Content

Crane Files Fraud Suit Against Former Astros Owner, Comcast/NBCU over CSN Houston

Current Team Owner Alleges Misrepresentation Tied To Business Plan, Sub Fees 11/22/2013 12:06 PM Eastern

 

Houston Astros ownership has filed a lawsuit against the MLB team’s former owner and Comcast/NBCUniversal, a partner in and operator of Comcast SportsNet Houston, alleging fraud and civil conspiracy relative to the embattled regional sports network.

Astros owner Jim Crane’s Houston Baseball Partners’ action, filed on Nov. 21 and assigned to 80th Texas state District Judge Larry Weiman, accuses former club owner Drayton McClane and Comcast/NBCU  of selling the network that “they knew to be overpriced and broken.” The lawsuit says Crane was “duped” when he bought McLane’s interest in the network, as part of the $615 million he paid for the club, by making“knowing misrepresentations” and stating “falsely inflated subscription rates.”

Seeking a jury trial, the suit wants the court to order McClane’s McLane Champions corporation to repay Crane’s group for losses that have resulted from alleged breaches of the group’s purchase agreement, stemming from rights fees unpaid by the RSN, which has only been able to reach carriage deals with providers reaching 40% of the Houston DMA. The suit -- which also cites Jon Litner, group presidet of NBC Sports Group, of false and misleading claims about the achievability of CSN Houston’s business plan tied to subscriber fees -- also asks for undetermined damages, as well as interest and exemplary damages and attorneys’ fees.

The suit was filed the same day Crane and his representatives provided an update in bankruptcy court proceedings on his attempt to formulate a new business plan by Dec. 12 for CSN Houston, which is 46% owned by the Astros, 32% by the Houston Astros, and 22% by ComcastNBCU. The NBA franchise is not named in Crane's new legal action.

For its part, Comcast/NBCUniversal issued this statement in response to the Crane lawsuit:"Comcast/NBCUniversal vehemently rejects any claim of wrongdoing asserted by the Astros. This litigation outside the bankruptcy proceedings is a desperate act, committed during a period in which Mr. Crane and his team of sophisticated advisors have been granted by the Bankruptcy Court an opportunity to explore and effectuate solutions to the Network’s serious business problems.  

"Instead, it appears that Mr. Crane is suffering from an extreme case of buyer's remorse, and aiming to blame the Network's challenges on anything but his own actions," the statement continued.  "Comcast/NBCUniversal looks forward to vindicating itself in this litigation and also remains committed to a reorganization of the Network in Bankruptcy Court."

Crane’s suit alleges that McLane and Rockets owner Leslie Alexander demanded in 2010 that Comcast charge a base subscriber rate for CSN Houston in Zone 1 – the primary area in the Houston DMA. According to the legal action, the MSO believed the monthly fee was too high and that it would have difficulty getting other distributors to carry the network, but agreed to the rate in exchange for a most-favored nation clause. Crane claims this information was concealed from him and he was unaware of this while he was negotiating to buy the baseball team, the deal for which was approved in November 2011. CSN Houston launched on Oct. 1, 2012, but, according to the action, Crane didn't know about the MFN until December of last year.

At yesterday’s bankruptcy hearing, Alexander said the club was interested in buying all of the RSN. During the Sept. 27 filing in which four Comcast-affiliated companies petitioned for involuntary Chapter 11 protection, Houston SportsNet Finance, which loaned the RSN $100 million for start-up costs and to build a studio, said it "would be prepared to make a bid to acquire either the network (under a plan of reorganization) or substantially all of its assets.”

The Astros were expected to comment on the lawsuit during a press conference this afternoon.

October