Pandora 2016 Annual Report Download - page 104

additional installment payments of $7.5 million each. The first was paid in 2015, and the remaining three installments will be
paid on or before April 1, 2016, July 1, 2016 and October 1, 2016.
On October 2, 2014, Flo & Eddie Inc. filed a class action suit against Pandora Media Inc. in the federal district court for
the Central District of California. The complaint alleges misappropriation and conversion in connection with the public
performance of sound recordings recorded prior to February 15, 1972. On December 19, 2014, Pandora filed a motion to strike
the complaint pursuant to California’s Anti-Strategic Lawsuit Against Public Participation (“Anti-SLAPP”) statute. This motion
was denied, and we have appealed the ruling to the Ninth Circuit Court of Appeals. As a result, the district court litigation has
been stayed pending the Ninth Circuit's review.
On September 14, 2015, Arthur and Barbara Sheridan, et al filed a class action suit against Pandora Media, Inc. in the
federal district court for the Northern District of California. The complaint alleges common law misappropriation, unfair
competition, conversion, unjust enrichment and violation of California rights of publicity arising from allegations that we owe
royalties for the public performance of sound recordings recorded prior to February 15, 1972. On October 28, 2015, the Court
granted the parties’ stipulation to stay the district court action pending the Ninth Circuit’s review of Pandora’s appeal in Flo &
Eddie et al. v. Pandora Media, Inc., which involves similar allegations.
On September 16, 2015, Arthur and Barbara Sheridan, et al filed a second class action suit against Pandora Media, Inc. in
the federal district court for the Southern District of New York. The complaint alleges common law copyright infringement,
violation of New York right of publicity, unfair competition and unjust enrichment arising from allegations that we owe
royalties for the public performance of sound recordings recorded prior to February 15, 1972. On October 28, 2015 the Court
granted the parties’ stipulation to stay the district court action pending the Second Circuit’s review of Sirius XM’s appeal in the
Flo & Eddie et al. v. Sirius XM matter, which involves similar allegations.
On October 17, 2015, Arthur and Barbara Sheridan, et al filed a third class action suit against us in the federal district
court for the Northern District of Illinois (“Third Class Action Suit”). The complaint alleges common law copyright
infringement, violation of the Illinois Uniform Deceptive Trade Practices Act, conversion, and unjust enrichment arising from
allegations that we owe royalties for the public performance of sound recordings recorded prior to February 15, 1972. On
December 29, 2015, Pandora filed a motion to dismiss and motion to stay the case pending the Second Circuit’s decision. The
motion to stay was denied, and the motion to dismiss remains pending.
On October 19, 2015, Arthur and Barbara Sheridan, et al filed a fourth class action suit against us in the federal district
court for the District of New Jersey (“Fourth Class Action Suit”). The complaint alleges common law copyright infringement,
unfair competition and unjust enrichment arising from allegations that we owe royalties for the public performance of sound
recordings recorded prior to February 15, 1972. Pandora’s response to the complaint was due on December 29, 2015. On
December 29, 2015, Pandora filed a motion to dismiss and motion to stay the case pending the Second Circuit’s decision. Both
motions remain pending.
On February 8, 2016, Ponderosa Twins Plus One et al filed a class action suit against Pandora Media, Inc. in the federal
district court for the Southern District of New York. The complaint alleges common law copyright infringement,
misappropriation, unfair competition and unjust enrichment arising from allegations that we owe royalties for the public
performance of sound recordings recorded prior to February 15, 1972. We are currently preparing our response to these
allegations.
The outcome of any litigation is inherently uncertain. Except as noted above, including with respect to the $90 million
settlement for UMG Recordings, Inc. et al v. Pandora Media Inc. in the Supreme Court of the State of New York, we do not
believe it is probable that the final outcome of the matters discussed above will, individually or in the aggregate, have a material
adverse effect on our business, financial position, results of operations or cash flows; however, in light of the uncertainties
involved in such matters, there can be no assurance that the outcome of each case or the costs of litigation, regardless of
outcome, will not have a material adverse effect on our business. In particular, rate court proceedings could take years to
complete, could be very costly and may result in current and past royalty rates that are materially less favorable than rates we
currently pay or have paid in the past.
Indemnification Agreements, Guarantees and Contingencies
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Notes to Consolidated Financial Statements - Continued
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