d 558, 562 (Colo. Ct. App. 1998) ("[T]he business community must be able to rely on its contractual arrangements and agreements."). Conversely, permitting EchoStar to litigate Dominion out of existence as one of its competitors is plainly not in the public interest. See C.R.S. § 6-4-102 ("competition is fundamental to the free market system and will yield the best allocation of our 15

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economic resources, the lowest prices, the highest quality commodities and services, and the greatest material progress."). Further, there is a strong public policy in favor of enforcing arbitration agreements, and an injunction designed to preserve the integrity of such agreements is in the public interest. See Tri-State, 885 F.2d at 709 n. 18 (injunction pending arbitration appropriate to further the peaceful resolution of labor disputes through voluntary arbitration). D. There are substantial issues going to the merits that justify preliminary injunctive relief.

EchoStar has threatened to terminate the Agreement, and thus Dominion's business, based solely on its claim that the manner in which Dominion is broadcasting Family Pack is inconsistent with the contract. Dominion, however, has complied with both the letter and spirit of the Agreement's Family Pack provisions, and EchoStar's threatened termination appears to be nothing more than its usual "business-by-litigation" strategy that has caused so much prior conflict between the parties. As explained above, Dominion provided EchoStar the requisite right of first refusal to broadcast Family Pack, which EchoStar declined. See supra, pp. 4-6. In reliance on this response, Dominion has entered into contracts with secular programmers, and has already started broadcasting certain secular family friendly channels on Sky Angel. (R. Johnson Decl. ¶ ¶ 18 19.) Only after Dominion asked EchoStar why it was blocking updated EPG information for the new channels did EchoStar raise any objection to Dominion's broadcast of the secular channels. (Exhibits 1-3 to T. Scott Decl.; Exhibit 4 to R. Johnson Decl.) EchoStar does not take issue with Dominion's right to broadcast Family Pack in general, but merely the number of

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channels in the package, the substitution of channels (of which EchoStar was given more than two months notice), and the pricing for this programming. (Exhibit 4 to R. Johnson Decl.) Dominion followed all the required contractual provisions before beginning its broadcast of the family-friendly programming on which EchoStar bases its threat to terminate the Agreement. (R. Johnson Decl. ¶¶ 14 - 16.) And, EchoStar was on notice of the substitution of certain channels for many months before the broadcasts began, yet did nothing to indicate any problems with Dominion's proposed approach. (Id. ¶¶ 15 - 17.) The history and intent of the Agreement's provisions regarding Family Pack are that EchoStar was to have the first right to broadcast Family Pack to Dominion's subscribers, under conditions in which EchoStar provided the programming and satellite capacity, and collected the revenue. It was not an arrangement where EchoStar could dictate pricing and programming when Dominion provides the programming to its subscribers at its own expense because EchoStar declined the right of first refusal. In short, there are substantial questions about whether the manner in which Dominion has exercised its right to broadcast Family Pack is a breach of the Agreement, as well as questions about whether EchoStar's termination notice is wrongful and itself a breach. E. An injunction preserving the status quo requires that EchoStar continue to perform all of its contract obligations.

The status quo between the parties is "the last uncontested status between the parties which preceded the controversy until the outcome of the final hearing." SCFC ILC, Inc. v. Visa, USA, Inc., 936 F.2d 1096, 1100 n.8 (10th Cir. 1991). In determining the status quo, the Court should look "to the reality of the existing status and relationship between the parties and not solely to the parties' legal rights." Dominion, 269 F.3d at 1155.

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Here, the last uncontested status between the parties was the course of dealing under the Agreement prior to EchoStar's June 15, 2005 letter accusing Dominion of breach and threatening termination of the Agreement. (Exhibit 2 to T. Scott Decl.) As part of that long course of dealing, Dominion controlled the programming broadcast on Sky Angel, and EchoStar did not block updates to EPG information. (R. Johnson Decl. ¶ 20.) Indeed, since 1996, EchoStar has routinely uplinked changed Sky Angel programming and updated EPG information for Dominion's channels without question. (Id. ¶ 23.) In previous litigation between these parties, EchoStar claimed that Dominion's requested injunction sought to alter the status quo because the injunction required that EchoStar undo the action that prompted the litigation in the first place. See Dominion Video Satellite, Inc. v. EchoStar Satellite Corp., 269 F.3d 1149, 1155 (10th Cir. 2001). Both this Court and the Tenth Circuit rejected this argument, the Tenth Circuit holding that "[a]dopting EchoStar's position would imply that any party opposing a preliminary injunction could create a new status quo immediately preceding the litigation merely by changing its conduct toward the adverse party." Id. Here, EchoStar has changed the status quo -- it has stopped allowing updates to EPG information uplinked in association with Dominion's channels. This self-help remedy is

contrary to the arbitration clause of the Agreement. An injunction preserving the status quo thus requires that, pending an arbitration, EchoStar not terminate the Agreement continue the historical course of dealing under the Agreement, including allowing changed programming and associated EPG data updates.

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F.

No Bond Is Required.

Dominion also requests that this injunctive relief be entered without bond. The amount of bond required in connection with an injunction is a matter of judicial discretion, and is based on the harm that might be suffered by the defendant if an injunction is entered. See Continental Oil Co. v. Frontier Refining Co., 338 F.2d 780, 782 (10th Cir. 1964) ("Under [Fed. R. Civ. P. 65(c)] the trial judge has wide discretion in the matter of requiring security and if there is an absence of proof showing a likelihood of harm, certainly no bond is necessary.") Here, the parties have specifically agreed that, to enforce their respective rights under the Agreement, each party may seek "a preliminary or permanent injunction (without the necessity of posting or filing a bond or other security)." (Exhibit 1 to R. Johnson Decl., § 12.3.1.) Nor is EchoStar at any risk of suffering harm from continuing to perform its contract obligations as it has for the past nine years pending an arbitration on the merits. Thus, no bond is required. See Dominion Video Satellite, Inc. v. EchoStar Satellite Corp., 270 F. Supp.2d 1205, 1216 (D. Colo. 2003), overruled on other grounds, Dominion, 356 F.3d at 1266. CONCLUSION For these reasons, Dominion respectfully asks that the Court enter a preliminary injunction in aid of arbitration directing that EchoStar continue to perform its obligations under the parties' Agreement while Dominion seeks relief from an arbitration panel.

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DATED: July 12, 2005

Respectfully submitted,

s/ Thomas D. Leland, Esq. Thomas D. Leland, Esq. Hale Friesen, LLP 1430 Wynkoop Street, Suite 300 Denver, Colorado 80202 Telephone: (720) 904-6000 Fax: (720) 904-6006 Email: [email protected] and Mark D. Colley, Esq. Cameron W. Fogle, Esq. Holland & Knight LLP 2099 Pennsylvania Avenue, N.W., Ste. 100 Washington, D.C. 20006 Telephone: (202) 955-3000 Fax: (202) 955-5564 Email: [email protected] Attorneys for Plaintiff Dominion Video Satellite, Inc.

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Case 1:03-cv-00607-JLK

Document 132-4

Filed 07/14/2005

Page 21 of 21

CERTIFICATE OF SERVICE I certify that on July12, 2005, I electronically filed the foregoing with the Clerk of Court using the CM/ECF system which will send notification of such filing to the following e-mail addresses: T. Wade Welch: [email protected] Ross W. Wooten: [email protected] And I hereby certify that I have mailed or served the foregoing to the following nonCM/ECF participants in the manner indicated by the non-participant's name: David K. Moskowitz, Esq. General Counsel and Senior Vice President EchoStar Satellite LLC 9601 S. Meridian Blvd. Englewood, Colorado 80112 Todd A. Jansen Cockrell, Quinn 7 Creighton 1700 Broadway, Suite 1516 Denver, Colorado 80290

s/Thomas D. Leland Thomas D. Leland Attorney for Plaintiff Dominion Video Satellite, Inc. HALE FRIESEN LLP 1430 Wynkoop Street, Suite 300 Denver, CO 80202 Telephone: (720) 904-6026 Fax: (720) 904-6006 Email: [email protected]

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