Opinion
03 C 3444
November 20, 2003
MEMORANDUM OPINION
This matter comes before the Court on the motions of Defendants Richard Delaney, Michael Harris, and Adam Pudlo to dismiss Counts III and IV of the complaint as well as the motions of Harris and Pudlo to dismiss or sever the claims against them. For the reasons set forth below, the motion to dismiss Count IV is denied and the motions to dismiss Count III and to sever the claims against Harris and Pudlo are granted. Pursuant to Federal Rule of Civil Procedure 21, we also order that claims against Defendants Ricardo DeSantiago, Julio Garcia, Adrian Guerra, Joseph Knur, Patrick Labrizzi, Slawomir Majkut, Bob O'Connell, and Mike Price be severed into eight additional suits. Only the first named individual, Richard Delaney, shall be left as a party to this case.
We note that the papers submitted by Delaney, Harris, and Pudlo do not conform with the requirements of Local Rule 5.2(a). We alert these parties to Local Rule 5.2(b), which allows the court to strike filed documents that do not comply with the spacing requirements listed. Although the plaintiff did not raise the issue, and it would be wasteful to strike these papers now, when the motion has been fully briefed, we caution Defendants that any future noncompliance with the Local Rules of this district will not be countenanced.
BACKGROUND
We accept the following allegations in the complaint as true for the purposes of this motion. Directv, Inc. ("Directv"), a California — based corporation, distributes hundreds of channels to customers nationwide. To provide this service, Directv relays digital signals from the United States to satellites in space, then back to the States. Each signal is encrypted while in space to prevent unauthorized usage. Only through the use of what Directv terms an "access card" can its viewers unscramble the satellite programming to which they have subscribed. Technology exists that thwarts satellite providers' efforts to limit access to its programming and allows persons to unscramble satellite broadcasting, which deprives Directv of its subscription fees. Directv describes this technology as "pirate access devices." The complaint alleges that several major distributors of illegal pirate access devices rely on the same mail shipping facility. With the help of local law enforcement, on May 25, 2001, Directv obtained shipping records, credit card receipts, e-mail communications, and other documents from this facility that indicated that each of the defendants named in this suit had purchased pirate access devices. Directv then launched a five-count complaint against these defendants, claiming that each purchased different pirate access devices at different times.
LEGAL STANDARD
A Rule 12(b)(6) motion to dismiss is used to test the legal sufficiency of a complaint. Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). In ruling on a motion to dismiss, a court must draw all reasonable inferences in favor of the plaintiff, construe allegations of a complaint in the light most favorable to the plaintiff, and accept as true all well-pleaded facts and allegations in the complaint. Bontkowski v. First Nat'l Bank of Cicero, 998 F.2d 459.461 (7th Cir. 1993); Perkins v. Silverstein, 939 F.2d 463, 466 (7th Cir. 1991). The allegations of a complaint "should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957). With these principles in mind, we turn to the motion at hand.
DISCUSSION
1. Private Right of Action under 18 U.S.C. § 2512The second and third counts of the instant complaint are based on alleged violations of the Wiretap Act. 18 U.S.C. § 2510-22. Count II, which is not challenged by Defendants' motion, claims a violation of 18 U.S.C. § 2511. This provision states, in pertinent part, that intentional interception, disclosure, or use of electronic communications; endeavors to accomplish those activities; or the procurement of another person to perform or endeavor to perform any of those activities is a criminal act. Count III, which Defendants argue does not state a claim for relief, seeks to recover damages for alleged violations of 18 U.S.C. § 2512(1)(b). This statute provides, in pertinent part, that manufacture, assembly, possession, or sale of any device that is primarily useful for surreptitiously intercepting electronic communications is also a criminal violation. The parties agree, as they must, that 18 U.S.C. § 2512 is a criminal statute and by itself does not allow a private party to recover damages for behavior that would violate its terms. However, the prayer for relief refers to a later section, 18 U.S.C. § 2520, as the premise of the claim for damages. This section provides, in pertinent part, that:
[A]ny person whose . . . electronic communication is intercepted, disclosed, or intentionally used in violation of this chapter may in a civil action recover from the person or entity, other than the United States, which engaged in that violation such relief as may be appropriate.
This section also requires that the alleged violator either know or have reason to know that the device in question is designed in such a way to make it primarily useful for surreptitious interception. 18 U.S.C. § 2512.
The essence of the motion to dismiss Count III is that § 2520 does not provide a private right of action for violations of § 2512.
Several other courts, including two others in our district, have considered this very question and reached conflicting results. The seminal case supporting Directv's position is Oceanic Cablevision. Inc. v. M.D. Electronics, 771 F. Supp. 1019 (D. Neb. 1991). In Oceanic, the court was faced with a 12(b)(6) challenge to two counts of a complaint against a distributor of cable descramblers: one premised on § 2511 and another premised on § 2512, In its analysis of the viability of the § 2511 count, the court concluded that the plaintiff had not stated a cognizable claim because the distributor was not alleged to have engaged in any of the activities listed in § 2520 — interception, disclosure, or use. The court examined an appellate court decision that had concluded that a party who merely sold devices capable of intercepting electronic communications did not violate either § 2511 or § 2512, despite the plaintiff's argument that such a sale could be construed as procuring another to perform prohibited interception, disclosure, or use, in violation of the plain language of the then — existing terms of §§ 2511 and 2520. Flowers v. Tandy Corp., 773 F.2d 585 (4th Cir. 1985). The Oceanic court questioned the continued vitality ofFlowers, noting that it was decided at a time when § 2520 contained language that directly mirrored the activities listed in § 2511, including procurement of another to intercept, disclose, or use another's communication. Subsequent to the decision in Flowers, Congress amended § 2520 to eliminate any mention of civil liability based on procuring interception, disclosure, or use. The Oceanic court attempted to capture the different situations by stating that, "Clearly, § 2520 only confers a private cause of action upon persons when the action is brought against parties that have violated the provisions of §§ 2510-2521." The court ignored the fact that this statement is not accurate even in the limited context of § 2511 actions. The removal of the reference to procuring another person to intercept, etc. from § 2520 was not accompanied by a removal of the analogous language from § 2511; a person who procures another to perform the acts prohibited by § 2511 still faces criminal liability, even though the possibility of civil liability has clearly been eliminated. However, the Oceanic court, in its subsequent discussion of a private right of action under § 2512, took its preceding statement at face value. The examination is limited solely to the issue of whether sale of cable descramblers, as opposed to some other device more directly associated with wiretapping, constituted a violation of § 2512. The court concluded that a violation was stated. However, the court then concluded that because a cable descrambler could be a device whose design "renders it primarily useful for the purpose of surreptitious interception of wire, oral, or electronic communications," there must be a private right of action under § 2520 for violations of § 2512, without any further analysis of whether such a sale was equivalent to an interception, disclosure, or intentional use of a communication in violation of the Act. We respectfully disagree that without such analysis, the court's conclusion that the statute confers a private right of action for violations of § 2512 is tenuous at best.
Later courts have followed in Oceanic's footsteps, relying on the erroneous statement in that opinion that any violation of the provisions of the Wiretap Act will allow the potential of civil recovery under § 2520. See, e.g., Directv v. EQ Stuff, Inc., 207 F. Supp.2d 1077, 1084 (C.D. Cal. 2002); Directv v. Gatsiolis, 2003 WL 22111097, at *2 (N.D.Ill. Sept. 10, 2003) (stating that a plaintiff can pursue relief from a defendant who violates any subsection of the Wiretap Act), In view of the plain language of § 2520, we cannot come to a like conclusion. The private right of action, by its own terms, attaches only after the fact of interception, disclosure, or use in violation of the Wiretap Act. After this initial act is complete, the aggrieved party may pursue civil remedies against the person who engaged in that violation, i.e., that interception, disclosure, or use. Section 2512 criminalizes only the production, sale, or possession of devices whose primary purpose is to perform the interception. These acts occur separate and apart from any actual interception, and persons who engage in them may never engage in the violations cited in § 2520 — interception, disclosure, or use prohibited by the Wiretap Act. As such, we agree with those courts who have concluded that § 2520 does not confer a private right of action for violations of § 2512, See, e.g., Flowers, 773 F.2d at 588-89; Directv v. Cardona, 275 F. Supp.2d 1357, 1362-70 (M.D. Fla. 2003); Directv v. Amato, 269 F. Supp.2d 688, 689-91 (E.D. Va. 2003).
Directv's arguments that Count III is salvaged by their allegations that the intercepted communications were actually used are misplaced. While we agree that the complaint contains such allegations, they go only to the viability of Count II, which is predicated on a violation of § 2511, not Count III, the count challenged by this motion. Accordingly, Count III is dismissed.
2. Common-Law Conversion
The 12(b)(6) motion also attacks the validity of Count IV, which purports to state a claim for common-law conversion. To state such a claim, Directv must allege that it has a right to the property, it has an absolute and unconditional right to the immediate possession of the property, it has made a demand for possession, and Defendants have wrongfully and without authorization assumed control, dominion, or ownership over the property. Cirrincione v. Johnson, 703 N.E.2d 67, 70 (Ill. 1998). Delaney, Harris, and Pudlo argue that the property at issue in this case, i.e., intangible electronic impulses, is not a proper subject for a conversion claim. The argument centers of the intangibility of the property and the resulting discordance with other requirements such as possession. Defendants rely on a statement of the Illinois Supreme Court in the case of In re Thebus to the effect that "an action for conversion lies only for personal property which is tangible, or at least represented by or connected with something tangible." 483 N.E.2d 1258, 1260 (Ill. 1985). However, Defendants fail to note that the quoted language was not the words of the Court itself but instead a passage contained in American Jurisprudence. Id. In addition, the full quote indicates that this is not a hard and fast rule, but only that "[i]t is ordinarily held" to be true. In assimilating this language with the other sources it examined, the Court pronounced its own take, that "the subject of conversion is required to be an identifiable object of property of which the plaintiff was wrongfully deprived." Id. A later appellate case, Stathis v. Geldermann, Inc., unequivocally announced that in Illinois., "parties may recover for conversion of intangible assets." 692 N.E.2d 798, 807 (Ill.App.Ct. 1998).
This result comports with that in Conant v. Karris, 520 N.E.2d 757, 763 (Ill.App.Ct. 1987). In Conant, a claim for conversion was allowed to stand on the allegation only that the contents of a printout were shown to an unauthorized party, not that the actual printout had changed hands. Id. The result in neither of these cases conflicts with the actual holding of the Supreme Court in In re Thebus, namely that conversion requires that the plaintiff be wrongfully deprived of an identifiable object of property. Here, Directv has alleged that Defendants wrongfully deprived it of its encrypted programming, an identifiable object of property, to which it had the right of exclusive control, i.e. possession. Viewing the allegations of the complaint in the light most favorable to Directv, as we must, we conclude that Count IV states a cognizable claim for conversion. Accordingly, the motion to dismiss this count is denied.
3. Joinder of Parties
Directv has filed at least forty-four lawsuits similar to this one throughout the country. The complaint does not provide a specific explanation as to why these particular defendants are grouped together. As such, Harris and Pudlo claim that they should not be joined as a party to this suit and move for dismissal or severance of the claims against them pursuant to Fed.R.Civ.Proc. 20.
The current tally may be as high as 82. Directv, Inc. v. Pickert, 2003 U.S. Dist. LEXIS 18263 (N.D. Ill. Oct. 14, 2003).
Rule 20 provides that multiple parties can be joined in a single action if two criteria are satisfied. First, the right to relief must arise out of "the same transaction, occurrence, or series of transactions or occurrences." Id. Second., there must be a question of law or fact common to all defendants. Id. If either criterion is not present, joinder is not permitted. 7 Charles Alan Wright, et. al., Federal Practice Procedure § 1953 (3d ed. 2001). The policy underlying joinder of parties is judicial economy. Elmore v. Henderson, 227 F.3d 1009, 1012 (7th Cir. 2000). Joinder of parties must also comport with fundamental fairness. Intercon Research Assocs., Ltd. v. Dresser Indus., Inc., 696 F.2d 53, 58 (7th Cir. 1982), A district court has discretion to deny joinder if it would not further the policies of the Rule and would cause prejudice, expense, or delay. Wright, at § 1952.
In ruling on permissive joinder, courts conduct a case-by-case analysis and avoid "hard and fast" rules. Id. at § 1953. Courts often look to Fed.R.Civ.Proc. 13(a), governing compulsory counterclaims, for guidance on the first prong. Id. Under Rule 13(a), the term "transaction" has a flexible meaning, which may include a series of many occurrences, related not so much by their immediate connection as by their logical relationship. Id. Thus, all "logically related events" that give rise to a cause of action are usually considered to constitute a transaction or occurrence. Id. a. Same Transaction or Occurrence
We first consider whether the claims against the individual defendants arise out of the same transaction, occurrence, or series of transactions or occurrences. Directv argues that because all the records came from a single writ of seizure, from a single warehouse, and the defendants all purchased the illegal devices within a narrow time frame. However, this prong turns on the nature of the plaintiff's right to relief, not the source of the evidence. Directv's case against each defendant will depend not on the date of the raid of Fulfillment Plus warehouse or whether a single writ was issued; rather, any trial in this case will likely center on whether each defendant actually ordered, possessed, manufactured, assembled, modified, and/or used each device in dispute, or converted the Directv's satellite communications, and whether each such device or behavior violates federal law. Specifically, the jury must decide whether DeSantiago, Garcia, Guerra, Harris, Knur, Labrizzi, Majkut, O'Connell, Price, and Pudlo (1) received unauthorized reception of satellite programming, (2) received unauthorized programming of electronic communications, (3) possessed or manufactured illegal access devices, (4) willfully assembled or modified such devices, and (5) is liable for civil conversion. The jury's resolution of these fact — specific questions as to a given defendant is completely independent of its tasks in answering those questions with regard to the other defendants. Therefore, because each defendant made different purchases and none of the named defendants is alleged to have acted in connection with any other, we agree with Harris and Pudlo that the claims against these defendants are not logically related. See Movie Systems, Inc. v. Abel, 99 F.R.D. 129, 130(D. Minn. 1983). b. Common Question of Law or Fact
Even if Directv had been able to show a common transaction, they must still establish an issue of law or fact common to all defendants. Directv argues that it will present substantially identical information at trial for each defendant, such as information regarding the procedure of ordering and shipping illegal access devices as well as the purpose of the devices and the process by which they are sold. Directv's arguments, however, do not satisfy the rule. While Directv may plan on presenting this evidence, the questions of law and fact will have to be tailored to the particulars of each individual defendant's actions, rather than being common to all.
Finally, Directv also argues that joinder in this case promotes judicial economy and serves fundamental fairness. In light of the potential for vastly different cases litigated at one time, in addition to the satellite litigation that has been generated by the eighty-odd cases like this one that Directv has filed, this argument rings rather hollow. In any event, judicial economy is a factor to be taken into account, not an independent basis to allow joinder under Rule 20 where the previous two factors are lacking. Furthermore, there is nothing fundamentally unfair about Directv litigating what are really separate claims in separate lawsuits. See Beaulieu v. The Concord Group Ins. Co., 208 F.R.D. 478, 480 (D.N.H. 2002); Movie Systems, 99 F.R.D. at 130.
We also note that of the district courts that have squarely confronted Directv's attempt to join parties in a manner similar to this suit, we were unable to find any that allowed joinder of the parties under these circumstances. In the Southern District of Iowa, the court inDirectv v. Loussaert, 2003 U.S. Dist. LEXIS 18017 (S.D. Iowa Oct. 2, 2003) found the acts of similarly situated defendants to be separate and distinct. In the Northern District of Ohio, Directv. Inc. v. Hunt clearly indicated its interpretation of Rule 20(a) did not permit Directv to file an action against five persons accused of individually violating federal communications and wiretapping laws because each defendant made purchases of different devices at different times and they did not act together.See Def.'s Mot. at App. A. In the Eastern District of New York, Directv v. Armellino held joinder of similarly situated parties to be improper because each defendant allegedly engaged in "separate" and "discrete" incidents. 216 F.R.D. 240 (E.D.N.Y. July 28, 2003). See also Directv, Inc. v. Blahuta, 2003 WL 22225585 (N.D. III. Sept. 25, 2003); Directv. Inc. v. Smith, No, 03 C 3540 (N.D.III. Sept. 18, 2003); Directv, Inc. v. Cardona, 2003 WL 21910578 (M.D. Fla. July 8, 2003); Direct Inc. v. Davidson, No. 03 C 03459 (N.D. Ill. June 6, 2003); Direct v. Inc. v. Garbutt, No. 03 C 3499 (N.D. Ill. June 3, 2003); Directv. Inc. v. Montes, No. 03 C 3463 (N.D. Ill. June 6, 2003).
c. Remedy for Misjoinder
Having concluded that joinder of the parties is not permissible in this case, we are left with the issue of the proper remedy. Harris and Pudlo have moved to dismiss the claims against them or, in the alternative, to sever them into a separate action. Rule 21 states that misjoinder of parties is not ground for dismissal of an entire action. Instead, parties are to be dropped or added to an action as necessary, either on motion by a party or by the court's own initiative. The rule does not identify the specific mechanism by which "dropping" is to occur, and it would seem that either dismissal or severance could be appropriate in many cases. In this case, however, we have the added wrinkle of a potential statute of limitations issue if the defendants other than Delaney are dismissed without prejudice and Directv attempted to file new complaints against them. In such an instance, a district court is "duty-bound" to sever rather than dismiss claims that are improperly joined to avoid gratuitous harm to the parties. Elmore, 227 F.3d at 1012. Accordingly, we conclude that severance is the proper remedy for Directv's misjoinder of the defendants other than Delaney.
CONCLUSION
Based on the foregoing analysis, we grant the motion to dismiss Count III and deny the motion to dismiss Count IV. We deny Harris and Pudlo's motion to dismiss pursuant to Fed.R.Civ.Proc. 21 but grant their motions to sever. Pursuant to Fed.R.Civ.Proc. 21, we also sever Defendants DeSantiago, Garcia, Guerra, Knur, Labrizzi, Majkut, O'Connell, and Price. Only the first named defendant, Richard Delaney, shall remain a party to this suit.