Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-15-02901/USCOURTS-ca8-15-02901-0/pdf.json

Parties Involved:
DISH Network, L.L.C
Appellant
Craig Felzien
Appellee
Neil Stokes
Appellee

Document Text:

United States Court of Appeals

For the Eighth Circuit

___________________________

No. 15-2901

___________________________

Neil Stokes; Craig Felzien

lllllllllllllllllllll Plaintiffs - Appellees

v.

DISH Network, L.L.C.

lllllllllllllllllllll Defendant - Appellant

____________

Appeal from United States District Court 

for the Western District of Missouri - Jefferson City

____________

 Submitted: April 14, 2016

 Filed: October 4, 2016

____________

Before LOKEN, BEAM, and SMITH, Circuit Judges.

____________

LOKEN, Circuit Judge.

DISH Network, L.L.C. (“DISH”), is a Colorado corporation that sells satellite

television access packages nationwide. DISH’s “carriage” agreement with Turner

Network Sales, Inc., expired on October 21, 2014, and was not renewed until

November 20, 2014. DISH’s carriage agreement with FOX News Network L.L.C.

expired on December 21, 2014, and was not renewed until January 15, 2015. DISH

subscribers who had selected programming packages that included popular Turner

Appellate Case: 15-2901 Page: 1 Date Filed: 10/04/2016 Entry ID: 4454972 
and FOX News channels did not have access to those channels during these

interruptions. Though DISH continued to provide hundreds of other channels, it did

not provide complaining subscribers any form of monetary relief for the Turner and

FOX News interruptions. 

Neil Stokes and Craig Felzien, DISH subscribers since 2008 and 2000,

respectively, commenced this action on behalf of themselves and a putative

nationwide class of DISH subscribers (collectively, “Plaintiffs”) seeking monetary

relief for the Turner and FOX News services interruptions. Applying Colorado law,

as the DISH Subscription Agreements expressly provide, the district court denied

DISH’s motion to dismiss Plaintiffs’ claims for breach of contract and breach of the

covenant of good faith and fair dealing. The court certified two questions for

immediate interlocutory appeal under 28 U.S.C. § 1292(b). We granted a timely

1

request to appeal the certified questions and now review de novo the district court’s

interpretation of the Subscription Agreements under Colorado law, Matrix Grp. Ltd.

v. Rawlings Sporting Goods Co., 477 F.3d 583, 590 (8th Cir. 2007), and the court’s

denial of DISH’s motion to dismiss these claims for failure to state a claim upon

which relief can be granted, Prescott v. Little Six, Inc., 387 F.3d 753, 756 (8th Cir.

2004), cert. denied, 544 U.S. 1032 (2005). We answer each certified question in the

negative, reverse the district court’s order denying DISH’s motion to dismiss, and

remand for further proceedings not inconsistent with this opinion. 

I. Relevant Contract Terms.

Plaintiffs subscribed to specific DISH access packages, paying in advance. 

They received Subscription Agreements after DISH installed satellite equipment in

Pending this appeal, the district court stayed this case and a case presenting 1

similar issues, Padberg v. DISH Network LLC, 11-04035-CV, 2012 WL 2120765

(W.D. Mo. June 11, 2012). 

-2-

Appellate Case: 15-2901 Page: 2 Date Filed: 10/04/2016 Entry ID: 4454972 
their homes, comprised of a Digital Home Advantage Plan Agreement (“Plan

Agreement”) and a Residential Customer Agreement (“RCA”). The certified

questions on appeal turn on the following contract provisions. The Plan Agreement

provides in relevant part:

BY SIGNING BELOW YOU ACKNOWLEDGE AND AGREE THAT

YOU HAVE RECEIVED, READ, UNDERSTAND, AND AGREE TO

BE BOUND BY ALL OF THE TERMS AND CONDITIONS OF THIS

AGREEMENT, INCLUDING . . . THE RESIDENTIAL CUSTOMER

AGREEMENT . . . AND THAT THE FOLLOWING TERMS WERE

DISCLOSED TO YOU PRIOR TO LEASE:

. . . 

WE RESERVE THE RIGHTTOCHANGE PRICES, PACKAGES,

AND PROGRAMMING AT ANY TIME,INCLUDING WITHOUT

LIMITATION,DURING ANYTERMAGREEMENT PERIODTO

WHICH YOU HAVE AGREED.

The RCA provides in relevant part:

1. THE DISH NETWORK SERVICE

. . . 

I. Changes in Services Offered. We may add, delete, rearrange and/or

change any and all programming, programming packages and other

Services that we offer, as well as the prices and fees related to such

programming, programming packages and Services, at any time,

including . . . during any term commitment period to which you have

agreed. If a change affects you, we will notify you of such change and

its effective date. In the event that we delete, rearrange or change any

programming, programming packages or other Services, we have no

obligation to replace or supplement such programming, programming

packages or other Services. You are not entitled to any refund because

of deletion, rearrangement or change of any programming, programming

packages or other Services. 

-3-

Appellate Case: 15-2901 Page: 3 Date Filed: 10/04/2016 Entry ID: 4454972 
7. LIMITATION OF OUR LIABILITY

A. INTERRUPTIONS AND DELAYS. NEITHER WE NOR OUR

THIRD-PARTY BILLING AGENTS . . . WILL BE LIABLE FOR ANY

INTERRUPTION IN ANY SERVICE OR FOR ANY DELAY OR

FAILURE TO PERFORM, INCLUDING WITHOUT LIMITATION:

IF SUCH INTERRUPTION, DELAY OR FAILURE TO PERFORM

ARISES IN CONNECTION WITH THE TERMINATION OR

SUSPENSION OF DISH NETWORK’S ACCESS TO ALL OR ANY

PORTION OF SERVICES; THE RELOCATION OF ALL OR ANY

PORTION OF THE SERVICES TO DIFFERENT SATELLITE(S); A

CHANGE IN THE FEATURES AVAILABLE WITH YOUR

EQUIPMENT; ANY SOFTWARE OR OTHER DOWNLOADS

INITIATED BY US; OR ANY ACTS OF GOD, FIRES,

EARTHQUAKES, FLOODS, POWER OR TECHNICAL FAILURE,

SATELLITE OR UPLINK FAILURE, ACTS OF ANY

GOVERNMENTALBODYOR ANYOTHER CAUSEBEYONDOUR

REASONABLE CONTROL.

II. The First Certified Question.

1. Under Colorado law, is the Subscription Agreement between Stokes and

DISH, which is comprised of both a Digital Home Advantage Plan Agreement

and a Residential Customer Agreement, illusory?

In our view, this issue is a classic red herring. The phrase “illusory promise” 2

means “words in promissory form that promise nothing.” 2 Corbin on Contracts

§ 5.28, at 142 (rev. ed. 1995). In most cases, the purported contract fails for lack of

consideration because, “[w]here the apparent assurance of performance is illusory,

it is not consideration for a return promise.” Restatement (Second) of Contracts § 77

Defined in Webster’s Third New International Dictionary as “a diversion

2

intended to distract attention from the real issue.”

-4-

Appellate Case: 15-2901 Page: 4 Date Filed: 10/04/2016 Entry ID: 4454972 
cmt. a. For example, in Bernhardt v. Hemphill, 878 P.2d 107, 111 (Colo. App. 1994),

plaintiffs entered into time-share contracts with a motel they owned and operated; the

court concluded that “the contracts were wholly illusory” because “no rights were

created that the plaintiffs did not already possess.” 

In this case, the district court concluded that, if the Subscription Agreements

provided “that DISH cannot be held liable for any interruption or delay of any or all

programs for any period of time . . . such an interpretation would of course render the

contract illusory.” We disagree. An illusory contract is unenforceable from its

inception. Here, the Subscription Agreement between Stokes and DISH had been in

effect for years when the Turner and FOX News service interruptions occurred. Both

parties had provided substantial performance oftheir respective contractual promises,

and DISH continued to provide many uninterrupted channels to its subscribers. 

Under Colorado law, a contract is not illusory for lack of consideration where a party

with seeminglyunlimited discretion in performing has at least partially performed and

thereby “incurred a sufficient detriment to provide consideration.” O’Hara Grp. 

Denver, Ltd. v. Marcor Housing Sys., Inc., 595 P.2d 679, 683-84 (Colo. 1979); see

United Press Int’l, Inc. v. Sentinel Publ’g Co., 441 P.2d 316, 318-19 (Colo. 1968). 

The answer to the first certified question is no. 

III. The Second Certified Question.

2. Under Colorado Law, if the Subscription Agreement between Stokes and

DISH, which is comprised of both a Digital Home Advantage Plan Agreement

and a Residential Customer Agreement, is not illusory, may, in light of the

express terms of the Subscription Agreement, the duty of good faith and fair

dealing be applied to require DISH to provide any monetary relief when it

deletes or changes programming for which subscribers have already paid?

-5-

Appellate Case: 15-2901 Page: 5 Date Filed: 10/04/2016 Entry ID: 4454972 
Under Colorado law, all contracts are subject to an implied duty of good faith

and fair dealing, as DISH concedes on appeal. The Plan Agreement, and Section 1.I.

of the RCA, entitled “Changes in Services Offered,” granted DISH discretion to

change “programming, programming packages and other Services that we offer, as

well as the prices and fees related to such . . . Services, at any time.” Under Colorado

law (as elsewhere), the “implied duty of good faith and fair dealing ‘requires that a

party vested with contractual discretion exercise that discretion reasonably.’” Bloom

v. Nat’l Collegiate Ass’n, 93 P.3d 621, 624 (Colo. App. 2004). As the Colorado

Supreme Court has explained:

The good faith performance doctrine is generally used to

effectuate the intentions of the parties or to honor their reasonable

expectations. Good faith performance of a contract involvesfaithfulness

to an agreed common purpose and consistency with the justified

expectations of the other party. . . . [A]dherence to this principle

promotes the central policy underlying contract law, that of construing

contracts so as to effectuate the parties’ intentions.

The duty of good faith and fair dealing applies when one party has

discretionary authority to determine certain terms of the contract, such

as quantity, price, or time. The covenant may be relied upon only when

the manner of performance under a specific contract term allows for

discretion on the part of either party. However, it will not contradict

terms or conditions for which a party has bargained. 

Amoco Oil Co. v. Ervin, 908 P.2d 493, 498 (Colo. 1995) (quotations omitted).

The duty of good faith and fair dealing “will not contradict terms or conditions

for which a party has bargained.” Id. The duty “does not obligate a party . . . to

assume obligations that vary or contradict the contract’s express provisions, nor does

it permit a party to inject substantive terms into the contract.” ADT Sec. Servs., Inc.

v. Premier Home Prot., Inc., 181 P.3d 288, 293 (Colo. App. 2007). Rather, “the

-6-

Appellate Case: 15-2901 Page: 6 Date Filed: 10/04/2016 Entry ID: 4454972 
doctrine of good faith performance is a means of finding within a contract an implied

obligation not to engage in the particular form of conduct which, in the case at hand,

constitutes ‘bad faith.’” Tymshare, Inc. v. Covell, 727 F.2d 1145, 1152 (D.C. Cir.

1984). The covenant is not about establishing new, independent rights or duties; it

is about “securing to the parties the sort of good faith performance that . . . they

reasonably thought they were securing at the time they entered the bargain.” Flood

v. Clearone Commc’ns, Inc., 618 F.3d 1110, 1122 (10th Cir. 2010); see Tymshare,

727 F.2d at 1153-54. 

Count II of Plaintiffs’ First Amended Complaint pleaded a claim for breach of

the covenant of good faith and fair dealing. But Plaintiffs did not allege that DISH

interrupted their accessto Turner and FOX News channelsin bad faith. They instead

alleged that DISH breached its duty of good faith and fair dealing “by unfairly

charging and collecting monies . . . for satellite television programming that DISH did

not provide . . . without providing a credit or other monetary relief . . . for the failure

to provide the programming.” Consistent with the contractual claims as pleaded, the

district court in denying DISH’s motion to dismiss concluded that “[t]he operative

question is whether it was reasonable for DISH to stop providing Turner and FOX

News Programming, keep the payments it would have been paying previously to the

providers for those channels, and provide no recompense to its customers.” 

DISH argues that the covenant of good faith and fair dealing, while applicable

to its Subscription Agreement, cannot support Plaintiffs’ claimfor monetary relief for

the two programming interruptions, because the Subscription Agreement expressly

provides that customers are not entitled to monetary relief for interruptions and

performance delays resulting from the loss of DISH’s access to the programming

services it provides. We agree, and therefore answer this second question in the

negative. The covenant “will not contradict terms or conditionsfor which a party has

bargained.” Amoco, 908 P.2d at 498. Therefore, DISH’s duty to exercise its

discretion to change programming in good faith cannot be the legal basis for a claim

-7-

Appellate Case: 15-2901 Page: 7 Date Filed: 10/04/2016 Entry ID: 4454972 
to monetary relief that is precluded by unambiguous terms of the Subscription

Agreement. In applying the covenant to specific contractual relationships, courts

must “take care to ensure that we don’t use the covenant as another means for

substituting a different deal from the one the parties contemplated.” Flood, 618 F.3d

at 1121. The Supreme Court of Colorado has repeatedly recognized this principle. 

“It is axiomatic that in construing a document courtsshould not rewrite the provisions

of an unambiguous document, but must enforce an unambiguous contract in

accordance with the plain and ordinary meaning of its terms.” USI Props. E., Inc. v.

Simpson, 938 P.2d 168, 173 (Colo. 1997). 

Section 1.I. ofthe RCA providesthatsubscribers “are not entitled to any refund

because of a deletion . . . or change of any programming, programming packages or

other Services.” Section 7.A. unequivocally providesthat DISH “will [not] be liable

for any interruption in any service or for any delay or failure to perform . . . without

limitation.” The district court cited various textual reasons why it declined to

construe these provisions in accordance with their plain meaning. First, the court

limited Section 7.A. to interruptions, delays, and failures that are “beyond [DISH’s]

reasonable control.” This interpretation ignored the use ofsemicolons in Section 7A,

which serve to signify that modifying phrases in one clause do not apply to other

clauses. See Greater E. Transp. LLC v. Waste Mgmt. of Conn., Inc., 211 F. Supp. 2d

499, 504 (S.D.N.Y. 2002). Giving effect to the provision’s punctuation, the phrase

“beyond our reasonable control” applies only to the final force majeure clause, which

disclaims liability for “any acts of god, fires, earthquakes, floods, power or technical

failure, satellite or uplink failure, acts of any governmental body or any other cause

beyond our reasonable control.” For service interruptions and delays that may occur

for many other reasons, and may entail loss of service ranging from momentary to

extensive, Section 7.A. precludes monetary liability “without limitation.”

-8-

Appellate Case: 15-2901 Page: 8 Date Filed: 10/04/2016 Entry ID: 4454972 
The district court further reasoned that, if Section 7.A. were to disclaim

monetary liability for all failures to perform, consistent with its plain meaning, then

Section 7.F. of the RCA would be meaningless surplusage. Section 7.F. provides:

F. DAMAGES LIMITATION. NEITHER WE NOR OUR THIRDPARTY BILLING AGENTS . . . SHALL HAVE ANY LIABILITY

WHATSOEVER FOR ANYSPECIAL,INDIRECT,INCIDENTAL OR

CONSEQUENTIAL DAMAGES ARISING OUT OF OR RELATING

TO: DISHNETWORKEQUIPMENTOR ANYOTHER EQUIPMENT;

OUR FURNISHING OR FAILURE TO FURNISH ANY SERVICES

OR EQUIPMENT TO YOU; OR ANY FAULT, FAILURE,

DEFICIENCY OR DEFECT IN SERVICES OR EQUIPMENT

FURNISHED TO YOU.

This section disclaims liability for consequential damages arising out of equipment

failures and service deficiencies, whereas Section 7.A. disclaims liability for an

“interruption in any Service or for any delay or failure to perform” in connection with

problems such as loss of access to programming, relocation of services to different

satellites, and software downloads. The difference in the disclaimers is not

surprising. For example, if a satellite dish becomes detached from a subscriber’s

home, falls, and damages the subscriber’s property, Section 7.F. disclaims “any

special, indirect, incidental or consequential damages” caused by “DISH Network’s

equipment” (i.e., the satellite dish). Section 7.A. does not apply because it is limited

to interruptions, delays, and failures to perform relating to “Services.” Thus, giving 3

effect to Section 7.A.’s plain meaning does not render Section 7.F. meaningless. 

Section 1.A. of the RCA states: “Services Defined. ‘Services’ shall mean all

3

video, audio, data, interactive and other programming services and all other services

that are currently available from DISH Network (whether subscription, pay-per-view

or otherwise) and that we may provide to customers in the future.” 

-9-

Appellate Case: 15-2901 Page: 9 Date Filed: 10/04/2016 Entry ID: 4454972 
Section 1.I. of the RCA states that a subscriber is “not entitled to any refund

because of a deletion, rearrangement or change of any programming, programming

packages or other Services.” The district court declined to interpret this provision 

in accordance with its plain meaning by drawing a distinction between a “refund” and

a “credit.” Noting that Section 3.D. of the RCA prohibits both credits and refunds, 

the court concluded that Section 1.I. allows for monetary relief in the form of a credit

for service interruptions because Section 1.I. explicitly prohibits only refunds. We

disagree. Section 3 of the RCA contains multiple provisions dealing with

Cancellation of Service. Sections 3.A.-C. provide that a customer’s subscription will

continue until the customer cancels or DISH disconnects Services; that the customer

may cancel at any time, but some plans include early termination or cancellation fees;

and the circumstances that permit DISH to disconnect Services. Section 3.D. then

provides that, if Services are cancelled or disconnected for any reason, “charges for

Services, once charged to your account, are non-refundable, and no refunds or credits

will be provided in connection with the cancellation of Services.” The addition of a

reference to “credits” in the context of Section 3 is understandable. It in no way

suggests that the language in Section 1.I -- “You are not entitled to any refund” --

intended anything less than the total preclusion of monetary relief for Services

interruptions, as the total disclaimer of liability in Section 7.A. confirms. 

We conclude that the district court’s interpretation of Section 1.I. and Section

7.A. of the RCA improperly converted the covenant of good faith and fair dealing

into an additional contract term. It allowed Plaintiffs to recover monetary relief for

Services interruptions, a remedy that is unambiguously precluded by the express

terms of the parties’ contractual bargain. Accordingly, the answer to the second

certified question is no. As pleaded, Plaintiffs’ claims for class-wide monetary relief

-10-

Appellate Case: 15-2901 Page: 10 Date Filed: 10/04/2016 Entry ID: 4454972 
in this case and in the related case of Padberg v. DISH Network LLC failed to state

a claim upon which relief can be granted. Our jurisdiction over this interlocutory

appeal extends no further.

The order of the district court dated July 15, 2015 is reversed and the case is

remanded for further proceedings not inconsistent with this opinion.

______________________________

-11-

Appellate Case: 15-2901 Page: 11 Date Filed: 10/04/2016 Entry ID: 4454972