United States District Court, N.D. Illinois
May 11, 2004.
DIRECTV, Inc., Plaintiff,
DALE OSTROWSKI and WILLIAM R. OSTROWSKI, Defendants
The opinion of the court was delivered by: MARK FILIP, District Judge
MEMORANDUM OPINION GRANTING IN PART
AND DENYING IN PART DEFENDANT DALE OSTROWSKI'S
MOTION TO DISMISS COUNTS III AND V OF PLAINTIFF'S
Plaintiff alleges that Defendants purchased and used a device to
decrypt or unscramble Plaintiff's "DIRECTV" satellite programming and
that Defendants then displayed this programming without authorization.
The complaint includes five counts. Count I seeks relief under
47 U.S.C. § 605(e)(3)(C) for unauthorized interception and exhibition of
copyrighted materials. Count II is brought under 18 U.S.C. § 2520 for
interception, disclosure, or use of electronic communications in
violation of 18 U.S.C. § 2511. Count III is brought under 18 U.S.C. § 2520
for possession, manufacture, or assembly of a device useful for the
surreptitious interception of electronic communications in violation of
18 U.S.C. § 2512(1)(b). Count IV seeks damages under 47 U.S.C. § 605(e)(4)
for assembly or modification of a device used primarily to facilitate
unauthorized decryption of satellite programming. Count V asserts a cause
of action for civil conversion under Illinois common law. Defendant Dale
Ostrowski ("Defendant") has moved under Federal Rule of Civil Procedure
12(b)(6) to dismiss Counts III and V, For the reasons stated below, Defendant's motion to dismiss
is granted as to Count III and denied as to Count V.
"A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of
a complaint for failure to state a claim upon which relief may be
granted." Johnson v. Rivera, 272 F.3d 519, 520-21 (7th Cir. 2001). In
ruling on the motion, the Court accepts as true all well-pleaded facts
alleged in the complaint and draws all reasonable inferences from those
facts in favor of Plaintiff. See, e.g., Jackson v. E.J. Brach Corp.,
176 F.3d 971, 977-78 (7th Cir. 1999). Dismissal for failure to state a
claim is not appropriate unless "`it appears beyond doubt that the
plaintiff can prove no set of facts in support of his claim which would
entitle him to relief.'" Lee v. City of Chicago, 330 F.3d 456, 459 (7th
Cir. 2003) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)).
A. Count III
As noted above, in Count III, Plaintiff alleges that Defendant violated
18 U.S.C. § 2512(1)(b), a criminal statute which prohibits the
manufacture, possession and assembly of certain interception devices.
Section 2512(1)(b) does not itself prohibit interception, disclosure, or
use of protected communications. Rather, such activities, among others,
are proscribed by another criminal statute, 18 U.S.C. § 2511. The parties
do not dispute that violations of § 2511 for interception, disclosure, or
use are made civilly actionable by 18 U.S.C. § 2520. In fact, in Count
II, Plaintiff is seeking relief under § 2520 for such alleged violations
of § 2511 and Defendant has not moved to dismiss Count II, Instead, the dispute before the Court centers on Plaintiff's contention
that § 2520 also renders civilly actionable violations of § 2512(1)(b)
for, among other things, possession and assembly of prohibited devices.
Defendant argues that Count III should be dismissed because
18 U.S.C. § 2520 does not render civilly actionable such alleged
violations of § 2512(1)(b).
This issue concerning whether § 2520 renders civilly actionable
alleged violations of § 2512(1)(b) has split numerous district courts
across the country and within this judicial district. Reasonable minds
obviously can disagree as to which side has the better of the argument,
but, as explained below, this Court respectfully rejects Plaintiff s
position and agrees with Defendant that Count III should be dismissed.
Section 2520 states, in pertinent part, as follows
Except as provided in section 2511(2)(a)(ii), any
person whose wire, oral, or electronic communication
is intercepted, disclosed, or intentionally used in
violation of this chapter may in a civil action
recover from the person or entity, other than the
United States, which engaged in that violation such
relief as may be appropriate.
18 U.S.C. § 2520. The courts holding that § 2520 renders civilly
actionable alleged possession and assembly of devices in violation of §
2512(1)(b) have reasoned that inclusion of the phrase "in violation of
this chapter" in § 2520 should be understood to mean that a civil cause
of action is available to redress a violation of any of the subsections
of Chapter 119 of Title 18 of the U.S. Code (which includes Section
2512(1)(b) and its prohibition against possession and assembly of
devices). See, e.g., Directv, Inc. v. Perez, 279 F. Supp.2d 962, 964
(N.D. Ill. 2003); Directv, Inc. v. Dillon, No. 03-8578, 2004 WL 906104,
at *2 (N.D. Ill. April 27, 2004); Directv, Inc. v. Dyrhaug, No. 03-8389,
2004 WL 626822, at *1 (N.D. Ill. March 26, 2004); Oceanic Cablevision,
Inc. v. M.D. Elecs., 771 F. Supp. 1019, 1027 (D. Neb. 1991). The courts holding that § 2520 does not render civilly actionable
alleged possession and assembly of devices in violation of § 2512(b), on
the other hand, have interpreted § 2520 to provide a civil remedy only
for violations involving actual interception, disclosure or use of
protected communications. See, e.g., Directv, Inc. v. Maraffmo, No.
03-3441, 2004 WL 170306, at *3 (N.D. Ill. Jan. 23, 2004); Directv, Inc.
v. Castillo, No. 03-3456, 2004 WL 783066, at *1 (N.D. Ill. Jan. 2,
2004); Directv, Inc. v. Delaney, No. 03 C 3444, at 7-8 (N.D. Ill. Nov.
20, 2003); Directv, Inc. v. Beecher, 296 F. Supp.2d 937, 942 (S.D. Ind.
2003). Or put differently, § 2520 does not render civilly actionable mere
possession of dubious devices. For these courts, the portion of § 2520
which states that "any person whose wire, oral or electronic
communication is intercepted, disclosed, or intentionally used in
violation of this chapter may in a civil action recover from the person
or entity . . . which engaged in that violation," 18 U.S.C. § 2520
(emphasis added), should be read so that the phrase "that violation"
refers to "intercepted, disclosed, or intentionally used." See Maraffmo,
No. 03-3441, 2004 WL 170306, at *3 ("As a matter of grammar and sentence
structure, the phrase `that violation' must refer to the interception,
disclosure, or intentional use of a communication. . . .") (citing
Beecher, 296 F. Supp.2d at 942).
Various courts have thoughtfully expressed the competing textualist
arguments (neither litigant has cited any legislative history, and none
of the precedent discusses any either), and this Court does not believe
it has anything meaningful to add in that interpretive debate. The Court
finds persuasive the view that the language of § 2520 is most fairly read
to render actionable alleged violations involving interception,
disclosure, or intentional use of communications, as contrasted with, for
example, simple possession of dubious devices. See, e.g., Beecher, 296
F. Supp.2d at 941. On this basis, the Court would find that Count III should be dismissed.
The Court's conclusion is buttressed by a Fifth Circuit decision that
perhaps has escaped the parties' attention and that lends support to the
view that Count III should be dismissed. Specifically in Peavy v.
WFAA-TV, Inc., 221 F.3d 158 (5th Cir. 2000), the Fifth Circuit, in
addressing the scope of civil liability delimited by § 2520, has held
that the phrase "`that violation' [in § 2520] refers only to illegal
interception, disclosure, or use." Peavy, 221 F.3d at 169. In Peavy, the
plaintiff brought an action against defendants under § 2520 for violations
of § 2511. However, the plaintiff sought to recover not only for the
defendants' alleged interception, disclosure, and use of protected
communications, but also sought to impose liability for the defendants'
procurement of someone to intercept protected communications. See id. at
168-69. Notwithstanding the "in violation of this chapter" language of §
2520, and the fact that § 2511 itself does prohibit such procurement
(see § 2511(1)(a)), the Fifth Circuit held that § 2520 does not render
civilly actionable such procurement because "the referenced `violation'
is `intercepted, disclosed, or intentionally used'; there is no mention
of `procures'." Id. at 169 (emphasis removed). Peavy's holding that §
2520 does not reach to procurement violations in the context of
interpreting the civil liability imposed by § 2520 and § 2511 supports
the view that § 2520 and § 2512 do not reach as far as Plaintiff would
like them in Count III, where Plaintiff seeks to impose liability without
being required to prove interception, disclosure or use.
In summary, the Court agrees with the courts which have held that §
2520 does not provide for civil liability for possession and assembly
violations of § 2512, and finds that Peavy lends further support for such
a conclusion. By its terms., § 2520 does not render civilly actionable
any and all violations of Chapter 119 of Title 18 of the U.S. Code.
Rather, inasmuch as § 2520 provides a civil remedy to "any person whose wire, oral, or
electronic communication is intercepted, disclosed, or intentionally used
in violation of this chapter . . . from the person or entity . . . which
engaged in that violation," "`that violation' refers only to illegal
interception, disclosure, or use." Peavy, 221 F.3d at 169; accord, e.g.,
Maraffino, 2004 WL 170306, at *3. Because Count III does not seek to base
liability on Defendant's alleged interception, disclosure, or use of
protected communications, but rather on possession of devices, Count III
B. Count V
In Count V, Plaintiff has asserted a cause of action for common law
conversion under Illinois law. Plaintiff has alleged that Defendant, by
his unauthorized interception and display of Plaintiff's satellite
programming, has unlawfully deprived Plaintiff of its proprietary
interests in that programming. To state a claim for conversion, Plaintiff
must allege that (1) it has a right to the property; (2) it has an
absolute an unconditional right to the immediate possession of the
property; (3) it made a demand for possession; and (4) Defendant
wrongfully and without authorization assumed control, dominion, or
ownership over the property. See Cirrincione v. Johnson, 703 N.E.2d 67,
70 (Ill. 1998). Defendant essentially contends that Count V should be
dismissed because intangible property such as Defendant's satellite
programming cannot be the subject of conversion under Illinois law.*fn1
As with the statutory question analyzed in the Court's discussion of
Count III, the issue of whether alleged unauthorized interception and
display of satellite programming meets the elements of civil conversion under Illinois law has divided courts within
this district. Five courts within this district have held that the tort
of conversion does not lie in these circumstances. See Directv, Inc. v.
Hinton, No. 03-8477, 2004 WL 856555, at * 4 (N.D. Ill. April 21, 2004)
(Darrah, J.); see also Directv, Inc. v. Frey, No. 03-3476, 2004 WL
813539, at *4 (N.D. Ill. April 14, 2004) (Zagel, J.); Directv, Inc. v.
Maraffmo, No. 03-3441, 2004 WL 170306, at *4 (N.D. Ill. Jan. 23, 2004)
(Lefkow, J.); Directv, Inc. v. Castillo, No. 03-3456, 2004 WL 783066, at
*2 (N.D. Ill. Jan. 2, 2004) (St. Eve, J.); Directv, Inc. v. Patel, No.
03-3442, 2003 WL 22682443, at *3 (N.D. Ill. Nov. 12, 2003) (Coar, J.).
Three courts have ruled that a cause of action was stated in similar
cases. See Directv, Inc. v. Dillon, No. 03-8578, 2004 WL 906104, at *4
(N.D. Ill. April 27) (Aspen, J.); see also Directv, Inc. v. Dyrhaus, No.
03-8389, 2004 WL 626822, at *2 (March 26, 2004) (Shadur, J.); Directv,
Inc. v. Delaney, No. 03 C 3444, at 8-10 (N.D. Ill. Nov. 20, 2003)
(Kocoras, J.). As demonstrated by this division, the issue is a close one
for which strong arguments have been made in support of both sides.
The difficulty in this area derives from the lack of Illinois caselaw
directly on point and the somewhat unresolved nature of the Illinois
caselaw that does exist. One Illinois Supreme Court case, In re Thebus,
483 N.E.2d 1258 (Ill. 1985), contains the following language "[i]n 18
Am.Jur.2d Conversion sec. 9, at 164 (1965), it is stated: `It is
ordinarily held . . . that an action for conversion lies only for
personal property which is tangible, or at least represented by or
connected with something tangible.'" Thebus, 483 N.E.2d at 1260 (ellipses
added). The court then went on to state that "the subject of conversion
is required to be an identifiable object of property of which the
plaintiff was wrongfully deprived." Id. With these statements, Thebus does
not by itself make clear whether intangible property ever can properly be
the subject of conversion in Illinois or if so, in what circumstances.
Three subsequent Illinois appellate court decisions have indicated that
intangible property can, at least in some cases, be the basis of a
conversion action. In Conant v. Karris, 520 N.E.2d 757 (Ill. App. Ct. 5th
Dist. 1987), the court did not use the term "intangible property," but it
nonetheless held that a conversion action was stated where plaintiff
alleged that a real estate broker learned a client's confidential
information about the valuation of a specific property and then used the
information to generate the broker's own competing and successful bid for
the property. See id. at 763. However, the tangible versus intangible
property issue appears to not have been squarely litigated, as the
principal issue before the court of appeals (which reversed the trial
court's dismissal of the count) was whether the plaintiff was deprived of
the use of his confidential information, given that he always retained a
copy of it himself. See id. ("As we have discussed, the complaint
sufficiently alleges that the information in this printout was used by
defendants. Once confidential information is released to competitors, it
hardly can be said that the data is still confidential."). Oftentimes
decisions that resolve an issue without it being the subject of a direct
adversarial clash before the court are not viewed as being entitled to
significant precedential weight on that point. See generally Brecht v.
Abrahamson, 507 U.S. 619, 631 (1993) (teaching that if a decision does
not "squarely addres[s] [an] issue," the Court remains "free to address
[it] on the merits" at a later time); United States v. LA. Tucker Truck
Lines, Inc., 344 U.S. 33, 38 (1952) (holding that where an issue was not
"raised in briefs or argument nor discussed in the opinion of the Court,"
"the case is not a binding precedent on this point"); Webster v. Fall,
266 U.S. 507, 511 (1925) ("Questions which merely lurk in the record,
neither brought to the attention of the court nor ruled upon, are not
considered as having been so decided as to constitute precedents.").
Nonetheless, Conant takes on added weight because in Stathis v.
Geldermann, Inc., 692 N.E.2d 798 (Ill.App. Ct. 1st Dist. 1998), another
Illinois appellate court relied on Conant to flatly assert that "[i]n
this State . . . parties may recover for conversion of intangible
assets." Id. at 807 (citing Conant). Moreover, Stathis reached this
conclusion in the process of rejecting the defendants' argument that
plaintiff was precluded from asserting "a claim for conversion because the
assets allegedly converted were intangible in nature." Id. Further,
Stathis assumed for purposes of argument that the conversion of a
controlling interest in a partnership could be legally cognizable
although Stathis found that the jury verdict rejecting the conversion
theory was not against the manifest weight of the evidence, so the
verdict was upheld. Id.
The third Illinois appellate court case to address the subject in the
wake of Thebus, Bilut v. Northwestern University, 692 N.E.2d 1327
(Ill.App. Ct. 1st Dist. 1998), stated that the Illinois "supreme court
has stated that an action for conversion lies only for personal property
that is tangible or at least represented by or connected with something
tangible." See id. at 1334 (citing In re Thebus, 483 N.E.2d at 1260).
Although Bilut barred the asserted conversion cause of action on statute
of limitations grounds, Bilut stated that alleged plagiarism of the ideas
in a research paper could be the subject of a conversion action "because
the printed copy of the research constituted tangible property." Id.
The courts in this district holding that a conversion action properly
can be maintained to remedy interception and use of satellite programming
have concluded that the existing Illinois appellate court authority
supports this view. In particular, these courts have analogized the
deprivation of the right of the plaintiff in Conant to keep its
information confidential with the deprivation of the "right of exclusive control" Plaintiff was deprived of
with respect to its satellite programming. See Directv, Inc. v. Delaney,
03 C 3444, at 9-10 (N.D. Ill. Nov. 20, 2003). The courts holding that a
conversion claim is not cognizable in these circumstances, in contrast,
have distinguished the Illinois appellate court cases on grounds that
"[i]n every Illinois conversion case involving intangible property, the
Plaintiff has been deprived of the ability to benefit from the object of
the alleged conversion. In this case, DirecTV continued to benefit from
its encrypted satellite television signal. . . ." See, e.g., Patel, 2003
WL 22682443, at *3.
As noted above, there is no clear answer in the Illinois caselaw on
this issue and both views have meaningful support. In the end, the Court
has cast its vote with the courts finding that the tort of conversion is
available in cases such as this one. In large part, this conclusion
results from the analysis of the tort of conversion and intangible
property rights conducted by the Seventh Circuit in FMC Corp. v. Capital
Cities/ABC, Inc., 915 F.2d 300 (7th Cir. 1990), another case that perhaps
has escaped the parties' attention. At issue in FMC Corp., was whether
the defendant was liable for conversion for failing to provide the
plaintiff with either the originals or copies of documents containing
plaintiff's confidential business information which the plaintiff had
lost. See id. at 301-03. Although the Seventh Circuit resolved a
threshold choice of law debate by deciding that the conversion issue
should be analyzed under California law, the Seventh Circuit stated that
We believe that the particular choice of law is not
crucial in this case. While the facts of this case may
present a novel question, our analysis does not. The
same result would be reached under the conversion and
replevin laws of most states. As one district court
recently noted, "[t]he principles of what conduct
constitutes conversion are universal."
Id. at 302 n.2 (quoting P.M.F. Servs., Inc. v. Grady, 703 F. Supp. 742,
743 n.1 (N.D. Ill. 1989)). The court held that the tort of conversion was sufficiently alleged. See
id. at 305-06.
Of particular consequence for present purposes, in FMC Corp., the
Seventh Circuit stated that "As Prosser and Keeton have noted . . .
`[t]here is perhaps no very valid and essential reason why there might
not be conversion' of intangible property." Id. at 305 (quoting Prosser
& Keeton on the Law of Torts ch. 3, § 15, at 92). Further, the Seventh
Circuit cited Conant as an example of "what appears to be the modern
trend of state law in protecting against the misuse of confidential
business information through conversion actions." See id. (citing
Conant). And the Seventh Circuit gave no indication that the deprivation
of such intangible property is cognizable in a conversion action only
where the plaintiff is "clearly deprived of the ability to obtain any
benefit from the objects of the alleged conversions." See Hinton, 2004 WL
856555, at *4. In fact, in one of the three cases the Seventh Circuit
cited as examples of the "modem trend" toward protecting confidential
business information through the tort of conversion, it is clear that the
claimant was not denied the entire benefit of the converted property. See
Datacomm Interface, Inc. v. Computerworld, Inc., 489 N.E.2d 185, 194
(Mass. 1986). In Datacomm., the claimant sought to impose liability on a
competitor for its use of a copy of a magazine circulation list owned by
the claimant. See id. at 194-95. The claimant had its own copy of the
list to use for circulation and marketing of its magazines. Id.
Nonetheless, the Massuchusetts Supreme Judicial Court held that the
competitor could be held liable for conversion for its unlawful use of
the claimant's circulation list. Id.
Additionally, in FMC Corp., the Seventh Circuit explained that
"[f]or purposes of conversion, it is not the intent to steal or pilfer
property that matters, but rather `an intent to exercise a dominion or
control over the goods which is in fact inconsistent with the plaintiff's rights.'" FMC Corp., 915 F.2d at 304 (quoting Prosser & Keeton on the
Law of Torts ch. 3, § 15, at 92). While it cannot fairly be stated in the
case sub judice that Defendant is alleged to have completely deprived
Plaintiff of the ability to obtain any benefit from its satellite
programming, it also cannot fairly be said that Defendant's alleged
unauthorized use of such programming was consistent with Plaintiff's
rights. Thus, under the general teachings concerning the tort of civil
conversion articulated by the Seventh Circuit in FMC Corp. which are
particularly significant given the unresolved nature of Illinois law in
this area, and which this Court suspects would carry substantial weight
with Illinois courts if they were deciding the precise issue sub judice
it appears that Plaintiff has stated a claim. Accordingly, Defendant's
motion to dismiss Count V is denied.
For the foregoing reasons, Defendant's motion to dismiss is granted as
to Count III and denied as to Count V.