Legal Dispute
04/13/11 3:33 pm
Rick James' Estate Files Class Action Suit Against UMG In Wake of Eminem Verdict.

April 04, 2011
By Antony Bruno

The legal dispute over digital royalties between Universal Music Group and aproduction company representing Eminem -- and what that verdict could mean forthe music industry -- just got a whole lot more complicated.

The estate of the late funkmeister Rick James has filed suit against the label,claiming it too is owed 50% of all sales from digital downloads of songs,albums and ringtones. And to make it even more complicated, the complaint wasfiled as a federal class action suit, meaning any other artist with similarclaims can join in for an even larger payday.

From the complaint:
"By this lawsuit, Plaintiff seeks to compel UMG to account to and pay itsother recording artists and music producers (i.e., those not directly involvedin the FBT litigation) their rightful share of the licensing income paid to UMGfor downloads and mastertones of the recorded music licensed by UMG to theseentities."

At issue is whether digital revenues from iTunes or other retailers should beconsidered a sale or a license. To date, Universal and other labels have paidartists as if they were a sale, which generates artists around 12-15% orrevenues. FBT Productions, which originally signed Eminem, contested that itshould be handled as a license, or 50% of revenues.

After losing the first round in court, FBT won in a federal appeals court, andlast month the Supreme Court declined to hear Universal's appeal of thatruling. While the label contends the ruling applies only to the language of thespecific contract between it an FBT Productions, there is widespread beliefthat other legacy acts would start making similar claims.

"In assessing and watching the Eminem case, the original judge found forthe production company and declared these were indeed licenses, and said it's amatter of law unless there's specific language in the contract to addressthis," Jeff Jampol, manager of the James estate, tells Billboard."Many entertainment industry attorneys have been lobbying about this issuefor years."

In other words, artists don't even need to request joining the class toparticipate. According to the attorney filing the complaint, David Given, ofthe law firm Phillips Erlewine & Given, the court must first approve theclass status, and then determine precisely how to define it. Depending on theoutcome of that, the plaintiffs will add a large number of artists to theclass, notifying all in writing of their inclusion and give them theopportunity to opt out.

Modern contracts between labels and artists more clearly spell out how digitalroyalties are to be split. But contracts signed with acts before the digitalage have more ambiguity. A class action suit spanning the contracts of severallegacy acts as opposed to just one would have a far wider impact on the issue.The class applies only to UMG artists. No other artists have yet joined theclass, but in the filing the attorneys representing the James estate "believesthat there are hundreds or thousands of class members, and that those classmembers can be readily determined and identified through UMG's files and, ifnecessary, appropriate discovery."

UMG issued the following statement in response to the James suit:
"The complaint filed by the Estate of Rick James suffers from manyinfirmities, not the least of which is that the claims asserted are notappropriate for class treatment.  We intend to vigorously defend againstit."

The James estate is not the first to apply a class action strategy to theissue. The Allman Brothers sued both Universal and Sony Music Entertainmentback in 2008 over a similar issue. The Sony case converted to class-actionstatus. Last month, both sides reported reaching an agreement in principle, sothat looks to be settled out of court. The Universal case remains ongoing.


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