Comcast of Illinois X v. Multi-Vision Electronics

491 F.3d 938

COMCAST OF ILLINOIS X, An Illinois Limited Liability Company, Plaintiff-Appellee, v. MULTI-VISION ELECTRONICS, INC., a dissolved Nebraska corporation doing business as Cable Network Company, also known as Cable Network; Ronald J. Abboud, Individually, Defendants-Appellants.

No. 06-3765.

United States Court of Appeals, Eighth Circuit.

Submitted: May 14, 2007.

Filed: June 29, 2007.

Counsel who presented argument on behalf of appellant was Theresa Phelps, St. Louis, MO. Also appearing on the brief was John J. Gazzoli, Jr., St. Louis, MO.

Counsel who presented argument on behalf of appellee was Jeffrey R. Platt, Lisle, IL.

Before MURPHY, HANSEN, and COLLOTON, Circuit Judges.

MURPHY, Circuit Judge.

Comcast of Illinois initiated this action against Multivision Electronics¹ and its sole officer and shareholder, Ronald J. Abboud, alleging that they had violated the Cable Communications Policy Act and injured Comcast by illegally distributing cable descramblers. The district court² granted Comcast's motion for summary judgment. After a hearing on damages, it awarded Comcast $2,188,115 in damages for which Multivision and Abboud were held to be jointly and severally liable. They appeal, arguing that the district court erred by granting summary judgment to Comcast, abused its discretion in awarding damages and denying a continuance, and should not have imposed individual liability on Abboud. We affirm.

I.

Comcast owns and operates a cable television system and provides cable services to paying subscribers. The system's signals are transmitted from their point of origin to Comcast's reception facilities and then retransmitted to subscribers' homes through Comcast's cable network. To prevent subscribers from receiving services they have not paid for, Comcast encodes or "scrambles" its signals. A subscriber must have a converter box or "descrambler" connected to a television in order to receive the transmitted signals, because scrambled signals are not viewable. As part of its service, Comcast offers its subscribers a descrambler for which they pay a small rental fee. Comcast's cable system is "addressable," meaning that Comcast programs each subscriber's converter to receive only purchased services. It is possible, however, for an individual to circumvent Comcast's encoding system by installing an unauthorized descrambler which decodes the signals and receives programming the individual has not purchased.

In February 2003 Comcast began to investigate the cable descrambler sales of Platinum Electronics, Inc. and Steven Abboud (Ronald Abboud's brother) and shortly thereafter initiated an action against them alleging illegal distribution of cable descramblers. In June 2003 while that litigation was ongoing, federal marshals raided the offices of Platinum Electronics in Omaha. Some of the documents seized during this raid related to sales of cable descramblers by Multivision, which had operated from the same location as Platinum Electronics.³

Based on the information contained in the seized documents, Comcast commenced this action against Multivision and Ronald Abboud. The complaint alleged that the defendants' distribution of cable descramblers between 1991 and 1999 violated the Cable Communications Policy Act, 47 U.S.C. § 553(a)(1), which provides that no one "shall intercept or receive or assist in intercepting or receiving any communication service offered over a cable system, unless specifically authorized to do so by a cable operator or as may otherwise be specifically authorized by law." Assisting in interception includes "the manufacture or distribution of equipment intended by the manufacturer or distributor . . . for unauthorized reception" of cable services. Id. § 553(a)(2). Comcast alleged that by selling cable descramblers the defendants had assisted in the unauthorized interception of cable services.

Evidence was presented to the district court relating to Multivision's sales of cable descramblers. It is not disputed that the descramblers sold by appellants are capable of decoding cable television signals or that Comcast had not authorized any identified customer to use a descrambler sold by Multivision. The descramblers Multivision sold typically cost customers well over $100, and at least three models cost $318. Invoices for the descramblers included a statement reading, "Do not hook up your descrambler until you have received authorization from your cable company or local officials. By opening and hooking up this equipment you agree to be fully responsible for using this equipment in a legal manner." Multivision also gave a return form to purchasers of cable descramblers. Customers could fill it out and give it to Multivision to identify the specific problem they were having with a descrambler. The form provided check boxes, three of which were labeled "premium stations are scrambled," "basic stations are scrambled," and "some premium stations come in, others do not."

Comcast also found a classified advertisement Multivision had placed in Nuts & Volts magazine in February, March, and April 1993, stating that it sold cable descramblers. Richard Killian, an investigator for Comcast, found Multivision listed along with other distributors of cable descrambling equipment on a Swedish website under the heading "Cable Descrambler Ordering List." Two of the other listed distributors (Modern Electronics and TKA Electronics) have been sued in Nebraska for illegal distribution of cable descrambling equipment, and we recently affirmed a grant of summary judgment against TKA Electronics in an unpublished opinion. Comcast of Ill. X, L.L.C. v. TKA Elecs., Inc., 211 Fed.Appx. 536 (8th Cir.2007).

Both sides filed motions for summary judgment. Comcast argued that there was no genuine issue of fact as to whether the defendants intended to help their customers illegally obtain cable programming. Multivision and Abboud argued that a 1994 decision of the Nebraska Supreme Court involving Abboud and the distribution of cable descramblers, Imperial Empire Trading Corp. v. City of Omaha, 246 Neb. 919, 524 N.W.2d 314 (1994), put Comcast on notice of the defendants' activities in 1994. Claiming that a three year statute of limitations governs actions under 47 U.S.C. § 553, the defendants argued that the action was time barred because Comcast did not sue until 2003.

The district court granted Comcast's summary judgment motion and denied that of the defendants. It concluded that Comcast's action was not barred by the statute of limitations because there was nothing to put Comcast on notice of the defendants' actions before February 2003. It further concluded that there was no genuine issue of fact as to whether the defendants intended to assist their customers in illegally intercepting cable television because the defendants were involved in distributing cable descramblers, whose only intended use was the unauthorized reception of cable services. It also held that the disclaimers included with the invoices were insufficient to shield the defendants from liability.

The district court initially set a hearing on damages for October 13, 2005. On October 4 defendants moved for a continuance based on an affidavit averring that Ronald Abboud had admitted himself to a "health rehabilitation facility" outside Nebraska for treatment three days before, that he would be unavailable on October 13, and that his treatment would last for 28 days or possibly longer. The court granted a continuance to November 21, 2005. At the November 21 hearing neither Abboud nor any of the defendants' witnesses were present. Based on a letter written by Abboud's psychotherapist, counsel for defendants requested a further continuance. After the district court denied the oral motion, the hearing proceeded. Comcast submitted defendants' tax returns for the years 1992 through 1997 as evidence of defendants' gross revenues and requested damages equal to the gross revenue reported on the tax returns ($8,555,246).

On September 28, 2006, the district court awarded Comcast damages. To find the amount of actual damages, it accepted the amount of gross revenue reported on Multivision's tax returns, rejected the deductions defendants had claimed on them, and deducted 75% from defendants' gross profits to reach $2,138,115, the actual damages awarded. The statute authorizes a district court to increase damages by up to $50,000 if it finds that a violation was committed willfully and for purposes of commercial advantage or private financial gain. See 47 U.S.C. § 553(c)(3)(B). The court found that defendants' violations met these requirements and added $50,000 for a total award of $2,188,115. It also found that plaintiff was entitled to recover reasonable attorney fees in the amount of $26,315 and ordered judgment entered in the total amount of $2,214,430. Ronald Abboud and Multivision were made jointly and severally liable for the judgment.

Abboud and Multivision appeal the summary judgment and the award of damages. In their view summary judgment was inappropriate not only because Comcast's claims are barred by the statute of limitations, but also because there is a dispute of material fact as to whether Abboud and Multivision intended the descramblers to be used for the unauthorized reception of cable programming. They further assert that the district court abused its discretion by denying their second motion for a continuance. The award of damages was itself an abuse of discretion they say, because Comcast failed to meet its burden of proving the amount of their profits, and the district court erred by finding the violation willful and Abboud personally liable.

Comcast responds that the issuance of the Imperial Empire decision and its availability in the public record was insufficient to put it on notice of appellants' activities, that the evidence of their intent and willfulness is overwhelming, and that there was sufficient basis to impose...