Spanish Broadcasting System is suing Grupo Radio Centro, accusing the company of systemically poaching not only its air talent, but several executives over the past 12 months.
In a case filed in U.S. District Court in Central California, SBS alleges Radio Grupo intentionally raided a morning show DJ and the entire morning show team, plus several higher-level executives for their knowledge of the company’s plans — all after SBS blanketed the Los Angeles market with a $1 million-plus marketing campaign.
The case gets to the heart of what information the former SBS employees supposedly shared with their new employer as RBR+TVBR learns from examining the complaint.
In its 14-page complaint, SBS alleges intentional interference with contractual relations, inducement of breach of contract and unfair competition.
Ratings are at the heart of the radio competition in Los Angeles, where more than $650 million is spent on advertising annually, according to SBS and each ratings point in the L.A. market typically translates to about $6 to $10 million in revenue. “Radio stations fight for these dollars. The radio station with the highest ratings typically wins out,” it tells the court.
Any significant ratings drop can cost an owner “hundreds of thousands of dollars in potential revenue,” notes the broadcaster, adding one station’s rating’s gain comes at the expense of another station.
SBS tells the court Grupo Radio is “using the strength of the market power it wields in Mexico to compete — “unfairly” — in the U.S. and says the company may “well be in violation” of the Communications Act, which restricts alien (meaning foreign) ownership.
But its main argument is that Grupo Radio has been conducting a “sharp campaign to poach SBS employees.”
The broadcaster says the latest poachee was morning show host Martin Romero Hernandez, known as “El Raton,” which is Spanish for “the rat.” Raton had four years left on his contract at KLAX(FM) when he accepted an offer from SBS competitor Grupo Radio; the company did so knowing of Raton’s contractual obligations to SBS subsidiaries in Florida and California, alleges SBS. “GRC intentionally interfered with that contractual relationship, induced the breach of contract, and unfairly competed with SBS,” saying GRC “ambushed SBS with a pirate’s timing to exacerbate SBS’ injuries” and commercially benefit just after SBS had launched a $1.1 million “labor-intensive, multi-faceted multi-media campaign.” The Raton ad campaign included billboards, bus shelters, newspaper ads, vans, social media and on-line contests, in addition to on-air announcements.
SBS tells the court that GRC induced the entire morning team to resign with El Raton, en masse on Feb. 3, “without any advance notice,” and with the intent of “crippling SBS’s morning drive programming.”
SBS says it operates two of the Los Angeles markets most successful stations — FMs KLAX and KXOL while it characterizes KXOS owner GRC as a “relative newcomer” to the market which has been directly competing against SBS since 2009.
According to SBS, Hernandez is only the latest in a long line of employees that GRC has poached, starting with negotiating with host Ricardo Sanchez (“El Mandril”) and his manager while he remained under contract with SBS, and successfully ending his relationship with SBS. Since then, GRC has made poaching “a core tenant of its business model,” alleges SBS.
At the executive level, one of the most successful poaches was former SBS California VP Corporate Sales Bill Shadorf, who “abruptly and unexpectedly resigned from SBS” in 2015 and joined GRC “with an axe to grind,” according to the complaint.
Shadorf’s management position gave him access to proprietary and confidential aspects of SBS’s business including confidential revenue figures, sales contracts, customer lists, vendor information, future marketing strategies and SBS’s contractual agreements with critical personnel, including its on-air talent. Indeed, as the Vice President of Corporate Sales, Shadorf not only had full access to SBS’s confidential pricing policies, but played an integral part in developing these policies.
He used that information against SBS to benefit his new employer, SBS alleges; it lists 11 employees who have left SBS to work for GRC in the past 12 months; more than half are sales executives including a former director of sales.
SBS notes that since its “raiding” GRC’s ratings have increased from a 2.2 to a 2.3 in morning drive — “a monumental jump that likely resulted in a substantial revenue spike.
SBS tells the court the amount of money “in controversy” exceeds $75,000 and it is seeking actual and compensatory as well as punitive damages, plus attorneys fees on all counts at trial. The broadcaster also wants the court to permanently restrain all the named GRC employees from directly or indirectly soliciting SBS employees and from further exploiting SBS’s confidential and proprietary business information.
RBR+TVBR observation: SBS tells the court that GRC officers, directors and/or managing agents knew what was going on ahead of time and either ignored it or actually authorized the actions. That’s why, SBS alleges, it’s entitled to punitive damages.
Interesting to me is the text regarding Shadorf, alleging that he knew details of SBS employment contracts with its on-air talent, and helped GRC poach them.
“Shadorf’s detailed knowledge of both SBS’s employment contracts and the specifics of SBS’s working relationships with other individuals went with Shadorf to his new employer, GRC,” states SBS in its complaint. “Equally important, Shadorf knew which employees were not bound by written agreements, were dissatisfied with their pay and who were most susceptible to a competing offer.”
