Marketplace Report: CBS v. Stern and Sirius

CBS has slapped a lawsuit on its former radio personality Howard Stern and his new employer, Sirius Satellite Radio. CBS says Stern misused its airtime to promote his new show. Janet Babin of Marketplace discusses the details of the suit with Madeleine Brand.

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MADELEINE BRAND, host:

Back now with DAY TO DAY. Howard Stern is facing a new legal battle, and this time, it has nothing to do with nasty language or inappropriate material. The shock jock is being sued by his former employer, CBS, for fraud and breach of contract. CBS is seeking millions of dollars in damages from Stern and his new employer, Sirius Satellite Radio. And Marketplace's Janet Babin is here. Janet, this is a 46-page complaint. What is CBS accusing Stern and Sirius of doing?

JANET BABIN reporting:

Well essentially, Madeleine, it was back in October 2004 that Stern announced that he had signed this five-year deal with Sirius. But if you remember, he spent the next 22 months on the air doing his show on CBS before he actually left, and he spent a lot of that air time raving about his new gig at Sirius.

Now, CBS is charging Stern with misappropriating millions of dollars worth of that radio airtime for his own financial benefit.

BRAND: Twenty-two months you say, why would CBS wait so long before filing this lawsuit?

BABIN: Yeah, there are a number of theories about that. According to the lawsuit, Stern and his agent received 34 million Sirius shares in January, because at that point, they managed to get a targeted number of people signed on to the service. So that's proof that Sirius is doing quite well because of Stern. Also, the ratings clearly now showing that CBS radio stations in all the major markets have lost, and they're losing advertising dollars as well.

Ira Shepard is a broadcast and labor attorney in Washington D.C. with Schmeltzer, Aptaker, and Shepard.

Mr. IRA SHEPARD (Attorney, Schmeltzer, Aptaker & Shepard): They're well within their statute of limitations. They were probably best advised to wait and see if they were damaged. There's no sense in filing a lawsuit if you don't have any damages.

BABIN: So, CBS could be biding it's time, could've just been biding its time there.

BRAND: But, I understand Stern doesn't see it that way. He says that CBS could have pulled him off the air at any time.

BABIN: Yes, that's right, and there is some legal precedent here for both arguments. According Clyde Vanel. He's an intellectual property attorney in New York, and he also deals with entertainment. He says that, under New York state law, there's an argument that can be made about fiduciary duty. Apparently, in New York State, if you're an employee, some case law says you have an obligation to act in the best interest of your employer. So, CBS could say that Howard Stern breached his fiduciary duty by chatting up Sirius at the company's expense.

But Vanel says there is a caveat to that argument.

Mr. CLYDE VANEL (Attorney): If a person, an employee, generally speaking, engages in things, and the employer directs, supervises, or kind of proves a certain type of behavior, right, that's contrary to what's generally seen as a fiduciary duty, then guess what? They have no duty. So, in response, Stern's attornies can say hey, the company acquiesced. They allowed it to happen. They didn't do anything.

BABIN: Stern calls the lawsuits a personal vendetta. He's got 20 days to respond. Coming up later today on MARKETPLACE, math and science teachers, where are you?

BRAND: Janet Babin of public radio's daily business show MARKETPLACE. And MARKETPLACE is produced by American Public Media. Thank you, Janet.

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