Federal Judge Won’t Let AT&T off the Hook

LOS ANGELES (CN) — A federal judge refused to dismiss a small TV network's lawsuit accusing AT&T of breaking an agreement to carry the network's two channels if it lobbied the FCC to support AT&T's $65 billion bid to acquire DirecTV.

AT&T announced a merger with the satellite TV provider in August 2015. For the FCC to approve the deal, AT&T needed support from independent programmers.

Herring Networks said that shortly after the merger was announced, its executives met with AT&T Services President Aaron Slator, who promised that AT&T would carry Herring's two channels on its DirecTV platform if Herring agreed to lobby the FCC on its behalf.

Herring Networks is a family-owned programmer that owns two channels: a news channel called One America News Network, and a lifestyle channel called A Wealth of Entertainment. AT&T previously carried both channels on its U-verse platform.

Herring sued AT&T Services and its corporate parent AT&T in March. It claimed that when it negotiated renewal of its U-verse licensing agreement in 2014, AT&T misled Herring about its plans to wind down the U-verse platform and migrate subscribers to DirecTV, which does not carry Herring channels.

AT&T also reneged on its promise to carry those channels on DirecTV, which has gained 200,000 subscribers since the merger, while U-verse has lost 325,000, Herring said.

In minutes filed from chambers, U.S. District Judge Cristina Snyder said on July 25 that Herring adequately pleaded its fraud and lobbying claims.

"Here, plaintiff alleges that it fully performed its lobbying obligations under the DirecTV promise. Moreover, even assuming that plaintiff was required to tender its channels to defendants, there is no indication that plaintiff did not attempt to tender those channels — indeed, plaintiff alleges that it desired to place its channels on DirecTV and only engaged in the lobbying efforts alleged in the complaint so that it could place those channels on DirecTV. And, in any event, defendants arguably frustrated plaintiff's ability to tender its channels by allegedly reneging on the DirecTV Promise and refusing to carry plaintiff's networks," Snyder wrote.

AT&T sought dismissal, arguing that Herring failed to plausibly allege that AT&T knew going into its 2014 negotiations with Herring that it intended to wind down the U-verse platform.

Snyder found that argument implausible, and refused to dismiss the case.

"Plaintiff alleges that in early 2014 and up and until plaintiff signed the U-verse Agreement with AT&T Services, defendants continued to represent that they intended to grow the U-verse platform. Nonetheless, in May 2014, only a month after plaintiff signed the U-verse

agreement, defendants announced their plan to acquire DirecTV for $65 billion. As both

parties acknowledge, this was a massive undertaking, involving extensive lobbying

efforts by defendants as well as numerous third parties. It is simply implausible that this

planned acquisition first arose in the weeks after the U-verse Agreement was finalized," Snyder wrote."

Snyder added that Herring has shown it was harmed as a result, as it seemed unlikely that Herring would have renewed its U-verse agreement if it knew about AT&T's plans for U-verse.

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