Judge adjourns until Monday with Dish document searches under way

Charlie Ergen, the maverick CEO who co-founded EchoStar in 1980 selling satellite dishes from his car and is now worth $9 billion, has crossed swords with Rupert Murdoch, Mel Karmazin, DirecTV, broadcast station owners and most of the cable industry. But he’s found a really tough nut in New York State Supreme Court Judge Richard Lowe.

Lowe sanctioned Ergen’s company, now called Dish Networks, for destroying evidence in the $2.4 billion breach of contract case pressed by Cablevision — a ruling upheld on appeal last summer. That judicial scolding has colored the Cablevision-Dish trial since it began on Sept. 19. Lowe has repeatedly slammed Dish attorneys for misdeeds and delays, which some on Wall Street think will result in a mistrial.

On Wednesday, Lowe sent the jury home and adjourned court until Monday to address legal issues in the case, mostly dealing with further document searches at Dish corporate headquarters in Englewood, Colo. The two sides now have four days to work out a settlement in the contract battle over Dish’s decision to drop Cablevision’s now-defunct Voom suite of HD channels. Nothing would please Wall Street more than to see this old fight put to rest.

“Ergen must have felt that he had something to present the court that would be compelling,” said Nomura analyst Mike McCormack. “I don’t think he would take an issue that’s personal and risk the kind of penalties he might face. Obviously, he must figure there is an opportunity here to come out victorious. But from a shareholder perspective, most owners would be happy to see it settled.”

A settlement would likely include a new carriage deal for AMC Networks, which was yanked off the Dish platform in June ahead of the trial. Ergen has insisted that move was not retaliation for the litigation but driven by the company’s demands for higher carriage fees for AMC, IFC, We TV and Sundance Channel. Ergen’s claims that few Dish subscribers watch AMC ring hollow as the cabler set a ratings record with Sunday’s season-three bow of “The Walking Dead.”

Ergen was expected to take the stand on Wednesday but his testimony was postponed until Monday when the trial resumes. He’ll face tough questions under cross-examination but may be able to set out Dish’s case more clearly than its lawyers have done so far. Meanwhile, Dish is facing three separate audits to determine if it destroyed other evidence, and investigators are trolling corporate hard drives, including that of programming VP Carolyn Crawford, for audit reports and subscriber data.

Thomas Clapps, a legal analyst for Susquehanna Financial who has followed the trial, said there could be more delays since Dish would be sure to appeal an adverse finding, and the court would need time to assess any new evidence. “As a result of all the sideshows at trial concerning Dish’s document destruction and misconduct, there is an increased risk of a mistrial,” Clapps wrote Wednesday.

Earlier in the week, Lowe admonished Crawford for attending trial proceedings, which could taint her upcoming testimony, though he later apologized for his sharp words. Several jurors have conflicts late this month with only two alternates to fill in. It’s a mistrial if more than two jurors can’t serve the entire length of the trial.  

Cablevision, the former parent company of AMC Networks (which was spun off as a separate entity last year), sued Dish in 2007 for dropping the Voom channels only two years into a 15-year carriage deal. Dish claims it had the right because Cablevision hadn’t fulfilled its obligation to invest in Voom programming. The legal crux of the case is whether the $100 million-plus that Cablevision did spend on Voom fulfilled the terms of its contract with Dish.

Cablevision has insisted that the agreement clearly refers to investment in the overall Voom business, and that Dish execs were aware of those parameters. Cablevision attorney Orin Snyder has been laser-focused on characterizing Dish as eager to seize any excuse to illegally exit a deal it no longer liked.

The sides presented documents that referred to spending on “the business, “the service,” “programming for the service” and “the”venture.” Unless there’s a mistrial or a settlement, it’ll be up to the jury to sort out who meant what by those terms.

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