Opinion
00 Civ. 5935 (GEL)(GWG)
July 6, 2001
REPORT AND RECOMMENDATION
To the Honorable GERARD E. LYNCH, United States District Judge:
Background
On August 10, 2000, plaintiff Cablevision Systems New York City Corporation ("Cablevision"), filed a compliant against defendant Roberto Flores, who is sued individually and "d/b/a Chi Hau Hau Grocery Deli." The complaint seeks damages for the illegal interception of cable television programming signals under 47 U.S.C. § 553(a)(1) and 605(a) of the Cable Communications Policy Act ("Communications Act"), and under Section 225(6) of New York State Public Service Law. The defendant was served but did not answer. On February 22, 2001, Cablevision sought a default judgment by Order to Show Cause. The District Judge granted Cablevision's request and a default judgment was entered on March 8, 2001. On March 19, 2001, the case was referred for an inquest regarding damages.
By Order dated March 23, 2001, I directed both parties to submit proposed findings of fact and conclusions of law regarding damages. The Order permitted the parties to request a hearing upon a proper showing. A copy of the Order was mailed to the defendant. On May 3, 2001, Cablevision served and filed proposed findings of fact and conclusions of law in accordance with that Order seeking to recover statutory damages in the amount of $10,000.00, attorney's fees and costs in the amount of $2,844.50, and punitive damages. The defendant's submissions were due on June 11, 2001. As of this date, defendant has made no submission at all.
Cablevision did not request a hearing on the issue of damages. The Second Circuit has held that an inquest may be held on the basis of documentary evidence, "as long as [the Court has] ensured that there was a basis for the damages specified in the default judgement." Fustok v. ContiCommodity Services, Inc., 873 F.2d 38, 40 (2d Cir. 1989). Accord Action S.A. Marc Rich Co., 951 F.2d 504, 508 (2d Cir. 1991). As Cablevision's submission includes an affidavit and documentary evidence, no hearing is required. The following findings of fact and conclusions of law are based on that submission. In addition, in light of the defendant's default, Cablevision's properly-pleaded allegations, except those relating to damages, are accepted as true. See e.g. Cotton v. Slone, 4 F.3d 176, 181 (2d Cir. 1993) ("factual allegations are taken as true in light of the general default judgment"); Greyhound Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992); Time Warner Cable of New York City v. Barnes, 13 F. Supp.2d 543, 547 (S.D.N.Y. 1998).
Findings of Fact and Conclusions of Law
Cablevision is a Delaware corporation with its principal place of business at 1111 Stewart Avenue, Bethpage, New York. Complaint ("Compl.") ¶ 4. Defendant Flores has a place of business at 600 East 180th Street, Bronx, New York 10457. Id. ¶ 5.
Cablevision constructs, operates, and maintains cable television systems in various parts of New York City including the area in the Bronx where defendant Flores conducts his business. See Affidavit of Charles Carroll, dated April 16, 2001, (hereinafter "Carroll Aff."), ¶ 2.
Cablevision receives signals for nearly all of its services from orbiting satellites and local radio towers. Id. ¶ 9.
Cablevision offers paying consumers cable television services in the form of different tiers of programming packages. Id. ¶ 3. The "Basic" service package consists of enhanced quality reception of broadcast stations as well as a number of additional programming services. Id. "Family" service is the higher level package where a customer subscribes to all of Cablevision programming services with the exception of the "premium" and the pay-per-view programming services. Id. Cablevision's residential subscribers may also elect to subscribe to one or more premium channels for an additional monthly charge per service. Id. ¶ 4. The cost of these premium services averages $10.95 per month per service. Id.
In addition to Basic and Family service, Cablevision customers may also subscribe to a package that includes the full range of Cablevision's programming services, including all of the premium channels, with the exception of the pay-per-view service, at a monthly rate of approximately $71.95. Id.
Additionally, Cablevision offers customers programming services which include movies, sporting events and other entertainment that they may order on a pay-per-view basis. Id. ¶ 5. The pay-per-view services typically range in price from approximately $4.50 to approximately $49.95 per selection. Id. The pay-per-view service is offered continuously over a 24-hour period. Id. The aggregate value of each pay-per-view event offered over a typical month, assuming each event is viewed once, is hundreds of dollars. Id.
An individual wishing to purchase Cablevision service is provided with a piece of equipment known as a "converter-decoder" which authorizes specific levels of Cablevision programming. Id. ¶ 8. To prevent subscribers from receiving programming services for which they have not paid, Cablevision encrypts or "scrambles" the signals for its services. Id. ¶ 9.
When in a scrambled mode, programming services not purchased remain distorted and not viewable on the subscriber's television set. Id. The converter-decoder boxes decodes or "descrambles" the scrambled Cablevision services according to the level of programming purchased Id. ¶ 10.
Each subscriber is entitled to receive only the level and amount of programming that the subscriber has selected and purchased. Id. ¶ 7. Despite this scrambling technology, it is possible for an individual to intercept and receive Cablevision signals without paying for it. Id. ¶ 15. An individual can either install an unauthorized converter-decoder or modify his or her own converter-decoder permitting the individual to intercept signals and view unauthorized (and unpaid-for) programming. Id. ¶¶ 14, 15.
During a routine audit of its cable television system, Cablevision investigators observed an illegal attachment at the Chi Hau Hau Grocery Deli indicating that the defendant was receiving unauthorized cable programming. Id. ¶ 16.
On January 19, 2000, Cablevision dispatched investigators to observe the interior of the Deli and this visit confirmed that such reception and interception was taking place. Id. ¶ 17; Affidavit of Michael Boylan, dated April 9, 2001 (hereinafter "Boylan Aff.") ¶ 3. The device permitted the defendant to view Cablevision's premium and pay-per-view programming services without authorization. Boylan Aff. ¶ 4. Flores was not a subscriber to Cablevision's cable television service in January 2000. Carroll Aff. ¶ 18. Thus the defendant engaged in the unauthorized reception and interception of Cablevision's cable television programming services by his ongoing use of a "pirate" modified cable television descrambling and decoding device. Id. ¶ 18.
The defendant knew that his use of an unauthorized converter-decoder would allow him to circumvent the security features of Cablevision's System, to descramble all of Cablevision's premium, pay-per-view and other scrambled programming, and to gain access to Cablevision's programming services without paying for such services. Compl. ¶¶ 18, 19. Indeed, unauthorized converter-decoders serve no lawful purpose on a cable system. See Time Warner Cable of New York City v. Barbosa, 2001 WL 118608 *3 (S.D.N.Y. January 2, 2001). Their sole function is to enable their users to receive unauthorized cable television programming without having to pay for the service. Id.
Statutory Damages
The unauthorized interception and reception of any cable television programming services which originate and are delivered by satellite or any other means is an express violation of 47 U.S.C. § 553(a)(1) and 605(a). See e.g. Time Warner Cable of New York City v. Barnes, 13 F. Supp.2d 543, 547-48 (S.D.N.Y. 1998) (citing International Cablevision, Inc. v. Sykes and Noel, 75 F.3d 123, 133 (2d Cir. 1996)). Defendant violated both sections by installing and operating the pirate converter decoder in the Chi Hau Hau Grocery Deli and intercepting and receiving Cablevision's cable television programming services. Compl. ¶ 22.
47 U.S.C. § 553(a)(1) provides in pertinent part that:
No person shall intercept or receive . . . any communications service offered over a cable system, unless specifically authorized to do so by a cable operator or as may otherwise be specifically authorized by law.
47 U.S.C. § 605(a) provides in pertinent part that:
No person not being authorized by the sender shall intercept any radio communication and divulge or publish the . . . contents . . . of such intercepted communication to any person.
Where a defendant's conduct has violated both sections 553 and 605 of the Communications Act, a plaintiff may recover damages under one of those sections only. Sykes, 75 F.3d at 129; Barnes, 13 F. Supp.2d at 548. Cablevision has elected to recover under the damages provision of section 605. Plaintiff's Proposed Findings of Fact and Conclusions of Law (hereinafter "Proposed Findings") at 7. Section 605 permits a damage award between $1,000 and $10,000. 47 U.S.C. § 605(e)(3)(C)(i)(II). Cablevision has requested the statutory maximum of $10,000. Proposed Findings at 7. As Cablevision has proprietary interests in the intercepted communications, it is entitled to bring this action as a "person aggrieved" within the meaning of 47 U.S.C. § 605(e)(3)(A); 47 U.S.C. § 605(d)(6). Cablevision's submissions establish that Flores installed in his place of business an unauthorized converter-decoder that enabled him to descramble all of Cablevision's encrypted premium and pay-per-view cable television signals. See Carroll Aff. ¶ 18. Flores therefore violated 47 U.S.C. § 605.
In its complaint, Cablevision requested an additional award of up to $100,000.00 under the "enhanced damages" provision of § 605(e)(3)(C)(ii). Compl. at 11. As Cablevision has not raised this request in its inquest submissions however, it is deemed waived. Even if Cablevision had sought such damages we would not be inclined to grant its request. The enhanced damages provision applies only when the violation was committed for "commercial advantage" or "private financial gain." § 605(e)(3)(C)(ii). Although the converter-decoder was found at a commercial establishment, Cablevision's submissions do not show that the illegal interception was used to Flores' commercial advantage or as part of his business.
The Court is to award statutory damages to a victimized plaintiff "as the court considers just." See 605(e)(3)(C)(i)(II); Time Warner Cable of New York City v. Taco Rapido Restaurant, 988 F. Supp. 107, 111 (E.D.N.Y. 1997). The statutory language provides no further guidance on how damages should be awarded.
One consideration employed by courts in determining damages is the amount of revenue that the aggrieved lost and the defendant saved. See Time Warner Cable of New York City v. Fland, 1999 WL 1489144 (S.D.N.Y. December 3, 1999). Because of the defendant's failure to answer the complaint or make any submission on the issue of damages, it has been impossible to determine either the actual amount of revenue lost by Cablevision and/or the amount of money saved by the defendant. Regardless of the actual direct damage suffered by Cablevision as a result of signal interception, there are indirect damages as well. Carroll Aff. ¶ 19. These unauthorized interceptions cause signal degradation and leakage, which violates Federal Communications Commission regulations, and could result in fines and sanctions. Id.
Another factor relevant to an award of damages is its deterrent value. See Barbosa, 2001 WL 118608 at *6. On a national scale, cable piracy results in revenue losses of approximately $5.1 billion, exclusive of pay-per-view service theft. See Carroll Aff. ¶ 13. This revenue loss directly affects the franchise fee of the City of New York, whose payment is based on the gross revenues of Cablevision. Carroll Aff. ¶ 19. Deterring other potential violators weighs strongly in favor of an increased award.
The wilfulness of the defendant's conduct also bears on the Court's consideration of the amount of statutory damages. See Cablevision Systems New York City Corporation v. Faschitti, 1996 WL 48689 at *2 (S.D.N.Y. February 7, 1996). Again, defendant has refused to avail himself of the opportunity to address this or any other factor relevant to damages. Thus, the Court assumes that the defendant's conduct has been wilful.
In sum, all the factors weigh in favor of an elevated award. Had the defendant contested any aspect of damages, the Court would likely have awarded something less than the maximum permitted by statute. The defendant, however, has chosen to ignore this Court's offer to be heard on the issue of damages. Thus the Court draws every inference against the defendant. As a result, I recommend that Cablevision be awarded judgment in the maximum amount permitted by statute or $10,000.00. See also Faschitti, 1996 WL 48689 at *2 (granting the statutory maximum based on need for deterrence, the defendant's wilful conduct and the defendant's failure to appear).
In addition to statutory damages under Section 605, Cablevision seeks to recover additional monetary and punitive damages for the defendant's violation of Section 225(6) of the New York State Public Service Law. Compl. at 11. In regards to a monetary damage award, case law does not permit a double recovery for a single violation that creates liability under two statutes. See Time Warner Cable of New York City v. Barnes, 13 F. Supp.2d 543, 549 (S.D.N Y 1998); Time Warner Cable of New York City v. Rivera, 1995 WL 362429, at *5 n. 2 (E.D.N.Y. June 8, 1995).
With respect to punitive damages, the Communications Act does not contain a punitive damages provision, see 47 U.S.C. § 605(e), and therefore no double recovery is implicated.
Given the Court's recommendation that the maximum statutory damages be imposed, however, and the high standard that must be met to obtain an award of punitive damages, see Barnes, 13 F. Supp.2d at 549, this Court does not believe that recovery of punitive damages is warranted.
Attorneys' Fees and Costs
Section 605 charges a court to "direct the recovery of full costs, including the award of reasonable attorneys' fees to an aggrieved party who prevails." 47 U.S.C. § 605(e)(3)(B)(iii). In New York State Ass'n for Retarded Children, Inc. v. Carey, 711 F.2d 1136 (2d Cir. 1983), the Second Circuit held that a party seeking an award of attorney fees must support that request with contemporaneous time records that show "for each attorney, the date, the hours expended, and the nature of the work done." Id. at 1154.
Cablevision has submitted an affirmation by its attorneys, Lefkowitz, Louis Sullivan, indicating it has incurred attorney's fees of $2,644.50 in prosecuting this action. Affirmation of Jennean R. Lee, undated (hereinafter "Lee Aff.") ¶ 8. The affidavit sets forth: (a) the names of the attorneys who worked on this matter; (b) the professional experience of those persons; (c) the number of hours each devoted to this action and the nature of the work they performed; and (d) the hourly rate at which each was compensated. Lee Aff. ¶¶ 3, 4, 5 and 6. Cablevision has further submitted contemporaneous time records reflecting the number of hours expended and 9 the nature of the work by each of the attorneys of the law firm. See Exhibits B, C and D to Lee Aff.
Cablevision's submission establishes that attorneys at the law firm expended the following number of hours prosecuting this action against the defendants at the following hourly rate of compensation:
Attorney Total Hours Hourly Rate Total Daniel J. Lefkowitz 1.20 240 228.00 William B. Jung 1.10 165 181.50 Jennean Lee 15.00 145 2175.00 Total $2,644.50 Lee Aff. ¶¶ 3, 4, 5 and 6.
These hours and billing rates are reasonable. See Barnes, 13 F. Supp.2d at 549 (award of $2,651.25 in attorney's fees); Cablevision Systems New York City Corporation v. Faschitti, 1996 WL 48689 *3 (S.D.N.Y. February 7, 1996) ($3,000).
I therefore recommend that Cablevision be awarded attorneys' fees in the amount of $2,644.50.
In addition, Cablevision incurred costs in the amount of $150.00 for filing the Summons and Complaint, and $50.00 for serving the defendant. Lee Aff. ¶ 8. I therefore recommend that Cablevision be awarded costs in the amount of $200.00.
Conclusion
For the reasons set forth above, I recommend that Cablevision be awarded judgment against the defendant in the amount of $12,844.50.
PROCEDURE FOR FILING OF OBJECTIONS TO THIS REPORT AND RECOMMENDATION
Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, the parties have ten (10) days from service of this Report to file any written objections. See also Fed.R.Civ.P. 6. Such objections (and any responses to objections) shall be filed with the Clerk of the Court, with courtesy copies delivered to the chambers of the Honorable Gerard E. Lynch, United States District Judge, at the United States Courthouse, 40 Centre Street, New York, N.Y. 10007, and to any opposing parties. Any requests for an extension of time to file objections must be directed to Judge Lynch. The failure to file timely objections will result in a waiver of those objections for purposes of appeal. See Thomas v. Arn, 474 U.S. 140 (1985).