[BC] LMAs - How Far Can They Go?

[Phil Alexander]

On 28 Jan 2006 at 19:51, Larry Fuss wrote:

> > I know enough not to sign a contract that lacks a termination clause and
> liquidated damages for foreseeable defaults.
> 
> This was in '93 when LMAs were still in their infancy.  The contract was
> prepared by an attorney, but I don't recall any specific clause relating 
> to damages.

Yes, but time brokerage was an old, old concept, and from the FCC viewpoint
an LMA is a 100% time brokerage agreement where the "broker" takes all the
station's time. Or, at least that is the practical effect of it.

A true LMA was originally where another station acted as broker and was
a licensee under FCC control, but operating a station belonging to another
licensee.

Liquidated damages: In a way, that is like a pre-nupt where all the 
consequences of termination are spelled out in dollars and cents.

> > Which is why the licensee should be required to provide all necessary
> equipment for programming and transmitting; and should be required by
> contract to comply with all rules and regs.
> 
> He was required to comply with the rules, but the new equipment was
> purchased by me when the station was moved into our facility.  All 
> he had was a bunch of junk that was hardly able to keep the station on-air.

Which is the reason for due diligence.
> 
> > As licensee, inspection and rules compliance is YOUR responsibility.
> One of the two required "presence" employees should be inspecting on
> a regular, routine basis.
> 
> True, but I'm 2000 miles away.  The presence employee was, as in the case of
> most LMAs, busy playing radio and not paying attention to technical stuff.

The "presence" employees have to do inspections or arrange for same.
EAS, Towers, Local Files plus everything else that is spelled out in
the rules as licensee responsibility. Licensee responsibility cannot
be delegated to the broker.

> > Isn't it more a question of quality of legal advice rather than market
> size?
> 
> Not necessarily.  In small markets, you're often dealing with an owner who
> may not be accustomed to EVER doing anything by the rules.  The doofus 
> mentioned in my first example just walked away as soon as the LMA was 
> signed.  He even went and had the power turned off because he no longer 
> wanted it in his name.  I hurriedly arranged to have it turned back on.  
> When I reminded him that the contract said that he as the licensee was 
> responsible for the power and I was supposed to reimburse him, he said 
> "we're gonna do it my way or not at all." Since we had a pending transfer 
> application on file, I hoped we could get the transfer approved before 
> anything drastic happened.  As it turned out, that was not a great idea.  
> But if I had walked away, my other in-market competitor would probably 
> have ended up with the station.  So $4000 was probably a small price to 
> pay.

OK, but it was a function of a lousy contract and a real low life who
wouldn't cooperate, but that can happen in any market.

> > Doing due diligence BEFORE starting and having a good agreement with teeth
> in the event of default drawn by a good communications lawyer is only 
> prudent, and is what you will see in a large market. Apply the same to a
> small market and it will work the same.
> 
> Contracts are only good as long as both parties abide by them.  When one of
> the parties is a doofus, all bets are off.

Well, a doofus can work out to your advantage if it is a carefully worded
contract where after going the long way around the barn, you wind up with
his property by default and owe him next to nothing.


Phil Alexander, CSRE, AMD
Broadcast Engineering Services and Technology 
(a Div. of Advanced Parts Corporation) 
Ph. (317) 335-2065   FAX (317) 335-9037





-- 
No virus found in this outgoing message.
Checked by AVG Free Edition.
Version: 7.1.375 / Virus Database: 267.14.23/243 - Release Date: 1/27/06