Opinion
CV-01-3945 (RR)
May 16, 2002
REPORT AND RECOMMENDATION
Introduction
Plaintiff, Entertainment by JJ, Inc.("Entertainment"), brings this action alleging that defendants Mama Zee Restaurant Catering Services, Inc., d/b/a Mama Zee Restaurant, and Bola Grant, unlawfully and illegally intercepted and misappropriated a closed circuit exhibition of the September 18, 1999 boxing match between Oscar De La Hoya and Felix Trinidad (the "event") in violation of the Communications Act of 1934, codified as amended at 47 U.S.C. § 553(a)(1) and 605(a). See Complaint ("Compl.") ¶¶ 1, 7, 14. More specifically, plaintiff alleges that defendants intercepted and received the event without paying the required fees, and displayed it to the patrons of the Mama Zee Restaurant. See Compl. ¶¶ 14-15.
Upon plaintiffs application and in light of defendants' failure to appear or otherwise defend in this action, the Clerk of the Court entered the default of the defendants On October 10, 2001. See Docket Entry 10. The Honorable Reena Raggi then referred this case to me for report and recommendation on the issue of damages as to the defaulting defendants. See Docket Entry 15. Plaintiff has submitted a memorandum of law ("Pl.'s Mem."), and the affidavits of its attorneys, Skip M. Klauber ("Klauber Aff.") and Christopher J. Fitzpatrick ("Fitzpatrick Aff."), in support of its application for statutory damages and attorney's fees and costs. Defendants have not submitted any opposition to the relief sought by plaintiff.
Facts
Plaintiff, Entertainment by JJ, offers closed-circuit telecasts of pay-per-view boxing events to subscribers in commercial establishments in the State of New York. See Klauber Aff. ¶¶ 2-4. Plaintiff was licensed to exhibit and sublicense the right to exhibit the closed-circuit telecast of the September 18, 1999 boxing match between Oscar De La Hoya and Felix Trinidad. See Klauber Aff. ¶ 3. Commercial establishments that entered into a contract with plaintiff to receive the event are charged a fee based upon the capacity of the establishment. See Klauber Aff. ¶ 6.
To prevent theft of programming services, Entertainment by JJ encrypts or "scrambles" transmissions of all programs. See Compl. ¶ 11. Plaintiff arranged for authorized establishments to receive the Event through electronic decoding equipment with electronic authorization or satellite coordinates necessary to receive the signal. See Compl. ¶ 13, Klauber Aff. ¶ 5.
Entertainment by JJ asserts that defendants used unauthorized decoding equipment to intercept plaintiffs pay-per-view programming without charge. See Compl. ¶ 15; Klauber Aff. ¶ 8. Plaintiffs claims are based upon the observations of its investigator, who witnessed the event being displayed in the Mama Zee Restaurant. See Klauber Aff. ¶ 7 and supporting affidavit of Kenny Fung.
Discussion
A. Liability
Once a default judgment is entered, a defendant is deemed to have admitted all of the well-pleaded allegations in the complaint pertaining to liability. See Greyhound Exhibitgroup. Inc., v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d Cir. 1992); Montcalm Pub. Corp. v. Ryan, 807 F. Supp. 975, 977 (S.D.N.Y. 1992).
The allegations of plaintiff s complaint clearly establish the elements of liability required to state claims under both Section 553(a)(1) and Section 605(a). Under 47 U.S.C. § 553(a)(1), "[n]o person shall intercept or receive or assist in intercepting or receiving 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." Section 605(a) provides that "[n]o person not being authorized by the sender shall intercept any radio communication and divulge or publish the existence, contents, substance, purport, effect, or meaning of such intercepted communication to any person." 47 U.S.C. § 605(a).
Section 605(a), which by its express terms prohibits unauthorized interception of interstate wire communications, has been held applicable to thefts of cable communications, provided that the cable programming originated as a radio communication. See International Cablevision v. Sykes, 75 F.3d 123, 131 n. 5 (2d Cir. 1996) ("Sykes II"). Plaintiff alleges that its cable transmissions are in fact derived from satellite communications. See Compl. ¶ 13, Klauber Aff. ¶ 5. As the cable transmissions here did originate as satellite communications, Section 605(a) applies to defendant's interception of plaintiffs signal. Therefore, plaintiff has properly pleaded a claim under Section 605(a) and defendant is thus deemed liable to plaintiff for violating this provision. See Greyhound Exhibitgroup, 973 F.2d at 158.
Section 553(a)(1) is narrower in scope than Section 605(a). Section 553(a)(1) was intended by Congress to apply specifically to "'theft of services offered over a cable svstem[.]'" International Cablevision, Inc. v. Sykes, 997 F.2d 998, 1008 (2d Cir. 1993) ("Sykes I") (emphasis in original) (quoting H.R. Rep. No. 934, at 83 (1984)). Thus, Section 553(a)(1) applies only to "'theft of a service from the point at which it is actually being distributed over a cable system.'" Id. Although they originate as satellite signals, plaintiffs transmissions are distributed via cable, and thus fall within the scope of Section 553(a)(1). See Sykes II. 75 F.3d at 133 (noting that Section 553(a) applies to any cable transmission, regardless of its origin). The plaintiff alleges that Mama Zee Restaurant could not have obtained transmission of the event without undertaking one of the following illegal acts: use of an unauthorized decoder; illegally altering cable service to bring the signal of the event into the restaurant, or moving an unauthorized decoder from its authorized location to the restaurant. See Pl.'s Mem. at 6. These acts constitute violations of Section 553(a)(1). See Sykes I, 997 F.2d at 1003 (noting that use of illegal converter boxes is a violation of Section 553(a)(1)). Thus, under Greyhound Exhibitgroup. 973 F.2d at 158, plaintiff has established defendants' liability for a violation of Section 553(a)(1).
Where liability has been established under Sections 553(a)(1) and 605(a) of the Communications Act, recovery under both sections is impermissible. See New Contenders. Inc. v. Diaz Seafood Corp., 96 Civ. 4701, 1997 WL 538827, at *1 (S.D.N.Y. Sept. 2, 1997). Rather, "where a defendant is found to have violated both statutes, the court should award damages pursuant to [Section] 605." Time Warner Cable v. Taco Rapido Restaurant, 988 F. Supp. 107, 110 (E.D.N.Y. 1997). I thus will consider plaintiffs request for damages only under Section 605(a).
Some courts have awarded damages under both Section 553(a) and Section 605. See Entertainment by J J. Inc. v. Perez, No. 99 Civ. 4261, 2000 WL 890819, at *1 (N.D. Cal. June 30, 2000) (discussing split among courts). However, the view in this Circuit, as noted above, is that where a defendant is found to have violated both sections, a plaintiff may seek recovery only under one provision or the other.
B. Damages
Although the allegations of a complaint pertaining to liability are deemed admitted upon entry of a default judgment, allegations relating to damages are not. See Greyhound Exhibitgroup, 973 F.2d at 158. Rather, claims for damages generally must be established in an evidentiary proceeding at which the defendant is afforded the opportunity to contest the amount claimed. Id. Thus, a court must ensure that there is a basis for the damages sought by a plaintiff before entering judgment in the amount demanded. See Fustok v. Conticommodity Servs., Inc., 873 F.2d 38, 40 (2d Cir. 1989). A court may make this determination based upon evidence presented at a hearing or upon a review of detailed affidavits and documentary evidence. See Fed.R.Civ.P. 55(b)(2); Action S.A. v. Marc Rich Co., Inc., 951 F.2d 504, 508 (2d Cir. 1991); Fustok, 873 F.2d at 40. Plaintiff in this case seeks an award of statutory damages, attorney's fees, and costs, and does not seek to establish or recover its actual damages. See Pl.'s Mem. at 7 et seq. Defendants have not submitted any opposition to the affidavits presented by plaintiff. Accordingly, a hearing is not warranted.
A claimant who has established liability under Section 605(a) may elect between actual damages plus defendant's profits, if any, or statutory damages. See 47 U.S.C. § 605(e)(3)(C)(i)(ll). Where a party elects to recover statutory damages, it may recover an award from $1,000 to $10,000 for each violation of Section 605(a). See 47 U.S.C. § 605(e)(3)(C)(i). An additional $100,000 in enhanced damages is available where the violation was willful and was committed for commercial advantage or financial gain. See 47 U.S.C. § 605(e)(3)(C)(ii); see also American Cablevision v. McGinn, 817 F. Supp. 317, 320 (E.D.N.Y. 1993) (citing Cablevision Sys. Corp. v. Maxie's North Shore Deli Corp., No. 88 Civ. 2834, 1991 WL 58350 (E.D.N.Y. Mar. 20, 1991)). As plaintiff has pleaded that defendants displayed the event in a commercial establishment, the statutory damage awards applicable to willful violations are available in this case. Id. Accordingly, plaintiff seeks to recover enhanced damages against defendants. See Pl.'s Mem. at Id. et seq.
The amount of damages to be awarded pursuant to Section 605 rests with the sound discretion of the court. See 47 U.S.C. § 605(e)(3)(C)(i)(II) (providing for an award "as the court considers just"); see also Taco Rapido Restaurant, 988 F. Supp. at 111. Because an award of damages pursuant to Section 605 turns in part on the commercial gain derived from illegal cable broadcasts, courts have assessed damages based upon the number of patrons in the establishment at the time of the broadcast. See, e.g., id. (awarding damages on a per patron basis) (citing Kingvision Pay-Per-View v. Prime Time Saloon. Inc., 95 Civ. 1422 (E.D.N.Y. Sept. 30, 1996) (awarding damages on a per-patron basis) and Cablevision Sys. Corp. v. 45 Midland Enters., Inc 858 F. Supp. 42, 45 (S.D.N.Y. 1994) (same)). Plaintiff has submitted evidence of the number of patrons present during the illegal broadcasts, and I therefore recommend that damages be assessed on a per-patron basis. Based upon awards in comparable cases, I recommend that plaintiff be awarded $50 per patron. See, e.g., Taco Rapido. 988 F. Supp. at 111 (awarding $50 per patron) (citing Prime Time Saloon, 95 Civ. 1422 (awarding $50 per patron)); see also 45 Midland Enters., (awarding $50 per patron).
The affidavit of plaintiffs investigator asserts that about 30 patrons were present during the display of the event. See Fung Aff., annexed to the affidavit of Skip Klauber. Accordingly, damages should be awarded in the amount of $1,500. In those instances where a defendant charges patrons an admission fee, the per-patron assessment is often increased by an amount equal to the product of the admission fee and the number of patrons present. See Prime Time Saloon, 95 Civ. 1422 (awarding an additional ten dollars per patron where defendant charged a ten dollar cover fee). The investigator's affidavit in this case states that a cover charge of six dollars was collected from patrons seeking to watch the fight. The statutory damages should, therefore, be increased by $180.
Plaintiff also seeks an enhanced damages award, asserting that defendants' acts were willful and committed for commercial gain. Although I recommend that this request be granted, I further recommend that the maximum amount of $100,000 not be imposed.
Courts deciding similar cases have not awarded the maximum statutory amount available. For example, the court in Maxie's North Shore Deli Corp. imposed $30,000 in damages against a sports bar which broadcast a boxing match without authority. 1991 WL 58350. Similarly, the court in Kingvisi on Pay-Per-View, Ltd. v. New Paradise Restaurant awarded plaintiff $20,000 in damages where a defendant, without authorization, broadcast a boxing match in its restaurant. No. 99 Civ. 10020, 2000 WL 378053 (S.D.N.Y. Apr. 11, 2000). See also Taco Rapido, 988 F. Supp. at 111-12 (awarding $50 per patron, plus $5,000 in enhanced damages, against a bar which broadcast a boxing match without authorization); Cablevisions Systems New York City Corp. v. Faschitti, No. 94 CV 6830, 1996 WL 48689 (S.D.N.Y. 1996) (awarding $20,000 in damages in a case involving a tavern which charged an admission fee of ten dollars to view an unauthorized broadcast of a boxing match).
The facts recited in the report of plaintiff s investigator do not support the large statutory damage award plaintiff seeks. According to the investigator's affidavit, patronage at defendants' restaurant was small, consisting of about 30 individuals on the night of the fight. Moreover, there is no evidence that defendants advertised or otherwise promoted the fight, or that they engaged in cable piracy in the past. The establishment had only two nineteen-inch television sets. In sum, there is no evidence that the defendants profited substantially from the showing of the event, or that they derive a significant portion of their revenue by showing pirated satellite broadcasts.
Plaintiff argues that this Court should grant an enhanced statutory damages award to deter future cable piracy. It is my recommendation that an award of $10,000, together with the $1,680 calculated based upon the number of patrons, is sufficient to both redress the harm caused by defendants' activities, as well as to deter future violations, particularly where, as here, the defendants' restaurant is small and there is no indication that it is particularly profitable.
The complaint names both the principal and the establishment as defendants. This Court's recommendation is that plaintiffs award be limited to a single recovery of $11,680, and that plaintiff be prohibited from recovering separately from both the establishment and its principals. Thus, if this recommendation is adopted, defendants should be held jointly and severally liable for a single award of $11,680 in statutory damages.
Plaintiff also seeks to recover its attorney's fees and costs. An award of fees and costs is mandatory pursuant to 47 U.S.C. § 605(e)(3)(B)(iii). In this Circuit, all claims for attorney's fees must be supported by contemporaneous time records that show, "for each attorney, the date, the hours expended, and the nature of the work done." New York State Ass'n for Retarded Children. Inc. v. Carey, 711 F.2d 1136, 1148 (2d Cir. 1983). The reasoning behind this rule is that "courts should not be faced with an impossible chore when making fee determinations, and that lawyers should not be required to expend even more hours reconstructing the past in assembling a fee application." Carrero v. New York City Hous. Auth., 685 F. Supp. 904, 908 (S.D.N.Y. 1988).
Plaintiff has submitted the affidavit of Christopher J. Fitzpatrick, detailing the basis of plaintiffs claim for $2,187.50 in attorneys' fees, reflecting 8.75 hours of work charged at the rate of $250 per hour. The affidavit incorporates what appears to be the text of contemporaneous time records. The amount sought appears reasonable, and I recommend it be awarded. Finally, plaintiff seeks to recover $260.00 in costs. See Fitzpatrick Aff., ¶ 4. This amount appears reasonable and comparable to awards of fees and costs in similar cases. See Kingvision Pay-PerView. Ltd. v. Las Cazuelas Mexican Restaurant, No. 99 Civ. 10041, 2000 WL 264004, at *3 (S.D.N.Y. Mar. 9, 2000) (awarding $701.17 in fees and costs). Accordingly, I respectfully recommend that plaintiff be awarded $260.00 in fees and costs.
Conclusion
For the foregoing reasons, I respectfully recommend that default judgments be entered against the defaulting defendants, jointly and severally, in the amount of $11,680 in statutory damages, $2,187.50 in attorneys' fees, and $260.00 in costs, for a total award of $14,127.50.
Any objections to the recommendations made in this Report must be filed with the Clerk of the Court and the Chambers of the Honorable Reena Raggi within ten days of receiving this Report and Recommendation, and in any event on or before June 10, 2002. Failure to file timely objections may waive the right to appeal the District Court's Order. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), 6(e), 72; Small v. Secretary of Health Human Servs., 892 F.2d 15, 16 (2d Cir. 1989).
Plaintiff is hereby directed to serve copies of this Report and Recommendation upon defendants at their last known addresses, and to file proof of service with the Clerk of the Court.