Opinion
Case No. 07 C 2568.
August 15, 2007
ORDER
Having considered the materials and evidence submitted by the parties in support of and in opposition to the motion for preliminary injunction brought by Comcast of Illinois III, Inc, Comcast Corporation, and Comcast Cable Holdings LLC (collectively, "Comcast"), it appears to the satisfaction of the Court that this is a proper case for issuance of a preliminary injunction pursuant to Federal Rule of Civil Procedure 65 and the relevant case law because (1) Comcast is likely to succeed on the merits of its false advertising claims; (2) unless a preliminary injunction issues, Comcast will suffer immediate and irreparable injury to its business, reputation, and goodwill; (3) the harm to DIRECTV, Inc. if enjoined balanced against the harm to Comcast if an injunction is denied favors Comcast and (4) the public interest favors granting a preliminary injunction. The Court's findings of fact and conclusions of law are set forth in the attached transcript of proceedings.
THE COURT ORDERS, ADJUDICATES, AND DECREES THAT, pending a trial on the merits and a determination in this action, DIRECTV, Inc. and its officers, agents, servants, employees, attorneys, and all other persons acting in active concert or participation with them (including but not limited to affiliates, resellers, and partners who sell DIRECTV, Inc.'s product, equipment, and services), shall immediately cease and refrain in any territory in which Comcast provides cable television service from using in commerce, publishing or otherwise disseminating in any and all media (including, without limitation, internet, television, radio, newspaper and other print, and direct mail) any advertising claims that rely upon, quote from or are based to any extent on a survey of consumers conducted by TNS in or around April 2006 ("TNS Consumer Survey") and/or a survey of home video installers conducted by Alliance Consulting Group in or around December 2006 ("Alliance Installer Survey"). To the extent DIRECTV, Inc. is aware of independent third parties who are disseminating advertisements that are the subject of this Order, DIRECTV, Inc. shall immediately advise them of this Order and instruct and demand their compliance. This Order shall not require DIRECTV, Inc. to recall or retract advertisements already disseminated, nor shall this Order require DIRECTV, Inc. to prevent dissemination of certain print advertisements that have been produced and cannot reasonably be stopped before their dissemination.
IT IS FURTHER ORDERED that Comcast shall file an undertaking in the amount of $500,000 unsecured bond.
IT IS SO ORDERED.
issue, no.
The interesting thing, though, is that the claim wasn't as explicit as it is here. It wasn't based on a study. They just said it. They didn't have a study.
So the Court also had to find that there was explicit falseness in the way in which they made the presentation, which it did.
THE COURT: All right. Thank you.
I'll give you my findings of fact and conclusions of law.
I will deal first with the likelihood of success on the merits, which is often the most important element for the Court to consider in a preliminary injunction case.
Beginning with the consumer survey, the initial question is whether injunctive relief would lie in view of the fact that DirecTV has ceased airing the consumer survey or American Pie type ad. I've got some cases here going to that question, if I can find them.
(Brief pause.)
THE COURT: I don't seem to be able to lay my hands on them, but basically what the cases say is that unless it is quite clear that the defendant has disavowed any intention to resume the allegedly unfair conduct in the foreseeable future, equitable relief is appropriate.
I've heard nothing in this case that indicates to me that DirecTV has not reserved to itself the option of airing the consumer survey again next week. It would take a much firmer statement of intention than I have heard from DirecTV to deter me from considering equitable relief as to the consumer survey.
The consumers were shown television screens which were a picture generated by a DirecTV digital signal and asked to compare it to an analog signal. The consumers were not told that one signal was digital and the other was analog.
The evidence in this case is uncontradicted that digital signals are better than analog signals. The responses of the consumers were predictably that the digital signal was better. It is not easy to think of a test that could be more unfairly designed than the consumer survey run by TNS in this case.
I asked one of the DirecTV witnesses whether there was any possible explanation for the superiority of a digital signal over an analog signal other than the fact that it was digital. And the question obviously puzzled the witness, who apparently thought that I was confused. But eventually he understood what I was asking and he said no, there is no other explanation. It's digital versus analog and digital is superior to analog.
So for DirecTV to have run ads saying that consumers preferred DirecTV over cable without telling the public that the comparison they were asked to make was between digital and analog rather than between digital satellite and digital cable, was obviously a misleading representation.
Now, the likelihood of Comcast prevailing on that issue on the merits of the case is overwhelming. In fact, without pre-judging it, it might even be material for a motion for partial summary judgment. I can't imagine submitting that issue to a jury. What would be the purpose, when DirecTV's own witness admits the superiority of digital over analog?
So I move to the next question raised by DirecTV today, and that is whether there has been a showing of irreparable harm and the corresponding need for injunctive relief to prevent that harm. That's the easiest part of the case for me. It's even easier than the unfairness of comparing digital to analog.
Obviously the damages — or the remedy at law would be inadequate because there's no way of proving which consumers were affected toward Comcast by having been exposed to this unfair survey and the ads concerning the unfair survey.
The Time Warner language seems applicable here and I find that there has been sufficient evidence of irreparable harm.
The next issue is whether the threatened injury to the plaintiff, here the counter-plaintiff, outweighs the threatened harm the injunction may inflict on the counter-defendant.
The possible harm to DirecTV would lie in the possibility that an injunction against running this unfair advertisement would be set aside on appeal and it would be allowed to continue running that series of ads. In that event, DirecTV would have been injured during the period of the injunction before the set-aside.
I regard the likelihood of an appellate reversal of an injunction against running the American Pie type ad as close to zero as one gets in legal proceedings. It is so obviously unfair on its face that an appeal would seem likely to me to jeopardize the appellant in terms of raising a frivolous appellate issue.
In any event, I see no likelihood of harm to DirecTV if I enjoin the American Pie ad.
By contrast, allowing the American Pie ad to continue or to be resumed, which is what we're really talking about here, would cause damage to Comcast for the reasons that I have explained. It would have no adequate remedy at law and no way of proving the monetary amount of any damage it would be presumed to have suffered.
And the last question is whether the granting of a preliminary injunction would disserve the public interest. And the answer to that one is a resounding no. The reverse is true. Denying the injunction would disserve the public interest because it would allow the public to be exposed to this unfair ad which DirecTV has given no assurance it will not resume in the absence of an injunction.
Therefore, all of the elements required for a preliminary injunction have been shown in regard to the consumer survey and any advertisement based on that survey.
I turn now to the installer survey —
MR. GARCIA: Your Honor, would you permit me to ask a question of the Court as to this?
THE COURT: Yes, go ahead.
MR. GARCIA: I'm just trying to get an understanding of what exactly your Honor is enjoining on this.
Is your Honor's injunction to the relief that Comcast has requested —
THE COURT: You're anticipating.
MR. GARCIA: Oh, I beg your pardon, your Honor.
THE COURT: I'll get to that later.
MR. GARCIA: Forgive me, sir.
THE COURT: Right.
Part of your answer lies in the fourth element that I just discussed, the public interest. I haven't devoted this amount of time to consider myself constrained by what may have been an insufficiently ambitious prayer by the plaintiff. But I'll get to that later.
Now, the installer survey is more complicated. It has the same problem that the consumer survey has because it asks for a comparison between DirecTV and cable without specifying digital cable. Therefore, the respondents would be just as likely to respond based upon their experience with analog cable as any experience they may have had with digital cable.
Indeed, one of the witnesses — I think it was Mr. Bekas — testified either last week or this morning that there may be areas involved in the installer survey where digital cable is not even available and the installers in those areas would have had no experience with digital cable.
So we start with that basic infirmity, with failure to ask a fair question. The question should have been, based on your experience as an installer, do you have a preference as between the picture afforded by satellite digital or cable digital. That wasn't asked. Instead, an inherently misleading and unfair question was asked.
Now, that problem might have been avoided or at least mitigated to some extent if the Alliance people had screened the installers to make sure they were getting installers who had had experience with both satellite digital, that is, DirecTV, and cable digital. But it didn't do that.
We don't know who these people are. We don't know what their experience has been. We don't know whether their experience has been limited entirely to analog cable. We don't know how much digital cable they've ever seen or when the last time they saw a digital cable picture prior to responding to the survey was.
Mr. Bekas did his best to persuade me that you can rely on these people's sophistication to correct any problem with the survey question, but I'm not persuaded by that. Mr. Bekas doesn't know any more than I do what these particular CEDIA members' experience was in relation to digital and analog. There is no reason to believe that he ever laid eyes on a single one of the installers who was surveyed by Alliance.
Now, of course, this is not an all or nothing proposition. It could well be that some of these installers interpreted the question to mean DirecTV digital versus cable digital and answered the question on that basis. They preferred DirecTV.
What tends to throw doubt on that hypothesis? I adverted to it a few minutes ago. There is absolutely no basis for anyone to think there's a difference between two pictures, one being analog and one being digital, other than the fact that one is digital.
So why would one of the installers say that a cable digital was inferior to a satellite digital? There's no evidence in this record that satellite as such is better than cable.
The difference is between digital and analog. The very fact that these people came up with four to one in favor of DirecTV speaks loudly for the proposition that they were responding on the basis of their experience with DirecTV's digital signal versus analog cable. What other explanation could there be for the four to one preference?
Well, Comcast has a suggestion and it is that essentially they were bribed by the expectation of receiving payments from DirecTV. I'm not persuaded by that argument. The payments were not to the installers except in the rare case where a dealer might be the installer who was surveyed. The payments, rather, were to the dealer employer of the installer.
Moreover, it appears that the payments were really very small in relation to the charges that these dealers would have made to install either DirecTV or some cable equipment.
There's no evidence whatever that the dealers shared any of this money they received from DirecTV with their installer employees.
In short, the connection between payments to CEDIA members and the results of the survey is simply too attenuated to provide even a partial basis for injunctive relief. So I reject that ground for injunctive relief.
Something I perhaps started to say a little while ago that I'll finish the thought on is this: I said it doesn't have to be all one way or the other. It doesn't have to be that all of the 400 installers surveyed answered strictly on the basis of comparing their experience with analog and their experience with digital. But if a substantial percentage of them responded on that basis — and there is every reason to believe that that is precisely what has happened for the reasons I've just explained — the four to one ratio disappears.
If you take out the ones who were talking only about analog, if you could identify them, which, of course, you can't — but if you took them out, the ratio might be one to one, for all we know.
In any event, there is no conceivable basis for saying that this Alliance survey is a valid survey.
Now, what's the law on surveys? And both sides have cited cases involving tests, for the most part, rather than surveys and for the very good reason that there aren't very many survey cases and there are lots of test cases. And the law on tests is obviously applicable to surveys.
I would like to quote what seems to be the common view from the case of Castrol, C-A-S-T-R-O-L, Inc., against Quaker State Corporation, 977 F2d 57, a case decided by the Second Circuit in 1992. And I'll read from page — well, you'll have to find it.
It's Page 7 of the slip opinion that I have but I don't have the particular pages in — oh, here. It's Page 63: "A plaintiff's burden in proving literal falsity thus varies depending on the nature of the challenged advertisement. Where the defendant's advertisement claims that its product is superior, plaintiff must affirmatively approve defendant's product equal or inferior. Where as, in the current case, defendant's ad explicitly or implicitly represents that tests or studies prove its product superior, plaintiff satisfies its burden by showing that the tests did not establish the proposition for which they were cited." I'll give you the citation.
(Continuing:) "We have held that a plaintiff can meet this burden by demonstrating that the tests were not sufficiently reliable to permit a conclusion that the product is superior."
That is precisely what Comcast has done here. They have shown that the survey conducted by Alliance was not sufficiently reliable to permit a conclusion that installers, in fact, preferred DirecTV over a truly comparable product, which would be a digital cable signal. That's the clear implication of the ad. Whether it was the intent of the survey or not, who knows because we haven't heard from Alliance. I'm inclined to think they didn't know what they were doing, and I would be interested to see them face-to-face.
But certainly it was DirecTV's intent to imply that the installers compared apples to apples and found digital to DTV's apples superior by a ratio of four to one.
To use the Castrol case language, the survey was not sufficiently reliable to permit a conclusion that DirecTV's product is superior.
I would like to take up the question of whether the disclaimer was effective. As I recall, the disclaimer was on the American Pie ad, so I'm harking back to the consumer survey at this point. I don't want to forget to mention the disclaimer.
The disclaimer is simply not legible. As I recall, it's on the screen for four seconds. But even if it were on the screen for 40 seconds, it wouldn't be legible enough or conspicuous enough for anyone to see it and to read it and to understand it.
It is an absolutely ineffective disclaimer and does nothing to mitigate the misleading nature of the American Pie ad.
Now, as far as the remaining elements required for a preliminary injunction, what I've said in regard to the American Pie ad is equally applicable to the Alliance ad concerning the installers.
Plaintiff's likelihood of success on the merits is very strong. It would have no — I say plaintiff. I meant, of course, Comcast.
Comcast would have no way of proving monetary damages resulting from the misleading Alliance survey and the ads based thereon and, therefore, the remedy at law is inadequate.
There is no threatened injury to DirecTV that is in the same hemisphere as the obvious injury to Comcast in allowing these ads to continue. And, again, the public interest will be served by getting these misleading ads out of the media so that the public will no longer be misled by them.
For these reasons I am going to grant Comcast's motion for a preliminary injunction restraining DirecTV and all of its agents and persons aligned with it from running any advertisements that rely upon, or quote from, or are in any way based on the consumer survey conducted by TNS or the installer survey conducted by Alliance.
Now, I'm going to get back to something Mr. Garcia asked me. What I'm going to do is enter an injunction order that I will ask Mr. Masters to prepare and Mr. Garcia to check for form. And to that injunction order I will attach a transcript of these findings and conclusions as my statement of my basis for issuing the injunction.
I reserve the right to edit the transcript both for form and substance, although I don't think any substance will need revision, but I reserve that right.
What I have said today is my ruling and you may proceed on that basis. And the reason I'm asking counsel to prepare the injunction order is that there are certain technical phrases I think should be part of the order referring to the technology involved that I think counsel will be far better able to engineer, if you will, than I would be.
So I will ask you to go to work on that and present an injunction order agreeable as to form, if you can do so. If you cannot do so, then I'll ask Mr. Masters to submit what he believes is an appropriate form. And Mr. Garcia, if he wants to submit a competitor, he may do so, not waiving any objection he has to the entry of any injunction at all.
I don't know how long this will take you, but I'll be ready to consider it as soon as you submit it and the transcript has been prepared by the court reporter and I've had a chance to read it.
We'll break now for lunch and come back for the other injunction proceeding this afternoon. Before we do that, are there any questions?
MR. GARCIA: I have a question, your Honor, as to the bond.
THE COURT: Yes.
I would be inclined to waive bond here on two grounds. First, I think that there is no likelihood — and I mean no likelihood of any injury to DirecTV from the issuance of this injunction.
Second, if there were injury, I see no reason to believe that Comcast, with its widespread business, is not financially solvent to an extent that they would be able to defray any damages without the need to look to a surety.
So to save a needless expense of a surety, I will not require a surety on the bond, and I'm inclined not to require a bond at all. I don't see any need for a bond.
What do you say, Mr. Garcia?
MR. GARCIA: Well, your Honor, I think a bond is required under the rule. And my understanding — I'm certain Comcast will argue that whatever the bond amount is, that limits the damages that would be — I think Comcast would argue and I've seen prevailers in preliminary injunctions —
THE COURT: All right. Let's do this. We're going to break for lunch. Look this up over the lunch hour and I will myself.
I have on many occasions issued injunctions without any bond at all in circumstances I thought were appropriate. And there hasn't been a single case where anybody has ever paid a nickel for having been improperly enjoined — or for having improperly obtained an improvident injunction.
But I'll make sure that I'm correct that a bond is not necessarily required.
MR. GARCIA: Well, if I could just say, whether your Honor has the power or not, respectfully, I would ask that a bond amount be entered.
THE COURT: What amount do you suggest would be appropriate?
MR. GARCIA: Your Honor, my understanding in the Time Warner case that Mr. Masters presented to the Court, there was a bond amount in the range of half a million dollars or more. I'm not sure of the precise amount.
Your Honor, Mr. Gieselman testified that there were advertisements that were pervasive out there on the installer survey, and to put a stop to them, pull them, destroy them, whatever needs to be done, we're probably talking several orders times that.
So I would ask for a bond in excess of 1.25 million, your Honor, to —
THE COURT: I don't think I would be likely to do that, but I'll look into it over the lunch hour and see what needs to be done. Okay?
Anything else?
MR. MASTERS: No, your Honor.
When are we resuming?
THE COURT: It's 12:30. How about we resume at 1:45?
MR. GARCIA: May I give the Court just an indication of what our hopes and intentions are this afternoon on our motion?
THE COURT: Yes. Good.
MR. GARCIA: We have a presentation, your Honor, that is comprised of admissions and deposition testimony that we took by video. There are snippets here and there, documentary evidence that is not at issue in terms of authentication. We have that presentation. That is, in total, probably an hour to an hour-and-a-half at the most. And then we only have one live witness, Mr. Gieselman, to talk about the harm to us by virtue of Comcast's false advertising.
So that is all we have. I can't imagine, if we started at 1:45 or 2:00, that we couldn't get it all in today.
THE COURT: Sounds good.
And what about the defense?
MR. MASTERS: Well, your Honor, we have I believe four or so witnesses.
But with regard to this presentation, again, we're back to something we talked about this morning, Rule 106 and Rule 32. It's very prejudicial for these excerpts that — we have no idea what they are. We've given you a brief in which we have indicated that they have taken things out of context, they have distorted people's testimony.
You're going to hear, apparently, some cherry-picked lines here and there from witnesses. We haven't been given an opportunity, as we are required to under the rules, to designate things, so that simultaneously with this testimony it comes into the record before your Honor —
THE COURT: What about that, Mr. Garcia?
MR. GARCIA: Judge, they got our exhibits with the deposition testimony cited back on August 7th. They have got it. We're not doing anything different from that.
THE COURT: So that's six days ago?
MR. GARCIA: Yes, sir.
MR. MASTERS: Well, this is the first time I've heard that they are planning on doing this. If it's just the testimony from the deposition excerpts and the briefs, you don't need to sit here and watch that. Why don't you just take the deposition testimony? We don't have to sit here for an hour-and-a-half. It's not an hour-and-a-half worth of testimony; it's —
THE COURT: Do you have it displayed on a chart or something?
MR. GARCIA: I have the actual person — you wanted to see the people. I have got them.
THE COURT: Good. That's what I'll do.
MR. MASTERS: We have those witnesses here live.
MR. GARCIA: Your Honor, I could present my —
THE COURT: But I think that DirecTV is entitled to present its case the way it wants to.
If it were just a matter of reading, I agree with Mr. Masters. But watching it on television would be much better. That's what I'll do.
MR. MASTERS: The only other issue then, your Honor, is Mr. Allenbach, who is the gentleman who performed the survey for the Magid organization. They have some excerpts from him.
There's no basis, that I know of, to allow them to proceed by deposition with regard to Mr. Allenbach. He's not a party opponent.
THE COURT: Well, we can do both. You can call him live and they can call him by TV.
MR. GARCIA: Great.
THE COURT: However, make sure you make the right choice as to what kind of TV you use.
(Laughter.)
MR. GARCIA: We won't tell you what it is, your Honor, without a fine disclaimer.
THE COURT: All right.
MR. GARCIA: 1:45 you said, your Honor?
THE COURT: 1:45.
(The within trial was recessed until 1:45 o'clock p.m. of the same day.)