Russian Media Group LLC v. Cable Am. Inc. And

• Decision Date: 10 March 2010
• Docket Number: No. 09-1554,No. 09-2903.,09-1554,09-2903.
• Citation: 598 F.3d 302
• Parties: RUSSIAN MEDIA GROUP, LLC,Plaintiff-Appellee, V. CABLE AMERICA, INC. and ShaiHarmelech, Defendants-Appellants, and USA Satellite & Cable, Inc., Intervenor-Defendant-Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

598 F.3d 302

RUSSIAN MEDIA GROUP, LLC, Plaintiff-Appellee, V. CABLE AMERICA, INC. and ShaiHarmelech, Defendants-Appellants, and USA Satellite & Cable, Inc., Intervenor-Defendant-Appellant.

No. 09-1554

No. 09-2903.

United States Court of Appeals

Seventh Circuit.

Argued Jan. 14, 2010.

Decided March 10, 2010.

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Zachary J. Freeman (argued), Daniel M Feeney (argued), Miller, Shakman &amp Beem, Chicago, IL, for Plaintiff-Appellee.

Paul J. Korniczky (argued), Joel F. Handler, Chicago, IL, for Defendants-Appellants.

Before FLAUM, ROVNER, and HAMILTON, Circuit Judges.

HAMILTON, Circuit Judge.

For nearly ten years, plaintiff Russian Media Group, LLC has battled in court with defendant Shai Harmelech and his companies, charging that Harmelech pirated Russian-language satellite television programming to enable him to compete unfairly against RMG's legitimate business. The district court found RMG's complaints justified and enjoined Harmelech and the other defendants from distributing Russian-language television programs to twenty specific apartment houses where they had been operating illegally. Harmelech and his companies appeal both the preliminary injunction and an emergency motions judge's denial of their motion to modify the preliminary injunction. We affirm in both cases.

I. Background

The district court's factual findings which defendants do not contest, were unfavorable to Harmelech and his companies. At each of the twenty properties at issue in this case, defendant Cable America, Inc.connected an individual subscriber's DIRECTV-or DishNetwork-issued satellite receiver to the property's master antenna system, allowing Cable America to distribute Russian-language programming throughout the building without the many other customers having to pay DIRECTV or DishNetwork. Instead, Russian-speaking customers in those properties paid Cable America a monthly fee of $25 to $30. Cable America kept this arrangement secret from DIRECTV and DishNetwork whose signals it was pirating, and shared none of the fees it collected with those providers. In essence, Cable America was defrauding DIRECTV and DishNetwork by having one customer pretend that he or she was merely an individual subscriber and then using that customer's subscription to resell the programming for Cable America's benefit.

Just as a fence can sell stolen watches for less than a jewelry store charges for legitimate goods, this dishonest business model allowed Cable America to compete unfairly against RMG, which also sells Russian-language programming to residential customers. RMG competes with DIRECTV and DishNetwork to provide that programming in many of the same buildings where Cable America set up this scam. RMG receives $39.99 a month from each person subscribing to its Russian programming package, but it must pay the costs of legally obtaining that programming and maintaining the hardware to transmit it to subscribers. Cable America, by obtaining the programming by fraud, incurred fewer costs and pocketed a larger portion of its monthly fee than RMG could. It also induced RMG's subscribers to switch away from RMG because of the lower fee.

RMG filed this suit against Harmelech and Cable America on June 30, 2006. After discovery had proceeded and the court had denied Cable America's motion for summary judgment and motion to dismiss, RMG moved for a preliminary injunction on March 7, 2008. In a June 26, 2008 hearing on the motion for preliminary injunction, RMG presented evidence that it was likely to succeed on its claim under the Illinois Cable Piracy Act. See 720 111. Comp. Stat. § 5/16-18 et seq. Harmelech testified in defense of himself and Cable America. (At the time of the hearing, defendant USA Satellite & Cable, Inc. was not a party to the suit. In his deposition testimony before the hearing, Harmelech had falsely denied that he controlled USA Satellite, a lie that was discovered later.) Harmelech testified first that Cable America merely charged for maintenance services that it provided in the subject properties. Later, he changed course and admitted that Cable America distributed the programming itself, but he claimed falsely that its distribution was authorized by the content owners. The district judge wrote that Harmelech's contradictory explanations for Cable America's conduct were "unsupported and contrary to the evidence, " and that his testimony was "unpersuasive and completely lacking in credibility."

On February 19, 2009, the district court issued the requested preliminary injunction. Although RMG had alleged three separate theories of liability, the district court relied only on the Illinois Cable Piracy Act, which allows an "aggrieved" party to sue those who pirate the communications services of others and thereby injure the plaintiff. See 720 111. Comp. Stat. § 5/16-21. Concluding that the Illinois Cable Piracy Act was sufficient to support the injunction, the district court declined to consider RMG's other legal theories. After finding that Cable America had violated the Cable Piracy Act and that RMG was an aggrieved party, the court ordered Harmelech and Cable America to cease alldistribution and transmission of Russianlanguage television to the twenty subject properties, and to disconnect any receivers they had set up to distribute Russian television in those properties.¹

Harmelech and Cable America appealed the injunction to this court on March 2, 2009, but they did not comply with the injunction. To begin with, they did not disconnect the illegally configured receivers. Further, in his response to RMG's request for contempt of court sanctions, Harmelech claimed falsely that it was USA Satellite, not Cable America, that controlled the receivers, and he claimed falsely that he was powerless to comply with the injunction. After the defendants retained new attorneys, Harmelech conceded that he was in fact in control of USA Satellite, but he claimed through his new attorneys that he had "believed that he could take the position that he could not force USA to disconnect the Russian television service" because "USA is a separate legal entity and a non-party to this case." The district court then held Harmelech and Cable America in contempt on May 5, 2009, but even six days after that, on May 11, 2009, RMG complained that almost all of the receivers were still connected. Faced with this obstinate refusal to comply with the injunction, the district court finally issued another order authorizing RMG itself to disconnect the defendants' receiv ers so that the preliminary injunction could have the intended effect.

USA Satellite intervened as a defendant in May 2009. Two months later, on a day when the assigned district judge was not available, the defendants filed an "emergency" motion to modify the injunction. The motion was based in part on a new defense of federal copyright preemption. The emergency judge denied the motion to modify for three reasons: it was untimely, it was not a genuine emergency motion, and the district court lacked jurisdiction to modify an injunction that was already pending before the court of appeals. The defendants appealed that order on July 28, 2009.

II. The Scope of the Injunction

The defendants first contend that the district court's injunction is too broad because it enjoins any transmission of Russian-language programming to the subject properties, including legal transmissions. In light of the extensive evidence of the defendants' misconduct, we conclude that the district court did not abuse its discretion in writing the injunction as it did targeted at the wrongdoing, but broad enough to be effective.

A preliminary injunction order must state the reasons why it issued, state its terms specifically, and describe in rea-sonable detail without referring to any other document the acts that are prohibited or required. Fed.R.Civ.P. 65(d). But the injunction must also be broad enough to be effective, and the appropriate scope of the injunction is left to the district court's sound discretion. See PepsiCo, Inc. v. Redmond, 54 F.3d 1262, 1272 (7th Cir. 1995) (affirming scope of injunction).

In particular, the district court has the discretion to issue a broad injunction in cases where "a proclivity for unlawful conduct has been shown." See McComb v. Jacksonville Paper Co., 336 U.S. 187, 192, 69 S.Ct. 497, 93 L.Ed. 599 (1949) (finding that injunction barring violations of Fair Labor Standards Act was justified based on defendant's "record of continuing and persistent violations" of law); accord, Lineback v. Spurlino Materials, LLC, 546 F.3d 491, 506 (7th Cir. 2008) (affirming injunction against specified violations of labor laws and against actions violating the law "in any like manner"). The district court may even enjoin certain otherwise lawful conduct when the defendant's conduct has demonstrated that prohibiting only unlawful conduct would not effectively protect the plaintiffs rights against future encroachment. See FTC v. Natl Lead Co., 352 U.S. 419, 428-30, 77 S.Ct. 502, 1 L.Ed.2d 438 (1957) (affirming broad FTC order because lawbreakers "must expect some fencing in"); General Instrument Corp. of Delaware v. Nu-Tek Electronics & Mfg., Inc., 197 F.3d 83, 8991 (3d Cir.1999) (where defendant had shown persistent pattern of pirating cable television signals, affirming injunction against distribution of devices that could be used to pirate cable television signals even where devices might have lawful uses); Sasnett v. Sullivan, 91 F.3d 1018, 1021 (7th Cir.1996) (recognizing "the familiar principle of equitable remedies that an injunction or other equitable decree may fence the defendant in, forbidding lawful as well as unlawful conduct in order to prevent the evasion of the core prohibition in the decree and to extirpate any lingering effects of the violation sought to be remedied"), vacated on other grounds, 521 U.S. 1114, 117 S.Ct. 2502, 138 L.Ed.2d 1007 (1997).

The defendants' objection...