Court Opinion

ID: 2995997
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:24:11.229494+00
Date Added: 2024-06-11T15:03:18.212211
License: Public Domain

In the
United States Court of Appeals
               For the Seventh Circuit
                          ____________

Nos. 01-2230, 01-2360, 01-3600
CSC HOLDINGS, INC.,
                                                 Plaintiff-Appellee,
                                 v.

FRANK P. REDISI, SR.,
and FRANK P. REDISI, JR.,
                                     Defendants-Appellants.
                          ____________
           Appeals from the United States District Court
       for the Northern District of Illinois, Eastern Division.
              No. 99 C 3516—Ruben Castillo, Judge.
                          ____________
 ARGUED FEBRUARY 11, 2002—DECIDED OCTOBER 29, 2002
                   ____________

 Before RIPPLE, DIANE P. WOOD, and WILLIAMS, Circuit
Judges.
  DIANE P. WOOD, Circuit Judge. For over a decade,
Frank Redisi, Sr. and his son, Frank Redisi, Jr., operated a
variety of business entities in the Chicago suburbs that
manufactured cable television decoders, which allow one
to view all of a cable provider’s scrambled premium or pay-
per-view programming free of charge. From 1992 to 1999,
the Redisis sold thousands of decoders to customers of
the plaintiff CSC Holdings, Inc., which refers to itself as
Cablevision here. In May 1999, Cablevision brought suit
for violations of the Cable Communications Policy Act of
1984, 47 U.S.C. § 553, and secured a temporary restraining
2                          Nos. 01-2230, 01-2360, 01-3600

order and asset freeze against the Redisis and their busi-
nesses. The district court found against the Redisis on
summary judgment and after a damages trial awarded
Cablevision over $29 million. On appeal, the Redisis as-
sert a statute of limitations defense and also contest nu-
merous discovery rulings and the district court’s dam-
ages determination. We reverse and remand for further
proceedings.

                             I
  The Redisis began selling their illegal wares sometime
before 1990, initially operating under the name of Tele-
view Distributors, Inc. By January 1991, FBI agents were
investigating the Redisis’ activities and meeting with
leaders of the cable television industry, including Robert
Astarita, Cablevision’s Senior Vice-President of Corporate
Security, to discuss the problem of cable theft. At one
point in 1991, Astarita sent Teleview Distributors a letter
indicating that he had evidence that some of the products
Teleview Distributors was selling might be capable of
descrambling Cablevision’s signal and that, if so, it
should cease and desist immediately. The Redisis failed
to respond to the letter.
  On November 4, 1992, the FBI served a search warrant
on Teleview Distributors, obtaining substantial evidence of
wrongdoing and shutting down the business. As a direct
result, Redisi, Jr. pleaded guilty to one count of violating
47 U.S.C. § 553. The FBI kept Astarita apprised of its
progress in fighting cable theft through at least 1995; in
particular, it gave him updates on the investigation and
the criminal charging of Redisi, Jr.
   Cablevision claims that after November 1992, it be-
lieved that the Redisis had turned from their life of crime,
but this proved not to be the case. They very quickly re-
sumed operations and later incorporated as Omega Hold-
Nos. 01-2230, 01-2360, 01-3600                            3

ings (owned by the Redisis) and Omega of Elgin (owned by
Redisi, Sr.) and shared facilities, equipment, and inventory
with various other companies selling decoders (owned by
defendants who have settled out of the case). Between
November 1992 and May 1999, the Redisis through various
corporate identities and affiliates sold 2,756 decoders to
probable Cablevision customers.
  Cablevision began a serious investigation of the Redisis
in March 1998, in the course of which it made six under-
cover purchases of decoders that descrambled all of its
programming over the course of the next year. On May 26,
1999, Cablevision filed a motion for a temporary restrain-
ing order and asset freeze and sought monetary and
injunctive relief. The district court enjoined the Redisis
from selling any decoders, froze the Redisis’ personal and
corporate assets, and directed the U.S. Marshal to seize
business records and computers.
  When the Redisis appeared in court, they moved unsuc-
cessfully to have the action dismissed. The district court
instead granted a preliminary injunction on June 24
and set a briefing schedule under which discovery was
to close on September 10. The defendants served written
discovery requests on the plaintiffs in July but did not
notice any depositions at that time. Cablevision moved
for summary judgment on July 29.
  On Friday, August 27, the Redisis’ attorney noticed
depositions for five Cablevision employees to be con-
ducted on the first three days of September. Astarita was
scheduled to be deposed on the morning of September 2,
six days after the notice was sent. Cablevision informed
the Redisis that it would produce four of the employees
but would not produce Astarita, representing that he had
no knowledge of events relating to the case that could
not be gained from the other four witnesses. The district
court then denied the Redisis’ motion to compel Astarita’s
4                           Nos. 01-2230, 01-2360, 01-3600

deposition, finding that the Redisis had produced no evi-
dence of relevance and that the expedited discovery re-
quest would be unduly burdensome to Astarita.
  On Friday, September 3, one week before the close of dis-
covery, the Redisis again noticed a deposition for Astarita.
Cablevision refused to comply with this notice, and the
Redisis then sought reconsideration of their original mo-
tion to compel. They produced affidavits from FBI agents
indicating that Astarita, and thus Cablevision, knew of
the Redisis’ actions as early as 1991 and had engaged in
extensive discussions with the FBI between 1993 and
1995. They further represented that this fact was impor-
tant to their statute of limitations defense. The district
court denied this motion as well on the ground that the
deposition was “not relevant.” In December 1999, it granted
Cablevision’s motion for summary judgment as to liabil-
ity in its entirety, rejecting the Redisis’ statute of limita-
tions defense.
   Damages discovery led to a repeat of many of the dis-
putes from the liability phase. After deposing Joseph
Flaim, Cablevision’s principal damages witness, the Redisis
moved to bar Flaim’s damages analysis (on the ground
that it was based on undisclosed materials) and requested
an extension of discovery. The district court denied both
motions but did order Cablevision to provide the Redisis
with a summary of its damages calculations and support-
ing materials other than its customer lists. Flaim tes-
tified as to his damages analysis at trial, which the dis-
trict court in large part accepted. The court then awarded
Cablevision almost $29.8 million in damages, plus $300,000
in costs and attorneys’ fees.

                             II
  The parties agree that the relevant statute of limita-
tions is found at 47 U.S.C. § 415(a), which provides, “All
Nos. 01-2230, 01-2360, 01-3600                             5

actions at law by carriers for recovery of their lawful
charges, or any part thereof, shall be begun, within two
years from the time the cause of action accrues, and not
after.” The Redisis do not seriously dispute that they
have violated the law, but they argue that the statute of
limitations bars Cablevision’s suit because Cablevision
knew of its injuries more than two years before it filed
suit in May 1999.
  In the first place, it should be noted that the Redisis
made a number of decoder sales to Cablevision customers
during the two years preceding the commencement of this
action. Under any theory of the case, Cablevision filed a
timely claim as to those sales, as the Redisis’ counsel
conceded at oral argument. But at least on the face of
the statute, Cablevision’s claims as to 90% or so of the
decoders sold would be barred if the Redisis’ statute of
limitations argument is correct. Cablevision offers two
reasons why it should still be permitted to prosecute its
claim in its entirety: (1) the Redisis’ actions amounted to
a continuing violation; and (2) the statute of limitations
was tolled because Cablevision did not know or have rea-
son to know of the Redisis’ violations.
   “[T]he statute of limitations does not begin to run on a
continuing wrong till the wrong is over and done with. . . .”
Taylor v. Meirick, 712 F.2d 1112, 1118 (7th Cir. 1983). This
is a general legal principle, just as applicable to Title VII
and Section 1983 cases as it is to copyright violations
or business torts. Heard v. Sheahan, 253 F.3d 316, 319-20
(7th Cir. 2001). A continuing violation exists “where it
would be unreasonable to require or even permit [a plain-
tiff] to sue separately over every incident of the defen-
dant’s unlawful conduct.” Id. at 319.
  The Supreme Court recently clarified the nature of con-
tinuing violations in National R.R. Passenger Corp. v.
Morgan, 122 S. Ct. 2061 (2002). In Morgan, the Court ruled
6                           Nos. 01-2230, 01-2360, 01-3600

that a Title VII plaintiff could not recover for “discrete
discriminatory acts” that occurred outside the relevant
EEOC filing deadlines but could recover for such actions
on a hostile work environment theory. Id. at 2071-73. We
too have noted the contrast between a continuing wrong,
such as deliberate indifference to a prisoner’s medical
treatment, and discrete acts, such as consistently under-
paying an employee because of her sex. Heard, 253 F.3d
at 320.
  The wrong alleged here is the Redisis’ “distribution of
equipment intended . . . for unauthorized reception of any
communications service offered over a cable system. . . .” 47
U.S.C. § 553(a)(2). While Cablevision contends that the
Redisis’ action was continuing because of their continued
sales made over a seven-year span, this belies the actual
nature of the claim. The Redisis sold over 2,700 decoders.
Each of those sales was a separate and discrete statu-
tory violation for which Cablevision could recover. The
mere fact that the Redisis made a regular habit of violat-
ing the statute is not enough to convert multiple individ-
ual violations into one long continuing wrong. For crim-
inal penalties, the statute expressly declares that the
distribution of each individual device “shall be deemed
a separate violation.” 47 U.S.C. § 553(b)(3). Because each
of the Redisis’ decoder sales is a separate violation, the
continuing violation doctrine has no application here.
  Statutes of limitations are of course subject to equita-
ble doctrines such as tolling, and the modern tendency is
to toll until the plaintiff knew or by reasonable diligence
should have known of both the injury and its governing
cause. Fries v. Chicago & Northwestern Transp. Co., 909
F.2d 1092, 1095 (7th Cir. 1990). An abstract fear of wrong-
doing is not enough. Sokol Crystal Prods., Inc. v. DSC Com-
munications Corp., 15 F.3d 1427, 1430 (7th Cir. 1994).
Nonetheless, the statute begins to run once a plaintiff
has knowledge which would lead a reasonable person to
Nos. 01-2230, 01-2360, 01-3600                            7

investigate the possibility that her legal rights had been
infringed. LaSalle v. Medco Research, Inc., 54 F.3d 443, 446
(7th Cir. 1995). The Redisis argued below that Cablevi-
sion knew or should have known of their actions as early
as 1991 and certainly no later than 1995, but the district
court rejected this position, instead finding that nothing
in the record would have put Cablevision on notice of
the defendants’ actions until it began its investigation in
1998.
  The Redisis point to a variety of information that
Cablevision had at its disposal prior to 1995, including
advertisements of their illegal wares placed in national
magazines, cease and desist letters sent to them by
Cablevision’s own Senior Vice-President Astarita, and
affidavits from FBI agents and another cable television
executive indicating that the FBI communicated several
times with Astarita about its “Operation Cable Trap”
investigation of decoder sellers including the Redisis. At
one such meeting in 1995, the agents specifically noted
that Redisi, Jr. and Teleview were advertising nation-
wide sales of decoders.
  The briefs of both parties make abundantly clear that
the key issues in this case are how much Astarita knew
about the Redisis’ activities and when he knew it. When did
Astarita first see the Redisis’ advertisements? What did
Astarita learn from the FBI meetings? What caused him
to launch his investigation in March 1998?
  Despite the critical importance of Astarita to the case,
the district court refused to allow the Redisis to depose
Astarita, finding that his testimony would not be rele-
vant to any issue in the case. A party has a general right
to compel any person to appear at a deposition, through
issuance of a subpoena if necessary. FED. R. CIV. P. 30(a).
A district court may quash or modify a subpoena if it
fails to allow a reasonable time for compliance or subjects
8                           Nos. 01-2230, 01-2360, 01-3600

the deponent to an undue burden. FED. R. CIV. P.
45(c)(3)(A). When a district court considers a motion to
compel, it must evaluate such factors as timeliness, good
cause, utility, and materiality. Farmer v. Brennan, 81 F.3d
1444, 1449 (7th Cir. 1996). We will overturn a decision
limiting discovery only if: “(1) the record contains no
evidence upon which the court could have rationally based
its decision; (2) the decision is based on an erroneous
conclusion of law; (3) the decision is based on clearly er-
roneous factual findings; or (4) the decision clearly ap-
pears arbitrary.” Stagman v. Ryan, 176 F.3d 986, 993-94
(7th Cir. 1999) (citing Gile v. United Airlines, Inc., 95 F.3d
492, 495 (7th Cir. 1996)).
  The sole ground the district court offered for its denial of
the Redisis’ motion to depose Astarita was that his testi-
mony would not be relevant. It is true that a district
court may deny motions to compel depositions that would
not aid in “the exploration of a material issue.” Israel
Travel Advisory Serv., Inc. v. Israel Identity Tours, Inc.,
61 F.3d 1250, 1254 (7th Cir. 1995). In this case, however, it
is plain that Astarita’s deposition would have assisted
in exploring the material issue of whether the Redisis
had a valid statute of limitations defense to the bulk
of Cablevision’s claim. The district court’s determination
that the motion to compel was “not relevant” was based,
as far as the record shows, only on Cablevision’s bare
representation that Astarita knew nothing about the
case and that four other deposed Cablevision employees
knew as much as he did. This is not enough to establish
an undue burden under Rule 45 or to show some other
exceptional circumstance that would justify prohibiting
the deposition altogether. See Kaier v. Mutual Life Ins.
Co., 161 F.R.D. 378, 380 (S.D. Ind. 1994). In any event, the
record proves that Astarita’s deposition was highly rele-
vant. The Redisis presented in their motions evidence
that none of the individuals Cablevision produced had
Nos. 01-2230, 01-2360, 01-3600                            9

been with the company for more than 14 months, while
Astarita had worked there for close to a decade. As director
of corporate security with responsibility for cable theft
investigations, he alone could provide the answer to the
relevant question of whether Cablevision had knowledge
sufficient to trigger a duty to investigate more than 24
months before it brought suit. Although discovery rul-
ings are subject to the usual harmless error analysis, see
FED. R. CIV. P. 61, we cannot find this ruling to be harm-
less. To the contrary, it went to the heart of the Redisis’
defense. Therefore, we must reverse the judgment of the
district court and remand with instructions to grant the
motion to compel Astarita’s deposition.
  The Redisis ask us to go further and hold that on the
record before us it was objectively unreasonable for
Cablevision not to have investigated their activities
sooner than it did. We decline to take this step. After
reviewing Astarita’s deposition and any other additional
facts the parties can adduce on remand, the district
court will be in the best position to determine whether
Astarita or anyone else at Cablevision reasonably should
have investigated sooner or whether the information at
his disposal was so limited as to toll the statute of lim-
itations.

                            III
  Even in a best-case scenario for the Redisis, we agree
with the district court that they are liable for sales with-
in the two-year period of limitations. That means at a
minimum that they must account for their post-May
1997 sales of illegal decoders. We therefore find it appro-
priate to address some of the damages issues the Redisis
have raised on this appeal, since some money will be due
no matter what. The Redisis bring two distinct challenges
10                         Nos. 01-2230, 01-2360, 01-3600

to the district court’s calculation of damages totaling
over $29 million. First, they argue that there was no basis
in evidence for the damages award. Second, they allege
that the district court wrongfully denied them the discov-
ery they needed to present their case properly.
  Cablevision had the option of recovering either statutory
damages or “the actual damages suffered . . . as a result
of the violation and any profits of the violator that are
attributable to the violation which are not taken into
account in computing the actual damages. . . .” 47 U.S.C.
§ 553(c)(3)(A)(i). Cablevision selected the latter option
and computed its damages by making a number of as-
sumptions. First, its damages expert, Flaim, compared
Cablevision’s subscription list with the names in the
Redisis’ “Gross Purchases” database accessed from its
seized computers (the Redisis having destroyed all paper
records) to create a list of 2,756 customers. He then as-
sumed a useful life of seven years for each decoder and also
assumed that each customer purchased only Cablevision’s
most basic cable services but had access to Cablevision’s
entire “Optimum Gold” package (including channels like
HBO, Cinemax, and The Movie Channel). In 1999, the
difference between these services was $40.25 per month.
Flaim also theorized that the average cable thief viewed
15 pay-per-view cable programs per month at a total
estimated cost of $114.50. This led to a total loss of
$154.75 per month or $1,857 per decoder per year of ser-
vice and a total loss of $29,767,710. Flaim’s analysis was
accepted in its entirety by the district court.
  Damages based on lost revenues are by their very na-
ture incapable of mathematical precision. Thus we will
uphold a district court’s damages determination under
the clear error standard as long as the award was based
on reasonable estimates. Bob Willow Motors, Inc. v. Gen-
eral Motors Corp., 872 F.2d 788, 798-99 (7th Cir. 1989). The
real question, however, is how one should determine a
Nos. 01-2230, 01-2360, 01-3600                          11

cable company’s “actual damages.” Cablevision seems to
believe that its damages are equivalent to the cost it
would have charged a cable thief for the services she
obtained through the use of the Redisis’ decoders. Thus, if
a viewer spent a few seconds scanning through twenty
or so pay-per-view movies with his remote control, and
each movie costs $5, Cablevision would assess its dam-
ages at $100.
  We have difficulty with this method of calculation. Few
rational viewers would pay $100 for the privilege of view-
ing a few seconds of twenty different movies; the action
is only taken because through use of the decoder the ser-
vice becomes free. Another way of stating this fact is that
absent the decoder, a viewer would not use the same cost
of services. And the marginal costs of providing “Opti-
mum Gold” or a pay-per-view movie to one additional
subscriber are surely minimal. Thus, the “actual damages”
suffered by Cablevision, i.e., the value of what has been
taken from it, is the amount it would have received for
the services that its viewers would have demanded ab-
sent the decoders, less the cost of providing those ser-
vices (which may or may not be negligible). One could even
assume that viewers willing to accept the risk of discov-
ery and prosecution for cable theft are users who con-
sume large amounts of cable services and would watch
more pay-per-view features than the average cable cus-
tomer. Even so, however, there must be some evidentiary
basis for determining what that figure would be.
   In this case, however, Flaim made no effort to tie his
damages calculation to any actual viewer habits. As best
we can determine, his finding that the average cable
thief would watch “ten low-priced movies and five higher-
priced events such as concerts, boxing matches and wres-
tling events” is based on nothing more than guesswork
and Flaim’s own viewing habits. While we have no prob-
lem with the basic premise that uncertainties as to dam-
12                         Nos. 01-2230, 01-2360, 01-3600

ages should be resolved against the wrongdoer, BE&K
Constr. Co. v. Will & Grundy Counties Building Trades
Council, 156 F.3d 756, 770 (7th Cir. 1998), this does not
give an injured party carte blanche to provide wild guesses
at its damages. A reasonable estimate as to pay-per-view
usage must be grounded in some record evidence, not
numbers pulled from thin air. MindGames, Inc. v. Western
Publ’g Co., 218 F.3d 652, 658 (7th Cir. 2000) (“Damages
must be proved, not just dreamed. . . .”). Indeed, the very
calculations Flaim made were rejected as “rank specula-
tion” in a similar case in another court. CSC Holdings, Inc.
v. New Info. Tech., Inc., 148 F. Supp. 2d 755, 759 (N.D.
Tex. 2001). On remand, Cablevision must tie its estimates
to real-world figures of customer usage if it wishes any
such damages award to be upheld.
  One other problem with Cablevision’s damages calcula-
tion is also evident on the record before us. Flaim set
damages for illegal access to “Optimum Gold” based only
on Cablevision’s 1999 cable rates, even though much of
the damages stemmed from asserted violations in other
years. Surely Cablevision must have access to its own
rates in earlier years. These rates must provide the basis
for calculations of damages for the years in question. One
cannot rely on estimates when the actual data is readily
available.
  The Redisis also allege that the district court erred in
denying them discovery of certain records. Most notably,
the district court denied the defendants access to Cable-
vision’s subscriber lists on the ground that they were
“cable pirates.” This unqualified ruling went too far.
“Parties may obtain discovery regarding any matter, not
privileged, that is relevant to the claim or defense of any
party.” FED. R. CIV. P. 26(b)(1). As the Redisis point out,
these subscriber lists were relevant to their efforts to
present an alternative and lower calculation of damages
than the $29 million figure submitted by Cablevision. Flaim
Nos. 01-2230, 01-2360, 01-3600                            13

accidentally may have included customers who sub-
scribed not to Cablevision but to a competing service
provider. Beyond this, some of the customers may have
purchased “Optimum Gold” or pay-per-view movies even
when they did own a decoder, and, if so, their damages
for those sales should be reduced. But the Redisis had
no way of raising these points or challenging Flaim’s
figures without access to the same customer databases
that Flaim had. There is no privilege or restriction on
releasing customer records to a non-governmental entity
pursuant to a court order. 47 U.S.C. § 551(c)(2)(B). There-
fore, the district court should have granted the Redisis
some form of access to the subscription lists.
  The district court appears to have feared that turning
over customer databases to “cable thieves” would allow the
Redisis to return again to their illegal ways. This con-
cern may have been realistic, but there are mechanisms
short of an outright denial of discovery to deal with it. The
court could have crafted a protective order under FED. R.
CIV. P. 26(c). In such an order, the court could have per-
mitted Cablevision to redact unnecessary information
from the records, required that all review be conducted in
camera, or permitted only the Redisis’ attorneys to be
present to view the documents. Each of these solutions
would have made it possible for the Redisis to mount a
defense; the outright denial of access to customer lists
did not.
  We encourage the district court to explore these and
other options in crafting a solution that will enable both
parties to provide reasoned estimates of Cablevision’s
damages. Since we are already reversing the judgment
for further proceedings on the statute of limitations issue,
we need not address each of the parties’ other damages
discovery disputes point-by-point. Instead, we are confi-
dent that such discretionary decisions can be better re-
solved by the district court in the first instance.
14                          Nos. 01-2230, 01-2360, 01-3600

                            IV
   As a final matter, the Redisis contend that the district
court’s order freezing their business and personal assets
was unlawful under Grupo Mexicano de Desarrollo, S.A.
v. Alliance Bond Fund, Inc., 527 U.S. 308 (1999). That
decision held that a district court may not issue an in-
junction freezing assets in an action for money dam-
ages where no equitable interest is claimed. Id. at 333.
However, the court specifically noted that a restraint
on assets was still proper if a suit sought equitable re-
lief. Id.; see also Deckert v. Independence Shares Corp., 311
U.S. 282, 288 (1940). Here Cablevision had the option of
seeking either statutory damages, actual damages, or an
accounting and profits remedy. 47 U.S.C. § 553(c)(3)(a)(1).
This last remedy, sought by Cablevision in the alterna-
tive in its initial complaint, is equitable in nature and
imposes a constructive trust on the defendant. An asset
freeze is thus proper to stop cable piracy that violates
the Communications Act. TKR Cable Co. v. Cable City
Corp., 267 F.3d 196, 208 n.4 (3d Cir. 2001). Since the as-
sets in question here were profits the Redisis made by
unlawfully stealing Cablevision’s services, the freeze
was appropriate and may remain in place pending final
disposition of the case.

                             V
  The judgment of the district court is REVERSED and
the case is REMANDED for further proceedings consistent
with this opinion. Circuit Rule 36 shall apply on remand.
Nos. 01-2230, 01-2360, 01-3600                        15

A true Copy:
      Teste:

                      ________________________________
                      Clerk of the United States Court of
                        Appeals for the Seventh Circuit

                 USCA-02-C-0072—10-29-02