HOUSTON (CN) - The new owner of the Houston Astros claims in court that it was "duped" with inflated subscription rates into buying the club and a stake in a regional TV network.
Houston Baseball Partners LLC sued McLane Champions LLC, R. Drayton McLane, Comcast Corp. and NBCUniversal Media LLC in Harris County Court.
The crux of the complaint involves negotiations between the previous team owners, McLane Champions, and Comcast over the TV network McLane formed with the owners of the Houston Rockets in 2003 to license the broadcast rights for Astros and Rockets games.
When the network took on the name Comcast SportsNet Houston in 2010, Comcast also allegedly contracted to market and sell the network to other cable and satellite TV carriers.
During negotiations for the network Comcast and the team owners haggled over the monthly rates Comcast would pay for rights to broadcast the teams' games, in particular the rates for Zone 1, the area around Houston where Astros and Rockets games are available, according to the lawsuit.
Ultimately, Comcast agreed to an "inflated Zone 1 base rate as part of the price of Comcast's purchase of an equity interest in the network, provided that the teams would include a 'most favored nation' ('MFN') clause in the affiliation agreement," the complaint states (parentheses in original).
"Under the MFN clause, if the network entered into any affiliation agreements with other distributors at lower base rates, then Comcast would be entitled to reduce its base rates to equal those lower rates.
"Stated more simply, Comcast ensured that it had nothing to lose by telling an eventual purchaser, like plaintiff, that the network could be marketed for a high base rate but then later signing up distributors at lower, market rates."
McLane Champions sold the Astros to Houston Baseball Partners, led by its principal owner Jim Crane, in 2011 for $615 million, according to the complaint.
The sale included McLane's 46 percent stake in Comcast SportsNet Houston.
Since its launch in fall 2012, the network is allegedly seen only by about 40 percent of Houston households as Dish Network, DirecTV, AT&T and Suddenlink do not carry the network, according to the Houston Chronicle.
The network's slow revenue has prevented Houston Baseball Partners from paying the Astros $56.6 million rights fees owed for the 2013 season, the Chronicle reported.
Crane's company calls the situation untenable in its lawsuit, as the revenue from the Astros license to the network was the club's largest income source.
"It was critically important to plaintiff that the network achieve the affiliate revenue projections, among other reasons, so that the network would have sufficient cash flow to pay the Astros' media rights, and so that the Astros would earn revenue from their equity interest in the network," the complaint states.
Crane's company wants punitive damages for fraud, negligent misrepresentation, breach of contract and conspiracy.
It also seeks a declaration that McLane Champions must repay its losses on its purchase of the team and network stake.
Houston Baseball Partners is represented by Richard Drubel with Boies, Schiller & Flexner of Hanover, N.H.Follow @@cam_langford
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