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G&G Closed Circuit Events, LLC v. Castillo

United States District Court, N.D. Illinois, Eastern Division

June 20, 2018

G&G CLOSED CIRCUIT EVENTS, LLC, Plaintiff,
v.
JAIME CASTILLO, MARIA CASTILLO, and EL BAJIO ENTERPRISES, INC. Defendants. JAIME CASTILLO, MARIA CASTILLO, and EL BAJIO ENTERPRISES, INC., on behalf of themselves and others similarly situated, Counter-Plaintiffs
v.
LAW OFFICES OF THOMAS P. RILEY, and G&G CLOSED CIRCUIT EVENTS, LLC, Counter-Defendants.

          MEMORANDUM OPINION AND ORDER

          EDMOND E. CHANG, UNITED STATES DISTRICT JUDGE

         This is the latest installment in a years-long saga of litigation between Jaime and Maria Castillo, El Bajio Enterprises, [1] G&G Closed Circuit Events (G&G for short), and G&G's attorney, the Law Offices of Thomas P. Riley (Riley for short). The conflict began when G&G accused the Castillos of unlawfully broadcasting a boxing match at their restaurant in violation of G&G's exclusive commercial distribution rights.[2] When G&G's settlement demands proved futile, G&G initiated this lawsuit. R. 1, Compl.[3] The Castillos struck back with several counterclaims, the current version looping in Riley as a defendant. R. 178, Third Am. Counterclaim. At this point (after years of disputes over discovery and liability), G&G and the Castillos have both moved for summary judgment on the issue of the Castillos' liability for broadcasting the boxing match. R. 295, Castillo Mot. Summ. J.; R. 304, G&G Mot. Summ. J. Meanwhile, G&G and Riley have each moved to dismiss the Castillos' entire Third Amended Counterclaim. R. 293, G&G Mot. Dismiss; R. 300, Riley Mot. Dismiss. For the reasons stated below, the Castillos' motion for summary judgment is granted on G&G's claim under 47 U.S.C. § 553, but otherwise denied. G&G's motion for summary judgment is also denied. Both motions to dismiss are granted, and the Castillos' Third Amended Counterclaim is dismissed with prejudice.

         I. Summary Judgment Motions

         A. Background

         In deciding a motion for summary judgment, the Court views the evidence in the light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). Because G&G and the Castillos have both moved for summary judgment, the Court will consider the evidence in the light most favorable to each party to see if the opposing party is entitled to summary judgment.

         G&G's version of events is that G&G owns the commercial distribution rights to a boxing match, Saul Alvarez v. Austin Trout Championship Fight Program, which was telecast nationwide on April 20, 2013. R. 306, G&G SOF ¶ 7.[4] The Castillos obtained access to the fight through their residential DirecTV account, and broadcast the fight at their restaurant, La Pena.[5] Id. ¶¶ 8-11. Aaron Lockner, an investigator working on behalf of G&G, [6] observed the fight through the window of La Pena, and went into the restaurant to investigate. R. 320, G&G Resp. Castillo SOF ¶ 46. Lockner wrote an affidavit stating that he saw the fight being displayed on three TVs in La Pena around 10:30 p.m. on April 20. G&G SOF Exh. 9, Lockner Aff. The Castillos did not order the fight from G&G, and did not obtain a commercial license to broadcast it. G&G SOF ¶ 12.

         The Castillos admit that they showed the fight at their restaurant, and that they never purchased a commercial license from G&G. R. 324, Castillo Resp. G&G SOF ¶ 12; R. 297, Castillo SOF ¶ 42. But the Castillos maintain that they were entrapped into showing the fight by Aaron Lockner. See Castillo SOF ¶ 42. According to the Castillos, on the night of the fight, an unknown customer-who the Castillos now believe to be Lockner-asked Jaime Castillo to change the channel to Showtime to put on the fight. Id. The Castillos were able to show the fight because (they maintain), DirecTV had mistakenly installed residential programming at La Pena. Id. ¶ 43. (The fight was broadcast to residential customers at no charge on April 20, so the Castillos presumably were not prompted to pay for the programming when they put on the fight at Lockner's request. See Castillo SOF ¶¶ 44, 46.) The Castillos further assert that G&G encourages investigators like Lockner to engage in dishonest behavior by paying them only if they provide signed affidavits attesting to acts of piracy, by not double-checking the investigators' assertions in their affidavits, and by failing to verify other evidence provided by the investigators, such as photos and videos. Castillo SOF ¶¶ 30-33, 38.

         B. Summary Judgment Standard

         Summary judgment must be granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A genuine issue of material fact exists if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In evaluating summary judgment motions, courts must view the facts and draw reasonable inferences in the light most favorable to the non-moving party. Scott v. Harris, 550 U.S. 372, 378 (2007). The Court may not weigh conflicting evidence or make credibility determinations, Omnicare, Inc. v. UnitedHealth Grp., Inc., 629 F.3d 697, 704 (7th Cir. 2011), and must consider only evidence that can “be presented in a form that would be admissible in evidence.” Fed.R.Civ.P. 56(c)(2). The party seeking summary judgment has the initial burden of showing that there is no genuine dispute and that they are entitled to judgment as a matter of law. Carmichael v. Village of Palatine, 605 F.3d 451, 460 (7th Cir. 2010); see also Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Wheeler v. Lawson, 539 F.3d 629, 634 (7th Cir. 2008). If this burden is met, the adverse party must then “set forth specific facts showing that there is a genuine issue for trial.” Anderson, 477 U.S. at 256.

         C. Analysis

         1. G&G's Commercial Distribution Rights

         A threshold dispute is whether G&G actually owns the commercial distribution rights to the Alvarez/Trout boxing match. G&G asserts that it purchased the rights from Showtime, and backs up this assertion with testimony from G&G's president Nicholas Gagliardi. G&G SOF ¶ 7; G&G SOF Exh 4, Gagliardi Dep. 21:5-23:1; R. 308, Gagliardi Aff. ¶ 3. The Castillos, on the other hand, argue that G&G's proof is insufficient to prove that G&G owns the commercial rights to the fight. See Castillo SOF ¶¶ 12-20; R. 296, Castillo Summ. J. Br. at 4. The Castillos do not provide any evidence to back up their suspicion that G&G does not own the rights to the fight, choosing to point only to oddities and inconsistencies in Gagliardi's testimony. See id.[7]

         Ordinarily, this kind of speculation about the truthfulness of the other side's testimony would not be enough to defeat a motion for summary judgment. See, e.g., Bell v. Duperrault, 367 F.3d 703, 707 (7th Cir. 2004) (“Inferences that are supported by only speculation or conjecture will not defeat a summary judgment motion.”). In this case, however, there is some reason to be skeptical about Gagliardi's testimony. Gagliardi states that he negotiated purchase of the rights via email with someone named Jock McLean, who was then a vice president for sports and event programming at Showtime Networks, Inc. Gagliardi Aff. ¶ 3. Gagliardi testifies that it was the usual practice to not have a written contract. Castillo SOF Exh. 7, Gagliardi Dep. 22:2-5.

         But Gagliardi was also unable to produce the emails that supposedly memorialized the agreement, or any other documentation to confirm that the sale actually took place. See id. 23:18-24:3. Gagliardi did explain the missing emails by testifying that his computer files got corrupted and the email was lost. Id. Gagliardi also testified that he tried to reach out to McLean, his contact at Showtime, and got no response. Id. 93:15-94:5. To be sure, none of this is a smoking gun. It could very well be true that Gagliardi's emails were indeed lost, and that McLean no longer works at Showtime or just refused to respond (though a subpoena would have required a response). Still, it is odd that G&G would have no documentation of its supposed rights to the programming. It is also strange that Gagliardi's emails were apparently stored only as files on one computer and could not be obtained from the provider of the email service. But, on the other hand, the Castillos provided no actual evidence to cast doubt on Gagliardi's testimony, even though they could presumably have backed up their theories by (as noted earlier) subpoenaing records from Showtime, for example. Even an absence of Showtime records would have been probative to rebut Gagliardi's testimony.

         At the end of the day, this is a close enough question to preclude summary judgment right now. Taken in the light most favorable to the Castillos, a reasonable jury could find, on these facts, that there is enough circumstantial evidence to disbelieve Gagliardi's testimony on ownership. This is an example of a case where the gaps in a movant's summary-judgment presentation cast enough doubt on an asserted fact that the non-movant can reasonably point to the absence of evidence as enough to raise a genuine issue. Having said that, a prompt motion from either side might be granted for very limited and targeted discovery on Showtime, even at this late date, to ascertain the truth of the ownership issue. And, in any event, at the pretrial order stage, the parties should consider whether a special interrogatory would be helpful on this issue (the Court has no firm thoughts on this as of yet). Also, depending on how the evidence plays out at trial, the Court might consider a motion for judgment as a matter of law on the issue. See Fed. R. Civ. P. 50(a). But, at this point, G&G cannot prevail on its summary judgment motion because it has not established that a reasonable factfinder must find that G&G owns the rights to the Alvarez/Trout fight. Conversely, the Castillos also cannot prevail on this issue right now, because a jury could reasonably believe Gagliardi's testimony that he purchased the rights.[8]

         2. Liability under 47 U.S.C. § 605

         Assuming that G&G owns the rights to the fight, it would still need to establish El Bajio and the Castillos' liability under 47 U.S.C. § 605. Section 605(a) prohibits different forms of satellite signal piracy. 47 U.S.C. § 605(a); see also J&J Sports Prods., Inc. v. Mandell Family Ventures, LLC, 751 F.3d 346, 353 (5th Cir. 2014). Section 605(a) is densely worded and not divided into subparagraphs, so it is helpful to break the statute down into sentences:

[Sentence 1] [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, (1) to any person other than the addressee, his agent, or attorney, (2) to a person employed or authorized to forward such communication to its destination, (3) to proper accounting or distributing officers of the various communicating centers over which the communication may be passed, (4) to the master of a ship under whom he is serving, (5) in response to a subpoena issued by a court of competent jurisdiction, or (6) on demand of other lawful authority.
[Sentence 2] No person not being authorized by the sender shall intercept any radio communication and divulge or publish the existence, contents, substance, purport, effect, or meaning of such intercepted communication to any person.
[Sentence 3] No person not being entitled thereto shall receive or assist in receiving any interstate or foreign communication by radio and use such communication (or any information therein contained) for his own benefit or for the benefit of another not entitled thereto.
[Sentence 4] No person having received any intercepted radio communication or having become acquainted with the contents, substance, purport, effect, or meaning of such communication (or any part thereof) knowing that such communication was intercepted, shall divulge or publish the existence, contents, substance, purport, effect, or meaning of such communication (or any part thereof) or use such communication (or any information therein contained) for his own benefit or for the benefit of another not entitled thereto.

         The first sentence of Section 605 is not applicable, because it regulates the behavior of communications personnel. United States v. Norris, 88 F.3d 462, 465 (7th Cir. 1996). Sentences 2 and 4 also do not apply here, because they target people who have “intercepted” satellite communications themselves or received “intercepted” communications from others. “Intercept” means to “tak[e] or seiz[e] by the way or before arrival at the destined place.” Nat'l Satellite Sports, Inc. v. Eliadis, Inc., 253 F.3d 900, 915 (6th Cir. 2001) (quoting Goldman v. United States, 316 U.S. 129, 134 (1942), overruled on other grounds, Katz v. United States, 389 U.S. 347 (1967)). In this case, there are no facts suggesting that the Castillos “took” or “seized” programming on its way to its intended destination. All parties seem to agree that La Pena was the intended endpoint of the DirecTV service at issue, and G&G does not argue that improper use of residential programming in a commercial establishment could be considered “interception.” Indeed, G&G relies on the Court's analysis in Joe Hand Promotions, Inc. v. Killeen, where the Court held that using residential programming for a commercial establishment was not “interception.” Joe Hand Promotions, Inc. v. Killeen, 14-cv-3996 (N.D. Ill.Dec. 22, 2015), ECF No. 80 at 9-10. Nor does G&G argue that anyone else “intercepted” the programming before the Castillos exhibited it. Sentences 2 and 4 of Section 605 do not apply.

         That leaves the third sentence: “No person not being entitled thereto shall receive or assist in receiving any interstate or foreign communication by radio and use such communication (or any information therein contained) for his own benefit or for the benefit of another not entitled thereto.” 47 U.S.C. § 605(a) (emphasis added). So, the question for summary judgment is whether a reasonable factfinder could find the Castillos were “entitled” to receive the Alvarez/ Trout fight, or, if not, whether the factfinder would have to find that the Castillos were not entitled to receive the programming.

         Courts have generally held that Section 605(a) imposes strict liability. See, e.g., J&J Sports Productions, Inc. v. Jorkay, LLC, 2013 WL 2629461, at *2 (E.D. N.C. June 11, 2013) (collecting cases finding that 47 U.S.C. § 605 imposes strict liability for violations). Because Section 605 imposes strict liability, courts generally grant summary judgment to plaintiffs if there is undisputed evidence that the defendant exhibited satellite programming without authorization, even when the defendants argue that the violation was caused by mistaken installation of residential programming at a commercial establishment. See, e.g., J&J Sports Productions, Inc. v. Dabrowski, 2015 WL 9304347, at *3 (N.D. Ill. 2015); Joe Hand Promotions, Inc. v. Zani, 2013 WL 5526524, at *2 (N.D. Ill. Oct. 7, 2013); Joe Hand Promotions, Inc. v. Ol' River Hideaway, LLC, 2016 WL 590251, at *3 (W.D. Tex. Feb. 11, 2016); Eliadis, 253 F.3d at 916-17.

         This case is different. The Castillos have offered evidence that their alleged violation of the statute was actually caused by the purported rights-holder's agent. The Castillos testified that Jaime only turned on the fight because Aaron Lockner- who at the time was investigating potential violations on G&G's behalf-asked them to turn it on. Castillo SOF ¶ 42. According to Jaime, Lockner even directed Jaime to the channel where the fight could be found. Id. Assuming that this version of events is true (which the Court must do in deciding G&G's summary judgment motion), and assuming that Lockner was acting within the scope of his agency, there was no violation of Section 605. If the rights-holder (or the rights-holder's agent) asks someone else to turn on their proprietary programming, then the rights holder is effectively giving permission for the program to be shown-which means that the exhibitor would be, in the terminology of Sentence 3, “entitled” to show the program. Cf. Eliadis, 253 F.3d at 917 (holding that a party who was contractually authorized to receive and relay a communication was “entitled” to receive and use the communication under Section 605). In this case, the Castillos maintain that Lockner, G&G's agent, asked Jaime Castillo to turn on the program, implicitly granting him permission to do so. This permission means that the Castillos became “entitled” to receive and show the boxing match when Lockner asked them to turn it on. See 47 U.S.C. § 605(a), Sentence 3. This result makes sense: it would be bizarre if G&G's agents could effectively cause violations of Section 605 and then collect from their unwitting victims. A reasonable factfinder could decide that this is exactly what happened to the Castillos, so G&G's motion for summary judgment is denied.

         That said, the Castillos are not entitled to summary judgment either. The crucial fact dispute about whether or not Lockner asked Jaime to turn on the program could go either way: a reasonable jury could find that Lockner is credible, and that the boxing match was already playing when he arrived.[9] If the match was already playing when Lockner walked in, then the Castillos are liable under Section 605 (so long as G&G owned the commercial distribution rights). In addition to this factual dispute, there are also some fact questions about Lockner's relationship with G&G, and whether he was acting within the scope of his agency when he (allegedly) asked the Castillos to turn on the Alvarez/Trout fight. All of these disputed fact issues prevent the Court from granting summary judgment to the Castillos on the Section 605 claim.

         3. Individual Liability

         If there is liability under Section 605, the Castillos will be individually liable for the violation. Courts generally hold that an individual is liable under Section 605 if she had a right and ability to supervise the violation and had a financial interest in it. J&J Sports Productions, Inc., 2015 WL 9304347, at *4. The Castillos admit that they are co-owners of El Bajio Enterprises, which does business as La Pena, that they were both at the restaurant on the night the fight was shown, and that they both had the right and ability to supervise the goings-on at the restaurant. Castillo Resp. G&G SOF ΒΆΒΆ 3, 19. The Castillos had an obvious financial interest ...


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