United States District Court, E.D. Pennsylvania
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For JOE HAND PROMOTIONS, INC., Plaintiff: THOMAS P. RILEY, LEAD ATTORNEY, LAW OFFICES OF THOMAS P. RILEY PC, SOUTH PASADENA, CA.
GENE E.K. PRATTER, United States District Judge.
In Joe Hand Promotions, Inc.'s (" Joe Hand" ) Renewed Motion for Default Judgment (Docket No. 14), Joe Hand seeks statutory and enhanced damages for Café Nostalgie and Victor Yakubets's unlawful interception of cable programming under 47 U.S.C. § 553(a)(1);  vicarious liability against Mr. Yakubets; and leave to move for attorneys' fees and costs. Because Joe Hand is entitled to damages, the Court grants the Motion as set out below. But to determine the appropriate amount, and who is liable therefor, the Court must consider several issues not yet addressed by the Third Circuit Court of Appeals and to which district courts have adopted a variety of approaches.
An unopposed motion for default judgment can be a tempting invitation to defer automatically to, or at least consider more charitably, the plaintiff's view of the law in addition to his allegations of fact. The invitation is all the more tempting because of the work-intensive paradox that results from declining it: While in our adversarial system, a court's acting sua sponte is the exception to the rule, a court evaluating a motion for default judgment must itself ask whether the plaintiff's complaint states claim(s) upon which relief can be granted. Where the complaint fails to state a claim, therefore, the paradox is that the defendant may have better luck by defaulting before an attentive (but unassisted) court than by engaging (and paying) a lawyer who, for one reason or another, fails to have the same causes dismissed early on with a Rule 12(b)(6) motion.
If, by contrast, the district court accepts the plaintiff's invitation and grants its imprimatur to the plaintiff's unchallenged legal theory, the court risks making bad law, even though that law is only persuasive authority, and even though the court is " confined from molar to molecular motions." S. P. Co. v. Jensen, 244 U.S. 205, 221, 37 S.Ct. 524, 61 L.Ed. 1086 (1917) (Holmes, J., dissenting). This risk is especially dangerous where a region of the legal landscape is typified by defaults, for default judgments not only often result from one-sided proceedings, but also rarely weather the appellate scrutiny necessary to ensure the law's uniformity. The unintended consequence of different rules or applications to similar cases is not only the erosion of the principle that the rule of law comprises the justice of similar treatment for similar circumstances, but also the loss of one of the principal aims of the law: predictability or certainty, such that persons and entities, good or bad, may understand the law's limits and adjust their behavior accordingly. See Oliver Wendell Holmes, Jr., The Path of the Law, 10 Harv. L. Rev. 457, 459-60 (1897). As Justice Holmes explained, " Far the most important and pretty nearly the whole meaning of every new effort of legal thought is to make these prophecies more precise, and to generalize them into a thoroughly
connected system. . . . The prophecies of what the courts will do in fact, and nothing more pretentious, are what [is] mean[t] by the law." Id. at 457-58, 461-62. Where the appellate courts have little opportunity to map the contours of certain statutory terrain, as with 47 U.S.C. § 553 here, litigants must contend with district courts' differing measurements of the same topography. For good or ill, this Court sees its duties as including sowing seeds in the legal landscape so that its harvests will be better anticipated, if not better understood.
A survey of district court decisions on § 553 (and its satellite analog, 47 U.S.C. § 605) shows a variety of approaches to, and therefore outcomes under, the following questions presented in this case: First, how should " statutory damages" be measured under 47 U.S.C. § 553(c)(3)(A)(ii), which, when taken alone, reveals few of which factors should be considered? Second, what must a plaintiff prove--or allege, at the default judgment stage--to show that the defendant committed the § 553 violation " willfully and for purposes of commercial advantage or private financial gain," § 553(c)(3)(B), and thus trigger the court's exercise of discretion to award the plaintiff so-called " enhanced damages" ? And what factors should guide this decision? Finally, under what circumstances, if any, may an individual or entity be held vicariously liable for a violation of § 553, and how much is required to plead sufficiently such vicarious liability? And if a defendant is vicariously liable, is he jointly and severally liable?
For these reasons, in order to grant Joe Hand's Motion, the Court both surveys the legal terrain and discusses several approaches to the issues posed in an attempt to provide reasoned guideposts rather than Delphic pronouncements.
I. FACTUAL AND PROCEDURAL HISTORY
Joe Hand, an international closed-circuit distributor of sports and entertainment programming, purchased the exclusive nationwide commercial distribution rights to broadcast the boxing match " The Big Challenge" : Adamek v. Grant (" the Match" ) on August 21, 2010. Joe Hand then spent substantial sums marketing the Match to commercial establishments, some of which purchased sublicenses from Joe Hand to exhibit the Match to their customers.
Café Nostalgie is a restaurant in Philadelphia, Pennsylvania. On the night of August 21, 2010, without such a sublicense, Café Nostalgie intercepted and broadcast the Match to its patrons on four televisions, as observed by Joe Hand's investigator, Daniel Szlezak. See Hand Aff. ¶ 7 (Docket No. 8); Szlezak Aff. (Docket No. 7-3). Because Café Nostalgie's reception of the Match was unlicensed, the interception violated either 47 U.S.C. § 553(a)(1) (" Unauthorized interception or receipt" of " any communications service offered over a cable system" ) or 47 U.S.C. § 605(a) (" 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. . . ." ). See also generally Joe Hand Promotions, Inc. v. Yakubets, No. 12-4583, 2013 WL 5224123 (E.D. Pa. Sept. 17, 2013).
Joe Hand subsequently brought suit against Café Nostalgie and Victor Yakubets, who is identified on Café Nostalgie's Liquor Control Board License as President, Secretary/Treasurer, Director, Stockholder, and Manager/Steward, and who Joe Hand thus alleges had the right and ability to supervise the activities of Café Nostalgie and its employees. Although
both Mr. Yakubets and Café Nostalgie appear to have been properly served, see Yakubets, 2013 WL 5224123, at *1, they failed to appear or answer Joe Hand's Complaint, and the Clerk of Court entered their default, see Fed.R.Civ.P. 55(a). Joe Hand then moved for default judgment under 47 U.S.C. § 605 and the tort of conversion (Docket No. 7), see Fed.R.Civ.P. 55(b)(2).
The Court concluded that because Joe Hand did not allege or subsequently show how Café Nostalgie intercepted the Match (i.e., by satellite or cable), Joe Hand could proceed only under 47 U.S.C. § 553, which governs cable transmissions:
[W]here 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. v. Cable City Corp., 267 F.3d 196, 207 (3d Cir. 2001)-- . . . 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. . . . Additionally, while costs and attorneys' fees must be awarded under § 605, the court may decline to award them under § 553.
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.
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, at *2 (N.D. Cal. Apr. 16, 2009). 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. Saucedo, No. 12-04657, 2013 WL 2384258, at *4 (N.D. Cal. May 30, 2013) (" [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.
Yakubets, 2013 WL 5224123, at *4-5 (some citations and footnotes omitted and/or reformatted).
For these reasons, the Court denied Joe Hand's Motion for Default Judgment with prejudice as to § 605 and invited Joe Hand to move again under § 553 (Docket Nos. 11-13). Joe Hand's Renewed Motion for Default Judgment is now before the Court. Joe Hand did " not request a hearing on damages," Br. 8-9 n.4 (Docket No. 14-1), but rather relies on its submissions on the Docket, including the affidavits of Joe Hand, Jr., Joe Hand's President (Docket No. 8), and Daniel Szlezak, who investigated
the unlawful interception of the Match (Docket No. 7-3), and Café Nostalgie's liquor license, of which Joe Hand has submitted a copy (Docket No. 7-3) and of which the Court may also take judicial notice.
II. THE DEFAULT JUDGMENT STANDARD OF REVIEW
Federal Rule of Civil Procedure 55 charts the course a plaintiff must navigate to obtain a default judgment against a nonresponsive defendant. First, if the plaintiff shows the defendant's " fail[ure] to plead or otherwise defend, . . . the clerk must enter [the defendant's] default," Fed.R.Civ.P. 55(a), which is valid only if the defendant was properly served. See Petrucelli v. Bohringer & Ratzinger, 46 F.3d 1298, 1304 (3d Cir. 1995).
The plaintiff may then " apply to the court for a default judgment." Fed.R.Civ.P. 55(b)(2). The court's initial inquiry is " whether the unchallenged facts constitute a legitimate cause of action." 10A Charles Alan Wright, Arthur R. Miller, et al., Federal Practice and Procedure § 2688 (3d ed. 2013) (citing cases). As at the motion to dismiss stage, the court accepts as true the well-pleaded factual allegations in the plaintiff's complaint, except those relating to damages, as though they were admitted or established by proof, Comdyne I, Inc. v. Corbin, 908 F.2d 1142, 1149 (3d Cir. 1990), as well as all reasonable inferences that can be drawn from the complaint, e.g., Yang v. Hardin, 37 F.3d 282, 286 (7th Cir. 1994). Conclusory allegations and the parties' legal theories or " conclusions of law" are not entitled to the
same presumption and are not deemed admitted. Wright & Miller, supra, § 2688.
If the court determines that the plaintiff has stated a cause of action, it must then assess damages. Unlike liability, unless damages are " liquidated or computable," they " cannot be awarded simply on the basis of the pleadings, but must instead be established at an evidentiary hearing held pursuant to [Rule] 55(b)(2)," Comdyne I, 908 F.2d at 1152, or otherwise by such proof as the plaintiff may submit without a hearing.
Default judgments are disfavored, see Farnese v. Bagnasco, 687 F.2d 761, 764 (3d Cir. 1982); the default judgment context usually offers none of the adversarial argument upon which the American legal system is founded and which remains a pillar of courts' ability to make informed and well-reasoned decisions. Thus, under Chamberlain v. Giampapa, 210 F.3d 154 (3d Cir. 2000), the district court must examine three additional factors to determine whether it should grant a default judgment: " (1) prejudice to the plaintiff if default is denied, (2) whether the defendant appears to have a litigable defense, and (3) whether defendant's delay is due to culpable conduct." Chamberlain, 210 F.3d at 164.
" Considerable delays," especially those that might " stretch on indefinitely," are sufficient to show prejudice to the plaintiff. Grove v. Rizzi 1857 S.P.A., No. 04-2053, 2013 WL 943283, at *2 (E.D. Pa. Mar. 12, 2013) (citation omitted). Second, outside of the court's obligation to decide whether it has jurisdiction and whether the complaint states a claim, the court may presume that an absent defendant who has failed to answer has no meritorious defense, e.g., Doe v. Simone, No. 12-5825, 2013 WL 3772532, at *5 (D.N.J. July 17, 2013), because " [i]t is not the court's responsibility to research the law and construct the parties' arguments for them,"
Econ. Folding Box Corp. v. Anchor Frozen Foods Corp., 515 F.3d 718, 721 (7th Cir. 2008). Third, the defendant's failure or refusal to " enage in the litigation process and [to] offer no reason for this failure or refusal" may " qualif[y] as culpable conduct with respect to the entry of a default judgment--indeed, for the Court to conclude otherwise would be to reward the recalcitrant or the oppositional and uncooperative." E. Elec. Corp. of N.J. v. Shoemaker Constr. Co., 657 F.Supp.2d 545, 554 (E.D. Pa. 2009).
The district court's evaluation of these factors is reviewed for abuse of discretion  and tends to be perfunctory because " when a defendant has failed to appear or respond in any fashion to the complaint, th[e] analysis is necessarily one sided." T& C Leasing Inc. v. BBMC, LLC, No. 09-873, 2010 WL 231128, at *1 (M.D. Pa. Jan. 14, 2010) (citing Anchorage Assocs. v. V.I. Bd. of Tax Review, 922 F.2d 168, 177 n.9 (3d Cir. 1990)). Thus, " entry of default judgment is typically appropriate in such circumstances at least until the defendant comes forward with a motion to set aside the default judgment pursuant to Rule 55(c)." Id.; cf. Feliciano v. Reliant Tooling Co., Ltd., 691 F.2d 653, 657 (3d Cir. 1982) (" [P]rejudice suffered by a non-defaulting party can often be rectified through the trial court's power under Rule 60(b) to impose terms and conditions upon the opening of a judgment." ); Gross v. Stereo Component ...