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Piercing the corporate veil in TV Signal Piracy Cases

Posted by Steve Vondran | Aug 05, 2018 | 0 Comments

What you can expect in a Boxing Match PPV Piracy Lawsuit.  Will officers and directors of the company be held PERSONALLY LIABLE? “Piercing the Corporate Veil” 

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Introduction

In a recent opposition paper opposing counsel argued to the Court that the corporate veil does not apply in unauthorized PPV boxing broadcast.  Our firm represents many businesses, restaurants and bars accused of violating federal law in showing pay-per-view boxing matches without having the proper commercial license (which may cost several thousand dollars).  They assert that officers and directors are not protected from personal liability.  This blog discusses the main cases cited in the brief so that you are aware of the potential risks of litigating these types of cases against Plaintiffs such as Joe Hand Promotion, G&G Closed Circuit Events, andJ&J Sports Productions.

What is the “corporate veil”?

According to wikipedia:

“Piercing the corporate veil or lifting the corporate veil is a legal decision to treat the rights or duties of a corporation as the rights or liabilities of its shareholders. Usually a corporation is treated as a separate legal person, which is solely responsible for the debts it incurs and the sole beneficiary of the credit it is owed. Common law countries usually uphold this principle of separate personhood, but in exceptional situations may “pierce” or “lift” the corporate veil……In the United States, corporate veil piercing is the most litigated issue in corporate law.  Although courts are reluctant to hold an active shareholder liable for actions that are legally the responsibility of the corporation, even if the corporation has a single shareholder, they will often do so if the corporation was markedly noncompliant with corporate formalities, to prevent fraud, or to achieve equity in certain cases of undercapitalization.”

Does the corporate veil apply in TV piracy cases?

Here are the cases cited by opposing counsel which could be cited and used in your case.

  1. Joe Hand Promotions, Inc. v. Hart (Florida) – Could not find on Westlaw….

      2. Kingvision Pay-Per-View v. Olivarez (New York) – Could not find on Westlaw….

      3. J&J Sports Productions, Inc. v. Mikhael (Central District California)

In this case the California court found personal liability:

“Individual Liability

The defendants argue that, “they did not authorize any signal piracy, nor derive a benefit from it” and therefore should not be held liable in their individual capacities. Defendants' Mot. at 13 citing Declarations of David Mikhael and Kimberly Mikhael. The plaintiff submits that, “[t]o hold an individual defendant liable in an individual capacity, an added level of analysis is required.” Plaintiff's Mot. at 11. The plaintiff correctly states that it “must demonstrate that the defendant had ‘a right and ability to supervise the violations and that he had a strong financial interest in such activities.'

citing J & J Sports Productions, Inc. v. J.R. ‘Z Neighborhood Sports Grille, Inc. (D.S.C. Apr. 5, 2010).

 Here, as plaintiff points out, defendants David  Mikhael and Kimberly  Mikhael were the members of Vape Escape, LLC and defendant Kimberly  Mikhael was the registered agent for Vape Escape, LLC. …Thus, the Court finds that the individual defendants had ‘a right and ability to supervise' the violation and a strong financial interest therein.  See Plaintiff's Mot. at 11-12 citing,  e.g.,  Joe Hand Promotions, Inc. v. Rizzi, 2013 (W.D. Tenn. Dec. 3, 2013).”

4. G&G Closed Circuit Events, LLC v. Miranda (Arizona)

Miranda next argues that plaintiff has failed to allege sufficient facts to suggest that he can be sued in his individual capacity for violations of § 605 and § 553. Plaintiff's complaint alleges that  Miranda is liable for the conduct alleged therein both as an individual and as an officer of RJ Randa, Inc., “which owns and operates … Filberto's Mexican Food and Bar….” Miranda argues that the fact that he is allegedly an officer of RJ Randa, Inc., the owner and operator of the commercial entity in question, is not sufficient to establish individual liability. “[T]o establish vicarious liability of an individual shareholder [or officer] for a violation of § 553 or § 605, [a p]laintiff must show that: (1) the individual had a right and ability to supervise the infringing activities and (2) had an obvious and direct financial interest in those activities.” See  J & J Sports Productions, Inc. v. Walia, Case No. 10–5136 SC, 2011 (N.D.Cal. March 14, 2011). “[A]n individual's status as a shareholder or officer is insufficient to show that he or she had the requisite supervision authority or financial interest to warrant individual liability.”  “ The plaintiff must allege that the defendant had supervisory power over the infringing conduct itself.”  Id. And, “a plaintiff cannot merely allege that the shareholders [or officers] profit in some way from the profits of the corporation.”  Id. Plaintiff argues that it has done more than simply allege that  Miranda was an officer of RJ Randa, Inc. Plaintiff has alleged that  Miranda “is also an individual s pecifically identified on the Arizona Department of Liquor Licenses and Control license issued to Filberto's Mexican Food and Bar (ABC # 12078603). ” Plaintiff also alleges “that on December 1, 2012 …  Miranda had the right and ability to supervise the activities of Filberto's Mexican Food and Bar, which included the unlawful interception of” the Fight Program. Plaintiff further alleges that “ Miranda, as an individual specifically identified on the liquor license for Filberto's Mexican Food and Bar, had the obligation to supervise the activities of Filberto's Mexican Food and Bar ... and, among other responsibilities, had the obligation to ensure that the liquor license was not used in violation of law.” Plaintiff also alleges that “on December 1, 2012 …  Miranda specifically directed the employees of Filberto's Mexican Food and Bar to unlawfully intercept and broadcast” the Fight Program “at Filberto's Mexican Food and Bar or that the actions of the employees of Filberto's Mexican Food and Bar are directly imputed to …  Miranda by virtue of [his] acknowledged responsibility for the actions of Filberto's Mexican Food and Bar.” Plaintiff alleges that “ Miranda … as an individual specifically identified on the liquor license for Filberto's Mexican Food and Bar, had an obvious and direct financial interest in the activities of Filberto's Mexican Food and Bar, which included the unlawful interception of” the Fight Program.   And, plaintiff alleges that upon information and belief, “the unlawful broadcast of” the Fight Program, “as supervised and/or authorized by …  Miranda resulted in increased profits for Filberto's Mexican Food and Bar.” 21 Plaintiff's allegations are similar to those in  J & J Sports Productions, Inc. v. Munguia, Case No. 2:12–cv–01961–SRB (D.Ariz. July 3, 2013). There, the plaintiff alleged that defendant Herencia Corporation was the owner/operator of La Reyna Bakery and that defendant Sigifredo Munguia was the president and sole director of Herencia.    The plaintiff further alleged that the defendants had unlawfully broadcast a fight program for which the plaintiff had the exclusive distribution rights. Munguia moved to dismiss the plaintiff's claims against him personally.    The plaintiff had alleged that Munguia as the president and sole director of Herencia, had the right, ability, and “obligation to supervise the activities of La Reyna Bakery”; is responsible for all activities of La Reyna Bakery; “specifically directed the employees of La Reyna Bakery to unlawfully intercept and broadcast Plaintiff's  Program ” or is responsible for their actions; and authorized the illegal interception and exhibition of the Program for purposes of financial gain. The court found “that such allegations are sufficient to state a claim upon which relief may be granted and agree[d] with [the p]laintiff that further factual information is likely ascertainable only through discovery.” Similarly here, plaintiff's allegations are sufficient to state plausible claims against Miranda personally. While plaintiff may discover more details about  Miranda's specific duties and decisions as this case develops, plaintiff has adequately alleged that  Miranda had the right and ability to supervise the infringing activity and that he had an obvious and direct financial interest in that activity.”

See G & G Closed Circuit Events, LLC v. Miranda, No. 2:13-CV-2436-HRH, 2014  (D. Ariz. Mar. 12, 2014).

So yes, there is case law that authorizes a Plaintiff to seek to hold a defendant personally liable under the right circumstances, but check to see if they have adequately pled this in the complaint, if not it could be subject to a motion to dismiss.

Contact a PPV satellite and cable piracy defense law firm

We can help if you received a legal demand letter, harassing phone call, or notice of a lawsuit (or served a summons and complaint).  Attorneys for these companies mentioned above can be extremely aggressive and trying to deal with their experience TV signal piracy lawyers (who have filed hundreds if not thousands of these lawsuits in federal courts over the years) can be a daunting task, and potentially a HUGE MISTAKE.  Your business could be on the line and admitting to wrong doing will only empower their counsel.  Before you call them, call us for a free initial consultation.  We can be reached at (877) 276-5084.  We offer low flat rate fees for most non-litigation cases. 

About the Author

Steve Vondran

Thank you for viewing our blogs, videos and podcasts. As noted, all information on this website is Attorney Advertising. Decisions to hire an attorney should never be based on advertising alone. Any past results discussed herein do not guarantee or predict any future results. All blogs are written by Steve Vondran, Esq. unless otherwise indicated. Our firm handles a wide variety of intellectual property and entertainment law cases from music and video law, Youtube disputes, DMCA litigation, copyright infringement cases involving software licensing disputes (ex. BSA, SIIA, Siemens, Autodesk, Vero, CNC, VB Conversion and others), torrent internet file-sharing (Strike 3 and Malibu Media), California right of publicity, TV Signal Piracy, and many other types of IP, piracy, technology, and social media disputes. Call us at (877) 276-5084. AZ Bar Lic. #025911 CA. Bar Lic. #232337

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