Recently, I was watching a hockey game on TV with some friends. During the breaks in the action, the old familiar Jock Jams were playing on the arena’s speakers. One of the folks in the room asked whether they have to pay to use those recordings. Yes, they do: it’s a public performance, subject to the restrictions found in the Copyright Act.
The same applies to other public venues, such as restaurants and bars. Naturally, the restaurant owners aren’t out there asking the Beatles for their OK to play “Hey Jude” during dinner service. Instead, the rights are administered by several performing rights organizations (including, in the US, ASCAP and BMI). They collect fees from the venues and then distribute them to the artist or rights holders.
So what happens if a non-compliant restaurant is owned by an LLC – who’s liable for failure to pay the fees? Let’s take a look at this music copyright issue.
This question came up in the 6th Circuit Court of Appeals in BMI v. Meadowlake. Roy Barr, along with his son, Philip, are the owners of Meadowlake, LLC. Meadowlake, in turn, runs Rafters Bar & Grill in Canton, Ohio. From the court’s opinion:
Rafters offers music and dancing for its customers. Known for its taste for rock, the restaurant plays everything from Queen and Pink Floyd to ZZ Top and Lynyrd Skynyrd—sometimes turning on a recording, sometimes bringing in live performers. Less known for its taste for compliance with the copyright laws, it hosts performances of the music without getting the copyright owners’ permission.
While Roy did not directly perform the music, nor did he turn on the recordings, it was all done under his direction and control. Accordingly, the court held that he “is vicariously liable for the pervasive copyright infringement at his restaurant.” His actions met both elements of the vicarious liability test in that he had “the right and ability to supervise the infringing conduct” and had “an obvious and direct financial interest in the infringement.”
Did Roy know about the infringing conduct? It doesn’t matter:
It makes no difference that Roy claims to have known nothing about the infringing performances. A defendant’s ignorance about the infringement or the performances does not blunt vicarious liability.
Now we come to the form of ownership. Shouldn’t Roy be able to escape personal liability through the corporate shield provided by his LLC? Not according to the court:
What, finally, of the reality that Roy owns the restaurant through a limited liability company? In one sense, the form of the business makes a difference. The legal structure of a business—corporation, limited liability company, partnership, what have you—may affect whether a defendant satisfies the test for vicarious liability in the first place. Business form might affect a defendant’s right to police the infringement or his financial interest in the infringement. But this case involves none of these complications. Roy does not suggest that the structure of his business sapped his authority over, or dulled his financial interest in, the prohibited performances.
In another sense, however, the form of the business does not make a difference. Once a defendant meets the test for vicarious liability, the classification of his business does not (at least in general) exempt him from liability. It thus does not matter whether Ohio’s laws on limited liability companies would make Roy personally liable for wrongs committed by or at his restaurant. Either way, Roy profited from infringement at his restaurant while refusing to exercise his right to stop it. And so either way, Roy remains vicariously liable.
Owning your business through an LLC or corporation is often a good idea, and it can be an effective way to shield against personal liability in some circumstances. However, as this case illustrates, it’s not a license to break the law.
Owners of bars, restaurants, and any other places where the public may gather, should carefully research these music performance licensing requirements. Don’t assume that ignorance of the law is an excuse.
