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Rob Brantley, Darryn Cooke v. Nbc Universal

June 3, 2011

ROB BRANTLEY, DARRYN COOKE, WILLIAM AND BEVERLEY COSTLEY, PETER G. HARRIS,
CHRISTIANA HILLS, MICHAEL B. KOVAC, MICHELLE NAVARRETTE, JOY PSACHIE AND JOSEPH VRANICH, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS-APPELLANTS,
v.
NBC UNIVERSAL, INC., VIACOM VBK INC.,
THE WALT DISNEY COMPANY, FOX ENTERTAINMENT GROUP, INC., TIME WARNER INC., TIME WARNER CABLE INC., COMCAST CORPORATION, COMCAST CABLE COMMUNICATIONS, LLC, COXCOM, INC., THE DIRECTV GROUP, INC., ECHOSTAR SATELLITE L.L.C., AND CABLE VISION SYSTEMS CORPORATION, DEFENDANTS-APPELLEES.



Appeal from the United States District Court for the Central District of California Christina A. Snyder, District Judge, Presiding D.C. No. CV 07-6101 CAS

The opinion of the court was delivered by: Ikuta, Circuit Judge:

FOR PUBLICATION

OPINION

Argued and Submitted March 7, 2011-Pasadena, California

Before: Pamela Ann Rymer, Consuelo M. Callahan, and Sandra S. Ikuta, Circuit Judges.

Opinion by Judge Ikuta

OPINION

This case is a consumer protection class action masquerading as an antitrust suit. Plaintiffs are a putative class of retail cable and satellite television subscribers. They brought suit against television programmers (Programmers)*fn1 and distributors (Distributors)*fn2 alleging that Programmers' practice of selling multi-channel cable packages violates Section 1 of the Sherman Act, 15 U.S.C. § 1. In essence, these consumers seek to compel programmers and distributors of television programming to sell each cable channel separately, thereby permitting consumers to purchase only those channels that they wish to purchase, rather than paying for multi-channel bundles, as occurs under current market practice. Plaintiffs appeal the dismissal with prejudice of their complaint for failure to state a claim for relief under Section 1 of the Sherman Act. We affirm.

I

The television programming industry can be divided into upstream and downstream markets. In the upstream market, programmers NBC Universal and Fox Entertainment Group own television programs (such as "Law and Order") and television channels (such as NBC's Bravo, MSNBC, and Fox Entertainment Group's Fox News Channel and FX) and sell them wholesale to distributors. In the downstream retail market, distributors such as Time Warner and Echostar sell the programming channels to consumers.*fn3

The nucleus of plaintiffs' claims regarding the nature of the Programmers' and Distributors' alleged antitrust violation has remained constant throughout the various iterations of their complaint. According to plaintiffs, Programmers have two categories of programming channels: "must-have," high-demand channels with a large number of viewers, and a group of less desirable, low-demand channels with low viewership. Plaintiffs allege that Programmers derive market power from their "must-have" channels because no Distributor can market and sell a programming package to consumers without those channels. Distributors contend that Programmers exploit this market power by bundling or tying the high and low demand channels together for sale to Distributors, thereby precluding Distributors from purchasing single "must-have" channels and (according to plaintiffs) forcing Distributors in turn to sell only multi-channel packages to consumers. Plaintiffs contend that in the absence of Programmers' bundling practices, Distributors would offer single channels for sale (often referred to as "a la carte programming"), and consumers could purchase only those channels that they wish to watch. Accordingly, plaintiffs claim, the challenged bundling practice limits Distributors' method of doing business and reduces consumer choice, while raising prices.

Based on these allegations, Plaintiffs claim that the Programmers and Distributors are in violation of Section 1 of the Sherman Act. Plaintiffs seek monetary damages under 15 U.S.C. § 15.*fn4 Plaintiffs also seek an injunction to compel Programmers to make channels available on an individual, non-bundled basis.

The district court dismissed plaintiffs' first complaint without prejudice on the ground that plaintiffs failed to show that their alleged injuries were caused by an injury to competition.

In their amended complaint, plaintiffs alleged that Programmers' practice of selling bundled cable channels foreclosed independent programmers from entering and competing in the upstream market for programming channels. The district court subsequently denied defendants' motion to dismiss, holding that ...


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