Not known if company will appeal the decision.
A New York State Supreme Court judge has denied a motion filed by Entercom Communications to dismiss a suit brought against the broadcaster by Eliot Spitzer, clearing the way for the New York State Attorney General's payola case to move forward.
In a 25-page Memorandum Decision obtained by Billboard.biz, Judge Ira Gammerman knocked down all of Entercom's arguments for dismissal. The decision, which comes six months after Entercom's filing, allows Spitzer's first pay-for-play complaint brought against a radio company for fraud and deceptive business practices to proceed to the discovery phase.
Entercom has 20 days to respond to the complaint. It was not immediately known whether the company planned to appeal the decision.
In its motion for dismissal, Entercom cited New York law stating that compliance with federal law is a "complete defense" against state consumer-protection laws. Entercom said it complied fully with federal law in disclosing when it accepted payment for airplay and that Spitzer has no authority to enforce federal payola laws. But the judge said that doesn't preclude the attorney general from enforcing consumer protection statutes that prohibit deceptive business practices.
Entercom also argued that Spitzer's case was "legally flawed" because it collapsed deception and injury into one claim. But the judge noted that section 349 of General Business Law doesn't require the AG to show that consumers have been injured before seeking relief. "My conclusion [is] that the practices here at issue are deceptive within the scope of section 349," the judge wrote.
Among other charges, Spitzer alleges that Entercom's "CD Preview" is materially deceptive -- even though the overnight paid spins program disclosed on-air that record companies were paying for play. But the judge drew a distinction between two types of listeners: the traditional listener or consumer (who was informed) and monitoring services such as Nielsen BDS, which "listen" for the song's inaudible electronic fingerprint to compile airplay charts.
Since there was no disclosure to this second type of listener, Entercom helped generate misleading chart information to the detriment of consumers, the judge concluded. "The CD Programs appear to have been designed primarily for the purpose of using the monitoring services and charting companies as a conduit to disseminate misleading information," the decision states. "Such conduct is actionable under section 349."
Filed in March, Spitzer's lawsuit brought to light a mountain of Entercom e-mails, which he says show that the company has "repeatedly engaged in a deceptive scheme" of choosing songs for airplay based on payments or non-cash consideration from labels and independent promoters without disclosure to the public and has done so with the "knowledge and encouragement" of its "corporate leadership."
At the time of Spitzer's filing, Entercom said it was confident that a court would "fully and fairly" resolve the claims of payola leveled against it.
Since Spitzer's sweeping payola probe began two years ago, all four major-label groups have agreed to multi-million dollar settlements and reforms that dramatically alter how they interact with radio stations.
Spitzer's office is pursuing settlements with seven radio companies, including Clear Channel, CBS Radio, Cox Radio and Emmis Communications.