A federal judge in California has ordered Nexstar Media Group to hit the reset button on a Board of Directors assembled to oversee its subsidiary business TEGNA because the makeup of the board violates a prior court order issued in an ongoing antitrust lawsuit.
In an order issued Thursday afternoon, U.S. District Judge Troy Nunley in Sacramento granted a motion filed by DIRECTV and several state attorneys general that sought clarification on the injunction as it relates to Nexstar’s decision to appoint its own executives to a board designed to oversee TEGNA’s operations while the case plays out.
Nunley said the injunction bars current and former Nexstar officers, employees, directors, consultants and other affiliated personnel from serving on TEGNA’s board. If Nexstar seeks to appoint someone with a material relationship to the company, it must first seek permission from the court.
The clarification comes after DIRECTV and the attorneys general notified the court that TEGNA’s five-member board consisted almost entirely of Nexstar’s own executives, including founder and CEO Perry Sook, Chief Operating Officer Michael Biard, Chief Financial Officer Lee Ann Gliha and General Counsel Elizabeth Ryder.
Only one board member, Timothy Busch, is not a Nexstar employee, though he previously worked in an executive position with the broadcaster.
Nunley said that structure undermined the purpose of the injunction, which required Tegna to remain a separate, distinct and independently managed business unit.
“It is directly contrary to the intent of the preliminary injunction to allow Nexstar executives to serve on TEGNA’s Board,” Nunley wrote. “Nexstar’s control of the TEGNA Board will undoubtedly allow it to influence TEGNA’s management and obtain access to TEGNA’s confidential information.”
The court rejected Nexstar’s argument that the injunction prohibited Nexstar personnel from serving as TEGNA officers but did not expressly bar them from serving as directors. Nunley called that reading “entirely disingenuous” and said it was “clearly the spirit of the preliminary injunction” that Nexstar executives would be barred from serving as TEGNA directors.
The court also rejected Nexstar’s argument that Sook and Gliha needed to serve on TEGNA’s board to satisfy the Sarbanes-Oxley Act, federal financial reporting obligations and debt agreement terms. Nunley said Nexstar did not identify a statutory or regulatory requirement that would mandate those board seats.
The judge also criticized Nexstar’s behavior since the lawsuit was filed, saying the company failed to disclose material information about board appointments despite multiple opportunities. Nunley also said Nexstar executives wrongly implied publicly that the court had endorsed certain actions when it had not.
“Defendants’ conduct is brazen,” Nunley wrote. “The Court finds Defendants have failed to comply with Rule 3.3 and admonishes them for their lack of candor.”
Nunley ordered Nexstar to “immediately” comply with the earlier order as clarified and file a status update on the matter within the next two weeks. He also ordered Nexstar to regularly provide DIRECTV and the state attorneys general with materials related to TEGNA’s future Board of Directors, including meeting minutes, material changes to budgets and financial and operational reports.
Nexstar closed on its acquisition of TEGNA in March, hours after receiving approvals from the U.S. Department of Justice and the Federal Communications Commission (FCC). The finalized deal came one day after DIRECTV and state attorneys general in California and elsewhere filed separate lawsuits arguing the merger violated federal antitrust laws. The cases were eventually consolidated.
Nunley issued a preliminary injunction after a hearing in April that allows Nexstar to own TEGNA on paper while the antitrust lawsuit plays out, but otherwise requires the broadcasters to maintain separate operations, with few exceptions. Nexstar is appealing the injunction.
Both sides in the lawsuit want the case to go before a jury next summer.
