Pegasus, NRTC Lose Damage Claim

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A federal court judge in Los Angeles has ruled that Pegasus Communications Corp. and the National Rural Telecommunications Cooperative have no right to compensatory or punitive damages in their ongoing litigation with DirecTV Inc.

The judge also ruled that DirecTV has no contractual obligations to provide Pegasus with service
after its current agreements expire. Pegasus claimed that it had a right of first
refusal to have the direct-broadcast satellite company
continue to provide service after the current agreements expire.

Judge Lourdes Baird of U.S. District Court for the Central District of
California made the summary judgment as part of her pretrial rulings May 22.

Pegasus, which resells DirecTV's product, entered litigation in 1999. The
litigation now includes a number of different claims by all parties over the
terms of a 1992 contract between the NRTC and DirecTV for distribution of
satellite-delivered services to rural America. For instance, the NRTC, on behalf
of a class of members, and Pegasus have sued the DBS company alleging that DirecTV
breached its obligations to provide premium programming, launch fees and
advanced services to Pegasus and the NRTC. DirecTV seeks $50 million on its
claim that Pegasus breached a joint marketing agreement.

The pretrial rulings also prevent Pegasus' attempt to recover damages
under California'd business and professions code. Further, the NRTC can't get damages from DirecTV, even if it
proves that the contract was breached, unless it can also prove that the breach was the result of an
intentional action at the highest executive levels of DirecTV, according to Baird's rulings.

Both
sides lauded the ruling. The core issue will proceed to a jury trial, an outcome
that has always been the hope of Pegasus, that company said in a prepared statement. DirecTV
is pleased that Pegasus' damage claims, which could have reached $150 million, were found unwarranted, the
company said in its statement.

The trial has been set for June
3.

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