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finding flat rates reasonable where "contemporaneous time records sufficiently detail[ed] the attorney or paralegal who performed the particular tasks noted, the date upon which the tasks were performed, and the nature of the tasks performed"
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04 Civ. 8592 (LBS) (RLE).
November 8, 2005
Peter J. Sullivan, Lefkowitz, Louis Sullivan, L.L.P., Jericho, NY, for Plaintiff.
Wendy Khrisat, Shrub Oak, NY, Pro se Defendant.
REPORT AND RECOMMENDATION
To the HONORABLE LEONARD B. SAND, U.S.D.J.;
I. INTRODUCTION
Plaintiff CSC Holdings, Inc. ("CSC"), a cable television system operator, initiated this action against defendant on May 7, 2004, alleging unauthorized interception and viewing of CSC's "scrambled" cable-borne television signals by use of an illegal decoder device. On January 5, 2005, the Honorable Leonard B. Sand entered default judgment against Khrisat, and the matter was referred to the undersigned for an inquest on damages. CSC seeks damages pursuant to the Communications Act of 1934, as amended, 47 U.S.C. §§ 553(a) and 605(a). For the reasons below, I recommend that judgment be entered for CSC in the amount of $12,612.00.II. BACKGROUND
CSC is a cable television operator that has been awarded franchises by Westchester County, New York. Affidavit of Donald Kempton in Support of Damages Inquest ("Kempton Aff.") at ¶ 2. Pursuant to these franchises, CSC is authorized to construct, operate, and maintain cable television programming in parts of Westchester County, including those parts where Khrisat resided at all times. Id. CSC offers a variety of programming packages, including the "Basic" service, which costs approximately $13 per month; the "Family" service, which costs approximately $35 per month; a full-range "premium" programming, which costs approximately $80 per month; and pay-per-view programming. Id. at ¶¶ 3-4. Pay-per-view events range in price between $3.95 and $54.95 per selection, and are offered continuously on several channels, twenty-four hours a day. Id. at ¶ 5. The aggregate cost of all pay-per-view events in the course of a typical month, over a typical system, assuming each pay-per-view event is viewed only once, is approximately $400. Id. CSC's customers pay a monthly fee for the level of programming and services that they have selected, and are entitled to only receive their selected level of programming and services. Id. at ¶¶ 6-7.
CSC receives the signals to all of its premium and pay-per-view programming by transmissions from orbiting satellites and local radio towers. Id. at ¶ 9. To protect its premium and pay-per-view programming services from unauthorized reception during its transmission, CSC encrypts, or "scrambles," the signals. Id. CSC's customers who select and pay for various channels are provided with a device known as a converter-decoder, which descrambles those channels to enable the customers to receive the transmitted television signals on their television sets. Id. at ¶¶ 8-10. Khrisat has been subscribing to CSC's "Family" level of service since August 19, 1988. Id. at ¶ 20.
The converter-decoders that CSC provides to its customers have the technology feature and function known as "addressability." Id. at ¶ 11. Addressability is a communication link between a cable operator's central computer and the descrambling and computer circuitry in each converter-decoder provided to its customers. Id. It enables CSC, to send signals to each addressable converter-decoder attached to a CSC system in order to direct it to descramble the particular programming that each customer has selected and agreed to purchase. Id. at ¶ 12. Because pirate converter-decoders are not addressable, they enable their users to receive and view all scrambled premium and pay-per-view programming in a descrambled mode without payment or authorization. Id. at ¶ 15.
The claim against Khrisat arose following CSC's investigation of an Indiana company, Explorer Electronics ("Explorer"), which CSC brought legal action against for the sale and distribution of pirate decoding equipment. Id. at ¶¶ 16-18. The United States District Court for the Northern District of Indiana, Hammond Division, ordered a civil seizure of Explorer's business premises. Id. Explorer's business records revealed that Khrisat had purchased pirate decoding equipment from Explorer on September 4, 2002. Id. at ¶ 19. This equipment decodes the scrambling technology CSC employed on the system that provided service to Khrisat's residence. Id.
III. DISCUSSION
Khrisat has failed to appear or defend in this action, and has been adjudged in default by the order entered by Judge Sand. Thus, Khrisat's liability is established on the well-pleaded allegations of the complaint. Bambu Sales, Inc. v. Ozak Trading Inc., 58 F.3d 849, 854 (2d Cir. 1995) ( quoting Trans World Airlines, Inc. v. Hughes, 449 F.2d 51, 63 (2d Cir. 1971), rev'd on other grounds, 409 U.S. 363 (1973). CSC was directed by the undersigned to submit affidavits and any other documentation in support of its request for damages. It seeks statutory damages in the amount of $10,000 under 47 U.S.C. § 605, plus costs and attorney's fees. Plaintiff's Memorandum of Law in Support of Damages Inquest Against Defaulting Defendant Wendy Khrisat ("Pl. Mem.") at 6.A. Statutory Framework
Section 553(a)(1) of title 47 of the United States Code provides, in pertinent part: 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.
Subsection (b) prescribes criminal penalties for willful violations, and subsection (c) creates a civil cause of action for "any person aggrieved by any violation of section (a)(1)." Civil remedies include injunctive relief, damages, costs and attorney's fees. 47 U.S.C. § 553(c)(2). A plaintiff may prove "actual damages," or elect to receive statutory damages ranging from $250 to $10,000, "as the court considers just." 47 U.S.C. § 553(c)(3)(A)(i)-(ii). Willfully committed violations that were "for the [purpose] of commercial advantage or private financial gain," may result in damages of up to $50,000, while violations committed by one who was "unaware and had no reason to believe his acts constituted a violation of this section" may be reduced to a minimum sum of $100. 47 U.S.C. §§ 553(c)(3)(B)-(C).
Section 605(a) of title 47 of the United States Code provides, in pertinent part:
No 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. 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.
The statute provides for both criminal penalties, §§ 605(e)(1) and (2), and a civil right of action for "person[s] aggrieved." § 605(e)(3). Injunctive relief, costs and attorney's fees are some of the civil remedies. § 605(e)(3)(B). An aggrieved person may recover either "actual damages," § 605(e)(3)(C)(i)(I), or statutory damages of not less than $1,000 or more than $10,000 for each violation thereof. § 605(e)(3)(C)(i)(II). The court may award additional damages of up to $100,000 for each violation found to be committed "willfully and for purposes of direct or indirect commercial advantage or private financial gain." § 605(e)(3)(C)(ii).
B. Khrisat's Liability
CSC's programming is broadcast via orbiting satellites, see Kempton Aff., and is therefore protected under 47 U.S.C. § 605(a), as radio communications. Khrisat's unauthorized reception is a violation of both § 605(a), which prohibits the unauthorized reception of protected radio communications, and § 553(a)(1), which protects all communication by cable systems. Int'l Cablevision, Inc. v. Sykes, 75 F.3d 123, 133 (2d Cir. 1996). CSC is a "person aggrieved" within the meaning of §§ 553(c)(1) and 605(e)(3)(A).
Where a court determines that a defendant's conduct has violated both §§ 553 and 605, a plaintiff may recover damages under only one of those sections. See id. at 127-33. An aggrieved cable operator is entitled to elect recovery of damages under § 605 in consideration of § 605's higher damages awards. Id. at 127. CSC has elected to recover damages under § 605 in the form of statutory damages, rather than actual damages, and seeks the statutory maximum of $10,000 as provided under § 605(e)(3)(C)(i)(II) for Khrisat's violations. CSC argues the statutory maximum is appropriate because a pirate decoder is not addressable such as to enable CSC to ascertain exactly which programs were viewed by Khrisat, and when. Pl. Mem. at 7; Kempton Aff. at ¶¶ 15, 31. In addition, CSC claims the maximum award is appropriate to deter future violations, as Khrisat's unauthorized access to CSC's broadcast programming, and similar piracy by others, causes CSC to lose money, expose it to potential FCC sanctions, and impairs its ability to purchase and offer quality programming services to its customers. Kempton Aff. at ¶ 30. Such conduct also adversely affects the County of Westchester, which grants franchises to CSC, and receives franchise fees based on CSC's revenues. Id. at ¶ 29.
C. Calculation of Damages
Because plaintiff's actual damages are not readily measured, statutory damages are appropriate. See, e.g., Kingvision Pay-Per View, Ltd. v. Olivares, et al., 2004 WL 744226 at *3 (S.D.N.Y. April 5, 2004). Although there are various methods of calculating the damages, see CSC Holdings, Inc. v. Ruccolo, 2001 WL 1658237, at *2 (S.D.N.Y. Dec. 21, 2001), this Court will base its calculation upon the monthly value of the defendant's unauthorized cable reception. See, e.g., Cablevision Sys. N.Y. City Corp. v. Lokshin, 980 F. Supp. 107, 113 (E.D.N.Y. 1997) (awarding damages of $125 per month for unpaid pay-per-view events). According to CSC, while Khrisat paid approximately $35 per month for her Family tier of service, she received an approximately $80 value every month, for twenty months, from the time she purchased the pirate decoder in September 2002, until the time CSC brought this action in April 2004. The value of services an individual receives from CSC is measured by the amount of access the individual gains to the company's programming, rather than simply by the programming the individual may view in a given month using the pirate decoder. Kempton Aff. ¶ 27. Because Khrisat's pirate decoder enabled her to gain access to CSC's "premium" level of service, the potential loss suffered by CSC each month was approximately $45, without accounting for pay-per-view events.
It is impossible to determine how many movies Khrisat viewed illegally. CSC estimates that in a typical system, the aggregate value of all pay-per-view events, each ranging from approximately $4 to $55, and assuming that each event is watched only once, is approximately $400 per month. Kempton Aff. at ¶ 5. It is unlikely that Khrisat would have purchased every pay-per-view event each time it was shown, but in an attempt to make an accurate assessment of actual use by a private violator, the Court finds it reasonable to assume that Khrisat watched a limited number of both high and low cost events each month. See, e.g., Cablevision Sys. N.Y. City Corp. v. Santiago, 2003 WL 1882254, at *6 (S.D.N.Y. Mar. 17, 2003) (estimate of two events at approximately $55 each, or one event at $55 plus fourteen events at $4 each, for a total of at least $110 per month); Time Warner Cable of N.Y. City v. Barbosa, 2001 WL 118608, at *5 (S.D.N.Y. Jan. 2, 2001) (estimate of ten to twelve events, each at $4, one event at $50, plus $55 for loss on additional premium programming, averaging $150 per month); Diaz, 2002 WL 31045855, *4 (approximately three events at $5 each); Lokshin, 980 F. Supp. at 113 n. 4 (estimate of sixteen events at an average cost of $5 each, and four events at approximately $11.25 each, amounting to $125 per month). More than a dozen movies are available each month. See Kempton Aff. at ¶ 5. The viewing of ten to twelve movies at $5 per movie, and one premium event at $55 would result in an additional loss to CSC of approximately $105 to $115 per month. Adding this amount to the $45 lost on premium programming, the total loss to CSC would be approximately $150 to $160 per month. Using an average of $155, CSC would be entitled to an additional $2,945 ($155 x 19 months), for a total of $3,800 in actual damages.
Additional penalties beyond the estimated actual damages are appropriate to ensure that the statute has a deterrent effect against prospective violators. See Int'l Cablevision, Inc. v. Sykes, 997 F.2d, 998 1003 (2d Cir. 1993). Therefore, the Court recommends that estimated damages be doubled to $7,600, which is comparable to awards in similar cases. See, e.g., Santiago, 2003 WL 1882254, at *5-*6 (S.D.N.Y. Mar. 17, 2003) ($5,115 in actual damages doubled to the statutory maximum of $10,000); Diaz, 2002 WL 31045855, at *4 ($5,029.75 in actual damages doubled to the statutory maximum of $10,000);
D. Attorney's Fees and Costs
CSC also seeks attorney's fees and costs incurred in the amount of $5,012. Affirmation of Services in Support of Inquest by Melinda M. Dus, Esq. ("Dus Aff.") at ¶ 14. Section 605(e)(3)(B)(iii) provides for the full recovery of costs, including reasonable attorney's fees to a prevailing aggrieved party. "[F]ee awards in the Second Circuit are computed under the lodestar method, which multiplies hours reasonably spent by counsel times a reasonable hourly rate." Gen. Elec. Co. v. Compagnie Euralair, S.A., 1997 WL 397627, at *4 (S.D.N.Y. July 3, 1997). The `lodestar' figure is strongly presumed to be a reasonable fee. City of Burlington v. Dague, 505 U.S. 557, 562 (1992). In determining a reasonable hourly rate for counsel, courts may consider "market rates `prevailing in the community for similar services by lawyers of reasonably comparable skill, experience, and reputation.'" Gierlinger v. Gleason, 160 F.3d 858, 882 (2d Cir. 1998) ( quoting Blum v. Stenson, 465 U.S. 886, 896 n. 11 (1984)). A court may also rely on its own knowledge of hourly rates charged by private firms in the community. See Miele v. N.Y. State Teamsters Conference Pension and Ret. Fund, 831 F.2d 407, 409 (2d Cir. 1987). For purposes of determining the fees, the relevant community is the judicial district in which the trial court sits. See In re Agent Orange, 818 F.2d 226, 232 (2d Cir. 1987). Further, a party seeking an award of attorney's fees must support its application by submitting contemporaneous time records that detail, "for each attorney, the date, the hours expended, and the nature of the work done." N.Y. State Ass'n for Retarded Children, Inc. v. Carey, 711 F.2d, 1136, 1148 (2d Cir. 1983). Applications without the required information should not be granted. See Diaz, 2002 WL 31045855, at *5.
In support of its request for fees, CSC's attorney, Melinda M. Dus ("Dus") has submitted an affidavit detailing that Patrick J., Sullivan, Esq. billed $165 per hour for five hours of work performed prior to January 1, 2005; Dus billed $145 per hour for 7.1 hours of work performed prior to January 1, 2005, and $165 per hour for 5.8 hours of work performed after January 1, 2005; and William E. Primavera, Esq. billed $145 per hour for 3.9 hours of work. Dus. Aff. at ¶¶ 9-11. With respect to work performed by paralegals, Susan A. Weindler billed $85 per hour for 0.9 hours of work done prior to January 1, 2005, and $95 per hour for 0.5 hours of work done after January 1, 2005; and Alfonso N. Cava billed $85 per hour for 0.7 hours of work. Id. at ¶¶ 12-13. Dus has also noted tasks billed at flat rates pre-arranged between CSC and counsel. The rates include $300 for the drafting of all papers related to the complaint; $200 for the drafting of all papers concerning a default motion; $150 for the drafting all papers related to initial disclosures; and $600 for the drafting of all papers related to the submission on damages. Id. at ¶ 8. When CSC's counsel and paralegals performed an activity concerning one of the above mentioned tasks, they billed 0.00 hours on the contemporary time printouts submitted to CSC. Id. Work unrelated to the tasks covered by the pre-arranged flat fees was billed on a per hour basis. Id. A copy of contemporaneous time printouts has been attached to Dus. Aff., as Exh. D-H.
The Court finds the hourly rates and pre-arranged flat fees charged by CSC's counsel and paralegals, as well as the disbursements, to be reasonable. While other courts in this district have disallowed recovery of pre-arranged flat fees, see Kingvision Pay-Per-View v. The Body Shop, 2002 WL 393091, at *5 (S.D.N.Y. Mar. 13, 2002); Diaz, 2002 WL 31045855, at *5; Santiago, 2003 WL 1882254, * 7; Cablevision Sys. N.Y. City Corp. v. Collins, 2004 WL 1490307, at *6 (S.D.N.Y. June 29, 2004), this Court recommends that these fees be included in the total award of attorney's fees that CSC seeks. The submitted contemporaneous time records sufficiently detail the attorney or paralegal who performed the particular tasks noted, the date upon which the tasks were performed, and the nature of the tasks performed. The Court is thus able to make an assessment of a reasonable lodestar amount. The Court finds the pre-arranged flat rates both reasonable for the tasks performed, and consistent with the Second Circuit's concern that parties seeking attorney's fees submit sufficient documentation that will enable the Court to determine whether attorney's fees sought by parties are reasonable and therefore, should be granted. See generally, Carey, 711 F.2d 1136 (2d Cir. 1983) (setting standard for attorney's fee applications and remanding case for further proceedings where district court's determination of attorney's fees was excessive and unreasonable, given that plaintiffs failed to maintain contemporaneous time records throughout the subject litigation). Therefore, the Court recommends that CSC be awarded $4,827 in attorney's fees.
CSC also seeks to recover $185 in reasonable costs, consisting of a $35 process service fee, and a $150 filing fee, which should be granted. In sum, the Court recommends that CSC be awarded a total of $5,012 for attorney's fees and costs.
E. Interest
Judge Sands ordered that CSC shall recover from Khrisat interests of this action. New York law provides three periods for the calculation of interest on money obligations: N.Y.C.P.L.R. § 5001, for interest on the cause of action from the time of accrual until verdict or decision; N.Y.C.P.L.R. § 5002, for interest from verdict or decision until judgment; and N.Y.C.P.L.R. § 5003, for interest from verdict or decision to judgment. Interests awarded pursuant to N.Y.C.P.L.R. § 5001 "is founded on the theory that there has been a deprivation of use of money or its equivalent and that the sole function of interest is to make whole the party aggrieved." 155 Henry Owners Corp. v. Lovlyn Realty Co., 647 N.Y.S.2d 230, 234 (App.Div. 1996) ( quoting Kaiser v. Fishman, 590 N.Y.S.2d 230, 234 (App.Div. 1992)). Two major exceptions to prejudgment interest under N.Y.C.P.L.R. 5001 are personal injury and punitive damages claims. Because statutory damages under the Communications Act are designed to deter others from similar infringing activity, they are analogous to punitive damages. See, e.g., Kaplan v. First City Mortgage, 701 N.Y.S.2d 859, 865 (N.Y. City Ct. 1999) (statutory damages under Telephone Consumer Protection Act of 1991 are punitive; no interest accrues before judgment). Nonetheless, CSC is entitled to interest at nine percent (9%) per year under N.Y.C.P.L.R. § 5003 from the time of the judgment on damages.
IV. CONCLUSION
For willful violation of § 605(a), I recommend that defendant Khrisat pay statutory damages of $7,600, plus costs and attorney's fees of $5,012.00, for a total of $12,612. In addition, interest at nine percent (9%) per year shall accrue from the date of entry of judgment on damages.Pursuant to Rule 72, Federal Rules of Civil Procedure, the parties shall have ten (10) days after being served with a copy of the recommended disposition to file written objections to this Report and Recommendation. Such objections shall be filed with the Clerk of the Court and served on all adversaries, with extra copies delivered to the chambers of the Honorable Leonard B. Sand, 500 Pearl Street, Room 1650, and to the chambers of the undersigned, Room 1970. Failure to file timely objections shall constitute a waiver of those objections both in the District Court and on later appeal to the United States Court of Appeals. See Thomas v. Arn, 474 U.S. 140, 150 (1985); Small v. Secretary of Health and Human Services, 892 F.2d 15, 16 (2d Cir. 1989) ( per curiam); 28 U.S.C. § 636(b)(1) (West Supp. 1995); Fed.R.Civ.P. 72, 6(a), 6(e).