Inside the rustic Seabreeze Tavern along the beach in Aptos, the remote controls for three TVs rest on the bar. Owner and manager Rich McInnis leaves them there for the "regulars," who have carte blanche to choose what they want to watch as long as they keep drinking beer.
One night in April 2009, a click from one of those remotes landed McInnis in a legal quagmire over piracy accusations that is repeating itself in federal courts across the country.
A tavern regular decided to order a United Fighting Championship bout, without the Seabreeze paying the commercial fee for a pay-per-view event. McInnis wound up months later staring at a lawsuit that asked him to fork over $160,000 in damages for an event that ordinarily would cost about $800.
From bakeries and taquerias to corner bars and mom-and-pop restaurants, sports promoters of pay-per-view events have unleashed an avalanche of such lawsuits from San Francisco to Arkansas. They argue that business owners are sapping their profits by stealing the televised signals outright or failing to pay the commercial fee to show an event that's typically 20 times the amount to order at home.
The legal tactics have sparked criticism from small-business owners, who say the lawsuits are abusing the court system and a veiled attempt to squeeze money from people who cannot afford to pay lawyers and defend themselves. In the Bay Area, hundreds of the lawsuits have been filed over the past few years, from Sandra Lemus' La Palapa restaurant in Santa Rosa to Lien Nguyen's Yen Nhi eatery in East San Jose.
McInnis is a rare example of a target who fought back -- and won without paying a dime.
"I have no idea if I showed the fight," he said during a recent interview in his bar overlooking Rio Del Mar Beach. "But if they had just sent me a bill, we wouldn't be clogging up the courts. They sued me for $160,000. I thought that was ridiculous for one fight."
The lawsuits typically are filed by three major players with licensing rights for pay-per-view events, which generate hundreds of millions of dollars a year in revenue: Campbell-based J&J Sports Productions owns rights to HBO boxing events; Joe Hand Promotions licenses the popular UFC fights; and G&G Closed Circuit is another boxing promoter.
The legal muscle behind the claims is Pasadena lawyer Thomas Riley. The lawsuits rely on a 1980s-era federal copyright law that was designed to crack down on the rampant theft of emerging satellite and cable technology, with harsh penalties for stealing the signals.
Nothing blocks business owners from ordering a fight from Comcast or DirecTV at a residential rate, which is closer to $50 to $100 a pop. But that's not an excuse, as many bar and restaurant owners have discovered the hard way, even when they try to argue that cable or satellite providers share the blame for confusion. Business owners must pay the sports promoters separately, before showing a pay-per-view event, or risk being sued for piracy.
Riley did not respond to requests for comment. Joe Hand Jr. declined to comment, saying only, "The lawsuits speak for themselves."
But the sports promoters clearly take the issue seriously, warning about piracy on their websites. In court papers, companies such as J&J have said that theft of the signals costs them millions of dollars a year. And whenever there is a blockbuster event, such as a Manny Pacquiao title fight, they send teams of investigators into bars and restaurants, armed with smartphones to photograph and video scofflaws.
A review by this newspaper of dozens of cases shows the sports promoters typically win their lawsuits, usually because those accused never show up in court to defend themselves. The result is a "default judgment" that gives Riley's law firm the right to go after them for money.
However, the lawsuits are drawing more scrutiny. Judges are refusing in most instances to give J&J and Joe Hand anything close to the six-figure damage awards they seek. In the Bay Area, lawyers are lining up to defend cases, concerned that simple misunderstandings over how to order the events can cost people their businesses.
"These people are hardworking and facing a situation that is very difficult for them to fight," said Sayuri Sharper, a lawyer with Silicon Valley's pro bono project.
A San Francisco judge, in a case against House of Chicken and Waffles in Oakland, recently slashed a demand for damages from $100,000 to $5,000. Two years ago, a San Diego judge, confronted with a similar six-figure request from Joe Hand, slammed the tactic, calling it a "shoot for the moon" approach.
James Ware, Northern California's chief federal judge, said that even when an owner admits wrongdoing, he tries to "ensure that they are given an opportunity to pay damages without jeopardizing the continuation of their business."
Nguyen, who owned a Vietnamese bar and restaurant, is still fighting her case. She had ordered a mixed martial arts fight through DirecTV but said she did not realize there was a larger fee for her business. She then received a letter demanding $170,000.
"I was shocked," she said. "I didn't do anything wrong. I'd rather give the money to poor people."
Lemus, who owns the small Santa Rosa taqueria, said she is in the same boat. "We don't have the money they are asking for," she said.
Down at the Seabreeze, McInnis no longer lets his regulars order pay-per-view events. In fact, after he settled his case with Joe Hand last year for no damages, he laughed when they asked if he would be willing to televise UFC bouts.
"It's been a lot of sleepless nights," he said. "There is no way I'll ever show a UFC fight at the Seabreeze."
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