Cable service provider engaged in reverse passing off of DirecTV signal (and other bad acts)

Northeast Cable Televis., LLC v. DirecTV, LLC, 2019 WL
1767066, No. 18CV2559 (N.D. Ohio Apr. 22, 2019)
DirecTV’s satellite television service provides hundreds of
channels. For certain kinds of multiple-unit properties (usually a hotel or
motel, hospital, college dormitory, or individual office), DirecTV sometimes
provides service through a Satellite Master Antenna Television System”(SMATV). In
that case, the SMATV property owner or manager is the “customer.” DirecTV
charges monthly fees based on the type of property as well as the programming
ordered and the number of individual units with access to the programming. The
SMATV customer is prohibited from charging the individual viewers for DirecTV
programming, and from rebroadcasting, retransmitting, or reselling DirecTV
programming.  DirecTV sometimes
subcontracts with dealers, who may not themselves bill the properties for DirecTV
programming except in rare cases.
Northeast Cable’s principal Pezzenti represented that, in
2003, he was approached by a representative of an authorized DirecTV dealer, which
proposed an arrangement according to which Northeast Cable would transmit DirecTV
programming to 14 multi-unit properties in Ohio and pay the bills to DirecTV on
the properties’ behalf. Northeast Cable thus entered “service agreements” with
14 properties in which it charged a monthly fee in exchange for providing
necessary equipment, performing maintenance, and paying DirecTV’s programming
bill each month. On SMATV Viewing Agreements with DirecTV, Pezzenti or
Northeast Cable usually listed itself as the “authorized customer,” “general
manager,” or something similar.
Northeast Cable routinely bills about $4,300 to $4,500 per
month for one property, whereas DirecTV would have billed the properties at about
$1,400 to $1,600 per month if it had billed directly [maybe for the reported
number of units], and the greater expense seems to be the general rule. DirecTV
further alleged that Northeast Cable vastly underreported the number of units
receiving programming service at the SMATV properties, for example reporting 25
units when DirecTV’s own investigation uncovered 127 active units.  Further, in two cases, it broadcast DirecTV
programming from one SMATV property to another non-SMATV property.
Northeast Cable also allegedly held itself out as the SMATV
properties’ “cable television programming provider,” omitting any reference to DirecTV.
For example, one ad says, “Are you overpaying? Why pay double to watch the same
channels? Call Northeast Cable today! Ditch the dish and get the same channels
for half price.” Northeast Cable also distributed a “TV Channel Selection Guide,”
listing the channels available through Northeast Cable without any indication
that DirecTV was the true source of the programming. In letters to residents,
Northeast Cable described itself as “your cable television service provider.” [Seems
like a Dastar issue, testing the
difference between goods and services.]
Under 47 U.S.C. § 605(a), “[N]o person receiving, assisting
in receiving, transmitting, or assisting in transmitting, any interstate or
foreign communication by wire or radio shall divulge or publish the existence, contents,
substance, purport, effect, or meaning thereof, except through authorized
channels of transmission or reception…to any person other than the addressee,
his agent, or attorney….” “[A]n entity violates § 605(a) if it transmits a
television signal to viewers other than those intended by the sender, even if
that entity is authorized to transmit the signal to some other viewers.” That was
what was happening here.  47 U.S.C. §
553(a) further provides that “No person shall intercept or receive or assist in
intercepting or receiving any communications 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.” Ditto.
Under the Electronic Communications Privacy Act, 18 U.S.C. §
2511(1), “it is illegal to intentionally intercept electronic communications.” “Northeast
Cable acquired DirecTV’s programming signal by representing itself as a
legitimate SMATV customer even though it was not ‘the owner or manager of the
business entity.’” And here I breathe a partial sigh of relief, because even
though this is not good conduct, calling that “interception” seems to create
the same problem as broad interpretations of the CFAA: the court said that it
wasn’t clear that this misrepresentation was interception.  However, with respect to retransmitting the
signal from contractually covered to uncovered properties via microwave and
underground cable, the court viewed this as “patently” in violation of the
ECPA.  I don’t know why that’s interception
as opposed to reception by someone authorized to receive it and retransmission
in excess of that authorization, especially given the statutory sections above
already covering the problem, but then again this is not my field.  The cited case, Luis v. Zang, 833 F.3d 619 (6th
Cir. 2016), is about someone who shouldn’t have been receiving the transmission
in the first place (spyware).
Lanham Act false designation of origin: it’s reverse passing
off! “Until recently, SMATV property owners and managers understood Northeast
Cable to be their programming provider and were unaware (in some cases) that DirecTV
was at all involved in their programming…. The harm to DirecTV is apparent:
Northeast Cable’s deception deprives DirecTV of revenues and business
relationships it otherwise would likely enjoy.”
False advertising: it was false for Northeast Cable to hold
itself out as “your cable television service provider,” and to represent that
subscribers would “[d]itch the dish” when they “subscribe” to Northeast Cable,
because the programming with Northeast Cable came from DirecTV’s satellite dish
service. The court skipped over materiality and reiterated that “Northeast
Cable’s deception deprives DirecTV of revenues and business relationships it
otherwise would likely enjoy,” which is … not actually the false advertising liability
standard. 
Common-law fraud: Northeast Cable’s representation of itself
as the “customer,” specifically, as a “property owner or manager” in SMATV
Viewing Agreements with DirecTV; representations that most of its properties
had 20 to 25 units even though many of them had dozens or hundreds; and use of
signal from elsewhere to support new properties were fraudulent.
Tortious interference: “The properties had SMATV contracts
with DirecTV, whether they knew it or not.” Northeast Cable deliberately caused
those properties to breach their contracts with DirecTV by “encouraging and
instructing the properties to charge residents individually for their
television programming…. And but for Northeast Cable’s involvement, DirecTV
would likely have enjoyed greater revenues and better business relationships
with the SMATV properties.”  [This doesn’t
quite match up with the “Northeast Cable charged more than DirecTV would have”
statements above, but it could easily be the case that DirecTV would have
charged less per any given number of units.]
Unjust enrichment: that too.
Irreparable harm: This proceeding and the underlying
investigation has damaged Northeast Cable’s reputation.  Further, the “relationship” between Northeast
Cable and DirecTV is “going to end…once this litigation is over” and Northeast
Cable will cease doing business at that time. “In the meantime, absent an
injunction, DirecTV will be tied to a sinking ship. … As Northeast Cable’s
reputation suffers, so too will DirecTV’s reputation, not just with individual
viewers and property owners and managers, but also with authorized dealers and
content distributors.”  [I’m not so sure
that follows.  It’s pretty clear from all
this that DirecTV is not responsible for the hinky stuff, and it appears to
have communicated that to the property managers here; the customers, as the
court pointed out, didn’t even know they were getting DirecTV. The remaining
arguments are far more persuasive.]
Although revenue lost from fraud is ordinarily compensable
with money damages, “DirecTV understandably lacks confidence that all
properties and all units have now been accounted for and that all corresponding
damages will be recoverable down the road.” 
And DirecTV might have legal and regulatory exposure in the meantime: it
has contractual obligations to accurately compensate content providers
according to the total number of viewers, and possibly regulatory obligations
to maintain accurate records of its programming transmissions. “As long as DirecTV
continues to pay its content providers according to Northeast Cable’s
disorganized and deflated reports, it may be exposed to legal and regulatory
enforcement.”  Plus, Northeast Cable is
going out of business and the injury may be irreparable because it can’t pay damages.

from Blogger http://bit.ly/2UOssVR

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