Dish Loses Appeal of Sanctions for E-Mail Destruction

(Corrects parent company in headline and beginning in first paragraph of story published Jan. 31.)

A Dish Network Corp. (DISH) unit lost its appeal challenging sanctions imposed on the company for destroying e-mail evidence in a Cablevision Systems Corp. (CVC) contract lawsuit.

A New York state appeals court in Manhattan today upheld a decision by the trial judge, Richard Lowe. The judge found in November 2010 that EchoStar Satellite LLC “systematically destroyed evidence in direct violation of the law.” He said he will tell jurors about the erased e-mails in a trial over claims by Cablevision’s defunct Voom unit that the Dish Network unit breached a contract. Jurors may assume the evidence would have been helpful to Cablevision, Lowe said.

The sanction was “appropriate and proportionate,” Justice Sallie Manzanet-Daniels wrote in a unanimous appeals court opinion.

“Although Voom may have other evidence to point to, the missing evidence is from a crucial time period during which EchoStar appears to have been searching for a way out of its contract,” Manzanet-Daniels wrote for the five-judge panel. “Evidence from this vital time period is not entirely duplicative of other evidence.”

Distribution Agreement

Voom sued in 2008, accusing EchoStar Satellite of breaching a distribution agreement that called for Voom to provide 21 high-definition television channels to the company, which at the time operated the Dish satellite-television network. The suit seeks more than $2.5 billion in damages.

“Today’s ruling confirms that EchoStar destroyed evidence in blatant violation of the law and will now be held accountable for its misconduct,” Orin Snyder, an attorney representing Cablevision, said of the Dish Network unit in an e-mail. “We look forward to trial.”

In 2008, EchoStar Communications Corp. changed its name to Dish Network Corp., focusing on satellite television, and spun off EchoStar Corp. (SATS) Both are based in Englewood, Colorado. EchoStar Satellite is now known as Dish Network LLC.

Cablevision announced plans to close Voom in December 2008, citing the lawsuit against EchoStar Satellite. Voom operated as part of Bethpage, New York-based Cablevision’s Rainbow segment, which was reorganized and spun off as AMC Networks Inc. (AMCX) last year.

‘Clear Negative’

Today’s ruling “is a clear negative for Dish Network, and significantly strengthens the hands of AMC and Cablevision, either in court or in any potential settlement,” Craig E. Moffett, an analyst with Sanford C. Bernstein & Co. said in a note to investors.

In February 2011, the appeals court put a trial on hold while the challenge to the sanctions was pending.

Roy Reardon, an attorney representing the Dish Network unit, didn’t immediately return a phone message left at his office seeking comment on whether the decision will be appealed to the state’s highest court.

The lower-court case is Voom HD Holdings LLC v. EchoStar Satellite LLC, 600292/2008, New York State Supreme Court (Manhattan).

To contact the reporter on this story: Chris Dolmetsch in New York at cdolmetsch@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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