The legal dispute over digital royalties between Universal Music Group and a production company representing Eminem -- and what that verdict could mean for the 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 was filed as a federal class action suit, meaning any other artist with similar claims can join in for an even larger payday.
From the complaint:
"By this lawsuit, Plaintiff seeks to compel UMG to account to and pay its other recording artists and music producers (i.e., those not directly involved in the FBT litigation) their rightful share of the licensing income paid to UMG for downloads and mastertones of the recorded music licensed by UMG to these entities."
At issue is whether digital revenues from iTunes or other retailers should be considered a sale or a license. To date, Universal and other labels have paid artists as if they were a sale, which generates artists around 12-15% or revenues. FBT Productions, which originally signed Eminem, contested that it should be handled as a license, or 50% of revenues.
After losing the first round in court, FBT won in a federal appeals court, and last month the Supreme Court declined to hear Universal's appeal of that ruling. While the label contends the ruling applies only to the language of the specific contract between it an FBT Productions, there is widespread belief that other legacy acts would start making similar claims.
"In assessing and watching the Eminem case, the original judge found for the production company and declared these were indeed licenses, and said it's a matter of law unless there's specific language in the contract to address this," Jeff Jampol, manager of the James estate, tells Billboard. "Many entertainment industry attorneys have been lobbying about this issue for years."
In other words, artists don't even need to request joining the class to participate. According to the attorney filing the complaint, David Given, of the law firm Phillips Erlewine & Given, the court must first approve the class status, and then determine precisely how to define it. Depending on the outcome of that, the plaintiffs will add a large number of artists to the class, notifying all in writing of their inclusion and give them the opportunity to opt out.
Modern contracts between labels and artists more clearly spell out how digital royalties are to be split. But contracts signed with acts before the digital age have more ambiguity. A class action suit spanning the contracts of several legacy 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 the class, but in the filing the attorneys representing the James estate "believes that there are hundreds or thousands of class members, and that those class members can be readily determined and identified through UMG's files and, if necessary, appropriate discovery."
UMG issued the following statement in response to the James suit:
"The complaint filed by the Estate of Rick James suffers from many infirmities, not the least of which is that the claims asserted are not appropriate for class treatment. We intend to vigorously defend against it."
The James estate is not the first to apply a class action strategy to the issue. The Allman Brothers sued both Universal and Sony Music Entertainment back in 2008 over a similar issue. The Sony case converted to class-action status. Last month, both sides reported reaching an agreement in principle, so that looks to be settled out of court. The Universal case remains ongoing.