General Instr. Corp v. NU-TEK Electr. & Mfg, Inc. ( 1999 )

Opinions of the United
1999 Decisions States Court of Appeals
for the Third Circuit
11-17-1999
General Instr. Corp v NU-TEK Electr. & Mfg, Inc.
Precedential or Non-Precedential:
Docket 98-1424, 98-1502
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Filed November 17, 1999
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Nos. 98-1424 & 98-1502
GENERAL INSTRUMENT CORPORATION OF DELAWARE
Appellant at No. 98-1502
v.
NU-TEK ELECTRONICS & MANUFACTURING, INC.,
Appellant at No. 98-1424
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
D.C. Civil Action No. 93-cv-03854
(Honorable Robert S. Gawthrop, III)
Argued June 3, 1999
Before: SCIRICA and RENDELL, Circuit Judges,
and SCHWARZER, District Judge*
(Filed: November 17, 1999)
STEPHEN W. ARMSTRONG,
ESQUIRE (ARGUED)
Montgomery, McCracken, Walker
& Rhoads
123 South Broad Street
Philadelphia, Pennsylvania 19109
Attorney for Appellant/Cross-
Appellee, Nu-Tek Electronics &
Manufacturing, Inc.
_________________________________________________________________
* The Honorable William W Schwarzer, United States District Judge for
the Northern District of California, sitting by designation.
GEOFFREY L. BEAUCHAMP,
ESQUIRE (ARGUED)
MICHAEL D. KRISTOFCO, ESQUIRE
Wisler, Pearlstine, Talone, Craig,
Garrity & Potash
484 Norristown Road
Blue Bell, Pennsylvania 19422
Attorneys for Appellee/Cross-
Appellant, General Instrument
Corporation of Delaware
OPINION OF THE COURT
SCIRICA, Circuit Judge.
The issues raised here on appeal require us to address
the remedial provisions of the Cable Communications Policy
Act of 1984 which prohibits unauthorized interception or
reception of cable communication services. See 47 U.S.C.A.
S 553 (West 1991 & Supp. 1999).
Following a jury trial, Nu-Tek Electronics &
Manufacturing, Inc. was ordered to pay $60,000 in
damages and $412,178.92 in attorney's fees and costs to
General Instrument Corporation for violating the Cable
Communications Policy Act of 1984, Pub. L. No. 98-549, 98
Stat. 2779 (codified as amended in scattered sections of 47
U.S.C.A.), specifically 47 U.S.C.A. S 553 which prohibits
assisting in unauthorized cable service reception. The
District Court also entered a permanent injunction barring
Nu-Tek from continuing its unlawful activities. The key
issues raised in this case are whether General Instrument
Corporation had standing to bring a suit under the Cable
Act (Nu-Tek's appeal) and whether statutory civil damages
under the Act are limited to $60,000 regardless of the
number of violations (General Instrument's cross-appeal).
The scope of the injunction and the calculation of the
amount of attorney's fees are also at issue.
We will affirm the judgment of the District Court on all
issues.
2
I.
General Instrument Corporation manufactures cable
descrambler boxes and sells them to programmers such as
Comcast and Cablevision, who in turn rent them to their
customers for a monthly fee. Nu-Tek Electronics &
Manufacturing, Inc. engaged in the business of obtaining
boxes manufactured by General Instrument and converting
them to receive all signals sent by the cable programmer,
whether or not the box owner had paid for the
programming. Nu-Tek's converted boxes allowed cable
subscribers to receive premium channels, even if they paid
only for basic cable service. In industry terminology, the
converted boxes were "nonaddressable" and "bulletproof,"
meaning that the cable programmer was not aware of their
use and could not disable the descramblers nor control
which channels were accessible. Between 1992 and 1995,
Nu-Tek sold over 5,000 such devices.
General Instrument sued Nu-Tek in the Eastern District
of Pennsylvania, alleging violations of (1) the Cable
Communications Policy Act of 1984, 47 U.S.C.A. SS 553 and
605; (2) the Lanham Act; and (3) federal copyright law. Prior
to trial, the parties voluntarily stipulated to a dismissal of
the copyright claim. The District Court also dismissed
General Instrument's claim brought under 47 U.S.C.A.
S 605, leaving only the S 553 and Lanham Act claims. A
jury rendered a verdict for General Instrument on the S 553
claim, and for Nu-Tek on the Lanham Act claim.
The District Court entered judgment in favor of General
Instrument for $60,000 in damages, which it found to be
the maximum amount allowed under the Cable Act, plus
reasonable attorney's fees. See General Instrument Corp. v.
Nu-Tek Elec. & Mfg., Inc., No. 93-3854, 1997 WL 325804(E.D. Pa. June 4, 1997) (General Instrument II). A week
later, the court issued an order permanently enjoining Nu-
Tek from manufacturing or distributing General Instrument
descrambler boxes modified to descramble cable signals
without authorization, and forbidding Nu-Tek from
transforming itself into a new entity to continue its cable
theft business or contributing to other cable theft
businesses. See Order of 6/11/97.
3
Subsequently, the District Court resolved several post-
trial motions, some of which form the basis for this appeal
-- namely, denying Nu-Tek's motion to amend the
injunction and granting General Instrument's motion for
attorney's fees on the Cable Act claim, fixing fees at
$412,178.92. See General Instrument Corp. v. Nu-Tek Elec.
& Mfg., Inc., 3 F. Supp. 2d 602 (E.D. Pa. 1998) (General
Instrument III). The remaining issues raised by Nu-Tek on
this appeal -- namely, whether General Instrument had
constitutional, prudential, and statutory standing to sue
Nu-Tek -- were decided in a 1996 pretrial order denying
Nu-Tek's motion for judgment on the pleadings. See
General Instrument Corp. v. Nu-Tek Elec. & Mfg., Inc., No.
93-3854, 1996 U.S. Dist. LEXIS 11175 (E.D. Pa. Jul. 30,
1996) (General Instrument I). In its cross-appeal, General
Instrument contends the District Court erred in holding the
Cable Act provided for an award of no more than $60,000
in statutory civil damages for "all" of Nu-Tek's S 533
violations. See General Instrument II, 1997 WL 325804, at
*4.
The District Court had subject matter jurisdiction under
28 U.S.C.A. S 1331. We have jurisdiction under 28 U.S.C.A.
S 1291.
II.
A. Standing
Nu-Tek contends that General Instrument lacked
constitutional, statutory, and prudential standing. We
exercise plenary review of standing and statutory
construction issues, but review for clear error the factual
elements underlying the District Court's determination of
standing. See Conte Bros. Auto., Inc. v. Quaker State-Slick
50, Inc., 165 F.3d 221, 224 (3d Cir. 1998); United States v.
Contents of Accounts Nos. 3034504504 and 144-07143 at
Merrill, Lynch, Pierce, Fenner and Smith, Inc., 971 F.2d 974,
984 (3d Cir. 1992).
1. Constitutional Standing
Constitutional standing is grounded in Article III's
provision limiting the jurisdiction of federal courts to
4
"cases" and "controversies." U.S. Const. art. III S 2. The
Supreme Court has established a three-part test for
determining constitutional standing:
First, the plaintiff must have suffered an injury in fact
-- an invasion of a legally protected interest which is
(a) concrete and particularized; and (b) actual or
imminent, not conjectural or hypothetical. Second,
there must be a causal connection between the injury
and the conduct complained of -- the injury has to be
fairly traceable to the challenged action of the
defendant, and not the result of the independent action
of some third party not before the court. Third, it must
be likely, as opposed to merely speculative, that the
injury will be redressed by a favorable decision.
Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)
(internal quotation marks omitted) (citations omitted);
accord Conte, 165 F.3d at 225 (constitutional standing has
three elements: an injury in fact, traceable to defendant,
and likely to be redressed by a favorable decision).
Contending General Instrument failed to prove "injury in
fact," Nu-Tek asserts "[t]he testimony at trial in this case
unequivocally showed that General Instrument never lost a
single sale of its products" because, as evidenced by
General Instrument's backlog, it could not satisfy existing
customer demand.
We disagree. In determining whether a plaintiff satisfies
the requirements of constitutional standing, the extent of
the injury plaintiff suffered is generally immaterial to the
question of injury in fact; "an ``identifiable trifle' will suffice."
Public Interest Research Group of N.J., Inc. v. Powell Duffryn
Terminals, Inc., 913 F.2d 64, 71 (3d Cir. 1990) (quoting
United States v. Students Challenging Regulatory Agency
Procedures, 412 U.S. 669, 689 n.14 (1973)). There is
considerably more here. General Instrument's Director of
Security, Stan Durey, testified at trial that General
Instrument incurs significant ongoing costs in policing
cable theft of its devices, and that General Instrument's
customers (cable operators) hold General Instrument
accountable for cable theft devices found on their systems.
Durey recounted a specific instance in which General
5
Instrument lost an account with Scripps Howard Cable
because of the rate of piracy in General Instrument cable
boxes and the cost of remedying the problem. Durey's
testimony was supported by testimony of executives from
Comcast and Suburban Cable, who stated that security
problems in General Instrument's systems would make
them less likely to do business with General Instrument.
These concrete, direct harms to General Instrument were
more than sufficient to meet the injury-in-fact requirement.
Furthermore, there is no doubt Nu-Tek was at least in part
the cause of these harms, and a decision favorable to
General Instrument would provide some redress.
Consequently, we will uphold the District Court's
determination that General Instrument satisfied
constitutional standing requirements.
2. Prudential Standing
Nu-Tek argues that even if General Instrument has
satisfied constitutional standing requirements, prudential
limitations on standing preclude General Instrument from
bringing a claim under S 553. Prudential standing consists
of "a set of judge-made rules forming an integral part of
``judicial self-government.' " Conte, 165 F.3d at 225 (quoting
Lujan, 504 U.S. at 560). These requirements are designed
to "limit access to the federal courts to those litigants best
suited to assert a particular claim." Phillips Petroleum Co. v.
Shutts, 472 U.S. 797, 804 (1985).
Where Congress has expressly conferred standing by
statute, prudential standing concerns are superseded. See
Warth v. Seldin, 422 U.S. 490, 501 (1975) ("Congress may
grant an express right of action to persons who otherwise
would be barred by prudential standing rules."); accord
Conte, 165 F.3d at 227 (noting that "Congress can
eliminate prudential restrictions on standing if it so desires"
but "as a matter of statutory interpretation . . . Congress is
presumed to incorporate background prudential standing
principles, unless the statute expressly negates them").
Here, the District Court held that prudential standing
concerns were superseded by S 553, which confers standing
on "any person aggrieved" by a violation of the Act's anti-
theft provision. See General Instrument I, 1996 U.S. Dist.
LEXIS 11175, at *7.
6
Section 553(a) makes it unlawful to intercept or receive
cable services without the operator's consent:
(1) No 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.
(2) For the purpose of this section, the term "assist in
intercepting or receiving" shall include the
manufacture or distribution of equipment intended by
the manufacturer or distributor (as the case may be)
for unauthorized reception of any communications
service offered over a cable system in violation of
subparagraph (1).
47 U.S.C.A. S 553(a). Subsection (c) of S 553 creates a
private cause of action under which General Instrument
sued:
(1) Any person aggrieved by any violation of subsection
(a)(1) of this section may bring a civil action in a United
States district court or in any other court of competent
jurisdiction.
Id. S 553(c)(1). A party who fulfilled the injury-in-fact prong
of the constitutional standing requirements would also be a
"person aggrieved" and would therefore fulfill the plain
language of the statute. Furthermore, the phrase "any
person aggrieved" is "ordinarily sufficient to confer standing
on any party satisfying the constitutional requirements."
Sioux Falls Cable Television v. South Dakota, 838 F.2d 249,
252 (8th Cir. 1988). Indeed, the Supreme Court recently
stated that Congress' use of "any person aggrieved" in the
Census Act, 13 U.S.C.A. S 209(b) (West 1990),"eliminated
any prudential concerns in [that] case." Department of
Commerce v. United States House of Representatives, 119 S.
Ct. 765, 772 (1999).
But Nu-Tek points out that 47 U.S.C.A. S 605 (West 1991
& Supp. 1999) (directed at wire and radio communication
theft and publication) also uses the term "any person
aggrieved" and defines it as follows:
7
[T]he term "any person aggrieved" shall include any
person with proprietary rights in the intercepted
communication by wire or radio, including wholesale or
retail distributors of satellite cable programming, and
[in certain cases] shall also include any person engaged
in the lawful manufacture, distribution, or sale of
equipment necessary to authorize or receive satellite
cable programming.
47 U.S.C.A. S 605(d)(6) (West Supp. 1999). According to Nu-
Tek, the addition of a clause in S 605 expressly including
manufacturers of satellite equipment within the category of
"any person aggrieved," and thus within the group granted
a private cause of action, suggests that, by omitting such a
clause in S 553, Congress did not intend to give
manufacturers a right to sue under S 553.
This argument is unconvincing. Section 605 establishes
two separate violations. Section 605(a) generally prohibits
the unauthorized interception and publication of
communications. Section 605(e)(4) prohibits manufacturing
a device or piece of equipment which "is primarily of
assistance in the unauthorized decryption of satellite cable
programming . . . or is intended for any other activity
prohibited by subsection(a)." These violations carry distinct
penalty and statutory damage provisions, see 47 U.S.C.A.
S 605(e)(1), (2), (3)(C)(i)(II), (4), and each is referenced in the
creation of the private cause of action.1 Section 553(c), on
the other hand, creates a single private cause of action
against violators of S 553(a)(1) which forbids intercepting,
receiving, and assisting in intercepting or receiving "any
communications service offered over a cable system." The
criminal penalties described in S 553(b) are also stated in
terms of violations of (a)(1) only. Section 553(a)(2) provides
"the term ``assist in intercepting or receiving' shall include
the manufacture or distribution of equipment." In short,
actions treated independently under S 605 are treated in a
unified manner under S 553. Section 553's failure to
separately enumerate the types of parties intended to be
_________________________________________________________________
1. Section 605(e)(3)(A) (West Supp. 1999) provides: "Any person aggrieved
by any violation of subsection (a) of this section or paragraph (4) of
this
subsection may bring a civil action."
8
included under "persons aggrieved" is consistent with its
uniform treatment of possible violations, whileS 605's
particularity is consistent with the distinctions drawn
throughout the section.
Furthermore, the structure of S 553 demonstrates that
"the manufacture [and] distribution of equipment" is
intended to be included in the types of harms which create
a cause of action. In creating a private cause of action,
S 553(c) ("any person aggrieved") specifically references
S 553(a)(1) ("[n]o person shall . . . assist in intercepting")
which is in turn referenced by S 553(a)(2) ("the term ``assist
in intercepting or receiving' shall include the manufacture
or distribution of equipment"). As was made clear during
the trial, cable box manufacturers like General Instrument
are directly harmed by the manufacture or distribution of
equipment which intercepts cable signals and, therefore,
fall squarely within the language of the statute.
Whether using a fine brush or broad one, however, the
legislative history of S 553 indicates that Congress intended
it to provide extensive protection against cable service theft.
See, e.g., H.R. Rep. No. 98-934, at 84 (1984), reprinted in
1984 U.S.C.C.A.N. 4655, 4720.2 Such protection requires
an inclusive interpretation of "any person aggrieved."
_________________________________________________________________
2. The report states, in part:
The committee is extremely concerned with a problem which is
increasingly plaguing the cable industry--the theft of cable
service.
This problem has taken on many forms from the manufacture and
sale of equipment intended to permit reception of cable services
without paying for it, to apartment building dwellers "tapping"
into
cable system wire in a building's hallway that is used for
providing
service to a neighbor's apartment unit, to the sale by building
superintendents of cable converters left behind by previous tenants
to new tenants. Such practices not only often permit one to obtain
cable service without paying the installation and hook-up costs,
but
also, for instance, involve individuals gaining access to premium
movie and sports channels without paying for the receipt of those
services.
H.R. Rep. No. 98-934, at 84 (1984), reprinted in 1984 U.S.C.C.A.N. 4655,
4720.
9
Accordingly, whether read as an explicit negation of
prudential standing requirements, see Department of
Commerce, 119 S. Ct. at 772, or in the context of its
legislative structure and history, see Conte, 165 F.3d at
227, we believe Congress' use of the phrase "any person
aggrieved" in S 553(c)(1) confers standing as broadly as the
Constitution allows. Because we have already determined
that General Instrument met the constitutional standing
requirements, we conclude that General Instrument had
standing to bring this action.
B. Amendment of the Injunction
Nu-Tek appeals the District Court's denial of its motion
to amend the permanent injunction. We review the terms of
the injunction for abuse of discretion. See McLendon v.
Continental Can Co., 908 F.2d 1171, 1176 (3d Cir. 1990).
But we review for clear error "factual determinations
prerequisite to issuing the injunction." Id. at 1177.
According to Nu-Tek, the permanent injunction is vague
and overbroad, and accordingly would prohibit it from
engaging in legitimate business activities. Nu-Tek claims
the injunction violates Fed. R. Civ. P. 65 (requiring that an
injunction "set forth the reasons for its issuance; . . . be
specific in its terms [and] . . . describe in reasonable detail
. . . the act or acts sought to be restrained") and Fed. R.
Civ. P. 52(a) (requiring the District Court to "set forth the
findings of fact and conclusions of law which constitute the
grounds of the action" when issuing a permanent
injunction).
In particular, Nu-Tek cites Paragraph 2 of the injunction
as problematic. Paragraph 2.a prohibits Nu-Tek from
distributing "any product" that is "designed, intended, or
capable of being used, either alone or in conjunction with
any other item, to receive . . . scrambled cable television
programming without the knowledge or authorization of
cable operators in whose systems [General Instrument]
equipment is used." Nu-Tek argues the phrase"capable of
being used" coupled with "either alone or in conjunction
with any other item" would prohibit the sale of virtually all
equipment, including legitimate, unmodified cable
equipment. Paragraph 2.b prohibits Nu-Tek from
10
"[r]emoving, secreting, concealing, or destroying any
records, property, or equipment relating to Nu-Tek's
business operations," and Paragraph 2.c enjoins Nu-Tek
from "[t]ransferring, removing, encumbering, or permitting
the withdrawal of any assets or property presently
belonging to Nu-Tek" without giving General Instrument
five days' notice.3 According to Nu-Tek, the District Court
failed to provide record support for these orders, in
violation of Fed. R. Civ. P. 52.
Contending the restrictions "all have no limitation in
their duration, and are set forth on a permanent, and
seemingly perpetual basis," Nu-Tek requests the injunction
be vacated and remanded to the District Court for proper
findings. Furthermore, Nu-Tek argues, paragraph 2.c
imposes an unjustifiable asset freeze that "gives [General
Instrument] power to prevent Nu-Tek from pursuing any
lawful business activities, and goes far beyond anything
necessary to ensure satisfaction of any judgment."
A district court has authority to enjoin parties to a civil
action subject to limited exceptions, none of which applies
here. See Fed. R. Civ. P. 65(d), (e). Furthermore, 47
U.S.C.A. S 553(c)(2)(A) specifically states that a district
court may "grant temporary and final injunctions . . . to
prevent or restrain violations of subsection (a)(1) of [S 553]."
As an equitable remedy, "the question whether injunctive
relief is to be granted or withheld is addressed to the
judge's discretion." Wright, Miller & Kane, Federal Practice
and Procedure: Civil 2d S 2941; see also 23 James Wm.
Moore et al., Moore's Federal Practice P 65.01 (2d Ed. 1985).
"An appeal to the equity jurisdiction conferred on federal
district courts is an appeal to the sound discretion which
guides the determinations of courts of equity." Hecht Co. v.
Bowles, 321 U.S. 321, 329 (1944) (quoting Meredith v.
Winter Haven, 320 U.S. 228, 235 (1943)). As noted,
injunctive relief ordered by the District Court is reviewed
with deference. Applying that standard, we do not believe
the restrictions imposed here constitute an abuse of
_________________________________________________________________
3. If General Instrument then withholds approval, Nu-Tek must seek
permission from the court for the proposed action. See Permanent
Injunction P2.c.
11
discretion. "The degree of particularity required[in an
injunction] depends on the nature of the subject matter.
McComb v. Jacksonville Paper Co., 336 U.S. 187, 191-92
(1949) (decrees of generality are often necessary to prevent
further violations where a proclivity for unlawful conduct
has been shown)." Ideal Toy Corp. v. Plawner Toy Mfg.
Corp., 685 F.2d 78, 83 (3d Cir. 1982). The District Court
explained:
The underlying fact is that Nu-Tek's business
essentially facilitated cable theft in violation ofS 553.
To stop such an operation is a primary purpose of the
injunction. It forecloses none of Nu-Tek's remaining
legitimate business because, from the start, no
identifiable legitimate business existed. Likewise, I find
that Nu-Tek should not be allowed to use its remaining
assets, which in all likelihood can serve only to further
other cable theft enterprises.
General Instrument III, 3 F. Supp. 2d at 607-08. Nu-Tek has
not asserted that the District Court's findings were clearly
erroneous. And it is readily apparent why, in light of such
findings, the court would use broad language in the
injunction. Assets that could be used by a second entity to
facilitate "further cable theft" must be carefully monitored.
While the District Court indicated that Nu-Tek may sell
unmodified General Instrument descramblers without
violating the injunction, the court ensured through its
limiting language that this could not become a loophole
through which Nu-Tek might continue to assist in the theft
of proprietary programming. We see no abuse of discretion
here and will uphold the District Court's denial of the
motion to amend the injunction.
C. Attorney's Fees
Contending that $412,178.92 in attorney's fees is
unreasonable, Nu-Tek requests that we vacate the District
Court's award to General Instrument.4 We review an award
of attorney's fees for abuse of discretion. See Rode v.
Dellarciprete, 892 F.2d 1177, 1182 (3d Cir. 1990). But "the
_________________________________________________________________
4. Nu-Tek apparently does not challenge the decision to award attorney's
fees.
12
question of what standards to apply in calculating an
award of attorney's fees is a legal question, and therefore
we exercise plenary review over this issue." Washington v.
Philadelphia County Ct. of Common Pleas, 89 F.3d 1031,
1034-35 (3d Cir. 1996).
Here, the District Court adopted General Instrument's
calculation of attorney's fees using the "lodestar" method:
hours reasonably expended multiplied by a reasonable
hourly rate. See General Instrument III, 3 F. Supp. 2d at
611-12. According to Nu-Tek, adherence to the lodestar
method rewarded General Instrument for "overlawyering"
and ignored General Instrument's "limited degree of
success." As Nu-Tek points out, General Instrument
originally asserted over $9 billion in damages, including $2
billion on the S 553 claim, before ultimately winning a
judgment for only $60,000. Also, General Instrument
prevailed only on the S 553 claim, but lost or withdrew its
claims under S 605, the Lanham Act, and federal trademark
and copyright law.
The lodestar method is "[t]he most useful starting point
for determining the amount of a reasonable fee." Hensley v.
Eckerhart, 461 U.S. 424, 433 (1983). Indeed, there is a
"strong presumption that the lodestar figure represents the
reasonable fee." City of Burlington v. Dague, 505 U.S. 557,
562 (1992) (internal quotation marks omitted). But courts
also must consider the degree of success obtained-- an
element which the Supreme Court has called "the most
critical factor" in assessing reasonableness of a fee award.
Farrar v. Hobby, 506 U.S. 103, 114 (1992) (quoting
Hensley, 461 U.S. at 436). In Farrar, the Court vacated an
attorney's fees award of $280,000 where plaintiff recovered
only nominal damages despite seeking $17 million in
compensatory damages.
Nu-Tek contends that because General Instrument
recovered only a small portion of its originally asserted
monetary damages, its degree of success was too limited to
warrant a $412,000 fee award. We disagree. The award of
damages, although small in comparison to what was
originally sought, represents the maximum amount the
District Court believed could be awarded under the Cable
13
Act's statutory damages provision.5 Furthermore, it is
significant that General Instrument successfully obtained
permanent injunctive relief against Nu-Tek, achieving the
crucial goal of putting an end to Nu-Tek's illegal conversion
of General Instrument's cable boxes. We have recognized
"[t]he amount of damages awarded, when compared with
the amount of damages requested, may be one measure of
how successful [a] plaintiff was in his or her action . . . ."
Washington, 89 F.3d at 1041. But that comparison may be
an imperfect measure, especially where injunctive relief is
also awarded. Because General Instrument obtained a
permanent injunction barring Nu-Tek from engaging in its
illegal activities and also received the maximum amount of
statutory damages, its suit achieved substantial success.
Therefore, the lodestar was an appropriate standard for
damages.
Assuming the lodestar method is valid, Nu-Tek also
claims the amount of fees was unreasonable in several
other respects. Nu-Tek asserts that General Instrument's
lead attorney, Geoffrey Beauchamp, recorded 1,171.82
hours of billing time on the case but excluded only about
330 hours as unrelated to the S 553 action when adjusting
the fee petition. Portions of the hours claimed by other
attorneys and paralegals were excluded in a similar
manner. Nu-Tek, noting the alleged expertise of General
Instrument's attorneys, asserts the amount of time spent
on this allegedly simple case was excessive. Nu-Tek claims
the District Court should have reduced the fees further to
reflect this, though Nu-Tek does not explain by precisely
how much. In addition, Nu-Tek contends the fees should
have been lowered to reflect the duplicative efforts
expended by General Instrument's attorneys -- for example,
deposing one witness four times and spending three trial
days on an ultimately unsuccessful Lanham Act claim.
Finally, Nu-Tek claims the District Court "erred by not
applying a sufficient negative multiplier to General
Instrument's lodestar figure that accounted fairly for failed
claims or the imprecise time records attached to General
Instrument's fee petition." As noted, the court accepted
_________________________________________________________________
5. The District Court's interpretation of the maximum damages provision
is discussed infra.
14
General Instrument's negative multipliers, which resulted
in reductions of over $76,000 for work that was clearly
unrelated to the S 553 claim and an additional reduction of
over $80,000 for work that was only partially related to the
winning claim.
We are not convinced by Nu-Tek's arguments. As the
District Court noted, "General Instrument submitted
voluminous billing records and supporting affidavits,
detailing the reasonable hourly rates, the attorneys, dates,
the subject matter of the work, and the amount of time
devoted to each matter." General Instrument III, 3 F. Supp.
2d at 611. The court did not blindly accept General
Instrument's calculations. In rejecting Nu-Tek's assertion
that General Instrument's fees were excessive and
duplicative, the court explained in some detail the parties'
competing stances, including Nu-Tek's contention that the
case was a straightforward one, and concluded, "After
careful review, I find that the multiplier used by GI fairly
reflects the amount of work devoted to the prevailing S 533
claim." Id. at 612. On appeal, "[o]ur task is not to determine
whether, sitting as a court of the first instance, we would
have reached the same conclusion as the district court did."
Washington, 89 F.3d at 1039. We see no abuse of discretion
here and will uphold the District Court's award of
attorney's fees.6
III.
General Instrument, as cross-appellant, contends the
District Court erred in interpreting the Cable Act to
preclude a recovery of statutory civil damages based on
each illegal cable box sold by Nu-Tek. The District Court
awarded General Instrument $60,000 in damages, believing
this was the maximum amount authorized by the Cable
Act. See General Instrument II, 1997 WL 325804, at *3.
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6. Nu-Tek also contests the District Court's inclusion of costs totaling
more than $100,000, approximately half of which was paid for
investigation. Nu-Tek asserts these costs were excessive. As with the
attorney's fees, General Instrument has submitted careful records of its
costs. The District Court found those records reasonable and
appropriate. We see no abuse of discretion.
15
General Instrument contends the Cable Act, as amended by
Congress in 1992, requires the District Court to award
between $250 and $10,000 for each converted cable box
illegally sold by Nu-Tek. Because there were 3,596 such
devices sold after January 1, 1993 (the effective date of the
amended damages provision), General Instrument's theory
would authorize a far greater monetary recovery, ranging
from approximately $900,000 to over $215 million.
Section 553 allows plaintiffs to choose between actual
damages or statutory damages. 47 U.S.C.A. S 553(c)(3)(A).7
_________________________________________________________________
7. S 553. Unauthorized reception of cable service
(a) Unauthorized interception or receipt or assist ance in
intercepting or receiving service; "assist in intercepting or
receiving" defined
(1) No 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.
(2) For the purpose of this section, the term"assist in
intercepting
or receiving" shall include the manufacture or distribution of
equipment intended by the manufacturer or distributor (as the case
may be) for unauthorized reception of any communications service
offered over a cable system in violation of subparagraph (1).
(b) Penalties for willful violation
(1) Any person who willfully violates subsection (a)(1) of this
section shall be fined not more than $1,000 or imprisoned for not
more than 6 months, or both.
(2) Any person who violates subsection (a)(1) of this section
willfully and for purposes of commercial advantage or private
financial gain shall be fined not more than $50,000 or imprisoned
for not more than 2 years, or both, for the first such offense and
shall be fined not more than $100,000 or imprisoned for not more
than 5 years, or both, for any subsequent offense.
(3) For purposes of all penalties and remedies established for
violations of subsection (a)(1) of this section, the prohibited
activity
established herein as it applies to each such device shall be
deemed
a separate violation.
(c) Civil action in district court; injunctions; damages;
attorney's fees and costs; regulation by States or franchising
authorities
16
Before trial, General Instrument elected to seek statutory
damages. The statutory damages provision provides:
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(1) Any person aggrieved by any violation of subsection (a)(1) of
this section may bring a civil action in a United States district
court
or in any other court of competent jurisdiction.
(2) The court may--
(A) grant temporary and final injunctions on such terms as it may
deem reasonable to prevent or restrain violations of subsection
(a)(1)
of this section;
(B) award damages as described in paragraph (3); and
(C) direct the recovery of full costs, including awarding
reasonable
attorneys' fees to an aggrieved party who prevails.
(3)(A) Damages awarded by any court under this section shall be
computed in accordance with either of the following clauses:
(i) the party aggrieved may recover the actual damages suffered by
him as a result of the violation and any profits of the violator
that
are attributable to the violation which are not taken into account
in
computing the actual damages; in determining the violator's
profits,
the party aggrieved shall be required to prove only the violator's
gross revenue, and the violator shall be required to prove his
deductible expenses and the elements of profit attributable to
factors other than the violation; or
(ii) the party aggrieved may recover an award of 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.
(B) In any case in which the court finds that the violation was
committed willfully and for purposes of commercial advantage or
private financial gain, the court in its discretion may increase
the
award of damages, whether actual or statutory under subparagraph
(A), by an amount of not more than $50,000.
(C) In any case where the court finds that the violator was not
aware and had no reason to believe that his acts constituted a
violation of this section, the court in its discretion may reduce
the
award of damages to a sum of not less than $100.
(D) Nothing in this subchapter shall prevent any State or
franchising authority from enacting or enforcing laws, consistent
with this section, regarding the unauthorized interception or
reception of any cable service or other communications service.
17
(ii) the party aggrieved may recover an award of
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.
(B) In any case in which the court finds that the
violation was committed wilfully and for purposes of
commercial advantage or private financial gain, the
court in its discretion may increase the award of
damages, whether actual or statutory under
subparagraph (A), by an amount of not more than
$50,000.
Id. S 553(c)(3)(A)(ii)-3(B). Because the statute establishes an
award of between $250 and $10,000 "for all violations
involved in the action," the District Court held that $10,000
was the maximum amount that could be awarded,
regardless of how many individual violations took place. See
General Instrument II, 1997 WL 325804, at *3. The court
awarded General Instrument $10,000 and, finding the
testimony of Nu-Tek's CEO to be "an exercise in rank
perjury," id., imposed the additional $50,000 discretionary
penalty authorized by S 553(c)(3)(B).
In doing so, the District Court rejected General
Instrument's argument that a 1992 amendment to S 553(b)
established that statutory civil damages are to be awarded
for each violation, rather than "all violations" as specified in
S 553(c). As amended, S 553(b) provides:
(b) Penalties for willful violation
(1) Any person who willfully violates subsection (a)(1)
of this section shall be fined not more than $1,000 or
imprisoned for not more than 6 months, or both.
(2) Any person who violates subsection (a)(1) of this
section willfully and for purposes of commercial
advantage or private financial gain shall be fined not
more than $50,000 or imprisoned for not more than
2 years, or both, for the first such offense and shall
be fined not more than $100,000 or imprisoned for
not more than 5 years, or both, for any subsequent
offense.
18
(3) For purposes of all penalties and remedies
established for violations of subsection (a)(1) of this
section, the prohibited activity established herein as
it applies to each such device shall be deemed a
separate violation.
Reasoning that Congress had purposefully amended this
"criminal" subsection of S 553 to establish cumulative
criminal penalties for each violation while leaving
undisturbed the plain language of S 553(c)(3)(A)(ii)
establishing statutory civil damages of $250 to $10,000 "for
all violations involved in the action," the District Court
concluded the 1992 amendment did not require
computation of civil damages on a per-violation basis.
General Instrument II, 1997 WL 325804, at *2.
Another district court in the Eastern District of
Pennsylvania has reached the same conclusion. See
Comcast Cablevision v. Roselli, No. 96-2938, 1997 WL
36957 (E.D. Pa. Jan. 30, 1997). There, the court pointed
out that 47 U.S.C.A. S 605, relating to wire and radio
communication theft and publication, provides for an
award of statutory damages of $1,000 to $10,000 for "each
violation" of S 605(a). The court held:
Congress . . . left untouched the "for all violations
involved" language in S 553(c)(3)(A)(ii). As a comparison
of that provision with S 605(e)(3)(C)(I)(II) makes clear,
Congress has no difficulty distinguishing "each" from
"all."
* * * *
[U]nless and until Congress changes the word "all" in
S 553(c)(3)(A)(ii) to "each," it would be inappropriate for
a court to multiply a civil damage award under S 553
based on the number of violations involved in a single
action.
Id. at *2-3. In contrast, district courts elsewhere have held
that S 553(c)(3)(A)(ii) allows the court to award statutory
damages for each violation of S 553(a)(1). See, e.g., Mountain
Cable Co. v. Choquette, 53 F. Supp. 2d 107, 112 (D. Mass.
1999); Columbia Cable TV Co., Inc. v. McCary, 954 F. Supp.
124, 128 (D.S.C. 1996); Time Warner Cable of N.Y. v.
19
Freedom Elec., Inc., 897 F. Supp. 1454, 1459 (S.D. Fla.
1995). Significantly, in the only other circuit opinion to
have addressed this question directly, the Court of Appeals
for the Ninth Circuit, adopting the same reasoning and
language as Roselli, held that statutory damages could not
be assessed for each individual violation by a manufacturer
like Nu-Tek but only for "all violations." See Continental
Cablevision, Inc. v. Poll, 124 F.3d 1044, 1048-1051 (9th Cir.
1997).
As noted, S 553(c)(3)(A)(ii) provides "the party aggrieved
may recover an award of 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."
The plain language of the statute anticipates multiple
violations and a single award of damages.
Furthermore, the structure of the statute makes clear
that S 553(b), "Penalties for wilful violation," addresses
criminal violations only. The 1992 amendment on which
Nu-Tek relies was inserted only in S 553(b) and permits
cumulative criminal sanctions. See Comcast Cablevision,
1997 WL 36957, at *3 ("Congress intended only to bring
criminal sanctions for violations of S 553(a)(1) into
``conformity' with those for violations of S 605(a) and was
mandating that for each offending device involved in the
prohibited activity a distinct criminal offense could be
charged."). General Instrument, however, asserts the words
"penalties and remedies" in S 553(b) bring both criminal
and civil actions within the language of the subsection,
contending the word "remedies" is redundant unless it
means civil sanctions. The structure of S 553 belies this
claim. Section 553(a) sets out what is prohibited,S 553(b)
provides criminal penalties while S 553(c) provides for civil
redress. Indeed, S 553(c) is titled "Civil action in district
court . . . ." Applying S 553(b)(3) to a civil case would run
counter to these clear divisions. Had Congress intended to
change both subsections (b) and (c) it could have added
language to both, as in S 605, or possibly to subsection (a).
Even a single change to S 553(c) would have had more
"universal" application than a single change to subsection
(b) as it is S 553(c)(3)(D) which addresses the preemptive
effect of S 553. Considering the structure ofS 553, we must
20
conclude an amendment to subsection (b) is intended only
for that subsection.8
Finally, General Instrument contends the District Court's
interpretation of S 553(c)(3)(A)(ii) would provide companies
like Nu-Tek a $60,000 "licensing fee" to engage in cable
theft with impunity. But as noted, plaintiffs are free to elect
actual, rather than statutory, damages when pursuing
S 553 claims. See 47 U.S.C.A. S 553(c)(3)(A)(i). In cases
where the actual damages exceed $60,000 ($10,000 plus
the discretionary $50,000 augmentation), parties will
doubtless choose this course. Furthermore, the prospect of
criminal liability provides an additional deterrent against
cable theft, particularly since the 1992 amendment
establishes that each illegal device constitutes a separate
violation. Id. SS 553(b)(1); 553(b)(3).
We hold that S 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.9 Therefore, we
will affirm the District Court's damage award.
IV.
The District Court did not err in determining that
General Instrument had constitutional and statutory
standing to sue Nu-Tek under 47 U.S.C.A. S 553. In our
view, S 553 expressly provides a federal remedy for cable
equipment manufacturers such as General Instrument to
recover for injuries sustained as a direct result of cable
theft, thus rendering prudential standing concerns
irrelevant. We also hold the court did not abuse its
discretion in declining to amend the permanent injunction
_________________________________________________________________
8. General Instrument also claims the purpose of the 1992 amendment
was to conform the penalties and remedies of S 553 with S 605. See, e.g.,
H.R. Conf. Rep. No. 102-862 (1992), reprinted in 1992 U.S.C.C.A.N.
1231, 1276. But S 605 demonstrates that Congress knows how to write
cumulative sanctions. See S 605(e)(3)(C)(i)(II) (stating "the party
aggrieved
may recover an award of statutory damages for each violation of
subsection (a) of this section . . . and for each violation of paragraph
(4)
of this subsection").
9. Plus the discretionary increase of not more than $50,000. See
S 553c)(3)(B).
21
or in accepting General Instrument's calculation of
attorney's fees and costs. Furthermore, we believe the court
properly interpreted the Cable Act's damages provision.
Accordingly, we will affirm the judgment of the District
Court.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
22