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Studio Owners: Ever been sued?
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Jay Levitt
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3rd April 2007
Old 3rd April 2007
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Studio Owners: Ever been sued?

I'm opening a new studio, and in a thread a few months back, several people recommended organizing as two LLCs: one to hold the real estate, and one to operate the studio. That way, if you get sued, "they" can't get at the real estate.

I talked to my business lawyer about this, and he's of the opinion that there are probably no significant liability issues in operating a studio. I have to admit that I can't come up with any reasonable ones (aside from the usual "someone trips and falls and sues everyone", in which case they'd probably sue the property owner anyway).

So my question to you all: Who are "they" and what are they suing for? Has anyone ever sued or threatened to sue your studio? Are there obvious liability scenarios I'm missing?
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3rd April 2007
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Quote:
Originally Posted by Jay Levitt View Post
Are there obvious liability scenarios I'm missing?
Client sues for "corrupted or missing" data on their (your) HD. (Biggie!!!!)
Client sues for their tapes even though they haven't finished paying yet
Client hurts themselves somehow on your property

And on and on.....

Make sure you are well protected.
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client sues you for using a tube preamp with a tube mic
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3rd April 2007
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I'm no lawyer but...

As I heard one lawyer say - You can get sued for anything! If a woman can sue McDonalds cause she spilt coffee on herself, someone will find a way.

Having said that there are numerous ways to protect all your assets under different names etc. and different tax benefits to each. I've read some books and been to seminars about the subject, some interesting stuff. If I ever go into business for myself I will be considering looking into some of it.

My thoughts are, I rather be protected and never be sued, than not be protected and get sued and loose everything. Like I said I'm no legal mind, I'm just going by what others have said and what I've read, but its food for thought.

I guess for me it comes down to Warren Buffet's two rules:

1. Don't loose money
2. Don't forget rule one
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3rd April 2007
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Originally Posted by drBill View Post
Client sues for "corrupted or missing" data on their (your) HD. (Biggie!!!!)
.
If your a moron and don't do daily backups you deserve to get sued ...
Sorry for being blunt ...
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3rd April 2007
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Quote:
Originally Posted by T_R_S View Post
If your a moron and don't do daily backups you deserve to get sued ...
What if you're not a Moron, moron, and the drive crashes while you're backing up. Never had it happen? It will.
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Quote:
Originally Posted by T_R_S View Post
If your a moron and don't do daily backups you deserve to get sued ...
Sorry for being blunt ...
Also, what about...."where's my missing vocal. I had a better vocal and it's not on my HD anymore." I hear that one all the time. People can't remember if they burned it, backed it up off line, never kept the take, it's on an alternate playlist, the other producer has it, it's on a hidden track, etc. People will sue for anything. and the more incompetant they are, the more likely they will be to sue you. I hope you're not so naive as to think a backup will keep you from being sued.
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3rd April 2007
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I agree - some people will sue everyone for everything. But those people will sue the studio property owner as well as the studio operator, so having two separate entities doesn't help there. Likewise for injuries - the property owner is ultimately liable, AIUI.

The data corruption thought is a good one - that's something that the operator might be liable for, but the property owner wouldn't be. Likewise the client suing for their tapes.. thanks, Dr. Bill.
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3rd April 2007
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Quote:
Originally Posted by T_R_S View Post
If your a moron and don't do daily backups you deserve to get sued ...
Sorry for being blunt ...
Here's another one. You DID backup properly. The producer grabs his disk and heads to prague to record an orchestra over the basics you laid down. He has only one day in Prague before needing to be back in LA, mixing for a dub that starts next week. The studio has a release date and will not give ANY more time. He gets to prague and maybe the engineer there screws up or maybe the drive just went down. AND.....his luggage with the backup drive went to Tokyo. Either way, the 6 hour session is kaput with not enough time to FTP the files over cause you're at the beach chilling and by the time you fight traffic and get back to the studio to start the FTP transfer (which of course would take HOURS) the session is over with nothing being recorded. And the composer and studio are BOTH EXTREMELY pissed. Where do YOU think the finger will point to.

Life is not so simple is it? Think about it before calling people morons.
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I have POSTED on the wall, NOT RESPONSIBLE for any backup data or machine /hardrive failure in result of your music getting lost. Im glad i do not have asshole clients

never had a issue....
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As a tape op I assisted on a session with Mick Jagger's Ex and swinging 60's babe Marianne Faithful. (long story but....) she wanted to crash at the studio on the sofa

But my job was to lock studio.

And not leave it unlocked with a sleeping 1960's celebrity on the couch..

She was a smoker.. and through my mind flashed this headline. "Recording engineer locks 1960's legend Marianne Faithful in London recording studio inferno" I kinda thought a stunt like that might get a guy off to a bad start in an already tough industry...

So I took her home to crash in my parents living room.. (how to freak your dad out! "Dad?" (half asleep in bed), 'what is it?" Can Marianne Faithful stay the night?"YOUR JOKING?!




Now read this..

GP-O won a $1.5 million lawsuit against producer Rick Rubin and his American Recordings label for injuries he sustained while trying to escape a fire at Rubin's home.[2] According to P-Orridge's attorney, David D. Stein, P-Orridge was staying at Rubin's home as a guest of Love and Rockets when the fire broke out. P-Orridge tried to escape the house by crawling through a second-story window and fell onto concrete stairs. P-Orridge suffered a broken wrist, broken ribs and a pulmonary embolism, as well as a shattered left elbow that will prevent him from playing guitar or keyboards, according to Stein. The jury found that the liability for the fire rested with Rubin and American Recordings and awarded P-Orridge $1,572,000 for his injuries.

http://en.wikipedia.org/wiki/Genesis_P-Orridge
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Quote:
Originally Posted by Jules View Post
As a tape op I assisted on a session with Mick Jagger's Ex and swinging 60's babe Marianne Faithful. (long story but....) she wanted to crash at the studio on the sofa
Poor girl must have been exhausted. Could probably have done with a Mars bar to pick her up.

As for the P-Orridge thing, the guy should have been happy to sustain all those injuries. Probably made him a better guitarist if anything. (dfegad woomanmoomin)

By the way, joeg, that tube mic/tube pre thing is either funny or really scary!! People ought to get sued for using only solid-state equipment!!
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4th April 2007
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Quote:
Originally Posted by drBill View Post
Client sues for "corrupted or missing" data on their (your) HD. (Biggie!!!!)
Client sues for their tapes even though they haven't finished paying yet
Client hurts themselves somehow on your property

And on and on.....

Make sure you are well protected.
Bill,

Since your studio is in a residential area and I'm pretty sure it's not zoned commercial, how did you find an insurance company willing to cover you under this zoning scenario? I have a similar dilemma, though we have what's known as a "cottage commercial" variance up here since it's an unincorporated section of Riverside County.

Cheers,
--
Don
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4th April 2007
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Don, PM'd ya.
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Clients or record companies could attempt to sue for all sorts of things. Now, i know that you have to show up and defend pretty much any suit, but at the same time... I guess the question is what things do people sue you for- that actually stand up in court?

One really screwy situation with Data backups is this:

A low-medium range studio (perhaps in the 20-45/hr range?) wants to back up everything to DVD, or to a secondary hard drive (hopefully provided by the client?) each night. That takes some time of course, and time is money. The clients don't want to pay for it to be done each night (either just at the hourly rate, or as a flat "backup fee"). So, they agree to either not do it, or to do it weekly instead. At some point, data gets lost. Either an intern (or owner!) made an oops, or maybe a drive went down the shitter. Now it's a bad situation. The client knows they didn't want to pay for data backup, but they want the benefits afterwards, and don't want to pay for the time to re-record stuff.

I had one situation where we were moving data from one drive to another. We were doing this because the client didn't trust us with his "beats" overnight (he was a freelance producers) or something like that (hard to remember) . The client had a cheap USB drive and we had firewire drives. Whatever the reason, we were doing a Move and not a Copy. OS X crashed, and the files were not to be found on reboot, or with Disk Doctor, etc... it sucked. Luckily it was just ONE days's work.
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Quote:
Originally Posted by drBill View Post
Here's another one. You DID backup properly. The producer grabs his disk and heads to prague to record an orchestra over the basics you laid down. He has only one day in Prague before needing to be back in LA, mixing for a dub that starts next week. The studio has a release date and will not give ANY more time. He gets to prague and maybe the engineer there screws up or maybe the drive just went down. AND.....his luggage with the backup drive went to Tokyo. Either way, the 6 hour session is kaput with not enough time to FTP the files over cause you're at the beach chilling and by the time you fight traffic and get back to the studio to start the FTP transfer (which of course would take HOURS) the session is over with nothing being recorded. And the composer and studio are BOTH EXTREMELY pissed. Where do YOU think the finger will point to.

Life is not so simple is it? Think about it before calling people morons.
A software app like Synchro Pro X only backs up the changed data so daily back ups only take about 10-15 minutes max.
It's not backed up until you have 2 back ups
DIGIDELIVERY FTP tansfer to the sever at 1000BASE/T speeds... stike

And what are doing at the beach?
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[quote=Jay Levitt;1212106]I agree - some people will sue everyone for everything. But those people will sue the studio property owner as well as the studio operator, so having two separate entities doesn't help there. Likewise for injuries - the property owner is ultimately liable, AIUI.


I disagree-it is never that simple. Generally the property owner will be liable for improper/unsafe fixtures/building not meeting code/regulations.

However, the occupier can also be liable if they knew of a fixture hazard, or created some risk themselves-obvious one being trip hazard cabling etc etc.

Regarding protection, get insurance, consider getting clients to sign exclusion clauses regarding obvious risks and having them agree for reduced rates to volutarily assume risks imposed by trip hazard cabling.

Consider setting up a trust if you own property, and the trust then holds property. You then run business in company. If you place property into trust before adverse incident, generally one cannot execute against property held in trust.

GJ
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4th April 2007
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A christian pop act threatened to sue me once because he was unhappy that I would not refund his mixing budget after I had done a mix, and two remixes.

I sent him a letter outlining exactly why he couldn't do this and how it would be beneficial for him not to. He decided to let it go and transfer the session to another studio.

He even sent me DVDs, a self address envelope, and paid for the session time to transfer it. Never heard from him since.
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I'm not a studio owner, but I've been a business owner and I've been sued.

1. Avoid the legal system at all costs. Do not sue anyone if you can avoid it, and do whatever you can to avoid being sued if you can. It can be legalized blackmail, but if you are sued and can get out early by paying off the plaintiff with a not-too-painful sum, do it. It will be way cheaper in the long run.

2. Usually the winners are the attorneys. As a plaintiff, even if you win, your legal fees or contingency agreement + taxes will take a huge chunk out of the award/settlement. As a defendant you lose. Period. You can't counter-sue for or collect your legal fees even if you win the case, except under very specific extraordinary circumstances that are very rare.

3. Protect your assests in any way you can. LLCs, foreign trusts, etc. should all be considered. Once you're served in a suit it's too late. Any attempt to shield your assests after being served is called a "fraudulent conveyence" and will be undone by the judge. (E.g. you can't give your house to your sister for $1 to prevent the plaintiff from getting it.)

4. It doesn't matter if you are in the right. I spent 150K (personally) and many hours in discovery, depositions, delivering copies of 8000 documents in a BS suit over a business deal. It took 3 years and with no end in sight we paid another big chunk of change to pay the "blackmail" to settle it.

Just my take, as someone who has been sued. Of course YLMV (Your liability may vary.)

Regards,

John
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Quote:
Originally Posted by pbell View Post
As I heard one lawyer say - You can get sued for anything! If a woman can sue McDonalds cause she spilt coffee on herself, someone will find a way.
Sorry, this is OT,

but you should read the details on that case before you judge the woman. McD's fukked up big time.
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As far as this lawsuit mania is concerned I m glad not to live in the U.S.

Pretty ridiculous whats going on there from time to time....



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5th April 2007
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Quote:
Originally Posted by Jay Levitt View Post
So my question to you all: Who are "they" and what are they suing for? Has anyone ever sued or threatened to sue your studio? Are there obvious liability scenarios I'm missing?
Speaking from experience: I think it's far more likely that you will get sued, not by a client, but by either your own business partners, your employees or outside engineers.

Getting everything in writing goes a long way to eliminating misunderstandings that can lead to lawsuits.
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6th April 2007
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Quote:
Originally Posted by joeq View Post
client sues you for using a tube preamp with a tube mic
LOL ....this is NOT funny - it happens all the time...

...
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Quote:
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As far as this lawsuit mania is concerned I m glad not to live in the U.S.

Pretty ridiculous whats going on there from time to time....
I think there are two main contributing factors to abuse of lawsuits:

1. It's illegal to beat somebody's ass if they owe you money.

2. People know this, and will act like assholes.

It's unnatural. This is now how humans were made to function. I think the world would be a much healthier place if it was legal to beat people's asses again.
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Originally Posted by Sui_City View Post
Sorry, this is OT,

but you should read the details on that case before you judge the woman. McD's fukked up big time.
Whatever!!
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Quote:
Originally Posted by pbell View Post
As I heard one lawyer say - You can get sued for anything! If a woman can sue McDonalds cause she spilt coffee on herself, someone will find a way.
Psssst.... here's what you oughta know about that McD's lawsuit...

http://www.lectlaw.com/files/cur78.htm


Derail off!!!!
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LOL

Im happy that I dont live in the U.S. . Looks like it`s full of morons.

You guys need to do stuff like:

Client- Im going to sue you!
you- Then, I will get a black ghetto dude to kill you. It will be cheaper for me that way.
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Unless the litigation involves criminal charges, it really should be considered from an economic perspective. Suing - or even defending - on principle, if the action can't be economically justified, is usually the wrong thing to do. Most commercial litigation is about money and its usually best to try and remember that, even in the emotional heat of the moment.

Litigation is expensive, disruptive, time consuming and unpredictable. While there are a few people who seem to thrive on it, for most, it's best avoided if possible.

If you are a defendant, it is advisable to strongly consider the economic benefits of settlement ---- even if you are right. In the American legal system, where everyone usually pays their own litigation costs (with exceptions for torts and some statutory claims), the cost (both time and money) of mounting a full defense (and the possibility of losing) has to be balanced against the cost of settlement -- even if you are right.

In my firm, while litigating a case completely would be of significant financial benefit to us as attorneys, we frequently advise clients not to litigate in favor of settlement or, if they are potential plaintiffs, not to sue at all -- because litigating, in these instances, doesn't make economic sense.

There are things that studio owners can do to moderate legal risk and liability. Incorporate or form an LLC or LLP to contain your business risk and protect your personal assets. If you do so, observe the required legal formalities associated with your company, LLC or LLP so that there isn't a later claim for "piercing the corporate veil". Don't treat your company bank account like your personal bank account and vice versa. Buy insurance. Use good, clear contracts. Know your legal obligations as an employer and busines owner and follow the applicable laws and rules. If you want to insulate personal assets, you should do that in concert with establishing an estate plan -- it is a pretty tricky deal. Generally, to insulate personal assets, you will need to give up control of them. There is of course some risk to that. For instance, if you make your spouse sole owner of an asset, will you still be married to him or her 10 years from now?

There isn't a magic bullet that will eliminate all possibility of a suit, but a considered approach to risk management can reduce the likelihood of one and limit the magnitude of the consequences.
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