We paid the judgment in full on November 9, 2020. The continued effort to sell my radio stations is a fraud upon the court, and tantamount to extortion.
-Ed Stolz, June 17, 2021
Embattled Radio Station owner Edward R. Stolz II has now filed a Writ of Mandamus in the Ninth Circuit, alleging a Fraud Upon the Court. Stolz's corporation Royce International Media Inc. owns KREV-FM in San Francisco, KFRH-FM in Las Vegas, and KRCK in Palm Springs, which stations were the subject of a copyright infringement lawsuit. The Writ seeks to immediately enjoin the imminent sale of the radio stations, which could occur "any day".
According to the Writ, filed June 16, 2021, Court-appointed receiver Larry Patrick conspired with Stolz' own attorney to withhold release of payment to the Judgment Creditors. This, so as to create a false pretext for the forced sale of the stations. Patrick is awaiting only FCC approval to sell the stations at "fire sale" prices, despite Stolz having "fully satisfied the underlying judgment - not once, but twice, and within days, again a third time."
The epic court battle started in 2016 when the American Society of Composers Authors and Publishers ("ASCAP") led a group of music publishers in a lawsuit against Stolz and his business entities, alleging copyright infringement. As a so-called "Performing Rights Organization", ASCAP charges radios stations a license fee equal to 1.7% of the station's gross revenue in exchange for the public performance rights to their vast catalog of music titles.
ASCAP alleged that Stolz simply refused to obtain any license. But according to the Writ, the dispute with ASCAP was a factual dispute about the gross revenue of the stations, and not an unwillingness to pay. Somehow, the factual dispute got recast as a legal dispute as to whether or not ASCAP's fee was "reasonable". It turns out that's a very important difference, because it cost Ed Stolz his right to a jury trial. You see, factual disputes are tried to a jury, while legal disputes are decided by the judge at a proceeding called a "Summary Judgment".
In July 2017, Stolz and his companies were found liable for copyright infringement at a Summary Judgment. In a future article, we will dig deep into the mystery of how this factual dispute turned into a legal dispute, and liability was found by the judge before the matter ever made it to a jury.
But for now, let's assume the judgment of 11 counts of willful copyright infringement was appropriate. By July 2018, after a jury trial (on the issue of "willfulness") and after attorney fees and costs and interest was added on, the award was over $1 million - $1,301,523.16 to be exact.
That's a lot of money, but it shouldn't be the total devastation now threatened. After all, Stolz' 3 FM Radio Stations are valued at over $30 million, according to veteran media property broker Doyle Hadden, who testified in the court proceedings. Stolz set about to sell one of the stations to pay off the judgment. But he wasn't able to do so right away. Courts are well-equipped for such situations, as interest payments are incorporated into judgments.
By July 2020, the judgment still had not been paid, and federal judge Jesus Bernal (U.S. District Court, Central District of California) appointed W. Lawrence "Larry" Patrick as a Receiver. For the uninitiated, a receivership is a "last resort" equitable remedy, when the Court seizes ownership control of property, first to preserve and maintain the value of the property, then possibly to sell it if the Judgment Debtor is still unable to pay the debt.
The Court Order appointing the Receiver authorized Larry Patrick to take control of the 3 named FM radio stations, and to "solicit offers for the sale of Defendants’ Radio Stations’ assets." However, that appointment order did not give Mr. Patrick control of Ed' Stolz's business entities.
Ultimately, Ed Stolz was able to pay the debt. In August 2020, Stolz managed to come up with enough money, and offered it to ASCAP. According to the Writ however, ASCAP refused to accept the money.
Stolz Slammed in Sleazy Articles
Articles began appearing in the trades, such as this September 23, 2020 article on Radio Insight: "Ed Stolz Avoids Jail; Makes Last Ditch Attempt To Retain Stations". Stolz complains now that nobody from any of the trade publications contacted him or his attorneys for his side of the story. The other side of the story surely would include the unusual fact the Court Order appointing Larry Patrick as receiver mandates that Patrick be paid a hefty broker's fee for the sale of the stations. This Writ argues this is a conflict of interest.
Jail time was at issue because Judge Bernal was threatening to (and ultimately did) find Stolz in contempt for refusing to cooperate with post-judgment discovery matters. Stolz believes that he cooperated fully with all the discovery requests, which were vague to begin with, and ultimately pointless. Post-judgment discovery is only needed when the Judgment Debtor cannot come up with the money. While it did take almost 2 years, Ed Stolz did come up with enough money to pay the entire judgment.
But listen to how the Radio Insight article spins it:
California U.S. District Judge Jesus G. Bernal has granted receiver/broker Larry Patrick permission to accept an all-cash offer made for the stations and to work “expeditiously with an aim to close the transaction before the close of the calendar year.” Despite that offer, Stolz is arguing that if he paid the money owed, the stations should be returned to him.
Of course Stolz was arguing that if he paid the money owed, the stations should be returned to him. Why would't they? It's certainly not because of any known law. As argued persuasively in the Writ, all previous law holds that when a Judgement Debtor satisfies the judgment, a receivership ends, and the property is returned.
As it turns out, the "all cash offer" for the three radio stations was a mere $ 6 million, made by Christian nonprofit broadcaster VCY America Inc., nowhere near the $30 million they are worth. And even at that price (less than 1/5 of market), $6 million is still more than 3 times the amount of the judgment. Frankly, to this author, no part of this story makes sense, except under the type of conspiracy alleged in the Writ of Mandamus. The Radio Insight article continues:
Both Patrick and the music companies have argued against Stolz’ latest gambit. The receivership attorneys stated that Stolz’s willingness to now pay goes against previous filings stating he did not have the money to pay back the money owed. The ASCAP led consortium believed the new filing was a ploy to interfere in the conclusion of the case and ask the court to demand explanation for his previous false claims of compliance in order to avoid further jailings for contempt of court.
So Stolz finally coming up with the money, and offering to pay the judgment is a "gambit", and is a "ploy to interfere in the conclusion of the case", i.e. to interfere with Larry Patrick's plan to net a huge commission by selling over $30 million worth of Radio Station assets for $6 million, all to pay a judgment under $2 million, which Stolz was willing and able to pay anyway, without having to sell the stations. Does this make sense to you? Me neither.
In the world of Radio Insight, Stolz is perpetrating a "ploy" and a "gambit" by offering to pay the judgment, while it's perfectly OK for ASCAP to refuse to take the money, and Larry Patrick to sell the radio stations for pennies on the dollar at a time when it is not necessary to sell them at all. Hmmmmmm......
ASCAP, Larry Patrick and the Court Refuse to Take The Money
At a subsequent court hearing, an "in camera review", Stolz did indeed attempt to explain why it took time to come up with over a million dollars, but as argued in the Writ, he was not allowed to participate. Judge Bernal authorized Receiver Larry Patrick to accept the offer to purchase the stations. The Writ makes the legal argument that the purpose of a receivership is to satisfy the judgment, and that this case - allowing a receivership to continue after the judgment debtor is able to to pay - is unprecedented.
Stolz and his then-attorney Dariush Adli (Adli Law Group, Los Angeles) were forced to petition the court for permission to deposit the judgment money with the registry of the Court. Judge Bernal granted the request, and:
On November 9, 2020, Ed Stolz deposited $1,301,523.16 in the registry of the District Court, the full amount of the judgment, down to the penny.
So that ended the case right? Wrong. Wait, it gets worse.
Instead of that money being released immediately after November 9, 2020, and given to the judgment creditors, it sat there. Attorney Dr. Adli refused to release it, despite Ed Stolz repeated demands that it be released, and that ASCAP enter a "satisfaction of judgment", which is what the law requires.
Larry Patrick Agrees to Sell Stations 7 Weeks After Stolz Paid the Money
So, seven weeks later, on December 28, 2020, Larry Patrick entered an Asset Purchase Agreement with VCY America to sell the stations for $6 million - pennies on the dollar. Then, on January 13, 2021, Judge Bernal made another judgment against the Defendants, tacking on another $384,124.20 in attorney fees. Stolz wasted no time in paying that one in full, as he deposited another $384,150.00 into the Court registry on February 2, 2021.
It what appears to this author (a legal expert) to be fraud, Larry Patrick signed the Asset Purchase Agreement as "W. Lawrence Patrick, solely in his capacity as court-appointed receiver for Silver State Broadcasting LLC, Golden State Broadcasting LLC, and Major Market Radio LLC." Recall that the appointment order states that Patrick is receiver over the 3 FM stations only, not the business entities. Silver State Broadcasting LLC owns an AM Radio Station K-BET (AM) in Las Vegas, and undisputedly not subject to the receivership.
In any event, since Stolz paid the judgment, the case would be over, right? Now it's over, right? Nope, it gets even worse.
Larry Patrick's Sweetheart Deal to VCY America Inc.
On March 15, 2021, Receiver Larry Patrick entered into a "Local Marketing Agreement" ("LMA") with VCY America to operate all 3 FM radio stations for a mere $5,000 per month. The document refers to Ed Stolz and his business entities as the "Prior Owners", despite them having fully paid the the operative First Amended Judgment on November 9, 2020, and then fully paid the operative Second Amended Judgment on February 2, 2021.
Just as with the Asset Purchase Agreement, Mr. Patrick entered the LMA purporting to be the Receiver over the business entities, which is simply false.
To document why $5,000 / month is such a suspiciously-low price to monetize 3 FM stations , the Writ first notes that $5,000 for 3 stations is an average of $1,667 per station, then compares this LMA to a comparable LMA for San Francisco radio stations:
LMAs for Radio Stations in the San Francisco Bay Area, should easily fetch twenty times that amount, and reasonably forty-eight times that amount.
As a representative example, Petitioners request judicial notice of a comparable
LMA between TDC Communications as licensee, and Bonneville International
Corporation as programmer. Executed in 2017, this LMA grants programming rights for
four FM radio stations in the San Francisco bay area – KMVQ-FM, KOIT-FM, KUFXFM
and KBLX_FM (“Comp LMA”). 2 A true and correct copy of the Comp LMA is
attached hereto as EXHIBIT “C,” pp. 35-69.
After doing the math, the Writ explains that:
The Comp LMA charges over $80,000 per station, per month. That is over 48 times as expensive as the charge to VCY America for the LMA on Ed Stolz' radio stations. 48 times!
Dear reader, it should be plain to see what is going on here. Obviously it is not reasonable to get 24/7 programming rights to a fully-loaded FM Radio Station for $1,667 per month. A station like that in a market like San Francisco should easily bring in $200,000 per month in advertising revenue, and likely a lot more.
An LMA agreement is like rent. As with any rental agreement, there is some relationship between the value of the asset vs. the rental price. Even if the $ 6 million price tag for 3 Radio Stations was close to fair (it isn't), it would still take 100 years to pay off $ 6 million at $5,000 per month, not counting interest. For the fair price of $30 million, it would take 500 years to pay for the assets. Obviously something is terribly wrong here.
For heaven's sake, you can't even rent an apartment in San Francisco for $1,667 per month. An FM Radio Station ?!?!!?
The Writ seeks to immediately enjoin (i.e. prohibit) the sale of the stations, pending Stolz paying off yet another, Third Judgment, requiring another $103,000 in attorney fees to be paid. According to the June 2, 2021 Order of the District Court, the receivership will remain open and the radio stations in jeopardy of sale until Larry Patrick submits his final receiver bills, and then the parties litigate whether those are good, and then finally those receiver bills are paid. According to the Writ, no court has ever held that before. All prior cases find that if the Judgement Debtor pays the judgment in full, the receivership ends.
Stolz Contemplates Lawsuit Against Receiver Patrick and Attorney Adli
Ed Stolz informs this author that he is not stopping with the Writ. Stolz is contemplating filing his own lawsuit, because he believes that the Receiver Larry Patrick breached his fiduciary duty by offering out the radio stations on a sweetheart deal, and that he conspired with Stolz' (now-former) attorney Dariush Adli to prevent the judgment money from being released, thus forming a pretext to sell the radio stations, and offer the LMA in the meantime.
The Writ of Mandamus was denied by the Ninth Circuit Court of Appeal, but not on the merits. The Court simply found that Defendants had not exhausted their other legal remedies.
On September 7, 2021, Ed Stolz and his companies filed their opening brief in an appeal to the Ninth Circuit. The appeal asks the Court to find that the underlying judgment was fully satisfied in November 2020, and therefore all subsequent actions - including the Second and Third Judgments, the Asset Purchase Agreement and the LMA - are null and void.
Dariush Adli, Larry Patrick and ASCAP lead attorney Jackson Wagener were contacted, but declined to comment on this article. The door at PMJMP remains open for anyone named or interested in this story to contact the author for comment.
Alexander C. Baker, J.D.
alex@pmjmp.org
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