Opinion
Nos. 03 Civ. 6132 (HB), 03 Civ. 6133 (HB), 03 Civ. 6134 (HB), 03 Civ. 6135 (HB), 03 Civ. 6136 (HB), 03 Civ. 6137 (HB), 03 Civ. 6138 (HB).
June 30, 2004
OPINION ORDER
Joe Hand Promotions, Inc. ("Joe Hand"), a distributor of satellite sports and entertainment programming, initiated seven suits against corporate and individual defendants for violating the Cable Communications Policy Act ("Communications Act"), as amended, 47 U.S.C. § 605 et seq., by illegally displaying a pay-per-view boxing match to its customers. These cases were consolidated by Order of the Court on November 24, 2003. Following a default in answering, Joe Hand moved for default judgment in four of the consolidated cases. The issue now is the appropriate amount of damages. See 47 U.S.C. § 605(e)(3)(C)(i)(II) (which provides the statutory damages scheme for the piracy alleged in the complaint). Joe Hand requests statutory damages for alleged violations of 47 U.S.C. § 605(a) (prohibiting the display of pirated cable signals) and 47 U.S.C. § 605(e)(4) (prohibiting the modification of equipment for the purpose of intercepting cable signals). In addition, Joe Hand seeks enhanced damages pursuant to 47 U.S.C. § 605(e)(3)(C)(ii) (allowing increased damages when violations of § 605(a) are shown to be willful and pursued for commercial advantage). For the combined violations, Joe Hand now requests a total of $110,302.50 from each of the defaulting defendants. This represents the maximum statutory damages of $110,000, in addition to costs of $302.50. I have not found sufficient support for this figure in plaintiff's submissions, and the figure bears no relationship to the harm done to Joe Hand An award of $1,000 in statutory damages and $1,500 in enhanced damages, for a total of $2,500 against each defendant is appropriate.
Joe Hand Promotions, Inc. v. Carl Redding et al., No. 03-CV-6133 (Soulvioli Inc.); Joe Hand Promotions, Inc. v. John Doe et al., No. 03-CV-6134 (Fish Chicken Rest. 112th St. Inc.); Joe Hand Promotions, Inc. v. "Jane" Zogaj et al., No. 03-CV-6136 (Drini Cafe Electra, Inc.) and Joe Hand Promotions, Inc. v. Sheha Shkurte et al., No. 03-CV-6137 (Karagaqi Corp.). Only three motions for default now remain, as the "Jane" Zogajet al. defendants were granted leave to file an answer on January 21, 2004.
I. BACKGROUND
Joe Hand was granted the right to distribute the Tyson/Etienne boxing match ("the fight") held on February 22, 2003 via closed-circuit television. Concerned about the erosion of sales caused by cable piracy, Joe Hand employed auditors to visit New York locations suspected of illegally displaying the fight. Based on their reports, Joe Hand filed suit against each establishment and its principals. Joe Hand submitted supporting affidavits in each consolidated case. The allegations are much the same in each case: the auditor entered the defendant's establishment, witnessed a portion of the fight broadcast, took a head count of patrons at the establishment, and left shortly thereafter. None of the auditors was charged an admission fee to view the fight. The maximum number of patrons counted by the auditors at the establishments at issue in the three consolidated cases, Amy Ruth's Restaurant, Fish Chicken Restaurant 112th St., and Karagaqi Café were twenty, one, and twelve, respectively.
II. DISCUSSION
A. DefaultTo date, the defendants in the three consolidated cases have failed to appear and the Clerk of the Court has already entered each party's default pursuant to Federal Rules of Civil Procedure ("Fed.R.Civ.P.") 55(a) on January 2, 2004. Fed.R.Civ.P. 55(b)(2) provides that when a party moves for judgment against an adverse party in default, the Court, in its discretion, may enter judgment against the defaulting party. Joe Hand has made such an application and the defendants in the three consolidated cases have shown no interest in responding to the complaint, or otherwise defending. Judgment by default is therefore appropriate.
B. Standard of Review
Following a default judgment, a defendant admits every "well-pleaded allegation" of the complaint as true, except those relating to damages. Cotton v. Slone, 4 F.3d 176, 181 (2d Cir. 1993); Flaks v. Koegel, 504 F.2d 702, 704 (2d Cir. 1974) ("While a default judgment constitutes an admission of liability, the quantum of damages remains to be established unless the amount is liquidated or susceptible of mathematical computation."). These are not liquidated damages, therefore the calculation of damages requires the Court to look beyond the averments of the complaint. Credit Lyonnais Secs. (USA), Inc. v. Alcantara, 183 F.3d 151, 155 (2d Cir. 1999). The Court is required to examine the sufficiency of all evidence with respect to damages, and, when evidence is deemed insufficient, to ascertain the appropriate level of damages through its own inquiry. S.E.C. v. Mgmt. Dynamics, Inc., 515 F.2d 801, 814 (2d Cir. 1975) ("[U]nless the amount of damages are absolutely certain, the court is required to make an independent determination of the sum to be awarded."). To aid in this task, the Federal Rules of Civil Procedure provide that "the court may conduct such hearings or order such references as it deems necessary and proper. . . ." Fed.R.Civ.P. 55(b)(2). The Second Circuit has consistently held that "[b]y its terms, 55(b)(2) leaves the decision of whether a hearing is necessary to the discretion of the district court." Fustok v. Conticommodity Servs., Inc., 873 F.2d 38, 40 (2d Cir. 1989); accord Tamarin v. Adam Caterers, Inc., 13 F.3d 51, 53-54 (2d Cir. 1993); Action S.A. v. Marc Rich Co., 951 F.2d 504, 508 (2d Cir. 1991).
The evidence submitted by Joe Hand is sufficient to allow the Court to determine the appropriate quantum of damages without recourse to an inquest or further submissions by the parties. In particular, the affidavits of Joe Hand's investigators provide ample factual detail concerning the number of patrons present in each of the defendants' establishments, the maximum capacity of each establishment, and the use of entry fees (or, more accurately, non-use of such fees) at each establishment. These figures allow for a relatively simple calculation of damages for the individual defendants on a per-patron basis. Even if the record were devoid of such precise figures, an evidentiary hearing is not required where the court can "ensure that there [is] a basis for the damages specified in a default judgment." Fustok, 873 F.3d at 40. Because specific factual evidence bearing on the appropriate level of damages has already been submitted, and because further evidence would not materially effect the damages calculation, an inquest is not necessary.
C. Calculation of Damages
The Communications Act provides for statutory damages for violations of 47 U.S.C. § 605(a), (e)(4), and provides for additional enhanced damages for violations of 47 U.S.C. § 605(a). The amount of damages assessed under either provision rests within the sound discretion of the court. Time Warner Cable v. Taco Rapido Rest., 988 F. Supp. 107, 110 (E.D.N.Y. 1997).
1. Statutory Damages
Pursuant to 47 U.S.C. § 605(e)(3)(C)(i)(II), an aggrieved party may elect to recover statutory damages for violations of both 47 U.S.C. § 605(a) (prohibiting the display of pirated cable signals) and (e)(4) (prohibiting the modification of equipment for the purpose of intercepting cable signals). The range of damages set for violations of § 605(a) is $1,000 to $10,000, whereas the range set for violations of § 605(e)(4) is $10,000 to $100,000. For willful and financially motivated violations of § 605(a), 47 U.S.C. § 605(e)(3)(C)(ii) allows the Court to increase the damages award by up to $100,000. Joe Hand bases its request for $110,000 in damages on either of two alternative combinations of these statutory provisions. Joe Hand argues that the requested damages are warranted by combining the maximum amount allowed for a violation of § 605(a) ($10,000) with the maximum amount allowed for a violation of § 605(e)(4) ($100,000), or, alternatively, by enhancing the maximum damage award allowed for a violation of § 605(a) ($10,000) by the maximum amount allowed under § 605(e)(3)(C)(ii) ($100,000). In either case, plaintiff seeks a total of $110,000.
When calculating damages under 47 U.S.C. § 605(e)(3)(C)(i)(II), some courts have used a patron-based estimation of actual damages, whereby the number of persons multiplied by a specific dollar amount for each serves as a proxy for plaintiff's loss.E.g., Time Warner Cable of New York City v. Googies Luncheonette, Inc., 77 F. Supp.2d 485 (S.D.N.Y. 1999) (awarding $50 per patron because that was approximately the amount charged residential purchasers); Taco Rapido Rest., 988 F. Supp. at 111 (awarding $50 per patron); Cablevision Sys. Corp. v. 45 Midland Enters., Inc., 858 F. Supp. 42, 45 (S.D.N.Y. 1994) (finding an award of $50 per patron to be "eminently reasonable"). Still, other courts have opted to award a flat sum. See, e.g., Garden City Boxing Club, Inc. v. Deblasio, No. 02-CV-6669, 2003 WL 22144395, at *4 (S.D.N.Y. Sept. 8, 2003) (awarding flat sum of $5,000).
Based on the factual record before the Court, I award Joe Hand the minimum amount in damages of $1,000 pursuant to 47 U.S.C. § 605(e)(3)(C)(i)(II) for defendants' display of the pirated fight broadcast in violation of § 605(a). The minimum amount in damages is consistent with the per-patron calculations relied upon by other courts. According to the affidavits submitted by Joe Hand, the number of patrons in attendance at the defendants' various establishments ranged from one to twenty. Estimating Joe Hand's damages at $50 per patron, the maximum amount owed by any of the defendants would be $1,000, precisely the minimum amount allowed by 47 U.S.C. § 605(e)(3)(C)(i)(II). The $10,000 requested by Joe Hand is unreasonable and clearly not intended to reflect plaintiff's lost profit. Moreover, damages for violations of § 605(e)(4) are unwarranted because this provision is targeted at the distributors of cable interception devices (e.g., satellite descramblers and "black boxes") and not at the end-users of such devices. Int'l Cablevision v. Sykes, 75 F.3d 123, 133 (2d Cir. 1996) ("a violation of § 605(e)(4) occurs upon the distribution of a descrambler").
There is also doubt concerning the applicability of § 605(e)(4) to the types of items modified in these cases. See, e.g., Cablevision Sys. Corp. v. Muneyyirci, 876 F. Supp. 415, 425 (E.D.N.Y. 1994) (holding that § 605(e)(4) applies only to air-borne, and not cable-borne, satellite signals).
2. Enhanced Damages
An enhancement of damages is permissible under 47 U.S.C. § 605(e)(3)(C)(ii) when a defendant's violation of § 605(a) is committed: (1) willfully; and (2) for the purpose of obtaining commercial advantage or private financial gain. As for the first requirement, Joe Hand claims that its requested enhancement of $100,000 is authorized by this provision since the defendants' willfulness is evidenced, ipso facto, by the broadcast of the fight at their establishments. Joe Hand makes no specific claims regarding the second requirement that the defendants sought to obtain commercial advantage by their conduct. In fact, Joe Hand's auditors uniformly reported that none of the establishments required an admission fee to view the fight.
Joe Hand also argues that a finding of willfulness can be based on the defendants' failure to answer the complaints. Some courts in the Second Circuit have concluded that a defendant's "default itself could be viewed as evidence of willfulness."E.g., Cablevision Sys. New York City Corp. v. Lokshin, 980 F. Supp. 107, 112 (E.D.N.Y. 1997) (citing Fallaci v. New Gazette Literary Corp., 568 F. Supp. 1172, 1173 (S.D.N.Y. 1983)); but see Doehrer v. Caldwell, 207 U.S.P.Q. 391 (N.D.Ill. 1980) (holding that default by defendant did not relieve plaintiff's burden of proving willful conduct in order to receive an enhanced damages award).
Some courts have inferred willfulness from this type of conduct. E.g., Cablevision Sys. New York City Corp. v. Doran, No. 01-CV-4294, 2003 U.S. Dist. LEXIS 24642, at *10 (S.D.N.Y. Nov. 26, 2003) (observing that "willfulness . . . can be demonstrated by a defendant's engaging in the affirmative act of installing and utilizing a pirate descrambler or some other device in order to illegally receive a transmission"); Taco Rapido Rest., 988 F. Supp. at 111 (regarding defendant's conduct as willful because "in order for [defendant] to receive the closed-circuit broadcast, it had to have engaged in some deliberate act, such as using an unauthorized decoder or altering the cable service in some way so as to receive and view the scrambled transmission"). Some courts are also willing to deem the "commercial advantage" requirement satisfied based on the inference that broadcasting a pay-per-view event will enhance a restaurant's profits. E.g., Entm't by J, J, Inc. v. Miraldo Rest., Inc., No. 01-CV-10832, 2003 U.S. Dist. LEXIS 11361, at *13 (S.D.N.Y. Apr. 22, 2003) ("[T]he evident purpose of defendant's efforts was to lure more customers . . . to enhance the defendant's profits.").
I, however, am unwilling to make such a leap to foist the penalty of $100,000 or anything near that figure onto small business owners, as this would only drive the defendants into bankruptcy, and neither Joe Hand nor the defendants would gain. This case is similar to Kingvision Pay-Per-View, Ltd. v. 2182 La Caridad Rest., Inc., No. 01-CV-7595, 2002 U.S. Dist. LEXIS 6934 (S.D.N.Y. Apr. 17, 2002), where I awarded the minimum statutory damages of $1,000 and no enhanced damages for a restaurant's illegal showing of a pay-per-view boxing match. There the plaintiff likewise argued that the broadcast of the fight was itself evidence of "an affirmative act that demonstrates a purposeful violation of some sort," id. at *9, and that an enhanced award under 47 U.S.C. § 605(e)(3)(C)(ii) was thus necessary to deter future violations of the Act, id. I rejected both of these arguments because the plaintiff presented no evidence of willfulness, other than a mere conjecture from the display of the fight itself, or any evidence that an enhanced award would effectively deter future violations. Id.
The only substantive difference between 2182 La Caridad Rest., Inc. and the three consolidated cases at issue is that here the Court has granted judgment by default. Yet, this distinction does not significantly alter the analysis because the plaintiff here has offered no better evidence showing the willfulness of the defendants' conduct than was put forward in 2182 La Caridad Rest., Inc. Indeed, Joe Hand has proffered only an affidavit that lists the most prevalent methods of signal piracy, which would provide for an even more attenuated inference of willfulness. Just as in 2182 La Caridad Rest., Inc., the only actual evidence that the defendants engaged in willful conduct is the broadcast of the fight itself at the defendants' establishments. Moreover, the plaintiff has failed to offer credible evidence that an enhanced damages award in the exorbitant amount of $100,000, or something in that range, is necessary to accomplish the goals of the statute, i.e., the use of enhanced damages to alter the economic expectations of prospective violators. Regardless, even in the case of a default judgment, a plaintiff must do more than gesture at an inference to support its request for enhanced damages. Garden City Boxing Club, Inc. v. Ayisah, No. 02-CV-6673, 2004 U.S. Dist. LEXIS 7867, at *5 (S.D.N.Y. April 28, 2004) ("plaintiff must . . . substantiate a claim with evidence to prove the extent of damages").
In addition, the value of deterrence must be balanced against the inequity of imposing heavy financial burdens on small businesses. The sting of an enhanced award should not be greater than deterrence requires and fairness allows. Thus, I award Joe Hand an additional $1,500 in enhanced damages from each defendant. This enhancement is not so large that it will spell financial ruin for the small businesses involved, especially if, as I suggest, Joe Hand allows installment payments over the course of a year or more, but it is large enough to raise the dollar amount of the penalty above the cost of obtaining a commercial license, and, for businesses of this size, should be a sufficient deterrent to avoid future violations.
D. Costs
Joe Hand also seeks costs in the amount of $302.50 from each defendant. Parties prevailing under section 605 of the Communications Act are entitled to costs pursuant to 47 U.S.C. § 605(e)(3)(B)(iii). Joe Hand is a prevailing party under the statute and is thus entitled to the requested fees. Taco Rapido Rest., 988 F. Supp. at 112 (awarding costs pursuant to 47 U.S.C. § 605(e)(3)(B)(iii) after entering default judgment for plaintiff).
III. CONCLUSION
For the foregoing reasons, Joe Hand's motion for default judgment with respect to the defendants in Joe Hand Promotions, Inc. v. Carl Redding et al., No. 03-CV-6133; Joe Hand Promotions v. John Doe et al., No. 03-CV-6134; and Joe Hand Promotions, Inc. v. Sheha Shkurte et al., No. 03-CV-6137 is granted and it is awarded $1,000 in statutory damages and $1,500 in enhanced damages, and $302.50 in costs, for a total of $2,802.50 from the defendants in each of the three consolidated cases. The Clerk of the Court is instructed to close these motions and these cases and remove them from my docket.
THIS CONSITUTES THE DECISION AND ORDER OF THE COURT.