Arizona Court awards $30,000 for default judgment, plus attorney fees. Legal News Update!

Introduction

We get a lot of questions about whether it is better to pay a large settlement to boxing piracy companies like Joe Hand Promotions, J&J Sports Production and G&G Closed Circuit Events. This blog seeks to provide important information about this topic, and provides a recent case review.

In this case, Plaintiff is an international distributor of sports and entertainment programming. By contract, Plaintiff purchased the domestic commercial exhibition rights to broadcast the Saul Alvarez v. Caleb Plant Championship Fight Program telecast nationwide on Saturday, November 6, 2021 (hereinafter the “Program”). This Program included the main event between Alvarez a/k/a “Canelo” and Plant, as well as all undercard bouts and commentary encompassed in the television broadcast. Without the authorization of Plaintiff, Defendants unlawfully intercepted, received and exhibited the Program at their commercial establishment, Cayomango, located in Phoenix, AZ 85031.

The case moved into default (since Defendant did not answer or respond to the complaint). Here is a general idea of what this approach could result in.

Motion to Default Judgment - Damages Discussion

The Court discussed:

To prevail under 47 U.S.C. § 605 or 47 U.S.C. § 553, Plaintiff must demonstrate that it has a proprietary interest in the Program and that Defendants unlawfully intercepted, received, published, divulged, displayed, and/or exhibited the Program at Cayomango without the authorization of Plaintiff. See 47 U.S.C. § 605(a); 47 U.S.C. § 553(a).

Plaintiff's Complaint properly alleges the elements of the above causes of action and, therefore, the first two factors of the Eitel analysis are satisfied. J & J Sports Productions, Inc. v. Hernandez, 2011 WL 3319558, *4 (E.D. Cal. Aug. 1, 2011).

Similarly, as all well-pled allegations of fact are taken as true Plaintiff has satisfied the fifth Eitel factor. See Fair Housing of Marin, 285 F.3d at 906. The Arizona district courts have granted default judgment based on similar allegations. E.g. Meza Jimenez, 2018 WL 317288; Joe Hand Promotions, Inc. v. Pinkhasov, 2012 WL 3641451 (D. Ariz. Aug. 24, 2012).

In addition, the Ninth Circuit has confirmed the application of 47 U.S.C. § 605 to satellite signals. Directv, Inc. v. Webb, 545 F.3d 837, 844 (9th Cir. 2008); G & G Closed Circuit Events, LLC v. Liu, 45 F. 4th 1113, 1116 (9th Cir. 2022). Plaintiff's Complaint alleges the existence of a satellite transmission and retransmission to cable and satellite companies, and the subsequent interception, receipt and/or publication thereof and thus the threshold finding required for liability under 47 U.S.C. §605 is satisfied.

In light of the foregoing, the Court may find Plaintiff's 47 U.S.C. §605 claim meritorious, that the complaint is sufficient, and that there is no possibility of a dispute concerning material facts such that default judgment is proper. This is particularly true in light of the strict liability nature of 47 U.S.C. § 605. See 47 U.S.C. § 605(e)(3)(C)(iii); Doherty v. Wireless Broadcasting Systems of Sacramento, Inc., 151 F.3d 1129, 1131 (9th Cir. 1998). The above analysis establishes the unlawful interception and receipt of the Program, and a threshold violation of Plaintiff's rights, and is sufficient to hold the LLC liable.

To hold an individual defendant liable when there is a business owner of the establishment, Plaintiff must also demonstrate either contributory infringement, i.e., that the defendant directly authorized the violation, J & J Sports Productions, Inc. v. Circle R & R, Inc., 2019 WL 937348, at *2, n.1 (S.D. Tex. Feb. 11, 2019), or that they are vicariously liable in that they had a right and ability to supervise the infringing activities and (2) had an obvious and direct financial interest in those activities” G & G Closed Circuit Events, LLC v. Miranda, 2014 WL 956235, at *4-5 (D. Ariz. Mar. 12, 2014) (quotation omitted).

The individual Defendants are vicariously liable. On Saturday, November 6, 2021, Defendant Eleazar Ayala was specifically identified as sole licensee on the Arizona Department of Liquor Licenses & Control filed for Cayomango LLC (012070012930). Cplt. ¶ 7; Riley Decl., Ex. 4. On Saturday, November 6, 2021, Defendant Ayala was specifically identified on the Arizona Corporation Commission records for Cayomango LLC (23124109) as Member and Manager of Cayomango LLC.

All Defendants had a right and ability to supervise the interception of this specific Program, and he had a strong financial interest in the interception of this specific Program (which included increased profits). With respect to financial interest, in addition to being established by case law as discussed below, the Program was shown at Cayomango on three television screens while patrons were present. The establishment was at capacity at the time of the broadcast. See Decl. of Affiant at 1 (noting capacity of 90 and observing that “the restaurant was at its seating capacity.”).

In addition, Cayomango advertised that the Program would be shown on both its public Facebook and Instagram pages. Advertising is a factor in support of vicarious liability. G & G Closed Cir. Events LLC v. Ramirez, 2022 WL 16755271, at *5 (E.D.N.Y. Aug. 1, 2022) (in finding vicarious liability, noting “[i]n addition, El Pedregal advertised its broadcast of the Program on posters outside the Establishment. . . Such advertising bolsters the inference that broadcasting would increase patronage and, thus, revenue.”). In Ellison v. Robertson, 357 F.3d 1072 (9th Cir. 2004), while addressing vicarious liability, the Ninth Circuit held: We concluded in [Fonovisa, Inc. v. Cherry Auction, Inc., 76 F.3d 259 (9th Cir. 1996)] that “the sale of pirated recordings at the Cherry Auction swap meet is a ‘draw' for customers,” which we held sufficient to state the financial benefit element of the claim for vicarious liability. Fonovisa, 76 F.3d at 263–64. There is no requirement that the draw be “substantial."

Although there is a clear inference that the advertising was successful, even assuming arguendo the financial interest may have been minimal, the availability of the infringing material is a draw sufficient to establish the financial interest necessary for vicarious liability.

In G & G Closed Circuit Events, LLC v. Alexander, 2020 WL 1904628 (D. Ariz. Apr. 17, 2020), the Court found the vicarious liability test satisfied, and noted: It is not necessary that [Defendant] violated the law himself or that he was present for the violation. [Defendant] was part-owner of the business, which in this context is sufficient. The Court finds that [Defendant] had the right and the ability to supervise the infringing activities. That he did not do so in this case is irrelevant. Second, [Defendant] is a member of [the] LLC, giving him an obvious and direct financial interest in the business. Therefore, [Defendant] is liable for the violation. G & G Closed Circuit Events LLC v. Williams, 2020 WL 3258738, at *3 (D. Ariz. June 16, 2020);

“Taken as true, the factual allegations in the complaint establish that . . . [the individual defendant] had the right and ability to supervise the infringing activities, and that Williams had an obvious and direct financial interest in those activities.”); J & J Sports Productions, Inc. v. Mikhael, 2016 WL 2984191, at *2 (C.D. Cal. May 19, 2016). In Joe Hand Promotions, Inc. v. Tickle, 2016 WL 393797 (M.D. Pa. Feb 2, 2016), the court the individual defendant vicariously liable because:

First, in his official capacity . . . Defendant . . . had the “right and ability to supervise” the piracy at issue as a matter of law. It is not necessary that Defendant violated the law himself or that he was present for the violation. Based on Defendant's official role at the establishment, he was responsible for the acts of his agents, his bartenders and other staff, and it is enough to hold him vicariously liable to the extent that one of his employees committed the piracy at issue . . . Defendant enjoyed “a direct financial interest in the violation.” That is to say, the enhanced profits earned from attracting patrons with a bootlegged program were directly related to the profits earned by Defendant's establishment, and by extension, Defendant himself would reap on a given night. That is a mere consequence of everyday business incentives.

It is also why lawmakers have enacted anti-piracy legislation: absent such penalties necessary to curb the evident moral hazard of such commercial piracy, the establishment owner would collect an ill-gotten gain, while the program distributor would incur all the costs associated with production and transmission.

As to the amount of money at stake, the amount requested by Plaintiff for its federal claim, $10,000 in statutory damages and $20,000 in enhanced statutory damages, are reasonable in that the statutory damages are within the amount authorized by Congress (the enhanced statutory damages request is significantly less than the amount authorized). 47 U.S.C. §§ 605(e)(C)(3)(i)(II) and (e)(3)(ii) (authorizing $10,000 and $100,000 in damages, respectively).

Because Plaintiff is an aggrieved party under section 605, Plaintiff is entitled to the damages permissible by statute, and thus this factor weighs in favor of default judgment. See J & J Sports Productions, Inc. v. Sanchez, 2011 WL 5041022, at *2 (S.D. Cal. Oct. 24, 2011). Next, because this Court has discretion with respect to an award of damages, even if this factor weighed against default judgment, it does not outweigh the other factors. J & J Sports Productions, Inc. v. Torres, 2011 WL 6749817, at *5 (E.D. Cal. Dec. 22, 2011).

When all of the Eitel factors are considered, it is clear that default judgment is appropriate in this case.

PLAINTIFF IS ENTITLED TO STATUTORY DAMAGES AND ENHANCED STATUTORY DAMAGES.

While default serves as an admission of well-pled allegations of fact with respect to liability, Danning v. Lavine, 572 F.2d 1386, 1388 (9th Cir. 978), default does not establish damages. Fair Housing of Marin, 285 F.3d at 906.

A party aggrieved under section 605 may, at its discretion, recover either actual or statutory damages. 47 U.S.C. § 605(e)(3)(C).

Plaintiff elects to recover statutory damages. The amount of statutory damages shall be not less than $1,000.00 nor more than $10,000.00. 47 U.S.C. § 605(e)(3)(C)(i)(II).

In addition, the Court may award enhanced damages of up to an additional $100,000 where “the violation was committed willfully and for the purposes of direct or indirect commercial advantage or private financial gain . . . .” 47 U.S.C. § 605(e)(3)(C)(ii).

Plaintiff requests $10,000 in statutory damages and $20,000 in enhanced statutory damages, for a total statutory damages award of $30,000. This award satisfies the purposes of compensating Plaintiff and acting as a deterrent against future acts of piracy by both these Defendants and others. J & J Sports Productions, Inc. v. Lopez, 2018 WL 4204584, at *4 (E.D. Cal. Sept. 4, 2018).

The awards also take into account that Defendants made particular efforts to capitalize on the unlawful broadcast, to wit, advertising via both Facebook and Instagram. On November 6, 2021, investigator Sarah Jennings observed the unlawful exhibition of the Program at Cayomango.......on three televisions, including a main 64” television that was “prominently playing the match to the attendees.” Ms. Jennings estimated the capacity of the establishment to be 90, and the restaurant was at capacity while she was present.

In fact, when Ms. Jennings arrived there was a waiting list. The cost to broadcast the Program lawfully was $1,250.00.

Next, Cayomango advertised that the Program would be shown via both Facebook and Instagram. Both posts stated, “Canelo VS Plant this Saturday November 6th, live the fight in CayoMango! The best drinks, the best food and the best events only at CayoMango. Every visit is unforgettable.” The Facebook post also included several hashtags, including, #canelo, #calebplant, #boxing, and #boxeo, which only served to increase the reach of the advertising. See Pelkowski v. Hovermann, 2021 WL 9032222, at *10 (E.D.N.Y. Sept. 9, 2021) (“Hashtags are often used in social media by businesses to promote products and disseminate news.”) (citation omitted). The Facebook post was also accompanied by a video trailer of the Program, which Ms. Jennings describe as “impressive.”

Advertising is a primary consideration of enhanced statutory damages. G & G Closed Circuit Events, LLC v. Olvera, 2020 WL 1503376, at *3 (E.D. Cal. Mar. 30, 2020) (“An enhanced statutory damages award may be warranted where the defendant engaged in promotional advertising or charged a premium for food or drinks”).

Given that Cayomango was at capacity during the event, there is a reasonable presumption that the advertising was successful.

B. Significant Damages Are Necessary To Address Piracy. A primary goal of piracy awards is deterrence. See Pinkhasov, 2012 WL 3641451, at *1 (awarding maximum statutory damages of $10,000 “[a]fter considering the goal of deterring cable piracy”); J & J Sports Productions, Inc. v. Barrio Fiesta of Manila Restaurant LLC, 2012 WL 2919599, at *2 (D. Ariz. July 17, 2012) (“Plaintiffs correctly note that enhanced damages are desirable in many cases because of their tendency to deter future violations.”).

In addition, the statutes contemplate both specific and general deterrence. Joe Hand Promotions, Inc. v. Gamino, 2011 WL 66144, at *4 (E.D. Cal. Jan. 10, 2011) (“the amount of damages awarded should be in an amount that is adequate to deter these Defendants and others from committing similar acts in the future.”).

C. Statutory Damages And Enhanced Statutory Damages. This Court has discretion in awarding statutory and enhanced statutory damages. See 47 U.S.C. § 605(e)(3)(C)(i)(II) and (c)(ii). While some courts will look to the licensing fee to determine an appropriate statutory damages award, this method undervalues the Program and fails to compensate Plaintiff adequately. See Kingvision Pay-Per-View, Ltd. v. Jasper Grocery, 152 F.Supp.2d 438, 442 (S.D.N.Y. 2001).

The Court may, however, consider estimated actual damages in making a statutory award. G & G Closed Circuit Events, LLC v. Segura, No. 21-16381, 2022 WL 1499650, at *1 (9th Cir. May 12, 2022). In Joe Hand Promotions, Inc. v. Dang My Linh, 2006 WL 8435988, at *2 (E.D.N.Y. Sept. 25, 2006), the district court addressed various methods employed to calculate damages and found, particularly in the default judgment context, that they are too punitive to the plaintiff and too beneficial to defendants: The mathematical approach or the consideration of aggravating factors makes sense in a contested matter, where both sides have appeared and all of the facts have been placed before the Court. However, when a defendant has failed to answer legal process and defaulted in a case, the application of such factors unfairly penalizes the plaintiff. . . . [W]hile it is reasonable to require a plaintiff to undertake some investigation before bringing this kind of action, as plaintiff here has done, we have to recognize that with statutory damages of $10,000 per violation, there is only so much digging that a court can expect a plaintiff to perform.

Thus handicapped by defendants' decision to not only violate the law, but to ignore the process of this Court, this Court believes that the $10,000 statutory maximum should be the presumptive amount awarded in a single violation case absent any indication in the record of mitigating circumstances. To hold otherwise would encourage defendants caught redhanded to ignore legal process in the recognition that judicial discretion is the only defense they have. This Court will not give them that defense at the cost of punishing plaintiff.

This rationale explains why a $10,000 award is warranted (particularly in the default judgment context). In Pinkhasov, 2012 WL 3641451 at *1, this Court awarded $10,000 in statutory damages. In addition, in a case with similar facts, G & G Closed Circuit Events LLC v. Venegas Alcantara, 2020 WL 1047058, at *3 (D. Ariz. Mar. 4, 2020), the Court awarded the exact amounts Plaintiff requests herein.

Enhanced statutory damages are established by several factors. Most notably, by the advertising. Defendants' default and the testimony of Mr. Gagliardi establishes that the interception, receipt, and broadcast of the encrypted Program was willful and for the purposes of commercial advantage or financial gain. See J & J Sports Productions Inc. v. Diaz, 2012 WL 1134904, at *1 (D. Ariz. Apr. 4, 2012) (“By defaulting, defendants admit that they published the Program . . . in violation of 47 U.S.C. § 605 and did so willfully and for purposes of direct or indirect commercial advantage or private financial gain.”). Case law also confirms that enhanced statutory damages are warranted: The act of intercepting an encrypted broadcast is not done by accident, but requires an affirmative action by the defendant. Very simply, the Court finds that the defendant took willful action to unlawfully intercept and broadcast the Exhibition. Further, the Court finds that this willful act was done for either “direct or indirect commercial advantage or private financial gain.”. . . Because the defendant showed the Exhibition on all of its televisions at no cost, the Court concludes that the defendant acted willfully for commercial advantage and private financial gain. Joe Hand Promotions, Inc. v. Wing Spot Chicken & Waffles, 920 F.Supp.2d 659, 668-69 (E.D. Va. 2013).

In view of the foregoing, and in keeping with previous awards made in cases with similar circumstances, Plaintiff requests $10,000 in statutory damages and $20,000 in enhanced statutory damages. In Venegas Alcantara, this Court awarded $10,000 in statutory damages and a $20,000 enhancement against an establishment that had broadcast the program to 45 patrons, and that had advertised the broadcast on Facebook. The Venegas Alcantara Court also noted, “[t]he showing was not an accident, as evidenced by Casita del Mar's advertisement of it on Facebook beforehand.” There was no indication that Venegas Alcantara was a repeat offender, and no evidence of a cover charge.

The circumstances herein are comparable, and actually somewhat more egregious. There were twice as many patrons herein, and there was advertising via both Facebook and Instagram. In Meza Jimenez, this Court awarded $10,000 in statutory damages and $20,000 in enhanced statutory damages against an establishment that showed the program on one television to 45 patrons. 2018 WL 317288 at *2. In Meza Jimenez there was a prior offense; however, there was no advertising.

Attorney Steve® Tip: If the case involves a large number of fight viewers, cover charges, drink premiums, and a large number of televisions the PPV boxing match was shown on, it would be wise to think twice before defaulting. Depending on the factors of your case, the awards could go even higher than the 30k awarded in this case (plus attorney fees).

Joint and Several Liability

All Defendants Are Jointly And Severally Liable For The Full Amount Of Damages. Once liability is established, all parties may be held jointly and severally liable for the full amount of damages. E.g., J & J Sports Productions, Inc. v. Mendoza, 2015 WL 5009000, at *3 (E.D. Cal. Aug. 20, 2015).

This standard applies to individual defendants who are vicariously liable along with a corporate defendant (as is the case herein). See Zuffa, LLC v. Nguyen, 2020 WL 6449316, at *3 (S.D. Fla. July 27, 2020); Joe Hand Promotions, Inc. v. Fusion Hookah, LLC, 2018 WL 1887293, at *3 (W.D. Tex. Feb. 1, 2018) (“Dixon's joint and several liability stems from a theory of vicarious liability”).

In Cmty. Television Sys., Inc. v. Caruso, 284 F.3d 430, 436 (2d Cir. 2002), the Second Circuit addressed the issue as follows:

We think section 605 is sensibly construed to create joint and several liability among those found liable for a single award of damages attributable to the purchase and installation of a single descrambler device. As to each device purchased and installed, the cable service provider has been injured by one loss of revenue, and, in the absence of proof of actual damages, those liable are fairly adjudged jointly and severally liable for one award of statutory damages.

While Caruso involved a device, it is nonetheless comparable in that both cases deal with the same actions taken by separate defendants with respect to a single violation. In G & G Closed Circuit Events LLC v. Torres, 2021 WL 2530833 (D. Ariz. Jan. 21, 2021), this specific Court made a $1,000 award against an individual defendant.

The Court had previously awarded $10,000 in damages and in excess of $6,000 in attorneys' fees and costs against the LLC in the same case. Id. at *2. Plaintiff filed a Motion to Alter or Amend the Judgment as to the individual, which the Court denied. In the course of so doing, the Court noted that the procedural posture as to the two defendants was different (the LLC defaulted, the individual appeared) and added, “[n]onetheless, the Court's conclusions as to the damages associated with the two Defendants were necessarily different based on the lack of any argument made by the business Defendant that resulted in the entry of default judgment.” G & G Closed Circuit Events, LLC v. Torres, Case No. 2:18-cv-02855-DJH (Feb. 19. 2021, Dkt. No. 57 at 2). Here, as all Defendants are in default, this distinction is not implicated.

III. PLAINTIFF IS ENTITLED TO COSTS AND REASONABLE ATTORNEYS' FEES. 47 U.S.C. § 605 mandates an award of costs and attorneys' fees to an aggrieved party. Specifically, the section states that the Court “shall direct the recovery of full costs, including awarding reasonable attorneys' fees to an aggrieved party who prevails.” 47 U.S.C. § 605(e)(3)(B)(iii) (emphasis added). Plaintiff requests 14 days from the entry of judgment to submit its Motion for costs and attorneys' fees. Civil LR 54.1, 54.2.

Attorney Steve® Note: The court awarded over 5k in additional attorney fees.