The satellite radio giant is facing a nightmare lawsuit over its performance of older songs.
This means that the lawsuit will now cover pretty much anyone who owns a pre-1972 sound recording, assuming the song got played on SiriusXM’s satellite radio service after August 21, 2009. It also means that SiriusXM is facing a potential monster legal bill. The judge appears to favor the plaintiffs’ damage theory that they be awarded 100 percent of SiriusXM’s revenues attributable to pre-1972 recordings without deductions for costs.
For a company that had reported more than $4 billion in revenue in 2014, with about 10 to 15 percent attributable to pre-1972 recordings (according to prior litigation with SoundExchange), the judge’s latest decision represents a staggering amount of money when calculated across four or five years.
Judge Gutierrez previously sent shock waves across the music industry when in September 2014, he granted summary judgment to Flo & Eddie on allegations that SiriusXM had violated California laws by performing older recordings. SiriusXM later suffered a blow in a lawsuit brought by members of the RIAA and was handed another big loss in a lawsuit in New York. (There’s also a case pending in Florida.)
Many had long assumed that rights to pre-1972 sound recordings didn’t cover public performance — and as others like Pandora watch closely, SiriusXM is appealing the New York decision to the 2nd Circuit — but Judge Gutierrez isn’t waiting for any higher appellate authority.
SiriusXM attempted to argue that because Flo & Eddie had already obtained a favorable ruling on the merits, certification of a class would violate a rule of procedure. But the judge today concludes that SiriusXM consented to Flo & Eddie’s early summary judgment motion and thus waived the protections of a rule intended to ensure due process.
The judge also rejects other attempted blocks to class certification thrown by SiriusXM.
The defendant asserted that because there isn’t any federal registration scheme governing pre-1972 recordings, it is hard to determine who owns what. Additionally, the defendant suggested that some of the owners might have authorized SiriusXM to perform their recordings, and so it would be too difficult to adjudicate authorization on a class-wide basis.
The plaintiffs represented by Harvey Geller and Henry Gradstein at Gradstein & Marzano agreed there is a need for a music licensing service to identify owners of pre-1972 recordings, but pointed to SoundExchange, Evan M. Greenspan, Inc. and Music Reports, Inc. as entities with databases that could assist.
Ultimately, the judge shrugs off SiriusXM’s concerns and even suggests that the defendant has already begun altering its ways by “pursuing authorization from pre-1972 recording owners in the past few months.”
Gutierrez writes that “class members can reliably identify themselves because SiriusXM has a record of the individual pre-1972 recordings that it has performed since August 21, 2009,” that “owners of the listed recordings can easily self-identify,” and “that challenges by Sirius XM will be rare because Sirius XM itself does not own recording rights or track pre-1972 recording ownership rights.”
As for authorization, the judge believes it is “highly unlikely that SiriusXM can successfully raise” defenses that it was given an implied license on most pre-1972 recordings because it operated for years without first seeking licenses or paying royalties. At the time, SiriusXM believed the fact that no radio broadcaster was paying such royalties supported the legal conclusion that it needn’t either. Not only has SiriusXM failed in getting the judge to buy the assumption that if everyone else is doing something, it must be right. The assumption may undercut SiriusXM’s future challenges.
Here’s the full decision with an additional section on how damages might be apportioned on a class-wide basis. As the judge writes, “Flo & Eddie pursues recovery of gross revenues attributable to SiriusXM’s unauthorized performance of pre-1972 recordings and this figure can be calculated in a mechanical and reliable way, even if the Court later concludes that certain pre-1972 recordings should be excluded from the model.”