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November 2014 Archives

November 5, 2014

Center for Art Law Case Updates

The following case selection first appeared in this week's Center for Art Law newsletter:

U.S. v. Ramnarine (S.D.N.Y. 16 Oct. 2014) - J. Koeltl, sentenced Brian Ramnarine, former owner of Empire Bronze Art Foundry in Long Island City to 2 ½ years imprisonment and ordered to pay $34,250 in restitution after pleading guilty to selling and attempting to sell fake sculptures that he falsely attributed to such artists as Jasper Johns, Robert Indiana and Saint Clair Cemin.

Schiffman v. Stewart, 2:2014cv06901 (C.D. Cal., 4 Sept. 2014) - Celebrity photographer Bonnie Schiffman filed a copyright infringement suit against musician Rob Stewart for using a promotional picture, which she claims is "substantially similar" to one she took in 1981. The original picture taken by Schiffman was used on the cover of Stewart's album "Storyteller," and she is seeking $2.5 million in damages.

MAFG Art Fund, LLC v. Gagosian, 653189/2012 (N.Y.S.2d, Sept 2014) - In ongoing litigation between the plaintiff billionaire financier Ronald O. Perelman and the defendant art dealer Larry Gagosian over the sale of a Cy Twombly painting, Perelman subpoenaed major players in the art business, including galleries, art dealers, auction houses, and artists, seeking information relating to transactions of which Gagosian has been a party. Gagosian's lawyers assert that these actions are all an effort to "harass Gagosian and disparage the gallery."

Franco Fasoli (A.K.A. "Jaz") v. Voltage Pictures, LLC, 1:14-cv-06206 (N.D.Il. 2014) - The plaintiffs, visual artists "Jaz," "Ever," and "Other", filed a copyright infringement claim alleging that multiple identified and unidentified Hollywood defendants blatantly misappropriated the artists' collaborative mural, protected under Argentina's copyright law, by creating an "infringing work" on the set of the film The Zero Theorem, which was filmed in Romania in 2012. The plaintiffs seek relief in the form of a preliminary and permanent injunction, impoundment and disposition of infringing articles, an order of accounting of gains and profits, and monetary damages. The plaintiffs are represented by Foley & Lardner LLP.

Marguerite Hoffman vs. L&M Arts, et. al, 3:10-CV-0953-D (N.D. Tex 2014) - When Marguerite Hoffman quietly sold her Rothko, she 'bargained for confidentiality' because the painting was promised to the Dallas Museum of Art. Shortly thereafter the painting turned up for a public auction, and Hoffman sued the dealer and the subsequent buyer for not keeping her sale secret, per terms of the sales agreement. On September 4, 2014, a Texas district court dismissed Hoffman's claim against the buyer and ruled that she can only recover benefit-of-the bargain damages from the seller. https://casetext.com/case/hoffman-v-l-m-arts?utm_source=Center%20for%20Art%20Law%20General%20List&utm_campaign=e8afc68020-RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_022731d685-e8afc68020-346773625

The Center for Art Law strives to create a coherent community for all those interested in law and the arts. Positioned as a centralized resource for art and cultural heritage law, it serves as a portal to connect artists and students, academics and legal practitioners, collectors and dealers, government officials and others in the field. In addition to the weekly newsletter (http://cardozo.us2.list-manage.com/subscribe?u=78692bfa901c588ea1fe5e801&id=022731d685), the Center for Art Law subscribers receive updates about art and law-related topics through its popular art law blog (http://itsartlaw.com/blog/)and calendar of events (http://itsartlaw.com/events/). The Center for Art Law welcomes inquiries and announcements from firms, universities and student organizations about recent publications, pending cases, upcoming events, current research and job and externship opportunities. To contact the Center for Art Law, visit our website at: www.itsartlaw.com or write to itsartlaw@gmail.com.

November 10, 2014

"Julie of the Wolves" Litigation

By Andrea L. Calvaruso

In a postscript to SDNY Judge Naomi Buchwald's ruling last March favoring Harper Collins in its copyright infringement suit against Open Road over control of e-book rights to "Julie of the Wolves", Judge Buchwald had determined on summary judgment that "a plain reading" of Harper's 1971 publishing agreement with the author demonstrated that digital rights (even though not yet in existence) were encompassed within the broad language of the publishing contract's grant clause, and therefore Open Road's 2011 e-book license with the author was invalid. As a result of this ruling, Harper sought over $1,000,000 in damages and attorneys' fees against Open Road on the ground that its decision to proceed with the e-book, without Harper's consent, was "objectively unreasonable."

In this latest ruling summarized below by "Publisher's Weekly," Judge Buchwald denied Harper's request and limited the award to the $30,000 statutory maximum, plus $7,000 in costs. http://www.publishersweekly.com/pw/by-topic/digital/content-and-e-books/article/61471-judge-rules-for-harpercollins-in-open-road-e-book-dispute.html

Week in Review

By Martha Nimmer

Cutting it Close on Constitutionality

The Ninth Circuit Court of Appeals will rehear a case disputing the constitutionality of the 1976 California Resale Royalties Act (CRRA). The suit, brought by artists Chuck Close, Laddie John Dill, and the estate of the sculptor Robert Graham, challenges "the rejection of their class action lawsuit against Sotheby's, Christie's and online auction giant eBay for violating the California law that entitles artists to claim five percent of resale royalties on any work sold for more than $1,000, so long as the seller resides or the transaction happens in California."

The law has received little attention since it went into effect over 40 years ago, but that changed in 2012 when U.S. District Judge Jacqueline Nguyen dismissed Close, Dill and the Graham Estate's claims, saying they ran "afoul" of the Commerce Clause of the U.S. Constitution. In that vein, Judge Nguyen wrote, "the following example illustrates the CRRA's problematic reach. Assume a California resident places a painting by a New York artist up for auction at Sotheby's in New York, and at the auction a New York resident purchases the painting for $1,000,000." Accordingly, even though the sale took place in New York and the artist is a New York resident, the mere fact that the seller is a California citizen could end up "spark[ing] a lawsuit over royalties." As a result, the judge determined "that the 'practical effect' of the law was controlling interstate commerce even though it may have some 'effects within the State.'"

Undeterred, the artists appealed the case to the Ninth Circuit, which heard oral arguments last April. In the newest development for the case, it was announced late last month that a fuller panel of appellate judges on the Ninth Circuit would rehear arguments in December. What makes that move unusual, according to The Hollywood Reporter, is that "no opinion from the Ninth Circuit ever came after that April hearing." Instead, it appears that the appellate circuit has chosen to proceed directly to the en banc hearing.


He Belongs to the Ages

The U.S. Supreme Court declined earlier this month to hear a case brought by the estate of Sir Arthur Conan Doyle. The suit alleged that authors who sought to publish stories about the famous detective Sherlock Holmes were required to pay the estate a licensing fee. The Supreme Court's refusal to hear the appeal will leave in place a June decision by Seventh Circuit Court of Appeals Judge Richard Posner; in his opinion, Judge Posner held that most of Doyle's Sherlock Holmes stories are no longer protected by copyright, and are, in fact, in the public domain.

The legal drama over whether Sherlock Holmes was in the public domain began sometime last year, when Doyle's estate "demanded a licensing fee from the publisher Pegasus, which had planned to release an anthology called In the Company of Sherlock Holmes, edited by Laurie R. King and Leslie S. Klinger." After being met with the licensing fee demand, Klinger sued the Doyle estate and later won.

Now that the Supreme Court has refused to take up the case, Doyle's estate is "out of options," at least in the U.S. Although the lower court's decision does preserve copyright on 10 later Sherlock Holmes stories by Doyle, the decision "leaves most of the author's work and characters in the public domain." This development means that viewers of the BBC hit television series Sherlock can also breathe a sigh of relief: according to the Los Angeles Times, "Holmes fans can occupy themselves by writing their own stories while they're waiting for the fourth season of the BBC hit "Sherlock," which likely won't debut for more than a year."


Dismissing the Dictator

Citing concerns over free speech, Judge William Fahey of Los Angeles Superior Court has dismissed former Panamanian dictator Manuel Noriega's lawsuit against Activision Blizzard, Inc. over his depiction in its video game "Call of Duty: Black Ops II." Judge Fahey granted the defendant's special motion to strike the case under a California statute that "seeks to prevent lawsuits stifling free speech," writes Reuters.

The former Panamanian dictator and ex-federal prisoner initiated the suit in July, accusing the video game developer of portraying him as "the culprit of numerous fictional heinous crimes," such as kidnapping and murder. Noriega claimed that Activision had "infringed his right to his own publicity, and sought unspecified damages." Activision countered, saying the depiction of the former Central American strongman was protected by the First Amendment. Jude Fahey agreed, adding that the plaintiff's right of publicity was "outweighed by the defendants' First Amendment right to free expression, and that there was no evidence of harm to Noriega's reputation."


Making the Merger Work

Earlier this month, the U.S. Department of Justice (DOJ) announced that Richmond, Virginia-based Media General, Inc. would divest of "several" television stations located across the country as the company seeks to complete its proposed $1.5 billion acquisition of LIN Media. Media General, which currently owns 31 television stations located in 29 metropolitan areas, announced its plan in March to purchase Austin, Texas-based LIN Media. LIN owns, operates or provides programming or sales services to over 50 television stations across 23 metropolitan areas.
Citing concern over advertising competition, the DOJ intervened earlier this year in the proposed merger. Specifically, the DOJ was concerned that the deal would "substantially lessen competition for spot advertising certain markets." Spot advertising, according to Entertainment Law Digest, "consists of those ads that are sold in the local market served by an individual television station;" those ads are typically purchased by advertisers who want to target potential customers in a specific geographic area.

In a complaint filed earlier this year in the District of Columbia's federal court, the Justice Department voiced concern over whether the merger would "combine stations that are either close substitutes or vigorous competitors in markets with limited alternatives." Representatives for the two media companies were able, however, to reach an agreement with the DOJ: Under the terms of its agreement with the DOJ, Media General will sell stations in Alabama, Georgia, Florida, Rhode Island, Massachusetts and Wisconsin. According to Bill Baer, assistant attorney general for the department's Antitrust Division, this sale "will ensure that these stations remain vigorous competitors in their designated market areas."



The Metropolitan Black Bar Association's Entertainment & Sports Law Committee and the Entertainment Arts and Sports Law Section's Committee on Diversity of the New York State Bar Association present an interactive networking experience where a panel of seasoned music executives and artist managers will edify attendees by sharing their professional experiences representing A-list musicians and entertainers in the business. This open format event is intended for attorneys, law students, and creative professionals in the music business who are interested in obtaining key insights on how technology and culture have impacted the evolving management landscape, business development tactics, marketing maneuvers, essential creative deal points, and trending contractual matters.

Confirmed speakers include Professor Jayson Jackson of the NYU Clive Davis Institute of Recorded Music, Emily White of management and consulting firm Whitesmith Entertainment, and Rob Love of marketing and management firm Launchpad Worldwide.

For this open format event, attendees are also encouraged to come prepared with questions.
Light refreshments will be served.

Tuesday, November 12, 2014
6:30 p.m.-8:00 p.m.

Black Wax Creative Space NYC
2 W 46th Street, #1601 (between 5th Ave & Avenue of the Americas) New York, NY 10036

Should you have any questions about this program, please email the Entertainment & Sports Law Committee at info@mbbanyc.org

*Please Note: No CLE credit will be provided for this event.
RSVP Required | Space is limited!

RSVP link: https://www.eventbrite.com/e/mbbas-entertainment-sports-law-committee-co-sponsor-presents-luminaries-lighting-the-path-for-tickets-14146782407

November 15, 2014

Amazon and Hachette Shake Hands on Distribution Deal; Hachette Authors No Longer in Limbo

The Author's Guild reported on Thursday, November 13th:

"This morning, after a nasty and very public corporate stalemate, Amazon and Hachette jointly announced they have come to terms. Their new multiyear contract will allow Hachette to set its own e-book prices, but that arrangement will be tempered by 'financial incentives' for Hachette to keep those prices low, according to the companies' joint statement."

More at http://www.authorsguild.org/advocacy/amazon-and-hachette-shake-hands-on-distribution-deal-hachette-authors-no-longer-in-limbo/#more-6562

November 20, 2014

Pre-1972 Sound Recordings Could Kill the Radio Stars

By Barry Werbin and Sharon O'Shaughnessy
Herrick, Feinstein LLP

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.

[The full SDNY decision can be accessed here: http://www.scribd.com/doc/247180767/Flo-Eddie-v-Sirius-XM-NY-Order.]

November 21, 2014

Turtles 2, Sirius 0: Is Broadcast Radio Next?

By Steve Gordon

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."

Week in Review

By Chris Helsel

Sirius XM Denied Summary Judgment in NY Copyright Dispute

Following a defeat in California federal court, Sirius XM (Sirius) has suffered yet another setback in its copyright dispute with "Happy Together" rockers, The Turtles. Flo & Eddie, Inc. (F&E), a corporation created and owned by two of The Turtles' founding members that owns all rights to the band's master recordings, has brought suits against Sirius in three states for copyright violation. This week, a federal judge in New York denied the satellite radio company's summary judgment motion. In so doing, the Southern District of New York ruled that while the Federal Copyright Act does not protect music recorded prior to 1972, New York state law does. The court 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." Further, the court declined to distinguish between holders of copyrights in sound recordings and any other industry, holding that "common law copyright in sound recordings comes with the entire bundle of rights that holders of copyright in other works enjoy."

The court also ordered Sirius to show cause by December 5th why summary judgment should not be ordered in favor of F&E.

In addition to California and New York, F&E also has similar litigation pending against Sirius in the Southern District of Florida. A win for F&E in Florida could open the door to a flood of lawsuits brought against both digital and traditional AM/FM music providers for unauthorized use of pre-1972 music recordings.


NBA, NFL Brace for Challenges to Domestic Violence Suspensions

On Tuesday, following a hearing conducted the previous day via conference call, National Football League (NFL) commissioner Roger Goodell announced that Minnesota Vikings running back Adrian Peterson was suspended without pay for the remaining seven games of the 2014 season after his plea of no contest to misdemeanor reckless assault. Peterson was originally indicted on felony child abuse charges for assaulting his four-year-old son with a "switch" (a thin tree branch, essentially). Following his indictment, the league placed Peterson on the Commissioner's Exempt List, which prohibited him from games and team activities but allowed him to continue to be paid. The suspension does not require Peterson to pay back any money earned to this point.

In suspending Peterson, Commissioner Goodell cited three aggravating factors that led to the harsher punishment: the child's age, Peterson's use of a weapon, and his failure to show "meaningful remorse" for his conduct. At the time of his indictment, Peterson stated that he would not "eliminate whooping (his) kids" and defended his conduct in texts to the boy's mother. Goodell's letter to Peterson informing him of the suspension stated: "These comments raise the serious concern that you do not fully appreciate the seriousness of your conduct, or even worse, that you may feel free to engage in similar conduct in the future."

On Wednesday, the NFL Players Association NFLPA (players union) filed an appeal on Peterson's behalf. It is believed that the appeal will focus on the vast discrepancies between punishments handed down to different players for similar infractions, and allege that the NFL has engaged in ex post facto lawmaking by applying its newly-enacted domestic violence policy to Peterson, whose infractions occurred prior to the announcement of the new policy.

Under the 2011 Collective Bargaining Agreement, the commissioner has the sole power to determine discipline under the player conduct policy, as well as to hear any appeal. While this system has come under heavy criticism of late, it is the result of good faith, arms-length bargaining, as the league office has been quick to point out. Nevertheless, Peterson and the union have requested that Goodell recuse himself as the appeal officer and that a neutral arbitrator hear the appeal instead.

Meanwhile, two blocks west of NFL headquarters, National Basketball Association (NBA) brass entered the domestic violence discussion this week as well. Commissioner Adam Silver announced Wednesday that Charlotte Hornets forward Jeff Taylor was suspended without pay for 24 games after Taylor pleaded guilty in October to misdemeanor domestic violence assault and malicious destruction of hotel property. He received probation and must complete a domestic violence intervention program.

NBA bylaws give the commissioner broad power to discipline players for conduct policy violations, but differ from NFL rules in that a suspended player has the right to file an appeal directly to an independent arbitrator. The NBA players' union, the NBPA, has indicated that it is prepared to do exactly that.

Newly elected NBPA executive director Michele Roberts said on Thursday that the suspension is "excessive, without precedent and a violation of the Collective Bargaining Agreement." She noted that the NBA CBA calls for a minimum 10-game suspension in cases involving a violent felony conviction - and that Taylor's case was merely a misdemeanor, which could be dismissed following the 18-month probationary period. Roberts also noted that the decision to appeal has not yet been made, but the union stands behind Taylor in the event he decides to pursue that route.

It should be fascinating to follow these two concurrent cases in the coming months, as they highlight both the increased emphasis professional leagues are placing on the discipline of players involved in domestic disputes and the crucial differences in the disciplinary and appeals processes of the NFL and NBA.


Court Saves Detroit Institute of Arts' Irreplaceable Collection

U.S. Bankruptcy Court Judge Steven Rhodes' recent approval of the beleaguered city's bankruptcy restructuring plan ensures that the Detroit Institute of Arts (DIA) will not be forced to sell off its precious masterpieces to pay creditors. Under the "great bargain" approved by Judge Rhodes, the museum, which attached itself to the city in 1919, will now become a private charitable organization. The plan calls for a coalition of foundations, state government and the DIA to contribute the equivalent of $816 million over 20 years as a proxy for the value of the museum. The DIA itself will contribute $100 million. The funds will be distributed to pensioners in an effort to mitigate against the pension cuts included in the city's restructuring plan.

The judge, who declared that the DIA was "critical" to the future of the city, stopped short of declaring a sale of the museum's art to pay the city's creditors illegal, although he did hint that the DIA would "almost certainly" prevail if it sued to prevent such a sale. Previously, the Michigan attorney general had opined that a forced sale was unlawful because the DIA was held for the public benefit in a charitable trust.

In approving the bankruptcy restructuring plan, Rhodes said in his address from the bench: "The evidence unequivocally establishes that the DIA stands at the center of the city as an invaluable beacon of culture, education for both children and adults, personal journey, creative outlet, family experience, worldwide visitor attraction, civic pride and energy, neighborhood and community cohesion, regional cooperation, social service and economic development."

Thankfully, despite its bleak financial situation, Detroit was able to avoid resorting to the regrettable and irreversible measure of selling its finest museum's precious masterpieces. As George N'Namdi, founder of the N'Namdi Center for Contemporary Art in Detroit, so astutely noted, a forced sale of art would have sunk morale to a new low and "destroyed the image of the city in the eyes of the world...It would represent such a defeatist position to be in, and I don't think the city could have ever recovered from that."


November 25, 2014

More Myths About Hiring Independent Contractors

By Kristine Sova

In a prior post titled Top Myths About Hiring Independent Contractors, we identified three common misconceptions about the use of independent contractors. The absence of clear-cut rules about the kinds of workers who are and aren't appropriately classified as independent contractors continues to result in the misclassification of independent contractors by employers. Here, we identify three more common misconceptions about classifying workers as independent contractors that almost always lead to liability for employers.

Myth #4: There are some workers who are always independent contractors.

IT professionals and web designers are always independent contractors, right? Wrong. While more often than not there are probably certain types of workers at a certain type of startup who are more likely to be independent contractors, there is no one type of worker that will always be an independent contractor. In all cases, determining whether a worker is an employee or independent contractor is a fact-and-circumstances inquiry.

Myth #5: Commission-only workers are independent contractors.

How a worker is compensated is just one factor that is considered when determining whether a worker is an employee or an independent contractor. This includes commission-only payments, which in New York, can be used to compensate employees, not just independent contractors. (If you operate a New York business with commissioned employees, be aware that the New York Labor Law requires employers to have written employment agreements with their commissioned employees. The law is also specific as to what terms must be included in those employment agreements.)

Myth #6: Probationary, temporary, or seasonal workers are independent contractors.

Some businesses hire probationary, temporary, or seasonal workers and classify them as independent contractors, reasoning that because the relationship will be short-lived, the worker need not be placed on payroll. The length of the relationship is not grounds alone to treat a worker as an independent contractor. Rather, the whole relationship must be considered. Further, if a short-term worker is performing work substantially similar to the work performed by your business's employees, it's likely the short-term worker is also an employee.

These three misconceptions all involve clear-cut rules. As a whole, they serve as a reminder that there is no shortcut for determining whether a worker is an employee or independent contractor. Rather, how a particular worker should be classified requires a comprehensive inquiry unique to the worker and the business. If you'd like to learn more, please read Is Your Worker an Independent Contractor or Employee? (http://sovalaw.com/blog/2014/05/08/is-your-worker-an-independent-contractor-or-employee/?utm_source=Sova+Law+Blog+Newsletter&utm_campaign=3c373927ba-RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_eff3a758ca-3c373927ba-62893717), which outlines the kinds of factors that are considered when determining whether a worker is an employee or independent contractor.

November 26, 2014

Match-Fixing and Corruption in Professional Tennis

By Cecilia Ehresman

The Tennis Integrity Unit (the "TIU") was established in 2008 by the Association of Tennis Professionals, the Women's Tennis Association, the International Tennis Federation, and the Grand Slam Committee. (Richard H. McLaren. Symposium: Doping in Sports: Legal and Ethical Issues: Corruption: Its Impact on Fair Play. 19 Marq. Sports L. Rev. 15, (2008)). It was created in response to the highly and negatively publicized investigation of Nikolay Davydenko, ranked fourth in the world, for allegedly fixing his August 2, 2007 match at the Prokom Open against Martin Arguello, ranked 87th. Id. Since its creation, the TIU has established and enforced a uniform regulatory structure for anti-corruption, the Tennis Anti-Corruption Code (the "Code"). This Code is used to handle match-fixing allegations across the sport. However, in the past three years, only nine players have been found guilty of match-fixing across the sport. (tennisintegrityunit.com). All of those players were low-ranking, with the only prominent player ever to be linked to match-fixing being Davydenko. Id.

Many argue that the TIU has solely sanctioned low-ranking players because it is only they who participate in match-fixing. This assertion is supported by the financial situation of such players (low-ranking players' tournament checks often do not cover the costs of their participation, causing them to have thousands of dollars in out-of-pocket costs per tournament), which explains why match-fixing is appealing to them. However, recent findings and events suggest that this might be a false assertion. A 2014 study, written by Ryan Rodenberg, an assistant professor of Sports Law at Florida State University, and Elihu Geustel, an Indiana-based professional tennis gambler, utilized two predictive models to track the betting market price against the "correct" price. (http://www.bloomberg.com/news/2014-09-01/tennis-betting-study-finds-unusual-patterns-in-23-matches.html). The 'correct' price was measured using data from previous matches in order to analyze each players' odds of winning the present match. Id. Under this model, betting patterns for a match were labeled suspect if there was a 16% to 29% difference between the market's and the model's price, since such a deviation could only be the result of an approximate $100,000 swing in wagering before the match even started. Id. Based on these measures, the study found that at least three matches at Wimbledon, this year alone, illustrated suspicious betting patterns which warranted an investigation. Id. This was also true of at least one match at the 2012 London Olympics and several opening-round matches at the 2011 French Open and 2012 Australian Open. Id. Yet none of these matches were ever investigated by the TIU.

Furthermore, in 2013 and 2010 respectively, a veteran sports corruption investigator (the "Investigator") and a Florida-based lawyer who represented the banned Italian players in 2000 (the "Lawyer") came forward to assert that the TIU continually targets low-ranking players for match-fixing, while purposefully allowing big-name players to slide under the radar. (http://www.sportsonearth.com/article/51670382/as-wimbledon-begins-does-tennis-have-a-gambling-problem). The Investigator was further quoted stating that as many as a dozen top-50 tennis players, including several who are included in the top 10, have been privately warned about their involvement in suspicious matches rather than being formally investigated. Id. Some of these suspicious matches included matches played at Wimbledon in 2013. Id.

These recent allegations should raise suspicion concerning the recent April 14, 2014 arrest of six men, four of whom were Southern Star players, and none of whom ranked above the top 200, for allegedly conspiring to fix several national and international matches. (http://espn.go.com/tennis/story/_/id/11230234/australia-police-arrest-6-tennis-match-fixing-ring). The information which led the TIU to investigate these men was never released, but Australian police did come forward to state that a number of bets were placed on tennis matches where the outcome seemed to be predetermined by at least one of the players. Id. The Australian police then reassured the public that none of these fixings related to the big-matches on the ATP World Tour at the Australian Open. Id.

In light of the recent allegations directed at the TIU and the way in which this most recent arrest was handled, one should ask why the TIU would refrain from going after big-name players. Would it be to ensure the integrity of the "big money" matches? According to the Lawyer, it is because going after "low-hanging fruit" does not jeopardize the TIU's "bottom line." (http://www.sportsonearth.com/article/51670382/as-wimbledon-begins-does-tennis-have-a-gambling-problem). In other words, by covering up the names of the top players who partake in gambling and match-fixing, the TIU insures income for the sport as a whole. Id. Tennis, like most professional sports, generates much of its income from fans and sponsors. Id. For this reason, it is in the sport's best interest to sanction lower ranking players to show that its anti-corruption system is working, as opposed to sanctioning big-named players, which would result in negative media attention and the loss of fans and sponsorships (as it did when Davydenko was accused of match-fixing in 2008). Id. Moreover, such negative attention would likely injure sports gambling companies who, for tennis alone, generated a total of $58 billion in gross profit in 2012. (http://www.bloomberg.com/news/print/2014-09-01/tennis-betting-study-finds-unusual-patterns-in-23-matches.html).

If the TIU is in fact only targeting low-ranking players while allowing higher-ranking players to slide under the radar, one must question if the TIU is "smart" for doing so. In other words, does this method best balance the integrity of the sport with fan happiness? Similar to what occurs in Major League Baseball (MLB), Article V of the Code ensures player confidentiality throughout an investigation. (http://mlb.mlb.com/pa/pdf/jda.pdf; http://www.itftennis.com/media/161972/161972.pdf). However, MLB superstars have been convicted of crimes. For example, Alex Rodriguez was convicted in 2014 of using steroids, and the Chicago White Sox were even convicted of fixing the World Series in 1919. (http://www.cnn.com/2014/01/11/us/alex-rodriguez-suspended/index.html; http://mlb.mlb.com/mlb/history/postseason/mlb_ws_recaps.jsp?feature=1919). So why would the TIU be afraid of going after big-named players when the MLB does it quite frequently regarding equally serious allegations? Again, perhaps it is to protect the sport as a whole from scandal in order to ensure tennis' financial stability. However, the TIU must recognize that such a method can only be a short-term fix. Allegations of corruption within the TIU itself are already becoming more frequent. Thus, if these allegations are true, it is only a matter of time before the truth is exposed. For this reason, if it is not doing so already, it is best for the TIU to equally target all players. While this may hurt sponsorship in the short-term, it will ensure that the public does not lose faith in the sport. As Warwich Barlett, chief executive officer of Isle of Man, a U.K. based Global Betting and Gambling Consultants firm, stated: "credibility is everything in sports...[and] people don't want to be on roulette if the wheel is rigged."

November 28, 2014

Week in Review

By Chris Helsel

Apple E-Books Antitrust Settlement Approved

Late last week, a federal judge in Manhattan approved a highly unusual settlement in which Apple has agreed to pay $400 million to as many as 23 million e-book consumers, in the form of cash and e-book credits.

In 2012, the U.S. Department of Justice and 33 states brought a civil antitrust action against Apple and five leading publishers, alleging that the defendants had conspired to raise e-book prices by restraining retail price competition. The government alleged that in 2010, as the tech giant prepared to introduce the iPad, Apple CEO Steve Jobs persuaded the publishers to switch to the so-called agency model, which let publishers - rather than retailers - set e-book prices. Apple, the suit alleged, was keenly aware of the publishers' growing frustration with market leader Amazon's steeply discounted e-book prices. The company used this knowledge, as well as the contingent opportunity to sell books through Apple's new e-book retail outlet, iBookstore, as leverage to pressure the publishers into artificially inflating e-book prices across the board.

The publishers quickly settled for $166 million, which was distributed in the form of store credit to consumers who had overpaid for e-book purchases with Apple's leading e-book retail competitor, Amazon, following the universal price hike. Following trial, the court held last year that Apple was complicit in the conspiracy. In her opinion, Judge Denise L. Cote conceded that Apple had "seized the moment and brilliantly played its hand" - though in doing so, it had unlawfully conspired with the publishers, in violation of the Sherman Act.

A damages trial was set for August of this year, but in June Apple agreed to settle for $400 million (plus $50 million to the attorneys). That settlement, approved last week, is subject to change pending the outcome of Apple's appeal, which is scheduled for December 15th. If the judgment is overturned and the case returns to district court, Apple has agreed to pay $50 million to consumers and $20 million to the attorneys.


Swiss Museum Accepts Nazi-Era Art Trove, Vows to Return Any Looted Pieces to Heirs of Rightful Owners

After deliberating for six months, a Swiss museum has announced it will accept the bequest of an enormous art trove amassed by one of Hitler's art dealers. The collection, which includes masterpieces by Monet, Matisse and Renoir, was left to the Kunstmuseum Bern by Cornelius Gurlitt, the Nazi-era dealer's son, shortly before he died in May. Much of the immense collection, with an estimated valued in the hundreds of millions of dollars, was accumulated by Gurlitt's father, Hildebrand, who was commissioned by the Fuhrer to purchase pieces for a proposed museum in Linz, Austria (Hitler's hometown).

The Swiss museum declared that before it takes possession of the collection, a team of experts will analyze each work to determine whether it was improperly looted or bought from Jewish owners under duress during the Nazi era. Any improperly obtained works are to be promptly returned to the heirs of the rightful owners, at the expense of the German government. If no owner can be identified, the looted works will be put on public display in Germany, in the hopes that potential claimants will eventually come forward. In a further effort to identify potential claimants, this week the museum made ledgers kept by Hildebrand Gurlitt from 1937 to 1941 publicly available on a German government website.

Of the collection's 1,280 pieces, 240 are believed to have been obtained improperly. Mr. Gurlitt stashed another 238 works at a vacation home in Salzburg, which have yet to be scrutinized.

Christoph Schäublin, president of the museum's Board of Trustees, stressed that the decision to accept the trove was immensely difficult, given the origins of much of the collection. He said at a news conference on Monday that the museum would adhere to the 1998 Washington Conference Principles on Nazi-Confiscated Art, which govern the investigation and return of art obtained under Hitler before and during the Second World War. Schäublin vowed to work with German officials to ensure that all looted art contained within the collection is returned to its rightful owners, and described the museum's undertaking as an "exceptionally complex responsibility."

Since the end of World War II, the handling of looted art has been a highly contentious issue in Europe and around the world. It is estimated that up to 20% of Europe's great art was obtained by Hitler's agents during his time in power, and that tens of thousands of pieces are still outstanding. Observers hope that the Kunstmuseum Bern's openness in handling the Gurlitt bequest, and its willingness to work with German authorities, will set a new standard for dealing with future discoveries of Nazi-era looted art. According to Christopher A. Marinello, director of Art Recovery International, the handling of the Gurlitt trove "could be a game changer for the way cultural institutions handle this in the future."


For NJ, All Bets Are Off (Again)

For the second time in two years, a federal judge has curbed New Jersey lawmakers' attempts to legalize sports betting in the state. Judge Michael Shipp of the District Court of New Jersey issued a permanent injunction late last week, declaring that New Jersey's latest effort - the 2014 Sports Wagering Law - violated a federal statute, the Professional and Amateur Sports Protection Act of 1992 (PASPA), which prohibits state-sponsored sports betting everywhere except Nevada, Delaware, Montana and Oregon.

The issue dates back to 2011, when voters approved a ballot measure supporting a bill passed by the state legislature amending the state constitution and authorizing the legislature to enact laws to allow sports betting. Governor Chris Christie signed the bill into law in 2012. The federal government, NCAA and the four major sports leagues filed suit to block the legislation, arguing that it violated PASPA, and that legalized sports gambling would irreparably harm the leagues by damaging fans' perception of the integrity of their games. New Jersey responded that PASPA violated the 10th Amendment anti-commandeering principle by compelling state officials to enforce a federal law. The state argued that PASPA violated equal sovereignty by allowing sports wagering in some states, but not others. (It should be noted that at the time PASPA was enacted, New Jersey was offered the opportunity to legalize sports betting, but declined to do so).

Judge Shipp granted summary judgment to the leagues, finding that the New Jersey law was preempted by the federal statute, and that Congress had the power under the Commerce Clause to enact PASPA. He also rejected the anti-commandeering and equal sovereignty claims. On appeal, the Third Circuit upheld the decision, but noted that states are free to repeal sports betting laws and decide "the contours of the prohibition." The U.S. Supreme Court denied certiorari.

In response, in October 2014 New Jersey enacted new legislation, once again attempting to legalize sports wagering. State lawmakers reasoned that while PASPA banned states from licensing and regulating sports betting, nothing required them to actively prohibit it. Therefore, they concluded, a state should be free to decriminalize sports betting, so long as the government did not directly regulate it. The 2014 Sports Wagering Law partially repealed the state's existing ban on sports betting, but restricted the activity to casinos and racetracks. This, they believed, comported with the Third Circuit's language allowing states to decide "the contours of the prohibition."

Once again, the NCAA and the leagues sued in federal court to block the legislation. They argued that the appellate court's "contours" language meant only that the state could determine the proper penalties related to sports betting, and that setting parameters like limiting the wagering to only casinos amounts to regulation. The leagues did concede, however, that federal law would allow a state to lift its ban on sports betting entirely - but not to determine where and when bets could be made, or to impose age restrictions.

Judge Shipp agreed with the petitioners, and granted summary judgment. Immediately, state officials declared that they planned to appeal once again. It now appears that the outcome of this saga will be determined by the Third Circuit's clarification of what exactly it meant by saying a state can decide the contours of the prohibition.

Unsurprisingly, legislators around the country are following this case closely. To date, Virginia, West Virginia, Kansas and Georgia have already publicly supported New Jersey's efforts. Should Governor Christie prevail, expect a wave of sports betting decriminalization to follow. Stay tuned.


About November 2014

This page contains all entries posted to The Entertainment, Arts and Sports Law Blog in November 2014. They are listed from oldest to newest.

October 2014 is the previous archive.

December 2014 is the next archive.

Many more can be found on the main index page or by looking through the archives.