Opinion
05-CV-6081 (CPS) (RER).
June 27, 2006
REPORT RECOMMENDATION
Plaintiff, J J Sports Productions, Inc. ("plaintiff" or "J J"), brings this action against defendants Jose Luis Valdez, individually and as the principal of El Sabor Divino Spanish Deli Restaurant, Inc. (collectively, "defendants" or "Divino"), alleging that defendants violated the Federal Communications Act of 1934, codified as amended at 47 U.S.C. §§ 553 and 605. Compl. ¶ 18. More specifically, plaintiff alleges that defendants engaged in the unlawful interception and exhibition of the Morales/Pacquaio pay-per-view boxing event (the "Event") on March 19, 2005. Id. ¶ 15.
Plaintiff filed the complaint on December 27, 2005. Docket Entry 1. Defendants were served on January 20, 2006. Docket Entry 2. Defendants failed to appear or otherwise move with respect to the complaint. Plaintiffs then moved for a default judgment on March 31, 2006 seeking statutory and enhanced damages, investigative and attorney's fees and costs, and a permanent injunction. Docket Entry 4. Upon plaintiff's application and in light of defendants' failure to appear in or otherwise defend this action, on April 13, 2006 the Clerk of the Court noted defendants' default pursuant to Fed.R.Civ.P. 55(a). Docket Entry 5. On April 18, 2006, the Honorable Charles P. Sifton granted plaintiff's application for a default judgment and referred this case to me for a report and recommendation with regard to jurisdiction, damages, non-monetary relief and attorneys fees. Docket Entry 6. Plaintiff has submitted, inter alia, a memorandum of law ("Pl. Memo") and the affidavits of its President, Joseph Gagliardi, dated March 20, 2006 ("Pl. Aff.") and its counsel, Julie Cohen Lonstein, dated March 30, 2006 ("Lonstein Aff."), in support of its application for damages. Docket Entry 4.
Facts
Plaintiff was granted the rights to distribute the Event, including all undercard bouts, and the entire television broadcast via closed circuit television and encrypted satellite signal. Compl. ¶ 15. Plaintiff entered into agreements with various entities in the State of New York allowing them to publicly exhibit the Event to their patrons. Id. ¶ 16. Defendants did not contract with J J for the rights to exhibit the Event. Pl. Aff. ¶ 6.
The satellite signal that transmitted the Event was encrypted to protect its access from those who did not contract with plaintiff to lawfully broadcast the Event. Defendants would not have the ability to receive the signal without, inter alia: 1) the use of a "black box" which is purchased for a fee and when installed on a cable TV line will descramble reception of pay-per-view broadcasts; 2) misrepresenting their commercial nature to the cable company in order to purchase the broadcast at the residential price of $54.95; or 3) the use of an illegal cable drop or splice from an adjacent apartment or home that had already purchased the broadcast at the residential price. Pl. Aff. ¶ 10.
Plaintiff hired independent auditors to identify establishments that were unlawfully exhibiting the Event. Pl. Aff. ¶ 4. Prior to visiting the establishments, the auditors were given a list of the locations that were authorized to exhibit the Event. Id. ¶ 5. On March 19, 2005, defendants intercepted and received the signal for the Event without authorization. Defendants then broadcast the Event to the patrons within El Sabor Divino Bar Spanish Restaurant located at 646 Bay Street, Staten Island, NY 110304-3806. Compl. ¶¶ 10, 18.
The auditor who visited Divino on the night of the Event submitted an affidavit dated April 18, 2005 ("Piracy Aff."), in which he states that he entered the restaurant at approximately 11:01 p.m. and observed the exhibition of a portion of an undercard bout of the Event. Piracy Aff. at 1. According to the auditor, there was one 24-inch television set in the left-rear side of the restaurant, and there were between 15-20 patrons in the restaurant. Id. Divino has an estimated capacity of 40. Id. The auditor neither paid a cover charge to enter Divino, nor ordered any food or drinks. Id.
Discussion
A. JurisdictionThis Court has jurisdiction to decide this case. See 28 U.S.C. § 1331; 47 U.S.C. § 605 (e)(3). Similarly, the Court has personal jurisdiction over defendants, who are residents of this District. See Compl. ¶ 3-4.
B 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 establish defendants' liability under § 605. Section 605(a) provides that "[n]o person not being authorized by the sender shall intercept any radio communication and divulge or publish the . . . contents . . . of such intercepted communication to any person." 47 U.S.C. § 605(a). Section 605(a) has been held to apply to the interception of cable communications originating as a satellite or radio transmission. See Int'l Cablevision, Inc. v. Sykes, 75 F.3d 123 (2d Cir.), cert. denied, 519 U.S. 929 (1996). J J alleges that defendants used an illegal device to intercept and receive J J's satellite signal and then broadcast the Event without authorization. Compl. ¶¶ 16-18. Defendants' alleged conduct thus violated 47 U.S.C. § 605(a).
It is well-settled that a claimant who establishes liability under both 47 U.S.C. § 553 and § 605 may only recover damages under one section. See Am. Cablevision of Queens v. McGinn, 817 F. Supp. 317, 320 (E.D.N.Y. 1993). Plaintiff, therefore, elects to recover damages under § 605. Pl. Memo at 4.
C. 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 must generally be established in an evidentiary proceeding at which the defendant is afforded the opportunity to contest the amount claimed. Id. An evidentiary presentation is required so that the court may ensure that there is a basis for the damages sought before entering judgment in the amount demanded. 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 and enhanced damages, investigative and attorney's fees and costs, and a permanent injunction. Pl. Memo at 3-9. Defendants have not submitted any opposition to the papers submitted by plaintiff. Accordingly, a hearing is not warranted.
A claimant who has established liability under Section 605(a) may recover an award of statutory damages of not less than $1,000 or more than $10,000, as the court considers just, for each violation of § 605(a). See 47 U.S.C. § 605(e)(3)(C)(i)(II). The court may consider such factors as "the pecuniary loss sustained by the victim as a result of the offense, the financial resources of the defendant, . . . the financial needs and earning ability of the defendant . . . as well as the burden that a damage award would impose on the defendant relative to the burden alternative relief would impose." Cablevision Sys. Corp. v. De Palma, No. 87-CV-3528, 1989 WL 8165, at *6 (E.D.N.Y. Jan. 17, 1989) (quoting Cablevision Sys. Dev. Co. v. Cohen, No. 84-CV-1155, slip. op. at 4-5 (E.D.N.Y. May 20, 1988).
Some courts have awarded flat amounts when calculating damages. See Home Box Office v. Champs of New Haven, 837 F. Supp. 480, 484 (D. Conn. 1993) (awarding $10,000 in statutory damages); Kingvision Pay-Per-View Ltd. v. Brito, No. 05 Civ. 1042, 2006 WL 728408, at *2 (S.D.N.Y. Mar. 20, 2006) (awarding $5,000 in statutory damages); Kingvision Pay-Per-View, Ltd. v. Ruiz, No. 04 Civ. 6566, 2005 WL589403, at *2-3 (S.D.N.Y. Mar. 9, 2005) (awarding $5,000 in statutory damages). Other courts have assessed damages by multiplying the number of patrons who viewed the event by the amount an individual would pay to view the program at home on a pay-per-view channel. See Time Warner Cable of New York City v. Taco Rapido Rest., 988 F. Supp. 107, 111 (E.D.N.Y. 1997) (awarding statutory damages of $50 per patron); Cablevision Systems Corp. v. 45 Midland Enterprises, 858 F. Supp. 42, 45 (S.D.N.Y. 1994) (same).
Plaintiff seeks the maximum statutory damage award of $10,000. Pl. Memo at 7 ("Plaintiff urges that the maximum amount of statutory damages under 605(e)(3)(C)(i)(II), $10,000 be awarded in this case."); see also 47 U.S.C. § 605(e)(3)(C)(i)(II). The Court finds that such an award is grossly disproportionate to the violation of the statute at issue here, especially in light of the fact that it would have cost defendant only $1,000 to exhibit the Event legally. See J J Sports Productions, Inc. v. Lopez, et al., No. 05-cv-5799, Docket Entry 12 (Affidavit of Jule Cohen Lonstein, dated June 7, 2006). An award ten times the amount of the license fee is unjust, and would amount to a windfall for plaintiff, something which the relevant statute does not contemplate. In the exercise of its discretion, this Court believes that an award of $2,500 in statutory damages is appropriate. This amount takes into account the pecuniary loss of plaintiff — $1,000 — and the financial resources, needs, and earning ability of the defendant, as well as the burden that a greater damage award would impose on the defendant. Given the default, while there is little information in the record to assess defendants' financial circumstances, the Court is sure that these defendants do not have the financial ability to afford a higher statutory damage award, especially in light of the award of enhanced damages, as discussed below. This amount is also in line with other statutory damage awards from this Court and others.
Plaintiff also seeks enhanced damages of up to $100,000, contending that defendants' wilfully violated the statute for commercial advantage or private gain. See 47 U.S.C. 605(e)(3)(C)(ii). Wilfulness is defined as "disregard for the governing statute and an indifference for its requirements." Trans World Airlines, Inc. v. Thurston, 469 U.S. 111, 126-27 (1985). Defendants intercepted and broadcast the program without authorization. Furthermore, defendants could not have done so without using an illegal device or misrepresenting the nature of their commercial establishment to a cable or satellite television provider. See Time Warner Cable of New York City v. Googies Luncheonette, Inc., 77 F. Supp.2d 485 (S.D.N.Y. 1999) ("Signals do not descramble spontaneously, nor do television sets connect themselves to cable distributions systems.").
In the instant case, the Court agrees that defendants committed the wilful violation for commercial advantage. It is likely that the exhibition of the Event led to an increase in patrons at Divino. In turn, those patrons most likely purchased food and/or drinks while viewing the Event. Accordingly, I recommend that plaintiff be awarded $7,500 in enhanced damages. The Court notes that there is no evidence that defendants advertised the exhibition of the Event to its patrons or the community at large, or that it charged patrons to view the Event. Therefore, a higher enhanced damages award is inappropriate. See Garden City Boxing Club, Inc. v. Polanco, No. 05 Civ. 3411 (DC), 2006 WL 305458, at * 3 (S.D.N.Y. Feb. 7, 2006) (awarding $10,000 in enhanced damages where plaintiff submitted proof that defendant advertised the event to lure in patrons).
See, e.g., Garden City Boxing Club, Inc. v. Ayisah, No. 02 Civ. 6673, 2004 U.S. Dist. LEXIS 7867 (S.D.N.Y. Apr. 28, 2004) (awarding $5,000 in enhanced damages for one-time exhibit of boxing match to 60 customers); Garden City Boxing Club, Inc. v. Deblasio, No. 02 Civ. 6669, 2003 U.S. Dist. LEXIS 16274 (S.D.N.Y. Sept. 8, 2003) ($5,000 enhanced damages for one-time exhibit of boxing match to 23 customers); Joe Hand Promotions, Inc. v. Hernandez, No. 03 Civ. 6132, 2004 U.S. Dist. LEXIS 12159 (S.D.N.Y. June 30, 2004) ($1,500 enhanced damages for one-time exhibit of boxing match to about twenty customers); Taco Rapido Rest., 988 F. Supp. at 111 (awarding $5,000 in enhanced damages for one-time exhibit of boxing match to 75 patrons inside, and 20 people standing outside, defendant's restaurant).
C. Costs and Fees
Plaintiff also seeks to recover attorney's fees and costs. An award of fees and costs is mandatory pursuant to 47 U.S.C. § 605(e)(3)(B)(iii). As directed by the Second Circuit in New York State Ass'n for Retarded Children v. Carey, 711 F.2d 1136, 1148 (1983), plaintiff has submitted a declaration of its attorney and contemporaneous time records. Plaintiff asserts that it incurred $1,026.25 in attorney's fees and $800.00 in costs. Lonstein Aff. ¶ 3. In her affidavit, counsel sets forth a description of the billing rates of her firm which are as follows: $200.00 per hour for work performed by an attorney and $75.00 per hour for work performed by a paralegal. Id. ¶ 4.
The hours and rates charged by counsel are reasonable, and should be awarded. See Tokyo Electron Arizona, Inc. v. Discreet Indus. Corp., 215 F.R.D. 60, 64 (E.D.N.Y. 2003) (finding rates of $400 for a partner and $180 for a third-year associate reasonable); New Leadership Comm. v. Davidson, 23 F. Supp.2d 301, 310 (E.D.N.Y. 1998) (finding rates of $275 for a partner and $200 for an associate reasonable).
Counsel asserts it incurred $800.00 in costs which consists of filing fees ($250), the cost of service of process ($200), and investigative fees ($350). Lonstein Aff. ¶ 3; Pl. Aff. ¶ 4, Ex. D. The amounts spent for filing fees and service of process are reasonable, and should be awarded. The language of Section 605(e)(3)(B)(iii) does not explicitly provide for the recovery of investigative costs or auditing fees. There is legislative history for the statute, however, that does indicate that at least some members of Congress intended that such costs be recoverable. Kingvision Pay-Per-View Ltd. v. Autar, ___ F. Supp. 2d ___, 2006 WL 997243, at * 6 (E.D.N.Y. Apr. 13, 2006) (citing 1984 U.S.C.C.A.N. 4742, 4750, 1984 WL 37497 (Leg. Hist.) (1984)). Nevertheless, to be recoverable, such costs must be subjected to the same level of scrutiny to which requests for attorneys' fees are subjected:
Thus, a plaintiff must document: (1) the amount of time necessary for the investigation; (2) how much the investigators charged per hour; [and] (3) why the investigators are qualified to demand the requested price.Id. (citing Int'l Cablevision, Inc. v. Noel, 982 F. Supp. 904, 918 (W.D.N.Y. 1997). Here, plaintiff has not submitted any such proof. Accordingly, I respectfully recommend that plaintiff's request for auditor's fees be denied.
D. Permanent Injunction
Plaintiff requests a permanent injunction enjoining defendants from further violations of §§ 553 or 605 in the future. A court "may issue an injunction on a motion for default judgment provided that the moving party shows that (1) it is entitled to injunctive relief under the applicable statute and (2) it meets the prerequisites for the issuance of an injunction." Main Events/Monitor Prods. v. Batista, No. 96-CV-5089, 1998 WL 760330, at * 1 (E.D.N.Y. Aug. 26, 1998). The first condition is satisfied because injunctions are available remedies pursuant to §§ 553(c)(2)(A) and 605(e)(3)(B)(I). The second condition, however, has not been satisfied. A party seeking an injunction must demonstrate irreparable harm and the absence of an adequate remedy at law. See Rondeau v. Mosinee Paper Corp., 422 U.S. 49, 57 (1975). Plaintiff has not submitted any evidence that it will suffer irreparable harm or that the statutory and enhanced damages are insufficient to deter future conduct. I therefore recommend that plaintiff's request for a permanent injunction be denied. See, e.g., Kingvision Pay-Per-View, Ltd. v. Lalaleo, ___ F. Supp. 2d ___, 2006 WL 1071885, * 8 (E.D.N.Y. Apr. 24, 2006).
Conclusion
For the foregoing reasons, I respectfully recommend that default judgment be entered against defendants Jose Luis Valdez and El Sabor Divino Spanish Deli Restaurant, Inc. in the amount of $11,476.25, comprised of $10,000.00 in statutory and enhanced damages, and $1,476.25 in attorney's fees and costs, plus post-judgment interest at a rate of 9%. Any objections to the recommendations made in this Report must be filed with the Clerk of the Court and the Chambers of the Honorable Charles P. Sifton within ten days of receiving this Report and Recommendation. 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 by July 2, 2006 at their last known address, and to file proof of service with the Clerk of the Court.