Dominion Video Satellite, Inc. v. Echostar Satellite L.L.C., F/k/a Echostar Satellite Corporation, Todd A. Jansen, T. Wade Welch, and Ross W. Wooten, Parties of Interest-Appellants

Citations: 430 F.3d 1269; 2005 U.S. App. LEXIS 26656Docket: 05-1080

Court: Court of Appeals for the Tenth Circuit; December 6, 2005; Federal Appellate Court

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Dominion Video Satellite, Inc. (Dominion) initiated legal action against EchoStar Satellite Corporation and Echosphere Corporation (collectively, EchoStar) in 2003, alleging breach of a lease agreement and seeking arbitration as stipulated in the contract. An arbitration panel ruled in favor of Dominion, awarding $2,438,178 in damages. Dominion subsequently filed a motion in the District Court to confirm this arbitration award under the Federal Arbitration Act. EchoStar contested both the arbitration outcome and the confirmation, filing multiple motions and memoranda. In October 2004, the District Court confirmed the arbitration award and found that EchoStar had unreasonably prolonged the arbitration and court proceedings, imposing sanctions on EchoStar's counsel and awarding Dominion its incurred costs, expenses, and attorneys' fees. EchoStar appealed the confirmation of the award and the sanctions against its counsel. The Tenth Circuit Court of Appeals, under 28 U.S.C. 1291, took jurisdiction of the appeals and affirmed the District Court's decisions.

The background reveals that both Dominion and EchoStar operate direct broadcast satellite systems licensed by the Federal Communications Commission (FCC). Dominion's "Sky Angel" network primarily offers Christian programming, while EchoStar's "DISH Network" features a wide range of programming. Prior to 1996, Dominion lacked satellite ownership for broadcasting, and EchoStar lacked sufficient FCC licenses. In 1996, the two parties entered into a "Direct Broadcast Service Transponder Lease, Channel Use and Programming Agreement," where EchoStar leased eight transponders to Dominion, which in turn subleased six back to EchoStar. This agreement allowed Dominion to broadcast Sky Angel and enhanced EchoStar's capacity. A "Programming Exclusivity" provision in the contract prohibits EchoStar from airing Christian programming, preventing competition for overlapping customer bases.

In December 2002, EchoStar began broadcasting Christian channels on the DISH Network, prompting Dominion to sue for an injunction, arguing this violated the Programming Exclusivity provision of their agreement. After hearings, the District Court granted Dominion a preliminary injunction, dismissing EchoStar's defenses as "disingenuous" and initiated arbitration per the agreement. In March 2004, an arbitration panel ruled unanimously that EchoStar's broadcasts breached the Agreement and issued a partial final award, directing measures to prevent future violations. EchoStar refused compliance, leading Dominion to seek confirmation of the award in District Court. Despite the narrow grounds for vacating arbitration awards, EchoStar opposed the confirmation, reiterating its previous arguments. Meanwhile, the arbitration panel held a remedies hearing and awarded Dominion $2,438,178 in September 2004 for economic harm, which EchoStar again sought to vacate. A consolidated hearing on all motions took place on October 20, 2004, where the District Court confirmed both arbitration awards and sanctioned EchoStar under 28 U.S.C. 1927, allowing Dominion to recover fees and costs. The ruling was formalized in a written judgment on October 22, 2004.

On October 29, Dominion notified EchoStar's counsel of fees incurred in confirming a panel's award, seeking an agreement on the fees by November 3 to comply with a District Court deadline. EchoStar did not respond. On November 5, Dominion filed a motion with the District Court for $62,686.02 in attorneys' fees, which prompted EchoStar to oppose it with a motion and supporting brief. During a hearing, the District Court criticized EchoStar's conduct, labeling the case as a prime example of the need for Section 1927, and ordered three EchoStar attorneys—Todd A. Jansen, T. Wade Welch, and Ross W. Wooten—to pay Dominion's requested fees and an additional $750 for fees incurred due to EchoStar's lack of response.

The attorneys are now appealing the District Court's order affirming the arbitration awards and the imposition of $63,436.02 in fees under Section 1927. The judicial review of arbitration decisions is limited, primarily allowing vacating awards only for fraud, arbitrator misconduct, or failure to provide a definitive award as per the Federal Arbitration Act. The court may also vacate an award if arbitrators acted with "manifest disregard" of the law, requiring evidence of willful inattention to governing law. EchoStar presents several arguments against the District Court's confirmation of the award, including federal preemption of Dominion's breach of contract claim, violations of the First Amendment, claim preclusion, legal impossibility, non-justiciability of the breach of contract claim, and the absence of damage provisions in the Agreement. EchoStar further requests a remand for clarification on the damage figure if the award is not vacated.

EchoStar's arguments do not include claims of fraud, corruption, or arbitrator misconduct, meaning its only chance of success relies on demonstrating that the arbitration panel acted in manifest disregard of the law or exceeded its powers. Most of EchoStar's arguments have been previously rejected by the District Court and the arbitration panel on three occasions. 

Regarding federal preemption, EchoStar contends that federal law protects its right to broadcast Christian programs as educational content, thus preempting Dominion's claims of contract violation. However, the existing legislation and regulations do not preempt the Programming Exclusivity provision in the agreement between Dominion and EchoStar. EchoStar fails to provide supporting precedent or evidence that the panel disregarded the law, invalidating this basis for overturning the panel's decision.

On First Amendment grounds, EchoStar argues that the District Court's confirmation of the arbitration award is a content-based restriction on speech and an unlawful prior restraint. Yet, EchoStar does not demonstrate state action necessary for First Amendment implications, nor does it provide evidence that the panel ignored First Amendment doctrines in favoring Dominion.

In regard to claim preclusion, EchoStar points to a previous arbitration panel's reference to a provision in their agreement. However, since the prior decision did not decide issues related to that provision, nor was the reference necessary for the resolution, claim preclusion does not apply, allowing for the confirmation of the arbitration award.

Under the defense of impossibility of performance, a contractual breach may be excused if changed circumstances make the promise significantly different from what both parties reasonably contemplated at the contract's inception. EchoStar argues that FCC regulations from 1998, which mandate reserving a portion of programming capacity for educational purposes, prevent it from broadcasting Christian programming. However, EchoStar's unsupported claims do not provide sufficient evidence to vacate the arbitration award.

In the arbitration request, Dominion claimed that EchoStar breached its obligation for "reasonable cooperation" in activating customer receivers. Although the panel found EchoStar not currently in breach, it ordered future cooperation, which EchoStar contests as an issue of "justiciability." This argument does not justify vacating the arbitration award, as justiciability relates to federal court jurisdiction and does not apply to arbitration proceedings.

EchoStar also contends that the panel exceeded its authority by awarding over two million dollars in damages, citing a clause in their Agreement that limits liability for certain damages. This clause pertains to indemnification from third-party actions and does not affect liability for breach of contract. The arbitration panel, having reviewed the issue thoroughly, concluded that the clause did not preclude damage awards, and EchoStar failed to demonstrate that the panel disregarded the law or exceeded its authority.

Lastly, EchoStar claims the District Court should have remanded the award for clarification of the damage amount awarded. The record sufficiently supports the panel's decision, and arbitration awards do not necessitate detailed reasoning when the basis for the award can be discerned from the record. EchoStar's assertion that the grounds for the award cannot be inferred disregards the extensive testimony and evidence presented during the arbitration.

EchoStar's arguments against vacating the arbitration award were deemed insufficient, and its appeal for confirmation was characterized as frivolous, which deprived Dominion of the benefits of arbitration aimed at reducing court-related expenses. Dominion has requested attorneys' fees for defending against EchoStar's appeal, with the court inviting Dominion to file a motion for sanctions within fifteen days, after which EchoStar will have fifteen days to respond. 

Regarding sanctions under 28 U.S.C. § 1927, EchoStar's attorneys argue that the District Court's imposition of sanctions was an abuse of discretion and that they lacked due process prior to being sanctioned. Section 1927 allows courts to require attorneys to cover costs incurred due to unreasonable or vexatious multiplication of proceedings. The court found that EchoStar's attorneys acted recklessly by filing meritless motions and briefs, which were unnecessary to preserve appeal issues. The District Court's determination that their conduct warranted sanctions was upheld. 

On the issue of due process, while EchoStar's attorneys claimed they did not receive adequate notice regarding the basis for the sanctions, the court noted that due process is a flexible concept, varying with circumstances. The attorneys' assertion of insufficient notice regarding the conduct leading to sanctions was considered in light of the overall procedural context.

Dominion requested sanctions against EchoStar, arguing that EchoStar's motion to vacate the arbitration award was intended solely to delay payment. Dominion characterized this motion as frivolous and claimed that EchoStar was abusing the judicial process to prolong its breach and evade compensation. In a subsequent reply supporting its motion to confirm the award, Dominion reiterated that EchoStar's opposition was a tactic for resistance and delay. During a hearing on October 20, 2004, Dominion's counsel highlighted EchoStar's numerous filings and previous requests for sanctions, contradicting EchoStar's attorneys' assertion that they lacked notice regarding the conduct under sanction consideration.

EchoStar's attorneys contended they were denied due process due to not being able to contest the amount of attorneys' fees claimed by Dominion. However, the record indicates that the District Court had established a clear process following the October 20 hearing to address fee amounts, including a request for an agreement between the parties and the potential appointment of a special master if no agreement was reached. Dominion complied with this procedure by submitting a proposed agreement listing fees over $60,000, which EchoStar's counsel ignored, opting instead to file an opposition only after Dominion's subsequent motion for fees. As EchoStar failed to engage with the provided process, it cannot now claim a lack of opportunity to respond, as established in Santana v. City of Tulsa, confirming that due process requirements are satisfied when a party does not utilize available procedures.

EchoStar's counsel contends that the District Court improperly imposed a $750 sanction during the January 2005 fees hearing. The District Court justified the sanction by referencing the attorneys' fees incurred by Dominion due to EchoStar's lack of response to a letter dated October 29th, which requested these fees. The court determined that EchoStar's actions "unnecessarily complicated and delayed" the case. The grounds for this sanction were consistent with prior warnings given to EchoStar's attorneys. Consequently, they could not reasonably claim ignorance regarding the potential for additional sanctions under 1927 for failing to consult opposing counsel before filing a brief against the fees. EchoStar's attorneys attended the hearing and had the chance to explain their failure to respond to Dominion's request, which the court deemed adequate given the circumstances, particularly since the sanction was relatively minor and could be apportioned among several individuals. The District Court did not abuse its discretion in requiring EchoStar's counsel to compensate Dominion with $62,686.02 in attorneys' fees plus the additional $750. Moreover, EchoStar did not demonstrate that the arbitration panel acted with fraud or manifest disregard for the law; thus, the District Court's confirmation of the final award stands. EchoStar's appeal was deemed frivolous, allowing Dominion to seek reasonable attorneys' fees within 15 days, with EchoStar given an additional 15 days to respond. The overall award of $63,436.02 in attorneys' fees and costs was upheld under 28 U.S.C. 1927.

A three-judge panel has unanimously decided that oral argument will not assist in this appeal and has ordered the case submitted without it. The panel notes that prior to this appeal, the Court vacated a preliminary injunction unrelated to the merits of the current dispute, and EchoStar's opposition papers were struck for mischaracterizing case law. EchoStar's claim that the arbitration panel exceeded its authority is rejected; the Agreement mandates binding arbitration for unresolved matters and allows the panel to issue orders within the scope of the dispute. The panel defined "reasonable cooperation" appropriately under its authority. Furthermore, EchoStar's argument regarding irreparable harm is addressed, emphasizing that irreparable injury occurs when effective monetary remedies are inadequate. Lastly, the claim that the District Court abused its discretion in imposing sanctions is dismissed, as the court does not require a finding of bad faith for such sanctions.