The quixotic saga involving embattled radio station licensee Ed Stolz has taken a new turn, as the Ninth Circuit Federal Appeals Court has affirmed a District Court’s decision to deny the termination of a receivership that stripped Stolz of his radio stations, placed them in a trust overseen by respected media broker Lary Patrick, and saw the stations sold in a single deal to non-secular broadcast ministry VCY America.
“This is a big loss for Stolz,” Patrick said. But, is it more symbolic than a determinative action that will allow VCY America to move forward with the purchase — an action thwarted by a Nevada Federal Bankruptcy Court?
That’s perhaps the larger question regarding which party gains control of Class A KREV-FM 92.7 in Alameda-San Francisco; Class C KFRH-FM 104.3 in North Las Vegas, Nev., and Class C KRCK-FM 97.7 in Palm Springs, Calif.
At present, KFRH is simulcasting Class B KBET-AM 790 in Las Vegas — the only station that is indisputably owned by Stolz. The licensee is Silver State Broadcasting, operating as a debtor in possession.
That status as a licensee seeking Chapter 11 reorganization is the lynchpin to the longterm fate of KREV, KFRH and KRCK. In a last-ditch attempt to prevent Patrick from selling the three FMs to VCY America for $6 million, Stolz filed for bankruptcy protection in a Nevada court. The move proved to be the right one for Stolz. In a stunning oral declaration made January 31, August B. Landis paved the way for Stolz to regain ownership of the properties. In Landis’ view, this was necessary in order to determine the total monetary value of all of his assets, so he could successfully emerged from bankruptcy.
For VCY America, it put the kibosh on a March 15, 2021 agreement to acquire KREV, KRCK and KFRH — a deal the FCC refused to approve. By February 25, 2022, an LMA ahead of closing put together between Patrick and VCY America dissolved per the Nevada court order. Paperwork was filed at the FCC to place the three stations back in Stolz’s control.
Meanwhile, in another twist tied to the placement of the stations under a receivership led by Patrick, ASCAP and those owned unpaid music royalty fees from Royce International received their money in full. Stripping Royce of his ownership of the stations was expressly tied to the need for those parties to be paid through a portion of the proceeds of their sale to VCY America.
For Stolz, a creditor’s plan of reorganization that would allow for the sale of the stations — on Stolz’s terms — was submitted to the bankruptcy court in Nevada. According to sources close to the matter, Stolz’s claims of a buyer for KREV and the willingness to sell all of its personal assets in order to retain control of the three stations are all conjecture. As of late February, Stolz reportedly still had outstanding debt of $1.089 million that must be dealt with; it was unclear if these are unsecured debts that a bankruptcy would reduce or negate a settlement. Then, there was an outstanding judgment against Stolz in San Francisco regarding a broken transmitter lease.
This leads us to the Ninth Circuit Appeals Court ruling, which Patrick believes “will be a strong lever” against Stolz in the Nevada bankruptcy proceedings. Regarding KREV, which Stolz believes can attract a pre-pandemic value of $15 million, Patrick shares that a deposition with veteran media broker Bob Mahlman of the Bronxville, N.Y.-based Mahlman Radio Brokerage Company yielded little in the way of a true possible buyer for the San Francisco FM.
The Ninth Circuit appeal was filed by the music industry coalition led by WB Music Corp. that filed its lawsuit against Stolz in the Southern California-based Federal District Court. That case was overseen by Judge Jesus Bernal. In a 20-page opinion distributed late Wednesday by the appeals court, Senior United States Circuit Judge Atsushi Wallace Tashima outlined why his court affirmed Bernal’s order denying a motion from Stolz to discharge Patrick.
Noting that Patrick had been appointed to aid in the execution of a judgment for violations
of the Copyright Act, Tashima explained that Patrick was authorized to sell the three radio stations to generate the funds needed to satisfy the judgment.
“Contending that they had satisfied the judgment by depositing certain sums with the district court, defendants moved to discharge the receiver, terminate the receivership, and enjoin the sale of the radio stations,” Tashima wrote. “The district court denied the
motion, holding that it was within its discretion to prolong the receivership in order to protect other creditors and ensure that the receiver would be paid for his services.”
After reviewing the case, the appeals court agreed with the First Circuit (Bernal’s court), declaring that even assuming Stolz satisfied the judgment, “it was within the district court’s discretion to prolong the receivership.”
Further, the Ninth Circuit held that Bernal’s court did not abuse its discretion in denying Stolz’s motion to terminate the receivership. “The district court offered valid reasons for not
terminating the receivership—protecting creditors, permitting the receiver to prepare a final accounting, ensuring that the receiver would be compensated for his time, and seeing to it
that obligations incurred during the receivership would be paid,” Tashima wrote.
Importantly, the Ninth Circuit Appeals Court panel deciding the case held that, given Stolz’s history of nonpayment, the district court acted within its broad discretion.
Given the Ninth Court ruling, attention will now turn to Nevada, and how the Bankruptcy Court judge overseeing Stolz’s reorganization effort will react.
The defendants in the matter are Stolz’s four broadcast entities as licensed by the FCC — Royce International Broadcasting Corp., Playa Del Sol Broadcasters, Silver State Broadcasting, and Golden State Broadcasting.
Stolz’s legal troubles leading to the loss, and return earlier this year, of KRCK, KREV and KFRH are tied to a 2017 court decision in district court from Bernal that found Stolz liable for infringing the copyrights of music owned by the coalition of music publishers that came together as plaintiffs. Failure to may music licensing fees was the problem; Stolz responded by dragging an independent promoter of popular music into the fray, with reports of possible pay-for-play relationships making their way across radio industry trade publications. Patrick even shared evidence that the L.A.-based promoter paid two of Stolz’s tower rent bills.
While that proved to be fodder for the press, the plaintiffs were awarded statutory damages totaling $330,000 in a March 2018 jury decision codified in May 2018 by the court.
However, in August 2018 the district court entered an amended judgment in the amount of $1,249,563.46. In addition to the amount awarded previously, the amended judgment included $864,278.75 in attorneys’ fees and $55,284.71 in costs. The Ninth Circuit affirmed this judgment in 2020.
In June 2019, after unsuccessful attempts to collect on the judgment, the music industry coalition moved for the appointment of a receiver to facilitate payment through a court-ordered divestment of KRCK, KREV and KFRH. Time was given to Stolz to come up with the funds before such a move was made; he did not, paving a path for Patrick.
The order from Bernal’s court granted Patrick fees of $7,500 per month, along with a
commission on any sale of the stations.
In September 2020, Stolz fought back, filing an ex parte application to discharge Patrick on the grounds that he was now prepared to satisfy the amended judgment plus interest. On October 9, 2020, Bernal said no, noting that Stolz had engaged in “repeated stonewalling.”
This brings Stolz, Patrick, and VCY America back to the Nevada bankruptcy court, where stonewalling is the accusation against Stolz.
How that judge acts could begin the final chapter, or at the very least the next one, in a long saga authored by a licensee determined to retain control of his radio stations — no matter the cost.
