You should read the article with Heather Nelson, an entertainment lawyer, in the new issue of STASH.
She gives some great advice on music and entertainment law.
To sum it up, yes an artist can be sued for not having the proper paperwork and permissions from the record label or the copyright owner of the song. There have been reports of some clubs across the country getting sued for playing Michael Jackson music by whatever record label that owns Michael Jackson's music. But of course these are major cases, and if a local artist used an instrumental from a major label artist and the song was played in the club.. it would be really low on the radar.