International Cablevision, Inc. v. Sykes

• Decision Date: 26 January 1996
• Docket Number: 1905,Nos. 1423,s. 1423
• Citation: 75 F.3d 123
• Parties: INTERNATIONAL CABLEVISION, INC. d/b/a Adelphia Cable, Plaintiff-Appellant, v. John SYKES and Marvin Noel, Defendants-Appellees. Dockets 94-7887, 94-7889.
• Court: U.S. Court of Appeals — Second Circuit

Page 123

75 F.3d 123

64 USLW 2492

INTERNATIONAL CABLEVISION, INC. d/b/a Adelphia Cable Plaintiff-Appellant, v. John SYKES and Marvin Noel, Defendants-Appellees.

Nos. 1423, 1905.

Dockets 94-7887, 94-7889.

United States Court of Appeals, Second Circuit.

Argued May 17, 1995.

Decided Jan. 26, 1996.

Geoffry D.C. Best, New York City (Lorna M. McKenzie, LeBoeuf, Lamb, Greene & MacRae L.L.P., Randall D. Fisher, Athena Jamesson, International Cablevision, Inc. d/b/a Adelphia Cable, Coudersport, Pennsylvania, Daniel J. Lefkowitz, William B. Jung, Law Offices of Daniel J. Lefkowitz, Jericho, New York, of counsel), for Plaintiff-Appellant.

Rodney O. Personious, Buffalo, New York (Brown & Kelly, of counsel), for Defendant-Appellee Marvin Noel.

George R. Blair, Jr., Buffalo, New York (Bouvier & O'Connor, of counsel), for Defendant-Appellee John Sykes.

Before: ALTIMARI, MAHONEY, and WALKER, Circuit Judges.

MAHONEY, Circuit Judge:

Plaintiff-appellant International Cablevision, Inc. d/b/a Adelphia Cable ("Cablevision") appeals from judgments entered August 12, 1994 against defendants-appellees John Sykes and Marvin Noel in the United States District Court for the Western District of New York, John T. Curtin, Judge, that granted Cablevision's motions for summary judgment pursuant to 47 U.S.C. § 553 ¹ against both Sykes and Noel, denied Cablevision's motions for summary judgment and dismissed its claims against Sykes and Noel pursuant to 47 U.S.C. § 605, ² awarded Cablevision statutory damages of $250 against each defendant-appellee pursuant to § 553(c)(3)(A)(ii), and denied Cablevision's applications for injunctive relief, attorney fees, and costs.

Vacated and remanded for the provision of relief pursuant to § 605.

Background

This appeal presents for decision the applicability of § 605 to the sale of devices known as "pirate" cable descramblers or "black boxes." The facts pertaining to Cablevision's suit against Sykes are described in a previous opinion by this Court. See International Cablevision, Inc. v. Sykes, 997 F.2d 998, 1000-03 (2d Cir.1993). Those pertaining to the suit against Noel are outlined in the district court opinion from which this appeal is primarily taken. See International Cablevision, Inc. v. Noel, 859 F.Supp. 69, 71-72 (W.D.N.Y.1994). Familiarity with both opinions is assumed.

Cablevision sells cable television programming which it delivers to its customers from the system headend via coaxial ground cable. The headend "has parabolic or other appropriately shaped antennas for receiving satellite-delivered program signals, high-gain directional antennas for receiving distant TV broadcast signals, directional antennas for receiving local signals, machines for playback of taped programming and commercial insertion, and studios for local origination and community access programming." Walter S. Ciciora, Cable Television in the United States: An Overview 9 (Cable Television Laboratories, Inc., Louisville, Colorado, rev. 2d ed. 1995).

Customers purchase a package of channels termed "basic service" from Cablevision for a minimum flat rate, and may purchase additional "premium" channels, such as HBO or Showtime, for a higher fee. Although both basic service and premium channels are transmitted to all subscribers' homes, Cablevision scrambles the signals for premium channels and provides a "descrambler" or "decoder" only to customers paying for premium service. However, a subscriber paying for basic service can gain access to premium channels by purchasing a "pirate" descrambler or "black box" from a source other than Cablevision.

In October 1990, Sykes sold a pirate descrambler for $250 to Sandra Helsel, a private investigator sent to his place of business by Cablevision, who tape recorded her conversation with Sykes. Helsel asked him for "a guarantee or warranty of some kind," and Sykes assured her that: "Any problems at all let me know.... Otherwise, like I said I got a thousand of them if I don't have one." Helsel then asked if she could get another one, and Sykes replied: "Yes. I've got 15/20 all the time."

Cablevision instituted a civil action against Sykes alleging violations of §§ 553 and 605 (as well as various provisions of New York law), and moved for summary judgment on its federal claims. Cablevision submitted an affidavit by Helsel and a transcript of the recorded conversation with Sykes in support of its motion for summary judgment.

In opposition, Sykes provided an affidavit in which he admitted that he had sold the descrambler to Helsel, but claimed that he had purchased it for approximately $250 at the behest of a special agent of the Federal Bureau of Investigation (the "FBI") with the understanding that the agent would reimburse him for the purchase. When Sykes was told that he would not be reimbursed, he sold it to Helsel for no profit.

FBI Special Agent Glen C. Reukauf provided an affidavit stating that some years earlier, in 1987, Sykes had advised him that certain local individuals had developed a device to descramble an encryption scheme recently adopted by Cablevision, and that Sykes had furnished Reukauf with such a device. Reukauf noted that he had been unaware at the time that Sykes had purchased the descrambler with personal funds (but rather had surmised that it had been lent to Sykes), and asserted that although he had returned the descrambler to Sykes, he had never authorized Sykes to resell it.

In a decision dated February 5, 1992, the district court denied Cablevision's motion for summary judgment, stating that:

The fact that Mr. Sykes sold the box to Ms. Helsel is not contested, and it was clear from her affidavit that Sykes knew what the device was, what it would do, and that he clearly intended to violate the law.

If that was the only evidence before the court, the plaintiff would be entitled to a motion for summary judgment.

However, there is a dispute as to when the device came into the possession of Mr. Sykes and the manner in which it came into his possession. If in fact he acted in behalf of the government in obtaining the device, there may be a good defense to this action. There must be a trial or hearing to resolve this material fact which is in dispute.

After a one-day bench trial, the district court dismissed the complaint, stating that the effort which Sykes had made to get in touch with the FBI agent to inform him of the piracy and to obtain a descrambler had benefited Cablevision, and that Sykes had "perhaps ... acted foolishly ... and sold the device ... to the investigator," but "there is no evidence here that there was any dealing for gain." The district court further found that Sykes' statements that he had many more descramblers were "part of the sale[s] pitch which he used with the investigator to get rid of the box," and concluded that the box had been "sold with the innocent purpose of ... recouping ... losses."

Cablevision appealed, and we vacated and remanded in Sykes. Rejecting the district court's determination that no violation of § 553 had occurred, we opined that " § 553(a)(1) contains no suggestion that its prohibition was meant to extend only to persons who are engaged in the continuing business or repeated conduct of selling [descrambling] devices," and that "there is no suggestion whatever in § 553(a)(1) that in the absence of financial gain there is no violation." 997 F.2d at 1004.

We then addressed § 605, noting that "the applicability of § 605 to the present case was not explored below, apparently because both sides and the district court assumed that both that section and § 553 were applicable," 997 F.2d at 1009, but stating that we considered the applicability of § 605 "unclear," 997 F.2d at 1007. We observed that the question was material because, as a result of 1988 amendments to § 605, the remedies available in a civil suit thereunder were considerably more severe than those available under § 553. 997 F.2d at 1007; compare § 553(c)(3), supra note 1, with § 605(e)(3)(C), supra note 2.

After reviewing the pertinent statutory language and legislative history, we concluded that:

[I]t may be that Congress intended that to the extent that a device is sold to assist in the theft of signals directly from a satellite, § 605(e)(4) would apply; that if the theft is of signals transmitted by radio waves, § 605(a) would apply; and that when the theft is of a signal transmitted by coaxial cable, § 553(a)(1), and not § 605, would apply.

If this was Congress's intended scheme, it is hardly clear that Sykes's conduct violated § 605. As indicated in Part I above, Cablevision's distribution of cable programming involves several types and stages of communication, including receipt of signals from satellite, transmission via radio, and retransmission over coaxial cable wiring. From the instruction sheet that Sykes gave Helsel, which was introduced at trial, it appears that Sykes's box was designed only for intercepting cable wire transmissions, not for intercepting satellite or radio signals prior to their conversion to a form suitable for transmission over coaxial cable. Thus, it may be that only § 553, not § 605, was applicable to his conduct.

997 F.2d at 1009.

Noting that the § 605 issue had neither been considered by the district court nor briefed on appeal, however, we vacated and remanded for the district court "in the first instance, if Cablevision wishes to pursue its claim under § 605, to determine the applicability of that section." 997 F.2d at 1009. We added that "[i]f [§ 605] was violated and Cablevision was aggrieved thereby, the [district] court should grant Cablevision's request for damages under § 605(e) instead of granting the lesser damages available under § 553." Id. Finally, we ruled that an award of attorney fees is mandated for a violation of § 605, but discretionary as to a violation of § 553. Id. at 1009-10; compare § 553(c)(2)(C), supra note 1, with § 605(e)(3)(B)(iii), supra note 2.

Cablevision had...