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Federal Court of Appeals Upholds Narrow Interpretation of Theft of Service Laws.
September 7, 2006
In an opinion issued in late August, the United States Court of Appeals for the First Circuit (covering Maine, Massachusetts, New Hampshire, Rhode Island, and Puerto Rico) upheld a lower court ruling against Charter Communications that applied a narrow interpretation to the Communications Act's theft of cable service provisions. Under this narrow interpretation, a cable operator that brings a single complaint against a defendant for multiple violations of the theft of service law is limited to a single award of statutory damages of no more than $10,000 (and possibly substantially less depending on the value of the service stolen).
Background. The Communications Act contains two separate provisions prohibiting theft of service: Section 705 (47 USC §605), which addresses the unauthorized use of "communication by radio" and Section 633 (47 USC §553), which addresses "unauthorized reception of cable service." While the two provisions are similar, Section 605 allows for the award of statutory damages in an amount between $1000 and $10,000 for each violation. In contrast, statutory damages under Section 553 are limited to between $250 and $10,000 for "all violations." In the Charter case, the lower court had held that (1) theft of cable service is covered only by Section 553, and not by Section 605; (2) the $10,000 cap on statutory damages under Section 553 applies to all violations in the aggregate, not to each violation separately; and (3) a court may elect to consider only the value of service stolen (and not other factors) in deciding how much to award as statutory damages under Section 553. Charter appealed each of these conclusions.
Discussion. The Court of Appeals upheld each element of the lower court's decision. First, the Court of Appeals found that because Section 605 applies to communications by radio, rather than communications by wire, it does not cover theft of cable service. The Court acknowledged that a few decisions in the early 1980s had held that Section 605 was applicable to theft of cable service, but ruled that those decisions pre-dated amendments to the Communications Act that (a) adopted Section 553 as a separate provision specifically aimed at cable theft and (b) amended Section 605 to make it specifically applicable to theft of satellite delivered services.
With respect to the issue of damages, the Court of Appeals concluded that the plain language of Section 553 imposed a $10,000 limit on "all violations" rather than on each violation. Although the effect of the decision is that cable theft of service is not as severely punished as theft of satellite service, the Court found that it was up to Congress, not the courts, to equalize the treatment of the two industries. The Court also pointed out that a cable operator could choose to file separate complaints for each violation in order to increase the amount of damages it might recover.
Finally, the Court of Appeals rejected Charter's argument that, in deciding the specific amount of statutory damages to award in a particular case (i.e., between $250 and $10,000), a court is required to consider not only the value of the cable service stolen, but also other factors such as injury to the operator's goodwill and its future growth and profitability, injury to the quality of service received by the operator's paying customers, and the need for a damage award that will be large enough to deter future acts of cable piracy. The Court of Appeals rejected Charter's arguments, holding that it was permissible for a court to look only to the value of the cable service stolen in setting the amount of statutory damages that the defendant has to pay the operator.
As noted, some older cases adopted a more expansive interpretation of the theft of service provisions. However, the First Circuit's decision appears to be in line with other more recent decisions, particularly with respect to the first two issues. While it may be too late for the cable industry to seek the addition of remedial language in the pending telecommunications legislation, it may be something that the industry will want to have Congress address in the future.
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