Legal Controversies in the Nightclub Industry

As some of us may know, the nightclub industry is prone to lawsuits, so it is important to practice legally in order to protect the longevity and image of the business. Since I am creating a business plan for a nightclub in New Orleans, I must always remind myself of the issues that could arise and educate myself to help prevent such issues. This requires a lot of research and a basic understanding of the legal language. For today’s blog, I want to share with you my findings on 3 different legal cases that are impacting the nightclub industry and provide my personal opinion on how one could protect his/her business from too much trouble in each case.

Copyright Issues

Copyright issues can occur in a “nightclub or live venue, onthe radio, on television, in commercial establishments, elevators or anywhereelse where music is publicly heard.” It is sometimes overlooked in the nightclub industry, as people may be unaware of the options that are available to them. For this particular case, we will look at how easy it was for this issue to occur at the Crocodile Rock Café in Pennsylvania.

According to an article on The Morning Call, BMI filed a lawsuit against The Crocodile Rock for playing music without a license. Joe Clark, owner of The Crocodile Rock, stated that there must be a “misunderstanding with the music licensing agency,” as his concert promoter have been paying BMI regularly. Unfortunately, these payments were only made to cover the promoter’s obligations and had nothing to do with the club itself. As a result BMI is suing for $30,000 in damages.

So what is the lesson learned here? Copyright issues are very sensitive. It should be in your best interest to discover the options that are available to you as a nightclub owner to prevent any copyright infringement. A great option is to purchase a blanket license from ASCAP, as it gives you permission to perform millions of songs that are already protected by the agency. This way, you will not only have access to the latest hits, but also the permission to play them in your venue.

Hostile Work Environment

A hostile work environment creates issues that are more common than one may think. In the nightclub industry, this can easily occur when one becomes a victim of sexual harassment, when one is under the negative influences of their peers, or even when one becomes a victim of battery and assault. To give an example, let’s analyze a lawsuit that occurred between a VIP server and Light Group, a grand nightclub operator in Las Vegas.

According to the plaintiff (server), the management at Light Group’s Jet Nightclub pressured her and other women servers to dress in sexy outfits, to use drugs, and to sleep with the VIPs in order to earn a more promising work shift. Because of this, the women were victims to sexual harassment and those who were unable to fulfill their duties were wrongfully discharged. The plaintiff also blamed the nightclub for her drug overdose, in which she received little help from the establishment. As a result, she sued the Light Group for punitive damages and the nightclub no longer exist as is.

As seen in this case, creating a hostile environment is never a safe practice, even if it brings in the highest dollars. If something were to go wrong, your liabilities would be great, especially if it involves someone’s life. One may argue that drug, sex, and alcohol are beyond our control, as it is part of many people’s nightlife enjoyment. However, I believe that some level of control could be maintained if the venue discouraged unsafe acts.

It is also important to never neglect an employee’s emotional and physical distress. As a nightclub owner, it should be in your best interest to protect and support your employees at all costs. Taking remedial action the moment an incident occurs is the best way to do this. This would not only protect the image of your business, but also the longevity of your company.

Dram Shop Rule

The Dram Shop Rule is a state law that puts a liability on establishments that sell liquor to intoxicated individuals who become injured as a result of too much alcohol consumption. Although this applies to 38 states, awareness of this law is essential when you are establishing a nightclub in an unfamiliar area. Let’s take a look at a recent case where this law was put into effect.

Club Volcano is a strip club in Birmingham, Alabama that contains a full bar, featured dancers, and a full dinner menu. According to an article on Alabama.com, an intoxicated off-duty officer had left Club Volcano and found himself in a car accident that resulted in the death of a minister. Since the Dram Shop Rule is practiced in the state of Alabama, both the officer and the club were sued for being the cause of the minister’s death. As a result, a total of over $40 million was paid in damages.

As important as it is to maintain a safe work environment, it is equally as important to make sure that your employees get the proper training to handle situations that could happen at any moment. Assuming that the officer is a regular to the venue, it is possible that the bartender’s natural reaction is to sell the officer a drink. Because of his unawareness of the harm that was about to take place, this resulted in a lawsuit that fell almost entirely on the club. Although this is something that is difficult to control, there are options that could help prevent such acts from occurring. Invest in services such as the Hospitality Insurance Agency that would help protect your nightclub from the Dram Shop Rule by educating and training your bartenders to become more responsible.