Summary
In McDougall, the defendant had purchased eight Pirate Access Devices and Plaintiff had specifically alleged that Defendant had engaged in an enterprise to sell and/or distribute the Devices.
Summary of this case from Directv, Inc. v. OliverOpinion
Civil Action No: SA-03-CA-1165-XR.
November 12, 2004
ORDER
On this day came on to be considered Plaintiff's motion for final default judgment (docket no. 7). The Court GRANTS the motion and addresses the issue of damages below.
I. Background
DIRECTV, Inc. ("DIRECTV") alleges that it is a California-based company that distributes satellite television programming throughout the United States. To prevent the unauthorized reception and use of its programming, DIRECTV digitally scrambles its programming using encryption technology. DIRECTV's customers use satellite receivers and access cards to unscramble the programming. Access cards are the size of credit cards and contain chips that unscramble DIRECTV's satellite programming and monitor DIRECTV customers' pay-per-view programming purchases.
Although DIRECTV encrypts its television programming and disables unauthorized access cards, black market devices, known as pirate access devices exist that allow individuals to circumvent DIRECTV's security efforts. These devices are available through Internet retailers. Pirate access devices use both hardware and software to restore the ability of disabled access cards to unscramble DIRECTV's programming.
See Plaintiff's Original Complaint at ¶¶ 2-5. See also DIRECTV, Inc. v. Borich, No. Civ. A. 1:03-2146, 2004 WL 2359414 (S.D.W. Va. Sept. 17, 2004).
In this case DIRECTV alleges that when a search of an Indiana business known as Digital Source Solutions was conducted on or about November 29, 2001, sales records were obtained and reviewed. Based upon this information, DIRECTV alleges that the defendant, Lance McDougall, purchased eight of Digital Source Solutions' pirate access devices.
See Plaintiff's Original Complaint at ¶¶ 7-8.
Based on McDougall's purchase and use of these devices, Plaintiff alleges that it is entitled to damages based upon (1) 47 U.S.C. § 605(a) and (e)(4) of the Cable Communications Policy Act of 1984, (2) 18 U.S.C. § 2511 of the Electronic Communications Policy Act of 1986, and (3) Tex. Civ. Prac. Rem. Code 123.001. McDougall, although properly served, has failed to answer the complaint.
Plaintiff states it no longer seeks damages based upon 18 U.S.C. § 2512 and its claim for civil conversion.
II. Analysis
A. McDougall, by his default, admits the factual allegations
According to Federal Rule of Civil Procedure 55(a), "[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend as provided by these rules and that fact is made to appear by affidavit or otherwise, the clerk shall enter the party's default." Rule 55(b)(1) provides for entry of judgment by default by the clerk of the court "[w]hen the plaintiff's claim against a defendant is for a sum certain or for a sum which can by computation be made certain," which is not the situation here. Rule 55(b)(2) states that "[i]n all other cases the party entitled to a judgment by default shall apply to the court therefor."
McDougall, by his default, "admits the plaintiff's well-pleaded allegations of fact. . . ." Nishimatsu Constr. Co., Ltd. v. Houston Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975). "The corollary of this rule, however, is that a defendant's default does not in itself warrant the court in entering a default judgment. There must be a sufficient basis in the pleadings for the judgment entered." Id. Further, a "defendant is not held to admit facts that are not well-pleaded or to admit conclusions of law." Id.
B. 47 U.S.C. § 605(a) of the Cable Communications Policy Act of 1984
Hereinafter called "Cable Communications Act"
Section 605(e)(3) of the Cable Communications Act provides a civil remedy for any person aggrieved by violations of Sections 605(a) or 605(e)(4). Count one of the Complaint alleges a violation of Section 605(a). This section of the Cable Communications Act states 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." 47 U.S.C. § 605(a). DIRECTV alleges that the defendant "illegally and without authorization, intercepted, received and exhibited, or otherwise assisted in the unauthorized interception, reception, and exhibition of Satellite Programming transmitted by DIRECTV," and that the defendant "used such communications for [his] own benefit or for the benefit of others who were not entitled to such communications." Complaint at ¶ 26. The court FINDS that DIRECTV has adequately alleged that the defendant purchased eight pirate access devices, that he used one or more of these devices to display DIRECTV programming that he did not pay for, intercepted Plaintiff's satellite communications in violation of Section 605(a), and further FINDS that the defendant, by his default, has admitted these allegations.
47 U.S.C. §§ 521, et. seq.
Although the statute uses the term "radio," all courts construing section 605(a) have assumed that the statute also applies to transmissions and interception of satellite cable programming. See section 605(b).
Plaintiff's Original Complaint at ¶ 18.
C. 47 U.S.C. § 605(e)(4) of the Cable Communications Act
Section 605(e)(3) of the Cable Communications Act also provides a civil remedy for any person aggrieved by a violation of Section 605(e)(4). Section 605(e)(4) of the Cable Communications Act refers to: "Any person who manufactures, assembles, modifies, imports, exports, sells, or distributes any electronic, mechanical, or other device or equipment, knowing or having reason to know that the device or equipment is primarily of assistance in the unauthorized decryption of satellite cable programming, or direct-to-home satellite services. . . ." (Emphasis added).
Count four of the Complaint states that the defendant "knowingly manufactured, assembled, or modified an electronic, mechanical or other device or equipment knowing or having reason to know, that the device or equipment is used primarily to facilitate the unauthorized decryption of Satellite Programming, or direct-to-home satellite services, or is intended for any other prohibited activity," and that the defendant "actively programmed and reprogrammed DIRECTV Access Cards and designed electronic systems for use in surreptitiously obtaining DIRECTV Satellite Programming." Further, "by removing and inserting Pirate Access Devices and/or inserting illegally programmed Access Cards into valid DIRECTV Receivers, defendant engaged in the unlawful assembly and/or modification of devices primarily of assistance in the unauthorized decryption of Satellite Programming." Id.
Complaint at ¶ 39.
Pursuant to Nishimatsu Constr. Co., "[t]here must be a sufficient basis in the pleadings for the judgment entered." 515 F.2d at 1206. Further, a "defendant is not held to admit facts that are not well-pleaded or to admit conclusions of law." Id.
The relevant well-pleaded facts in this case is that the defendant purchased eight pirate access devices. However, Plaintiff also alleges based upon information and belief that McDougall was engaged in an enterprise to distribute and/or resell the devices.
Id. at ¶ 18.
Id. at ¶ 18.
Courts that have addressed the issue have concluded that mere purchasing and use of pirate access devices does not constitute a violation of section 605(e)(4). See DIRECTV, Inc. v. Albright, No. 03-4603, 2003 WL 22956416 at *7 (E.D. Pa. Dec. 9, 2003) (section 605(e)(4) "targets upstream manufacturers and distributors, not the ultimate consumer of pirating devices."); See also DIRECTV, Inc. v. Borich, No. Civ. A. 1:03-2146, 2004 WL 2359414 (S.D.W. Va. Sept. 17, 2004) ("the court does not find that the act of `removing and inserting Pirate Access Devices and/or inserting illegally programmed Access Cards into valid DIRECTV Receivers' is the type of assembly or modification prohibited by the statute. . . . Borich's act of installing and activating the pirate access device does not convert him into the type of manufacturer or distributor of these devices contemplated by Section 605(e)(4)").
However, in this Complaint Plaintiff also alleges that in addition to mere purchase and use, McDougall also was engaged in an enterprise to distribute and/or resell the devices. Section 605(e)(4) prohibits the sale or distribution of such devices. Because the complaint does contain allegations that would support a finding that McDougall sold or distributed pirate devices within the meaning of Section 605(e)(4), the court FINDS that DIRECTV has adequately alleged a violation of Section 605(e)(4). The court further FINDS that the defendant has admitted this allegation.
D. 18 U.S.C. § 2511 of the Electronic Communications Policy Act of 1986
Count two of the Complaint is brought pursuant to the Electronic Communications Policy Act of 1986, 18 U.S.C. § 2510, et seq. Section 2511 of that Act refers to "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. . . ." Section 2520 states that "any person whose wire, oral, or electronic communication is intercepted, disclosed, or intentionally used in violation of this chapter may in a civil action recover from the person or entity which engaged in that violation such relief as may be appropriate." In Count two of the Complaint, DIRECTV alleges that the defendant "intentionally intercepted, endeavored to intercept, or procured other persons to intercept electronic communications from DIRECTV." Further, Plaintiff alleges that Defendant used or attempted to use the intercepted communications. The court FINDS that DIRECTV has adequately alleged that the defendant intercepted and used its electronic communication in violation of Section 2511, and further FINDS that the defendant, by his default, has admitted this allegation.
This Court is aware that there is a disagreement among the various district courts as to whether mere possession of a pirate access device is enough to trigger a section 2511 violation. See DIRECTV, Inc. v. Abston, No. Civ. 5:03-CV-223-C, 2004 WL 2389524 (N.D. Tex. Oct 26, 2004) ("it is generally accepted that § 2511 is covered through 18 U.S.C. § 2520 to provide a civil cause of action. Section 2520 provides that a `person whose wire, oral, or electronic communication is intercepted, disclosed, or intentionally used in violation of this chapter may in a civil action recover from the person or entity'. . . . Section 2520 does not render civilly actionable mere possession or procurement of dubious devices"); DIRECTV, Inc. v. Ostrowski, 334 F. Supp. 2d 1058 (N.D. Ill. 2004). However, in this default judgment setting where Plaintiff has also alleged Defendant intercepted and used the electronic communication, the Court need not further address this point.
E. Tex. Civ. Prac. Rem. Code 123.001
Section 123.001 states:
(1) "Communication" means speech uttered by a person or information including speech that is transmitted in whole or in part with the aid of a wire or cable.
(2) "Interception" means the aural acquisition of the contents of a communication through the use of an electronic, mechanical, or other device that is made without the consent of a party to the communication, but does not include the ordinary use of:
(A) a telephone or telegraph instrument or facility or telephone and telegraph equipment;
(B) a hearing aid designed to correct subnormal hearing to not better than normal;
(C) a radio, television, or other wireless receiver; or
(D) a cable system that relays a public wireless broadcast from a common antenna to a receiver.
(Emphasis added).
Section 123.002(a) states:
A party to a communication may sue a person who:
(1) intercepts, attempts to intercept, or employs or obtains another to intercept or attempt to intercept the communication;
(2) uses or divulges information that he knows or reasonably should know was obtained by interception of the communication; or
(3) as a landlord, building operator, or communication common carrier, either personally or through an agent or employee, aids or knowingly permits interception or attempted interception of the communication.
Plaintiff alleges that it transmits satellite communications and Defendant intercepted such communications. The Court FINDS that Plaintiff is a party that transmitted information contemplated by section 123.001, and that Plaintiff may bring suit pursuant to 123.002(a)(1). The court FINDS that DIRECTV has adequately alleged a violation of Section 123.001, et seq. The court further FINDS that the defendant has admitted this allegation.
F. Damages under 47 U.S.C. § 605
Any person aggrieved by any violation of 605(a) or 605(e)(4) may be awarded damages by a court. 605(e)(3)(A).
Damages awarded by any court under this section shall be computed, at the election of the aggrieved party, in accordance with either of the following subclauses;
(I) the party aggrieved may recover the actual damages suffered by him as a result of the violation and any profits of the violator that are attributable to the violation which are not taken into account in computing the actual damages; in determining the violator's profits, the party aggrieved shall be required to prove only the violator's gross revenue, and the violator shall be required to prove his deductible expenses and the elements of profit attributable to factors other than the violation; or
(II) the party aggrieved may recover an award of statutory damages for each violation of subsection (a) of this section involved in the action in a sum of not less than $1,000 or more than $10,000, as the court considers just, and for each violation of paragraph (4) of this subsection involved in the action an aggrieved party may recover statutory damages in a sum not less than $10,000, or more than $100,000, as the court considers just.47 U.S.C. § 605(C)(i). Plaintiff has elected statutory damages and claims it is entitled to $80,000 because Defendant violated section 605 on eight different occasions.
Plaintiff conflates its damages discussion and fails to address that subclause II differentiates between section 605(a) and 605(e)(4) violations.
With regard to the section 605(a) violation, although by default McDougall admits to purchasing eight pirate access devices, using one or more of these devices to display DIRECTV programming that he did not pay for, and intercepting Plaintiff's satellite communications in violation of Section 605(a), Plaintiff failed to allege in its Complaint how many unauthorized interceptions were made by McDougall. The Court FINDS that Plaintiff has only alleged that one unauthorized interception was made in violation of section 605(a) and awards Plaintiff statutory damages in the amount of $1,000.
With regard to the section 605(e)(4) violation, Plaintiff alleges that Defendant purchased eight different devices. Based upon information and belief, it contends that McDougall was engaged in an enterprise to distribute and/or resell the devices. Accordingly, it seeks $10,000 for each device purchased. See Cablevision of Southern Conn., Ltd. Partnership v. Smith, 141 F. Supp.2d 277 (D. Conn. 2001) ("The court concludes that it is a reasonable inference, from the facts listed above, that Smith sold or distributed 19 of the 20 decoders he received from Ultimate Mail Order Services, excluding the one decoder that Cablevision argues that Smith employed for personal use." Court assesses $10,000 statutory penalty for each of the 19 devices for a total of $190,000.). The Court FINDS that it is a reasonable inference that McDougall resold or distributed seven of the eight devices he purchased and that he kept one for his own personal use. The Court awards Plaintiff statutory damages of $70,000 ($10,000 per each of the seven violations).
DIRECTV, Inc. v. Adkins, 320 F. Supp.2d 474 (W.D. Va. 2004) (granting DIRECTV's request for monetary damages and awarding $10,000 per device against each defendant).
G. Damages under 18 U.S.C. § 2511
Pursuant to § 2520, in a violation of § 2511 "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."
Given that the Court has already awarded Plaintiff $71,000 in statutory damages, the Court will undertake an analysis as to whether it has discretion not to award further damages for the § 2511 violation(s).
Not surprisingly, the various courts are in disagreement as to whether a district court has discretion not to award statutory damages for violation of 18 U.S.C. § 2511(1)(a). The Fourth and Eighth Circuits have concluded that courts have discretion not to award damages. The Seventh Circuit has concluded that a court does not have discretion to decline to award damages. The confusion stems from the fact that section 2520(c)(1) states that the court shall assess damages if the conduct is "the private viewing of a private satellite video communication that is not scrambled or encrypted." However, "[i]n any other action under this section, the court may assess as damages. . . ." 2520(c)(2). It appears contradictory that Congress would mandate the assessment of damages in non-scrambled or non-encrypted interceptions, but grant judicial discretion in cases where devices were procured to intercept and de-scramble the encrypted cable programming. That, however, appears to be what Congress did. Accordingly, the Court concludes that it has discretion to not award damages.
Culbertson v. Culbertson, 143 F.3d 825 (4th Cir. 1998); Reynolds v. Spears, 93 F.3d 428 (8th Cir. 1996). See also DIRECTV, Inc. v. Christomos, NO. 03-1622-HO, 2004 WL 2110700 (D. Or. Sep 20, 2004) (court has discretion, but if it chooses to do so it must award the greater of $100 a day for each day of violation or $10,000); Goodspeed v. Harman, 39 F. Supp.2d 787 (N.D. Tex. 1999).
Rodgers v. Wood, 910 F.2d 444 (7th Cir. 1990).
Next, the Court must decide what factors guide its discretion. Most courts have declined to award damages for de minimis violations of the statute. A variety of factors are relevant to this determination: (1) the duration of the interception or the extent of the disclosure; (2) the reason for the interception; (3) whether the defendant reasonably believed that his actions were legal; (4) whether the interceptions resulted in actual damages to the plaintiff; (5) whether the defendant profited from the interception; and (6) whether the defendant has already been punished in some other proceeding. See Goodspeed v. Harman, 39 F. Supp.2d at 791. Given the default judgment in this case, there is no evidence as to factors 1, 2, 3, and 5. Plaintiff states in conclusory fashion, but provides no evidence that Defendant's free viewing "may easily [have] reach[ed] thousands in a single year." The Court does not condone Defendant's actions. However, because it lacks sufficient information to make an informed decision, and the Court has already awarded Plaintiff $71,000 in statutory damages, the Court will exercise its discretion and decline to award further damages for the section 2511 violation.
Other courts have considered the following: (1) whether the defendant profited as a result of his 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 damage award will be sufficient to deter similar conduct; and (5) whether the damage award is comparable to awards in similar cases. See DIRECTV, Inc. v. Huynh, 318 F. Supp.2d 1122, 1131 (M.D. Ala. 2004) (citations omitted).
The court further notes that other courts have awarded similar damages in comparable cases. See, e.g., Directv, Inc., v. Decroce, 332 F. Supp. 2d 715 (D.N.J. 2004) (granting default judgment, permanent injunctive relief and awarding minimum statutory damages under § 605); Directv v. Huynh, 318 F. Supp.2d at 1122 (granting default judgment, awarding minimum statutory damages under § 605, and exercising its discretion to award no damages under § 2511).
H. Damages under Tex. Civ. Prac. Rem. Code 123.001
A person who establishes a cause of action under this chapter is entitled to:
(1) an injunction prohibiting a further interception, attempted interception, or divulgence or use of information obtained by an interception;
(2) statutory damages of $10,000 for each occurrence;
(3) all actual damages in excess of $10,000;
(4) punitive damages in an amount determined by the court or jury; and
(5) reasonable attorney's fees and costs.
As in the section 605(a) claim, Plaintiff has failed to allege in its Complaint how many unauthorized interceptions were made by McDougall. The Court FINDS that Plaintiff has only alleged that one unauthorized interception was made in violation of section 123 and awards Plaintiff statutory damages in the amount of $10,000. Plaintiff has not sought, and the Court does not award punitive damages.
I. Attorney's Fees and Costs
DIRECTV also seeks an award of reasonable attorney's fees and other litigation costs in accordance with 18 U.S.C. § 2520(b)(3), 47 U.S.C. 605(e)(3)(B)(iii), and Tex. Civ. Prac. Rem. Code 123.001. Section 605 provides that the court "shall direct the recovery of full costs, including awarding reasonable attorneys' fees to any aggrieved party." 47 U.S.C. § 605(e)(3)(B)(iii). Although this statute provides that the court shall award attorney's fees, the determination of the fee amount is left to the court's discretion. The plaintiff has provided the court with an Affidavit of Lisa C. Fancher regarding fees and costs, which total $1,179.16. The court FINDS these costs and fees are reasonable.
J. Injunctive Relief
The court further FINDS that DIRECTV is entitled to the permanent injunctive relief that it has requested in its Complaint and Motion for Final Default Judgment. Section 605 authorizes the court to grant temporary and final injunctions on such terms as it deems reasonable to prevent or restrain violations of subsection (a). 47 U.S.C. § 605(e)(3)(B)(i); see also DIRECTV, Inc. v. Kaas, 294 F. Supp.2d 1044 (N.D. Iowa 2003). Although a party prevailing on a Section 605 claim is entitled to recover costs and attorney's fees, the court has discretion as to the grant of injunctive relief. In the present case, DIRECTV alleges that "unless restrained by this court, the Defendant will continue to receive, intercept, transmit, and exhibit the Satellite Programming . . . in violation of 47 U.S.C. § 605." Complaint at ¶ 50. DIRECTV further alleges that it has no adequate remedy at law and will suffer irreparable harm without an injunction from this court. Id. at ¶¶ 51-52. For these reasons, the court ENJOINS the defendant, McDougall, from receiving, possessing, or using any pirate access device to receive, intercept or use DIRECTV satellite programming.
The Court also issues this injunction pursuant to Tex. Civ. Prac. Rem. Code 123.001.
III. Conclusion
Based upon its review of the motion and affidavits, the court has determined that a hearing on this matter is unnecessary. In accordance with Fed.R.Civ.P. 55(b)(2) and pursuant to these findings, the court ENTERS default judgment against the defendant, Lance McDougall, in the sum of $80,000, plus an additional $1,179.16, which represents the reasonable attorney's fees and costs incurred by DIRECTV. The court also permanently ENJOINS the defendant from receiving, possessing, or using any pirate access device to receive, intercept or use DIRECTV satellite programming.
Although as calculated by the Court statutory damages total $81,000, Plaintiff only seeks $80,000.