In a piece of legal news with wide implications for the music business, indie string trio Time for Three and S'More Entertainment have filed a class action lawsuit against Entertainment One regarding the music and entertainment distributor's their direct deal with SiriusXM.
Guest post by Chris Castle of Music Technology Policy
The string trio Time for Three and S’More Entertainment filed a class action yesterday (Jan 17) in New York federal district court against “Defendants Entertainment One GP LLC and Entertainment One U.S. LP, doing business as E1 Entertainment and/or Koch Entertainment LP” for a variety of claims relating to the defendant’s direct deal with SiriusXM.
The class action complaint describes the suit:
4. In violation of the Class Member Contracts, Defendants entered into secret negotiations and agreements with satellite radio provider Sirius XM Radio (“Sirius XM”), for the exploitation of Plaintiffs’ and the Class Members’ intellectual property. Defendants have systematically failed to account for any revenue, or pay any portion of the revenue generated from the exploitation of the Class Members’ Musical Works on Sirius XM under this agreement.
5. Plaintiffs bring this nationwide class action on behalf of themselves and similarly situated Class Members arising from Defendants’ failure to properly account for and pay revenues generated for the distribution of the Class Members’ Musical Works on Sirius XM and other digital satellite radio providers. Plaintiffs bring claims including for breach of contract, breach of the implied covenant of good faith and fair dealing, an accounting, and declaratory relief. Plaintiffs seek monetary damages, injunctive, and/or declaratory relief on behalf of themselves and others similarly situated against Defendants’ for their willful violation of the Agreements….
B. Defendants’ Secretly Withheld Revenues From Sirius XM in Violation of the Contracts Resulting in Substantial Damages to the Class Members
24. Pursuant to the 1995 Digital Performance Right in Sound Recordings Act, and the 1998 Digital Millennium Copyright Act, artists, songwriters, and masters holders are legally entitled to receive royalties for digital performances of Musical Works on DEMD, including on Sirius XM. In the absence of a direct contractual agreement between the digital transmission entities (e.g. Sirius XM) and a record company, these DEMD royalties are determined based on federally-approved statutory license rates. By law DEMD royalties generated pursuant to a statutory license—absent an agreement between the parties—are collected on behalf of and distributed to rights holders by the independent non-profit organization, SoundExchange, Inc. (“SoundExchange”).
25. When digital transmission providers contract directly with record companies for DEMD rights, such royalties are paid at contractually negotiated rates, and the obligation to collect, account for and pay such revenues to artists and musicians falls on the record company, instead of SoundExchange.
26. In this case, Defendants secretly negotiated and entered into an agreement for Sirius XM to distribute the Musical Works of Plaintiffs and the Class Members. Defendants had a legal obligation under the Agreements with Plaintiffs and other Class Members to properly and accurately account for and pay the revenue received by Defendants to Plaintiffs and Class Members. On information and belief, rather than fulfilling their contractual obligations, Defendants have systematically, knowingly, and intentionally withheld and failed to account for and pay for revenue generated from Sirius XM Plaintiffs and other Class Members.
27. As a result of Defendants’ conduct, the revenue that Defendants have collected from Sirius XM is never reported, and is never subject to potential remittance to Plaintiffs and the Class Members. Instead, these revenues have been wrongfully retained by Defendants outright.
28. Defendants have engaged in this conduct even though they have no contractual or legal right to do so. It is currently unknown whether there are entities other than Sirius XM from whom Defendants are collecting DEMD revenue, without reporting and paying such revenues to Plaintiffs and the Class Members.
29. Defendants are wrongfully retaining monies that are owed to Plaintiffs and the Class Members. On information and belief, Defendants could easily account for and pay the money owed to Plaintiffs and the Class Members, as required by the Agreements.