The opinion of the court was delivered by: Kennelly, District Judge.
MEMORANDUM CONCERNING ISSUANCE OF TEMPORARY RESTRAINING
On July 28, 2000, this Court, sitting as Emergency Judge,
issued an ex parte temporary restraining order against the
defendants in this case.*fn1 The purpose of this Memorandum
is to explain the Court's decision not to enter certain aspects
of the order requested by plaintiff.
The plaintiff operates cable television systems throughout the
United States. To secure its product, which consists mainly of
copyrighted works, plaintiff encodes or scrambles the premium
and pay-per-view programming services that it transmits and
provides subscribers who purchase these services with a
converter that is programmed to descramble only those
programming services that the customer has purchased.
In December 1999, plaintiff began an investigation of
defendants, a corporation and its suspected principals, after
learning that they were selling descrambling devices. Plaintiff
conducted an undercover investigation, which included purchases
of the devices from defendants. It then tested the devices and
determined that they were designed to descramble all of the
scrambled premium and pay-per-view programming services offered
by plaintiff. The manufacturer of the devices analyzed the
devices purchased from defendants and determined that they had
been altered to permit them to receive without authorization all
of plaintiffs scrambled premium and pay-per-view services.
The Communications Act provides that no person shall intercept
or receive, or assist in intercepting or receiving, any
communications services offered over a cable television system
unless authorized to do so by the cable operator.
47 U.S.C. § 553(a)(1). "Assisting" is defined as including the manufacture
and sale of equipment intended for unauthorized reception of
cable television service. Id. § 553(a)(2). The legislative
history of the statute indicates that § 553(a)(2) was intended
to prevent the manufacture and distribution of unauthorized
descrambling devices like those allegedly offered by defendants.
H.R.Rep. No. 934, 98th Cong., 2d Sess. 84 (1984), reprinted in
1984 U.S.Code Cong. & Admin.News 4655, 4721.
Section 553(c)(1) permits a person aggrieved by a violation of
§ 553(a)(1) to bring a civil action in federal court. Section
553(c)(3) allows the plaintiff to recovery actual damages as
well as the defendant's profits, as well as a penalty. Section
553(c)(2) permits the issuance of a temporary injunction to
prevent violation of § 553(a)(1). On July 27, plaintiff filed
this action against the defendants seeking damages, disgorgement
of profits, and penalties, and it also filed an ex parte
motion for a temporary restraining order. As indicated earlier,
the motion for temporary restraining order came before this
Court, sitting as Emergency Judge.
In the motion, plaintiff sought an ex parte order to: 1)
restrain defendants from offering or selling descrambling
devices; 2) restrain them from destroying their books and
records, including financial records; 3) freeze their assets; 4)
direct them to identify within one day all their assets,
including any held within the prior year; 5) grant plaintiff
expedited discovery from the defendants, their accountants, and
others acting on their behalf; 6) direct defendants to provide,
within two days, an accounting of all sales and purchases of
descrambling devices from 1995 to the present, including
profits, transfers, and withdrawals of assets; 7) authorize and
direct the United States Marshal to enter defendants' business
premises (using force if necessary) and seize all of their
records, including computer hard drives, servers, disks, and
tapes, as well as examples of the descrambling devices; 8)
direct defendants to disclose, at the time of the seizure, any
other location where they have records or descrambling devices;
and 9) authorize and direct the United States Marshal to go to
the places identified by defendants, enter them (using force if
necessary) and seize any records located there.
The Court declined, however, to enter several aspects of the
ex parte order requested by plaintiff, specifically, the
proposed provisions directing defendants to disclose their
assets, to make an accounting of their purchase and sales of the
descrambling devices, and to disclose locations other than the
one already known to plaintiff where defendants might have
records or more of the devices. The purpose of this Memorandum
is to explain why the Court declined to do these things.
As disclosed by plaintiff in its ex parte motion, the sale
of decoding devices like those defendants are claimed to have
offered and sold is prohibited by federal criminal statute,
see 47 U.S.C. § 553(b), as well as by Illinois criminal
statute, see 720 ILCS 5/16-10(a)(4). Under the circumstances,
information disclosing defendants' purchases and sales of the
devices, the revenues obtained from those sales, the assets they
now have that may have been derived from those sales, and the
locations where they keep their records and other descrambling
devices is, without question, information that might tend to
incriminate the defendants. See, e.g., FTC v. H.N. Singer,
Inc., 668 F.2d 1107, 1114 (9th Cir. 1982) (recognizing that
preliminary injunction requiring defendant to disclose records
might implicate Fifth Amendment); SEC v. Rehtorik, 755 F. Supp. 1018,
1019 (S.D.Fla. 1990) (order compelling accounting in civil
case "would directly impinge [defendant's] right against
self-incrimination"); SEC v. College Bound, Inc., 849 F. Supp. 65,
67 (D.C. 1994) (compelled accounting implicates defendants'
Fifth Amendment privilege); In re Interbanque, Inc., No.
95-364, 1996 WL 762330, at *5-6 (Bankr.D.D.C. 1996) (same). See
generally United States v. Hubbell, ___ U.S. ___, 120 S.Ct.
2037, 147 L.Ed.2d 24 (2000) (Fifth Amendment protects individual
from responding to subpoena for broad categories of business
records absent grant of immunity).
There is no question that an accounting is an equitable remedy
traditionally available in cases in which the defendant holds or
held an asset in which the plaintiff has an interest. Here,
however, plaintiff sought a road map to locate potentially
incriminating evidence. And it sought this remedy ex parte.
Had the Court granted the order plaintiff sought, the United
States Marshal would have sent his deputies to defendants' place
of business, and at the same time the Deputy Marshals were
seizing the defendants' records, computers, and descrambling
devices (by force if necessary), they would have served
defendants with a court order, signed by a federal judge,
requiring the defendants to disclose potentially incriminating
information. Though an accounting is a remedy that has long been
available in courts of
equity, the potential for criminal prosecution and the
circumstances under which an ex parte order of this type is
obtained and would have been served make what plaintiff sought
different in kind, and not simply in degree, from an accounting
ordered at a more advanced stage of litigation, after the
adversary process has run its course.
It is difficult for this Court to imagine how an ex parte
court order compelling the individual defendants*fn3 to
provide such information can coexist with the Fifth Amendment.
When the Court posed this issue to plaintiffs' counsel at the
time they presented their motion, counsel initially responded
that the defendants, upon service of the order, certainly would
have the right to decline to provide the information if they
chose to do so. But as indicated above, the order is designed to
be served in conjunction with a forced entry upon defendants'
premises conducted by federal law enforcement agents — an
inherently coercive encounter. It is highly unlikely that an
ordinary citizen, confronted with such a show of force and
served with a federal court order directing him to provide
information (some of it immediately), would have the faintest
idea that he had the right to refuse to do so. Certainly nothing
within the order proposed by plaintiff directed the agents to
advise the defendants of their constitutional right to refuse to
provide the information, and even if such a provision were added
(an option the Court also considered), the same ordinary citizen
might not be expected to understand such advice from a law
enforcement agent as trumping a judge's order directing
The Court has also examined the authorities cited by
plaintiffs to support the proposition that expedited discovery
is appropriate in a "cable piracy" case like this one; none of
these cases address the Fifth Amendment implications of ordering
an individual, as part of an ex parte restraining order, to
provide potentially incriminating information. See Time Warner
Cable of New York City v. M.D. Electronics, Inc., 101 F.3d 278
(2d Cir. 1996); Time Warner Cable of New York City v. Freedom
Electronics, 897 F. Supp. 1454 (S.D.Fla. 1995); Century ML
Cable Corp. v. Carrillo Diaz, 43 F. Supp.2d 166 (P.R. 1998);
Intermedia Partners Southeast v. QB Distributors, 999 F. Supp. 1274
(Minn. 1998); TKR Cable Co. v. Cable City Corp., No.
96-2877, 1996 WL 465508 (N.J. July 29, 1999). If plaintiff
serves discovery requests seeking the information that ...