AMC and Cablevision’s breach of contract case against Dish for dropping the long defunct VOOM HD channels has been kicking around for years, but now is due to go to trial in September. And the smart money is starting to bet that Dish will settle to avoid being creamed in a case where the plaintiffs are seeking to split $2.5B in damages. That was one of the main drivers behind this morning’s decision by Susquehanna Financial Group’s Vasily Karasyov to raise his rating on AMC shares to positive from netutral, and his price target to $49 from $42. His company’s litigation analyst, Thomas Claps, says that Dish “is facing significant headwinds” as a result of two pre-trial rulings “which could cripple its liability and damages defenses.” The judge in the case has decided to tell the jury that Dish “destroyed potentially critical evidence in the case” and say they can infer that the evidence “would have been unfavorable to Dish.” In addition, the court will not allow Dish to include testimony or a report from its main damages expert. As a result, Karasyov believes Dish will settle — possibly before the October season premiere of AMC’s popular series Walking Dead — with the satellite company paying far less than $2.5B but resuming its carriage of the programmers’ channels including AMC, IFC, and WE.

Bernstein Research’s Craig Moffett also weighed in on the case this morning as he lowered his stock price target for Dish to $26 from $28. He’s now baking in a pre-tax loss of $1B. Moffett says that Dish will have a harder time than it did in its patent infringement case with TiVo using appeals and other legal maneuvers to delay its day of reckoning. The rules are different for a tort case than for a patent infringement one. And under New York State law, if the plaintiffs win, then Dish would have to escrow cash before it can appeal — and pay interest on it, which could be as high as 9%. He’s also betting on a settlement: “Cases involving spoliation of evidence rarely go to trial because the odds are so skewed against the offending party,” he says.