In 2002, when the digital satellite company EchoStar joined a suit against pay-TV provider NDS, EchoStar aimed high. Its lawyers at DLA Piper and T. Wade Welch & Associates accused NDS of breaching EchoStar’s programming security codes and posting them on the Internet for sale to pirates across the globe. EchoStar demanded about $1 billion from NDS in damages and disgorgement penalties and another $1 billion in statutory damages.
Six years later a federal district court jury in Santa Ana, Calif., found that NDS had, in fact, intercepted EchoStar’s satellite signal in a single test of piracy methods. Jurors deemed the interception a technical violation of the federal Communications Act and a California statute.
But they awarded EchoStar a whopping $45.69 in actual damages and $1,500 in statutory damages — not exactly the $2 billion EchoStar sought. The verdict suggested that the jury entirely rejected EchoStar’s theory that NDS illicitly assisted the pirating of EchoStar’s signal.
Who won the case? The judge who presided over the trial, Santa Ana federal District Court Judge David Carter, determined that each side prevailed on some of EchoStar’s asserted claims. He awarded attorney fees to both sides: about $13 million (plus costs) to EchoStar counsel and about $9 million (and no costs) to NDS’s lawyers at O’Melveny & Myers and Hogan & Hartson (now Hogan Lovells). The net award was about $4 million to EchoStar’s lawyers at DLA and T. Wade Welch.
NDS’ O’Melveny lawyers filed an appeal of Carter’s fee award. In their brief to the 9th U.S. Circuit Court of Appeals, NDS’ counsel argued that the judge abused his discretion in awarding such lavish fees to EchoStar when EchoStar completely failed to prove its underlying piracy case. NDS, they argued, was in fact the prevailing party in all aspects of the case.
EchoStar, represented on appeal by DLA, countered in its 9th Circuit brief that the jury ruled in its favor, finding NDS liable and rejecting NDS’ counterclaims. Indeed, EchoStar argued, if Carter erred, it was in declining to award EchoStar all of the costs it sought. “While courts may infer implicit factual findings by a jury where the verdict clearly supports that conclusion, there are many possible reasons in this case why the jury decided as it did,” EchoStar’s DLA lawyers wrote. “Only the jury knows on what basis it found NDS liable, and the district court should not have inferred from the jury’s general verdict that EchoStar had not proven its principal theory of liability and reduced EchoStar’s fees and costs award.”
But a three-judge 9th Circuit panel, in an unpublished opinion released Aug. 5, concluded that NDS won the trial. The panel reversed Carter’s award to EchoStar, ordering him to enter judgment denying attorney fees and costs to EchoStar. The appellate judges also reconsidered fees for NDS’ lawyers, concluding that they were due about $18 million in fees, plus reasonable costs — about twice what Carter ordered. Instead of a net $4 million in attorney fees to EchoStar, EchoStar now has to pay NDS $18 million, a swing of $22 million.
“There is no question that NDS successfully defended against all of EchoStar’s claims based on or related to its theory that NDS was responsible for the compromise of EchoStar’s satellite television programming security system,” the 9th Circuit wrote in an unsigned opinion. (The panel included 9th Circuit Judge Harry Pregerson, senior appellate Judge David Thompson, and Columbus federal district court judge James Graham, sitting by designation.) “The overwhelming success of NDS in its defense of EchoStar’s lawsuit was trivially mitigated [by the jury's damages awards],” the panel concluded. “If found liable for the December 2000 Internet posting [of EchoStar's encryption programs] and its aftermath, NDS faced the possibility of paying nearly $2 billion in damages. Instead, NDS was held liable for less than $2,000 in damages, and was prohibited from again engaging in conduct whose occurrence it never challenged.”
Darin Snyder of O’Melveny, who argued for NDS at the April 6, 9th Circuit hearing, told us his client was particularly happy that the appellate panel agreed NDS won the 2008 trial. “NDS was pleased with the jury’s verdict because it vindicated NDS’ position that it was not responsible for piracy of EchoStar’s digital satellite system,” he said. “We were especially gratified that the 9th Circuit accepted the argument that [NDS] was the prevailing party at trial.”
Kate Frenzinger of DLA, who argued the appeal for EchoStar, didn’t respond to our request for comment.
This article first appeared on The Am Law Litigation Daily blog on AmericanLawyer.com.