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holding the corporate defendant's chief executive jointly and severally liable where it was undisputed that the establishment was fairly busy and patrons were ordering food and drinks while watching the fight
Summary of this case from J&J Sports Prods. v. Beer 4 U, Inc.Opinion
17-CV-01184 (LDH) (PK)
2019-03-20
J & J SPORTS PRODUCTIONS, INC., Plaintiff, v. AHUACHAPAN CORP. d/b/a Ahuachapan Restaurant and Neris Esquival, Defendants.
MEMORANDUM AND ORDER
Plaintiff J & J Sports Productions, Inc., commenced this action on March 2, 2017. (ECF No. 1.) Defendants Ahuachapan Corp. ("Ahuachapan") and Neris Esquival were served on April 18, 2017. (ECF Nos. 5, 6.) Plaintiff asserts seven claims against Defendants under various provisions of the Federal Communications Act (the "FCA"), codified at 47 U.S.C. §§ 553(a), 605(a), and 605(e)(4). (Compl. ¶¶ 22–23, 33–35, 42–43, 46–49, 57–58, 62–63, ECF No. 1.) Plaintiff alleges actual damages of $4,573.75, comprising $1,200.00 in lost licensing fees, $1,373.75 in lost pay-per-view charges, and $2,000.00 for damage to Plaintiff's goodwill and reputation. (Pl.'s Mem. Supp. Req. Default J. ("Pl.'s Mem.") at 10–13, ECF No. 12.) Plaintiff argues that, because Defendants' conduct was willful, treble damages amounting to $13,720.50 are warranted. (Id. at 17.) Plaintiff further seeks to recover costs of $470.00 and prejudgment interest at the rate of 9% annually since March 8, 2014, but not attorney's fees. (Id. at 18.)
Defendants failed to appear in this matter, and an entry of default was entered by the Clerk of the Court on July 6, 2017. (ECF No. 10.) On September 6, 2017, Plaintiff moved for a default judgment against both Defendants. (ECF No. 11.) This Court referred the motion to Magistrate Judge Peggy Kuo, who issued a report and recommendation on September 10, 2018 (the "R & R"). (ECF No. 19.) Plaintiff timely filed an objection (the "Objection") challenging Magistrate Judge Kuo's recommendation that the Court deny a default judgment against Defendant Esquival, as well as challenging the amount of damages assessed against Defendant Ahuachapan. (ECF No. 21.) The Court adopts the R & R except as modified below.
STANDARD OF REVIEW
The Court reviews de novo any portion of the R & R to which a party objects. 28 U.S.C. § 636(b)(1)(C) ; Fed. R. Civ. P. 72(b)(3). As to the remainder, "the district court need only satisfy itself that there is no clear error on the face of the record." Estate of Ellington ex rel. Ellington v. Harbrew Imps. Ltd. , 812 F. Supp. 2d 186, 189 (E.D.N.Y. 2011) (quoting Urena v. New York , 160 F. Supp. 2d 606, 609–10 (S.D.N.Y. 2001) (internal quotation marks omitted)).
The following facts are taken from the complaint, Plaintiff's submissions filed in connection with its motion for default judgment, and the R & R. Where, as here, a defendant defaults, "a court is required to accept all of the [plaintiff's] factual allegations as true and draw all reasonable inferences in its favor, but it is also required to determine whether [the plaintiff's] allegations establish [the defendants'] liability as a matter of law." Finkel v. Romanowicz , 577 F.3d 79, 84 (2d Cir. 2009) (internal quotation omitted).
Plaintiff had exclusive licensing rights to exhibit—and to authorize others to exhibit—the closed-circuit telecast of a March 8, 2014 boxing program (the "Event"). (Compl. ¶¶ 7–11; see also ECF No. 16-1 (licensing agreement).) The transmission of the Event was electronically coded or "scrambled" to prevent unauthorized third parties from viewing it. (Compl., ¶ 12.) Those who contracted with Plaintiff to broadcast the Event were provided with the electronic equipment and satellite coordinates necessary to receive the signal of the Event. (Id. ¶ 14.) The licensing fee for an establishment with a capacity of 100 or fewer persons was $1,200.00. (ECF No. 13-3.)
Defendant Ahuachapan is a New York corporation doing business as a restaurant located at 214-21 Jamaica Avenue, Queens Village, New York. (Compl. ¶ 5.) Plaintiff alleges, upon information and belief, that Defendant Esquival is an "officer[ ], director[ ], shareholder[ ] and/or principal[ ]" of Defendant Ahuachapan. (Id. ) Around midnight on the morning of March 9, 2014, an auditor observed approximately 20 to 25 persons watching the Event on the sole television in Defendant Ahuachapan's restaurant. (ECF No. 16-4 at 2, 4.) Defendants did not contract with Plaintiff to display the Event. (Compl., ¶ 13.)
Magistrate Judge Kuo recommended that the Court deny Plaintiff's motion for a default judgment against Defendant Esquival and grant the motion as to Defendant Ahuachapan for liability under § 605(a) of the FCA but not §§ 553(a) or 605(e)(4). (R & R 661.) She reasoned that the complaint alleges that the Event originated as a radio communication subject to § 605(a), not a cable communication subject to § 553(a), and that § 605(e)(4) "is not aimed at the ultimate consumer or end-user of pirating devices, but rather upstream manufacturers and distributors." (R & R 663–65.) Magistrate Judge Kuo recommended that the Court award Plaintiff actual damages against Defendant Ahuachapan "based on the customary $54.95 pay-per-view charge that each of the 25 people [viewing the Event at Defendant Ahuachapan's restaurant] would have paid to view it at home." (R & R 666.) This results in actual damages of $1,373.75. Magistrate Judge Kuo further recommended awarding Plaintiff enhanced damages of three times the amount of actual damages, in light of Defendant Ahuachapan's willful conduct. (Id. at 666–67.) This results in enhanced damages of $4,121.25. Finally, Magistrate Judge Kuo recommended awarding Plaintiff $470.00 in costs. (Id. at 667.) Plaintiff objects only to Magistrate Judge Kuo's recommendation to deny Plaintiff's motion for a default judgment against Defendant Esquival and her calculation of damages against Defendant Ahuachapan. (See generally Objection 2–7.)
Section 553(a) of the FCA prohibits the unauthorized interception of communications offered over a "cable system." 47 U.S.C. § 553(a)(1). Section 605(a) prohibits the unauthorized interception of "any radio communication." 47 U.S.C. § 605(a). Section 605(e)(4) prohibits the manufacture, assembly, modification, and sale of satellite-decryption devices. 47 U.S.C. § 605(e)(4).
The R & R appears to miscalculate the actual damages as $1,373, omitting the additional 75 cents that result from multiplying the per-person pay-per-view rate of $54.95 by 25 persons. (R & R 666.)
The R & R appears to multiply $1,373 by three, producing enhanced damages of $4,119. (Id. at 667.) Trebling $1,373.75, however, produces the slightly higher enhanced-damages calculation of $4,121.25 applicable here.
DISCUSSION
I. Defendant Esquival's Liability
Plaintiff does not seek to hold Defendant Esquival directly liable for the March 8, 2014 broadcast. Rather, Plaintiff's theory of liability as to Defendant Esquival is based on the alternative theories of vicarious liability and contributory liability, each drawn from the copyright context, that allow for individual corporate officers to be held liable for their companies' FCA violations. See, e.g., J & J Sports Prods., Inc. v. Guncay , No. 18-CV-2097, 2018 WL 6313210, at *2 (E.D.N.Y. Oct. 17, 2018), R. & R. adopted , 2018 WL 6308773 (Dec. 3, 2018) ; J & J Sports Prods., Inc. v. James , No. 17-CV-5359, 2018 WL 3850731, at *4 (E.D.N.Y. July 25, 2018), R. & R. adopted , 2018 WL 3848921 (Aug. 13, 2018) ; J & J Sports Prods., Inc. v. LX Food Grocery Inc. , No. 15-CV-6505, 2016 WL 6905946, at *2 (E.D.N.Y. Nov. 23, 2016). The Court agrees that the facts of this case do not permit the application of contributory liability against Defendant Esquival. However, the Court does not agree with the R & R's determination as to vicarious liability.
In assessing Plaintiff's claim against Defendant Esquival, the R & R states that "for Plaintiff to establish Esquival's vicarious liability for Ahuachapan's violation of the FCA, it must plead that he authorized the exhibition of the Event, had a right and ability to supervise it, and had an obvious and direct financial interest in its exploitation." (R & R 663.) This is a misstatement of the law, as it erroneously conflates the distinct legal standards for contributory and vicarious liability. Contributory liability applies where the officer himself "authorized the infringing use." Softel, Inc. v. Dragon Med. & Sci. Commc'ns, Inc. , 118 F.3d 955, 971 (2d Cir. 1997) (quoting Sony Corp. v. Universal City Studios, Inc. , 464 U.S. 417, 437, 104 S.Ct. 774, 78 L.Ed.2d 574 (1984) (brackets omitted)). Alternatively, vicarious liability for copyright infringement can be established where a corporate officer had (1) a "right and ability to supervise" the company's activities and (2) "an obvious and direct financial interest in the exploitation of copyrighted materials" by the corporate entity. Softel , 118 F.3d at 971 (quoting Shapiro, Bernstein & Co. v. H.L. Green Co. , 316 F.2d 304, 307 (2d Cir. 1963) ). Notably, there is no requirement that a corporate officer have authorized the infringement to be vicariously liable for it.
Plaintiff's uncontroverted allegations against Defendant Esquival satisfy both elements of vicarious liability. As to the first element, state records list Esquival as Ahuachapan's chief executive officer. (ECF No. 21-1.) It is hard to imagine a CEO without control over his or her company. See, e.g., Wansdown Props. Corp., N.V. v. Azari , 165 A.D.3d 537, 86 N.Y.S.3d 469, 471 (2018) ("Under New York law, the president or other general officer of a corporation has power, prima facie, to do any act which the directors could authorize or ratify." (internal quotation marks and brackets omitted)). Moreover, Plaintiff alleges that Esquival is an officer, director, shareholder, and/or principal of Ahuachapan. (Compl. ¶ 5.) Finally, Plaintiff alleges that Esquival was listed as a principal on Ahuachapan's state-issued liquor license (id. ¶ 16), which, under New York law, required that Esquival "be the owner [of the establishment], or ... [have] control over the food and beverage at the premises," N.Y. Alco. Bev. Cont. Law § 106(1). These facts are sufficient to establish Esquival's right and ability to supervise the infringing activities. Cf. J & J Sports Prods., Inc. v. Mangos Steakhouse & Bakery, Inc. , No. 13-CV-5068, 2014 WL 2879868, at *5 & n.9 (E.D.N.Y. May 7, 2014) ("[M]indful of the difficulty that plaintiffs face in producing evidence in default cases such as this, and in keeping with the majority of courts in this district, the Court recommends that the individual defendant be held vicariously liable."), R. & R. adopted , 2014 WL 2879890 (E.D.N.Y. June 24, 2014).
In determining whether a complaint has established the second prong of vicarious liability, courts have looked to whether "the plaintiff showed direct financial gain, such as a cover charge on the night of the event[,] ... [or] strong indirect evidence of financial gain, such as a bar hosting a large number of patrons, who would presumably purchase drinks during the broadcast." LX Food , 2016 WL 6905946, at *3. Here, there was no cover charge, but the undisputed facts establish that the space was fairly busy. (See ECF No. 16-4 at 4.) Ahuachapan's dining area contained approximately only 4 to 8 tables, and approximately 20 to 25 persons were watching the Event and ordering food and drinks. (See id. ) In J & J Sports Productions, Inc. v. Mangos Steakhouse & Bakery, Inc. , the district court imposed vicarious liability on the individual defendant where there were "approximately twenty-two patrons on the premises at the time of the broadcast." 2014 WL 2879868, at *1. Like the district court in Mangos , this Court is persuaded that Plaintiff's uncontroverted allegation that 20 to 25 patrons viewed the Event while purchasing food and drinks from Ahuachapan is enough to impose vicarious liability on its chief executive, Esquival. Thus, Esquival is jointly and severally liable for actual damages caused by Ahuachapan's violation. Unlike Ahuachapan, however, Esquival is not liable for enhanced damages. The R & R correctly sets forth the standard for applying enhanced damages under the FCA:
The Court is aware of another case in this district where a district court declined to impose vicarious liability on the grounds that the individual defendant did not have "anything to do with the decision to display the [e]vent." J & J Sports Prod., Inc. v. El Ojo Aqua Corp. , No. 13-CV-6173, 2014 WL 4700014, at *4 (E.D.N.Y. Aug. 29, 2014), R. & R. adopted , 2014 WL 4699704 (E.D.N.Y. Sept. 22, 2014). Although such a showing may be necessary to establish contributory liability, it goes beyond the mere "right and ability to supervise" necessary to establish vicarious liability under Softel , 118 F.3d at 971.
The Court may enhance its award of damages by an amount up to $100,000 per violation if the plaintiff establishes that the violation "was committed willfully and for purposes of direct or indirect commercial advantage or private financial gain[.]" 47 U.S.C. § 605(e)(3)(C)(ii). Willfulness is defined as "disregard for the governing statute and an indifference for its requirements." Trans World Airlines, Inc. v. Thurston , 469 U.S. 111, 126-27, 105 S.Ct. 613, 83 L.Ed.2d 523 (1985). Willfulness is "established by the act that an event is broadcast, without authorization, through a defendant's cable box." [Garden City Boxing Club, Inc. v. ] Bello , 2005 WL 2496062, at *4 [ (E.D.N.Y. Sept. 20, 2005) ] (citing [Time Warner Cable v. ] Googies Luncheonette, Inc. , 77 F.Supp.2d [485,] 490 [ (S.D.N.Y. 1999) ] ("signals do not descramble spontaneously, nor do television sets connect themselves to cable distribution systems")).
(R & R 666–67.) Magistrate Judge Kuo recommended that enhanced damages should be awarded against Ahuachapan because it "could not have obtained the transmission of the Event without wrongful interception." Id. at 667. The same logic does not apply to Esquival because, as discussed above, his liability stems from his right and ability to supervise Ahuachapan's activities (combined with his obvious and direct financial interest in Ahuachapan's exploitation of the Event). Plaintiff has alleged no facts that would raise an inference of Esquival's willful, direct participation in the violation. Cf. J & J Sports Prods., Inc. v. Sugar Cafe Inc. , No. 17-cv-5350, 2018 WL 324266, at *3 (S.D.N.Y. Jan. 5, 2018) ("Plaintiff has not established, for example, that [the corporate officer] was personally involved in approving the decoding of the signal or otherwise knew that the fight was being unlawfully intercepted."). Esquival is therefore not liable for enhanced damages.
II. The Amount of Damages
Although Plaintiff states that it objects to the amount of damages assessed against Ahuachapan, Plaintiff does not substantiate its objection with any specific allegations or legal arguments. (Objection 1.) Objections must be "specific ... to the proposed findings and recommendations." Fed. R. Civ. P. 72(b). Where, as here, objections are conclusory, the Court reviews them for clear error only. See, e.g., Whyte v. Commonwealth Fin. Sys. , No. 14-CV-7030, 2015 WL 7272195, at *2 (E.D.N.Y. Nov. 17, 2015) ("Plaintiff's ‘objections’ to the R & R are neither specific, nor clearly aimed at particular findings.... The Court therefore reviews Plaintiff's objections for clear error, and finds none."); Zaretsky v. Maxi-Aids, Inc. , No. 10-CV-3771, 2012 WL 2345181, at *2 (E.D.N.Y. June 18, 2012) ("[A]bsent a specific challenge to any of [the magistrate's] findings or conclusions therein, [an R & R] is reviewed only for clear error."), aff'd , 529 F. App'x 97 (2d Cir. 2013) (summary order); Jones v. Smith , No. 9-CV-6497, 2012 WL 1592190, at *1 (S.D.N.Y. May 7, 2012) (collecting S.D.N.Y. cases). There is no clear error in Magistrate Judge Kuo's calculation of damages as to Ahuachapan.
CONCLUSION
The Court has reviewed the remainder of the R & R for clear error and, finding none, adopts the R & R except as to Defendant Esquival's vicarious liability. For the foregoing reasons, Plaintiff's motion for entry of a default judgment against both Defendants, Ahuachapan and Esquival, is GRANTED. The Court awards Plaintiff $1,373.75 in actual damages and $470.00 in costs against Defendants Ahuachapan and Esquival, who are jointly and severally liable for that sum. The Court further awards Plaintiff $4,121.25 in enhanced damages against Defendant Ahuachapan alone.
SO ORDERED.
REPORT AND RECOMMENDATION
Peggy Kuo, United States Magistrate Judge:
Plaintiff J & J Sports Productions, Inc. brought this action against Defendants Ahuachapan Corp. d/b/a Ahuachapan Restaurant ("Ahuachapan") and its principal, Neris Esquivel ("Esquivel"), (collectively, "Defendants"), pursuant to the Federal Communications Act of 1934 ("FCA"), 47 U.S.C. §§ 553 and 605. (Compl, Dkt. 1.) Plaintiff alleges that Defendants violated the FCA by unlawfully and willfully intercepting, receiving, and transmitting its closed circuit telecast of a boxing match. (Id. ¶ 15.)
Before the Court on referral from the Honorable LaShann DeArcy Hall is Plaintiff's Motion for Default Judgment (the "Motion"). (Sept. 8, 2017 Order.) For the reasons stated herein, the undersigned respectfully recommends that Plaintiff's Motion be granted against Defendant Ahuachapan for a violation of 47 U.S.C. § 605(a) and denied as to §§ 553(a)(1) and 605(e)(4). In addition, the undersigned respectfully recommends that Plaintiff's Motion against Defendant Esquivel for violations of the FCA be denied.
BACKGROUND
I. Facts as Alleged in the Complaint and Uncontroverted Evidence Submitted by Plaintiff
Pursuant to a Closed Circuit Television License Agreement, dated February 20, 2014, with Golden Boy Promotions, LLC (the "License Agreement"), Plaintiff had the exclusive right to exhibit the "closed-circuit telecast of March 8, 2014 Light Middleweight Championship Fight Program between Saul Alvarez and Alfredu Angulo, including undercard or preliminary bouts" (the "Event") throughout New York and other areas. (Compl. ¶¶ 7, 8, Dkt. 1; License Agreement, Dkt. 16-1.) Plaintiff also entered into an oral agreement with G & G Closed Circuit Events, LLC ("G & G") to handle its marketing and sales for the Event. (Compl. ¶ 9; Letter Resp. to Ct.'s Apr. 3, 2018 Order, Dkt. 16.) A commercial establishment in New York could only exhibit the Event if authorized to do so by Plaintiff or G & G for a fee. (Compl. ¶¶ 10, 11.) Establishments that contracted with Plaintiff or G & G received equipment and satellite coordinates necessary to receive and exhibit the signal for the Event. (Id. ¶ 14.) Plaintiff retained the "exclusive right" to commence a claim arising out of any alleged piracy of the closed circuit telecast in New York. (License Agreement ¶ 6, Dkt. 16-1.)
Defendant Ahuachapan is a corporation organized under New York law, operating as "Ahuachapan Restaurant" at 214-21 Jamaica Avenue, Queens Village, New York. (Compl. ¶ 5.) Defendant Esquivel is an officer, director, shareholder, and principal of Ahuachapan. (Id. ) Plaintiff alleges that Defendants "willfully intercepted and/or received the interstate communication of the Event," without contracting with Plaintiff, and transmitted the Event to their patrons, infringing upon Plaintiff's exclusive right. (Id. ¶¶ 15-16.) The Complaint alleges that Defendant Esquivel, as Ahuachapan's officer, director, and shareholder, as well as principal on Ahuachapan's liquor license with the New York State Liquor Authority, "had a right and ability to supervise the infringing activities" and "obvious and direct financial interest [and gain] in the exploitation of the copyrighted material." (Id. ¶ 16.)
Yvette Strong, an auditor for Plaintiff, submitted an affidavit stating that she visited Ahuachapan shortly after midnight on March 9, 2014, that the television in the establishment was displaying the Event, and that approximately 25 people were present. (Strong Aff., Dkt. 16-4.) According to Joseph M. Gagliardi, the President of J & J Sports Productions, the normal licensing fee for an establishment with a maximum occupancy of thirty people to exhibit the Event was $ 1,200.00. (Gagliardi Aff. ¶ 8, Ex. 1, Dkt. 12-2.)
Strong's affidavit states "on this 9 day of _ 2014," omitting the month. (Strong Aff. ¶ 3, Dkt. 16-4.) However, because the affidavit is dated March 12, 2014 and the Event date is March 8, 2014, it can be reasonably inferred that she visited Ahuachapan on March 9, 2018. (Strong Aff., Dkt. 16-4.)
II. Procedural Background
On March 2, 2017, Plaintiff filed the Complaint, and served it and the Summons on Defendants on April 18, 2017 . (Dkt. 1, 5, 6; Updated Aff. of Service, Dkt. 16-3.) On July 5, 2017, Plaintiff requested a certificate of default, which was entered by the Clerk of Court on July 6, 2017. (Dkt 8, 10.) On September 6, 2017, Plaintiff moved for default judgment. (Dkt. 11.) A Motion Hearing was held on May 1, 2018 and Plaintiff was permitted to make supplemental filings. (See Mot. Hr'g Tr. at 5, Dkt. 18.)
Plaintiff initially listed "Neria Esqiuel" as the authorized agent for Ahuachapan in the Affidavit of Service (Dkt. 5), later filed an amended affidavit of service with the correct name. (Dkt. 16-3.)
DISCUSSION
I. Standard for Default Judgment
In order to grant default judgment, the Court must ensure that Plaintiff took all of the required steps in moving for default judgment, including providing proper notice to Defendants of the lawsuit. Plaintiff properly served Defendant Ahuachapan by delivering copies of the Summons and Complaint to its authorized agent, Neris Esquivel; and Defendant Esquivel by delivering copies to him, personally. (Dkts. 5-6, 16, 16-3.) N.Y. C.P.L.R. §§ 308(1), 311(a)(1). After Defendants failed to answer the Complaint, Plaintiff obtained certificates of default and moved for default judgment. See Fed. R. Civ. P. 55 ; City of New York v. Mickalis Pawn Shop, LLC , 645 F.3d 114, 128 (2d Cir. 2011). Plaintiff mailed Defendants a copy of the Motion for Default Judgment and accompanying papers in compliance with Local Rule 55.2(c). (See Dkt. 11.)
"A default judgment is ordinarily justified where a defendant fails to respond to the complaint." SEC v. Anticevic , No. 05-CV-6991 (KMW), 2009 WL 4250508, at *2 (S.D.N.Y. Nov. 30, 2009). An entry of default is sometimes insufficient to establish liability, "since a party in default does not admit mere conclusions of law." Trs. of the Plumbers Local Union No. 1 Welfare Fund v. Philip Gen. Constr. , No. 05-CV-1665 (NG)(RLM), 2007 WL 3124612, at *3 (E.D.N.Y. Oct. 23, 2007) (citation omitted). Notwithstanding the entry of default, the Court must determine whether the allegations establish liability as a matter of law. See Finkel v. Romanowicz , 577 F.3d 79, 84 (2d Cir. 2009).
The Court accepts as true the well-pleaded allegations of the Complaint as to liability, drawing all reasonable inferences in favor of Plaintiff. Id. Plaintiff bears the burden of presenting proof of damages, which may take the form of documentary evidence and detailed affidavits. See CIT Bank, N.A. v. Dambra , No. 14-CV-3951 (SLT)(VMS), 2015 WL 7422348, at *5 (E.D.N.Y. Sept. 25, 2015) ; Action S.A. v. Marc Rich & Co., Inc. , 951 F.2d 504, 508 (2d Cir. 1991).
II. Liability under the FCA
Plaintiff alleges that Defendants violated 47 U.S.C. §§ 553(a)(1), 605(a), and 605(e)(4). (Coml. ¶¶ 22-23, 35, 46, 48., Dkt. 1.) For the reasons stated below, the undersigned respectfully finds that Defendant Esquivel did not violate the FCA and that Defendant Ahuachapan violated § 605(a).
A. Plaintiff's Standing
Under the FCA, "any person with proprietary rights in the intercepted communication," may bring a civil action for relief, including damages. 47 U.S.C. § 605(d)(6). The Complaint alleges that Plaintiff had an exclusive license to exhibit the closed-circuit telecast in New York, and the Event could only be exhibited in commercial establishments that had contracted with Plaintiff or G & G to do so. (Compl. ¶¶ 7-11, Dkt. 1.) As further support, Plaintiff offers the License Agreement, which granted it exclusive right. (Dkt. 16-1.) The License Agreement also states that even if it sublicenses some rights, Plaintiff retains "the exclusive right to commence or settle any claim or litigation that arises out of the alleged piracy, use or proposed use of the closed circuit television telecast" in New York. (Id. ¶ 6.) Plaintiff has established that it is an aggrieved person under the FCA.
B. Defendant Esquivel's Liability
The Complaint alleges that Defendant Esquivel, as officer, director, shareholder, and principal of Ahuachapan, had a "right and ability to supervise the infringing activities." (Comp. ¶ 5.) It also alleges that as a result of his position, he "had a direct financial gain" in Ahuachapan's infringing activities. (Id. ) The Complaint does not allege that Esquivel authorized the infringing activities.
Case law in the Second Circuit makes clear that for Plaintiff to establish Esquivel's vicarious liability for Ahuachapan's violation of the FCA, it must plead that he authorized the exhibition of the Event, had a right and ability to supervise it, and had an obvious and direct financial interest in its exploitation. Garden City Boxing Club, Inc. v. Morales , No. 05-CV-0064 (FB)(KAM), 2005 WL 2476264, at *10 (E.D.N.Y. Oct. 7, 2005) (quoting Kingvision Pay-Per-View Ltd. v. Olivares , No. 02-CV-6588, 2004 WL 744226, at *5 (S.D.N.Y. Apr. 5, 2004) ).
The Complaint fails to establish liability against Defendant Esquivel. Instead of asserting well-pleaded facts showing Defendant Esquivel's liability, the Complaint merely makes conclusory assertions. Corbin v. Wilson , No. 10-CV-3156 (NGG)(RER), 2011 WL 4374213, at *3 (E.D.N.Y. Aug. 26, 2011), R & R adopted , 2011 WL 4381152 (E.D.N.Y. Sept. 19, 2011) (on motion for default, repeating conclusory language is not sufficient to plead an allegation that must be taken as true); see also, Directv, Inc. v. Hoa Huynh , 503 F.3d 847, 854 (9th Cir. 2007) (repeating statutory language is a conclusion of law, not a well-pleaded allegation). Even though the Complaint alleges that Defendant Esquivel is listed as a principal on Ahuachapan's liquor license, this fact alone does not suggest that he had anything to do with the decision to broadcast the Event, or that he obviously and directly financially benefitted from exploitation of the Event. J & J Sport Productions, Inc. v. El Ojo Aqua Corp. , No. 13-CV-6173, 2014 WL 4700014, at *4 (E.D.N.Y. Aug. 29, 2014) R & R adopted , 2014 WL 4699704 (E.D.N.Y. Sept. 22, 2014). Without such facts, the Complaint lacks well-pleaded allegations to state a claim for liability against Defendant Esquivel under the FCA. Accordingly, the undersigned recommends that the request for default judgment against Defendant Esquivel be denied.
C. Defendant Ahuachapan's Liability
Section 553(a)(1) of the FCA states that "no person shall intercept or receive or assist in intercepting and 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) ; see Int'l Cablevision, Inc. v. Sykes , 997 F.2d 998, 1008 (2d Cir. 1993) ( Section 553 covers theft of services being offered over a cable system). The Complaint does not allege that any intercepted communication was offered over a cable system. It merely states that Defendants "illegally and without authorization, intercepted, received or otherwise assisted in the unauthorized interception or receipt of the Event." (Compl. ¶¶ 46, 48.) There is no description of the Event being transmitted by cable, as opposed to any other method. See e.g. , Kingvision Pay-Per-View, Ltd. v. Villalobos , 554 F.Supp.2d 375, 379-81 (E.D.N.Y. 2008) (complaint explicitly alleged that defendants intercepted a cable system); Morales , 2005 WL 2476264, at *2 (same). Accordingly, the Defendant Ahuachapan is not liable under 47 U.S.C. § 553(a)(1).
Section 605(a) states that:
No person not being authorized by the sender shall intercept any radio communication and divulge or publish the ... contents ... 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 ... for his own benefit or for the benefit of another not entitled thereto. No person having received any intercepted radio communication ... knowing that such communication was intercepted, shall divulge or publish the ... contents ... of such communication ... or use such communication ... for his own benefit or for the benefit of another not entitled thereto.
It "prohibits by its express terms the unauthorized interception of interstate wire communications," and has been applied to thefts of other forms of communication, as long as that communication "originated as a radio communication." J & J Sports Productions, Inc. v. Smith , No. 06-CV-243 (CPS), 2007 WL 595090, at *2 (E.D.N.Y. Feb. 22, 2007) ; Int'l Cablevision, Inc. v. Sykes , 75 F.3d 123, 132-33 (2d Cir. 1996) ; see King Vision Pay-Per-View, Ltd. v. Tardes Calenas Moscoro, Inc. , No. 01-CV-9775 (JGK) (JCF), 2004 WL 473306, at *2 (S.D.N.Y. Mar. 12, 2004) (R & R holding defaulting defendant liable where plaintiff's factual allegations referred to satellite transmissions, indicating that the broadcast originated with a radio transmission). The Complaint states that satellite coordinates were necessary to receive the signal for the Event, thereby establishing that the interception, receipt, and transmission of the Event derived from satellite communications. (Comp. ¶¶ 14-15, 33.) J & J Sports Prods. Inc. v. Dzako & Sons Corp. , No. 13-CV-2739 (ARR)(CLP), 2014 WL 1871917 at *4 (E.D.N.Y. May 8, 2014). Furthermore, the facts in the Complaint establish that Defendant Ahuachapan intercepted and received the Event, and then transmitted it to its patrons, all without Plaintiff's authorization. Accordingly, the facts in the Complaint taken as true establish liability against Defendant Ahuachapan under 47 U.S.C. § 605(a).
The Complaint also alleges that Defendant Ahuachapan violated 47 U.S.C. § 605(e)(4), which imposes penalties on
any person who manufactures, assembles, modifies, imports, exports, sells, or distributes any electronic, mechanical, or other device or equipment, knowing or having reason to know that the device or equipment is primarily of assistance in the unauthorized decryption of satellite cable programming, or direct-to-home satellite services, or is intended for any other activity prohibited by subsection (a).
(Compl. ¶ 32-33.)
Section 605(e)(4) is not aimed at the ultimate consumer or end-user of pirating devices, but rather upstream manufacturers and distributors. Morales , 2005 WL 2476264, at *5 (assembling cases that have recognized this concept). The Complaint alleges that Defendant Ahuachapan "modified electronic, mechanical and/or another device to intercept electronic decoding equipment and satellite coordinates that [were] explicitly provided to the Plaintiff." (Compl. ¶ 33.) It does not provide any factual assertions to support a finding that Defendant Ahuachapan is an upstream manufacturer or distributor, instead of an ultimate consumer or end-user of an illegally modified device. Morales , 2005 WL 2476264, at *5. It also fails to assert any factual basis for Defendant Ahuachapan actually modifying any device to perform the interception. Accordingly, the Complaint fails to establish liability against Defendant Ahuachapan under 47 U.S.C. § 605(e)(4).
III. Relief
The undersigned considers only damages against Ahuachapan under § 605(a).
In the Complaint, Plaintiff requested statutory damages, costs, fees, and interest. (Compl. at 13, Dkt. 1.) However, in the Motion, Plaintiff sought actual damages including $ 2,000 for Plaintiff's goodwill and reputation, as well as $ 4,116.16 in pre-judgment interest. (Mot. Mem. at 13, 17, 18, Dkt. 12; Hooten Affirmation ¶¶ 19, 21, 28-32, Dkt. 13.) Plaintiff also stated that it was not requesting attorneys' fees. (Mot. Mem. at 18; Hooten Affirmation ¶ 31.) At the Motion Hearing, Plaintiff's counsel stated that Plaintiff no longer requested $ 2,000 for goodwill and "waive[d] any interest pre-judgment." (Mot. Hr'g at 9.)
Plaintiff seeks actual damages consisting of the $ 1,200 licensing fee that Ahuachapan would have had to pay had it properly sought a license, and $ 1,373.75, calculated based on a rate of $ 54.95 pay-per-view amount for each of the 25 patrons in Ahuachapan when it exhibited the Event. Plaintiff further requests that this total of $ 2,573.75 be trebled to $ 7,721.25 based on Ahuachapan's willful violations for commercial advantage. (Mot. Mem. at 10, 13, Dkt. 12; Mot. Hr'g Tr. 8:21-11:4.) Alternatively, Plaintiff seeks maximum statutory damages of $ 100,000 because the violation was willful, "for a direct commercial purpose, and to seek private financial gain." (Compl. ¶¶ 39-40; see Mot. Hr'g Tr. at 10-11.)
A. Damages
Upon finding a violation of the FCA, the Court has discretion to award damages within the statutory range of $ 1,000 to $ 10,000 for each violation. See 47 U.S.C. § 605(e)(3)(C)(i)(II) ; Entertainment by J & J Inc. v. Mama Zee Rest. & Catering Servs. Inc. , No. 01-CV-3945 (RR), 2002 WL 2022522, at *3 (E.D.N.Y. May 21, 2002), R & R adopted, No. 01-CV-3945 (RR), June 24, 2002. Section 605 does not define violation; however, a single showing on a single night is generally interpreted as one violation. See Garden City Boxing Club, Inc. v. Rosado , No. 05-CV-1037 (DLI)(JMA), 2005 WL 3018704, at *3 (E.D.N.Y. Oct 6, 2005), R & R adopted , No. 05-CV-1037 (DLI)(JMA), Nov. 9, 2005; see also Time Warner Cable of New York City v. Taco Rapido Rest. , 988 F.Supp. 107, 111 (E.D.N.Y. 1997). When assessing damages under § 605, a court may either multiply the number of patrons present during the broadcast by a specific amount, such as the customary pay-per-view charge, or if the exact number of patrons is unknown, impose damages based on what the court considers just. Garden City Boxing Club, Inc. v. Bello , No. 05-CV-1300 (ARR)(JMA), 2005 WL 2496062, at *2 (E.D.N.Y. Sept. 20, 2005), R & R adopted , No. 05-CV-1300 (ARR)(JMA), Oct. 12, 2005; see J & J Sports Prods. Inc. v. Arhin , No. 07-CV-2875 (SJ), 2009 WL 1044500 at *5 (E.D.N.Y. Apr. 17, 2009) (reasoning that even though plaintiff did not submit supporting evidence, the typical residential pay-per-view price for the broadcast of a boxing match is $ 54.95); Time Warner Cable of New York City v. Googies Luncheonette, Inc. , 77 F.Supp.2d 485, 490 (S.D.N.Y. 1999) (recommending the per-patron calculation where there is uncontradicted evidence about the number of patrons in the establishment); see Dzako & Sons Corp. , 2014 WL 1871917, at *9 (calculating the per patron amount, but granting the licensing fee because the licensing fee was higher than the statutory minimum amount while the per patron amount was less).
Plaintiff requests the $ 1,200 licensing fee that Ahuachapan would have had to pay if it had validly entered into a licensing agreement to show the Event, and damages of $ 1,373.70 based on the customary $ 54.95 pay-per-view charge that each of the 25 people would have paid to view it at home. (Mot. Mem. at 9-10, 13, Dkt. 12.) Plaintiff's auditor Strong states that she saw approximately 25 people present during the exhibition of the Event, a fact that is uncontradicted. (Strong Aff., Dkt. 16-4.) The Court may use the per patron calculation, or impose a damages amount that it finds just. Bello , 2005 WL 2496062, at *2. When the evidence regarding the number of patrons in the establishment is uncontradicted, courts have tended to use the per patron amount to calculate damages. Googies Luncheonette, Inc. , 77 F. Supp. 2d at 490 ; Arhin , 2009 WL 1044500, at *6 ; cf. Dzako & Sons Corp. , 2014 WL 1871917, at *9 (granting the licensing fee instead of the per patron amount because the licensing fee was higher than the statutory minimum amount while the per patron amount was less). Here, the number of patrons is uncontradicted; therefore, the undersigned recommends using the per patron calculation, which results in an award above the $ 1,000 statutory minimum. Accordingly, the undersigned recommends that Plaintiff be awarded $ 1,373 in actual damages.
B. Enhanced Damages
The Court may enhance its award of damages by an amount up to $ 100,000 per violation if the plaintiff establishes that the violation "was committed willfully and for purposes of direct or indirect commercial advantage or private financial gain[.]" 47 U.S.C. § 605(e)(3)(C)(ii). Willfulness is defined as "disregard for the governing statute and an indifference for its requirements." Trans World Airlines, Inc. v. Thurston , 469 U.S. 111, 126-27, 105 S.Ct. 613, 83 L.Ed.2d 523 (1985). Willfulness is "established by the act that an event is broadcast, without authorization, through a defendant's cable box." Bello , 2005 WL 2496062, at *4 (citing Googies Luncheonette, Inc. , 77 F.Supp.2d at 490 ("signals do not descramble spontaneously, nor do television sets connect themselves to cable distribution systems")). " Section 605(e)(3)(C)(ii) allows for increased damage awards against persons or entities operating commercial establishments that show the unauthorized programming to patrons." Id. (citing Googies Luncheonette, Inc. , 77 F.Supp.2d at 490-92 ) (awarding $ 4,000 in damages, consisting of a $ 1,000 base award and triple the base ($ 3,000) in enhanced damages for willfulness); J & J Sports Prods., Inc. v. Forbes , No. 07-CV-4394 (ENV)(JMA), 2008 WL 5263732 at *6 (E.D.N.Y. Dec. 17, 2008) (same); J & J Sports Prods. Inc. v. Rodrigues , No. 05-CV-5805 (RJD), 2007 WL 1726462 at *7 (E.D.N.Y. Apr. 19, 2007), R & R adopted , No. 05-CV-5805 (RJD), June 14, 2007. Courts consider many factors including repeated violations, substantial unlawful monetary gains, advertising the broadcast, charging a cover or food premiums during the broadcast, and a plaintiff's significant actual damages. Bello , 2005 WL 2496062, at *4.
Plaintiff claims it is entitled to treble its actual damages, up to the statutory maximum of $ 100,000 because of Defendant Ahuachapan's willful violation. (Mot. Mem. at 14-17 Dkt. 12.) Plaintiff has not offered any evidence that the Defendant pirated other events, advertised the broadcast, or charged a cover to view the Event or a premium on food and drinks during the broadcast. Bello , 2005 WL 2496062, at *4. Defendant Ahuachapan's "conduct was nonetheless willful by virtue of their illegal interception." Id. Plaintiff has established that Ahuachapan is a commercial establishment that broadcast the Event, without authorization. (Compl. ¶¶ 5, 15-16, Dkt. 1; Mot. Mem. at 6, 14-17, Dkt. 12.) Ahuachapan could not have obtained the transmission of the Event without wrongful interception. (Mot. Mem. at 6, Dkt. 12.) Accordingly, for Ahuachapan's willful violation of the statute, in addition to its actual damages, the undersigned recommends that Plaintiff be awarded triple its actual damages, resulting in $ 4,119 in enhanced damages.
C. Costs
Litigation costs are available to a prevailing party in an action under the FCA. 47 U.S.C. § 605(e)(3)(B)(iii). Plaintiff seeks $ 470 in costs, consisting of $ 400 in filing fees "for the purchase of an index number" and $ 70 for the process server's fee. (Mot. Mem. at 18, Dkt. 12; Mot. Hr'g 10:11-21, Dkt. 18.) The docket establishes that Plaintiff paid the $ 400 filing fee. (Dkt. 1.) A Statement of Damages for Plaintiff supports payment of both fees. (Dkt. 11 at 4.) Dzako & Sons Corp. , 2014 WL 1871917, at *11. Accordingly, the undersigned recommends that Plaintiff be awarded $ 470 in costs.
CONCLUSION
Based on the foregoing, the undersigned respectfully recommends that Plaintiff J & J Sports Productions, Inc.'s Motion be granted against Defendant Ahuachapan for a violation of 47 U.S.C. § 605(a) and denied as to §§ 553(a)(1) and 605(e)(4). In addition, the undersigned respectfully recommends that Plaintiff's Motion against Defendant Esquivel for all violations be denied. Accordingly, the undersigned respectfully recommends that against Defendant Ahuachapan, the Court award Plaintiff $ 5,962, consisting of $ 1,373 in actual damages, $ 4,119 in enhanced damages, and $ 470 in costs.
Plaintiff is directed to serve a copy of this Report and Recommendation on each defendant forthwith by certified mail and file proof of service on the docket by September 13, 2018. Any objection to this Report must be filed in writing with the Clerk of Court within fourteen (14) days of service. 28 U.S.C. § 636(b)(1) ; Fed. R. Civ. P. 72(b). Failure to timely file any such objection waives the right to appeal the District Court's Order. 28 U.S.C. § 636(b)(1) ; Fed. R. Civ. P. 72(b).
SO ORDERED.
September 10, 2018