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Joe Hand Promotions, Inc. v. Yakubets

United States District Court, Third Circuit

September 16, 2013



GENE E.K. PRATTER United States District Judge

Before the Court is Plaintiff Joe Hand Promotions, Inc.’s Motion for Default Judgment, filed on July 3, 2013 (Docket No. 7), for damages pursuant to 47 U.S.C. § 605 and for the tort of conversion. Joe Hand filed its Complaint on August 9, 2012 (Docket No. 1), and properly served Defendants, Victor Yakubets and Café Nostalgie, Inc., by process server on October 24, 2012 (Docket Nos. 4 & 5). After Defendants failed to answer or otherwise respond to the Complaint, Joe Hand requested the entry of default, which the Clerk of Court entered on January 24, 2013.

For the reasons that follow, Joe Hand’s Motion for Default Judgment will be denied, although it may still move for judgment and damages for conversion and pursuant to 47 U.S.C. § 553, the remaining cause of action set out in the Complaint.

I. Background

Joe Hand Promotions, Inc., is an international closed-circuit distributor of sports and entertainment programming. Joe Hand purchased the exclusive nationwide commercial distribution rights to broadcast a particular boxing match, “The Big Challenge”: Adamek v. Grant (“the Match”), on August 21, 2010. In turn, Joe Hand entered into sublicensing agreements with various commercial entities that granted those parties rights to publicly exhibit the Match. According to the affidavit of investigator Daniel Szlezak, on August 21, 2010, Mr. Szlezak entered Café Nostalgie and observed an unlawful exhibition of the Match on four televisions. Joe Hand argues that because it had exclusive rights to distribute the Match, Defendants could only have lawfully exhibited it if they had contracted with Joe Hand. Thus, Joe Hand argues, the interception of the Match was not only unlawful, it was also willful. Compl., Docket No. 1, ¶ 24. Joe Hand did not allege whether the Defendants had intercepted the Match via cable or satellite. Based on this single unlawful showing of the Match as observed by Mr. Szlezak, Joe Hand alleges three counts in its Complaint: (1) violation of 47 U.S.C. § 605; (2) violation of 47 U.S.C. § 553; and (3) conversion.

II. Discussion

In its Motion for Default Judgment, Joe Hand asks for full statutory and enhanced damages under 47 U.S.C. § 605, in the aggregate amount of $110, 000, as well as $500 for the tort of conversion. Because the returned summonses indicate that the Defendants were properly served, the Court must next consider whether Joe Hand’s Complaint states causes of action under § 605 and the tort of conversion. See Pope v. United States, 323 U.S. 1, 12 (1944) (“[U]pon default, . . . the court determines that the unchallenged facts shown of record establish a legally binding obligation; it adjudicates the plaintiff’s right of recovery and the extent of it, both of which are essential elements of judgment.” (citations omitted)); Chanel, Inc. v. Gordashevsky, 558 F.Supp.2d 532, 536 (D.N.J. 2008) (“[B]efore granting a default judgment, the Court must first ascertain whether the unchallenged facts constitute a legitimate cause of action, since a party in default does not admit mere conclusions of law.” (internal quotation marks omitted)). Because default was entered, the Court accepts as true the well-pleaded factual allegations of Joe Hand’s Complaint and treats those allegations as though they were established by proof, except those relating to damages. See Comdyne I, Inc. v. Corbin, 908 F.2d 1142, 1149 (3d Cir. 1990). But the Court need not accept Joe Hand’s legal conclusions: “Even after default, . . . it remains for the court to consider whether the unchallenged facts constitute a legitimate cause of action, since a party in default does not admit mere conclusions of law.” 10A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane § 2688, at 63 (3d ed. 1998); see Pope, 323 U.S. at 12; Gordashevsky, 558 F.Supp.2d at 536; cf. Thomson v. Wooster, 114 U.S. 104, 113 (1885) (“[A] decree pro confesso is not a decree as of course according to the prayer of the bill, nor merely such as the complainant chooses to take it; but that it is made (or should be made) by the court, according to what is proper to be decreed upon the statements of the bill assumed to be true.”).

A. Joe Hand’s Cause of Action Under 47 U.S.C. § 605

Although Joe Hand moves for default judgment under 47 U.S.C. § 605, its Complaint alleges violations of both 47 U.S.C. §§ 553 and 605. To determine whether Joe Hand is entitled to damages under § 605, the Court must assess whether, as a matter of law, § 605 should apply at default judgment where a plaintiff has pled facts which, when taken as true, must as a logical matter support a violation of either § 605 or § 553, but prove neither as an individual claim.

Section 553 prohibits the unauthorized interception and transmission of cable communications, whereas § 605 prohibits the unauthorized interception and transmission of encrypted satellite cable programming. J&J Sports Prods., Inc. v. Moody, No. 08-5225, 2009 WL 1515749, at *1 n.1 (E.D. Pa. May 28, 2009); see 47 U.S.C. §§ 553, 605(a).[1] Indeed, § 605 is “applicable only to satellite transmissions insofar as they are actual airborne transmissions.” TKR Cable Co. v. Cable City Corp., 267 F.3d 196, 205 (3d Cir. 2001).

Here, however, nothing in Joe Hand’s Complaint or Mr. Szlezak’s affidavit establishes how the signal was intercepted. For example, Mr. Szlezak does not mention observing either a satellite dish or a cable box when he visited Café Nostalgie. In fact, as Joe Hand acknowledges, it “cannot determine the precise means that the Defendants used to receive the Program unlawfully.” Mem., Docket No. 7, at 8.

At the motion to dismiss stage, where the plaintiff is permitted to plead alternative theories of liability, Joe Hand’s Complaint can state causes of action under both §§ 553 and 605. See, e.g., J&J Sports Prods., Inc. v. 4326 Kurz, Ltd., No. 07-3850, 2008 WL 4630508 (E.D. Pa. Oct. 17, 2008), at *3-4 & n.3; see also Circuito Cerrado, Inc. v. Katuran, No. 10-4343, 2011 WL 3925245 (E.D. Pa. Sept. 6, 2011), at *2 & n.13. But at the default judgment stage, although a court must treat a plaintiff’s factual allegations as true, the allegations taken as proven must show an entitlement to relief and proof of damages under a stated cause of action. In this case, Joe Hand’s allegations-qua-facts, combined with the evidence it offers in affidavits, is unable to show that the Defendants intercepted any satellite transmission. Consequently, Joe Hand has not carried its burden of proof under § 605.

Of course, Joe Hand is not without recourse. Instead, this Court must first answer the peculiar question that arises at default judgment when a plaintiff’s allegations-qua-facts prove neither of his alternative theories of relief, but logic dictates that they must prove one or the other. A further premise is that no further development of the facts will allow the court to determine which provision should apply. Here, in other words, as a matter of syllogistic logic, the Defendants must have violated one of either § 605 or § 553 based on the allegations-qua-facts: (1) the Match was broadcast, and therefore could have been intercepted, only by cable and satellite;[2] and (2) the Defendants intercepted the signal.[3] Through which provision, if not both, should Defendants’ claims be channeled?

In the only part of his briefing that can be read to address this problem, counsel argues that Joe Hand “should not be prejudiced because it cannot isolate the precise means of signal transmission the Defendants used” “because the Defendants have failed to respond, ” and therefore moves for damages pursuant solely to § 605. Mem., Docket No. 7, at 8.[4] But the Court is unconvinced by Joe Hand’s attempt to profit from this unclear picture:

[I]t does not appear that Plaintiff made any effort to obtain this information on its own. For instance, Plaintiff could have sought to obtain this information by filing a third party subpoena or requesting an order for inspection or, at the very least, Plaintiff could have sent someone out to the establishment at issue to see if a satellite dish could be seen from the outside. Therefore, the Court is not convinced that Plaintiff was entirely powerless in obtaining the information necessary to determine the means of signal transmission . . . .

J&J Sports Prods., Inc. v. Montes, 12-02246, 2013 WL 245476 (N.D. Cal. Jan. 22, 2013), at *3 n.1 (citation, quotation marks, and alterations omitted); accord Joe Hand Promotions, Inc. v. Mujadidi, No. 11-5570, 2012 WL 3537036 (N.D. Cal. Aug. 14, 2012), at *4; cf. J&J Sports Prods., Inc. v. Long, No. 08-640, 2009 WL 1563914 (E.D. Pa. June 3, 2009), at *1 (“[B]ecause the only evidence J & J Sports has concerning the method used by the defendants to receive the boxing match consists of cable invoices, J & J Sports seeks damages under 47 U.S.C. § 553.”).

Courts appear to take different approaches to the problem as to which, § 553 or § 605, should apply at default judgment when the plaintiff has not made out facts to support either. J&J Sports Prods., Inc. v. Bonilla, No. 12-02243, 2013 WL 3725264 (N.D. Cal. July 14, 2013), at *3 & n.2 (“courts have been split”); Montes, 2013 WL 245476, at *3 (“there appears to be a split of authority”). A scan of case law from the federal appellate courts picks up nothing but radio silence, a static which, the procedural posture of these cases telegraphs, will not likely be pierced by our Court of Appeals’ clarion call. Several district courts in the Third Circuit have “award[ed] damages under either statute for a single amount, ” Moody, 2009 WL 1515749, at *1 (emphasis added); see also, e.g., J&J Sports Prods., Inc. v. Roach, No. 07-5059, 2008 WL 8901291 (E.D. Pa. July 8, 2008), at *2; J&J Sports Prods., Inc. v. Munguti, No. 06-1282, 2007 WL 928479 (D.N.J. Mar. 27, 2007), at *4 (awarding “an authorized amount of statutory damages for the illegal interception of programs under either [statute]”), as have district courts in sister circuits, see, e.g., J&J Sports Prods., Inc. v. Turrubiartes, No. 11-1496, 2013 WL 3878740 (S.D. Ind. July 26, 2013), at *2 (“[B]ecause the damages the Court ultimately considers just under these circumstances fall within the parameters of either statute and because the entry of default has established, as a factual matter, that either one or the other statute has been violated, the Court need not definitely determine the applicable statute.”); G&G Closed Circuit Events, LLC v. Castro, No. 12-01036, 2012 WL 3276989 (N.D. Cal. Aug. 9, 2012), at *3-4. The reasoning for this approach seems to be that the ranges of possible damage awards under §§ 553 and 605 often overlap. See, e.g., Montes, 2013 WL 245476, at *3; Castro, 2012 WL 3276989, at *2; see also Moody, 2009 WL 1515749, at *2 (“Based on the evidence presented and the Complaint, we find that $1, 200.00 is the proper amount of statutory damages under either § 605 or § 553, as the rate for purchase of the Match would have been $1, 200.00.”).[5]

Other district courts, by contrast, presume that § 553 applies in the absence of any evidence of satellite signal interception. See, e.g., Mujadidi, 2012 WL 3537036, at *4 (“In the absence of any evidence indicating that a satellite dish was used, the Court concludes that [the Plaintiff] has established at most interception through use of a cable box.”); J&J Sports Prods., Inc. v. Ayala, No. 11-05437, 2012 WL 4097754 (N.D. Cal. Sept. 17, 2012), at *2 (“Because sufficient facts have not been alleged, nor has Plaintiff presented any affidavit evidence of a satellite, the Court holds that 47 U.S.C. § 605 does not apply.”).

Having reviewed the case law and considered the issue, this Court subscribes to the view that where a plaintiff’s complaint pleads claims under both §§ 553 and 605, but at the default judgment stage the plaintiff can prove neither with individual specificity, then § 553 will be applied. A presumption in favor of § 553 is the more principled and persuasive approach. Because a defendant cannot violate both sections with the same conduct—“§ 605 encompasses the interception of satellite transmissions” whereas “[o]nce a satellite transmission reaches a cable system’s wire distribution phase, it is subject to § 553 and is no longer within the purview of § 605, ” TKR Cable Co., 267 F.3d at 207—both approaches recognize that the substantive law itself forces a determination of which statute applies. But the enigmatic approach of awarding damages under “either statute, ” even if expedient or practical, cannot be the general rule. For one, the syllogism that proves that a plaintiff violated either § 553 or § 605 lacks sufficient bandwidth to allow the plaintiff to proceed under § 605: if § 553 did not exist, neither would the syllogism, and such plaintiffs would be entitled to nothing.

Second, the fact that § 553(c)(3)(A)(ii)’s and § 605(e)(3)(C)(i)(II)’s damage ranges sometimes overlap cannot support the adoption of a categorical rule that damages may be awarded under either. In any case involving several incidents of unlawful interception, for example, the statutory damage guidelines would suggest sharply divergent amounts because § 605 provides for damages for each violation, whereas § 553 provides for one award (plus enhanced damages in the court’s discretion) for all violations. See Gen. Instrument Corp. of Del. v. Nu-Tek Elecs. & Mfg., Inc., 197 F.3d 83, 95 (3d Cir. 1999) (“We hold that § 553(c)(3)(A)(ii) expressly limits the available statutory civil damages to a single award of between $250 and $10, 000 for all violations.”). Further, under the “either statute” approach, courts in the Third Circuit often award statutory damages equivalent to what the defendant would have paid to have lawfully obtained and exhibited the program in question.[6] But what appears to be an easy solution to courts confronting rate cards of $2200, an amount within the overlapping ranges of both §§ 553 and 605, is unavailable in cases, like Joe Hand’s here, where the rate card establishes a price of $500, within the range of § 553(c)(3)(A)(ii) but outside the range of § 605(e)(3)(C)(i)(II).[7] Additionally, while costs and attorneys’ fees must be awarded under § 605, the court may decline to award them under § 553.[8]

In addition, the presumption that § 553 applies absent any evidence of interception by satellite is a more principled approach. The fundamental principle that a plaintiff in a civil lawsuit must prove his case by a preponderance of the evidence dictates that if he can present only insufficient evidence of a particular wrong, he should not be entitled to relief. Although it may be clear from the facts alleged, and accepted as true on a motion for default judgment, that a violation of either § 605 or § 553 must have occurred, in such a situation the plaintiff has not discharged that burden of proof with respect to either. If they had a choice, plaintiffs in every such case would elect to proceed under § 605: its damage range is higher than § 553’s, and it applies upon each violation. But in each such case, the plaintiff will have failed to allege a necessary element of § 605(a), to wit, radio transmission by satellite. See 47 U.S.C. § 605 (“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. . . .”). Thus, notwithstanding the similar remedial schemes of the two statutes, in the absence of evidence of a violation subjecting the defendant to greater damages (§ 605), the plaintiff should be restricted to pursuing damages under § 553. See, e.g., J&J Sports Prods., Inc. v. Nguyen, No. 12-02253, 2013 WL 3814670 (N.D. Cal. July 22, 2013), at *3 (“[T]he affidavit does reveal that [the Defendant] did not have a satellite dish. As a result, the court concludes that Defendant intercepted the program via a cable signal in violation of § 553 and will award damages under that section. . . . Such a presentation—the result of an 8 minute investigation—certainly cannot support a maximum award.”); J&J Sports Prods., Inc. v. Hernandez, No. 12-05773, 2013 WL 2468354 (N.D. Cal. June 6, 2013), at *2 (“[T]he Complaint makes no specific allegations that Defendant used satellite technology, even after Plaintiff sent an investigator into Defendant’s establishment to observe the broadcast. The Court will therefore proceed to assess damages pursuant to Section 553 . . . .”).

Practical reasons also support channeling plaintiffs through § 553 under these circumstances: “a cable box is more easily hidden” than a satellite dish. J&J Sports Prods., Inc. v. Guzman, No. 08-05469, 2009 WL 1034218 (N.D. Cal. Apr. 16, 2009), at *2. As a result, where a defendant has somehow intercepted a signal but the means remain undiscovered— subterranean or up in the air—then, “unlike § 605, a permissible inference can be drawn with respect to § 553.” Ayala, 2012 WL 4097754, at *2; accord Guzman, 2009 WL 1034218, at *2; cf. J&J Sports Prods., Inc. v. Fisher, No. 12- 790, 2013 WL 4482405 (S.D. Ohio Aug. 20, 2013), at *4 (“It is well established that courts will not award damages under both § 605 and § 553 in cases based on facts like these. In this case, the Court finds that actual damages are too difficult to ascertain and that statutory damages under § 553 are appropriate.” (citations omitted)); J&J Sports Prods., Inc. v. Saucedo, No. 12-04657, 2013 WL 2384258 (N.D. Cal. May 30, 2013), at *4 (“[T]he investigator indicated that Defendant’s establishment does not have a satellite dish. As a result, Defendant most likely intercepted the program via a cable signal in violation of Section 553.” (citation omitted)). Third-party subpoenas and orders for inspection to one side, a plaintiff who has gone to the trouble of sending an investigator to a defendant’s establishment, as here, can at the very least ask the investigator to keep his antennae up for evidence of a satellite dish.

For the foregoing reasons, the Court adopts a presumption in favor of § 553, to the exclusion of § 605, in the context of a motion for default judgment where the plaintiff’s complaint has pled alternative causes of action under both provisions, and the plaintiff’s allegations-qua-facts and additional evidence do not establish which applies. Consequently, Joe Hand’s motion for default judgment is denied with respect to § 605, but without prejudice to a motion for default judgment pursuant to § 553.

B. Joe Hand’s Cause of Action for Conversion

Joe Hand also moves for an award of $500 for the tort of conversion. The Court will deny without prejudice Joe Hand’s motion with respect to the conversion claim. Joe Hand’s counsel addresses the conversion claim in his Memorandum of Law in a mere seven-line paragraph that cites only the California Civil Code and a California case. See Mem., Docket No. 7, at 20. Because counsel has not suggested why choice of law principles support the use of California law in this case, where the violation occurred in Pennsylvania, the Court finds that Joe Hand has not properly moved for default judgment with respect to the conversion claim.

III. Conclusion

For the reasons stated above, Joe Hand’s Motion for Default judgment is denied with prejudice with respect to § 605 and without prejudice with respect to the conversion claim. The Court adopts a presumption in favor of § 553, to the exclusion of § 605, in the context of a motion for default judgment where the allegations and additional facts do not establish which section applies. But to ensure that its communication does not get scrambled or intercepted, the Court invites Joe Hand to move for default judgment pursuant to § 553 and the tort of conversion, provided counsel cites appropriate authorities.

An Order consistent with this Memorandum follows.


AND NOW, this 16th day of September, 2013, upon consideration of Plaintiff Joe Hand Promotions, Inc.¬ís Motion for Default Judgment (Docket No. 7), and for the reasons stated in the accompanying Memorandum, it is hereby ORDERED that the Motion is DENIED, with prejudice as to the claim under 47 U.S.C. § 605 and without prejudice as to the claim for conversion

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