In an age where the luxurious lives of reality housewives populate millions of televisions throughout the country, the day-to-day activities of wealthy suburban moms are well known to Americans. Stephanie Smith, a wealthy mother of five young children living in the Pacific Palisades near the luxurious Los Angeles coastline, was one such woman. One noteworthy thing set Stephanie Smith apart, however – her multi-million-dollar marijuana empire.

Smith was a commercial real estate developer and landlord who leased her properties to marijuana growers. Those growers allegedly paid her more than three times the standard rent and produced tens of thousands of weed plants. On December 13, 2017, Smith’s weed-growing warehouses became public knowledge after police raided her home and discovered the plants.

Newspapers immediately picked up the story, calling Smith a “Queenpin” and her property “a weed fortress.” Smith v. Palisades, No. B292107 2019 WL 4744765 (Cal. Ct. App. Sept. 30, 2019) at *1. Palisades News, a local community newspaper, published an article stating that Smith was “busted” for running an illegal marijuana-growing operation of a size normally associated with a “drug lord” and that Smith made millions of dollars per month from the operation. Id. Three months after the raid, Smith sued Palisades News for defamation (libel), false light, and intentional infliction of emotional distress in Smith v. Palisades News.

Continue Reading Court Strikes Alleged Marijuana Queenpin’s Defamation Claim

This article is part of a series monitoring developments with regard to California Assembly Bill 5 and its impact on the entertainment industry. See our first post here.

The Talking Heads repeat the words, “same as it ever was” in their famous song, “Once in a Lifetime.” Echoing that sentiment, we have learned that all the major studios (and some of the streaming platforms) have agreed to continue to respect the use of loan-out companies after January 1, 2020, the effective date of new California Assembly Bill 5 (AB5). Consensus in the legal community is one of relief that the status quo will remain in place and loan-out viability will continue in accordance with past custom and practice. This outcome is consistent with the position of the various guilds, which issued a rare joint pronouncement in September solidifying their stance that loan-outs will not be affected by AB5.

As a reminder, AB5 is the newly signed law that redefines the distinction between an employee and an independent contractor. With the leadership of the major studios and streamers, we are expecting that other studios and production companies will follow the same policy, and business will continue as usual. Or will be the “same as it ever was.”

The NCAA has traditionally restricted college athletes from accepting any endorsements or compensation related to their participation in college sports. But less than a month after California enacted the Fair Pay to Play Act, which will prohibit the NCAA from preventing college athletes in the state from profiting off their commercial identities starting in 2023, the NCAA’s board voted unanimously to allow students across the country to benefit from the use of their “names, images, or likenesses.”

Name, Image, and Likeness

The right to profit from the commercial use of one’s name, image, and likeness, referred to as the right of publicity, prevents others from exploiting one’s identity without consent. Arguably, the NCAA’s previous policies interfered with athletes’ rights of publicity—while the NCAA and its member schools profited from college athletes’ names, images, and likenesses, the athletes received no compensation.

Continue Reading Questions Remain After NCAA Vote Allows Student Athletes to Cash In

On July 10, 2019, the United States District Court for the Eastern District of Pennsylvania dismissed with prejudice a defamation and false light lawsuit filed by a dancer at a New Jersey Strip club against the New York Daily News, holding that the plaintiff had failed to plead actual malice with respect to her claims.

The case stemmed from a December 2017 Daily News article about the government-ordered closing of the strip club Satin Dolls, best known as a frequent filming location for a popular television series. The article noted that New Jersey state authorities had ordered the shutdown of Satin Dolls after accusing the club of engaging in illegal activity, such as alleged prostitution, lewd activity, racketeering, and extortion-related charges. The article was accompanied by a photograph of two Satin Dolls employees posing with merchandise related to the television series. One of the photographed employees, Diane LoMoro, subsequently sued the Daily News for defamation, claiming that the article falsely linked her to alleged criminal conduct; that the paper allegedly doctored the photo to make Ms. LoMoro appear “fatter, larger, uglier, blotchier, discolored, disproportionate, and grotesque”; and that the Daily News allegedly invaded Ms. LoMoro’s privacy by portraying her in a false light.

Continue Reading Put Your Hands Together for the First Amendment: Satin Dolls Dancer Loses Defamation Suit Against <em>Daily News</em>

Individuals working in the entertainment and media industries will feel the pinch in home-states like California and New York.

Last month, a federal judge dismissed a lawsuit against the Treasury Department brought by New York, Connecticut, Maryland, and New Jersey that challenged the constitutionality of the Tax Cuts and Jobs Act’s limitation on the federal deduction for state and local taxes paid. The TCJA imposed a $10,000 upper limit, known as the SALT Cap, to the amount individuals can deduct on their federal tax return for state and local taxes. The SALT Cap applies for tax years 2018 through 2025.

Residents of states with higher state individual income tax rates, such as California and New York, have felt the brunt of this change. Consequently, the industries predominantly based in these states such as entertainment and media have been particularly hit. Moreover, the SALT Cap limits both state tax and property tax deductions to $10,000 combined, compounding the issue for California residents, where real estate prices have increased dramatically. Not surprisingly, California saw the largest outflow of domestic residents of all states in 2018. New York came in at third. And in case we were unsure whether tax considerations caused the exodus, Florida, a state with no state income tax, received the most movers.

Continue Reading Federal Judge Upholds Cap on State and Local Tax Deduction; What’s Next in California’s Fight Against the TCJA?

The United States District Court for the Southern District of New York recently dismissed a claim of copyright infringement against Mic Network, Inc. over its use of a partial screenshot of a New York Post article in a subsequent publication. The screenshot featured a photograph of a man in a bar, with the caption “Why I won’t date hot women anymore” on one side and a selection of the article’s text on the other. The Court found Mic’s use of the screenshot was protected by the fair use defense.

The case arose when photographer Stephen Yang sued Mic for copyright infringement over Mic’s use of the photograph Yang licensed to the New York Post for its April 2017 article, which recounted the dating experience of a man living in New York. The article created a great deal of buzz on social media and provoked heated debate and substantial criticism because of its provocative content.

In response to this debate, Mic published its own article, “Twitter is skewering the ‘New York Post’ for a piece on why a man ‘won’t date hot women,‘” which featured the screenshot, including a portion of Yang’s photograph. Yang sued for copyright infringement over Mic’s use of his photograph. Mic responded with a motion to dismiss Yang’s claim on the grounds its use of the photograph was protected by the fair use doctrine. (As evidenced by its title, Mic’s article discussed and added to the criticism surrounding the original article.)

Continue Reading Court Deems Screenshot Fair Game for Fair Use Defense in Copyright Action

The New England Patriots recently released star receiver Antonio Brown following allegations of past misconduct, which Brown denies. Setting aside instances in which such clauses are prohibited by unions, Brown’s termination highlights two issues that should be carefully considered when drafting any morals clause – what constitutes a morals violation and timing.

How Bad Is Bad?

Assuming no prohibitions from relevant guilds, sports teams, studios, advertisers, and other employers may negotiate with talent over what conduct qualifies as grounds for termination on morals grounds. Some behaviors, such as sexual assault, criminal fraud, or acts of violence, are so clearly over the line that they are generally non-negotiable and always included. Defining exactly what additional conduct counts as “bad behavior” for this purpose is often highly contentious, however, and can involve many categories of behavior, with qualifiers relating to, among other things, actual damage to the employer. For instance, both parties can agree that an employee may be terminated for cause based on “bad behavior,” as defined in the contract. But what happens when the company/studio/employer seeks to terminate a relationship on morals grounds, but the talent disputes the truth of the allegations? To avoid uncertainty, the parties may wish to define what level of investigation or proof is required before a morals termination is triggered.

Continue Reading Lessons from Antonio Brown’s Dismissal: Don’t Fumble the Morals Clause

This Article is part of a series monitoring developments with regard to California Assembly Bill 5 and its impact on the entertainment industry.

California Governor Gavin Newsom recently signed into law Assembly Bill 5 (“AB5” or the “Bill”), which redefines the distinction between an employee and an independent contractor. AB5 is primarily targeted at gig economy companies such as Uber and Grubhub, whose workers had been classified as independent contractors up to this point. Proponents of AB5 argued that many gig economy workers worked full time but received none of the benefits commonly associated with full time employment—including overtime, minimum wage, and workers’ compensation. Consequently, AB5 was touted as providing increased benefits and rights to a growing gig economy workforce. An additional impetus for AB5 was the legislature’s desire to stem financial losses to the state as a result of worker misclassification, including the loss of tax revenues.

Continue Reading Assembly Bill 5: Guilds Issue Joint Statement Advocating for Continued Use of Loan-Outs

The Federal Trade Commission held a workshop earlier this week in Washington, D.C., to discuss possible updates to the COPPA Rule, which implements the Children’s Online Privacy Protection Act (“COPPA”). COPPA was originally enacted in 1998 and regulates the way entities collect data and personal information online from children under the age of 13. The Rule hasn’t been updated since 2013, and the intervening years have produced seismic technological advances and changes in business practices, including changes to platforms and apps hosting third-party content and marketing targeting kids, the growth of smart technology and the “Internet of Things,” educational technology, and more.

For the most part, FTC staff moderators didn’t tip their hand as to what we can expect to see in a proposed Rule revision. (One staff member was the exception, whose rapid-fire questions offered numerous counterpoints to industry positions, so much so that the audience would be forgiven for thinking they were momentarily watching oral argument at the Supreme Court.) Brief remarks from Commissioners Wilson and Phillips staked out their positions more clearly, but their individual views were so different that they too offered little assistance in predicting what a revised Rule may look like. Commissioner Wilson opened the workshop by sharing her own experience as a parent trying to navigate and supervise the games, apps and toys played by her children, and emphasized the need for regulation to keep up with the pace of technology to continue protecting children online. Commissioner Phillips also referred to his children at one point, but his remarks warned against regulation for regulation’s sake, flagged the chilling effect on content creation and diversity when businesses are saddled with greater compliance costs, and advocated a risk-based approach.

Continue Reading A Recap of the FTC’s COPPA Rule Workshop

On September 18, 2019, the Florida Third District Court of Appeal held in Hullick v. Gibraltar Private Bank & Trust Co. & Hayworth that a corporation’s board of directors’ discussions during a board meeting did not constitute defamation because the board’s intra-corporate communications were not “published” or communicated to a third party. Since the U.S. Supreme Court in Citizens United fortified the notion that corporations are people, the Florida Court of Appeal allows corporations to talk to themselves—without fear of defamation lawsuits.

Hullick v. Gibraltar Private Bank & Trust Co. & Hayworth is set against the backdrop of an allegedly well-documented $1.2 billion Ponzi scheme purportedly orchestrated by a prominent Florida lawyer (now disbarred and serving a 50-year sentence in federal prison).[1] Gibraltar Private Bank and Trust Company, one of the appellees (co-defendant below), was one of two banks where the lawyer allegedly laundered money.[2]

Continue Reading Florida Corporate Executive Escapes Defamation Liability For Statements Made In Board Meeting