Coxcom, Inc. v. Chaffee

• Decision Date: 04 August 2008
• Docket Number: No. 07-2031.,No. 07-2030.,07-2030.,07-2031.
• Citation: 536 F.3d 101
• Parties: COXCOM, INC., d/b/a Cox Communications New England, Plaintiff, Appellee, v. Jon CHAFFEE, individually and d/b/a Electronic Imports and Chaffee International, Defendant, Appellant. Amy Chaffee, individually and d/b/a Electronic Imports; Ramalda Bou, individually and d/b/a Electronic Imports, Defendants. CoxCom, Inc., d/b/a Cox Communications New England, Plaintiff, Appellee, v. Amy Chaffee, individually and d/b/a Electronic Imports; Ramalda Bou, individually and d/b/a Electronic Imports, Defendants, Appellants. Jon Chaffee, individually and d/b/a Electronic Imports and Chaffee International, Defendant.
• Court: U.S. Court of Appeals — First Circuit

536 F.3d 101

COXCOM, INC., d/b/a Cox Communications New England, Plaintiff, Appellee, v. Jon CHAFFEE, individually and d/b/a Electronic Imports and Chaffee International, Defendant, Appellant.

Amy Chaffee, individually and d/b/a Electronic Imports; Ramalda Bou, individually and d/b/a Electronic Imports, Defendants.

CoxCom, Inc., d/b/a Cox Communications New England, Plaintiff, Appellee, v. Amy Chaffee, individually and d/b/a Electronic Imports; Ramalda Bou, individually and d/b/a Electronic Imports, Defendants, Appellants.

Jon Chaffee, individually and d/b/a Electronic Imports and Chaffee International, Defendant.

No. 07-2030.

No. 07-2031.

United States Court of Appeals, First Circuit.

Heard June 3, 2008.

Decided August 4, 2008.

Keven A. McKenna, for appellant Jon Chaffee.

James A. Currier, on brief for appellants Amy Chaffee and Ramalda Bou.

Shaun K. Hogan, with whom Lefkowitz, Hogan & Cassell, LLP was on brief, for appellee.

Before TORRUELLA, LIPEZ, and HOWARD, Circuit Judges.

HOWARD, Circuit Judge.

Appellants Jon Chaffee, Amy Chaffee, and Ramalda Bou appeal from the district court's decision granting summary judgment and damages to appellee CoxCom, Inc., after finding that appellants violated the Cable Communications Policy Act of 1984, 47 U.S.C. § 553(a)(1) ("Section 553"), and the Digital Millennium Copyright Act ("DMCA"), 17 U.S.C. § 1201. Appellants argue that CoxCom lacked standing to bring the lawsuit, and that summary judgment was improvidently granted. Appellants further contend that, summary judgment notwithstanding, they were entitled to a jury trial on damages, and they also dispute the imposition of a permanent injunction. We affirm.

I.

A. Background Facts

CoxCom offers cable television services to subscribers in Rhode Island, Massachusetts, and Connecticut. CoxCom leases set-top electronic decoding equipment (commonly known as "cable boxes") to its subscribers to descramble incoming signals for viewing. The cable box also transmits certain information from subscribers back to CoxCom, including billing information associated with the purchase of pay-per-view programming.¹

At issue here is a digital cable filter, a device that can affect those return transmissions. These filters block low-frequency signals, typically those below 50mhz. Normally, after a subscriber purchases and views pay-per-view programming, the subscriber's cable box sends a transmission to the cable company with data on the purchase. This transmission is emitted at a low frequency, 8.096mhz. With the filter installed, pay-per-view purchases of up to $300 would not register on the cable company's central computer. After accumulating $300 of unbilled charges, the cable box would "lock out" additional pay-per-view purchases. The filters are not illegal, and they also have innocuous uses, such as allowing cable television subscribers to enhance viewing quality by filtering out interference from FM radio broadcast towers, shortwave radios, and home appliances.

Appellants,² residents of Rhode Island at the relevant time, sold the filters at computer trade shows, including in Rhode Island and Connecticut. Appellants sold the filters with an instruction sheet stating that the filter was designed to "test" the performance of pay-per-view billing systems and further providing:

By having this filter connected to your digital cable box any and all programming that can be received by pressing the `Buy,' `Order' or `Purchase' button on your remote will be viewed without the billing information reaching the cable company. We ARE NOT suggesting or implying that anyone who purchases this tool participate in any theft of cable programming [and] therefore, it is imperative that you notify your cable company of any programs that you view while using this filter so they will know to bill you accordingly.

. . . .

A digital cable filter will ... block out pay per view and movie order charges from your cable company, giving you free pay per view. Therefore, it is mandatory that you notify your cable company of the extra orders.³

Appellants made statements to their customers in the course of selling the filters that were recorded by CoxCom's investigators. Amy Chaffee stated that the filters actually worked, and that they worked specifically on CoxCom's equipment. She also warned a prospective customer that the cable box would only hold a certain amount of unbilled pay-per-view charges, which she estimated at $500.

Appellants also provided their contact information to filter purchasers for customer support and service. Jon Chaffee made the following statements in email correspondence with filter purchasers: "It is only for pay per view, not HBO and Showtime. Here is [sic] the directions;" "The filter only works for pay for views ... It doesn't work for HBO, Showtime and other premium channels. You must reset the box before removing or you will be charged;" "Here is [sic] the instructions for the cable filter. Sorry it only works for pay per view."

CoxCom's undercover investigators purchased eighteen digital cable filters from appellants at computer trade shows in Connecticut and Rhode Island and in a separate sale arranged over the telephone and consummated in a parking lot in Rhode Island. CoxCom subsequently commenced this action in district court, alleging that the filter sales violated Section 553 and the DMCA.

B. Procedural History

Immediately after filing its complaint, CoxCom moved ex parte for a temporary restraining order ("TRO") seeking to seize appellants' business records and computers and to enjoin appellants from selling, transferring, storing or distributing digital cable filters pending the resolution of the matter. The court granted both requests, and the parties then entered into a preliminary injunction on consent, under the terms of the TRO.

Appellants' answer requested a jury trial.⁴

After the close of discovery, CoxCom moved for summary judgment. Appellants motion objected and cross-moved for summary judgment. The magistrate judge recommended that CoxCom's motion be granted and that appellants' be denied. After de novo review, the district court adopted the Report and Recommendation in full over several objections by appellants.

With appellants' liability established, the district court referred the matter to the magistrate judge for a Report and Recommendation on damages and costs. Present at the bench trial on damages were Jon Chaffee, appearing pro se, and counsel for Amy Chaffee and Ramalda Bou. Neither Jon Chaffee nor counsel presented any evidence on damages, although each cross-examined CoxCom's witnesses.⁵

The magistrate judge recommended that CoxCom be awarded statutory and enhanced damages under Section 553 in the amount of $35,000, and statutory and enhanced damages under the DMCA in the amount of $105,000, jointly and severally against appellants Jon and Amy Chaffee. Further, the magistrate judge recommended that CoxCom be awarded attorneys' fees and costs of $196,586.11, also jointly and severally against appellants Jon and Amy Chaffee. As Ramalda Bou was present for a limited number of filter sales and was an employee of the Chaffees, she was found liable for $3,300 under Section 553, and for $2,200 under the DMCA. Finally, the magistrate judge recommended that all appellants be permanently enjoined from future possession, sale, or distribution of digital cable filters. The district court accepted the Report and Recommendation in full, over objections submitted by appellants.

On appeal, appellants argue first that the district court had no jurisdiction over the matter because CoxCom lacked standing to sue. They next argue that summary judgment was improperly granted to CoxCom on the questions of liability under Section 553 and under the DMCA. Finally, appellants argue that they were entitled to a jury trial on damages, and that the permanent injunction was improperly granted.⁶

II.

A. Article III Standing

"The requisite elements of Article III standing are well established: `A plaintiff must allege personal injury fairly traceable to the defendant's allegedly unlawful conduct and likely to be redressed by the requested relief.'" Hein v. Freedom From Religion Found., Inc., ___ U.S. ___, 127 S.Ct. 2553, 2562, 168 L.Ed.2d 424 (2007) (quoting Allen v. Wright, 468 U.S. 737, 751, 104 S.Ct. 3315, 82 L.Ed.2d 556 (1984)).

To establish constitutional standing at the summary judgment stage, "a plaintiff cannot rest on mere allegations, but must set forth by affidavit or other evidence specific facts which for purposes of the summary judgment motion will be taken to be true." Libertad v. Welch, 53 F.3d 428, 436 (1st Cir.1995).

The Supreme Court in Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992), described an injury-in-fact as "an invasion of a legally protected interest which is (a) concrete and particularized ... and (b) actual or imminent, not conjectural or hypothetical." Id., 504 U.S. at 560, 112 S.Ct. 2130 (internal citations and quotation marks omitted). See also Sullivan v. City of Augusta, 511 F.3d 16, 25 (1st Cir.2007); United States v AVX Corp., 962 F.2d 108, 113-14 (1st Cir. 1992).

A particularized injury is one that "affect[s] the plaintiff in a personal and individual way." Lujan, 504 U.S. at 560 n. 1, 112 S.Ct. 2130. We have said that plaintiffs seeking to demonstrate injury-in-fact "need not establish a particularly damaging injury; they need only show that they were directly affected by the conduct complained of, and therefore have a personal stake in the suit." Libertad, 53 F.3d at 439. In Bennett v. Spear, 520 U.S. 154, 167-68, 117 S.Ct. 1154, 137 L.Ed.2d 281 (1997), the Supreme Court held that the petitioners, non-exclusive recipients of irrigation water, demonstrated an injury-infact sufficient to survive a motion to dismiss based on allegations that the aggregate amount of water would be reduced through government action. The...