12.05.2014

Sirius Pre-'72 Judge Says She'll Weigh Unearthed NY Ruling


A New York federal judge said Wednesday that she hadn't considered a decades-old court decision unearthed recently by SiriusXM when she ruled last month that New York state law requires the satcaster to pay to play pre-1972 records — and that it might require her to rethink the ruling.
What will she find?
As the judge digs deeper, will she change her mind?

Beastie Boys Fight For Their Rights... and Keep the $$$

(Reuters) - A federal judge on Thursday refused to throw out Beastie Boys' $1.7 million jury verdict against Monster Beverage Corp over the energy drink company's use of the hip-hop group's music in a promotional video without permission.
In a 69-page decision, U.S. District Judge Paul Engelmayer in Manhattan said there was "ample basis" to believe the video could confuse people into believing incorrectly that Beastie Boys, a 2012 inductee into the Rock and Roll Hall of Fame, had endorsed Monster energy drinks.
He also said jurors could infer that Monster intended to deceive viewers and benefit from its apparent association with a group "particularly popular among young men, Monster's target demographic."
The roughly four-minute "megamix" video was put together by the disk jockey Z-Trip, and included excerpts from five Beastie Boys songs.
Monster conceded shortly before the trial that it was liable for copyright infringement, but that Beastie Boys didn't deserve the $2.5 million of damages it sought.

Engelmayer concluded that the eventual $1.7 million award on June 5 did not "shock the conscience," and could be left intact.
Monster and its lawyers did not immediately respond to requests for comment. A lawyer for Beastie Boys did not immediately respond to a similar request.
Beastie Boys members Adam "Ad-Rock" Horovitz and Michael "Mike D" Diamond testified at the trial. The group's third member, Adam "MCA" Yauch, died in May 2012. The lawsuit began three months later. Monster is based in Corona, California.
The case is Beastie Boys et al v. Monster Energy Co, U.S. District Court, Southern District of New York, No. 12-06065.
(Reporting by Jonathan Stempel in New York)

12.01.2014

Your Business Startup Checklist

You have a vision in mind, the talent to make it work and the capital to start the next thing you need to know are the steps to make it happen. Below is an overview of the steps you should take to ensure your business starts on the right footing. These steps overlap so even though they are laid out in order this list doesn't require you to do them one step at a time. 

  • Choose a Name
    • Put some thought into the name of your business and make sure it makes sense within the type of industry you work in as well as helps your business stand out. Before buying domain names and marketing your business name, search the web and city/state records to ensure another business is not operating under that name already.
  • Choose a Location
    • You have heard that the survival and eventual success of a business depends on location, location, LOCATION! Even in the age of the internet and the global marketplace, a good location is vital. Even if you are operating from home, make sure you are in compliance with local zoning requirements.
  • Choose a Business Entity
    • Deciding on whether to set up an LLC, a partnership, a C-Corp or an S-Corp will depend on the nature of your business, whether you seek investors or not, inherent business risks and other factors. Once you have decided, choose the state where you seek to form your entity and go through the proper procedures to register.
  • Draft and Sign a Shareholder / Buy-Sell Agreement
    • Any start-up with more than one owner should draft a shareholder / buy-sell agreement to address how you and your partner(s) will work with each other throughout the life of the business. You might think it's not worth the hassle because everyone is excited and gets along greatly or because you don't want to discuss potentially contentious issues like what to pay partners or shareholders who retire from the business but believe me it is better to discuss it before the business starts then after.
  • Get a Federal Employer Identification Number
    • Apply for one via the IRS website or by calling the IRS at 1800.829.4933.
  • Open a Business Bank Account
    • With your EIN and your business's certified corporate charter / articles of incorporation (corporations), articles of organization (LLCs), partnership agreement (general partnerships), certificate of limited partnership (limited partnerships), certificate of assumed name (as required by sole proprietorships in some states) or a government-issued business license, you can go to a local bank and open up your account. 
  • Draft the Contracts Necessary for Your Business 
    • While the life-blood of your business is the cash flow that runs your company, its heart is the sum of all the contracts you execute. While there are some contracts that are ubiquitous in all types of business, each area of business has its unique types of agreements and contracts native to its particular concerns. Many of the contracts you sign will already have been drafted by the other party (ex. vendor agreements) but you should have a file with contracts that your company drafts (ex. independent contractor agreements). An attorney can help you draft agreements that meet your business needs and protect you from liability.
  • Sign the Real Property Lease
    • This is a very important document since it will constitute an agreement you have to commit to for a number of years whether business is booming or not. The good news is that you have some leverage to modify the lease to your benefit. Unlike most residential landlords, a commercial property landlord is willing to make concessions to lease you their space.  Think long and hard about the pros and cons of the space you are considering before you do so. Don't hesitate to contact a lawyer to help you here.
  • Familiarize Yourself with Employer Laws
    • Whether you hire independent contractors or employees, as soon as you hire even 1 worker, you need to make sure that you are complying with federal and state labor laws.  Talk with an attorney to help you navigate this area.
  • Familiarize Yourself with Intellectual Property Laws
    • You would be surprised how many businesses create and own intellectual property and are not even aware of it. In addition, workers for a business create intellectual property that might or might not be owned by the business. Talk with an attorney about protecting your IP and how to monetize your IP.
  • Register Your Copyright, Trademark and/or Patent
    • Depending on the nature of your business you will need to copyright, trademark or patent a number of things. Even if at the moment your business does not to register any intellectual property, think long and hard about what could be potential intellectual property your company may end up creating, possessing or acquiring in the long run and develop a strategy for handling them (which should include registration).
  • Register a Fictitious Business Name
    • If you are using a different name for your business then register the name in your county. 
  • Get State and Local Business Licenses
    • Depending on the type of business you conduct, you may first need to get permission from the state, city or municipality you operate in. Contact your state's appropriate agencies to make sure that you get the licenses and permits you need to be in compliance.
  • Employer Filings and Withholding
    • Classify the worker as an independent contractor or an employee. If the worker is an employee then withhold, deposit, report and pay employment taxes. 
  • Worker's Compensation and Other Insurance
    • Worker's compensation insurance is required by law if you have employees. You also may want to obtain property, errors and omissions, liability and up to 10 other types of insurance that your business might need.
  • Keep Your Records Straight
    • File and store all the agreements you've drafted and signed and the permits, licenses and official documents you've received in a safe but accessible place. Also, store all the important job-related documents in regards to hiring, training, keeping and firing employees in an employees personnel file. Maintain proper accounting records, understand your contract terms and ensure that you track the dates for renewing the leases, permits and licenses to keep your business running smoothly.

This overview is intended to give you a grand perspective of your business's start-up process. Hopefully, this will give you the knowledge to know what you need. If you'd like more help with any of these steps or with any other steps more specific to your business, then feel free to contact me.

~~ Danny Jiminian, a New York-based attorney, representing and advising clients in the areas of business law, intellectual property, sports/entertainment and non-profits. For more information, visit: www.djimlaw.com.

Disclaimer: This article is for informational purposes only and does not constitute legal advice nor create an attorney-client relationship. You are urged to seek the advice of an attorney who can provide counsel with respect to your corporate, business, labor, contract, intellectual property, taxation and other law matters.

11.24.2014

Turtles 2, Sirius 0: Is Broadcast Radio Next?

Last Friday, a New York federal court ruled that New York State law protects public performance rights in sound recordings. Although the defendant in the case was SiriusXM Satellite Radio, which is a digital service, the ruling would appear to apply to any radio station, nightclub, or any other venue that plays recorded music in New York.
The result is that radio stations may, for the first time in U.S. history, have to pay to play records, although the decision only applies to records produced prior to 1972. Records produced on or after February 15, 1972 are subject to federal law which explicitly states that sound recordings do not have performance rights except in respect of digital transmissions.
The New York federal court judge Colleen McMahon ruled: "In short, general principles of common law copyright dictate that public performance rights in pre-1972 sound recordings do exist." The judge based this conclusion on a series of New York court decisions that afforded public performance rights to holders of common law copyrights in works such as plays and films. She acknowledged that "the conspicuous lack of any jurisprudential history confirms that not paying royalties for public performances of sound recordings was an accepted fact of life in the broadcasting industry for the last century."
However, she discarded that history by observing, "... acquiescence by participants in the recording industry in a status quo where recording artists and producers were not paid royalties while songwriters were does not show that they lacked an enforceable right under the common law - only that they failed to act on it."
MacMahon rejected Sirius' request to dismiss the lawsuit and held that unless Sirius raises any factual issues requiring a trial by December 5th, she will rule outright for the plaintiff, Flo & Eddie, Inc. (ie, The Turtles), "and proceed to an inquest on damages."
In late September, a California federal judge, Philip Gutierrez, ruled that California state law also protected public performance rights in pre-72 recordings. In both the New York and California cases, the plaintiff (Flow & Eddie, Inc.) and the defendant (Sirius XM) were the same. Flo & Eddie, Inc. is a company controlled by founding The Turtles members Howard Kaylan and Mark Volman, and controls that band's catalog of recordings, including the hit "Happy Together."
Unlike New York, California has a specific statute that directly addresses pre-1972 sound recordings. Section 980(a)(2) of the California Civil Code states: "The author of an original work of authorship consisting of a sound recording initially fixed prior to February 15, 1972, has an exclusive ownership therein until February 15, 2047, as against all persons except one who independently makes or duplicates another sound recording...."
Judge Gutierrez found "that copyright ownership of a sound recording under § 980(a)(2) includes the exclusive right to publicly perform that recording." His conclusion was largely based on the fact that neither the statute itself, nor the legislative history for Section 980(a)(2), specifically excluded public performance rights for sound recordings.
Judge McMahon's decision seems to encourage claims against terrestrial radio stations operating in both New York and California, given her observation that the historical absence of claims against radio stations for failing to pay for legacy recordings did not mean that the owners of those records do not have an "enforceable right." Indeed, she almost invites a claim against them by stating that such copyright owners do have an enforceable right that so far they have just "failed to act on." McMahon acknowledged that her decision could have far-reaching consequences, such as prompting other lawsuits or causing more states to change their copyright laws, but said "the broader policy problems are not for me to consider."
The natural first plaintiff against a terrestrial radio station would of course be Flo & Eddie, Inc. However, one can imagine more than a few class action litigators who may be thinking about bringing an action on behalf of a group of legacy artists against radio stations in New York and California, including networks such the ClearChannel.
Another possible consequence of these legal victories may be that the National Association of Broadasters (NAB) may finally be willing to compromise and agree to support legislation that would make terrestrial radio finally pay something for sound recordings.
As they say in the broadcast business, "Stay Tuned."
By Steve Gordon

Pre-1972 Sound Recordings Could Kill the Radio Stars

On the heels of the Central District of California's related September 2014 decision, Judge Colleen McMahon of the Southern District of New York, has denied Sirius' motion for summary judgment on Flo & Eddie, Inc.'s class action complaint alleging that Sirius XM Radio (Sirius) committed common law copyright infringement and engaged in unfair competition by publicly performing pre-1972 sound recordings of The Turtles, and by reproducing those recordings in aid of its performances. Flo & Eddie, Inc. v. Sirius XM Radio, Inc. (S.D.N.Y. Nov. 14, 2014). Absent Sirius convincing the court by December 5, 2014, that there are remaining issues of material fact that would require a trial, Judge McMahon will enter summary judgment in favor of Flo & Eddie as to copyright infringement liability and proceed to an inquest on damages.
Ultimate victories for Flo & Eddie, Inc., which owns the copyrights to The Turtles' master recordings, could be disastrous to Sirius, a subscription-based satellite and Internet radio services provider, which operates 24/7, devotes entire channels to pre-1972 sound recordings, and, like other streaming music providers, has never paid separate royalties to perform sound recordings. Damages could reach millions of dollars, and this sea of change after decades of status quo non-enforcement will surely result in copycat lawsuits that will turn the broadcast and streaming music industry on its head.
Sirius and other providers pay music license royalties covering the underlying musical compositions, but music is the only type of creative work that has two independent copyrights: (i) a copyright in the composition (lyrics and music) that generally is held by the composers of works or their music publishers; and (ii) a copyright in the sound recording, which is the medium in or on which a particular performance of a musical composition is fixed for posterity and for playback. As Judge McMahon explained, "In essence, a copyright in a sound recording is a copyright in the performance -- not in the work being performed."
While federal law has protected copyrights in musical compositions since 1831, Congress only made sound recordings eligible for federal statutory copyright protection in 1971. This protection operates prospectively and, consequently, recordings that were "fixed" (i.e., recorded) prior to February 15, 1972, are not eligible for federal copyright protection. As Congress did not adopt a federal copyright scheme for pre-1972 sound recordings, holders of sound recording copyrights seeking to exercise their rights must look to state common law to determine the copyright protections and remedies to which they are entitled.
Enter Flo & Eddie, Inc., a California corporation that is wholly owned by Mark Volman and Howard Kaylan. Volman and Kaylan were two of the original members of the 1960s rock group The Turtles, whose memorable hits include "Happy Together" and "It Ain't Me Babe." Flo & Eddie, Inc. acquired all rights to The Turtles master recordings. Sirius acknowledges that it "performs" sound recordings, including pre-1972 Turtles recordings owned by Flo & Eddie,Inc., by broadcasting them over its satellite radio network and streaming them over the Internet. To facilitate this service, Sirius makes multiple copies -- temporary, permanent, whole, and/or partial -- of pre-1972 The Turtles sound recordings during its broadcast process, performs the copies it makes, and does so without obtaining sound recording reproduction and performance licenses from Flo & Eddie, Inc.
Flo & Eddie, Inc. filed three class actions against Sirius in California, New York, and Florida, asserting state common law copyright infringement claims (as well as claims for unfair competition, conversion, and misappropriation) under the laws of the three respective states. Florida has yet to issue its ruling.
In the California action, Flo & Eddie, Inc. argued that Sirius was liable for two unauthorized uses of its sound recordings: (i) publicly performing Flo & Eddie, Inc.'s recordings by broadcasting and streaming the content to end consumers and to secondary delivery and broadcast partners; and (ii) reproducing Flo & Eddie's recordings in the process of operating its satellite and Internet services. Sirius argued that the bundle of rights that attaches to copyright ownership of a pre-1972 sound recording does not include the exclusive right to publicly perform the recording. Flo & Eddie,Inc., however, contended that an exclusive public performance right existed under California law.
Relying on California's copyright statute, Civil Code §980(a)(2), the California court agreed with Flo & Eddie, Inc. and, on September 22, 2014, granted its motion for summary judgment on its public performance-based claim. After first noting that the California legislature intended ownership of a sound recording to include all rights that can attach to intellectual property, save the singular exception for a "cover" of a recording, the court concluded that copyright ownership of a sound recording under §980(a)(2) necessarily includes the exclusive right to publicly perform the recording. The court also found in favor of Flo & Eddie, Inc. on its unfair competition, conversion and misappropriation claims.
As New York, unlike California, does not have a specific statute that protects a public performance right in pre-1972 sound recordings, Judge McMahon considered the following four issues under New York common law: (i) whether the owners of pre-1972 sound recordings possess an exclusive right to the public performance of those works and whether Sirius infringed Flo & Eddie, Inc.'s copyright; (ii) whether Sirius' broadcast of The Turtles recordings is protected by the "fair use" doctrine; (iii) whether upholding Flo & Eddie, Inc.'s claims would violate the Dormant Commerce Clause; and (iv) whether Flo & Eddie, Inc.'s claims were barred by laches.
In the New York action, Flo & Eddie, Inc. first argued that New York's common law copyright protection prohibited both the reproduction and public performance of The Turtles' pre-1972 sound recordings. Echoing the argument that it made in California, Sirius contended that New York common law copyrights in pre-1972 sound recordings do not afford an exclusive right of public performance. After first acknowledging that this was a question of first impression, Judge McMahon ultimately concluded that "the New York Court of Appeals would recognize the exclusive right to public performance of a sound recording as one of the rights appurtenant to common law copyright in such a recording." Judge McMahon reached this conclusion based upon a detailed examination of the background principles and history of New York copyright common law, which revealed that the common law typically protects against unauthorized performances and has provided "expansive" protection for artistic works that do not enjoy federal statutory copyright protection for at least 50 years. Sirius' argument -- that New York case law contains no discussion of public performance rights in sound recordings -- was unavailing. As the court ultimately concluded, "New York has always protected public performance rights in works other than sound recordings that enjoy the protection of common law copyright. Sirius suggests no reason why New York -- a state traditionally protective of performers and performance rights -- would treat sound recordings differently."
The court next determined that Sirius reproduced Flo & Eddie, Inc.'s copyrighted recordings without authorization by (i) reproducing The Turtles' recordings for its three main databases, associated backups and smaller on-site databases; and (ii) producing several temporary but complete copies of The Turtles' recordings for its play-out servers, caches and buffers. In response to Sirius' argument that it was not liable for infringement because it did not "distribute" The Turtles' recordings, Judge McMahon pointed out that "[t]o the extent that distribution is an element of common law copyright infringement, publicly performing sound recordings is an act of distribution. Otherwise, Sirius cannot explain how New York courts could have recognized infringement claims alleging that defendants publicly performed copyrighted works without authorization."
Judge McMahon also rejected Sirius' contention that its creation of multiple complete copies of Flo & Eddie, Inc.'s sound recordings could be considered "fair use." After noting that New York courts have not articulated the scope of New York's fair use doctrine, the court undertook a fair use analysis based on the Copyright Act standard and concluded that "Sirius makes non-transformative use of Flo and Eddie's recordings and does so for commercial gain. It is, therefore, 'common sense' that Flo and Eddie would suffer market harm when Sirius takes its property and exploits it, unchanged and for a profit." The court also held that Sirius engaged in unfair competition, Flo & Eddie, Inc.'s assertion of its common law copyright is not barred by the Dormant Commerce Clause, and Sirius cannot invoke the defense of laches.
These explosive rulings may have dire consequences for the broadcast radio industry -- especially streaming music platforms. While the California and New York decisions will be appealed, they raise a host of issues that underscore the uncertain future of the sound recording copyright landscape. For instance, if the decisions are not stayed pending appeal, will pre-1972 music disappear from the airwaves? Will litigating the existence of a public performance right on a state-by-state basis upend the entire broadcasting industry? What happens if the myriad of state laws end up conflicting in the Internet age? Will Congress step in, as many have started urging, and bring pre-1972 sound recordings under the fold of the federal Copyright Act? In the words of The Beatles, legislators need to "Come Together" and sort this out.
By Barry Werbin and Sharon O'Shaughnessy
Herrick, Feinstein LLP
The full SDNY decision can be accessed HERE.

11.20.2014

Non-profit Term Limits are a Convenient Crutch

During the last three weeks I’ve attended three board meetings and joined several board committee conference calls. These meetings have reminded me of the wonderful benefits—as well as the significant time commitment—associated with serving on nonprofit boards. The friendships I’ve formed and governance lessons I’ve learned have been priceless. But from time to time something happens at a board meeting that makes me wonder whether staying on the board is the best use of my time. Although I haven’t quite figured out an algorithm or decision-tree that will make my decision to leave an easy one, years of board experience have helped me see some of the warning signs that it’s time to go. One such warning sign is unaddressed bad behavior by a fellow board member.

Should He Stay or Should He Go Now?

Everyone who has advised, served on or reported to a nonprofit board has met (or heard stories about) at least one ineffective, disruptive or obnoxious board member. The nonprofit sector would crumble without the tireless contributions of dedicated, generous volunteer leaders. You know who you are! But the sector would be so much better if governing boards had the resolve to help unproductive and disrespectful members move off the board and on to other pursuits.

What’s the risk of ignoring bad behavior? Ineffective, rude and absentee board members bring the entire board down. And have you ever noticed that whether we’re talking about paid staff, service volunteers or board members, the poor or poisonous performers are the last to resign? I hate to have to say this, but absent an incentive to leave, or an escort to the nearest exit, the worst members of your board will probably remain at the table for years after you’ve moved on.

There are two principal options for dealing with a board member whose presence is no longer mission-productive:
  1. Address the bad behavior, poor attendance or inadequate performance issue without delay – In my article titled “Enforcing Board Member Responsibilities,” I discuss ways to hold each board member’s feet to the fire. For example, in my experience it’s incredibly important that board members are reminded about what they have agreed to do. When a board member’s conduct is egregious, this intervention may include a request that the board member resign, or risk being voted off the board. The person who will deliver this tough message should be identified long before the trouble starts brewing. Suitable candidates include the Chair of the Board Development or Governance Committee, the board Chair or the Vice Chair. Note: The CEO/Executive Director should never be asked to fill this role.
  2. Allow the bad board member to cycle off when his or her term ends – I’m always chagrined to hear about the re-election of an ineffective or disruptive board member in a nonprofit whose bylaws provide term limits. Why does this happen? In some cases the real culprit is an ineffective board development process. Sadly, some boards still scramble at the last minute to conscript volunteer leaders. And of course it’s always easier to re-elect a member than do the work required to recruit, vet and onboard a new volunteer. For boards that are opposed to confrontation or squeamish about calling it like it is, term limits are a convenient way to limit the damage done by an ineffective or disruptive board member. When the poor performer’s time is up, thank them for their service and send them on their way.
During the 24th annual “This Year In Nonprofit Law” event held in Philadelphia this week and hosted by my colleague Don Kramer, I was reminded of a “Ready Reference Page” published by Don back in 2005. That article, part of the terrific publication called Don Kramer’s Nonprofit Issues®, was titled “Term Limits Are For Cowards.” Don argues forcefully that the downsides of term limits outweigh the benefits. If you’re not already a subscriber and fan of Don’s work, you should be. While I agree that term limits sometimes force the premature departure of high-performing leaders whose wisdom, commitment and leadership are wanted and needed, I think that there are two compelling reasons why term limits are a convenient and helpful crutch.

First, although addressing poor performance and outright bad behavior when it occurs is absolutely preferable to allowing a board member to cycle off at the end of her term, few boards have the courage and stomach to do this. In the absence of the resolve needed to hold every member accountable, term limits allow poor performers to leave gracefully. Second, and more importantly, term limits necessitate a laser like focus on board development that every nonprofit mission deserves. With board members—good and not so good—automatically cycling off the board every year, board development becomes an active, thoughtful and ongoing process.

In too many cases, the absence of term limits leads to a lazy board development process, with the same cast of characters re-elected to new terms every election cycle. This lazy practice robs the nonprofit of the new perspectives and ideas that give your mission a boost every time new board members join the governing team. New board blood forces and inspires a board to challenge assumptions that constrain our missions and impact. As a member of three local and three national boards, I’ve also seen the personal reward of term limits: although it’s hard to say goodbye to a treasured board leader, it is incredibly exciting to meet interesting, bright new members. As I think about my period of service coming to an end on two of the boards where I serve, I am excited envisioning that my departure will create space for someone with a different point of view to step in, learn and serve.

At my speech at “This Year In Nonprofit Law” I shared my view that governance rules and structures must be specifically fashioned to suit the mission, goals, culture and aspirations of a nonprofit. Creating and evolving a governance model is hard work. The importance of your mission and the hard work required deserve the best governing team you can assemble. When a bad actor or unreliable member winds up on your team roster, you need to take action. Bite the proverbial bullet and address the issue head on, or lean back on your crutches, including term limits, and let nature take its course.

By Melanie Lockwood Herman

Melanie Herman is executive director of the Nonprofit Risk Management Center. She welcomes your questions and comments about risk topics or the Center’s mission and programs at Melanie@nonprofitrisk.org or 703.777.3504.

Reposted from the Nonprofit Risk Management Center newsletter

11.19.2014

Baby. Got. Back... Pay

Alternative title: When The Court Ordered Strip Club to Pay Dancers $10M in Back Wages

Musical accompaniment to this story:

From New York (CNN) -
More than 2,000 current and former exotic dancers in New York City were awarded $10 million in a class-action lawsuit they brought against their employer, Rick's Cabaret. 
The federal judge's order came on Friday, four years after the dancers filed their lawsuit alleging the company cheated them out of wages. The award covers unpaid wages from 2005-2012. 
For the dancers, the ruling follows a court victory last year when the judge ruled that they were considered hourly employees who deserve to be paid minimum wage. Rick's Cabaret argued that the dancers worked as independent contractors. 
Friday's ruling was a partial summary judgment, which means a trial over the dispute will take place as planned, and the amount of the award could change. The club says it will appeal. 
While it is true that a patron pays a dancer $20 for a personal dance, these are considered "performance fees" and are not considered regular wages. The club owes the dancers back pay for their hourly wages, the court ruled. According to court documents, Rick's Cabaret failed to pay the dancers minimum wage and kept some payments that should have gone into the dancers' pockets. 
U.S. District Judge Paul Engelmayer also found that Rick's Cabaret shortchanged dancers through something called "Dancer's Dollars." 
Patrons were able to purchase $24 vouchers called Dancer's Dollars, which could be redeemed for personal dances at the club. Rick's Cabaret "systemically retained, without disclosure to customers" $2 of each voucher, in addition to charging a $4 service fee. Dancers only received $18 of each voucher. When paid in cash, the dancers retained the full $20 fee for each dance. 
The withheld $2 from each voucher should have gone to the dancers as a gratuity, according to the court documents. 
Rick's Cabaret had claimed that the dancers made more than minimum wage when the dancers' performance fees were included. But under labor law, "such fees do not offset defendants' minimum wage obligations," according to the court documents. 
"We are very pleased with the court's well-reasoned and thorough decision, and are confident that we will prevail at trial and secure an even greater monetary judgment," the dancers' attorney, Anna P. Prakash, said in a statement. "The court's decision reflects that exotic dancers are entitled to the same legal protections as other employees, and is a resounding victory for a group whose voices are all too often ignored." 
RCI Hospitality Holdings, which owns Rick's Cabaret, said the case is ongoing and "there is no current or near-term obligation to pay any sums as a result of this decision." 
The company is "disappointed" with the initial judgment, and plans on appealing it once the final judgment is reached, RCI Hospitality Holdings said. 
Engelmayer said that it was unclear to patrons that the dancers would not receive the full payment. None of these payments were recorded in the club's gross receipts.

The lessons for NY business owners and entrepreneurs:
  • If you want your workers to be considered "independent contractors," then treat them like one.
  • If your workers are employees, then follow the NY Labor Laws and the Fair Labor Standards Act to a tee.
  • Don't be cheap and try to cheat your employees out of their minimum wages... even if they make good tips.

11.17.2014

"It Ain't Where You're From, It's Where You're At" - Gordon Rees v. A-Rod

Rakim once said, "It ain't where you're from, it's where you're at / Since you came here, you have to show and prove."  That advice could've come handy to law firm, Gordon Rees, in their lawsuit against perennial target, Yankees baseball player, Alex Rodriguez over alleged unpaid fees.

Back in July, 2014, New York Law Journal reported:
The firm of Gordon Rees Scully Mansukhani said Rodriguez, currently serving an unprecedented 162-game suspension imposed by Major League Baseball, owes $380,058.91—money he agreed to pay in May 2013 when he retained the firm and partner, David Cornwell, a veteran sports attorney. Cornwall, based in the firm's Atlanta office, is an expert in representing professional athletes accused of violating their sports' drug and steroid policies. 
Even though Rodriguez "unequivocally promised" to pay the firm for extensive legal work, he "now refuses to pay a substantial portion of the legal fees incurred over the course of eight months in connection with Gordon & Rees' hard work and long hours on one of the most high-stakes sports litigations in history," the complaint stated in Gordon Rees Scully Mansukhani v. Rodriguez, 14 cv 5252.
The complaint, filed by firm partner Peter Siachos, also seeks prejudgment interest and attorney fees. Siachos said Rodriguez refused to pay the $380,058.91 at the direction of Desiree Perez of the Jay-Z celebrity management company Roc Nation. Perez allegedly told Rodriguez "not to pay the invoices, and to make Gordon & Rees sue him."
 
The firm claims it racked up "thousands of hours of work" from May to December 2013 and that Rodriguez only paid part of the money due. It also seeks to compel Rodriguez into fee arbitration in Georgia. The case has been assigned to Judge William Pauley.
But now that lawsuit is in jeopardy of being thrown out because it seems the law firm has no idea where they or Alex Rodriguez is really "at."
U.S. District Court Judge William H. Pauley III said at a hearing Friday [November 14, 2014]  that in order for the firm's lawsuit to remain in federal court in Manhattan, Gordon & Rees has to state in a new filing that its partners do not live in Florida, the state where Rodriguez resides. 
Gordon & Rees already amended its lawsuit once, correcting A-Rod's home state to Florida. [my bold italics]
"Maybe the third time will either be a charm or a strikeout," Pauley said. ~~ Newsday

11.14.2014

Well... This Can't Be Good...

Law360 has the latest development on the Jay-Z infringement case and it's basically that the...
Judge Can't Hear Infringement In Jay-Z's 'Run This Town'
Ahead of arguments on Jay-Z's bid to dismiss a lawsuit claiming he illegally sampled a 1960s funk song on his hit track “Run This Town,” the judge handling the case told the parties Thursday he had been unable to hear the supposed infringement after listening to the track numerous times.
While this does not bode well for the plaintiff, I wonder... was the judge bopping his head to the beat? 

Btw, here's the defendant's motion to dismiss:


FBI's List of IP Safeguarding Tips

Intellirights posted this in April of 2014 but I think it's still worth sharing:
The Federal Bureau of Investigation has posted some intellectual property protection tips that can be helpful to any company or individual seeking to safeguard key information assets. 
As the FBI’s notice points out, intellectual property assets can include vendor information, prototypes or blueprints, negotiation strategies, software, and financial data. The notice urges IP owners to avoid storing vital information on any device that connects to the Internet, encourages IP owners to use current software security tools, and reminds IP owners of the importance of training employees and keeping them aware of information security policies and protocols.

“You are ultimately responsible for protecting your own intellectual property,” so “take reasonable steps to protect your intellectual property and products, and document those measures,” the FBI warns.
 
To contact the FBI about economic espionage, theft of trade secrets, or other IP rights violations, please visit www.fbi.gov.

Oracle and SAP Settle Their Copyright Battle

Techno Stream reports:
Oracle Corp. (ORCL:US), which lost a shot in August at reinstating a $1.3 billion damages award against SAP SE, accepted $359 million to end its copyright lawsuit against the German software company and forgo a new trial.
German company SAP has settled its long-standing copyright-infringement lawsuit with the other tech giant Oracle after reaching a deal to pay $359 million in damages with interest to the American company instead of the $1.3 billion awarded in 2010. The agreement brings to a close a dispute that arose seven years ago between Oracle and Walldorf, Germany-based SAP, the biggest supplier of back-office business-management software. 
The contention arose when Oracle said SAP in 2007 through its now-defunct subsidiary, TomorrowNow, had illegally downloaded Oracle’s software to provide software support services to its customers. The stipulated judgment entered Thursday avoids a new trial on damages and brings to an end Oracle’s suit against SAP and its defunct unit TomorrowNow Inc. over violation of copyrights on Oracle’s business software. A jury awarded $1.3 billion in damages based on the value of a hypothetical license that SAP would have negotiated for using Oracle’s copyrighted software. The federal judge in Oakland, California, presiding over the case ruled the verdict was excessive and reduced it to $272 million, drawing an appeal from Oracle. 
Oracle’s General Counsel, Dorian Daley, comments “We are thrilled about this landmark recovery and extremely gratified that our efforts to protect innovation and our shareholder’s interests are duly rewarded. This sends a strong message to those who would prefer to cheat than compete fairly and legally.” Similarly, an SAP spokesman reported that SAP is just as pleased with the court’s decision, claiming that the case “ultimately accepted SAP’s arguments to limit Oracle’s excessive damages claims and that Oracle has finally chosen to end this matter.” You may know Oracle as the Silicon Valley-based company most celebrated for databases but has branched out to develop software in many other categories—sometimes in direct competition with the Germany-based SAP. Oracle filed the original trademark infringement suit in 2007, alleging that TomorrowNow—a company which SAP had acquired—had illegally downloaded some of Oracle’s software. Founded in 1998 by Andrew Nelson and Seth Ravin in 1998, TomorrowNow was providing software upgrades and technical service to PeopleSoft, that was taken over by Oracle later. In January 2005, TomorrowNow was purchased by SAP AG, a competitor of PeopleSoft bought by Oracle Corporation the same year, transferring the liability and legal wrangles to the respective new owners. In a trial that followed, TomorrowNow was found liable for copyright infringement in 2010 and SAP AG was ordered to pay $1.3 billion to Oracle but the sum was reduced to $272m on appeal.



Hachette and Amazon Bury the Hatchet

RTE has the latest on the deal between Hachette and Amazon:
Hachette Book Group and Amazon.com have reached a multi-year agreement for ebook and print book sales after months of fighting that pitted authors, agents and publishers against the world's largest online retailer. 
Hachette, a unit of France's Lagardere, said the new ebook terms will take effect early next year and that it will have the responsibility for setting consumer prices.
Amazon, which pulled several of Hachette's books from its inventory, will immediately resume selling all of Hachette's catalogue. The books will be prominently featured in promotions. 
The high-profile fight started earlier this year when Amazon and Hachette began negotiations on a new agreement. 
The centre of the dispute involved which party controlled the right to set prices for ebooks.  [my bold italics]
While the negotiations played out, Amazon delayed the delivery and removed pre-order options for several of Hachette's titles, including ‘The Silkworm,’ by Harry Potter author JK Rowling, writing under the pen name Robert Galbraith. 
Amazon is the undisputed main outlet for consumers buying ebooks, and the stand-off provoked an outcry from authors and agents. 
Lagardere CFO Dominique D'Hinnin said during the company's quarterly earnings call with analysts, "We are very happy to have this discussion behind us." 
The French media conglomerate said the deal with Amazon one-book pricing will not have an impact on margins and it expects "significant lift" in book sales in November and December. 
Lagardere has said that Amazon accounts for about 60% of Hachette's digital sales.
In a statement that did not provide further details, Hachette Book Group CEO Michael Pietsch said, "This is great news for writers. The new agreement will benefit Hachette authors for years to come. It gives Hachette enormous marketing capability with one of our most important bookselling partners." 
Amazon Vice President of Kindle David Naggar said in a statement, "We are pleased with this new agreement as it includes specific financial incentives for Hachette to deliver lower prices, which we believe will be a great win for readers and authors alike." 
The agreement was reached a day after Amazon directors and executives, including founder and CEO Jeff Bezos, held a board meeting in Las Vegas, coinciding with its third annual cloud computing summit.

There isn't much analysis on the deal just yet but this much is clear, according to Digital Book World, Hachette had to concede on lower prices:
The agreement covers print and ebook distribution and will take effect early next year. 
Much like Simon & Schuster, which struck a deal with Amazon last month–in a development many saw as increasing the pressure on Hachette to do the same–Hachette’s new agreement allows the publisher to set prices on its ebooks. That means a return–likely to be limited by the specific terms of the deal–to agency pricing. 
In its statement today, Hachette appears to have gained that right by compromising, at least to a certain extent, on one of the key sticking points in its standoff with Amazon: lower prices. The new agreement, the statement says, “includes specific financial incentives for Hachette to deliver lower prices,” something the publisher voiced strong objections to earlier this year. [my bold italics]
Here's JakonRoth putting it all in perspective:
Joe sez: As many had guessed, this was all about discounting. As with S&S, it appears to be an agency model, but one that incentivizes discounting. 
Which is similar to the KDP structure. If self-pubbed authors keep their prices within a certain range ($2.99-$9.99), they get 70%. Outside of that range, they only get 35%. 
What does this mean for the publishing world? 
Not much. The Big 5 are no doubt going to continue to price ebooks as high as they can to protect their paper sales. The majority of Big 5 authors will have fewer ebook sales as a result. The lucky bestsellers who are released in large paper numbers will continue to stay rich. 
Now let's wait for Authors United and the Authors Guild to chime in and take credit for all of the pressure they put on Amazon to force Bezos to take the tough, hard deal he's been giving indies for several years. 

11.13.2014

Can a Person With a Bad Rep Be Defamed?

Can a person with a terrible reputation be defamed?

Canyon Entertainment Simone Sheffield is hoping that's the case as she defends herself against Damon Dash who is claiming he entitled to substantial rewards based on his $2M investment in film projects Sheffield has co-produced. The defamation claim is only a small but interesting part of this case as THR ESQ. points out.
The lawsuit also included the allegation that "Simone, without any actual knowledge of the truth of the accusations she was making, accused Damon of going to jail in an attempt to further cause economic harm to Damon’s personal and business reputation."The accusation that Dash was in trouble with the law appears to have been made as the two sides were quarreling with each other in the run-up to the lawsuit. Just one potentially major rub: It might have been Dash himself who said it to others. 
In an email Dash sent to Sheffield and other film industry people  on January 10, he wrote:
"I just got a call from I guess lees manager Simone to tell me about the tv project we were speaking about... she then asked me if I was going to jail... I found that to be offensive because I've never in my life read anything implying that I was going to jail because of a tax debt... when I did try to explain exactly what was going on with my tax situation because based on her comment she had to be told that and could never had read that and I wanted to make sure if she was so concerned she had the right story... and if there is anything in those gossip columns that says this please show me so I can deal with it legally..."
So of course, Sheffield is now telling the judge that "Plaintiff’s email identifies Plaintiff – not the Sheffield Defendants – as the publisher of the allegedly defamatory words!"
Sheffield's memorandum emphasizes that the phone call that preceded the email was a private one with no third parties involved, and adds that if Dash "thinks it defamatory to question whether he was facing jail for tax evasion, he should not have restated the question."
 
In reaction to Dash's email, Sheffield forwarded along various links to media stories about Dash's tax situation. The websites that covered it certainly weren't the most reputable ones out there, but nevertheless, Sheffield's memorandum argues they can't carry a defamation claim thanks to Dash consenting. 
"If Plaintiff thinks it is defamatory to forward links of public articles stating that he was facing jail for tax evasion, then Plaintiff should not have demanded that Ms. Sheffield forward the links," says Sheffield's legal papers. 
But it gets even better. 
Even if Sheffield made statements regarding Dash’s failure to pay his taxes and that he was "going to jail," Sheffield says the gist of the statement was true. The defendant points to public records demonstrating that the State of New York has filed six tax liens against Dash, including one on August 6, 2007 for more than $2 million. 
"It also true – as evidenced by the incarceration of the other celebrities for failing to satisfy their obligations, including Martha StewartWesley Snipes and Heidi Fleiss – that the failure to pay taxes can result in incarceration."
And if that doesn't work, Sheffield is hoping that a person with a bad reputation can't win anyway. 
Sheffield says that Dash still can't win a defamation lawsuit. She says that Dash is "libel-proof," meaning that the hip-hop mogul's reputation is so poor that his reputation can't further be tarnished. 
"Here, at the time of Ms. Sheffield’s alleged defamatory statement, headlines of Plaintiff’s tax issues and potential criminal liability had already been splashed across the Internet by some of the most widely-read sites, including: TMZ, Perez Hilton, BET and MediaTakeOut.com, with eye-catching headlines," says the memorandum authored by attorney James Sammataro. "The pre-existing negative publicity regarding Plaintiff’s failure to pay taxes has so tarnished his reputation on this topic, that he is barred, as a matter of law, from prevailing on a defamation claim relating to the same subject matter."

10.28.2014

Another Reason Why What a Word Means Matters in a Contract

Well here's a reason why one as a lawyer needs to be a creative psychic who can predict all the possible scenarios that can result from a deal:
New York's highest court has refused to reinstate the lawsuit by Duke Ellington's heirs against music publisher EMI.  
...The heirs have been seeking half the royalties from foreign sales of his music. Their 2010 suit alleges breach of the 1961 standard songwriter royalty contract. Ellington signed the deal with Mills Music, predecessor of EMI, now part of global Sony/ATV Music. The contract calls for an even split of net revenue. EMI deducts 50 percent commissions to foreign subpublishers, which it now owns, [my bold italics] before splitting the rest with the heirs. The heirs challenged that practice, but the Court of Appeals says the publisher can keep doing it. ~~Billboard
EMI is essentially double-dipping, paying itself half upfront and then with an additional 50% of the commissions before giving the rest to Ellington's heirs. Why did the court rule this way?
A sharply-divided Court of Appeals affirmed two previous decisions dismissing the case, which had accused the Sony/ATV Music subsidiary of exploiting decades-old contractual language on so-called "net receipts" and structural changes in the music industry in order to take two separate cuts from revenue generated overseas. 
Ellington's 1961 contract gave him 50 percent of any money the publisher received from sales outside the U.S., but only after foreign “subpublishers” had taken their own cut. Importantly, though, the music industry has changed since Ellington signed the deal: the foreign subpublishers taking a cut were independent entities in 1961; today, they're affiliated with EMI. 
The musician's heirs sued for breach of contract in 2010, claiming the modern arrangement meant EMI was effectively receiving sequential cuts of the same revenue. But a trial court, and later a mid-level appeals court, ruled that the plain language of the contract didn't care whether affiliated and unaffiliated subpublishers were getting that first cut.  
“We note that the globalization of the music industry has rendered this 'net receipts' arrangement much more favorable to music publishers than to artists,” the court wrote. “Nonetheless, we must examine the parties' intentions based on the plain language within the four corners of the agreement.” ~~Law360
A key point of contention was the meaning of the word "affiliate" which Ellington's heirs argued included the foreign subpublishers under EMI's wing.
Not so, said the high court, which found that the “other affiliates” language referred only to connected entities that had existed in 1961 — not those created since. 
“Absent explicit language demonstrating the parties' intent to bind future affiliates of the contracting parties, the term 'affiliate' includes only those affiliates in existence at the time that the contract was executed,” the court wrote.  ~~Law360
The dissenting judge did make the seemingly obvious point that "nothing in th[e] common definition suggests that an affiliate does not include a foreign affiliate," and questions the Court for accepting EMI's framing of the word and the issues.
As a final note, appellant's [Ellington's] claims should give us pause because they suggest this is not, as the majority seems to believe, the unintended results of "the globalization of the music industry" that renders the Agreement "more favorable to music publishers than to artists" (majority op at 11 [footnote omitted]). Indeed, I share the concurring opinion's sense that there is something troubling about interpreting "affiliate" in the context of this Agreement, as the majority does, to include only those affiliates in existence at the formation of the contract (concurring op at 1). This interpretation sets the stage for the type of abuse alleged here, namely corporate reconfigurations that avoid the understanding of the parties. ~~Justia
By now it seems like old news that artists are constantly at the mercy of the media conglomerates and their methods of dealmaking and accounting. And how harmful this imbalance is to the creatives.  Will this ever change? Or is the corporate power structure to slick and entrenched to ever have to?

Until then, its up to us as entertainment lawyers serving talent to do our utmost to protect our clients and their heirs with the power of the pen.  


To read the court's decision, click HERE.


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