WNAC, LLC v. VERIZON CORPORATE SERVICES GROUP, INC.

UNITED STATES DISTRICT COURT

DISTRICT OF MASSACHUSETTS

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WNAC, LLC, *

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Plaintiff, *

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v. *

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Civil Action No. 21-cv-10750-ADB

VERIZON CORPORATE SERVICES *

GROUP, INC. and NEXSTAR MEDIA *

GROUP, INC., *

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Defendants. *

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MEMORANDUM AND ORDER

BURROUGHS, D.J.

Plaintiff WNAC, LLC (“WNAC”) brought this action against Verizon Corporate

Services Group, Inc. (“Verizon”) and Nexstar Media Group, Inc. (“Nexstar”) (collectively,

“Defendants”), alleging that Defendants conspired to wrongfully retransmit the signal from

WNAC’s television broadcast station, WNAC-TV, in violation of the Copyright Act, and also

asserting various state law claims. See [ECF No. 84 (“Second Amended Complaint”)]. Verizon,

in turn, counterclaims alleging that WNAC violated Massachusetts General Law Chapter 93A

(“Chapter 93A”) by breaching the duty to negotiate in good faith imposed by the Federal

Communication Commission (“FCC”) rules relating to retransmission consent negotiations. See

[ECF No. 88 (“Counterclaim Complaint” or “CC”)]. Currently before the Court is WNAC’s

motion to dismiss Verizon’s counterclaim pursuant to Federal Rule of Civil Procedure 12(b)(6).

[ECF No. 89]. For the following reasons, the motion is DENIED.

I. BACKGROUND

A. Statutory and Regulatory Background

Pursuant to 47 U.S.C. § 325 (the “Act”),

[n]o . . . multichannel video programming distributor shall retransmit the signal of

a broadcasting station, or any part thereof, except

(A) with the express authority of the originating station;

(B) under section 534 of this title, in the case of a station electing, in

accordance with this subsection, to assert the right to carriage under such

section; or

(C) under section 338 of this title, in the case of a station electing, in

accordance with this subsection, to assert the right to carriage under such

section.

Id. § 325(b)(1). “[T]elevision stations . . . every three years . . . , [must] make an election

between the right to grant retransmission consent under this subsection and the right to signal

carriage under section 534 of this title.” Id. § 325(b)(3)(B). Verizon is a multichannel video

programming distributor (“MVPD”) and WNAC is a broadcasting station within the meaning of

§ 325. [CC ¶¶ 1, 19].

Pursuant to its statutory rule-making authority under the Act, see 47 U.S.C. § 325(b)(3),

the Federal Communication Commission (“FCC”) promulgated rules (“FCC Rules”) that

mandate that “[t]elevision broadcast stations and [MVPDs] shall negotiate in good faith the

terms and conditions of retransmission consent agreements,” 47 C.F.R. § 76.65(a).

B. Factual Background

The following facts are taken from Verizon’s Counterclaim Complaint and assumed to be

true. See Ruivo v. Wells Fargo Bank, N.A., 766 F.3d 87, 90 (1st Cir. 2014).

Prior to January 2017, Verizon retransmitted WNAC’s broadcast signal in the

Providence, Rhode Island–New Bedford, Massachusetts market (“Providence–New Bedford

Market”) through a February 6, 2015 retransmission-consent agreement between Verizon and

LIN Television Corporation (“LIN”) (“February 2015 LIN Retransmission-Consent

Agreement”). [CC ¶¶ 9, 11]. Prior to 2017, LIN was authorized, as WNAC’s local marketing

agent, to negotiate retransmission consent on WNAC’s behalf. [Id.]. In exchange for the right to

retransmit WNAC’s signal, Verizon paid fees to LIN, a portion of which LIN “presumably

passed along” to WNAC. [Id.]. The February 2015 LIN Retransmission-Consent Agreement

provided that it would remain in place through August 5, 2017, unless the parties opted to

terminate it. [Id. ¶ 10]. In early 2015, LIN merged with Media General, Inc. [Id.]. The merged

entity, also named Media General, Inc. (“Media General”), succeeded to the February 2015

Retransmission Agreement. [Id.].

On December 30, 2016, Nexstar entered into a retransmission-consent agreement with

Verizon for the term January 1, 2017 to December 31, 2019 (“December 2016 Nexstar

Retransmission-Consent Agreement”). [CC ¶ 12]. On January 13, 2017, Nexstar informed

Verizon that, effective on or around January 17, 2017, it was merging with and acquiring Media

General. [Id. ¶ 13]. Pursuant to the December 2016 Nexstar Retransmission-Consent

Agreement’s “after-acquired” provision, in the event that two conflicting retransmission-consent

agreements could apply to the same station, the December 2016 Nexstar Retransmission-Consent

Agreement “would govern ‘any additional television broadcast station’ of which ‘Nexstar

becomes the direct or indirect owner, operator, licensee, programmer, or manager.’” [Id. ¶ 14].

After Nexstar’s January 2017 acquisition of Media General, Verizon continued to

retransmit WNAC’s signal in the Providence–New Bedford Market, but stopped paying fees to

Medial General, pursuant to the February 2015 LIN Retransmission-Consent Agreement. [CC

¶ 15]. Instead, Verizon began paying fees to Nexstar for WNAC’s signal, and continued to do so

through December 2019, the end of the term for the December 2016 Nexstar Retransmission-

Consent Agreement. [Id.]. “At all times, Verizon believed in good faith that [the December

2016 Nexstar Retransmission-Consent Agreement] . . . properly authorized its retransmission of

WNAC’s signal from 2017 to 2019.” [Id. ¶ 16].

In or around November 2019, Verizon commenced direct negotiations with WNAC to

obtain retransmission consent for 2020 through 2022. [CC ¶ 17]. In December 2019, Verizon

and WNAC reached an agreement, through which WNAC consented to Verizon retransmitting

WNAC’s signal in the Providence–New Bedford Market for the term January 1, 2020 to

December 15, 2022. [Id.].

“At all times, Verizon had a significant number of subscribers in the [Providence–New

Bedford Market] . . . to whom it retransmitted WNAC’s signal.” [CC ¶¶ 11, 23].1 Likewise,

“WNAC was benefiting from [Verizon’s] retransmission [of its signal] by leveraging higher

advertising fees based on the station’s distribution on Verizon’s system.” [Id. ¶ 24]. Verizon

asserts that WNAC “knew throughout the 2017–2019 cycle [and through Verizon and WNAC’s

negotiations in late 2019] that Verizon was retransmitting [WNAC’s] signal.” [Id. ¶¶ 23–24].

Verizon further avers that “WNAC [also] knew that Nexstar acquired Media General in January

2017 and succeeded to its role as programmer for the WNAC station.” [Id. ¶ 22].

Finally, Verizon asserts that if, in 2017–2019, “WNAC believed – as it now alleges – that

Nexstar was not authorized to negotiate with or grant consent to Verizon on WNAC’s behalf in

2017–2019, FCC rules required it to commence retransmission-consent negotiations with

Verizon on its own,” as well as to “designate[] a representative to negotiate with Verizon who

1 At the time of the February 2015 LIN Retransmission-Consent Agreement, Verizon had nearly

150,000 subscribers in the Providence–New Bedford Market and had transmitted WNAC’s

signal for years before that. [CC ¶¶ 11, 23].

was authorized to make binding representations on its behalf.” [CC ¶ 25]. Verizon states that

WNAC did neither. [Id.].

C. Procedural Background

WNAC filed its original complaint on May 6, 2021, [ECF No. 1], and an amended

complaint on February 10, 2022, [ECF No. 40]. After the Court granted in part and denied in

part Defendants’ motions to dismiss WNAC’s state law claims, [ECF No. 60], Verizon filed its

answer and counterclaim to WNAC’s first amended complaint on January 24, 2023, [ECF No.

69]. WNAC then filed the Second Amended Complaint on March 2, 2023. [Second Amended

Complaint]. In turn, Verizon filed its Answer and Counterclaim to WNAC’s Second Amended

Complaint on March 16, 2023. [CC].

On March 24, 2023, WNAC moved to dismiss Verizon’s counterclaim, which Verizon

opposed on April 24, 2023. [ECF Nos. 89, 97].

II. LEGAL STANDARD

In reviewing a motion to dismiss under Rule 12(b)(6), the Court must accept as true all

well-pleaded facts, analyze those facts in the light most favorable to the plaintiff, and draw all

reasonable factual inferences in favor of the plaintiff. See Gilbert v. City of Chicopee, 915 F.3d

74, 76, 80 (1st Cir. 2019). “[D]etailed factual allegations” are not required, but the counterclaim

must set forth “more than labels and conclusions.” Bell Atl. Corp. v. Twombly, 550 U.S. 544,

555 (2007). The alleged facts must be sufficient to “state a claim to relief that is plausible on its

face.” Id. at 570. “To cross the plausibility threshold a claim does not need to be probable, but it

must give rise to more than a mere possibility of liability.” Grajales v. P.R. Ports Auth., 682

F.3d 40, 44–45 (1st Cir. 2012) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). “The

plausibility standard invites a two-step pavane.” A.G. ex rel. Maddox v. Elsevier, Inc., 732 F.3d

77, 80 (1st Cir. 2013) (citing Grajales, 682 F.3d at 45). First, the Court “must separate the

[counterclaim’s] factual allegations (which must be accepted as true) from its conclusory legal

allegations (which need not be credited).” Id. (quoting Morales-Cruz v. Univ. of P.R., 676 F.3d

220, 224 (1st Cir. 2012)). Second, the Court “must determine whether the remaining factual

content allows a ‘reasonable inference that the defendant is liable for the misconduct alleged.’”

Id. (quoting Morales-Cruz, 676 F.3d at 224).

III. DISCUSSION

Verizon alleges that despite WNAC’s knowledge that Verizon was retransmitting its

signal while paying elevated rates to Nexstar, and WNAC’s “stated belief that Verizon lacked

consent to retransmit [that] signal, WNAC failed to engage in negotiations with Verizon for its

consent to retransmit.” [CC ¶ 37]. Additionally, according to Verizon, “WNAC did not

designate an authorized representative to negotiate on its behalf; did not approach Verizon about

a retransmission-content agreement; and did not ever suggest that Nexstar lacked authority to

collect retransmission-consent fees on its behalf.” [Id.]. Verizon asserts that through these

inactions or omissions, WNAC violated the FCC Rules, or at least the spirit of the Rules, and

therefore engaged in unfair and/or deceptive acts or practices within the meaning of Chapter

93A. [Id. ¶ 38]. Verizon further alleges that WNAC’s conduct caused Verizon a “loss of money

or property,” by “necessitating Verizon’s defense of its interests in this litigation, entailing

significant litigation costs, including but not limited to its attorneys’ fees, and by causing the

inflated retransmission-consent fees that Verizon ultimately paid to Nexstar from 2017-2019.”

[Id. ¶ 41].

[Massachusetts] General Laws c. 93A, § 11, states, in relevant part: “[a]ny person

who engages in the conduct of any trade or commerce and who suffers any loss of

money or property, real or personal, as a result of the use or employment by another

person who engages in any trade or commerce of an unfair method of competition

or an unfair or deceptive act or practice . . . may . . . bring an action in the superior

court . . . for damages and such equitable relief . . . as the court deems to be

necessary and proper.”

Milliken & Co. v. Duro Textiles, LLC, 887 N.E.2d 244, 258–59 (Mass. 2008) (quoting Mass.

Gen. Laws c. 93A, § 11). “To be successful, a plaintiff bringing a claim under § 11 must

establish (1) that the defendant engaged in an unfair method of competition or committed an

unfair or deceptive act or practice, as defined by G.L. c. 93A, § 2, or the regulations promulgated

thereunder; (2) a loss of money or property suffered as a result; and (3) a causal connection

between the loss suffered and the defendant’s unfair or deceptive method, act, or practice.” Auto

Flat Car Crushers, Inc. v. Hanover Ins. Co., 17 N.E.3d 1066, 1074–75 (Mass. 2014).

WNAC asserts that its conduct, or inaction, was neither unfair nor deceptive, although its

arguments in its opening brief focus exclusively on unfairness. [ECF No. 90 at 15–23].

Specifically, it argues that its conduct was not unfair because the FCC Rules impose no duty on

WNAC to initiate negotiations with Verizon, and, “it is not within ‘the penumbra of some

established concept of unfairness’ for a commercial party to wait until a business relationship

ends before asserting its legal rights in court.” [Id. at 15–20 (quoting Zurich Am. Ins. Co. v.

Watts Regulator Co., 796 F. Supp. 2d 240, 244 (D. Mass. 2011))]. Additionally, WNAC asserts

that it never refused to negotiate or appoint an authorized representative, and in fact, it sent

letters to Verizon and other MVPDs informing them of its retransmission consent election and

identifying a point of contact for negotiations. [Id. at 20–23]. WNAC requests that the Court

take judicial notice of these letters. [Id. at 21–23].

In opposition, Verizon responds that WNAC offers a cramped reading of the FCC Rules,

and even if WNAC has not actually violated the regulations, it violated their spirit. [ECF No. 97

at 11–21]. Verizon asserts that the Rules “embody” “unfairness principles” because the FCC

Rules were “promulgated . . . to ensure that negotiations over retransmission consent ‘are

conducted in an atmosphere of honesty, purpose and clarity of process,’” and “impos[es] on

broadcasters a general ‘[d]uty to negotiate in good faith.’” [Id. at 12–13 (first citing PMP

Assocs., Inc. v. Globe Newspaper Co., 321 N.E.2d 915, 917 (Mass. 1975); then citing

Implementation of the Satellite Home Viewer Improvement Act of 1999: Retransmission

Consent Issues, First Report and Order, 15 FCC Rcd 5445 ¶ 24 (2000) (“Good Faith Order”),

recon. granted in part, 16 FCC Rcd 15599 (2001); and then citing 47 C.F.R. § 76.65(a), (b)(1))].

As such, WNAC’s conduct falls “‘within at least the penumbra,’ of th[ose] unfairness

principles.” [Id. at 13]. Finally, according to Verizon, several of WNAC’s arguments, including

those related to WNAC’s alleged failure to designate a negotiation representative, contest

Verizon’s factual allegations, which is inappropriate on a motion to dismiss. [Id. at 21–22].

“Chapter 93A does not define what constitutes an ‘unfair or deceptive act or practice.’”

Kattar v. Demoulas, 739 N.E.2d 246, 257 (Mass. 2000) (citation omitted). Instead, “Chapter

93A liability is decided case-by-case, and Massachusetts courts have consistently emphasized the

‘fact-specific nature of the inquiry.’” Arthur D. Little, Inc. v. Dooyang Corp., 147 F.3d 47, 55

(1st Cir. 1998) (quoting Linkage Corp. v. Trustees of Bos. Univ., 679 N.E.2d 191, 209 (Mass.

1997)). “Although whether a particular set of acts, in their factual setting, is unfair or deceptive

is a question of fact, the boundaries of what may qualify for consideration as a [Chapter] 93A

violation is a question of law.” Id. at 54 (quoting Ahern v. Scholz, 85 F.3d 774, 797 (1st Cir.

1996)). “Chapter 93A ‘is a statute of broad impact.’” Anoush Cab, Inc. v. Uber Techs., Inc., 8

F.4th 1, 15 (1st Cir. 2021) (quoting Exxon Mobil Corp. v. Att’y Gen., 94 N.E.3d 786, 791 (Mass.

2018)). “The courts are not invited by the statute to punish every departure from ‘the punctilio

of an honor the most sensitive,’ but they may enforce standards of behavior measurably higher

than perfidy.” Anoush Cab, 8 F.4th at 17 (quoting Doliner v. Brown, 489 N.E.2d 1036, 1040

(Mass. App. Ct. 1986)).

To determine what conduct rises to the level of an “unfair” act or practice actionable

under G. L. c. 93A, [the Supreme Judicial Court (‘SJC’)] ha[s] consistently looked

to the factors articulated in [PMP Assocs., 321 N.E.2d at 917]: (1) whether the

conduct is within “at least the penumbra of some common-law, statutory, or other

established concept of unfairness; (2) whether it is immoral, unethical, oppressive,

or unscrupulous; [and] (3) whether it causes substantial injury to consumers” or

other businesses.

H1 Lincoln, Inc. v. S. Washington St., LLC, 179 N.E.3d 545, 557 (Mass. 2022). “For [a]

practice to fall within the penumbra of a statute’s concept of unfairness, it need not actually

violate the statute.” Cooper v. Charter Commc’ns Ents. I, LLC, 760 F.3d 103, 111 (1st Cir.

2014) (quoting Kattar, 739 N.E.2d at 257). “[I]t is neither necessary nor sufficient that a

particular act or practice violate common or statutory law.” Mass. Eye & Ear Infirmary v. QLT

Phototherapeutics, Inc., 552 F.3d 47, 69 (1st Cir. 2009) (citing Kattar, 739 N.E.2d at 257;

Renovators Supply Inc. v. Sovereign Bank, 892 N.E.2d 777, 787 (Mass. App. Ct. 2008)),

decision clarified on denial of reh’g, 559 F.3d 1 (1st Cir. 2009). Instead, Massachusetts courts

“focus on the nature of challenged conduct and on the purpose and effect of that conduct as the

crucial factors in making a G.L. c. 93A fairness determination.” Com. Union Ins. Co. v. Seven

Provinces Ins. Co., 217 F.3d 33, 40 (1st Cir. 2000) (quoting Mass. Emps. Ins. Exch. v. Propac-

Mass, Inc., 648 N.E.2d 435, 438 (Mass. 1995)).

The Court finds that Verizon has adequately alleged that WNAC engaged in unfair acts

or practices. As noted above, the FCC Rules’ plain language imposes a duty on TV broadcast

stations, like WNAC, to “negotiate in good faith the terms and conditions of retransmission

consent agreements.” 47 C.F.R. § 76.65(a). In announcing the FCC Rules, the FCC explained

its understanding that “by imposing the good faith obligation, Congress intended that the

Commission develop and enforce a process that ensures that broadcasters and MVPDs meet to

negotiate retransmission consent and that such negotiations are conducted in an atmosphere of

honesty, purpose and clarity of process.” Good Faith Order ¶ 24. The FCC Rules adopt a “two-

part test for [evaluating] good faith” in this context. See id. ¶ 6. The first part of the test

considers whether a party has engaged in any of several specifically identified actions, id.,

including:

(i) Refusal by a Negotiating Entity to negotiate retransmission consent;

(ii) Refusal by a Negotiating Entity to designate a representative with authority to

make binding representations on retransmission consent; [and]

(iii) Refusal by a Negotiating Entity to meet and negotiate retransmission consent

at reasonable times and locations, or acting in a manner that unreasonably delays

retransmission consent negotiations[.]

47 C.F.R. § 76.65(b)(1)(i)–(iii). “The second part of the good faith test is based on a totality of

the circumstances standard.” Good Faith Order ¶ 7; see 47 C.F.R. § 76.65(b)(4). Pursuant to the

“broader, totality of the circumstances test,” Good Faith Order ¶ 30, “[parties] may present facts

to the Commission which, even though they do not allege a violation of the objective standards,

given the totality of the circumstances reflect an absence of a sincere desire to reach an

agreement that is acceptable to both parties and thus constitute a failure to negotiate in good

faith,” id. ¶ 32; see 47 CFR § 76.65(b)(4).

A breach of a duty of good faith may serve as the basis for a Chapter 93A claim. See

Lycos, Inc. v. Internet Venture Works, Inc., No. 02-cv-11383, 2003 WL 21146661, at *2 (D.

Mass. May 19, 2003) (denying motion to dismiss Chapter 93A based on alleged breach of a duty

to negotiate in good faith that was imposed by a settlement agreement); see also Martorana v.

Progressive Direct Ins. Co., No. 22-cv-10613, 2023 WL 2465639, at *7 (D. Mass. Mar. 10,

2023) (declining to dismiss a Chapter 93A claim premised in part on conduct breaching the

implied covenant of good faith and fair dealing, because such conduct “comes ‘within a[]

recognized or established common law . . . concept of fairness’” (second alteration in original)

(quoting VMark Software v. EMC Corp., 642 N.E.2d 587, 595 (Mass. App. Ct. 1994))). The

Court likewise finds that where the Rules explicitly identify “[r]efusal by a Negotiating Entity to

designate a representative with authority to make binding representations on retransmission

consent” as a violation of the Rules’ duty of good faith, a failure to identify a point of contact for

negotiations could constitute unfair conduct within the meaning of Chapter 93A. 47 C.F.R.

§ 76.65(b)(1)(ii).

WNAC argues that it did designate a negotiation representative, pointing to letters it

asserts it sent to Verizon and other MVPDs and posted to the FCC’s publicly available website,

and that the Court may take judicial notice of these letters when considering the motion to

dismiss. [ECF No. 90 at 21–22]. These letters state, for example:

[WNAC] hereby notifies you that pursuant to Section 325(b) of the

Communications Act of 1934, as amended, and Section 76.64(f) of the FCC’s

Rules, [WNAC] elects to assert its right, under Section 76.64(a) of the FCC’s rules,

to have the broadcast signal of [WNAC] carried on your multichannel video

programming distribution service in our ‘television market[.]’ . . . This

retransmission consent election is for the [relevant] period.

[ECF No. 91-2 at 7 (letter dated September 23, 2017 and addressed to “Verizon Corporate

Services Group, Inc,” relevant to period “January 1, 2018 through December 31, 2020”)]. They

add: “Please direct any correspondence concerning this election statement to me [President

Timothy G. Sheehan] at the address provided below.” [Id.]. Verizon does not contest that the

Court may take judicial notice of the existence of these letters, but argues that their “legal

effect,” that is whether these letters satisfied WNAC’s obligation under the FCC Rules to

designate a negotiation representative, is disputed, and thus not an appropriate subject for

judicial notice. [ECF No. 97 at 22–24]. The Court agrees. Cf. Gent v. CUNA Mut. Ins. Soc’y,

611 F.3d 79, 84 n.5 (1st Cir. 2010) (taking “judicial notice of the relevant facts provided on the

[Center for Disease Control’s] website, . . . ‘not subject to reasonable dispute.’” (citing Fed. R.

Evid. 201(b), (f); Denius v. Dunlap, 330 F.3d 919, 926–27 (7th Cir. 2003))). At this early stage

of the litigation, the Court declines to adopt WNAC’s reading of these letters, and instead credits

Verizon’s allegation that WNAC failed to designate a representative, which may qualify as

unfair conduct.

Likewise, given the Rules’ broad test for good faith, see July 27, 2016 FCC Letter from

Chairman Tom Wheeler to Representative Bob Gibbs, 2016 WL 4371564, at *1 (July 27, 2016)

(“[O]ur current totality of the circumstances test . . . is intentionally broad”), the Court finds that

not disclosing information and not commencing negotiations, could, depending on the

surrounding facts, show “an absence of a sincere desire to reach an agreement that is acceptable

to both parties and thus constitute a failure to negotiate in good faith,” Good Faith Order ¶ 32.

Even if the Rules are more focused on practices within negotiations rather than practices prior to

negotiations, as WNAC asserts, at least one of the per se violations of the Rules’ duty of good

faith relates to a pre-negotiation practice, that is, refusing to designate a negotiation

representative. It therefore seems that WNAC’s alleged practices fall within at least a penumbra

of the FCC Rules’ concept of unfairness.

The Court declines to address WNAC’s arguments concerning deceptive acts or

practices, which it only raised in its reply brief. See [ECF No. 104]. “The purpose of a reply

memorandum is not to file new arguments that could have been raised in a supporting

memorandum.” Noonan v. Wonderland Greyhound Park Realty LLC, 723 F. Supp. 2d 298, 349

(D. Mass. 2010). “Where, as here, a moving party raises an argument for the first time in a reply

brief, that argument is waived.” Napert v. Gov’t Emps. Ins. Co., No. 13-cv-10530, 2013 WL

3989645, at *2 n.4 (D. Mass. Aug. 1, 2013); see also Wills v. Brown Univ., 184 F.3d 20, 27 (1st

Cir. 1999) (“[T]heories offered for the first time in the reply brief are not preserved.” (emphasis

omitted)). WNAC may re-raise its arguments in future motions, but for purposes of the instant

motion to dismiss, they are waived. The Court finds that Verizon has, at this early stage of the

litigation, adequately pleaded potentially deceptive conduct. For the same reason, the Court

finds Verizon has sufficiently alleged injury and causation. Again, WNAC may raise arguments

included in its reply brief in future motions, but for now they are deemed waived.

IV. CONCLUSION

For the above reasons, WNAC’s motion to dismiss, [ECF No. 89], is DENIED.

SO ORDERED.

February 26, 2024 /s/ Allison D. Burroughs

ALLISON D. BURROUGHS

U.S. DISTRICT JUDGE