An interesting case is developing here in Ohio over whether two former radio personalities who launched a streaming online show violated their covenants not to compete with the radio station that formerly employed them. The first round has gone to the former employees, as Stark County Common Pleas Court Judge Charles E. Brown, Jr. denied the request for a preliminary injunction sought by DA Peterson, a media company that owns FM WDJQ (Q92). (I have attached a PDF of the complaint, which includes the covenant, below; Judge Brown has not yet committed his decision to writing). There has been a significant number of media reports covering this case already and it may prove to be an important dispute in the radio and television industry.
The two former employees, Patrick DeLuca and Charlotte DiFranco, had spent the last six years co-hosting a morning show on WDJQ, a contemporary-hits radio station that broadcasts to the Canton and Youngstown areas. They left the station in February when they were unable to negotiate a new contract with WDJQ. According to the former hosts’ website, DeLuca and DiFranco were the top-ranked Canton morning show radio market for key demographic groups as recently as late 2011. They then launched an online station at www.theradiosucks.com, with live morning shows three times a week.
Because Judge Brown’s decision appears to have been based on the language of the covenant, the definitions are critical to understanding his decision. The covenant defined WDJQ’s business as “the operation, promotion and marketing of commercial radio stations, print and direct mail operations, and bulk mail facilities” and defined “Competing Business” as any person or entity “carrying on business that is the same or essentially the same as the Company Business.” The covenant barred the co-hosts from, among other things, “engag[ing] in any activities the same as the Job Duties for any Competing Business.” The definition of Job Duties is fairly lengthy but it reinforces that their job concerned broadcasting governed by the FCC. According to one report, the terms of their covenant are “like many in the industry” that typically bar employees “from any on-air duties at terrestrial radio stations within 60 miles” of the radio station’s market.
Given this relatively narrow language, DeLuca and DiFranco argued that their non-compete only prohibited them from running a business that was “the same or essentially the same as a commercial radio station.” According to that media report, they argued that their online venture fell outside the language of the non-compete because it did not use the public airwaves, required no FCC license, was not regulated by the FCC, and was not subject to the 60 mile transmission radius restricting radio stations. Having just received the complaint this morning, my preliminary review leads me to conclude that the judge’s decision was solidly within his discretion under Ohio law.
I don’t pretend to be an authority on radio or television stations (although I did represent a television station in a trade secret dispute several years ago and know that they can be complicated due to the heavy regulation of those industries) but I would expect that every media company in the country will be double-checking its non-competes with its on-air talent and executives to make sure that they cover potential competition over the Internet. The Wall Street Journal is reporting today that the CW network’s decision to offer some of its programming online has rankled some of the television stations carrying that network, so online distribution will continue to be a future flashpoint for the media industry. Not surprisingly, DeLuca has just announced a three-year distribution agreement with tunein, a stream aggregation company from Palo Alto, California looking for opportunities to distribute original Internet-based content.
The takeaway? The radio station’s covenants did not contemplate or specifically include online shows. As a result, when the judge considered the covenant, he construed it against the employer and found that any ambiguity would be in favor of the former co-hosts. In that respect, this case resembles the recent Florida case, Heiderich v. Florida Equine Veterinary Svcs., Inc, which involved a covenant that failed to adequately provide for the many ways in which the employee could conceivably compete with the old employer.
In short, this case reinforces the importance of trade secret audits that would include updating agreements to make sure that they cover all potential competitive ventures as an employer’s market evolves and its competitive technology changes.