DirecTV, Inc. v. Rawlins

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

DIRECTV, INCORPORATED, 

Plaintiff-Appellant,

v.  No. 06-1430

JOHN J. RAWLINS,

Defendant-Appellee.



Appeal from the United States District Court

for the Western District of North Carolina, at Statesville.

Richard L. Voorhees, District Judge.

(5:04-cv-00129)

Argued: December 7, 2007

Decided: April 21, 2008

Before DUNCAN, Circuit Judge, HAMILTON,

Senior Circuit Judge, and Catherine C. BLAKE,

United States District Judge for the District of Maryland,

sitting by designation.

Vacated and remanded by published opinion. Judge Duncan wrote the

opinion, in which Senior Judge Hamilton joined. Judge Blake wrote

a separate concurring opinion.

COUNSEL

ARGUED: Howard Robert Rubin, SONNENSCHEIN, NATH &

ROSENTHAL, L.L.P., Washington, D.C., for Appellant. Ray Martin

Kline, Raleigh, North Carolina, for Appellee. ON BRIEF: Samuel

2 DIRECTV, INC. v. RAWLINS

Bryant Davidoff, SONNENSCHEIN, NATH & ROSENTHAL,

L.L.P., Washington, D.C., for Appellant.

OPINION

DUNCAN, Circuit Judge:

Appellant DIRECTV, Inc. ("DIRECTV"), a satellite television ser-

vice provider, commenced this action in the Western District of North

Carolina against appellee John Rawlins. DIRECTV alleged that

Rawlins utilized illegal devices to access DIRECTV television pro-

gramming beyond the level of his paid subscription in violation of, as

relevant here, the Cable Communications Policy Act of 1984 (the

"Cable Act"), 47 U.S.C. § 605(a), and the Electronic Communications

Privacy Act of 1986 (the "Wiretap Act"), 18 U.S.C. § 2511. After

Rawlins failed to respond, the district court entered default judgment

against him under both statutes. The court permanently enjoined

Rawlins from continuing to violate the laws and awarded DIRECTV

attorney’s fees and costs. However, the court declined to award the

statutory damages DIRECTV requested under either of the relevant

statutory provisions.

On appeal, DIRECTV challenges only the district court’s denial of

statutory damages under the Wiretap Act. Finding that the district

court abused its discretion, we vacate the judgment and remand for

further proceedings consistent with this opinion.

I.

This litigation arises in the wake of recent dramatic technological

changes in the home entertainment industry, a brief description of

which provides the context for our decision here. DIRECTV provides

satellite television programming to its customers through subscription

services and pay-per-view options. Programming content is distrib-

uted to customers via encrypted (i.e., scrambled) signals, which are

sent to satellite dishes, decrypted by receivers, and then delivered to

customers’ televisions. DIRECTV manages the amount and type of

content provided to customers by the use of "access cards," small

DIRECTV, INC. v. RAWLINS 3

credit card-sized devices containing chips that instruct receivers to

decrypt only those signals covered by individual customers’ subscrip-

tion packages. These access cards also monitor customers’ pay-per-

view purchases.

This method of home television viewing is a fairly recent innova-

tion. See H.R. Rep. No. 100-887(II), at 10 (1988), reprinted in 1988

U.S.C.C.A.N. 5577, 5639 (discussing history of satellite-relayed cable

programming). In 1975, Home Box Office Inc. ("HBO") began deliv-

ering movies to cable television operators via satellite. These cable

operators would pay HBO, and later other satellite carriers, per-

subscriber fees for access to their signals, and then deliver the signals

to subscribers over cable wire. Problems arose after technological

advances enabled owners of backyard satellite dishes to receive satel-

lite carriers’ signals directly, without paying the carriers or the cable

operators. The legality of this practice was immediately challenged.

Though not explicitly prohibited by statute, the practice was consid-

ered illegal by the Federal Communications Commission ("FCC") and

held by several courts to be a prohibited use of satellite signal. How-

ever, satellite carriers were not content to rely on the legal system to

prevent this type of access to their signal. Thus, they began using

encryption technology and providing decryption capacity only to pay-

ing customers, effectively cutting off access to others. Id.

In 1984, the Cable Act was enacted, clarifying the law respecting

use of this technology. It legalized the sale and use of backyard

dishes, authorized owners of these dishes to receive unencrypted sig-

nals under certain circumstances, and increased penalties for unautho-

rized signal reception, including the reception of encrypted signals.

Two years later, Congress passed the Wiretap Act to enhance Federal

privacy protection in the rapidly evolving telecommunications indus-

try. See 132 Cong. Rec. S14441-04 (daily ed. Oct. 1, 1986) (statement

of Sen. Leahy) (describing the need for updates to the then-existing

law in light of technological advances and the cumbersome structure

of the telecommunications industry). In the years following the pas-

sage of these Acts, satellite television became a multi-billion dollar

business. As the industry grew, so too did efforts to gain unauthorized

access to its programming.

DIRECTV entered the market in 1994, providing, as an alternative

to cable television, all-digital multi-channel television programming

4 DIRECTV, INC. v. RAWLINS

delivered directly to home viewers via satellite. Before long, techno-

logically sophisticated scofflaws found methods for reprogramming

or replacing DIRECTV access cards with illicit decoder technology

that allowed home viewers, or "end-users," to gain access to

DIRECTV programming without payment. In response, DIRECTV

developed electronic counter-measures, including, for example, trans-

mitting occasional bursts of data that had the effect of disabling unau-

thorized access cards without harming legitimate DIRECTV access

cards. In short order, however, a market emerged around the design

and sale of illegal "pirate access devices," which restore the ability of

disabled access cards to unscramble DIRECTV’s encrypted signals or

otherwise allow their users to gain access to DIRECTV’s signal with-

out payment.

In addition to availing itself of technological remedies, DIRECTV

has increasingly turned to the legal system. Utilizing civil enforce-

ment mechanisms contained in the Cable Act and the Wiretap Act,

DIRECTV has aimed to curb piracy by filing complaints against

alleged violators, seeking injunctive relief, damages, attorney’s fees

and costs. To date, DIRECTV has initiated anti-fraud and anti-piracy

enforcement actions against more than 25,000 defendants. See

DIRECTV, Inc. v. Hoa Huynh, 503 F.3d 847, 850 (9th Cir. 2007) (cit-

ing website maintained by DIRECTV chronicling its anti-piracy liti-

gation efforts). The case before us is one such action.

II.

On December 1, 2001, and January 28, 2002, with the assistance

of the United States Marshals Service, DIRECTV executed writs of

seizure on "The Computer Shanty" and "EQ Stuff," two alleged sell-

ers of pirate access devices. Among the items confiscated were busi-

ness records that implicated Rawlins, among others. According to the

seized records, Rawlins purchased the following illegal devices from

The Computer Shanty: one "Netsignia 210 Programmer," one

"ULPRO X Super Unlooper," and one "ULTCOMBO," which con-

sists of a "Shanty Unlooper," a "Shanty PS2 Blue Emulator," a

"Shanty Programmer," and a "Shanty Bootloader."1 From EQ Stuff,

1

A "Programmer" is a device used to clone or program an access card

to receive unauthorized programming. An "Unlooper" is used to restore

DIRECTV, INC. v. RAWLINS 5

Rawlins purchased one "EQ Zapulator" (a type of emulator) and one

"EQ Amtel Programmer." Rawlins had each of these devices shipped

to Charlotte, North Carolina, and used them to display and view

DIRECTV programming without authorization. Rawlins paid a total

of $852.00 for these devices. See J.A. 42-44.

On the basis of this information, DIRECTV filed a civil complaint

against Rawlins on September 3, 2004, alleging, inter alia, violations

of the Cable Act and Wiretap Act. When Rawlins failed to appear, the

clerk entered Rawlins’s default upon DIRECTV’s motion.2

DIRECTV thereafter moved for default judgment, seeking a perma-

nent injunction, statutory damages,3 attorney’s fees and costs. On

March 8, 2006, the district court granted the motion for summary

judgment with respect to DIRECTV’s Cable Act and Wiretap Act

claims.4

functionality to illegally modified access cards that were disabled by

misuse or by DIRECTV’s electronic counter-measures. An "Emulator"

links an access card slot on a DIRECTV receiver to a personal computer,

allowing the user to run software on the computer to emulate the func-

tions of an access card without susceptibility to DIRECTV’s electronic

counter-measures. A "Bootloader" allows the user to circumvent certain

electronic counter-measures deployed by DIRECTV to disable unautho-

rized access cards. See J.A. 36-39 (Whalen Aff. at 12-15).

2

Due to Rawlins’s default, we accept DIRECTV’s allegations against

him as true. See Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780

(4th Cir. 2001) ("The defendant, by his default, admits the plaintiff’s

well-pleaded allegations of fact, is concluded on those facts by the judg-

ment, and is barred from contesting on appeal the facts thus estab-

lished.").

3

DIRECTV moved for statutory damages only, and not for actual dam-

ages, because Rawlins’s default made it difficult for DIRECTV to prove

actual damages. We also note that, in its motion for default judgment,

DIRECTV prayed for $10,000 in statutory damages but did not specify

whether it believed such damages should be awarded under the Cable

Act or the Wiretap Act. In its supplemental memorandum in support of

its motion, however, DIRECTV explained that it was seeking an award

under the statutory damage provisions of both Acts, presumably in the

alternative.

4

The district court denied default judgment on a claim against Rawlins

for willfully assembling or modifying devices or equipment, brought pur-

suant to 47 U.S.C. § 605(e)(4). DIRECTV did not appeal this denial.

DIRECTV also included various state law claims in its complaint, but

abandoned these when moving for default judgment.

6 DIRECTV, INC. v. RAWLINS

Turning to the requested relief, the court permanently enjoined

Rawlins from violating 47 U.S.C. § 605(a) or 18 U.S.C. § 2511, and

awarded DIRECTV costs and fees in the total amount of $556.96.

The district court did not, however, grant DIRECTV statutory dam-

ages under either Act. Relying on the plain language in each statute,

the court found that, under the Cable Act, "[t]he award of statutory

damages . . . is committed to the Court’s discretion," and that, under

the Wiretap Act, a court likewise "may, in its discretion, refuse to

award any damages." J.A. 73, 67; see Nalley v. Nalley, 53 F.3d 649,

650 (4th Cir. 1995) (holding that the Wiretap Act "gives the district

court discretion to decline to award damages even though a violation

may have occurred."). Though the court recognized that "an award of

statutory damages [under the Wiretap Act] may serve the legitimate

and useful purpose of deterrence," it found "that this purpose can be

met by an award of costs and attorneys’ fees" on the particular facts

of this case. J.A. 68. The court similarly declined to award statutory

damages under the Cable Act, finding injunctive relief, costs, and fees

to be "sufficient deterrents." J.A. 74.

On appeal, DIRECTV seeks review only of the district court’s

refusal to award statutory damages under the Wiretap Act, 18 U.S.C.

§ 2520(c)(2). Significantly, DIRECTV did not appeal the denial of

damages under the Cable Act, 47 U.S.C. § 605(e)(3)(C)(I)-(II), and

acknowledged at oral argument that the district court did not abuse its

discretion in that regard. We review the district court’s denial of statu-

tory damages under the Wiretap Act for abuse of discretion. See Nal-

ley, 53 F.3d at 654. A district court abuses its discretion if it fails

"adequately to take into account judicially recognized factors con-

straining its exercise," or if it bases its exercise of discretion on an

erroneous factual or legal premise. James v. Jacobson, 6 F.3d 233,

239 (4th Cir. 1993).

III.

DIRECTV raises two principal arguments on appeal. First, it

argues that the Wiretap Act only grants discretion to a district court

to decline to award damages for de minimis violations of the statute.

See Appellant’s Br. at 20 (citing Nalley, 53 F.3d at 653). Second,

DIRECTV argues that, to the extent the district court did have discre-

tion to decline to award damages, it abused such discretion by relying

DIRECTV, INC. v. RAWLINS 7

on improper considerations and failing to recognize the severity of

Rawlins’s violation of the statute.

A.

Analysis of these arguments begins, as it must, with the language

of the underlying statutes.5 The Cable Act prohibits the unauthorized

reception of DIRECTV’s encrypted signal by end-users, 47 U.S.C.

§ 605(a), and the manufacture, assembly, modification, importation,

exportation, sale, or distribution of devices or equipment used to

assist end-users in such unauthorized reception, id. § 605(e)(4). In

addition to imposing criminal liability, the Cable Act also allows an

aggrieved party such as DIRECTV to elect to recover either actual or

statutory damages for violations of these provisions. Id.

§ 605(e)(3)(C)(i). For those seeking statutory damages, as DIRECTV

did in this case, the Cable Act sets forth a two-tiered penalty system.

The relevant portion of the Cable Act provides:

[T]he party aggrieved may recover an award of statutory

damages for each violation of [§ 605(a)] involved in the

action in a sum of not less than $1,000 or more than

$10,000, as the court considers just, and for each violation

of [§ 605(e)(4)] involved in the action an aggrieved party

may recover statutory damages in a sum not less than

$10,000, or more than $100,000, as the court considers just.

Id. § 605(e)(3)(C)(i)(II) (emphasis added). In other words, end-users

who violate the Cable Act are subject to awards of statutory damages

of $1,000 to $10,000 per violation, while manufacturers, program-

mers, sellers, and others facilitating such conduct face statutory dam-

age awards of $10,000 to $100,000 per violation.6

5

Though DIRECTV appeals only the district court’s decision with

respect to the Wiretap Act, we find it prudent to discuss the Cable Act

and Wiretap Act in conjunction here to provide the complete statutory

backdrop to the district court’s analysis.

6

This court previously held, in an unpublished opinion, "that

§ 605(e)(4) does not categorically exempt individual users." DIRECTV,

Inc. v. Pernites, 200 F. App’x 257, 258 (4th Cir. 2006) (per curiam). We

8 DIRECTV, INC. v. RAWLINS

Such acts of piracy also violate the independent statutory scheme

embodied in the Wiretap Act. The Wiretap Act subjects to criminal

punishment "any person who . . . intentionally intercepts, endeavors

to intercept, or procures any other person to intercept or endeavor to

intercept, any wire, oral, or other electronic communication." 18

U.S.C. § 2511(1)(a). With limited exceptions not applicable here, the

Wiretap Act, like the Cable Act, also provides a civil remedy to any

party aggrieved by a violation of § 2511. Id. § 2520(a). The aggrieved

party "may in a civil action recover . . . such relief as may be appro-

priate," § 2520(a), which includes appropriate declaratory or equitable

relief, damages, and reasonable attorney’s fees and costs, § 2520(b).

The Wiretap Act’s civil damages provision, in turn, is divided into

two parts. The first provides that if the violation involved is "the pri-

vate viewing of a private satellite video communication that is not

scrambled or encrypted . . . then the court shall assess" actual dam-

ages or statutory damages in an amount ranging from $50 to $1,000.

Id. § 2520(c)(1) (emphasis added). The second part provides that,

[i]n any other action under this section [including those

involving encrypted communications], the court may assess

as damages whichever is the greater of—

offer no opinion here regarding the issue addressed in Pernites—whether

§ 605(e)(4) might properly be applied to end-users like Rawlins. Many

courts have held that § 605(e)(4) targets only upstream manufacturers

and distributors and not the ultimate consumers of pirating devices. See

Hoa Huynh, 503 F.3d at 855 (collecting cases); DIRECTV, Inc. v. Nez-

nak, 371 F. Supp. 2d 130, 133 (D. Conn. 2005); DIRECTV, Inc. v.

Albright, No. Civ.A. 03-4603, 2003 WL 22956416, at *2 (E.D. Pa. Dec.

9, 2003); DIRECTV, Inc. v. Borich, No. Civ.A. 1:03-2146, 2004 WL

2359414, at *3 (S.D. W.Va. Sept. 17, 2004). Other courts have taken the

view this court found persuasive in Pernites. See DIRECTV, Inc. v. Rob-

son, 420 F.3d 532, 543-44 (5th Cir. 2005). In this case, DIRECTV

brought a claim under § 605(e)(4) and moved for default judgment on the

claim. The district court denied the motion, finding that § 605(e)(4) tar-

geted only upstream manufacturers and distributors, citing Borich but

failing to mention Pernites. J.A. 70. DIRECTV did not appeal the denial

of this claim, and we will therefore not address it.

DIRECTV, INC. v. RAWLINS 9

(A) the sum of the actual damages suffered by the

plaintiff and any profits made by the violator as a

result of the violation; or

(B) statutory damages of whichever is the greater

of $100 a day for each day of violation or $10,000.

Id. § 2520(c)(2) (emphasis added). Because it is the interception of

DIRECTV’s encrypted satellite signal that is at issue in this case,

§ 2520(c)(2) controls the award of statutory damages.

This court has recognized, consistent with the language of the stat-

ute and with the views of the majority of our sister circuits, that the

award of damages under § 2520(c)(2) is discretionary. See Nalley, 53

F.3d at 652-53; see also DIRECTV, Inc. v. Brown, 371 F.3d 814, 818

(11th Cir. 2004); Dorris v. Absher, 179 F.3d 420, 429 (6th Cir. 1999);

Reynolds v. Spears, 93 F.3d 428, 435 (8th Cir. 1996). But see Rodgers

v. Wood, 910 F.2d 444, 448 (7th Cir. 1990).7 The proper parameters

7

When a court does award damages under § 2520(c)(2), the statute

requires that the award amount to at least $10,000. The Sixth Circuit has

provided a helpful description of the workings of the statute, in the form

of step-by-step guidance to district courts:

(1) The court should first determine the amount of actual dam-

ages to the plaintiff plus the profits derived by the violator, if

any. See 18 U.S.C. § 2520(c)(2)(A).

(2) The court should next ascertain the number of days that the

statute was violated, and multiply by $100. See 18 U.S.C.

§ 2520(c)(2)(B).

(3) The court should then tentatively award the plaintiff the

greater of the above two amounts, unless each is less than

$10,000, in which case $10,000 is to be the presumed award. See

id.

(4) Finally, the court should exercise its discretion to determine

whether the plaintiff should receive any damages at all in the

case before it. See 18 U.S.C. § 2520(c)(2).

Dorris, 179 F.3d at 430. In no case will a court reach step three and con-

clude that the tentative award under § 2520(c)(2) is less than $10,000.

Therefore, where, as here, a plaintiff seeks the statutory minimum

amount of $10,000, the only relevant step from the procedure outlined

in Dorris is the fourth step: the district court’s exercise of "its discretion

to determine whether the plaintiff should receive any damages at all." Id.

10 DIRECTV, INC. v. RAWLINS

of this discretion form the crux of this appeal, and, therefore, it is to

those parameters that we now turn.

B.

DIRECTV first argues that our precedent in Nalley created a

bright-line test, making mandatory an award of damages under the

Wiretap Act for any violation of the statute that is not de minimis in

nature. Rawlins, on the other hand, insists that "Nalley stands for the

rule that any district cou[rt] may decline to award damages in any

case involving § 2520(c)(2)." Appellee’s Br. at 6 (emphasis added).

The facts of Nalley provide a useful backdrop to our consideration

of its applicability to the present case. In Nalley, a woman who

received an audiotape containing a telephone conversation between

her husband and a paramour played the tape for her children, her

attorney, and the paramour’s husband. The woman’s husband and his

lover sued his wife under the Wiretap Act, seeking statutory damages

of $10,000 for her intentional disclosure of the contents of their tele-

phone conversation, "knowing or having reason to know that the

information was obtained through [an unauthorized] interception."

Nalley, 53 F.3d at 650 (alteration in original) (quoting 18 U.S.C.

§ 2511(1)(c)). The wife stipulated to a one-day violation of the Wire-

tap Act, and the case proceeded to trial on the issue of damages. The

district court found the act of intentionally disclosing the contents of

the audiotape to be a de minimis violation of the Wiretap Act. Con-

cluding that it had discretion to decline to award damages under the

Wiretap Act, the district court awarded none. Nalley, 53 F.3d at 650.

Confronting an issue of first impression in the circuit, this court

decided that the Wiretap Act "gives the district court discretion to

decline to award damages even though a violation may have

occurred." Id. The Nalley decision was grounded in the language of

18 U.S.C. § 2520(c)(2), which states that "the court may assess . . .

damages," in an appropriate case (emphasis added). The court con-

trasted the language of § 2520(c)(2) with the mandatory language

appearing in § 2520(c)(1) (". . . the court shall assess damages . . . .")

(emphasis added). The court held, "To give this contrasting language

meaning, we must read § 2520(c)(2) to embody a congressional intent

to grant courts the discretion to decline to award damages in all but

DIRECTV, INC. v. RAWLINS 11

the particular circumstances covered by § 2520(c)(1), where Congress

clearly did not manifest an intent to confer such discretion." Nalley,

53 F.3d at 651.

DIRECTV would have us read Nalley as limiting the court’s dis-

cretion to decline to award damages under the Wiretap Act to de

minimis violations. Fairly read, however, the language of Nalley does

not support such a construction. It is not inferable solely from the fact

that the violation in that case was found to be de minimis that the

court’s discretion is circumscribed on that basis. Rather, the opinion

cites favorably a number of factors that weigh in the determination of

whether an award of damages is appropriate: the severity or minimal

nature of the violation; whether there was actual damage to the vic-

tim; the extent of any intrusion into the victim’s privacy; the relative

financial burdens of the parties; whether there was a reasonable pur-

pose for the violation; and whether there was any useful purpose to

be served by imposing the statutory damages amount. Nalley, 53 F.3d

at 654 (citing Reynolds v. Spears, 857 F. Supp. 1341, 1348 (W.D.

Ark. 1994), aff’d, 93 F.3d 436 (8th Cir. 1996)), and Shaver v. Shaver,

799 F. Supp. 576, 580 (E.D.N.C. 1992)); see also Dorris, 179 F.3d

at 430; DIRECTV, Inc. v. Guzzi, 308 F. Supp. 2d 788, 790 (E.D.

Mich. 2004).8 The invocation of such a range of criteria to govern the

court’s exercise of discretion refutes the argument that the existence

of more than de minimis harm alone suffices to strip the court of dis-

cretion. We therefore cannot agree that Nalley precludes the exercise

of discretion for non-de-minimis harms.

C.

In the alternative, DIRECTV argues that, to the extent the district

court had discretion under Nalley to decline to award damages, it

abused that discretion both by giving weight to improper consider-

ations and by failing to adequately consider several Nalley factors,

8

While Nalley may be read as merely alluding to these non-exclusive

factors, we find them to provide a useful framework for exploring the

equities at stake in a court’s exercise of discretion, and we therefore

adopt them here.

12 DIRECTV, INC. v. RAWLINS

including the severity of Rawlins’s piracy and the harm it exacted

upon DIRECTV.9 We agree.

The district court analyzed the claim for Wiretap Act damages as

follows:

In exercising [its] discretion [under the Wiretap Act] in the

instant case, the Court concludes that damages are not

appropriate. Aside from potentially receiving Directv’s sat-

ellite television programming for free of charge for a period

of time, there is no indication that Defendant otherwise prof-

ited from his conduct. There is no evidence that he used the

devices for commercial purposes or purchased the device for

resale. There are no allegations that Defendant induced oth-

ers to commit similar violations. Although Directv alleges

that "[t]he value of the programs that Defendant[ ] [was]

capable of viewing without authorization may easily reach

$100,000 in a single year," there is no allegation as to how

long Defendant actually used the devices or the dollar

amount Directv would have received in subscription fees but

did not obtain as a result of Defendant’s activity. There is

no evidence of the amount of Defendant’s actual personal

use of the devices. Therefore, the Court denies Directv’s

request for statutory damages arising from Defendant’s vio-

lation of [the Wiretap Act].

J.A. 67-68 (citation omitted) (alteration and emphasis in original).

The flaws in the district court’s analysis are manifest. First, the

analysis relies on a number of irrelevant factors. The Wiretap Act

criminalizes the actions of any person who "intentionally intercepts,

endeavors to intercept, or procures any other person to intercept" elec-

tronic communications. 18 U.S.C. § 2511(1)(a). It allows recovery in

a civil action brought by any person whose electronic communica-

tions are "intercepted, disclosed, or intentionally used." Id. § 2520(a);

DIRECTV, Inc. v. Nicholas, 403 F.3d 223, 228 (4th Cir. 2005). There-

9

Rawlins presents no cogent counterargument, except to repeat that the

district court should be granted wide discretion in its awarding of dam-

ages under the Wiretap Act.

DIRECTV, INC. v. RAWLINS 13

fore, the fact that Rawlins neither used the devices for commercial

purposes nor purchased them for resale is not germane to an analysis

of damages related to his patent violation of the statute.

The district court also gives weight to the lack of evidence to show

that Rawlins induced others to violate the Wiretap Act. Although such

a consideration might be relevant if Rawlins were charged with pro-

curing another person to intercept electronic communications under

the Wiretap Act, id. § 2511(1)(a), it has no apparent bearing on his

culpability for his own interception.10

Furthermore, the district court’s reasoning punishes DIRECTV for

gaps in evidence that are due solely to Rawlins’s default. For exam-

ple, the district court twice points to the lack of "evidence of the

amount of Defendant’s actual personal use of the devices." J.A. 67.

Such evidence would most easily be produced in defense by Rawlins,

not as part of DIRECTV’s case-in-chief. It is scarcely appropriate,

procedurally, to allow Rawlins to benefit from the paucity of evidence

attributable to his own default. To the contrary, by providing district

courts with the alternative of either actual or statutory damages, the

Wiretap Act provides a vehicle for awarding damages that does not

stall merely because the defendant has refused to participate in the

process.

10

The import of the concurring opinion, seemingly in this regard, is

opaque. It first suggests that the Whalen affidavit, which was submitted

with "Plaintiff’s Supplemental Memorandum of Law in Support of Its

Motion for Entry of Default Judgment Against Defendant Rawlins" spe-

cifically referred to by the district court in the opening paragraph of its

order, J.A. 62, and repeatedly described in Rawlins’s brief as having

been considered by the court, see Appellee’s Br. at 6-7, was somehow

"inadvertently overlooked." However, the only portion of III.C. with

which it apparently takes issue is the characterization of the evidence on

which the district court relies—that Rawlins neither used the pirated

devices for commercial purposes, nor purchased them for resale—as "ir-

relevant." The opinion fails to explain how it could be otherwise. The

language of the statute at issue criminalizes interception, not commercial

use or resale. 18 U.S.C. § 2511. We thus think it clear that our descrip-

tion of that evidence is well-founded, even in the absence of the guidance

we provide today.

14 DIRECTV, INC. v. RAWLINS

In that regard, the district court erred not only in what it did con-

sider, but in what it failed to consider in exercising its discretion.

Most troubling is the district court’s apparent failure to give much, if

any, weight to the affidavit of James F. Whalen, submitted by

DIRECTV. Whalen was the Senior Director in DIRECTV’s Office of

Signal Integrity, which investigated reports of theft of DIRECTV’s

satellite signal. His affidavit provided significant detail regarding

DIRECTV’s costs and billing practices, Rawlins’s account history,

and the particular devices Rawlins utilized. See J.A. 25-61. Such evi-

dence, standing uncontroverted by virtue of Rawlins’s default, cer-

tainly warranted careful consideration. See James, 6 F.3d at 239.

The Whalen affidavit is critical to DIRECTV’s claim for damages

precisely because it is probative of many of the Nalley factors that,

although never considered by the district court, should govern the

exercise of discretion to award damages under the Wiretap Act: the

severity of the violation; the degree of harm to the victim; the relative

financial burdens of the parties; and the purposes to be served by

imposing the statutory damages amount. See Nalley, 53 F.3d at 654.

The district court’s analysis is also troubling because of its failure to

adequately weigh any of these considerations. For example, it did not

analyze the severity of Rawlins’s violation of the Wiretap Act, despite

evidence in the Whalen affidavit detailing the extent of Rawlins’s

piracy. Similarly, the court paid no heed to the significant amounts

Rawlins expended for his pirating equipment, surely probative of his

ability to pay damages. Nor do we have the benefit of the district

court’s analysis into whether there would be a useful purpose to be

served by awarding the statutory amount in this case, as the court only

offered the bald assertion that the purpose of deterrence "can be met

by an award of costs and attorneys’ fees." J.A. 68.

On the whole, we also find the district court’s conclusion to be

incongruent with the seriousness of Congress’s approach to the inter-

ception of encrypted signals. See Nicholas, 403 F.3d at 227-28. In

Nicholas, this court held that a provider victimized by a violation of

18 U.S.C. § 2511(1) could bring a civil action against the violator. Id.

at 228. In so holding, the court noted Congress’s intent "that violators

who intercept encrypted transmissions, requiring greater technical

savvy and efforts, are to face greater punishments than those who take

DIRECTV, INC. v. RAWLINS 15

fewer measures in order to intercept nonencrypted transmissions." Id.

at 227.

For these reasons, we conclude that the district court abused its dis-

cretion in its approach to analyzing whether statutory damages should

have been awarded under 18 U.S.C. § 2520(c)(2).

IV.

Having determined that the district court erred in its analysis of

DIRECTV’s claim for damages under the Wiretap Act, we must

remand for a proper consideration of whether such damages should

be awarded. The particulars of our mandate, however, warrant elabo-

ration.

At the outset, we highlight the limitations on what remains to be

decided in this case. Two facts make the posture of this case unusual

—the district court’s failure to award any damages, and DIRECTV’s

decision to appeal only the Wiretap Act claim. First, as described in

detail above, the district court declined to award damages under the

Cable Act and also declined to award damages under the Wiretap

Act. That decision places this case outside the heartland of judgments

in the thousands of cases in which DIRECTV has pursued defendants

who stole DIRECTV programming through the use of pirate access

devices. In many such cases, the defendants, like Rawlins, defaulted.

However, those district courts often elected to award statutory dam-

ages to DIRECTV under the Cable Act, in amounts ranging from

$1,000 to $10,000, and then exercised their discretion under the Wire-

tap Act to decline to award additional damages for the same conduct.11

11

DIRECTV, Inc. v. Lankester is emblematic. No. 8:03-CV-1631 (D.

Md. May 25, 2005) (memorandum opinion). The court granted default

judgment in favor of DIRECTV against fifty-eight individual defendants,

finding it just, in each case, to grant the minimum statutory damage

award of $1,000 per violation (which that court interpreted as "per

device") under the Cable Act. The resulting damages awards, exclusive

of attorney’s fees and costs, ranged from $1,000 to $6,000. The court

then declined to award damages under the Wiretap Act, citing Nalley for

the proposition that such an award was discretionary. The court com-

mented, "[f]oremost among the court’s reasons [for declining to award

16 DIRECTV, INC. v. RAWLINS

Such an exercise of discretion is entirely consistent with Nalley.

Where a court reasonably concludes that the purposes of the Wiretap

Act are adequately served by an award of damages under the Cable

Act, and that an additional $10,000 award premised on the same con-

duct would be gratuitous, there is no "useful purpose" to be served by

the imposition of additional statutory damages under 18 U.S.C.

§ 2520(c)(2). See DIRECTV, Inc. v. Brown, 371 F.3d 814, 819 (11th

Cir. 2004) (upholding, in a case involving a defaulting defendant like

Rawlins, a district court’s decision not to augment its award of sub-

stantial Cable Act damages with any Wiretap Act damages, as any

additional award "could easily be viewed as gratuitous"); cf. Nalley,

53 F.3d at 654. In such circumstances, because it would serve no use-

ful purpose, a district court does not abuse its discretion, even though

faced with more than a de minimis violation, in declining to award

damages under the Wiretap Act. See Brown, 371 F.3d at 819. Indeed,

DIRECTV has acknowledged the propriety of withholding a Wiretap

damages under the Wiretap Act] is that DIRECTV will receive judg-

ment[s] against [the defendants] for [ ] violation[s] of the Cable Act . . . ,

violation[s] premised on the same underlying conduct." Lankester, No.

8:03-CV-1631, at 10 (citing DIRECTV, Inc. v. Huynh, 318 F. Supp. 2d

1122, 1131 (M.D. Ala. 2004)) (internal quotations omitted) (alterations

in original). Numerous other district courts in this and other circuits have

rendered similar judgments. See, e.g., DIRECTV Inc. v. Haynes, No.

5:03-CV-872 (E.D.N.C. 2005) (awarding $1,000 in statutory damages

against each of four separate defendants under the Cable Act and nothing

under the Wiretap Act); DIRECTV Inc. v. Yancey, No. 4:04-CV-11

(W.D. Va. Dec. 12, 2005) (memorandum opinion) (awarding $10,000

statutory damages for violation of 47 U.S.C. § 605(a) and $10,000 for

violation of § 605(e)(4), but declining to award further additional dam-

ages under the Wiretap Act); DIRECTV Inc. v. Rodriguez, No. 03-CV-

4590, 2007 WL 1834676, at *2-3 (E.D.N.Y. June 26, 2007) (awarding

$2,000 under the Cable Act and nothing under the Wiretap Act);

DIRECTV Inc. v. Kaas, 294 F. Supp. 2d 1044, 1049 (N.D. Iowa 2003)

(finding requested award of $10,000 excessive; awarding $1,000 under

the Cable Act and nothing under the Wiretap Act); DIRECTV Inc. v.

Moulder, No. 2:03-CV-3266 (E.D. Pa. 2005) (awarding $10,000 statu-

tory damages without specifying whether the award arose under the

Cable Act or the Wiretap Act); DIRECTV Inc. v. Quell, No. 2:03-CV-

3274 (E.D. Pa. 2004) (awarding $2,000 statutory damages, also unspeci-

fied).

DIRECTV, INC. v. RAWLINS 17

Act award in such a case, noting at oral argument that "DIRECTV has

not ever sought to pursue double damages under the two statutes."12

It is not possible, however, for us to remand this case for reconsid-

eration of both the Cable Act and Wiretap Act claims for damages

because DIRECTV has only appealed the district court’s denial of

Wiretap Act damages. See Doe v. Chao, 511 F.3d 461, 465-66 (4th

Cir. 2007) (discussing the mandate rule and noting that the rule pro-

hibits district courts from reconsidering issues the parties failed to

raise on appeal). Having made the strategic decision to appeal only

the ruling under the Wiretap Act, DIRECTV cannot now escape the

consequences of its decision, and the strictures its strategy has placed

on the scope of the remand. The district court no longer has the option

to award damages under the Cable Act.13 By the same token, how-

ever, Rawlins, by his default, has lost the ability to contest the well-

pleaded allegations of the complaint or his guilt under either statute.

See Ryan, 253 F.3d at 780. At bottom, then, it is solely the question

of the appropriateness of statutory damages under the Wiretap Act

that we remand for reconsideration by the district court.14

12

In line with this assertion, it appears that DIRECTV did not pursue

appeals in the vast majority of the cases in which Cable Act damages,

but not Wiretap Act damages, were awarded. It may well be, then, that

had the district court here awarded some actual or statutory damages,

under either Act, DIRECTV would not have pursued this appeal.

13

It does not follow that the Cable Act is entirely irrelevant on remand.

As part of its determination on remand as to whether there is a "useful

purpose" to be served by imposing damages under the Wiretap Act, the

district court may consider the fact that DIRECTV could have sought

relief under the Cable Act on appeal, but chose to forego it as a matter

of strategy. We do not suggest a bright-line rule; instead, when a plaintiff

selectively pursues damages under certain statutes and not others, the

district court may consider on a case-by-case basis whether awarding the

particular damages sought might represent a windfall to the plaintiff in

light of the damages otherwise available but not sought.

14

In remanding for reconsideration, we reject DIRECTV’s request that

we reverse and remand for entry of a statutory damages award of

$10,000 pursuant to § 2520(c)(2). Having clarified the proper course of

analysis that must govern a district court’s exercise of discretion in

awarding damages, we find it prudent to allow the district court to recon-

sider the application of that analysis in the first instance.

18 DIRECTV, INC. v. RAWLINS

The parameters that should guide that reconsideration are not

novel. The district court must carefully consider the evidence already

presented by DIRECTV in support of its damages claim, including,

most notably, the Whalen affidavit. Using this and other evidence

before it, the district court should examine the relevant factors that

guide its exercise of discretion. In particular, the court should con-

sider the extent of Rawlins’s violation of the Wiretap Act, as evi-

denced by the Whalen affidavit. Moreover, the court should consider

the relative financial burdens of the parties, paying close attention to

Rawlins’s past expenditures on pirating equipment. The court should

also determine whether a useful purpose would be served by an award

of statutory damages. All of these factors should be considered

against the backdrop of the seriousness with which Congress has

treated the underlying conduct at issue here. Weighing these factors

and evidence in the balance, the district court should carefully exer-

cise its discretion in deciding whether to award DIRECTV statutory

damages under the Wiretap Act.

V.

In sum, a district court’s discretion to award or not award damages

under the Wiretap Act is not restricted to those cases involving de

minimis violations. Such discretion is not boundless, however. To the

contrary, a district court must carefully evaluate the relevant evi-

dence, heeding the factors invoked in Nalley and adopted here today,

before exercising its discretion. Because the district court in this case

did not do so, we vacate its judgment and remand for further proceed-

ings consistent with this opinion.

VACATED AND REMANDED

BLAKE, District Judge, concurring separately:

I concur entirely with all but Section III C of the majority opinion.

As to III C, I concur with the need for remand but write separately

because my perspective differs somewhat from the majority.

First, I agree that remand is necessary because it does not appear

that the district court considered the Whalen affidavit. In its opinion

DIRECTV, INC. v. RAWLINS 19

the court refers only to the value of the potential unauthorized access

noted in the complaint ($100,000 in a single year) and states there is

"no allegation as to how long defendant actually used the devices or

the dollar amount DIRECTV would have received in subscription

fees but did not as a result of Defendant’s activity." J.A. 67. In fact,

the Whalen affidavit asserts that Rawlins was a subscriber from Sep-

tember 4, 2000, to at least October 5, 2005, and shows that he pur-

chased devices between October 2000 and May 2001; it also provides

what appears to be a reasonable estimate of the likely annual value

($2,748.96) of the pirated programming. J.A. 25-61. Indeed, in light

of this obvious discrepancy it may be that the district judge inadver-

tently overlooked the affidavit. Remand is warranted for careful con-

sideration of this evidence in light of the factors now explicitly

adopted by the majority.

Second, however, as to the factors the district court did consider

and rely on, the majority identifies as "irrelevant" the fact that

Rawlins neither used the devices for commercial purposes nor pur-

chased them for resale, and the lack of evidence to show that Rawlins

induced others to violate the Wiretap Act. As I believe this guidance

from the Circuit had never before been made explicit, and would not

have been clear from prior case law, I would not fault the district

court for having considered those factors in its analysis.

In summary, I agree with the need for remand and appreciate the

majority’s willingness to permit the district court to exercise its dis-

cretion with a full understanding of the factors that should be consid-

ered and therefore concur in the result of Section III C as well as

joining in the remainder of the majority opinion.