The guys end the week by discussing a recent lawsuit in New York involving restaurants being sued by the music industry for playing music. They answer the question, "One of our former employees filed a frivulous lawsuit against us. Our attorney is reluctant to countersue for malicious prosecution so should I just forget about it?"
NASIR: Welcome to our podcast where we cover business in the news and answer some of your business legal questions that you, the listener, can send in to firstname.lastname@example.org.
My name is Nasir Pasha.
MATT: And I’m Matt Staub.
NASIR: And that’s it. Thank you for joining us, everyone. Don’t forget to leave some positive reviews on our iTunes and thank you. That’s all I have.
MATT: That’s all you have for today?
NASIR: Yeah, we’ll give everyone a break today; a lot of legal issues this week that they’ve had to deal with.
MATT: That’s good because you sprung this story on me the last minute so I don’t have the background information that you do.
NASIR: Oh, like I do?
MATT: Well, you knew about the story, but I’m glad we’re talking about this because it’s something I have never thought about before. Now that I’ve seen the idea, I’m pretty intrigued.
So, this is in New York – at least, this specific lawsuit – but I’m sure it applies to a bunch of places. So, restaurants in New York are being sued by the music industry for playing music in their restaurants which, you know, I guess that, when you think about it, is there a valid license to the music that’s being played? How exactly is it set up? Or maybe some restaurants are just having their owners records their own music and that’s what’s being played over the speakers? But it’s a really, really interesting idea that, like I said, I’ve never really thought about it.
MATT: Lucky for me, you’ve looked into music licensing for restaurants.
NASIR: I’ve dealt with this before. It’s actually, you know, we’ll pull out a story that we’ll link to of a restaurant – where were they? I want to say New Jersey but it’s probably off.
MATT: I thought it was in New York.
NASIR: New York?
Anyway, so restaurants are being sued by music industry for up to $150,000 for playing music, and this is a big headline as if it’s a big deal, but the reality is this happens all the time, and the reason is because, just like Matt’s saying, it’s not a common issue that you would come across, but those in the music industry know it very well.
There are these what are called “performing rights organizations” and there’s a few of them. There’s BMI, there’s ASCAP, there’s SESAC, and each one of them have a different focus and so forth. They’re not really important to all this but the point is that they govern not only stuff that’s playing on TV but also radio. By the way, there’s also – related to this – sports events too and I’ve dealt with that as well. When you’re watching the NFL, right? There’s always that warning that this is not supposed to be rebroadcasted, et cetera, and then you’re sitting in your living room thinking, “Wait a minute, am I breaking the law right now by watching this?”
But the reality is that, when you have a restaurant, for example, depending upon whether or not the general public can listen to the music or whether or not how the size of your TV and all these very specific specifications will depend upon whether or not you have to pay a licensing fee to the appropriate organization for use of that. And so, oftentimes, like, for radio, if you have more than, like, six loud speakers, or more than four loud speakers in any one room, or joining outdoor space, there’s always those technical details, but the point is that, if you want to play the radio or even, like, people say Pandora or Spotify, you can’t just play that and say, “Okay. Now, this is my media entertainment for my restaurant.” You actually have to get that license to actually play that. And so, oftentimes, if you think about it – and we’ve talked about this in the past – the only way that this license has any value or people have any incentive to actually buy a license is enforcement. So, these guys, these organizations are very aggressive in making sure that these rules are followed to such an extent they’ll even send in literally undercover so-called informants into these restaurants just to document and file a lawsuit or send a demand letter. Basically, it’s not quite extortion, but basically convince you that, “Hey, unless you pay for a licensing fee, we’re going to fine you for X amount of dollars.”
MATT: Unless you’re Taylor Swift; no one’s selling actual CDs anymore.
NASIR: I did read that she sold, like, a record number of albums, right?
MATT: Well, she pulled her music, at least from Spotify.
NASIR: Big Taylor Swift fan, right?
MATT: Uh, not particularly, but…
NASIR: I like how you’re not denying it, though.
MATT: It’s the type of music where it’s not good music, but it’s catchy enough that, like, after a certain number of times you hear it, you think it’s good music, if that makes sense.
NASIR: I think you’re just in denial. I think you’re a big fan so I’m just going to ignore what you just said. But, back to the real legal issue, I think one thing to recognize is that, if you think that there’s some exception that you’re getting away with, then make sure it’s founded in law. There are so many misconceptions like, for example, “Oh, what if I put my iPhone or iPod and then plug it into the speaker system? It’s my music. I purchased them all.” No, still no.
And then, “Oh, what if I play old music or just play the radio or just play this? What if it’s just for my employees?” Now, that’s actually an exception. Like, if your employees are playing for their own benefit – like, back in the kitchen or something like that, you know, at their desk and so forth – then that’s different. But, if it’s broadcast in the public – you know, in the seating area and so forth – then that’s an issue.
There’s a reason why, by the way, you walk into elevators, you know, you’ve heard of elevator music? There’s a reason for that. There’s a reason they don’t play the radio because it’s too expensive to do so. It’s just easier just to buy some elevator music and play it like that.
MATT: You always hear the joke on TV shows – it’s usually on TV shows – they play, like, an actual song and they’ll only play a few seconds of it. They’ll make the joke that they don’t have the rights to play more of it.
MATT: That’s pretty common.
MATT: Yeah, there’s a lot of rules with this.
NASIR: Yeah, very fact-specific.
MATT: A lot of specific numbers and size of your space and all this stuff so it’s pretty tricky.
MATT: We have a question that I think you’ll like as well.
NASIR: It’s all for my benefit, right?
MATT: Yeah, one of our former employees filed a frivolous lawsuit against us.
“Our attorney is reluctant from countersuing for malicious prosecution or should I just forget about it?”
So, I think they’re asking, should they countersue?
NASIR: Forget about it.
MATT: Forget about it, yeah.
NASIR: Just forget about it.
MATT: Forget about it.
NASIR: Yeah, just forget about it. I think that’s the best answer for most of these. For most of these questions, that’s probably the go-to answer – “just forget about it.”
MATT: I guess my question is, yeah, I don’t agree with you but, like, “In what situation would you actually go after them for malicious prosecution?” That’s the better question.
NASIR: I guess that is a better question. Now, the problem is with malicious prosecution – and this is, like, the primary problem of bringing this lawsuit in every case – is that, in order to file it, the case that you’re dealing with has to be over. One of the primary elements of a malicious prosecution case is that the legal action that was brought was brought without probable cause and it was dismissed in favor of the victim, okay? And so, that means that there’s no countersuit for malicious prosecution because then, if you think about it, it would be always like that. So, you have to file after the case is over. Basically, you have to win your case, right? And I think that there may be some detailed case law in this. Like, if you settle, right? That can remove your ability to file for malicious prosecution. If they withdraw their case early, right? And it’s just dismissed without prejudice or even with prejudice, right? And there was no judgment then you may have a harder time filing it. But the point is that, even at that point, you’re going to have to spend a lot of money, right?
Let’s break this question down first. First, there’s always going to be problems with malicious prosecution but one of the things that this person mentioned is “our attorney is reluctant from countersuing for malicious prosecution.” First, I think your attorney may not have communicated what malicious prosecution is to you fully. Second is that attorneys, especially litigators – and we deal with them all the time, like, literally part of our job is to manage litigation for our clients meaning managing other attorneys that prosecute or defend lawsuits for our clients – and one thing that we’ve learned is that you have to have a lot of trust in the person in the battlefield, so to speak. Once you’ve chosen that person, once you’ve vetted them, and you develop trust with them, then you get to let them make some of those strategic decisions on how to proceed. Now, that’s not to say that you should trust them fully. You should always get second opinions and that’s kind of – not to sell our services but – that’s one thing that we do very well. We keep an eye on these guys to make sure that they’re looking out. We're the first, second general on the battlefield, so to speak, just to make sure everything’s going well. But, in this case, your attorney needs to grant to do a better job informing you and communicating with you. But, most likely, even if it’s a frivolous lawsuit, very rarely does a malicious prosecution case actually come about and, even then, once you settle this case, you’re not going to want to do anything more. You’re not going to want to pay more attorneys’ fees with the risk of losing and getting involved with this. You’re just going to be glad it’s going to be over.
MATT: And that’s why I kind of asked, what do the circumstances have to be in order to bring the lawsuit? And I just can’t think of too many of them.
MATT: I mean, I guess, if it really misrepresented then that’s I guess when you would want to do it. but, for the most part, it’s not going to be worth the time or the hassle. It’s just not worth it.
NASIR: Yeah, I think that’s well said because principal will always ruin you in litigation because litigation Is hell no matter whether you’re on the winning side or losing side, you’ve already once suit-filing has been filed. And, I don’t know, you asked the question, the only times that I’ve actually personally seen malicious prosecution cases that made sense was in the news. you know, when, every once in a while, it was like such an outrageous claim and then after it was done and done, you know, some celebrity countersues – not countersues – files suits for malicious prosecution or something to that effect. But, other than that, it’s not a very common thing to do because it’s almost never worth it and, even if it is, you know, frankly, that’s one of the problems with our legal system. I’m not saying there’s a better solution, but one of the issues with our legal system is it’s very easy to file a lawsuit and, no matter what, when you’re sued against, you’re going to have to spend some money to defend and, even if you lose, unless it’s by contract or by statute, you have to pay for your own attorney’s fee. And so, even the other party loses that is.
So, in this case, this is just the nature of doing business. When you get sued, you have to chalk it up. This is the cost of doing business sometimes.
MATT: I agree. I think this was one of the better answers we’ve had for a question over our 118 episodes.
NASIR: I think this is the first time we actually answered the question, right?
MATT: Probably because there was an actual – well, a lot of law required to answer it.
NASIR: Yeah. Well, dealing with this stuff is not about the law. I mean, frankly, like I said, once you’ve been sued, you’ve already lost. So, how do you prevent it? It’s not about the law. It’s really creating an environment for which you are risk-conservative and are protected from these issues. Anyway…
That’s why I just don’t hire any employees. Then you won’t have any former employees filing frivolous lawsuits against you – unless the frivolous lawsuit is that they were an employee and they weren’t really…
MATT: Or just sue them first before they can sue you.
NASIR: Actually, that’s a great idea. All right, guys. Well, thank you so much for joining us and have a good Podcast Day. I believe today is Podcast Day, right?
MATT: Sure, why not?
NASIR: All right.
MATT: Keep it sound and keep it smart.