By Peg Brickley
Houston Astros owner Jim Crane has sued Comcast Corp. (CMCSA)
accusing the cable company of fraud in selling him a stake in the
"overpriced and broken" regional broadcast venture, Comcast
SportsNet Houston.
The suit was filed in state court in Texas, as Mr. Crane
attempts to hang on control of the regional network by convincing
other broadcasters to carry it.
Comcast, which owns part of the regional sports venture, pushed
it into bankruptcy in September, blocking a drive by Mr. Crane to
force co-owner Comcast out of its spot as broadcaster.
Whether the network remains in bankruptcy is a question Judge
Marvin Isgur of the U.S. Bankruptcy Court in Houston has yet to
decide.
Comcast denied the charges of fraud in the lawsuit and said it
would defend against allegations that the November 2011 sale of the
Astros baseball team and more than 40% of the network to Mr. Crane
was founded in "knowing misrepresentations" about the network's
financial prospects.
"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 cable company said in a prepared
statement.
In a bankruptcy court filing, Mr. Crane said the state court
lawsuit was necessary to preserve his legal rights, as the statute
of limitations was running out on some causes of action.
Besides Astros games, the regional network broadcasts the games
of the Houston Rockets basketball team, as well as soccer and local
high school football games. The Houston Rockets also own a piece of
the network.
In bankruptcy court and in the state court lawsuit, Mr. Crane
has complained that Comcast set the subscription rates for the
Houston regional sports venture so high that other distributors
such as Time Warner Cable Inc. (TWC), DirecTV (DTV) and AT&T
Inc. (T) refused to pick up the offering. As a result, the network
reaches only about half the households in its targeted area, Mr.
Crane's suit alleges.
"The rates were doomed to fail all along," according to the
complaint filed Thursday in Harris County, Texas.
Mr. Crane says the team and its fans are paying a stiff price
for the deal.
"Fans of the Houston Astros have been injured because
defendants' misrepresentations leave plaintiff with an impossible
choice: either accept the broken network as is, and deprive
thousands of fans [of] the ability to watch Houston Astros games on
their televisions, or distribute the games at market rates and take
massive losses out of the Houston Astros player payroll--thereby
dooming the franchise for years to come," he said in the
lawsuit.
R. Drayton McClane Jr., who sold the Astros and the regional
network to Mr. Crane in 2011, is also named as a defendant in the
action, accused of making hundreds of millions of dollars from
allegedly duping Mr. Crane into the buy. Mr. McClane couldn't
immediately be reached for comment Friday.
One of 12 regional networks that are part of the sports division
of Comcast's NBCUniversal unit, Comcast SportsNet Houston, pays
Comcast annual fees and is on the hook to the cable company for a
loan.
-Katy Stech contributed to this article.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection. Go to
http://dbr.dowjones.com)
Write to Peg Brickley at peg.brickley@wsj.com.
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