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TIME WARNER CABLE OF NEW YORK CITY v. U.S. CABLE T

March 7, 1996

TIME WARNER CABLE of NEW YORK CITY, a division of Time Warner Entertainment Company, L.P., Plaintiff, against U.S. CABLE T.V., INC. d/b/a U.S. CABLE TV, ZENTEK CORP., WILLIAM C. YEH, KAREN YEH, THEODORE ORLANDO, JOHN DOES 1-10, JANE DOES 1-10, UNIDENTIFIED CORPORATIONS 1-10 and UNIDENTIFIED BUSINESS ENTITIES 1-10, Defendants.


The opinion of the court was delivered by: TRAGER

 TRAGER, District Judge:

 This order, concerned with the distribution of unauthorized cable descrambling devices in violation of 47 U.S.C. §§ 553 and 605, finds defendants William Yeh, U.S. Cable T.V., and Zentek to have been in civil contempt of a Consent Judgment entered by this court on July 26, 1995 and assesses compensatory damages in the amount of $ 7,440,000 plus attorneys' fees and costs. It also orders plaintiff to accept a ten-year term on an otherwise mutually acceptable, revised permanent injunction.

 Background

 Procedural History

 On July 14, 1995 a complaint was filed by Time Warner Cable of New York (Time Warner) against two corporations, U.S. Cable and Zentek Corp. and their president, William Yeh, as well as some other individuals not involved in the present matter. As William Yeh effectively is U.S. Cable and Zentek, the court's references to him and to 'defendant' will, also, as appropriate, apply to those corporations. On July 18, 1995, this court granted Time Warner, ex parte, a Temporary Restraining Order authorizing seizure of business records, illicit sales proceeds and statutorily prohibited decoding devices. (The defendant corporations sold unauthorized descramblers, also called decoders, capable of translating encrypted signals received over cable wires. These devices are used by cable subscribers who pay only the basic fee to access premium and pay per view channels without additional payment to their cable company.)

 On July 26, 1995, this court so ordered the parties' final Consent Judgment/permanent injunction, under which the defendants, William Yeh, U.S. Cable T.V. and Zentek, paid Time Warner $ 1,050,000 and they, "any of their servants, agents, employees, successors, assigns, affiliates and persons and/or entities acting on their behalf or acting in concert with them" were enjoined from:

 
(a) engaging in or assisting in the unauthorized interception of cable telecommunication programming services or signals (whether being transmitted to or from a cable television system through air or wire);
 
(b) connecting, attaching, splicing into, tampering with or in any way using the cable wires or facilities of [Time Warner] for the purpose of gaining access to any cable television telecommunications programming services or signals without [Time Warner]'s express written authorization; and (c) manufacturing, selling, offering for sale, advertising for sale, distributing, importing, exporting, assembling, purchasing, transferring, obtaining, modifying, storing, or possessing any electronic equipment capable of descrambling (or equipment designed for descrambling purposes), intercepting, receiving, transmitting, retransmitting, or capable of making available all or part of any cable television telecommunication programming services or signals (whether being transmitted to or from cable television systems through the air or wire) without further Order of this Court . . .

 This Consent Judgment settled actions pending in state and federal courts in Alabama in addition to the case before this court.

 On October 13, 1995, the court received testimony and documentary and physical evidence related to the activities that constituted the contempt for the purpose of determining damages. The parties also presented argument with regard to the appropriate measure of damages. Both parties submitted additional evidence following their appearances before the court. Plaintiff submitted an advertisement that appeared in the September 1995 Popular Mechanics magazine, advertising U.S. Cable's 800 number. The plaintiff also submitted documentation of its fees and costs. The defendant submitted U.S. Cables' telephone charges for its 800 number for the months immediately prior to its sale and an affidavit by Gary Curran regarding the attempted sale of descramblers in August. This evidence has been reviewed by the court, as have the parties' written analyses and discussions of the submissions.

 Contumacious Conduct

 Importation and Proposed Sale of Descramblers to Cable Box Wholesalers

 Despite the terms of the permanent injunction contained in the settlement agreement so ordered by this court, in August 1995, Mr. Yeh decided to complete the importation of 8,500 Super Pioneer descramblers, ordered prior to the Consent Judgment, that were then being held in customs, paying a balance due of $ 25,000. He then attempted to distribute them to other sellers of unauthorized descramblers. He testified that he considered other alternatives such as returning the descramblers to their manufacturers. Although he may well have considered such an option, it is undisputed that, in the end, he rejected it. Yeh at 87, 109-13.

 The customs documents indicate that one shipment of sixty-nine cartons arrived July 6, 1995 and was accepted August 9, 1995, while another, of 150 cartons, was accepted August 11, 1995. Ex. 8-A & 8-B, T. Allen at 75-78. Mr. Yeh's testimony that placed the acceptance at August 20, 1995 is simply unsupported by the documentary evidence and, even if true, would not lessen the offense of importation of the illegal devices contrary to the Consent Judgment. Yeh at 111-12.

 The U.S. Cable general manager, Kim Vigil, inventoried the shipment, verified its condition, and then accepted the descramblers on behalf of U.S. Cable at the customs broker's warehouse. Vigil at 45. Yeh arranged for the sale of 4,000 descramblers to Cable Box Wholesalers (Cable Box), another descrambler merchant. He arranged with Vigil for Gary Curran, the president of Cable Box, to come inspect the descramblers, and, if Curran accepted them, to have him pay with a bank check. Vigil at 43-46, Yeh 105-09.

 Unknown to Yeh, following the original seizure of U.S. Cable equipment on July 20, 1995, Vigil had informed Time-Warner's investigation agency, ACI, about Yeh's clearing this shipment through customs and his proposed sale of a portion of it to Gary Curran of Cable Box. Vigil at 33. ACI paid Ms. Vigil a total of $ 4,500 as an "informant fee," in two wire transfers, one dated August 23, 1995 and another August 31, 1995. Pltf. Affirm. of Costs, Ex. G. No evidence was presented, either at the hearing or thereafter, as to the nature of Vigil's agreement with Time Warner's investigators.

 On August 23, 1995, the U.S. Marshal for the Southern District of Florida, pursuant to the order granted by this court on August 22, seized 8,500 descramblers held for U.S. Cable at a Customs Service International warehouse. The marshals also seized a check made payable to Zentek Corp., another of Yeh's corporations and also a defendant here.

 Time Warner represents that Curran had approved the purchase for Cable Box and was headed for his car to pick up the check to render payment when he and the check were seized by the marshals. Defendant represents that Curran had not accepted the offer at the time of the seizure of the check. Defendant has submitted affidavits, first, from an attorney for Cable Box Wholesalers, and, post-hearing, from Curran himself, to that effect. In these affidavits, it is alleged that the marshal's search of Curran and seizure of the Cable Box' bank check from a locked briefcase inside a locked car was beyond the scope of the order and, hence, unconstitutional. The attorney's affidavit asserts that Curran was only returning to his car to obtain a knife to open the boxes and had not yet determined to purchase the descramblers. Def. Aff., dated September 15, 1995, Ex. A. After the hearing, defendant submitted an affidavit from Curran himself, essentially confirming the description of the transaction provided by his attorney. In addition, Curran's affidavit contains a number of self-serving statements with regard to Curran's lack of knowledge that his intended purchases were illegal that the court finds not credible in view of Cable Box's established business selling unauthorized cable descramblers. Id. PP 7-8. See Pltf. Ex. 4, Cable Box catalogue.

 Following the seizure, Time Warner purchased a Super Pioneer descrambler from Cable Box for use in Time Warner's franchise area, the same model that was offered to Gary Curran of Cable Box at the customs warehouse in Florida. Time Warner offered documentary evidence to establish that three percent of Cable Box' sales were directed to Time Warner's franchisees. Pltf. Ex. 9.

 Transfer of Telemarketing Component of U.S. Cable to M.D. Electronics

 As part of Time Warner's investigation of defendant's compliance with the Consent Judgment, its investigator called U.S. Cable's 800 number. This call elicited a recorded message directing the caller to M.D. Electronics, and, in fact, connecting the caller to M.D. Electronics by simply pressing one button. B. Allen at 69. M.D. Electronics' catalog was provided as evidence that this company was also engaged in the sale of descramblers. Pltf. Ex. 6. Further testing to determine whether M.D. Electronics sold descramblers, the investigator purchased and obtained delivery of descramblers for use in Time Warner's franchise areas from the company. The M.D. Electronics salespersons ...


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