Innovative Sports Management, Inc. v. Huaman

Opinion

1 2 3 UNITED STATES DISTRICT COURT 4 NORTHERN DISTRICT OF CALIFORNIA 5 SAN JOSE DIVISION 6 7 INNOVATIVE SPORTS MANAGEMENT, Case No. 22-cv-05796-BLF INC., 8 Plaintiff, ORDER ADOPTING REPORT AND 9 RECOMMENDATION AS MODIFIED v. BY THE COURT 10 ZENON HUAMAN, [Re: ECF No. 28] 11 Defendant. 12

13 14 Plaintiff Innovative Sports Management, Inc., (“ISM”) filed this action against Defendant 15 Zenon Huaman for the alleged unlawful interception and exhibition of a soccer match for which 16 ISM owned exclusive television distribution rights. The case was originally assigned to a 17 magistrate judge. After Huaman did not appear and timely respond to the complaint, the Clerk of 18 the Court entered default against him. ISM subsequently filed an application for default judgment. 19 Because not all parties had consented to magistrate judge jurisdiction, the magistrate judge ordered 20 that the case be reassigned to a district judge and recommended that the newly assigned district 21 judge grant the application for default judgment and award $1,100 in statutory damages. The 22 magistrate judge’s recommended damages award was less than the amount ISM requested. 23 The case was subsequently reassigned to this Court, and ISM filed a Motion for De Novo 24 Determination of Dispositive Matter Referred to Magistrate Judge. Mot., ECF No. 28. ISM asks 25 the Court to award $3,000 in statutory damages, $18,000 in enhanced damages, and $550.00 in 26 conversion damages. Mot. 10. No opposition has been filed. 27 For the following reasons, ISM’s Application for Default Judgment is GRANTED and its 1 GRANTED IN PART and DENIED IN PART. 2 I. BACKGROUND 3 ISM is a commercial distributor and closed-circuit licensor of sports and entertainment 4 television programming. Compl. ¶¶ 16, 19, 42, ECF No. 1; Pls. Aff. Supp. Pl.’s App. For Default 5 J. (“Jacobs Aff.”) ¶ 3, ECF No. 12-3. By contract, ISM held exclusive nationwide distribution 6 rights to the Peru v. Bolivia Soccer Match event (“the Program”), which was telecast on October 7 10, 2021. Compl. ¶ 16; Jacobs Aff. ¶¶ 3-4; Jacobs Aff. Ex. 1 (“Media Rights Agreement”). 8 Commercial establishments were not permitted to exhibit the event unless authorized to do so by 9 ISM. Compl. ¶¶ 17-18; Jacobs Aff. ¶ 3. 10 On the date of the telecast, private investigator Mario Galvez observed the alleged 11 unlawful exhibition of the event on a television at Jess’s Place, a commercial establishment in San 12 Jose, California. Galvez Decl. ¶¶ 3, 5, ECF No. 20; Galvez Aff. 2, ECF No. 12-2. Galvez 13 photographed a satellite dish on the roof of the building and this photograph was authenticated by 14 his supplemental declaration. Galvez Aff. 2; Galvez Decl. ¶ 7. No cover charge was required to 15 enter the restaurant to watch the Program, nor was the purchase of food or drink required. Galvez 16 Aff. 2. Galvez reported the capacity of the restaurant to be approximately forty people. Galvez 17 Aff. 2. During the thirteen minutes he was there, Galvez conducted three headcounts and counted 18 twenty people each time. Galvez Aff. 2. 19 On October 6, 2022, ISM filed this action against Huaman, the primary owner and licensee 20 on the California Department of Alcoholic Beverage Control License issued to Jess’s Place. 21 Compl. ¶ 8. ISM’s complaint asserts claims for violation of the Federal Communications Act of 22 1934, 47 U.S.C. § 605 (claim 1); violation of the Cable & Television Consumer Protective and 23 Competition Act of 1992, 47 U.S.C. § 553 (claim 2); common law conversion (claim 3); and 24 violation of California Business and Professions Code § 17200 (claim 4). Compl. ¶¶ 15-47. 25 Huaman was served with the Complaint on October 19, 2022. Proof of Serv. Ex. A, at 2, ECF 26 No. 7. Huaman has not appeared or otherwise filed a response to the complaint. On November 27 11, 2022, ISM filed a request for entry of default and served the request upon Huaman. Req. to 1 Enter Default 1, 3, ECF No. 8.1 The Clerk of the Court entered default on November 16, 2022. 2 Entry of Default, ECF No. 9. ISM filed an application for default judgment on January 12, 2023. 3 App. Default J. ¶ 5, ECF No. 12. 4 On May 1, 2023, the magistrate judge to whom this case was assigned issued an Order for 5 Reassignment to a District Judge and Report and Recommendation in which she recommended 6 granting ISM’s Application for Default Judgment. R. & R. 10, ECF No. 21. ISM timely moved 7 for de novo determination of certain portions of the magistrate judge’s Report and 8 Recommendation on May 15, 2023, objecting to (1) the recommended award of $1,100 in 9 statutory damages under 47 U.S.C. § 605; (2) the recommended denial of enhanced statutory 10 damages; and (3) the recommended denial of conversion damages. Mot. 3. 11 II. LEGAL STANDARD 12 “A district judge must determine de novo any part of the magistrate judge’s disposition 13 that has been properly objected to.” Fed. R. Civ. P. 72(b)(3); See 28 U.S.C. § 636(b)(1)(C); Civ. 14 L.R. 72–3(a). A de novo review requires the Court to consider the matter anew, as if no decision 15 previously had been rendered, and come to its own conclusion about those portions of the 16 Magistrate Judge’s findings and recommendations to which an objection was made. See Ness v. 17 Comm'r, 954 F.2d 1495, 1497 (9th Cir. 1992). A district court “may accept, reject, or modify, in 18 whole or in part, the findings or recommendations made by the magistrate judge.” 28 U.S.C. 19 § 636(b)(1)(C). 20 III. DISCUSSION 21 ISM does not object to the magistrate judge’s recommendation to grant default judgment. 22 For that reason, the Court will accept this recommendation unless clearly erroneous or contrary to 23 law. In exercising its discretion to enter default judgment, the Court considers seven factors, 24 commonly known as the “Eitel factors”: 25

26 1 Acknowledging that it may not recover under both 47 U.S.C. § 605 and 47 U.S.C. § 553, ISM did not seek default judgment on its claim under § 553. See ECF No. 12-1 at 4; see also J&J 27 Sports Prods., Inc. v. Ro, No. C 09-02860 WHA, 2010 WL 668065, at *3 (N.D. Cal. Feb. 19, (1) [T]he possibility of prejudice to the plaintiff, (2) the merits of 1 plaintiff's substantive claim, (3) the sufficiency of the complaint, (4) the sum of money at stake in the action, (5) the possibility of a dispute 2 concerning material facts, (6) whether the default was due to excusable neglect, and (7) the strong policy underlying the Federal 3 Rules of Civil Procedure favoring decisions on the merits. 4 Eitel v. McCool, 782 F.2d 1470, 1471–72 (9th Cir. 1986). 5 The Court agrees with the magistrate judge’s application of the Eitel factors to the facts of 6 this case. Accordingly, the Court finds that entry of default judgment is proper. 7 A. Statutory Damages Under 47 U.S.C. § 605(e)(3)(C)(i)(II) 8 The magistrate judge recommends that the Court award ISM $1,100 in statutory damages 9 under 47 U.S.C. § 605. R. & R. 10. This amount was determined by considering the $550 10 commercial license fee to broadcast the Program in an establishment the size of Jess’s Place and 11 doubling it to address deterrence of future misconduct. R. & R. 8. ISM objects to the amount 12 awarded under § 605, asserting that the Court should increase the amount to more adequately 13 compensate ISM and function as a more effective deterrent. Mot. 3. 14 The Federal Communications Act, 47 U.S.C. § 605, prohibits any person from receiving or 15 transmitting “wire or radio” signals “except through authorized channels of transmission or 16 reception.” 47 U.S.C. § 605(a). An aggrieved party may recover a sum of not less than $1,000 17 and not more than $10,000 for each violation of § 605(a), as the court considers just. 47 U.S.C. 18 § 605(e)(3)(C)(i)(II). While there is no precise formula for calculating statutory damages under 19 § 605, “[c]ourts in this district have taken various approaches, considering factors including 20 whether the defendant was a repeat offender, use of cover charge, increase in food price during 21 programming, presence of advertisement, number of patrons, number of televisions used, and 22 impact of the offender’s conduct on the claimant.” G&G Closed Circuit Events, LLC v. Omni 23 Group Fin., Inc., No. 22-cv-02714-SI, 2023 WL 2456785, at *3 (N.D. Cal. Mar. 10, 2023) 24 (internal quotations and citation omitted). 25 After a de novo review of the allegations and evidence, the Court agrees with the 26 magistrate judge that ISM should be awarded $1,100. ISM presents no evidence or factual 27 allegation that Huaman is a repeat offender. Huaman did not charge a cover for patrons to enter 1 The restaurant was half full, with 20 patrons present. Galvez Aff. 2. ISM’s investigator reported 2 that prices were “fair,” Galvez Aff. 2, and there is no evidence or allegation that Huaman 3 increased food pricing during the Program. ISM presents no allegation or evidence that Huaman 4 advertised the Program. There was one television set in the restaurant showing the Program. 5 Galvez Aff. 2. Given these circumstances, the Court finds the $1,100 statutory damages award to 6 be appropriate. Accordingly, ISM is awarded $1,100 in statutory damages under 47 U.S.C. § 605. 7 B. Enhanced Damages Under 47 U.S.C. § 605(e)(3)(C)(ii) 8 The magistrate judge recommends denying ISM an award of enhanced damages under 47 9 U.S.C. § 605 because there was insufficient evidence to show that Huaman previously violated the 10 statute or “displayed the Program for a ‘commercial advantage’ or for ‘financial gain.’” R. & R. 11 9. ISM objects to the denial of enhanced damages, arguing that the magistrate judge improperly 12 required ISM to establish that Huaman made an “actual profit,” when the statute requires only that 13 Huaman acted for the purpose of financial gain. Mot. 3, 6-7. ISM concedes that “certain 14 enhancement factors (e.g., repeat offender status, cover charge, or advertising) are not present in 15 this case” but nevertheless requests that the Court presume that Huaman acted for the purposes of 16 commercial advantage or private financial gain. Id. at 7. 17 The Court agrees with ISM that ISM is not required to allege or prove that Huaman 18 profited from showing the Program for the Court to award enhanced damages. Accord J&J Sports 19 Prods. v. Miranda, No. C-10-01810 JSW (DMR), 2011 WL 13384703, at *7 (N.D. Cal. July 11, 20 2011) (“[A]n award of enhanced damages pursuant to section 553 requires that an interception be 21 committed ‘willfully’ and for ‘commercial advantage,’ not commercial gain. Therefore, 22 Defendant’s failure to profit from the interception is not dispositive.”). However, courts have 23 considered a defendant’s actual profits as a factor in determining whether a plaintiff is entitled to 24 enhanced damages. See G & G Closed Cir. Events LLC v. Govan, No. C 13-05488 SI, 2014 WL 25 2194520, at *1 (N.D. Cal. May 23, 2014); see also Kingvision Pay-Per-View, Ltd. v. Backman, 26 102 F. Supp. 2d 1196, 1198 (N.D. Cal. 2000). It is unclear whether the magistrate judge 27 impermissibly treated ISM’s conclusory, thus inadequate, allegations about Huaman’s profits as a 1 award such damages. See R & R 9. The Court therefore reweighs the factors for determining 2 whether to award enhanced statutory damages in its de novo review of the allegations and 3 evidence. 4 Enhanced damages are available when the statutory violation was committed willfully and 5 for the purpose of commercial advantage or private financial gain. See 47 U.S.C. 6 § 605(e)(3)(C)(ii). While the Ninth Circuit has not articulated a test for determining when 7 enhanced damages are appropriate, courts in this district have considered such factors as whether 8 the defendant advertised the broadcast of the Program to entice a larger crowd, charged a cover to 9 enter the establishment, charged a premium for food and drinks on the night the broadcast was 10 shown, repeatedly violated the Act, or profited from the violation in order to determine whether 11 Defendant’s purpose was for financial gain or advantage. See G & G Closed Cir. Events, LLC v. 12 Zapata, No. 5:18-CV-01103-EJD, 2019 WL 3891219, at *1 (N.D. Cal. Aug. 19, 2019) (internal 13 quotations and citation omitted); Govan, 2014 WL 2194520, at *1. 14 As discussed above, Huaman did not charge a cover to patrons to enter the restaurant or 15 require the purchase of food or drink on the day of the Program. Galvez Aff. 2. Huaman had one 16 television set showing the Program and there were 20 patrons present in the restaurant. Galvez 17 Aff. 2. ISM provides no evidence of prior violations, significant earnings by Jess’s Place that 18 night, or advertising of the exhibition of the Program to draw a larger crowd. See Galvez Aff. 2. 19 Taking the allegations and evidence as a whole, ISM has not demonstrated its entitlement to 20 enhanced damages. 21 C. Conversion Damages 22 Finally, the magistrate judge recommends denying ISM damages for conversion because 23 “statutory damages in the amount of $1,100 sufficiently compensate ISM and . . . this case does 24 not present circumstances where an additional award would be justified.” R. & R. 10. ISM objects 25 to the denial of conversion damages noting that courts in this district have awarded damages for 26 conversion in addition to statutory damages. Mot. 8. After de novo review, the Court grants 27 ISM’s request for damages for its conversion claim. 1 wrongful disposition of the property right; and (3) damages. G.S. Rasmussen & Assocs., Inc. v. 2 || Kalitta Flying Serv., Inc., 958 F.2d 896, 906 (9th Cir. 1992). “[P]roperty subject to a conversion 3 || claim need not be tangible in form; intangible property interests, too, can be converted.” Voris v. 4 Lampert, 7 Cal. 5th 1141, 1151 (2019). ISM has established the three elements of its conversion 5 claim: ISM alleges that it owned the distribution rights to the Program, that Huaman 6 || misappropriated these rights through its interception of transmission of the program, and damages. 7 See Compl. {fj 34-36. The Court accepts these allegations as true. Geddes v. United Fin. Grp., 8 559 F.2d 557, 560 (9th Cir. 1977) (“The general rule of law is that upon default the factual 9 allegations of the complaint, except those relating to the amount of damages, will be taken as 10 |} true.”). 11 ISM has also established the amount to which it is entitled for Huaman’s conversion of its 12 || distribution rights. Damages for conversion are first presumed to be the value of the property at 13 the time of the conversion. Cal. Civ. Code § 3336. ISM has provided evidence that it would have 14 charged Huaman $550 to sublicense the Program. Jacobs Aff. Ex. 3, at 22, ECF No. 12-3. 3 15 Because Huaman did not enter into an agreement and pay the required fee, ISM is entitled to $550 a 16 || conversion damages. 17 || Iv. ORDER 18 For the reasons stated above, ISM’s Application for Default Judgment is GRANTED and 19 || ISM’s Motion for Determination of Dispositive Matter Referred to Magistrate Judge is 20 GRANTED IN PART and DENIED IN PART. ISM is awarded a total of $1,650: $1,100 in 21 statutory damages under 47 U.S.C. § 605 and $550 in damages for conversion. Judgment shall be 22 || entered accordingly. 23 |! IT IS SO ORDERED. 24 25 26 || Dated: June 23, 2023

28 BETH LABSON FREEMAN United States District Judge