7th Circuit: Why Did the Satellite Networks Exclude Black-Owned Stations? Because They Could.

The Seventh Circuit opinion in Circle City Broadcasting I, LLC  v. AT&T Services Inc,, does a great job laying out the structure of the television broadcast industry. Multi-channel distributors, like DISH or DirecTV, enter into transmission agreements with networks or individual stations. These transmission agreements can be structured differently. Sometimes the distributors will pay for the right to transmit television stations; sometimes they don’t, but it may still be a good deal for the stations, because they can attract more advertising revenue if they are widely distributed.

The two local Indianapolis stations at issue, WISH and WNDY, were once owned by Nexstar Broadcasting, Inc., the fifth largest network in the country. FCC regulations forced it to sell the stations, and it sold to Circle City, controlled by DuJuan McCoy, a Black man. When Nexstar owned the stations, Dish and DirecTV paid to distribute their broadcasts. After the sale, they elected not to continue doing so.

Mr. McCoy alleged that racism was behind the decision. He sued, based on 42 U.S.C. § 1981, but the court said it was more like capitalism. Nexstar’s market power enabled it to negotiate favorable terms. Mr. McCoy had no such market power. The two companies stopped paying  to distribute WISH and WNDY because they could.

Mr McCoy negotiated aggressively with the distributors, in both cases demanding that Circle City be paid higher distribution fees than Nexstar had been paid. In both cases, the distributors were confounded. The two distribution networks explained the market structure. DirecTV pointed out that it had a general policy of not paying distribution fees to independent stations. Mr. McCoy treated this like the unspoken “house rule” in Lefkowitz.  The District Court dismissed both actions, finding no evidence in the record that the distributors’ decision was race-based.

On appeal, DISH argued that the relationship between Mr. McCoy and Circle City was too attenuated to merit treating the latter as a proper § 1981 plaintiff. That issue, the court found, was unsettled, so it assumed without deciding that the District Court go things right on that issue and affirmed the District Court’s holding on evidentiary grounds. Mr. McCoy had turned up no evidence of discrimination, and the distributors articulated non-discriminatory reasons for their refusal to pay fees to Circle City.