DirecTV, Inc. v. Rawlins

PUBLISHED

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

DIRECTV, INCORPORATED, 
Plaintiff-Appellant,
v.  No. 06-1430
JOHN J. RAWLINS,
Defendant-Appellee.

Appeal from the United States District Court
for the Western District of North Carolina, at Statesville.
Richard L. Voorhees, District Judge.
(5:04-cv-00129)

Argued: December 7, 2007

Decided: April 21, 2008

Before DUNCAN, Circuit Judge, HAMILTON,
Senior Circuit Judge, and Catherine C. BLAKE,
United States District Judge for the District of Maryland,
sitting by designation.

Vacated and remanded by published opinion. Judge Duncan wrote the
opinion, in which Senior Judge Hamilton joined. Judge Blake wrote
a separate concurring opinion.

COUNSEL

ARGUED: Howard Robert Rubin, SONNENSCHEIN, NATH &
ROSENTHAL, L.L.P., Washington, D.C., for Appellant. Ray Martin
Kline, Raleigh, North Carolina, for Appellee. ON BRIEF: Samuel
2 DIRECTV, INC. v. RAWLINS
Bryant Davidoff, SONNENSCHEIN, NATH & ROSENTHAL,
L.L.P., Washington, D.C., for Appellant.

OPINION

DUNCAN, Circuit Judge:

Appellant DIRECTV, Inc. ("DIRECTV"), a satellite television ser-
vice provider, commenced this action in the Western District of North
Carolina against appellee John Rawlins. DIRECTV alleged that
Rawlins utilized illegal devices to access DIRECTV television pro-
gramming beyond the level of his paid subscription in violation of, as
relevant here, the Cable Communications Policy Act of 1984 (the
"Cable Act"), 47 U.S.C. § 605(a), and the Electronic Communications
Privacy Act of 1986 (the "Wiretap Act"), 18 U.S.C. § 2511. After
Rawlins failed to respond, the district court entered default judgment
against him under both statutes. The court permanently enjoined
Rawlins from continuing to violate the laws and awarded DIRECTV
attorney’s fees and costs. However, the court declined to award the
statutory damages DIRECTV requested under either of the relevant
statutory provisions.

On appeal, DIRECTV challenges only the district court’s denial of
statutory damages under the Wiretap Act. Finding that the district
court abused its discretion, we vacate the judgment and remand for
further proceedings consistent with this opinion.

I.

This litigation arises in the wake of recent dramatic technological
changes in the home entertainment industry, a brief description of
which provides the context for our decision here. DIRECTV provides
satellite television programming to its customers through subscription
services and pay-per-view options. Programming content is distrib-
uted to customers via encrypted (i.e., scrambled) signals, which are
sent to satellite dishes, decrypted by receivers, and then delivered to
customers’ televisions. DIRECTV manages the amount and type of
content provided to customers by the use of "access cards," small
 DIRECTV, INC. v. RAWLINS 3
credit card-sized devices containing chips that instruct receivers to
decrypt only those signals covered by individual customers’ subscrip-
tion packages. These access cards also monitor customers’ pay-per-
view purchases.

This method of home television viewing is a fairly recent innova-
tion. See H.R. Rep. No. 100-887(II), at 10 (1988), reprinted in 1988
U.S.C.C.A.N. 5577, 5639 (discussing history of satellite-relayed cable
programming). In 1975, Home Box Office Inc. ("HBO") began deliv-
ering movies to cable television operators via satellite. These cable
operators would pay HBO, and later other satellite carriers, per-
subscriber fees for access to their signals, and then deliver the signals
to subscribers over cable wire. Problems arose after technological
advances enabled owners of backyard satellite dishes to receive satel-
lite carriers’ signals directly, without paying the carriers or the cable
operators. The legality of this practice was immediately challenged.
Though not explicitly prohibited by statute, the practice was consid-
ered illegal by the Federal Communications Commission ("FCC") and
held by several courts to be a prohibited use of satellite signal. How-
ever, satellite carriers were not content to rely on the legal system to
prevent this type of access to their signal. Thus, they began using
encryption technology and providing decryption capacity only to pay-
ing customers, effectively cutting off access to others. Id.

In 1984, the Cable Act was enacted, clarifying the law respecting
use of this technology. It legalized the sale and use of backyard
dishes, authorized owners of these dishes to receive unencrypted sig-
nals under certain circumstances, and increased penalties for unautho-
rized signal reception, including the reception of encrypted signals.
Two years later, Congress passed the Wiretap Act to enhance Federal
privacy protection in the rapidly evolving telecommunications indus-
try. See 132 Cong. Rec. S14441-04 (daily ed. Oct. 1, 1986) (statement
of Sen. Leahy) (describing the need for updates to the then-existing
law in light of technological advances and the cumbersome structure
of the telecommunications industry). In the years following the pas-
sage of these Acts, satellite television became a multi-billion dollar
business. As the industry grew, so too did efforts to gain unauthorized
access to its programming.

DIRECTV entered the market in 1994, providing, as an alternative
to cable television, all-digital multi-channel television programming
4 DIRECTV, INC. v. RAWLINS
delivered directly to home viewers via satellite. Before long, techno-
logically sophisticated scofflaws found methods for reprogramming
or replacing DIRECTV access cards with illicit decoder technology
that allowed home viewers, or "end-users," to gain access to
DIRECTV programming without payment. In response, DIRECTV
developed electronic counter-measures, including, for example, trans-
mitting occasional bursts of data that had the effect of disabling unau-
thorized access cards without harming legitimate DIRECTV access
cards. In short order, however, a market emerged around the design
and sale of illegal "pirate access devices," which restore the ability of
disabled access cards to unscramble DIRECTV’s encrypted signals or
otherwise allow their users to gain access to DIRECTV’s signal with-
out payment.

In addition to availing itself of technological remedies, DIRECTV
has increasingly turned to the legal system. Utilizing civil enforce-
ment mechanisms contained in the Cable Act and the Wiretap Act,
DIRECTV has aimed to curb piracy by filing complaints against
alleged violators, seeking injunctive relief, damages, attorney’s fees
and costs. To date, DIRECTV has initiated anti-fraud and anti-piracy
enforcement actions against more than 25,000 defendants. See
DIRECTV, Inc. v. Hoa Huynh, 503 F.3d 847, 850 (9th Cir. 2007) (cit-
ing website maintained by DIRECTV chronicling its anti-piracy liti-
gation efforts). The case before us is one such action.

II.

On December 1, 2001, and January 28, 2002, with the assistance
of the United States Marshals Service, DIRECTV executed writs of
seizure on "The Computer Shanty" and "EQ Stuff," two alleged sell-
ers of pirate access devices. Among the items confiscated were busi-
ness records that implicated Rawlins, among others. According to the
seized records, Rawlins purchased the following illegal devices from
The Computer Shanty: one "Netsignia 210 Programmer," one
"ULPRO X Super Unlooper," and one "ULTCOMBO," which con-
sists of a "Shanty Unlooper," a "Shanty PS2 Blue Emulator," a
"Shanty Programmer," and a "Shanty Bootloader."1 From EQ Stuff,
1
A "Programmer" is a device used to clone or program an access card
to receive unauthorized programming. An "Unlooper" is used to restore
 DIRECTV, INC. v. RAWLINS 5
Rawlins purchased one "EQ Zapulator" (a type of emulator) and one
"EQ Amtel Programmer." Rawlins had each of these devices shipped
to Charlotte, North Carolina, and used them to display and view
DIRECTV programming without authorization. Rawlins paid a total
of $852.00 for these devices. See J.A. 42-44.

On the basis of this information, DIRECTV filed a civil complaint
against Rawlins on September 3, 2004, alleging, inter alia, violations
of the Cable Act and Wiretap Act. When Rawlins failed to appear, the
clerk entered Rawlins’s default upon DIRECTV’s motion.2
DIRECTV thereafter moved for default judgment, seeking a perma-
nent injunction, statutory damages,3 attorney’s fees and costs. On
March 8, 2006, the district court granted the motion for summary
judgment with respect to DIRECTV’s Cable Act and Wiretap Act
claims.4

functionality to illegally modified access cards that were disabled by
misuse or by DIRECTV’s electronic counter-measures. An "Emulator"
links an access card slot on a DIRECTV receiver to a personal computer,
allowing the user to run software on the computer to emulate the func-
tions of an access card without susceptibility to DIRECTV’s electronic
counter-measures. A "Bootloader" allows the user to circumvent certain
electronic counter-measures deployed by DIRECTV to disable unautho-
rized access cards. See J.A. 36-39 (Whalen Aff. at 12-15).
2
Due to Rawlins’s default, we accept DIRECTV’s allegations against
him as true. See Ryan v. Homecomings Fin. Network, 253 F.3d 778, 780
(4th Cir. 2001) ("The defendant, by his default, admits the plaintiff’s
well-pleaded allegations of fact, is concluded on those facts by the judg-
ment, and is barred from contesting on appeal the facts thus estab-
lished.").
3
DIRECTV moved for statutory damages only, and not for actual dam-
ages, because Rawlins’s default made it difficult for DIRECTV to prove
actual damages. We also note that, in its motion for default judgment,
DIRECTV prayed for $10,000 in statutory damages but did not specify
whether it believed such damages should be awarded under the Cable
Act or the Wiretap Act. In its supplemental memorandum in support of
its motion, however, DIRECTV explained that it was seeking an award
under the statutory damage provisions of both Acts, presumably in the
alternative.
4
The district court denied default judgment on a claim against Rawlins
for willfully assembling or modifying devices or equipment, brought pur-
suant to 47 U.S.C. § 605(e)(4). DIRECTV did not appeal this denial.
DIRECTV also included various state law claims in its complaint, but
abandoned these when moving for default judgment.
6 DIRECTV, INC. v. RAWLINS
Turning to the requested relief, the court permanently enjoined
Rawlins from violating 47 U.S.C. § 605(a) or 18 U.S.C. § 2511, and
awarded DIRECTV costs and fees in the total amount of $556.96.
The district court did not, however, grant DIRECTV statutory dam-
ages under either Act. Relying on the plain language in each statute,
the court found that, under the Cable Act, "[t]he award of statutory
damages . . . is committed to the Court’s discretion," and that, under
the Wiretap Act, a court likewise "may, in its discretion, refuse to
award any damages." J.A. 73, 67; see Nalley v. Nalley, 53 F.3d 649,
650 (4th Cir. 1995) (holding that the Wiretap Act "gives the district
court discretion to decline to award damages even though a violation
may have occurred."). Though the court recognized that "an award of
statutory damages [under the Wiretap Act] may serve the legitimate
and useful purpose of deterrence," it found "that this purpose can be
met by an award of costs and attorneys’ fees" on the particular facts
of this case. J.A. 68. The court similarly declined to award statutory
damages under the Cable Act, finding injunctive relief, costs, and fees
to be "sufficient deterrents." J.A. 74.

On appeal, DIRECTV seeks review only of the district court’s
refusal to award statutory damages under the Wiretap Act, 18 U.S.C.
§ 2520(c)(2). Significantly, DIRECTV did not appeal the denial of
damages under the Cable Act, 47 U.S.C. § 605(e)(3)(C)(I)-(II), and
acknowledged at oral argument that the district court did not abuse its
discretion in that regard. We review the district court’s denial of statu-
tory damages under the Wiretap Act for abuse of discretion. See Nal-
ley, 53 F.3d at 654. A district court abuses its discretion if it fails
"adequately to take into account judicially recognized factors con-
straining its exercise," or if it bases its exercise of discretion on an
erroneous factual or legal premise. James v. Jacobson, 6 F.3d 233,
239 (4th Cir. 1993).

III.

DIRECTV raises two principal arguments on appeal. First, it
argues that the Wiretap Act only grants discretion to a district court
to decline to award damages for de minimis violations of the statute.
See Appellant’s Br. at 20 (citing Nalley, 53 F.3d at 653). Second,
DIRECTV argues that, to the extent the district court did have discre-
tion to decline to award damages, it abused such discretion by relying
 DIRECTV, INC. v. RAWLINS 7
on improper considerations and failing to recognize the severity of
Rawlins’s violation of the statute.

A.

Analysis of these arguments begins, as it must, with the language
of the underlying statutes.5 The Cable Act prohibits the unauthorized
reception of DIRECTV’s encrypted signal by end-users, 47 U.S.C.
§ 605(a), and the manufacture, assembly, modification, importation,
exportation, sale, or distribution of devices or equipment used to
assist end-users in such unauthorized reception, id. § 605(e)(4). In
addition to imposing criminal liability, the Cable Act also allows an
aggrieved party such as DIRECTV to elect to recover either actual or
statutory damages for violations of these provisions. Id.
§ 605(e)(3)(C)(i). For those seeking statutory damages, as DIRECTV
did in this case, the Cable Act sets forth a two-tiered penalty system.
The relevant portion of the Cable Act provides:

[T]he party aggrieved may recover an award of statutory
damages for each violation of [§ 605(a)] involved in the
action in a sum of not less than $1,000 or more than
$10,000, as the court considers just, and for each violation
of [§ 605(e)(4)] involved in the action an aggrieved party
may recover statutory damages in a sum not less than
$10,000, or more than $100,000, as the court considers just.

Id. § 605(e)(3)(C)(i)(II) (emphasis added). In other words, end-users
who violate the Cable Act are subject to awards of statutory damages
of $1,000 to $10,000 per violation, while manufacturers, program-
mers, sellers, and others facilitating such conduct face statutory dam-
age awards of $10,000 to $100,000 per violation.6
5
Though DIRECTV appeals only the district court’s decision with
respect to the Wiretap Act, we find it prudent to discuss the Cable Act
and Wiretap Act in conjunction here to provide the complete statutory
backdrop to the district court’s analysis.
6
This court previously held, in an unpublished opinion, "that
§ 605(e)(4) does not categorically exempt individual users." DIRECTV,
Inc. v. Pernites, 200 F. App’x 257, 258 (4th Cir. 2006) (per curiam). We
8 DIRECTV, INC. v. RAWLINS
Such acts of piracy also violate the independent statutory scheme
embodied in the Wiretap Act. The Wiretap Act subjects to criminal
punishment "any person who . . . intentionally intercepts, endeavors
to intercept, or procures any other person to intercept or endeavor to
intercept, any wire, oral, or other electronic communication." 18
U.S.C. § 2511(1)(a). With limited exceptions not applicable here, the
Wiretap Act, like the Cable Act, also provides a civil remedy to any
party aggrieved by a violation of § 2511. Id. § 2520(a). The aggrieved
party "may in a civil action recover . . . such relief as may be appro-
priate," § 2520(a), which includes appropriate declaratory or equitable
relief, damages, and reasonable attorney’s fees and costs, § 2520(b).

The Wiretap Act’s civil damages provision, in turn, is divided into
two parts. The first provides that if the violation involved is "the pri-
vate viewing of a private satellite video communication that is not
scrambled or encrypted . . . then the court shall assess" actual dam-
ages or statutory damages in an amount ranging from $50 to $1,000.
Id. § 2520(c)(1) (emphasis added). The second part provides that,

[i]n any other action under this section [including those
involving encrypted communications], the court may assess
as damages whichever is the greater of—

offer no opinion here regarding the issue addressed in Pernites—whether
§ 605(e)(4) might properly be applied to end-users like Rawlins. Many
courts have held that § 605(e)(4) targets only upstream manufacturers
and distributors and not the ultimate consumers of pirating devices. See
Hoa Huynh, 503 F.3d at 855 (collecting cases); DIRECTV, Inc. v. Nez-
nak, 371 F. Supp. 2d 130, 133 (D. Conn. 2005); DIRECTV, Inc. v.
Albright, No. Civ.A. 03-4603, 2003 WL 22956416, at *2 (E.D. Pa. Dec.
9, 2003); DIRECTV, Inc. v. Borich, No. Civ.A. 1:03-2146, 2004 WL
2359414, at *3 (S.D. W.Va. Sept. 17, 2004). Other courts have taken the
view this court found persuasive in Pernites. See DIRECTV, Inc. v. Rob-
son, 420 F.3d 532, 543-44 (5th Cir. 2005). In this case, DIRECTV
brought a claim under § 605(e)(4) and moved for default judgment on the
claim. The district court denied the motion, finding that § 605(e)(4) tar-
geted only upstream manufacturers and distributors, citing Borich but
failing to mention Pernites. J.A. 70. DIRECTV did not appeal the denial
of this claim, and we will therefore not address it.
 DIRECTV, INC. v. RAWLINS 9
(A) the sum of the actual damages suffered by the
plaintiff and any profits made by the violator as a
result of the violation; or

(B) statutory damages of whichever is the greater
of $100 a day for each day of violation or $10,000.

Id. § 2520(c)(2) (emphasis added). Because it is the interception of
DIRECTV’s encrypted satellite signal that is at issue in this case,
§ 2520(c)(2) controls the award of statutory damages.

This court has recognized, consistent with the language of the stat-
ute and with the views of the majority of our sister circuits, that the
award of damages under § 2520(c)(2) is discretionary. See Nalley, 53
F.3d at 652-53; see also DIRECTV, Inc. v. Brown, 371 F.3d 814, 818
(11th Cir. 2004); Dorris v. Absher, 179 F.3d 420, 429 (6th Cir. 1999);
Reynolds v. Spears, 93 F.3d 428, 435 (8th Cir. 1996). But see Rodgers
v. Wood, 910 F.2d 444, 448 (7th Cir. 1990).7 The proper parameters
7
When a court does award damages under § 2520(c)(2), the statute
requires that the award amount to at least $10,000. The Sixth Circuit has
provided a helpful description of the workings of the statute, in the form
of step-by-step guidance to district courts:
(1) The court should first determine the amount of actual dam-
ages to the plaintiff plus the profits derived by the violator, if
any. See 18 U.S.C. § 2520(c)(2)(A).
(2) The court should next ascertain the number of days that the
statute was violated, and multiply by $100. See 18 U.S.C.
§ 2520(c)(2)(B).
(3) The court should then tentatively award the plaintiff the
greater of the above two amounts, unless each is less than
$10,000, in which case $10,000 is to be the presumed award. See
id.
(4) Finally, the court should exercise its discretion to determine
whether the plaintiff should receive any damages at all in the
case before it. See 18 U.S.C. § 2520(c)(2).
Dorris, 179 F.3d at 430. In no case will a court reach step three and con-
clude that the tentative award under § 2520(c)(2) is less than $10,000.
Therefore, where, as here, a plaintiff seeks the statutory minimum
amount of $10,000, the only relevant step from the procedure outlined
in Dorris is the fourth step: the district court’s exercise of "its discretion
to determine whether the plaintiff should receive any damages at all." Id.
10 DIRECTV, INC. v. RAWLINS
of this discretion form the crux of this appeal, and, therefore, it is to
those parameters that we now turn.

B.

DIRECTV first argues that our precedent in Nalley created a
bright-line test, making mandatory an award of damages under the
Wiretap Act for any violation of the statute that is not de minimis in
nature. Rawlins, on the other hand, insists that "Nalley stands for the
rule that any district cou[rt] may decline to award damages in any
case involving § 2520(c)(2)." Appellee’s Br. at 6 (emphasis added).

The facts of Nalley provide a useful backdrop to our consideration
of its applicability to the present case. In Nalley, a woman who
received an audiotape containing a telephone conversation between
her husband and a paramour played the tape for her children, her
attorney, and the paramour’s husband. The woman’s husband and his
lover sued his wife under the Wiretap Act, seeking statutory damages
of $10,000 for her intentional disclosure of the contents of their tele-
phone conversation, "knowing or having reason to know that the
information was obtained through [an unauthorized] interception."
Nalley, 53 F.3d at 650 (alteration in original) (quoting 18 U.S.C.
§ 2511(1)(c)). The wife stipulated to a one-day violation of the Wire-
tap Act, and the case proceeded to trial on the issue of damages. The
district court found the act of intentionally disclosing the contents of
the audiotape to be a de minimis violation of the Wiretap Act. Con-
cluding that it had discretion to decline to award damages under the
Wiretap Act, the district court awarded none. Nalley, 53 F.3d at 650.

Confronting an issue of first impression in the circuit, this court
decided that the Wiretap Act "gives the district court discretion to
decline to award damages even though a violation may have
occurred." Id. The Nalley decision was grounded in the language of
18 U.S.C. § 2520(c)(2), which states that "the court may assess . . .
damages," in an appropriate case (emphasis added). The court con-
trasted the language of § 2520(c)(2) with the mandatory language
appearing in § 2520(c)(1) (". . . the court shall assess damages . . . .")
(emphasis added). The court held, "To give this contrasting language
meaning, we must read § 2520(c)(2) to embody a congressional intent
to grant courts the discretion to decline to award damages in all but
 DIRECTV, INC. v. RAWLINS 11
the particular circumstances covered by § 2520(c)(1), where Congress
clearly did not manifest an intent to confer such discretion." Nalley,
53 F.3d at 651.

DIRECTV would have us read Nalley as limiting the court’s dis-
cretion to decline to award damages under the Wiretap Act to de
minimis violations. Fairly read, however, the language of Nalley does
not support such a construction. It is not inferable solely from the fact
that the violation in that case was found to be de minimis that the
court’s discretion is circumscribed on that basis. Rather, the opinion
cites favorably a number of factors that weigh in the determination of
whether an award of damages is appropriate: the severity or minimal
nature of the violation; whether there was actual damage to the vic-
tim; the extent of any intrusion into the victim’s privacy; the relative
financial burdens of the parties; whether there was a reasonable pur-
pose for the violation; and whether there was any useful purpose to
be served by imposing the statutory damages amount. Nalley, 53 F.3d
at 654 (citing Reynolds v. Spears, 857 F. Supp. 1341, 1348 (W.D.
Ark. 1994), aff’d, 93 F.3d 436 (8th Cir. 1996)), and Shaver v. Shaver,
799 F. Supp. 576, 580 (E.D.N.C. 1992)); see also Dorris, 179 F.3d
at 430; DIRECTV, Inc. v. Guzzi, 308 F. Supp. 2d 788, 790 (E.D.
Mich. 2004).8 The invocation of such a range of criteria to govern the
court’s exercise of discretion refutes the argument that the existence
of more than de minimis harm alone suffices to strip the court of dis-
cretion. We therefore cannot agree that Nalley precludes the exercise
of discretion for non-de-minimis harms.

C.

In the alternative, DIRECTV argues that, to the extent the district
court had discretion under Nalley to decline to award damages, it
abused that discretion both by giving weight to improper consider-
ations and by failing to adequately consider several Nalley factors,
8
While Nalley may be read as merely alluding to these non-exclusive
factors, we find them to provide a useful framework for exploring the
equities at stake in a court’s exercise of discretion, and we therefore
adopt them here.
12 DIRECTV, INC. v. RAWLINS
including the severity of Rawlins’s piracy and the harm it exacted
upon DIRECTV.9 We agree.

The district court analyzed the claim for Wiretap Act damages as
follows:

In exercising [its] discretion [under the Wiretap Act] in the
instant case, the Court concludes that damages are not
appropriate. Aside from potentially receiving Directv’s sat-
ellite television programming for free of charge for a period
of time, there is no indication that Defendant otherwise prof-
ited from his conduct. There is no evidence that he used the
devices for commercial purposes or purchased the device for
resale. There are no allegations that Defendant induced oth-
ers to commit similar violations. Although Directv alleges
that "[t]he value of the programs that Defendant[ ] [was]
capable of viewing without authorization may easily reach
$100,000 in a single year," there is no allegation as to how
long Defendant actually used the devices or the dollar
amount Directv would have received in subscription fees but
did not obtain as a result of Defendant’s activity. There is
no evidence of the amount of Defendant’s actual personal
use of the devices. Therefore, the Court denies Directv’s
request for statutory damages arising from Defendant’s vio-
lation of [the Wiretap Act].

J.A. 67-68 (citation omitted) (alteration and emphasis in original).

The flaws in the district court’s analysis are manifest. First, the
analysis relies on a number of irrelevant factors. The Wiretap Act
criminalizes the actions of any person who "intentionally intercepts,
endeavors to intercept, or procures any other person to intercept" elec-
tronic communications. 18 U.S.C. § 2511(1)(a). It allows recovery in
a civil action brought by any person whose electronic communica-
tions are "intercepted, disclosed, or intentionally used." Id. § 2520(a);
DIRECTV, Inc. v. Nicholas, 403 F.3d 223, 228 (4th Cir. 2005). There-
9
Rawlins presents no cogent counterargument, except to repeat that the
district court should be granted wide discretion in its awarding of dam-
ages under the Wiretap Act.
 DIRECTV, INC. v. RAWLINS 13
fore, the fact that Rawlins neither used the devices for commercial
purposes nor purchased them for resale is not germane to an analysis
of damages related to his patent violation of the statute.

The district court also gives weight to the lack of evidence to show
that Rawlins induced others to violate the Wiretap Act. Although such
a consideration might be relevant if Rawlins were charged with pro-
curing another person to intercept electronic communications under
the Wiretap Act, id. § 2511(1)(a), it has no apparent bearing on his
culpability for his own interception.10

Furthermore, the district court’s reasoning punishes DIRECTV for
gaps in evidence that are due solely to Rawlins’s default. For exam-
ple, the district court twice points to the lack of "evidence of the
amount of Defendant’s actual personal use of the devices." J.A. 67.
Such evidence would most easily be produced in defense by Rawlins,
not as part of DIRECTV’s case-in-chief. It is scarcely appropriate,
procedurally, to allow Rawlins to benefit from the paucity of evidence
attributable to his own default. To the contrary, by providing district
courts with the alternative of either actual or statutory damages, the
Wiretap Act provides a vehicle for awarding damages that does not
stall merely because the defendant has refused to participate in the
process.
10
The import of the concurring opinion, seemingly in this regard, is
opaque. It first suggests that the Whalen affidavit, which was submitted
with "Plaintiff’s Supplemental Memorandum of Law in Support of Its
Motion for Entry of Default Judgment Against Defendant Rawlins" spe-
cifically referred to by the district court in the opening paragraph of its
order, J.A. 62, and repeatedly described in Rawlins’s brief as having
been considered by the court, see Appellee’s Br. at 6-7, was somehow
"inadvertently overlooked." However, the only portion of III.C. with
which it apparently takes issue is the characterization of the evidence on
which the district court relies—that Rawlins neither used the pirated
devices for commercial purposes, nor purchased them for resale—as "ir-
relevant." The opinion fails to explain how it could be otherwise. The
language of the statute at issue criminalizes interception, not commercial
use or resale. 18 U.S.C. § 2511. We thus think it clear that our descrip-
tion of that evidence is well-founded, even in the absence of the guidance
we provide today.
14 DIRECTV, INC. v. RAWLINS
In that regard, the district court erred not only in what it did con-
sider, but in what it failed to consider in exercising its discretion.
Most troubling is the district court’s apparent failure to give much, if
any, weight to the affidavit of James F. Whalen, submitted by
DIRECTV. Whalen was the Senior Director in DIRECTV’s Office of
Signal Integrity, which investigated reports of theft of DIRECTV’s
satellite signal. His affidavit provided significant detail regarding
DIRECTV’s costs and billing practices, Rawlins’s account history,
and the particular devices Rawlins utilized. See J.A. 25-61. Such evi-
dence, standing uncontroverted by virtue of Rawlins’s default, cer-
tainly warranted careful consideration. See James, 6 F.3d at 239.

The Whalen affidavit is critical to DIRECTV’s claim for damages
precisely because it is probative of many of the Nalley factors that,
although never considered by the district court, should govern the
exercise of discretion to award damages under the Wiretap Act: the
severity of the violation; the degree of harm to the victim; the relative
financial burdens of the parties; and the purposes to be served by
imposing the statutory damages amount. See Nalley, 53 F.3d at 654.
The district court’s analysis is also troubling because of its failure to
adequately weigh any of these considerations. For example, it did not
analyze the severity of Rawlins’s violation of the Wiretap Act, despite
evidence in the Whalen affidavit detailing the extent of Rawlins’s
piracy. Similarly, the court paid no heed to the significant amounts
Rawlins expended for his pirating equipment, surely probative of his
ability to pay damages. Nor do we have the benefit of the district
court’s analysis into whether there would be a useful purpose to be
served by awarding the statutory amount in this case, as the court only
offered the bald assertion that the purpose of deterrence "can be met
by an award of costs and attorneys’ fees." J.A. 68.

On the whole, we also find the district court’s conclusion to be
incongruent with the seriousness of Congress’s approach to the inter-
ception of encrypted signals. See Nicholas, 403 F.3d at 227-28. In
Nicholas, this court held that a provider victimized by a violation of
18 U.S.C. § 2511(1) could bring a civil action against the violator. Id.
at 228. In so holding, the court noted Congress’s intent "that violators
who intercept encrypted transmissions, requiring greater technical
savvy and efforts, are to face greater punishments than those who take
 DIRECTV, INC. v. RAWLINS 15
fewer measures in order to intercept nonencrypted transmissions." Id.
at 227.

For these reasons, we conclude that the district court abused its dis-
cretion in its approach to analyzing whether statutory damages should
have been awarded under 18 U.S.C. § 2520(c)(2).

IV.

Having determined that the district court erred in its analysis of
DIRECTV’s claim for damages under the Wiretap Act, we must
remand for a proper consideration of whether such damages should
be awarded. The particulars of our mandate, however, warrant elabo-
ration.

At the outset, we highlight the limitations on what remains to be
decided in this case. Two facts make the posture of this case unusual
—the district court’s failure to award any damages, and DIRECTV’s
decision to appeal only the Wiretap Act claim. First, as described in
detail above, the district court declined to award damages under the
Cable Act and also declined to award damages under the Wiretap
Act. That decision places this case outside the heartland of judgments
in the thousands of cases in which DIRECTV has pursued defendants
who stole DIRECTV programming through the use of pirate access
devices. In many such cases, the defendants, like Rawlins, defaulted.
However, those district courts often elected to award statutory dam-
ages to DIRECTV under the Cable Act, in amounts ranging from
$1,000 to $10,000, and then exercised their discretion under the Wire-
tap Act to decline to award additional damages for the same conduct.11
11
DIRECTV, Inc. v. Lankester is emblematic. No. 8:03-CV-1631 (D.
Md. May 25, 2005) (memorandum opinion). The court granted default
judgment in favor of DIRECTV against fifty-eight individual defendants,
finding it just, in each case, to grant the minimum statutory damage
award of $1,000 per violation (which that court interpreted as "per
device") under the Cable Act. The resulting damages awards, exclusive
of attorney’s fees and costs, ranged from $1,000 to $6,000. The court
then declined to award damages under the Wiretap Act, citing Nalley for
the proposition that such an award was discretionary. The court com-
mented, "[f]oremost among the court’s reasons [for declining to award
16 DIRECTV, INC. v. RAWLINS
Such an exercise of discretion is entirely consistent with Nalley.
Where a court reasonably concludes that the purposes of the Wiretap
Act are adequately served by an award of damages under the Cable
Act, and that an additional $10,000 award premised on the same con-
duct would be gratuitous, there is no "useful purpose" to be served by
the imposition of additional statutory damages under 18 U.S.C.
§ 2520(c)(2). See DIRECTV, Inc. v. Brown, 371 F.3d 814, 819 (11th
Cir. 2004) (upholding, in a case involving a defaulting defendant like
Rawlins, a district court’s decision not to augment its award of sub-
stantial Cable Act damages with any Wiretap Act damages, as any
additional award "could easily be viewed as gratuitous"); cf. Nalley,
53 F.3d at 654. In such circumstances, because it would serve no use-
ful purpose, a district court does not abuse its discretion, even though
faced with more than a de minimis violation, in declining to award
damages under the Wiretap Act. See Brown, 371 F.3d at 819. Indeed,
DIRECTV has acknowledged the propriety of withholding a Wiretap

damages under the Wiretap Act] is that DIRECTV will receive judg-
ment[s] against [the defendants] for [ ] violation[s] of the Cable Act . . . ,
violation[s] premised on the same underlying conduct." Lankester, No.
8:03-CV-1631, at 10 (citing DIRECTV, Inc. v. Huynh, 318 F. Supp. 2d
1122, 1131 (M.D. Ala. 2004)) (internal quotations omitted) (alterations
in original). Numerous other district courts in this and other circuits have
rendered similar judgments. See, e.g., DIRECTV Inc. v. Haynes, No.
5:03-CV-872 (E.D.N.C. 2005) (awarding $1,000 in statutory damages
against each of four separate defendants under the Cable Act and nothing
under the Wiretap Act); DIRECTV Inc. v. Yancey, No. 4:04-CV-11
(W.D. Va. Dec. 12, 2005) (memorandum opinion) (awarding $10,000
statutory damages for violation of 47 U.S.C. § 605(a) and $10,000 for
violation of § 605(e)(4), but declining to award further additional dam-
ages under the Wiretap Act); DIRECTV Inc. v. Rodriguez, No. 03-CV-
4590, 2007 WL 1834676, at *2-3 (E.D.N.Y. June 26, 2007) (awarding
$2,000 under the Cable Act and nothing under the Wiretap Act);
DIRECTV Inc. v. Kaas, 294 F. Supp. 2d 1044, 1049 (N.D. Iowa 2003)
(finding requested award of $10,000 excessive; awarding $1,000 under
the Cable Act and nothing under the Wiretap Act); DIRECTV Inc. v.
Moulder, No. 2:03-CV-3266 (E.D. Pa. 2005) (awarding $10,000 statu-
tory damages without specifying whether the award arose under the
Cable Act or the Wiretap Act); DIRECTV Inc. v. Quell, No. 2:03-CV-
3274 (E.D. Pa. 2004) (awarding $2,000 statutory damages, also unspeci-
fied).
 DIRECTV, INC. v. RAWLINS 17
Act award in such a case, noting at oral argument that "DIRECTV has
not ever sought to pursue double damages under the two statutes."12

It is not possible, however, for us to remand this case for reconsid-
eration of both the Cable Act and Wiretap Act claims for damages
because DIRECTV has only appealed the district court’s denial of
Wiretap Act damages. See Doe v. Chao, 511 F.3d 461, 465-66 (4th
Cir. 2007) (discussing the mandate rule and noting that the rule pro-
hibits district courts from reconsidering issues the parties failed to
raise on appeal). Having made the strategic decision to appeal only
the ruling under the Wiretap Act, DIRECTV cannot now escape the
consequences of its decision, and the strictures its strategy has placed
on the scope of the remand. The district court no longer has the option
to award damages under the Cable Act.13 By the same token, how-
ever, Rawlins, by his default, has lost the ability to contest the well-
pleaded allegations of the complaint or his guilt under either statute.
See Ryan, 253 F.3d at 780. At bottom, then, it is solely the question
of the appropriateness of statutory damages under the Wiretap Act
that we remand for reconsideration by the district court.14
12
In line with this assertion, it appears that DIRECTV did not pursue
appeals in the vast majority of the cases in which Cable Act damages,
but not Wiretap Act damages, were awarded. It may well be, then, that
had the district court here awarded some actual or statutory damages,
under either Act, DIRECTV would not have pursued this appeal.
13
It does not follow that the Cable Act is entirely irrelevant on remand.
As part of its determination on remand as to whether there is a "useful
purpose" to be served by imposing damages under the Wiretap Act, the
district court may consider the fact that DIRECTV could have sought
relief under the Cable Act on appeal, but chose to forego it as a matter
of strategy. We do not suggest a bright-line rule; instead, when a plaintiff
selectively pursues damages under certain statutes and not others, the
district court may consider on a case-by-case basis whether awarding the
particular damages sought might represent a windfall to the plaintiff in
light of the damages otherwise available but not sought.
14
In remanding for reconsideration, we reject DIRECTV’s request that
we reverse and remand for entry of a statutory damages award of
$10,000 pursuant to § 2520(c)(2). Having clarified the proper course of
analysis that must govern a district court’s exercise of discretion in
awarding damages, we find it prudent to allow the district court to recon-
sider the application of that analysis in the first instance.
18 DIRECTV, INC. v. RAWLINS
The parameters that should guide that reconsideration are not
novel. The district court must carefully consider the evidence already
presented by DIRECTV in support of its damages claim, including,
most notably, the Whalen affidavit. Using this and other evidence
before it, the district court should examine the relevant factors that
guide its exercise of discretion. In particular, the court should con-
sider the extent of Rawlins’s violation of the Wiretap Act, as evi-
denced by the Whalen affidavit. Moreover, the court should consider
the relative financial burdens of the parties, paying close attention to
Rawlins’s past expenditures on pirating equipment. The court should
also determine whether a useful purpose would be served by an award
of statutory damages. All of these factors should be considered
against the backdrop of the seriousness with which Congress has
treated the underlying conduct at issue here. Weighing these factors
and evidence in the balance, the district court should carefully exer-
cise its discretion in deciding whether to award DIRECTV statutory
damages under the Wiretap Act.

V.

In sum, a district court’s discretion to award or not award damages
under the Wiretap Act is not restricted to those cases involving de
minimis violations. Such discretion is not boundless, however. To the
contrary, a district court must carefully evaluate the relevant evi-
dence, heeding the factors invoked in Nalley and adopted here today,
before exercising its discretion. Because the district court in this case
did not do so, we vacate its judgment and remand for further proceed-
ings consistent with this opinion.

VACATED AND REMANDED

BLAKE, District Judge, concurring separately:

I concur entirely with all but Section III C of the majority opinion.
As to III C, I concur with the need for remand but write separately
because my perspective differs somewhat from the majority.

First, I agree that remand is necessary because it does not appear
that the district court considered the Whalen affidavit. In its opinion
 DIRECTV, INC. v. RAWLINS 19
the court refers only to the value of the potential unauthorized access
noted in the complaint ($100,000 in a single year) and states there is
"no allegation as to how long defendant actually used the devices or
the dollar amount DIRECTV would have received in subscription
fees but did not as a result of Defendant’s activity." J.A. 67. In fact,
the Whalen affidavit asserts that Rawlins was a subscriber from Sep-
tember 4, 2000, to at least October 5, 2005, and shows that he pur-
chased devices between October 2000 and May 2001; it also provides
what appears to be a reasonable estimate of the likely annual value
($2,748.96) of the pirated programming. J.A. 25-61. Indeed, in light
of this obvious discrepancy it may be that the district judge inadver-
tently overlooked the affidavit. Remand is warranted for careful con-
sideration of this evidence in light of the factors now explicitly
adopted by the majority.

Second, however, as to the factors the district court did consider
and rely on, the majority identifies as "irrelevant" the fact that
Rawlins neither used the devices for commercial purposes nor pur-
chased them for resale, and the lack of evidence to show that Rawlins
induced others to violate the Wiretap Act. As I believe this guidance
from the Circuit had never before been made explicit, and would not
have been clear from prior case law, I would not fault the district
court for having considered those factors in its analysis.

In summary, I agree with the need for remand and appreciate the
majority’s willingness to permit the district court to exercise its dis-
cretion with a full understanding of the factors that should be consid-
ered and therefore concur in the result of Section III C as well as
joining in the remainder of the majority opinion.