Wnac, LLC v. Verizon Corp. Servs. Grp.

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WNAC, LLC, Plaintiff, v. VERIZON CORPORATE SERVICES GROUP, INC. and NEXSTAR MEDIA GROUP, INC., Defendants.

Civil Action No. 21-cv-10750-ADB

United States District Court, D. Massachusetts

February 26, 2024

MEMORANDUM AND ORDER

ALLISON D. BURROUGHS U.S. DISTRICT JUDGE

Plaintiff WNAC, LLC (“WNAC”) brought this action against Verizon Corporate Services Group, Inc. (“Verizon”) and Nexstar Media Group, Inc. (“Nexstar”) (collectively “Defendants”), alleging that Defendants conspired to wrongfully retransmit the signal from WNAC's television broadcast station, WNAC-TV, in violation of the Copyright Act, and also asserting various state law claims. See [ECF No. 84 (“Second Amended Complaint”)]. Verizon, in turn, counterclaims alleging that WNAC violated Massachusetts General Law Chapter 93A (“Chapter 93A”) by breaching the duty to negotiate in good faith imposed by the Federal Communication Commission (“FCC”) rules relating to retransmission consent negotiations. See [ECF No. 88 (“Counterclaim Complaint” or “CC”)]. Currently before the Court is WNAC's motion to dismiss Verizon's counterclaim pursuant to Federal Rule of Civil Procedure 12(b)(6). [ECF No. 89]. For the following reasons the motion is DENIED.

I. BACKGROUND

A. Statutory and Regulatory Background

Pursuant to 47 U.S.C. § 325 (the “Act”),

[n]o . . . multichannel video programming distributor shall retransmit the signal of a broadcasting station, or any part thereof, except

(A) with the express authority of the originating station;

(B) under section 534 of this title, in the case of a station electing, in accordance with this subsection, to assert the right to carriage under such section; or

(C) under section 338 of this title, in the case of a station electing, in accordance with this subsection, to assert the right to carriage under such section.

Id. § 325(b)(1). “[Television stations . . . every three years . . ., [must] make an election between the right to grant retransmission consent under this subsection and the right to signal carriage under section 534 of this title.” Id. § 325(b)(3)(B). Verizon is a multichannel video programming distributor (“MVPD”) and WNAC is a broadcasting station within the meaning of § 325. [CC ¶¶ 1, 19].

Pursuant to its statutory rule-making authority under the Act, see 47 U.S.C. § 325(b)(3), the Federal Communication Commission (“FCC”) promulgated rules (“FCC Rules”) that mandate that “[t]elevision broadcast stations and [MVPDs] shall negotiate in good faith the terms and conditions of retransmission consent agreements,” 47 C.F.R. § 76.65(a).

B. Factual Background

The following facts are taken from Verizon's Counterclaim Complaint and assumed to be true. See Ruivo v. Wells Fargo Bank, N.A., 766 F.3d 87, 90 (1st Cir. 2014).

Prior to January 2017, Verizon retransmitted WNAC's broadcast signal in the Providence, Rhode Island-New Bedford, Massachusetts market (“Providence-New Bedford Market”) through a February 6, 2015 retransmission-consent agreement between Verizon and LIN Television Corporation (“LIN”) (“February 2015 LIN Retransmission-Consent Agreement”). [CC ¶¶ 9, 11]. Prior to 2017, LIN was authorized, as WNAC's local marketing agent, to negotiate retransmission consent on WNAC's behalf. [Id.]. In exchange for the right to retransmit WNAC's signal, Verizon paid fees to LIN, a portion of which LIN “presumably passed along” to WNAC. [Id.]. The February 2015 LIN Retransmission-Consent Agreement provided that it would remain in place through August 5, 2017, unless the parties opted to terminate it. [Id. ¶ 10]. In early 2015, LIN merged with Media General, Inc. [Id.]. The merged entity, also named Media General, Inc. (“Media General”), succeeded to the February 2015 Retransmission Agreement. [Id.].

On December 30, 2016, Nexstar entered into a retransmission-consent agreement with Verizon for the term January 1, 2017 to December 31, 2019 (“December 2016 Nexstar Retransmission-Consent Agreement”). [CC ¶ 12]. On January 13, 2017, Nexstar informed Verizon that, effective on or around January 17, 2017, it was merging with and acquiring Media General. [Id. ¶ 13]. Pursuant to the December 2016 Nexstar Retransmission-Consent Agreement's “after-acquired” provision, in the event that two conflicting retransmission-consent agreements could apply to the same station, the December 2016 Nexstar Retransmission-Consent Agreement “would govern ‘any additional television broadcast station' of which ‘Nexstar becomes the direct or indirect owner, operator, licensee, programmer, or manager.'” [Id. ¶ 14].

After Nexstar's January 2017 acquisition of Media General, Verizon continued to retransmit WNAC's signal in the Providence-New Bedford Market, but stopped paying fees to Medial General, pursuant to the February 2015 LIN Retransmission-Consent Agreement. [CC ¶ 15]. Instead, Verizon began paying fees to Nexstar for WNAC's signal, and continued to do so through December 2019, the end of the term for the December 2016 Nexstar Retransmission- Consent Agreement. [Id.]. “At all times, Verizon believed in good faith that [the December 2016 Nexstar Retransmission-Consent Agreement] . . . properly authorized its retransmission of WNAC's signal from 2017 to 2019.” [Id. ¶ 16].

In or around November 2019, Verizon commenced direct negotiations with WNAC to obtain retransmission consent for 2020 through 2022. [CC ¶ 17]. In December 2019, Verizon and WNAC reached an agreement, through which WNAC consented to Verizon retransmitting WNAC's signal in the Providence-New Bedford Market for the term January 1, 2020 to December 15, 2022. [Id.].

“At all times, Verizon had a significant number of subscribers in the [Providence-New Bedford Market] . . . to whom it retransmitted WNAC's signal.” [CC ¶¶ 11, 23].^[1] Likewise, “WNAC was benefiting from [Verizon's] retransmission [of its signal] by leveraging higher advertising fees based on the station's distribution on Verizon's system.” [Id. ¶ 24]. Verizon asserts that WNAC “knew throughout the 2017-2019 cycle [and through Verizon and WNAC's negotiations in late 2019] that Verizon was retransmitting [WNAC's] signal.” [Id. ¶¶ 23-24]. Verizon further avers that “WNAC [also] knew that Nexstar acquired Media General in January 2017 and succeeded to its role as programmer for the WNAC station.” [Id. ¶ 22].

Finally, Verizon asserts that if, in 2017-2019, “WNAC believed - as it now alleges - that Nexstar was not authorized to negotiate with or grant consent to Verizon on WNAC's behalf in 2017-2019, FCC rules required it to commence retransmission-consent negotiations with Verizon on its own,” as well as to “designate[] a representative to negotiate with Verizon who was authorized to make binding representations on its behalf.” [CC ¶ 25]. Verizon states that WNAC did neither. [Id.].

C. Procedural Background

WNAC filed its original complaint on May 6, 2021, [ECF No. 1], and an amended complaint on February 10, 2022, [ECF No. 40]. After the Court granted in part and denied in part Defendants' motions to dismiss WNAC's state law claims, [ECF No. 60], Verizon filed its answer and counterclaim to WNAC's first amended complaint on January 24, 2023, [ECF No. 69]. WNAC then filed the Second Amended Complaint on March 2, 2023. [Second Amended Complaint]. In turn, Verizon filed its Answer and Counterclaim to WNAC's Second Amended Complaint on March 16, 2023. [CC].

On March 24, 2023, WNAC moved to dismiss Verizon's counterclaim, which Verizon opposed on April 24, 2023. [ECF Nos. 89, 97].

II. LEGAL STANDARD

In reviewing a motion to dismiss under Rule 12(b)(6), the Court must accept as true all well-pleaded facts, analyze those facts in the light most favorable to the plaintiff, and draw all reasonable factual inferences in favor of the plaintiff. See Gilbert v. City of Chicopee, 915 F.3d 74, 76, 80 (1st Cir. 2019). “[D]etailed factual allegations” are not required, but the counterclaim must set forth “more than labels and conclusions.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The alleged facts must be sufficient to “state a claim to relief that is plausible on its face.” Id. at 570. “To cross the plausibility threshold a claim does not need to be probable, but it must give rise to more than a mere possibility of liability.” Grajales v. P.R. Ports Auth., 682 F.3d 40, 44-45 (1st Cir. 2012) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “The plausibility standard invites a two-step pavane.” A.G. ex rel. Maddox v. Elsevier, Inc., 732 F.3d 77, 80 (1st Cir. 2013) (citing Grajales, 682 F.3d at 45). First, the Court “must separate the [counterclaim's] factual allegations (which must be accepted as true) from its conclusory legal allegations (which need not be credited).” Id. (quoting Morales-Cruz v. Univ. of P.R., 676 F.3d 220, 224 (1st Cir. 2012)). Second, the Court “must determine whether the remaining factual content allows a ‘reasonable inference that the defendant is liable for the misconduct alleged.'” Id. (quoting Morales-Cruz, 676 F.3d at 224).

III. DISCUSSION

Verizon alleges that despite WNAC's knowledge that Verizon was retransmitting its signal while paying elevated rates to Nexstar, and WNAC's “stated belief that Verizon lacked consent to retransmit [that] signal, WNAC failed to engage in negotiations with Verizon for its consent to retransmit.” [CC ¶ 37]. Additionally, according to Verizon, “WNAC did not designate an authorized representative to negotiate on its behalf; did not approach Verizon about a retransmission-content agreement; and did not ever suggest that Nexstar lacked authority to collect retransmission-consent fees on its behalf.” [Id.]. Verizon asserts that through these inactions or omissions, WNAC violated the FCC Rules, or at least the spirit of the Rules, and therefore engaged in...