Pegasus, DirecTV Claims Rejected

A federal judge Thursday tossed out a dispute between Pegasus Communications Corp. and DirecTV Group Inc. over a contract for marketing satellite television service in rural areas, ending more than four years of litigation.

U.S. District Judge Lourdes G. Baird in Los Angeles, in a summary judgment, dismissed Pegasus’ claims and DirecTV’s counterclaims ahead of trial. Shares of Bala Cynwyd, Pa.-based Pegasus rose $2.54 to $19.83 on Nasdaq.

The dispute relates to the duration of Pegasus’ contract with El Segundo-based DirecTV, the largest U.S. satellite television service, to resell the satellite service in rural areas. DirecTV spokesman Bob Marsocci says Pegasus’ deal expires in June 2008, but Pegasus has claimed it lasts until 2016.

“We feel completely vindicated because all of Pegasus’ claims have been dismissed,” Marsocci said.

Pegasus said in a statement that it would comment further when Baird issued her final order.

Pegasus had 1.3 million subscribers at the end of last year, down from 1.5 million at the end of 2002. Revenue at Pegasus has declined for the last year. This week, the company said it would delay its quarterly earnings filing.

Pegasus distributes DirecTV services through the National Rural Telecommunications Cooperative, which was originally part of the litigation.

In August, DirecTV settled with the rural cooperative and agreed to pay $150 for each subscriber when the agreement ends.

DirecTV, which changed its name from Hughes Electronics Corp. this year, had 12.6 million customers at the end of the first quarter. Rupert Murdoch’s News Corp. bought a controlling 34% stake in DirecTV in December.

The case is separate from a $51.5-million jury verdict awarded last month to DirecTV in a trial over a marketing agreement with Pegasus. DirecTV is seeking an additional $11 million in interest.

Shares of DirecTV fell 16 cents to $17.08 on the New York Stock Exchange.