Opinion
Civ. No. 03-5738 (RHK/AJB).
March 8, 2005
Henry M. Helgen III and Amy Court, McGrann, Shea, Anderson, Carnival, Straughn Lamb, Chartered, Minneapolis, for Plaintiff.
No appearance by Defendant.
MEMORANDUM OPINION AND ORDER
Introduction
Plaintiff DirecTV, Inc. has sued Defendant Jim Sheffield alleging that Defendant has received and intercepted its satellite transmissions in violation of federal law. Before the Court is DirecTV's Motion for Default and Permanent Injunction. For the reasons set forth below, the Court will grant DirecTV's Motion, direct the Clerk to enter Defendant's default, enter judgment by default against Defendant, institute a permanent injunction, and award statutory damages.
Background
Drawn from DirecTV's Complaint, the factual allegations are as follows: DirecTV is a California corporation with its principal place of business in California. Defendant is a citizen and resident of Minnesota. DirecTV provides television programming to millions of subscribers in the United States through a direct broadcast satellite system. To provide security and prevent unauthorized viewing of its programming, DirecTV encrypts, or scrambles, its satellite transmissions. Those authorized to view DirecTV programming are required to create an account, obtain a DirecTV Access Card, and purchase other system hardware, including a small satellite dish. Upon activation of the Access Card by DirecTV, the subscribing customer can de-encrypt DirecTV's satellite signal and view its television programming.
Despite these security measures, several companies sell modified DirecTV Access Cards and other devices ("pirate access devices") that permit the viewing of DirecTV's programming without authorization by, or payment to, DirecTV. In 2001, DirecTV executed Writs of Seizure at various mail shipping facilities used by these companies and it secured sales records, shipping records, email communications, credit card receipts, and other documents showing the sale and purchase of pirate access devices. These records demonstrated that Defendant placed an order with a distributor through the interstate or foreign wire facilities and purchased a pirate access device. That device was then delivered to Defendant's Minnesota address via the United States Postal Service or other commercial mail carriers.
Based on this information, DirecTV filed a three-count Complaint against Defendant. Count I alleges unauthorized reception of satellite signals, in violation of 47 U.S.C. § 605(a); Count II alleges unauthorized interception of electronic communications, in violation of 18 U.S.C. § 2511(1)(a); and Count III alleges possession of pirate access devices, in violation of 18 U.S.C. § 2512(1)(b). Defendant was served with the Summons and Complaint, but has failed to plead or otherwise defend against this action. (Helgen Aff. ¶¶ 4, 6.)
Pursuant to Rule 55 of the Federal Rules of Civil Procedure, DirecTV has moved for the entry of a default and a judgment by default on Count I, which alleges a violation of 47 U.S.C. § 605(a), and Count II, which alleges a violation of 18 U.S.C. § 2511(1)(a). It seeks an injunction and $10,000 in statutory damages. Defendant has made no appearance.
Count III of DirecTV's Complaint, which alleges a violation of 18 U.S.C. § 2512(1)(b), will be dismissed with prejudice because there is no private right of action to enforce this provision. See DirecTV v. Bertram, 296 F. Supp. 2d 1021 (D. Minn. 2003).
To be clear, DirecTV does not seek $10,000 under Count I and an additional $10,000 under Count II. DirecTV seeks $10,000in total.
Standard of Review
Default under Rule 55 of the Federal Rules of Civil Procedure encompasses two steps: the entry of a default and the subsequent entry of a judgment by default. 10 James Wm. Moore, Moore's Federal Practice § 55.10[1]; Fed.R.Civ.P. 55. For the first step, Rule 55(a) provides that "[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend . . . and that fact is made to appear by affidavit or otherwise, the clerk shall enter the party's default." Fed.R.Civ.P. 55(a). This step is satisfied because, as noted above, Defendant has failed to answer or otherwise defend this action. The Court will direct the Clerk to enter default against Defendant. For the second step, Rule 55(b)(2), which is the applicable provision in this case, requires that "the party entitled to a judgment by default shall apply to the court therefor" and authorizes the court "to determine the amount of damages" where necessary "to enable [it] to enter judgment or to carry it into effect." Fed.R.Civ.P. 55(b)(2).
Rather than moving under Rule 55(b)(2), DirecTV has moved under Rule 55(b)(1). (Motion at 1.) Rule 55(b)(1) provides: "When the plaintiff's claim against a defendant is for a sum certain or for a sum which can by computation be made certain, the clerk upon request of the plaintiff and upon affidavit of the amount due shall enter judgment for that amount and costs against the defendant, if the defendant has been defaulted for failure to appear and is not an infant or incompetent person." (emphasis added). "[A] claim is not a sum certain unless there is no doubt as to the amount to which a plaintiff is entitled as a result of the defendant's default." KPS Assocs., Inc. v. Designs By FMC, Inc., 318 F.3d 1, 19 (1st Cir. 2003) (citations omitted). Here, DirecTV's claim is not a "sum certain" because, as will be seen below, the determination of statutory damages is within the Court's discretion. See 47 U.S.C. § 605(e); 18 U.S.C. § 2520;DirecTV, Inc. v. Kaas, 294 F. Supp. 2d 1044, 1047-48 (N.D. Iowa 2003). Thus, Rule 55(b)(1) is inapplicable.
Analysis
As noted above, default will be entered against Defendant and DirecTV seeks judgment by default on Counts I and II. The Court will address each claim in turn.
A. Count I — 47 U.S.C. § 605(a)
Count I alleges that "Defendant has received and/or assisted others in receiving DIRECTV's satellite transmissions of television programming without authorization, in violation of 47 U.S.C. § 605(a)." Section 605(a) provides, in relevant part, that "[n]o person not being entitled thereto shall receive or assist in receiving any interstate or foreign communication by radio and use such communication (or any information therein contained) for his own benefit or for the benefit of another not entitled thereto." By virtue of Defendant's default, the factual allegations in the Complaint, except those relating to damages, will be taken as true. 10A Charles Alan Wright, Arthur R. Miller, and Mary Kay Kane,Federal Practice and Procedure § 2688 (3d ed. 2004); Fed.R.Civ.P. 8(d). Thus, the Court finds that Defendant violated § 605(a). See, e.g., DirecTV, Inc. v. Huynh, 318 F. Supp. 2d 1122, 1128 (M.D. Ala. 2004) (finding similar allegations as stating a claim and that, by defaulting, the defendant admitted liability).
Any person aggrieved by a violation of § 605(a) may bring a civil action in federal court. See 47 U.S.C. § 605(e)(3)(A). Upon finding a violation, the court:
(i) may grant temporary and final injunctions on such terms as it may deem reasonable to prevent or restrain violations of subsection (a) . . .;
(ii) may award damages as described in subparagraph (C); and
(iii) shall direct the recovery of full costs, including awarding reasonable attorneys' fees to an aggrieved party who prevails.Id. § 605(e)(3)(B). Pursuant to subparagraph (C), damages shall be computed, "at the election of the aggrieved party," in accordance with either of the following methods of calculation:
(I) the party aggrieved may recover the actual damages suffered by him as a result of the violation . . .; or
(II) the party aggrieved may recover an award of statutory damages for each violation of [§ 605(a)] involved in the action in a sum of not less than $1,000 or more than $10,000, as the court considers just. . . . Id. § 605(e)(3)(C)(i) (emphasis added). As noted above, DirecTV seeks an injunction and statutory damages of $10,000.
DirecTV does not seek attorneys' fees or costs.
With regard to an injunction, the Court will permanently enjoin Defendant from receiving, assisting in receiving, transmitting, assisting in transmitting, divulging, or publishing DirecTV's satellite transmissions in violation of § 605(a). See id. § 605(e)(3)(B)(i) (authorizing the Court to grant temporary and final injunctions on such terms as it deems reasonable to prevent or restrain violations of § 605(a)); see also DirecTV, Inc. v. Griffin, 290 F. Supp. 2d 1340, 1344 (M.D. Fla. 2003) (enjoining the defendant for violation of § 605(a) in a similar default context).
This leaves the issue of statutory damages. The award of statutory damages under § 605(e)(3) is committed to the Court's discretion. See DirecTV v. Haskell, 344 F. Supp. 2d 761, 763-64 (D. Me. 2004); DirecTV, Inc. v. Montes, 338 F. Supp. 2d 352, 355 (D. Conn. 2004). If awarded, statutory damages must be "not less than $1,000 or more than $10,000, as the court considers just." 47 U.S.C. § 605(e)(3)(C)(i)(II).
Courts have used a variety of methods to calculate "just" damages under this provision, including assessing the maximum statutory rate; estimating the amount of services the defendant pirated and applying a multiplier to that figure; adopting the plaintiff's estimate of the amount of services pirated; and, where there has been no evidence of the actual usage or commercial advantage, applying the statutory minimum for each pirated device. See Haskell, 344 F. Supp. 2d at 764 (citing cases); Montes, 338 F. Supp. 2d at 355 (same). Courts have considered a number of factors while using these methods, including (1) whether the defendant profited as a result of the violation; (2) whether the defendant assisted or induced others in violating the statute; (3) whether the defendant's violation was willful or flagrant; (4) whether the damages will be sufficient to deter similar conduct; and (5) whether the damages are comparable to those awarded in similar cases. See Huynh, 318 F. Supp. 2d at 1131 (citing cases).
In support of its statutory damages claim, DirecTV presents evidence of losses it attributes to the unauthorized reception of its satellite signals. First, it asserts that it has lost subscription and pay-per-view revenue. Because of the difficulty in determining the exact amount of unauthorized programming that Defendant has received, DirecTV has created a model profile that it suggests approximates Defendant's viewing habits. This profile assumes that Defendant would receive as much programming per month as the "typical DIRECTV high-end legitimate customer," which represents the top ten-percent of subscribers to its premier program package. (Sichler Decl. ¶ 27.) The average monthly bill sent to this "high-end legitimate customer" in 2003 was $229.08. (Id.) Assuming that Defendant received DirecTV's signal for two years from the date of his purchase (February 2001 (id. ¶ 13)), DirecTV calculates its loss at $5,497.92 ($229.08 × 24 months) (Mem. in Supp. at II.C.1).
While Defendant may have received unauthorized programming for more than two years, DirecTV assumes that Defendant received programming for only two years. (Mem. in Supp. at II.C.1.)
Second, DirecTV asserts that the unauthorized reception of its satellite signals has caused it to invest money in anti-piracy efforts. Some of these efforts include creating an Office of Signal Integrity, which investigates theft of satellite signals, and an End-User Development Group, which pursues users of pirate access devices. (Sichler Aff. ¶¶ 32-33.) It has also replaced vulnerable technology and deployed Electronic Counter Measures, which are electronic signals that are sent out to disable modified access cards. (See id. ¶¶ 34-36.) Although it has not quantified the dollar amount of these costs, DirecTV asserts that the money it spent would not have been necessary were it not for piracy. (See id. ¶ 39.)
Upon consideration of the relevant legal authority and the evidence presented in this case, the Court finds that statutory damages are warranted for Defendant's violation of § 605(a). DirecTV presents credible evidence of its estimated loss of subscription and pay-per-view revenues due to Defendant's unauthorized and unrestricted reception of its programming. Although DirecTV's actual loss may be higher or lower, this model provides a reasonable approximation of its damages. See Time Warner Cable of New York City v. Barbosa, 2001 WL 118608, at *5-6 (S.D.N.Y. Jan. 2, 2001) (holding that statutory goals are served by taking into account the duration of the violation and awarding damages based on the plaintiff's lost revenues during this time period). DirecTV also presents evidence of the measures it has taken to combat piracy. Although it has not quantified how much money these measures have cost, such measures undoubtedly cost something and those costs would not have been incurred in the absence of piracy.
But it would not be a sufficient deterrent if the damages were limited to the value of the stolen services. There would be no incentive to comply with the law if the penalty were merely the amount that should have been paid. The statute recognizes this in setting the minimum statutory damage award at $1,000. See 47 U.S.C. § 605(e)(3)(C)(i)(II). As such, an additional $1,000 shall be awarded on top of the lost revenues. See Montes, 338 F.3d at 356 (adding $1,000 to lost revenues in computing total statutory damages). Accordingly, the Court concludes that statutory damages in the amount of $6,497.92 ($5,497.92 lost revenue + $1,000) will fairly and adequately compensate DirecTV for its losses, punish Defendant for the violation of federal law, and serve as a sufficient deterrent to Defendant and others.
B. Count II — 18 U.S.C. § 2511(1)(a)
Count II alleges that "[b]y using Pirate Access Devices to decrypt and view DIRECTV's satellite transmissions of television programming, defendant intentionally intercepted, endeavored to intercept, or procured other persons to intercept or endeavor to intercept, DIRECTV's satellite transmission of television programming, in violation of 18 U.S.C. § 2511(1)(a)." Section 2511(1)(a) makes it a criminal offense for any person who "intentionally intercepts, endeavors to intercept, or procures any other person to intercept or endeavor to intercept any wire, oral, or electronic communication." As stated previously, by virtue of Defendant's default, the factual allegations in the Complaint, except those relating to damages, will be taken as true. Thus, the Court finds that Defendant violated § 2511(1)(a). See, e.g., Huynh, 318 F. Supp. 2d at 1128-29.
Any person whose wire, oral, or electronic communications is intercepted, disclosed, or intentionally used may recover damages from the person who engaged "in that violation." 18 U.S.C. § 2520(a). The Court
may assess as damages whichever is the greater of —
(A) the sum of the actual damages suffered by the plaintiff and any profits made by the violator as a result of the violation; or
(B) statutory damages of whichever is the greater of $100 a day for each day of violation or $10,000.Id. § 2520(c)(2) (emphasis added). As noted above, DirecTV seeks $10,000 in statutory damages.
DirecTV does not seek an injunction to prevent or restrain violations of § 2511(1)(a). (See Mem. in Supp. at III.C.)
Whether to award statutory damages under this section is committed to the Court's discretion. See DirecTV, Inc. v. Brown, 371 F.3d 814, 818 (11th Cir. 2004); Reynolds v. Spears, 93 F.3d 428, 435 (8th Cir. 1996). Courts assessing damages under this provision consider factors similar to those considered in calculating damages under 47 U.S.C. § 605(a). See Huynh, 318 F. Supp. 2d at 1132 (citing cases). Among those factors is whether the defendant is subject to another judgment based on the same underlying conduct. See id.
Upon consideration of the relevant legal authority and the evidence presented in this case, the Court will exercise its discretion and award no statutory damages for Defendant's violation of § 2511(1)(a). Foremost among the Court's reasons is that DirecTV will receive damages against Defendant for the violation of § 605(a) based upon the same underlying conduct. Those damages will fully and adequately compensate DirecTV for its losses, punish Defendant, and deter Defendant and others.See Huynh, 318 F. Supp. 2d at 1132.
Conclusion
Based on the foregoing, and all of the files, records and proceedings herein, IT IS ORDERED that Plaintiff DirecTV, Inc.'s Motion for Default and Permanent Injunction (Doc. No. 7) is GRANTED as follows:
1. The Clerk is directed to enter default against Defendant pursuant to Federal Rule of Civil Procedure 55(a);
2. DirecTV is entitled to a judgment by default on Counts I and II of its Complaint against Defendant for violations of 47 U.S.C. § 605(a) and 18 U.S.C. § 2511(1)(a) pursuant to Federal Rule of Civil Procedure 55(b)(2);
3. Defendant is permanently enjoined from receiving, assisting in receiving, transmitting, assisting in transmitting, divulging, or publishing DirecTV's satellite transmissions in violation of 47 U.S.C. § 605(a);
4. Statutory damages in the amount of $6,497.92 are awarded in favor of DirecTV and against Defendant;
5. Count III of the Complaint, which alleges a violation of 18 U.S.C. § 2512(1)(b) is DISMISSED WITH PREJUDICE; and
6. As a result of this Order, there are no counts remaining in the Complaint for adjudication.