UPDATED: Jim Crane Accuses Drayton McLane and Comcast of Fraud in a New Lawsuit
Nothing to see here, literally.
Comcast and its parent company have released a statement in response to Jim Crane's lawsuit, calling it "a desperate act," referring to Crane's team as his "sophisticated advisors" and calling it an "extreme case of buyer's remorse." I guess someone at NBC legal was feeling sassy this morning. Full statement below and further updates as they become available. Original post after the statement.
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. Comcast/NBCUniversal looks forward to vindicating itself in this litigation and also remains committed to a reorganization of the Network in Bankruptcy Court.
Jim Crane said he did his due diligence when he purchased the Houston Astros. That he looked at all of the books. That he and his people went through everything there was to know about the Astros and their deal with CSN Houston before completing the purchase of the team. He even told bankruptcy court he had no idea why the various cable and satellite providers wouldn't carry CSN on the requested terms. (Behind the Chronicle paywall.)
That was Thursday morning. On Thursday afternoon he filed suit against former Astros owner Drayton McLane and Comcast, alleging fraud, negligent misrepresentation, breach of contract and a civil conspiracy hatched between the defendants to hide the true value of the network, entice him into buying into an infeasible business plan and to accept that the network's valuation was falsely inflated. A lot can change in a few hours.
The lawsuit was filed in state district court after the bankruptcy hearing updating the parties involved on Crane's (lack of) progress. Crane was charged with finding deals for CSN with carriage providers in a put-up-or-shut-up move by the judge last month. Crane essentially admitted during the hearing that there's been no movement toward obtaining deals with Direct TV, U-verse, Dish Network or any of the other smaller providers. The fact that he didn't bring up the suit he was about to file in the hearing is notable and probably won't go over well with the bankruptcy judge at the next progress report/hearing.
Also notable is the fact the suit failed to include Rockets owner Leslie Alexander though his name is often mentioned in the suit as an accomplice to McLane in committing the fraud alleged by Crane. According to the suit, Alexander and McLane knowingly decided upon a carriage fee they knew was too high and would not be paid by providers.
"Comcast told McLane, Alexander, and the Teams that increased base rate was too high and that Comcast would not be able to convince other distributors to enter into affiliation agreements to distribute the Network's content at that base rate," according to the lawsuit. But Comcast, according to the suit, was complicit in agreeing to a rate it knew was more than other carriers would be willing to pay as long as "the Teams would include a 'most favored nation' ('MFN') clause in the Affiliation Agreement." That clause would guarantee Comcast's base rates would always be lower than those paid by Direct TV, U-verse, Dish Network and the others.
Crane claims he relied on these assertions when he purchased the team and only recently discovered there was no way in hell other carriers would agree to the set rates. Crane says it wasn't until December that he learned McLane and Alexander set the unrealistic price point, Comcast warned them it was too high, but none of the parties informed Crane until it was too late. So here we are. There's still no TV deal. The Rockets aren't on television. The Astros aren't on television. Jim Crane's been put in charge of getting the carriage deals. And now Crane's suing McLane and Comcast for defrauding him, which is something we probably should have seen coming. It is still perplexing, however, that Alexander was not named as a defendant given his alleged involvement according to Crane. On Thursday, Alexander surprised those gathered at the bankruptcy hearing when he offered to buy the entire CSN network. One can't help but wonder if maybe, maybe, Alexander's offer might have triggered a few last-minute rewrites of Crane's complaint.
It is difficult to anticipate what will happen next, but here are some educated guesses:
Expect Comcast to try to bring this case back under the auspices of the bankruptcy court.
Expect one of the defendants to try to bring Alexander into the suit as a co-defendant, seeing as how he, according to the pleadings, played a key role in the alleged fraud.
Expect Drayton McLane to bring in some high-powered attorneys to match Crane's team, which includes David Boles, one of the most respected trial lawyers in the country.
Expect McLane to go with his aw-shucks-just-a-poor-country-boy shtick.
Most important, don't expect the Rockets, Astros or Dynamo to come to your non-Comcast cable television anytime soon.
Or maybe Alexander will just make Crane an offer he can't refuse.