Sometimes, even with having the best of lawyers, a lawsuit cannot be avoided. In the case of KPWR-FM’s “unique, unusual, extraordinary, and irreplaceable morning personality ‘Big Boy’”, despite an employment agreement with a detailed right of first refusal giving KPWR-FM owner Emmis a right to match with financial terms and conditions substantially similar to a third-party offer, and despite Emmis claiming that it did match the third-party offer from iHeart Media, Inc., Emmis and Big Boy are now going to court.
What happened here? Are there any take-aways for either air personalities or employers from what might be a prolonged, expensive mess of litigation for Emmis and Big Boy (at this point, iHeart Media, Inc. is not part of the legal action).
From the legal complaint, we know that up until now Emmis was paying Big Boy a minimum base salary of $1.45 million per year with a right to substantial bonuses, an automobile allowance and fringe benefits. Big Boy’s contract with Emmis ends on February 28, 2015, giving Big Boy the right to seek other employment during the final 60 days of the agreement, and giving Emmis the right to match any offer Big Boy might receive with substantially similar financial terms and conditions.
According to the court filings, iHeart Media, Inc. offered Big Boy an LA radio gig built around his brand for a three year term at a $3.5 million guaranteed base with 16% of all “net commissionable revenues generated by the station” (remember this phrase as we go through this), four weeks annual vacation, a custom featured channel on iHeart’s digital platform with revenues from that channel included in the net commissionable revenue, $1 million in annual marketing, a featured presenter at national tent-pole events, $200K for video/television projects, personal use of the iHeart private jet twice a year, and benefits given to other similarly-situated employees.
Emmis states in its court filing that it timely responded to the iHeart Media, Inc. third-party offer stating that “[Emmis] hereby agrees to match the Offer” with a three year term at the $3.5 million annual salary, four weeks annual vacation, a custom featured channel on Emmis’ digital platform, $1 million in marketing annually, a featured presenter at national tent-pole events, $200K for video/television projects, personal private jet transportation twice a year, and continuing similarly-situated employee benefits.
Also recounted in the Emmis court filing is that Emmis did not offer the 16% of net commissionable revenue from the station. Emmis argues, however, that there is no reasonable possibility that in excess of $3.5 million could be earned by Big Boy if “net commissionable revenue” is defined as Emmis calculates that number. Emmis states that the new iHeart Media, Inc. station with which Big Boy would be associated would have to earn at least $21.875 million in “net commissionable revenue” for anything in excess of $3.5 million to be paid to Big Boy.
Emmis observes that in today’s Los Angeles radio market, and using the definition of “net commissionable revenue” as Emmis understands it, such a revenue figure for a new station is not possible. Emmis claims it informed Big Boy and his attorneys that it would consider any information to the contrary in matching the offer. Rather than proffering such information showing that Big Boy could earn in excess of $3.5 million at iHeart Media, Inc. with 16% of net commissionable revenue taken into consideration, Big Boy’s attorneys simply informed Emmis that the Emmis response was treated as a “rejection” on the basis that it did not contain a provision for a payment of 16% of net commissionable revenue.
Thus, the legal fight comes down to two largely factual questions. First, what did iHeart Media, Inc. mean by its offer of “net commissionable revenue”. Second, was the Emmis offer to Big Boy without 16% of net commissionable revenue, even if Big Boy had no chance of ever increasing his earnings above the base amount, a “substantially similar” match of the financial terms and conditions in the iHeart Media, Inc. offer.
Emmis states in its legal complaint that the term “net commissionable revenue” has widely varying definitions within the broadcasting industry. Further, Emmis relies upon its written statement to Big Boy that it “hereby agrees to match the Offer”.
If this case goes to trial, it appears that the issue to be litigated will be whether Emmis matched the iHeart Media, Inc. offer “on terms that are substantially similar to the Offer when taken as a whole” (the words from Big Boy’s current employment agreement with Emmis). In reading the facts presented by Emmis in its legal complaint, it appears as if Emmis did. But that will ultimately be for the court to determine.
Emmis’ complaint asks for a court-ordered injunction restricting Big Boy from commencing employment with iHeart Media, Inc., stating that its employment agreement with Big Boy contemplates such relief. A good early indication for Emmis, assuming that Big Boy and Emmis do not figure out a way to immediately settle, will be whether the California courts order Big Boy not to commence working for iHeart Media, Inc.
There is, of course, no way that the court can directly order Big Boy to work for Emmis. The right to work or not work for any employer is one power that every employee has under our U.S. Constitution. But, if the courts find in favor of Emmis, and Big Boy does not honor the terms of his employment agreement with Emmis, the courts could award Emmis significant damages making the prospect of Big Boy not working for Emmis very expensive for Big Boy.
Every time I hear that a radio personality is involved in a court action that is somewhat of the personality’s own making, I am skeptical, thinking it is merely a ratings ploy. Indeed, for the few LA radio listeners who did not know who Big Boy was prior to today, they do now.
In reading through the legal complaint it becomes evident, however, that Big Boy, for whatever reason, really does not wish to continue to work for Emmis, or is possibly mistaken as to what his total compensation will be with iHeart Media, Inc. Either way, it may be expensive for Big Boy to break his employment agreement with Emmis as litigation costs can easily run into the hundreds of thousands of dollars.
Previously, I wrote about employees not taking lightly the signing of form employment agreements proffered to them upon accepting a new broadcast station position (“Prepare When Signing An Employment Agreement” at https://www.radioink.com/Article.asp?id=2528142 in the September 6, 2012 edition of Radio Ink). Here, the employment agreement that Big Boy had with Emmis appears to be specific to his highly-talented position and purports to protect him with the highest compensation and benefits his talents in the Los Angeles radio market would offer him. At the same time, the agreement protected Emmis, his employer, from Big Boy jumping to a competitor provided he was offered substantially similar financial compensation. Still, both Emmis and Big Boy are in court today. Even the best lawyers and the most detailed agreements sometimes cannot keep employer-employee relationships together.
The Emmis legal complaint against Big Boy was filed several days ago. As this concerns one of the nation’s preeminent radio personalities on one of Los Angeles’ leading radio stations employed by one of our industry’s top broadcasters, it is likely that we will hear much more about this case, unless Emmis and Big Boy find a way to agree. For now, the best that can be said is that the publicity surrounding this legal dispute will bring attention to both Big Boy and to KPWR-FM while in the end both will be poorer because of legal fees.