Yeh did not dispute the evidence that he had sold the 800 number to M. D. Electronics and, in fact, he introduced the agreement he had executed with Joseph Abboud, representing United Imports, Inc. Yeh at 92-94. Pltf. Ex. 10. (Yeh acknowledged that he "thinks" Abboud owns M.D. Electronics.) The letter was dated July 27, 1995, one day after the Consent Judgment. The letter contains a condition that Yeh must "provide, prior to closing, evidence that call volume on the 800 number has averaged no less than ten thousand (10,000) calls per month during the last six months, and that call volume exceeded 10,000 units during June, 1995." Id. P 4. The letter also includes a non-compete clause, applicable to both U.S. Cable and Yeh, with regard to "the sale of cable television decoders or converters by mail order, or through mail order companies, for a period of one year following the closing date." Id. P 6 (Emphasis added.). A further provision permits the purchaser to use "the content and format of your advertising," although not "the names U.S. Cable TV, Zentek, or any substantially similar names in any advertising." Id. P 7.
Yeh stressed that he had sold the 800 number only as a way of disposing of the converters that Time Warner was to return to him. Yeh at 93-94, 99-100, 107. The court finds this motivation, although present, was only incidental to Yeh's intention to maximize his returns (or, essentially the same thing, minimize his losses) through the profitable liquidation of the remaining assets of U.S. Cable. His sale of the 800 number and the goodwill associated with it as well as his completion of the importation of the 8,500 descramblers in customs and his efforts to sell them, all compatible with liquidation of the business, unfortunately also indicate his lack of regard for his obligations under the Consent Judgment.
Civil contempt findings were requested by the plaintiff and are conceded by Mr. Yeh. The Consent Judgment provided that this court retained jurisdiction for the purpose of enforcing compliance with its injunction and punishing violations. The hearing was held and evidence received for the purpose of determining the appropriate measure of damages. The issues to be addressed are, first, whether Time Warner's prompt seizure of the imported descramblers limits its damages to the costs of that investigation and seizure, as was argued by the defense; second, whether the sale of the 800 number to another known merchandiser of illegal descramblers was prohibited by the Consent Judgment; and, if so, third, what is an appropriate measure of the damage thereby incurred by the plaintiff when the actual amount of sales resulting to plaintiff's franchise cannot readily be determined. A fourth issue is whether a coercive fine is required to ensure that the defendant does not continue or resume participation in the sale of equipment in violation of 47 U.S.C. §§ 503 and 605. Lastly, a final issue concerns the duration of the modified proposed Consent Judgment about which the parties disagree, although they have reached agreement as to all other provisions. Defendant has also interposed objections to some attorneys' fees and costs presented by the plaintiff.
Standard for Determining Penalties in Civil Contempt Proceeding
The financial relief granted in a civil contempt proceeding is ordinarily limited to damages sustained by the plaintiff and "an award of costs and attorneys' fees." "Civil contempt proceedings may yield a conditional jail term or fine. Civil contempt may also be punished by a remedial fine, which compensates the party who won the injunction for the effects of his opponent's noncompliance." Hutto v. Finney, 437 U.S. 678, 690-91, 57 L. Ed. 2d 522, 98 S. Ct. 2565 (1979). Imposition of a fee intended to punish the defendant rather than to induce compliance converts the action to that of criminal contempt and, in most instances, requires that the defendant be given the option of a jury trial. See 18 U.S.C. §§ 402, 3691. In civil contempt proceedings, then, "fine and imprisonment are . . . employed not to vindicate the public interest but as coercive sanctions to compel the contemnor to do what the law made it his duty to do." Penfield Co. of California v. SEC, 330 U.S. 585, 590, 91 L. Ed. 1117, 67 S. Ct. 918 (1947).
Wright, Miller & Kane, in Federal Practice and Procedure § 2960, state, concerning relief available in a civil contempt proceeding:
[Because] the ultimate object of the punishment [in civil contempt proceeding] is the enforcement of the rights and remedies of a litigant . . the relief granted . . . is compensatory or conditional. . When a fine is imposed on someone who has been adjudged guilty of contempt, partly as compensation to the complainant and partly as punishment, the criminal feature of the order is dominant and fixes its character for purposes of appellate review.
As a result of these restrictions upon remedies available in civil contempt proceedings, the court is limited, in devising remedies for the defendant's contumacious conduct, to assessing the defendant to compensate Time Warner for damages it has incurred as the result of the defendant's contumacy and to imposing a fine or imprisonment for remedial purposes intended to coerce the defendant to do what the court finds he still refuses to do. Thus, if the court finds that the defendant is not continuing in his contumacious conduct, no penalty other than compensatory damages may be imposed. In civil contempt, the party fined or imprisoned must "'carry the keys of their prison in their own pockets.'" Penfield Co. of California v. SEC, 330 U.S. 585, 590, 91 L. Ed. 1117, 67 S. Ct. 918 (1947) (quoting In re Nevitt, 117 F. 448, 461 (8th Cir. 1902)). In other words, any fine imposed on Mr. Yeh must be contingent on his doing, or ceasing to do, specific acts.
Damages Resulting from Importation of Descramblers
It is undisputed that William Yeh took decisive steps to import approximately 8,500 illegal descrambler devices in violation of the Consent Judgment's specific prohibition of those actions. Judgment at 5. It is also undisputed that Time Warner took possession of all these descrambler devices before any sales were made to any end-users in its franchise areas who could have used the devices to obtain access to services for which they had not paid. The parties dispute whether a sale was or was not completed to another distributor of descramblers, Cable Box Wholesalers, but it is undisputed that Yeh at least attempted to sell 4,000 descramblers to that distributor.
In International Cablevision, Inc. v. Sykes (Sykes II), 75 F.3d 123, 1996 U.S. App. LEXIS 1080, 1996 WL 32960 (2d Cir. 1996), the Court held that both 47 U.S.C. § 605 and § 553 provisions of relief were applicable to the sale of unauthorized cable descramblers. This resolved the question that had been raised, but not decided, by the court's earlier decision in the same case, Sykes I, 997 F.2d 998 (2d Cir. 1993), with regard to the applicability of § 605 relief to cable descrambler sales.
A violation of § 605(e)(4) occurs upon the distribution of a descrambler with knowledge (or reason to know) 'that the (descrambler) is primarily of assistance in the unauthorized decryption of satellite cable programming, or is intended for any other activity prohibited by § 605(a).' Thus, the act of distribution for either of the above purposes incurs the heavier penalties provided by § 605(e)(3)(C)(i)(II) [e.g, not less than $ 10,000 nor more than $ 100,000 per device], while the subsequent act of interception (or assistance in interception) is a violation of the third sentence of § 605(a) and incurs the lesser penalties provided by § 605(e)(3)(C)(i)(II) [e.g, not less than $ 1,000 nor more than $ 10,000 per device].