Community Television Sys. v. Caruso
(Argued: September 6, 2001 Decided: March 20, 2002).
1.- No 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 . In the context of an alleged violation arising from a descrambling
device, unless some limiting construction is given to the potentially far-reaching
scope of this prohibition, a violation might be thought to occur every time
a person "receive[s]" TV images transmitted by radio waves and "use[s]"
such images "for his own benefit" by enjoying a telecast. Such a construction
would impose liability upon household guests, children, and baby-sitters.
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Background
TCI is a cable operator with a franchise area in South-Central Connecticut.
Like other cable operators, TCI distributes cable programming to residents in
its franchise area for a monthly fee that varies depending upon the extent of
programming the subscriber purchases. TCI offers "basic" and "expanded
basic" packages and, for an additional monthly fee, access to "premium"
channels, such as Home Box Office ("HBO"), Cinemax, and Showtime.
TCI also offers pay-per-view programming, which allows subscribers to pay for
access to a particular film, sporting event, or music concert.
TCI receives programming for premium channels and special pay-per-view events
by means of satellite. TCI gathers the programming through a cluster of antennas
referred to as a "head end." TCI then develops a channel line-up by
using "modulators" to tune the signals to particular frequencies.
The programming is sent to TCI's customers by means of a coaxial ground cable.
The principal means by which TCI prevents unauthorized viewing of its cable
programming is to transmit the programming to its customers by means of electronically
coded (scrambled) signals. When individuals subscribe for cable services, TCI
provides them with electronic decoding equipment, referred to as "addressable
converters," which attach to their television monitors. TCI controls the
addressable converters from its central offices to permit viewing in descrambled
form of only the programming for which subscribers have paid.
In July 1994, the FBI seized the computer of Robert R. Radil, who operated a
business involving the manufacture, assembly, sale, and installation of illicit
cable descramblers. Radil's devices descramble cable programming, enabling those
who install the devices to have free and unlimited access to premium channels
and pay-per-view movies and special events. The devices are "non-addressable,"
meaning that TCI cannot detect the unauthorized viewing from its central offices.
Radil recorded on his computer files the details of the orders and delivery
of the descrambler devices he sold. Culling the names of customers from Radil's
computer files and checking with the telephone company and the Department of
Motor Vehicles, the FBI compiled a master list of names, addresses, and telephone
numbers of Radil's customers ("FBI list").
TCI obtained the FBI list and in July 1997, commenced this action, requesting
injunctive and monetary relief under 47 U.S.C. §§553(a) and 605(a)
against 129 alleged purchasers of Radil's descramblers. As to all but seven
defendants, the claims were disposed of by settlement, default judgment, or
dismissal.
Five of the remaining seven defendants are the appellants here. They are Michael
Caruso and Angelina ("Julie") Caruso, Thomas and Michelle White, and
Charles Mingrone. Each of the five appellants either had accounts with TCI or
resided in homes that received TCI service, but did not pay for any premium
or pay-per-view services, except HBO, between the date of their alleged purchase
and the time of trial.
The principal evidence presented to establish the appellants' liability was
a "Filled Orders" list from Radil's computer files. The list described
the orders for descrambling units that Radil sold and installed. With respect
to each of the appellants, Radil's "Filled Orders" list states the
customer's name, the television channel selected to receive the customer's cable
transmissions, the date the order was placed, the date of delivery, and the
type of descrambler ordered.
Radil's records contain one line of information for each unit ordered. The records
reflect the following purchasers of units: "Tom/Michelle White," "Michael/Julie
Caruso," and "Angela/Chuck Mingrone." The Whites, Carusos, and
Mingrones were each married couples living in homes where a descrambler was
installed; the Carusos and the Mingrones are now divorced; Angela Mingrone is
not a defendant. Radil testified that he personally installed the descrambler
units. He also testified that he had no specific recollection of dealing with
any of the appellants personally.
Throughout the pretrial depositions and in interrogatories each appellant, except
Charles Mingrone, invoked his or her Fifth Amendment privilege against self-incrimination
when asked whether he or she had ordered or received a descrambler from Radil,
and where the present location of the descrambler might be. Mingrone testified
at his deposition that he did not order a descrambler from Radil, did not know
Radil, and had never had any contact with Radil. He invoked his Fifth Amendment
privilege, however, when asked whether he had used a descrambler, whether anyone
living at his address had ordered a descrambler from Radil, and whether his
ex¬wife was in possession of the descrambler. None of the appellants testified
at trial.
TCI's complaint alleged that the defendants purchased descramblers and used,
or assisted others in using, those devices in violation of 47 U.S.C. §§
553 and 605. In his Opinion of March 20, 2000, Judge Thompson held that the
defendants had violated both sections 553 and 605. Community Television Systems,
Inc. v. Caruso, 134 F. Supp. 2d 455, 461 (D. Conn. 2000) ("Caruso").
Acting pursuant to section 605, Judge Thompson assessed each appellant the maximum
statutory damages of $10,000, 47 U.S.C. § 605(e)(3)(C)(i)(II), awarding
TCI a total of $50,000. 3 Judge Thompson subsequently awarded TCI attorney's
fees and costs in a total amount of $90,083.27. He accepted the formula proposed
by TCI to allocate liability for a portion of the attorney's fees to each of
the seven defendants (two of whom are not appellants) according to their pro
rata share of each component of the fee. 4 This resulted in the following individual
assessments against the five appellants: Angelina Caruso, $14,243.62; Michael
Caruso, $12,677.49; Charles Mingrone, $13,421.12; Michelle White, $13,239.62;
Thomas White, $13,239.62.
Discussion
I. The Applicable Statutory Provision
The appellants contend that Judge Thompson erred in holding them liable under
47 U.S.C. § 605. They assert that the applicable statutory provision is
47 U.S.C. § 553. Section 605(a) provides:
No 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.
Section 553(a)(1) provides:
No 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.
The appellants contend that because section 605 concerns "radio communication"
and section 553 more specifically concerns "cable system[s]," the
latter provision, with its arguably more lenient consequences for violators,
5 should apply.
This Court has previously ruled that section 605 applies in cases involving
the sale of descrambling devices as long as the headend of the cable system
at issue receives at least some radio transmissions. International Cablevision,
Inc. v. Sykes ("Sykes II"), 75 F.3d 123, 131 n.5, 133 (2d Cir. 1996).
Two circuits have disagreed with this view, see TKR Cable Co. v. Cable City
Corp., 267 F.3d 196, 197 (3d Cir. 2001); United States v. Norris, 88 F.3d 462,
469 (7th Cir. 1996), but we are bound by Sykes II. Judge Thompson determined
that "TCI's cable service involves radio and satellite transmissions."
Caruso, 134 F. Supp.2d at 461. Although section 553 could be applied as an alternative
to section 605, the District Court was entitled to assess damages under the
latter provision. Sykes II, 75 F.3d at 129; International Cablevision, Inc.
v. Sykes ("Sykes I"), 997 F.2d 998, 1007 (2d Cir. 1993).
II. The Amount of Damages
The appellants allege that the District Court erred in assessing against each
of them the $10,000 maximum damages available under 47 U.S.C. § 605(e)(3)(C)(i)(II),
which provides:
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 . . . .
They assert that a "violation" should be limited to the illicit use
of one cable descrambling unit. Their contention raises three subsidiary issues:
(a) how many violations occurred, (b) how many people are liable for the damages
resulting from each violation, and (c) as to each scrambler installed in a home,
are separate awards of damages to be assessed against each person held liable
for a violation, or are some of them jointly and severally liable for a single
award of damages.
(a) Number of violations. The five appellants are alleged to have violated the
portion of section 605(a) providing that an unauthorized person shall not "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." In the context of
an alleged violation arising from a descrambling device, unless some limiting
construction is given to the potentially far-reaching scope of this prohibition,
a violation might be thought to occur every time a person "receive[s]"
TV images transmitted by radio waves and "use[s]" such images "for
his own benefit" by enjoying a telecast. Such a construction would impose
liability upon household guests, children, and baby-sitters. Where the alleged
violation arises from the use of a descrambling device, we think a violation
occurs each time a device is purchased and installed. Thus, in the pending case,
there was one violation in each of the homes for which a device was purchased
and installed.
(b) Who is liable for each violation? Of course, more than one person can be
liable for a single violation, a proposition that is self-evident as to both
criminal and civil liability. In the pending case, the seller's computer records
showed the names of the Carusos, the Whites, and Mingrone as purchasers, and
the devices were installed in their homes. That evidence suffices to create
at least a rebuttable presumption that each of them is liable. It may be that
the appearance of a spouse's name in a seller's computer records can occur without
the spouse taking part in the purchase, much less the installation, of the purchased
device. The seller might simply be recording the names of both occupants of
the home, writing down the two names printed on a check used to purchase the
device, or for other reasons adding to the store's customer base. But as long
as the spouse is afforded an opportunity to rebut the presumption with testimony
of no participation in the purchase or installation, the presumption may remain
and permit a finding of liability.
(c) Individual or joint awards? There remains the issue of whether each appellant
is liable for an individual assessment of damages or each pair (in the case
of the Carusos and the Whites) is jointly and severally liable for one assessment.
Although analogies might be drawn from various civil damage contexts to support
either individual or joint awards, our task is to give sensible content to the
imprecise damage provisions of a federal regulatory statute whose drafters in
all likelihood did not have cable descrambling devices for home use in mind.
In the context at hand, we think section 605 is sensibly construed to create
joint and several liability among those found liable for a single award of damages
attributable to the purchase and installation of a single descrambler device.
As to each device purchased and installed, the cable service provider has been
injured by one loss of revenue, 8 and, in the absence of proof of actual damages,
those liable are fairly adjudged jointly and severally liable for one award
of statutory damages.
III. Attorney's Fees
The District Court concluded that, pursuant to 47 U.S.C. §605(e)(3)(B),
TCI was entitled to an award of attorney's fees and costs. The Court awarded
a total of $90,083.27, but elected to impose liability upon each of the seven
defendants found liable, five of whom are the appellants here, only for each
defendant's pro rata share of each component of the fee award. Normally, the
total amount of an attorney's fee award is imposed jointly and severally upon
all defendants found liable, at least in the absence of "separate and distinct"
fee components attributable to the litigating tactics of individual defendants.
Koster v. Perales, 903 F.2d 131, 139 (2d Cir. 1990). However, TCI has not cross-appealed
to seek an increase in the amount of fees assessed against each appellant, and
we therefore will not review the District Court's decision to apportion fees
on a pro rata basis.
The appellants contend that the amount of the attorney's fees awarded is unreasonable.
Specifically, they assert that the District Court erred in including as components
of the individually pro-rated fee award $49,999.50 for a failed summary judgment
motion and $9,695.50 for compiling the fee application.
"Our review of an award of attorneys' fees is 'highly deferential to the
district court'; we will reverse on appeal only for an abuse of discretion."
Crescent Publishing Group, Inc. v. Playboy Enterprises, Inc., 246 F.3d 142,
146 (2d Cir. 2001) (quoting Alderman v. Pan Am World Airways, 169 F.3d 99, 102
(2d Cir. 1999)). The appellee's attorneys submitted a detailed affidavit outlining
their fees, carefully calculated to the nearest tenth of an hour for every aspect
of the litigation. The fees per hour ranged from $90, for work of a junior paralegal,
to between $240 to $275, for the work of the most experienced attorney on the
case. We see no basis for saying that the District Court exceeded its discretion
in making the fee award. Indeed, the decision to make a pro rata apportionment
of each component of the award was generous to the appellants.
Nevertheless, now that we have revised the damages from five individual awards
of $10,000 to three awards, two of which are imposed jointly and severally upon
the Carusos and the Whites, respectively, and one upon Mingrone, we deem it
appropriate, in the resulting remand, to authorize the District Court to revisit
the apportionment of fees and determine whether the amounts of fees assessed
against the appellants should be reduced and whether any fee amounts for which
the Carusos and Whites are liable should be imposed on each couple jointly and
severally.
Conclusion
The judgment of the District Court is affirmed in part, reversed in part, and
remanded for recalculation of damages and reconsideration of the award of attorney's
fees. No appellate costs are awarded.
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