Summary
holding that defaulting defendant was liable under 47 U.S.C. § 605, where plaintiff's factual allegations referred to "satellite transmissions, which indicate that the broadcast originated with a radio transmission."
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01 Civ. 9775 (JGK) (JCF)
March 12, 2004
REPORT AND RECOMMENDATION
This is an action brought by King Vision Pay-Per-View Corp., Ltd. ("King Vision") pursuant to the Cable Communications Policy Act of 1984 (the "Cable Act"), 47 U.S.C. § 553 and 605, seeking relief for the unauthorized interception and commercial exhibition of closed-circuit television programming. The defendants, Tardes Calenas Moscoro, Inc. d/b/a Tardes Calenas ("Tardes Calenas") and its principal, Jose Geraldo Mosqurera, failed to answer or move with respect to the complaint. After a default judgment was entered, the case was referred to me for an inquest on damages. A hearing was held on November 24, 2003, and although notice was sent to the defendants, no one appeared on their behalf. Accordingly, the following findings are based on the submissions of the plaintiff.
Background
On March 13, 1999, Evander Holyfield and Lennox Lewis were contestants in a professional prizefight at Madison Square Garden. (Plaintiff's Complaint ("Compl."), ¶ 7). King Vision owned the exclusive right to exhibit the closed-circuit telecast of this fight in commercial establishments in New York. (Compl., ¶¶ 7-9). It sublicensed these rights to a variety of closed-circuit locations such as theaters, bars, lounges, and restaurants. (Compl., ¶ 7).
In order to ensure limited access to the programming, King Vision coded or scrambled its transmission of the event. (Compl., ¶ 11). The telecast was transmitted via satellite and then distributed to the various commercial entities that had paid King Vision the appropriate fee. (Compl., ¶¶ 12, 13).
In this case, however, the defendants received and exhibited the fight without paying the fee. (Compl., ¶¶ 16-18). On the night of the event, King Vision sent out investigators to do random checks on establishments suspected of showing the fight illegally. One of these investigators, Ed Ferington, entered Tardes Calenas in Woodside, New York at approximately 10:51 p.m. and observed that the telecast was being displayed. (Plaintiff's Memorandum of Law In Support of Request for Judgment By Default ("Pl. Memo."), Exh. B). A preliminary bout was being shown on two televisions, and there were approximately fifteen people in the restaurant. (Pl. Memo., Exh. B). Upon learning of the unauthorized use of the telecast, King Vision filed the instant action.
Discussion
A. Statutory Framework
The plaintiff alleges that the defendants violated both sections 553 and 605 of the Cable Act. Section 553(a) of the Cable Act provides, in pertinent part: "[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." 47 U.S.C. § 553 (a) (1). Subsection (c) creates a civil cause of action for "[a]ny person aggrieved by any violation of subsection (a)(1)." Civil remedies include injunctive relief, damages, costs, and attorneys' fees. 47 U.S.C. § 553(c)(2). As to damages, the party aggrieved may prove "actual damages" as specified in subsection (c)(3)(A)(i), or, as the plaintiff has done here, may elect to receive, under subsection (c)(3)(A) (ii), "statutory damages for all violations involved in the action, in a sum of not less than $250 or more than $10,000 as the court considers just." Whichever method of computation of damages is chosen, the amount awarded may be increased if the plaintiff proves willfulness or decreased if the defendant proves that the violation was committed innocently. 47 U.S.C. § 553(c)(3)(B) (C).
Section 605(a) of the Cable Act provides, in part: "[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). Subsection (e)(3) creates a right of action for any person aggrieved, and remedies may include injunctive relief, statutory damages, and costs and attorney fees. 47 U.S.C. § 605 (e)(3)(B) (i)-(iii). The party aggrieved may prove actual damages or may seek statutory damages between $1,000 and $10,000. 47 U.S.C. § 605 (e)(3) (C)(i)(I) (II). If the violation is willful, statutory damages may be enhanced by as much as $100,000. 47 U.S.C. § 605 (e)(3) (ii).
A. Jurisdiction
As this case arises under federal law, this Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331. In addition, the Cable Act itself provides for jurisdiction. 47 U.S.C. § 605 (e)(3)(A). There is personal jurisdiction over the defendants in this forum both because they are doing business in New York and because the plaintiff's claims arise from the defendants' transaction of business here. N.Y. C.P.L.R. §§ 301 and 302.
B. Venue
As plaintiff's counsel acknowledges, this case was mistakenly filed in this Court when it should have been brought in the Eastern District of New York where Tardes Calenas is located. (Tr. at 2-3). However, "if a party defaults by failing to appear or file a timely responsive pleading, the party waives defects in venue." Rogers v. Hartford Life and Accident Insurance Co., 167 F.3d 933, 942 (5th Cir. 1999) (citations omitted); see Hoffman v. Blaski, 363 U.S. 335, 343 (1960) ("A defendant, properly served with process by a court having subject matter jurisdiction, waives venue by failing seasonably to assert it, or even simply by making default."). Accordingly, the error in venue is no obstacle to King Vision's obtaining judgment here.
"Tr." refers to the transcript of the evidentiary hearing held on November 24, 2003.
B. Liability
All of a plaintiff's factual allegations, except those relating to damages, must be accepted as true where, as here, the defendants default. See Transatlantic Marine Claims Agency, Inc. v. Ace Shipping Corp., 109 F.3d 105, 108 (2d Cir. 1997); Cotton v. Slone, 4 F.3d 176, 181 (2d Cir. 1993); Time Warner Cable of New York City v. Barnes, 13 F. Supp.2d 543, 547 (S.D.N.Y. 1998). In this case, the allegations of the Complaint establish a violation of the Cable Act by Tardes Calenas.
Tardes Calenas is clearly liable under section 553, as it intercepted the communications of a cable system without authorization. With respect to section 605, while King Vision does not provide much detail on the technology used in transmitting the telecast, it does refer to satellite transmissions, which indicate that the broadcast originated with a radio transmission. Therefore, Tardes Calenas' conduct included the unauthorized interception of radio signals in violation of section 605 of the Cable Act. See, e.g., King Vision Pay-Per-View, Ltd, v. New Paradise Restaurant, No. 99 Civ. 10020, 2000 WL 378053, at *l-2 (S.D.N.Y. April 11, 2000); King Vision Pay-Per-View, Ltd, v. Las Cazuelas Mexican Restaurant, No. 99 Civ. 10041, 2000 WL 264004, at *2-3 (S.D.N.Y. March 9, 2000).
King Vision has not, however, pled sufficient facts to obtain judgment against Jose Geraldo Mosqurera. The Complaint alleges only that he "is, upon information and belief, an owner" of Tardes Calenas. (Compl., ¶ 6). When asked about this at the evidentiary hearing, plaintiff's counsel could only represent that a search had been made of the records of the Secretary of State of the State of New York concerning Tardes Calenas, and "the name Jose Geraldo Mosurera shows up on that search." (Tr. at 4). But officers and directors of a corporation are not generally liable for tortious acts of the corporation unless they participate in or have knowledge of such acts. See Cohen v. Koenig, 25 F.3d 1168, 1173 (2d Cir. 1994); Buy This, Inc. v. MCI Worldcom Communications, Inc., 209 F. Supp.2d 334, 342 (S.D.N.Y. 2002); Isanaka v. Spectrum Technologies USA Inc., 131 F. Supp.2d 353, 361 (N.D.N.Y 2001). Similarly, a shareholder is not liable for a tort committed by a corporate entity absent facts that would justify piercing the corporate veil. See Freeman v. Complex Computing Co., 119 F.3d 1044, 1051 (2d Cir. 1997); Wm. Passalacqua Builders, Inc. v. Resnick Developers South, Inc., 933 F.2d 131, 137-39 (2d Cir. 1991). There is nothing in the language of the Cable Act indicating that it was intended to override these general principles and impose strict liability on corporate officers, directors, or shareholders. In the absence of allegations asserting Mr. Mosqurera's complete dominance of Tardes Calenas or his personal involvement as a corporate officer or director in the illegal acts of the business, he cannot be found individually liable for violating the Cable Act.
D. Damages
In its Complaint, King Vision sought an award of statutory damages pursuant to both § 553 and § 605, but later recognized that it could recover only under one of the two. (Tr. at 2). See Time Warner Cable of New York City v. Barbosa, No. 98 Civ. 3522, 2001 WL 118608, at *5 (S.D.N.Y. Jan. 2, 2001); American Cablevision of Queens v. McGinn, 817 F. Supp. 317, 320 (E.D.N.Y. 1993). King Vision has therefore elected to seek statutory damages of $10,000 pursuant to § 605, enhancement of $100,000 because the violation was willful, and costs and attorneys' fees of $3,000, for a total of $113,000. (Compl. at 7-8; Affidavit in Support of Request for Attorney's Fees ("Attorney's Fees Aff."), Exh. A.).
While there should be some proportionality between the loss suffered and the amount of statutory damages, the calculation should be generous enough to ensure that the plaintiff is fully compensated. In some cases, courts have tried to estimate the profits obtained by the defendants or the amount of the licensing fee that the plaintiff was deprived of.See Time Warner Cable of New York City v. Googies Luncheonette, Inc., 77 F. Supp.2d 485, 490 (S.D.N.Y. 1999) (awarding damages of $50 per patron);Time Warner Cable of New York City v. Taco. Rapido Restaurant, 988 F. Supp. 107, 111 (E.D.N.Y. 1997)(same); Cablevision Systems Corp. v. 45 Midland Enterprises, Inc., 858 F. Supp. 42, 45 (S.D.N.Y. 1994) (same). Other courts have awarded a flat sum for each violation.See, e.g., Kingvision Pay-Per-View Limited Corp. v. New Paradise Restaurant, No. 99 Civ. 10020, 2000 WL 378053, at *2 (S.D.N.Y. April 11, 2000) (awarding total of $20,000); Kingvision Pay-Per-View Limited Corp. v. Las Cazuelas Mexican Restaurant, No. 99 Civ. 10041, 2000 WL 264004, at *3 (S.D.N.Y. March 9, 2000) (awarding $12,500).
Unfortunately, in this case King Vision has provided very little information on which to base a damage calculation. It provided no data from which the profits of Tardes Calenas might be inferred, such as whether the establishment imposed a cover charge on the night of the telecast. Nor did King Vision even identify the licensing fee that it charged its legitimate customers. Nevertheless, the availability of unauthorized access to programming reduces demand and depresses the prices that King Vision can charge. See Cablevision Systems New York City Corp. v. Faschitti, No. 94 Civ. 6830, 1996 WL 48689, at *2 (S.D.N.Y. Feb. 7, 1996).
In this case, a basic award of $5,000 against Tardes Calenas is warranted. This figure well exceeds the probable licensing fee, and it is far more than the minimal amount of added revenues that Tardes Calenas likely received by exhibiting the fight. On the other hand, it represents a recognition that maximum statutory damages should be reserved for cases where there is evidence of more substantial injury to the plaintiff or profit by the defendant.
King Vision is entitled to a further enhancement of the damage award because the violation was willful and carried out with the purpose of reaping commercial profits. In order for Tardes Calenas to access the telecast, it would have been necessary to use an unauthorized decoder, to make misrepresentations identifying Tardes Calenas as a residential customer, or to illegally divert cable service or satellite signals into Tardes Calenas. The illegality of any of these actions would have been apparent to the perpetrator. Moreover, the exhibition of the fight undoubtedly generated commercial profits for Tardes Calenas. Under these circumstances, enhanced damages of $5,000 are appropriate. See Home Box Office v. Champs of New Haven, Inc., 837 F. Supp. 480, 484 (D. Conn. 1993).
E. Attorneys' Fees and Costs
An award of costs, including attorneys' fees, is mandatory under § 605. 47 U.S.C. § 605 (e)(3)(B) (iii); see also International Cablevision, Inc. v. Sykes, 997 F.2d 998, 1009 (2d Cir. 1993). The Second Circuit has held that "any attorney . . . who applies for court-ordered compensation . . . must document the application with contemporaneous time records . . . specify[ing], for each attorney, the date, the hours expended, and the nature of the work done." New York State Association for Retarded Children, Inc. v. Carey, 711 F.2d 1136, 1148 (2d Cir. 1983).
King Vision has detailed counsel's hours and disbursements. The plaintiff seeks reimbursement for 5.8 hours of attorney time billed at a rate of $300 per hour, and for 2.1 hours of paralegal time billed at a rate of $100 per hour. (Attorney's Fees Aff., Exh. A). In order to determine reasonable rates, a court must consider rates "prevailing in the community for similar services by lawyers of reasonably comparable skill, experience, and reputation." Blum v. Stenson, 465 U.S. 886, 896 n. 11 (1984). The relevant community is the district in which the court sits. Luciano v. Olsten Corp., 109 F.3d 111, 115 (2d Cir. 1997). In determining the prevailing market rate, the court may rely on its knowledge of hourly rates charged in the community.
Though the time records fully support the number of hours worked, the rates charged are somewhat excessive. A rate of $250 per hour is more within the range of reasonable attorneys' fees for partners in New York City in similar cases. See, e.g., Cablevision Systems New York City Corp. v. Soto, No. 00 Civ. 6200, 2001 U.S. Dist. LEXIS 17591, at *20-21 (S.D.N.Y. Oct. 25, 2001) ($240 per hour); Cablevision Systems New York City Corp. v. Flores, No. 00 Civ. 5935, 2001 WL 761085, at M-5 (S.D.N.Y. July 6, 2001) (same); Time Warner Cable of New York City v. Liosojo, No. 99 Civ. 9486, 2000 U.S. Dist. LEXIS 10552, at * 17 (S.D.N.Y. July 27, 2000) ($125 per hour); Time Warner Cable of New York City v. Dockins, 96 Civ. 6852, 1998 U.S. Dist. LEXIS 22689, at *22-23 (S.D.N.Y. Sept. 4, 1998) ($190 per hour). Similarly, the rate requested for paralegal work is somewhat beyond the range in this district and will therefore be reduced to $75 per hour. See Hiciano v. Apfel, No. 98 Civ. 4037, 2002 WL 1148413, at *3 (S.D.N.Y. May 29, 2002) ($75 rate);Brenlla v. LaSorsa Buick Pontiac Chevrolet, Inc., No. 00 Civ. 1059117, 2002 WL 1059117, at *15 (S.D.N.Y. May 28, 2002) (same);Grochowski v. Ajet Construction Co., No. 97 Civ. 6269, 2002 WL 465272, at *3 n. 8 (S.D.N.Y. March 27, 2002) (same). Accordingly, the plaintiff is entitled to $157.50 in paralegal fees and $1,450.00 in attorneys' fees, for a total of $1,607.50.
The plaintiff has also provided documentation for $1,050.00 in disbursements. In part, the plaintiff contends that it spent $600 making 800 copies at $.75 per copy. (Attorney's Fees Aff., Exh. A). However, counsel may not build a profit into costs incurred in-house when they seek to shift those costs to an adversary. Rather, costs should be reimbursed at a rate no higher than would be charged by a commercial vendor. See Haroco, Inc. v. American National Bank Trust Co. of Chicago, 38 F.3d 1429, 1441 (7th Cir. 1994). Here, $.10 per page is more consistent with what an outside photocopy service would have charged. See General Electric Co. v. Compagnie Euralair, S.A., No. 96 Civ. 0884, 1997 WL 397627, at *6 (S.D.N.Y. July 3, 1997) ($.10 per page is appropriate); Anderson v. City of New York, 132 F. Supp.2d 239, 246 (S.D.N.Y. 2001) ($.25 per page excessive and warrants 50% reduction in amount requested); Northwest Financial, Inc. v. Fernandez, 121 F. Supp.2d 258, 263 (S.D.N.Y. 2000); accord In re San Juan Dupont Plaza Hotel Fire Litigation, 111 F.3d 220, 237-38 (1st Cir. 1997). Accordingly, the charge for photocopying expenses will be reduced to $80 (800 copies at $.10 per copy). All other disbursement charges are reasonable, and the amount awarded for costs should therefore be $530.00. In sum, an award of $2,137.50 should be made for attorneys' fees and costs.
Conclusion
For the reasons set forth above, I recommend that judgment be entered in favor of the plaintiff and against Tardes Calenas for $10,000.00 in statutory damages and $2,137.50 in costs and attorneys' fees for a total of $12,137.50. Pursuant to 28 U.S.C. § 636(b)(1) and Rules 72, 6(a), and 6(e) of the Federal Rules of Civil Procedure, the parties shall have ten (10) days to file written objections to the Report and Recommendation. Such objections shall be filed with the Clerk of the Court, with extra copies delivered to the chambers of the Honorable John G. Koeltl, U.S.D.J., Room 1030 and to the chambers of the undersigned, Room 1960, 500 Pearl Street, New York, New York, 10007. Failure to file timely objections will preclude appellate review.
Respectfully submitted,