United States District Court, D. New Jersey
June 8, 2005.
DIRECTV, Inc., Plaintiff,
MICHAEL J. MARINO, et al. Defendants.
The opinion of the court was delivered by: GARRETT BROWN, District Judge
This matter comes before the Court upon plaintiff DIRECTV's
("Plaintiff" or "DIRECTV") motion to dismiss defendant Dave
Richards' ("Defendant") counterclaim pursuant to Fed.R.Civ.P.
12(b)(6) for failure to state a claim upon which relief may be
granted. DIRECTV also seeks to recover its attorneys' fees
associated with this motion. The Court has jurisdiction over this
matter pursuant to 28 U.S.C. § 1331. The Court, having considered
the parties' submissions and decided the matter without oral
argument pursuant to Fed.R.Civ.P. 78, will grant DIRECTV's
motion and award attorneys' fees.
On November 25, 2003, DIRECTV instituted this action against
several named defendants,*fn1 including Dave Richards,
alleging violation of the Federal Communications Act of 1934
("the Communications Act"), 47 U.S.C. § 605, and the Electronic
Communications Privacy Act ("the Privacy Act"),
18 U.S.C. §§ 2510-2521. See Complaint ¶ 5.
DIRECTV is a direct broadcast satellite provider that delivers
television programming to millions of homes and businesses across the nation. See
Complaint ¶ 1. DIRECTV invested over $1.25 billion in developing
its direct broadcast satellite system. Id. In order to secure
and prevent unauthorized viewing of its programming, DIRECTV
encrypts, or electronically scrambles, its satellite
transmissions. Id. at ¶ 2. DIRECTV has been plagued by the
proliferation of companies engaged in the sale of illegal
equipment that unscrambles their signal and allows users to view
their programming for free. With the assistance of law
enforcement authorities, DIRECTV has engaged in an aggressive
campaign designed to identify the manufacturers and distributors
of pirate access devices and the individuals purchasing them and
recover lost revenue via legal actions.
On or around December 1, 2001, DIRECTV executed Writs of
Seizure upon an internetbased seller, The Computer Shanty. Id.
at ¶ 3. Through its website, The Computer Shanty was allegedly
selling pirate access devices that are used to illegally
intercept transmission signals, including DIRECTV's programming.
Id. DIRECTV acquired The Computer Shanty's business records and
commenced actions against those individuals who allegedly
purchased illegal devices for resale or to intercept DIRECTV's
programming for unauthorized viewing. Id.
DIRECTV alleges that Defendant purchased pirate access devices
over the internet on The Computer Shanty's website. Id. at ¶
13. On or about May 30, 2001, Defendant allegedly purchased two
devices; namely, two "Boot Loader Boards." Id. at ¶ 13(a).
These devices were shipped to Defendant's home in Lodi, New
Jersey. Id. DIRECTV claims that Defendant's actions violate
Section 605 of the Communications Act and Sections 2510-2521 of
the Privacy Act.
On August 31, 2004, Defendant filed a motion to dismiss
DIRECTV's complaint and a motion to quash the third-party subpoena on PayPal.*fn2 On
October 14, 2004, this Court denied both motions. Subsequently,
on October 18, 2004, Defendant filed an answer and counterclaim,
asserting that DIRECTV had engaged in false, misleading and
deceptive acts and practices in violation of the New Jersey
Consumer Fraud Act, N.J. STAT. ANN. §§ 56:8-2 and 56:8-19, et
seq., by circulating derogatory and inaccurate information
regarding Defendant's financial responsibility and credit
worthiness ("Counterclaim"), causing him to suffer emotional and
financial damages. See Counterclaim ¶¶ 6-31. By letter dated
November 3, 2004, DIRECTV advised Sobel that it believed the
Counterclaim was patently frivolous and demanded that it be
withdrawn. During a November 15, 2004 Telephonic Status
Conference with Magistrate Judge John J. Hughes, the parties
addressed Defendant's counterclaim. Judge Hughes' November 19,
2004 Scheduling Order states: "In the event that Defendant
Richards does not withdraw his Counterclaim, Plaintiff may, at
any time, move to dismiss Defendant Richards' Counterclaim and
may seek its attorney's fees in connection therewith." See
Scheduling Order, entered November 19, 2004 .
Defendant has not withdrawn the Counterclaim. On December 1,
2004, DIRECTV filed the instant motion to dismiss the
Counterclaim and seeks its attorneys' fees and costs associated
with the motion.
A. Standard for a Motion to Dismiss
A motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) may be
granted only if, accepting all well-pleaded allegations in the complaint as true,
and viewing them in the light most favorable to plaintiff,
plaintiff is not entitled to relief. Oran v. Stafford,
226 F.3d 275, 279 (3d Cir. 2000); Langford v. City of Atl. City,
235 F.3d 845, 850 (3d Cir. 2000); Bartholomew v. Fischl,
782 F.2d 1148, 1152 (3d Cir. 1986). The Court may not dismiss a complaint
unless plaintiff can prove no set of facts that would entitle him
to relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957);
Angelastro v. Prudential-Bache Sec., Inc., 764 F.2d 939, 944
(3d Cir. 1985), cert. denied, 474 U.S. 935 (1985). "The issue
is not whether a plaintiff will ultimately prevail but whether
the claimant is entitled to offer evidence to support the
claims." Scheuer v. Rhodes, 416 U.S. 232, 236 (1974).
Under Rule 12(b)(6), the Court must "accept the allegations in
the complaint as true, and draw all reasonable factual inferences
in favor of the plaintiff. [The motion can be granted] only if no
relief could be granted under any set of facts that could be
proved." Turbe v. Gov't of the V.I., 938 F.2d 427, 428 (3d Cir.
1991) (citing Unger v. Nat'l Residents Matching Program,
928 F.2d 1392, 1394-95 (3d Cir. 1991)); see also Langford,
235 F.3d at 850; Dykes v. SE. Pa. Transp. Auth., 68 F.3d 1564,
1565, n. 1 (3d Cir. 1995), cert. denied, 517 U.S. 1142
(1996); Piecknick v. Commw. of Pa., 36 F.3d 1250, 1255 (3d Cir.
1994); Jordan v. Fox, Rothschild, O'Brien & Frankel,
20 F.3d 1250, 1261 (3d Cir. 1994). A complaint may be dismissed for
failure to state a claim where it appears beyond any doubt "that
no relief could be granted under any set of facts that could be
proved consistent with the allegations." Hishon v. King &
Spalding, 467 U.S. 69, 73 (1984).
A complaint should not be dismissed unless it appears beyond
doubt that "the facts alleged in the complaint, even if true,
fail to support the claim." Ransom v. Marrazzo, 848 F.2d 398, 401 (3d Cir. 1988). Legal conclusions made in the guise of
factual allegations, however, are given no presumption of
truthfulness. Papasan v. Allain, 478 U.S. 265, 286 (1986);
see also Morse v. Lower Merion Sch. Dist., 132 F.3d 902,
906 (3d Cir. 1997) ("[A] court need not credit a complaint's
`bald assertions' or `legal conclusions' when deciding a motion
B. Defendant's Counterclaim Must Be Dismissed Because DIRECTV
And Defendant Did Not Engage In A Consumer Transaction
Defendant contends that DIRECTV has engaged in a campaign
designed to undermine Defendant's financial responsibility and
credit worthiness by disseminating false, misleading and
deceptive information in violation of the New Jersey Consumer
Fraud Act. See Counterclaim ¶¶ 6-31. More specifically,
Defendant alleges that DIRECTV's conduct violates Sections 56:8-2
and 56:8-19 of the New Jersey Consumer Fraud Act. See N.J.
STAT. ANN. §§ 56:8-2 and 56:8-19 (2005). Section 56:8-2 provides,
in pertinent part that:
The act, use or employment by any person of any
unconscionable commercial practice, deception, fraud,
false pretense, false promise, misrepresentation, or
the knowing, concealment, suppression, or omission of
any material fact with intent that others rely upon
such concealment, suppression or omission, in
connection with the sale or advertisement of any
merchandise or real estate, or with the subsequent
performance of such person as aforesaid, whether or
not any person has in fact been misled, deceived or
damaged thereby, is declared to be an unlawful
N.J. STAT. ANN. §§ 56:8-2 (2005). Section 56:8-19 provides a
private right of action for conduct proscribed by the statute.
The absence of a consumer transaction between the parties is
fatal to Defendant's counterclaim. The Supreme Court of New
Jersey has clarified that the New Jersey Consumer Fraud Act is aimed basically at unlawful sales and advertising practices
designed to induce consumers to purchase merchandise or real
estate . . . The legislative concern was over sharp practices and
dealings in the marketing of merchandise and real estate whereby
the consumer could be victimized by being lured into a purchase
through fraudulent, deceptive or other similar kind of selling or
Daaleman v. Elizabethtown Gas Co., 390 A.2d 566, 568-69 (N.J.
1978) (emphasis added). Put simply, the Act is intended to
protect consumers engaging in consumer transactions. See J&R
Ice Cream Corp. v. California Smoothie Licensing Corp.,
31 F.3d 1259, 1272 (3d Cir. 1994). Further, New Jersey courts have
clarified that the New Jersey Consumer Fraud Act only applies to
"bona fide consumers" of a product. See Grauer v. Norman
Chevrolet GEO, 729 A.2d 522, 524 (N.J.Super.Ct. Law Div.
1998). In the present case, even drawing all favorable inferences
in Defendant's favor, it is impossible to find that a bona fide
consumer transaction existed between the parties.
On the contrary, this entire litigation is premised on the
absence of a legitimate consumer transaction; that is, the
underlying facts allege that Defendant was illegally intercepting
DIRECTV's programming without paying for it. See DIRECTV, Inc.
v. Pepe, 03-2424 (Katharine S. Hayden, U.S.D.J.) (holding that
the defendant's counterclaim that DIRECTV's initiation and
pursuit of claims that defendant illegally intercepted its'
signal did not violate the New Jersey Consumer Fraud Act because
"[t]he actual absence of a consumer relationship is the focus
of the lawsuit against [the defendant].") (emphasis in original).
This Courts determination that DIRECTV's complaint could succeed
as a matter of law is antithetical to any contention that their
conduct somehow violated the New Jersey Consumer Fraud Act.
Further, Defendant's contention that his status as a legitimate
subscriber of DIRECTV's programming somehow brings his counterclaim within the purview of the New Jersey
Consumer Fraud Act is devoid of merit. Defendant is attempting to
obscure the facts underlying DIRECTV's claims. That Defendant may
also pay for some of DIRECTV's programming is entirely irrelevant
to whether or not Defendant purchased pirate access devices to
illegally intercept DIRECTV's signal.*fn3 Therefore, the
Court finds that Defendant's counterclaim must be dismissed.
C. DIRECTV Is Entitled To Attorneys' Fees
By letter dated November 3, 2004, DIRECTV demanded that Sobel
withdraw the counterclaim.*fn4 In the letter, DIRECTV
advised Sobel that it regarded the Counterclaim as "patently
frivolous," directing him to Judge Hayden's opinion in DIRECTV
v. Pepe. The letter advised Sobel that DIRECTV would seek
sanctions if he did not withdraw the counterclaim. Significantly,
DIRECTV alleges that Sobel has asserted the identical
counterclaim on behalf of fourteen (14) other defendants in
actions brought by DIRECTV under the Communications Act and
Privacy Act and has voluntarily dismissed this counterclaim in
all fourteen (14) instances after DIRECTV filed a motion to
dismiss. In his opposition brief, Sobel does not dispute the
veracity of these allegations. Instead, Sobel merely argues that
whether or not he asserted and subsequently withdrew similar or
identical counterclaims in other actions is irrelevant. Sobel is
only partially correct. White it is true that his conduct in
these other actions is irrelevant to whether the Counterclaims must be dismissed as a matter of law,
the Court finds this conduct to be clearly relevant to the
question of whether attorneys' fees are appropriate in this case.
Further, this issue was discussed by the parties during a
November 15, 2004 telephonic status conference with Judge Hughes.
During that call, DIRECTV advised Judge Hughes that it believed
the counterclaim was patently frivolous and that Sobel had
voluntarily dismissed identical claims on fourteen (14) other
occasions. Judge Hughes addressed this issue in his November 18,
2004 Scheduling Order, specifically stating: "In the event that
Defendant Richards does not withdraw his Counterclaim, Plaintiff
may, at any time, move to dismiss Defendant Richards'
Counterclaim and may seek its attorney's fees in connection
therewith."*fn5 See Scheduling Order, entered November 19, 2004 .
In light of these facts and this Court's determination that the
Counterclaim is entirely without merit, the Court holds that
DIRECTV is entitled to the attorneys' fees and costs incurred in
addressing the Counterclaim. DIRECTV placed Sobel on notice two
times via its November 3, 2004 letter and during the November
15, 2004 teleconference with Judge Hughes that it believed his
claims to be patently frivolous. The letter pointed Sobel to
Judge Hayden's decision in Pepe which pointedly concluded that
the identical counterclaim could not be sustained under the
Consumer Fraud Act because there was no consumer
transaction.*fn6 Further, Sobel's decision to voluntary
withdraw similar or identical counterclaims in fourteen (14)
other DIRECTV actions is circumstantial evidence that Sobel
understands that the Counterclaim has no basis in law or in fact.
Further, as discussed above, this Court already determined that
DIRECTV's claims had merit when it denied Defendant's motion to
dismiss. That holding is clearly inapposite to the success of the
Counterclaim. Accordingly, the Court concludes that it is
appropriate to award DIRECTV the attorneys' fees incurred in
association with this motion.
DIRECTV requests fees in the amount of $1,343.00, which
allegedly represents 7.9 hours of associate time at the rate of
$170.00 per hour.*fn7 See DIRECTV Reply Brief. However, DIRECTV has failed to submit an appropriate affidavit of services
comporting with Local Civil Rule 54.1. Without an affidavit of
services, this Court is unable to determine whether this amount
is reasonable and justified under the circumstances. Accordingly,
DIRECTV is directed to submit an appropriate affidavit of
services within thirty (30) days of the entry of the Order
accompanying this Memorandum Opinion.
For the foregoing reasons, DIRECTV's motion to dismiss is
granted. Further, the Court finds that DIRECTV is entitled to the
reasonable attorneys' fees expended preparing this motion.
DIRECTV is directed to submit an appropriate affidavit of
services comporting with Local Civil Rule 54.1 within thirty (30)
days of the entry of the Order accompanying this Memorandum
Opinion. An appropriate form of Order is filed herewith.