THERESA CARROLL BUCHANAN, Magistrate Judge.
THIS MATTER comes before the Court of plaintiff's Motion for Default Judgment against defendants Lesly Restaurant.
Plaintiff J & J Sports Productions, Inc. filed this action against defendant Lesly Restaurant, doing business as Lesly Restaurant Bar & Grill ("defendant"), on June 3, 2016, to recover damages for the unauthorized viewing of the June 7, 2014 closed-circuit telecast of "Miguel Cotto v. Sergio Martinez, WBC Middleweight Championship Fight Program," including preliminary events (collectively "the Event"). (Compl. ¶¶ 6, 13.) The Complaint alleges violations of Section 705 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 553 and 605. (Compl. ¶ 1.) 47 U.S.C. § 553 grants relief for unauthorized reception of cable services, while 47 U.S.C. § 605 affords a remedy for unauthorized publication or use of communications.
Before the Court can render default judgment, it must have both subject matter and personal jurisdiction over the defaulting party.
This Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331, which provides that district courts shall have original jurisdiction over all civil actions arising under the Constitution, laws, or treaties of the United States. This dispute arises under Section 705 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 553 and 605.
The Court also has personal jurisdiction over defendant because defendant is a Virginia corporation with its principal place of business in Falls Church, Virginia. (Compl. ¶ 5; Mem. Supp. Mot. Default J. 1.) Pursuant to 28 U.S.C. § 1391(b)(2), venue is proper in this judicial district because the acts giving rise to the claims occurred in this district. (Compl. ¶ 3; Mem. Supp. Mot. Default J. 1.)
As a general rule, a defendant must be served with the summons and complaint filed with the court. Fed. R. Civ. P. 4. On June 17, 2016, plaintiff's private process server personally served Judit Lizez Hernandez Jimenez, registered agent for defendant Lesly Restaurant Inc., with a copy of the Summons and Complaint. (Dkt. 4.) Therefore, service was proper under Virginia Code § 8.01-299(1) and Federal Rules of Civil Procedure 4(e) and 4(h).
Rule 55 of the Federal Rules of Civil Procedure provides for the entry of default judgment when "a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend." Defendant has not appeared, answered, or otherwise filed any responsive pleadings in this matter. On otherwise filed any responsive pleadings in this matter. On August 4, 2016, the Clerk of this Court entered default as to defendant pursuant to plaintiff's Request for Entry of Default and Federal Rule of Civil Procedure 55(a). (Dkts. 7,8.) Plaintiff then filed a Motion for Default Judgment on August 8, 2016. (Dkt. 9.) The undersigned Magistrate Judge held a hearing on plaintiff's Motion on August 26, 2016, at which no representative for defendant appeared. (Dkt. 14.) Finding this matter uncontested, the undersigned took plaintiff's Motion under advisement to issue this Report and Recommendation.
Upon a full review of the pleadings, the undersigned Magistrate Judge finds that plaintiff has established the following facts.
Plaintiff is a California corporation with its principal place of business in Campbell, California. (Compl. ¶ 4.) Defendant is a Virginia corporation, doing business as Lesly Restaurant, Inc., with its principal place of business at 306 Hillwood Avenue, Falls Church, Virginia 22046. (
Plaintiff is a distributor of sports and entertainment programming who paid substantial fees to enter into a closed-circuit television license agreement ("the License Agreement") to exhibit the June 7, 2014 closed-circuit telecast of "Miguel Cotto v. Sergio Martinez, WBC Middleweight Championship Fight Program," including preliminary events. (Compl. ¶ 6; Gagliardi Aff. ¶ 3.) Through its License Agreement, plaintiff acquired the right to distribute the Event in Virginia. (Compl. ¶¶ 7-8.) As such, any business in Virginia seeking to show the Event was required to pay plaintiff for the rights to broadcast the Event. (
Plaintiff has retained auditors and law enforcement personnel as part of plaintiff's campaign to identify signal pirates and pursue litigation against commercial establishments found to be pirating plaintiff's programming. (Gagliardi Aff. ¶¶ 4-6.) Plaintiff provided participating auditors and law enforcement agencies with a confidential list of customers who were authorized to broadcast the Event. (
Based on Mr. Posey's investigation, plaintiff concluded that defendant intercepted and/or received the interstate communication of the Event and enabled patrons to view the Event without a license from plaintiff. (Compl. ¶¶ 13-17; Mem. Supp. Mot. Default J. 2; Gagliardi Aff. ¶ 7.) Consequently, plaintiff claims that defendant avoided lawful payment to its company by misappropriating plaintiff's licensed exhibition of the Event while infringing upon plaintiff's exclusive rights. (Compl. ¶¶ 13-17; Mem. Supp. Mot. Default J. 2.)
Where a defendant has defaulted, the facts set forth in the plaintiff's complaint are deemed admitted. Before entering default judgment, however, the Court must evaluate the plaintiff's complaint to ensure that the complaint properly states a claim.
Plaintiff first alleges unauthorized reception of cable services by defendant in violation of 47 U.S.C. § 553 ("Section 553"). (Compl. ¶¶ 18-24; Mem. Supp. Mot. Default J. 2-3.) Plaintiff is suing as a "person aggrieved" by a violation of Section 553, which provides that "[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);
Plaintiff also alleges unauthorized publication or use of radio and satellite communications by defendant in violation of 47 U.S.C. § 605 ("Section 605"). (Compl. ¶¶ 25-32; Mem. Supp. Mot. Default J. 3.) Plaintiff is suing as a "person aggrieved" by a violation of Section 605, which defines a "person aggrieved" to include "any person with proprietary rights in the intercepted communication." 47 U.S.C. § 605(d)(6). Pursuant to the License Agreement, plaintiff maintained proprietary rights in the communication of the Event. (Compl. ¶ 30; Gagliardi Aff. ¶ 3.)
Section 605 further provides,
47 U.S.C. § 605(a). When programming is transmitted or intercepted over both cable and satellite mediums, both Sections 553 and 605 apply.
Plaintiff alleges that defendant intercepted, received, published, divulged, displayed, and/or exhibited the Event for purposes of direct or indirect commercial advantage, in violation of Section 705 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 553 and 605. Thus, plaintiff moves this Court to enter default judgment against defendant and award $10,000.00 in statutory damages, enhanced statutory damages due to willfulness, and reasonable attorneys' fees and costs. (Mem. Supp. Mot. Default J. 4.)
In support of its claim for damages, plaintiff submitted the Gagliardi Affidavit and the Winder Declaration. Although plaintiff has set forth the elements of liability under both Sections 553 and 605, courts have held that recovery under both sections is improper.
As a "person aggrieved" by a violation of Section 605, plaintiff may be granted injunctive relief and/or damages, and must be granted reasonable attorneys' fees and costs. 47 U.S.C. § 605(e)(3)(B)(i)-(iii). The Court may award either actual damages suffered as a result of the violation and any profits attributable to the violation, or statutory damages of not less than $1,000.00 and not more than $10,000.00.
Plaintiff seeks statutory damages in the amount of $10,000.00. Courts have employed two general approaches to calculating statutory damages: either by basing the damages calculation on the number of patrons in an establishment during the unauthorized broadcast, or by utilizing a flat damage amount usually based on the unpaid sublicense fee.
This Court has followed both approaches to calculating damages. In
Here, plaintiff has not submitted data showing the amount of any profits that defendant may have acquired by illegally broadcasting the Event. The sublicense fee plaintiff charges to commercial establishments legally purchasing broadcast rights varies based on the capacity of the establishment and the event being licensed. (Gagliardi Aff. ¶ 8.) Exhibit 1 to the Gagliardi Affidavit shows a price of $800.00 for bars or restaurants with an occupancy capacity of 1-100 to broadcast the Event. (Gagliardi Aff. Ex. 1.) As such, the undersigned finds that an award of $3,000.00, calculated as $100.00 multiplied by the approximately 30 patrons that were present, is appropriate in this case.
If the Court finds that defendant's violation was willful and for "purposes of direct or indirect commercial advantage or private financial gain" the Court may increase the amount of actual or statutory damages by an amount of not more than $100,000.00. 47 U.S.C. § 605(e)(3)(C)(ii). Plaintiff's Complaint sought enhanced damages for willfulness in the amount of $100,000.00. In the Motion for Default Judgment, plaintiff similarly seeks that maximum amount of enhanced damages.
Courts have evaluated whether enhanced damages are appropriate by assessing factors such as "repeated violations over an extended period of time; substantial unlawful monetary gains; significant actual damages to plaintiff; defendant's advertising for the intended broadcast of the event; [and] defendant's charging a cover charge or charging premiums for food and drinks."
Plaintiff argues that signal piracy is per se intentional because it cannot occur without the intentional modification of electronic equipment, the removal of devices designed to prevent unauthorized exhibition, or other willful acts. (Gagliardi Aff. ¶¶ 9, 13.) Plaintiff states that it has lost several millions of dollars due to signal piracy, and that the widespread nature of the piracy problem has resulted in higher costs of services to lawful commercial and residential cable and satellite consumers. (
Defendant's violation of Section 605, taking place in a commercial establishment rather than a residence, was committed for purposes of direct or indirect commercial advantage. The pleadings make clear that such interception cannot be done accidentally or innocently. An award of some enhanced damages is therefore appropriate as a deterrent. However, the maximum allowable enhanced damages award is inappropriate when the evidence before the Court suggests that defendant's commercial gain resulting from the unauthorized broadcast was likely not significant.
Here, there were approximately 30 patrons in defendant's Lesly Restaurant at the time of the unauthorized broadcast. (Stephens Aff. 2.) The Lesly Restaurant is also located in Falls Church, a generally populous area. (Compl. ¶ 5; Gagliardi Aff. ¶ 18.) However, plaintiff has not provided any evidence of repeated violations, nor has plaintiff shown that defendant advertised the unauthorized broadcast. Further, plaintiff's investigator did not pay a cover charge to enter the Lesly Restaurant and there is no evidence that defendant charged a premium for food or drink.
The undersigned finds that defendant's actions were willful and done for direct or indirect commercial advantage and that plaintiff is thus entitled to enhanced damages in the amount of $10,000.00. This award represents an amount in the middle of the spectrum of enhanced damages awarded by courts in this District considering similar facts, including number of patrons viewing the broadcast. .
Plaintiff also seeks to recover attorneys' fees and costs. Pursuant to 47 U.S.C. § 605(e)(3)(B)(iii), the Court "shall direct the recovery of full costs, including awarding reasonable attorneys' fees to an aggrieved party who prevails." In support of its request, plaintiff submitted the Declaration of J. Bradley Winder, which details the work done, hours expended, and total amount due. (Dkt. 10-5.)
Mr. Winder declared that he anticipated expending a total of 6.5 hours of his time at a rate of $300.00 per hour, totaling $1,950.00 in legal fees. (Winder Decl. 3.) Mr. Winder also included anticipatory billings of six hours for preparing for and traveling to the hearing on the Motion for Default Judgment from his office in Richmond, Virginia, increasing the attorney fees by $1,800.00. (
For the reasons outlined above, the undersigned Magistrate Judge recommends that default judgment be entered in favor of plaintiff J & J Sports Productions, Inc. and against defendant Lesly Restaurant in the total amount of $17,426.77, consisting of $3,000.00 in statutory damages, $10,000.00 in enhanced damages, $3,750.00 in attorneys' fees, and $676.77 in costs.
The parties are advised that objections to this Report and Recommendation, pursuant to 28 U.S.C. § 636 and Rule 72(b) of the Federal Rules of Civil Procedure, must be filed within fourteen (14) days of its service. Failure to object to this Report and Recommendation waives appellate review of any judgment based on it.
The Clerk is directed to send a copy of this Report and Recommendation to all counsel of record and to defendant at the following address:
