"When SOCAN purchased Audiam, I believe many of us Audiam investor's saw this as a positive thing," Victory Records founder Tony Brummel, one of the Audiam investors, said in an e-mail sent to Billboard. "SOCAN is supposed to have been created by music people for music people- to collect for and pay songwriters and copyright owners. Audiam over performed, beat all forecasted numbers post purchase and now Audiam and its investors, the initial believers, are being punished for it. SOCAN's business is predicated on trust but we, obviously, cannot trust them…Unfortunately, SOCAN is punishing instead of embracing the entities that helped support a spectacular business that does great things for songwriters and copyright holders and publishers."
According to Brummel and earlier Billboard reports on Audiam, the company's investors include artists like Jason Mraz and Jimmy Buffett, and business executives from various sectors of the music industry including Tom Windish, Cliff Burnstein, Bill Silva and Tom Atencio.
"SOCAN is disappointed that its disagreement with former shareholders of Audiam has given rise to litigation," SOCAN’s chief legal officer and general counsel Andrea Kokonis said in a statement to Billboard. "This can happen while conducting business. The matter is solely of a corporate law nature and SOCAN is confident that its position will be fairly assessed and validated by the courts. In respect of the judicial process, SOCAN will not be commenting further on the matter until it has been resolved."
Beyond allegedly not making due payments for the three earnouts, the filing claims that SOCAN also didn't follow the procedure laid out in the acquisition agreement for handling disputes regarding the performance targets.
"On October 11, 2019, Jeffrey Price, as the initial Security holder Representative—and also Audiam's CEO—sent a demand for the earnouts to the defendants, setting forth in detail, the calculations for each of the three earnouts and providing the necessary supporting documents," the complaint states. "Defendants refused to pay."
Price subsequently resigned as the security holder representative in November and was replaced by Schreer, a composer, Audiam investor and co-founder and CEO of TuneSat, which monitors and collects payments for music played in television programming. Schreer didn't immediately respond to a request for comment.
On Oct. 30, MINT (a subsidiary of SOCAN) sent a letter back to Schreer claiming the income statement and earning calculations were "deficient." While MINT responded within the 20-day period laid out as part of the procedure for handling disputes in the acquisition agreement, it also says that a response is supposed to show MINT's own line-item calculations as to where it disagrees, the filing states. "To be effective, MINT must provide a detailed ‘earnout notice of disagreement’ to the securityholder representative within 20 days of MINT's receipt of the measurement period income statement and earnout calculation," the filing stated.
According to the complaint, MINT is supposedly claiming that the 20-day period had not even commenced. Meanwhile, the plaintiff has stated that no further communication was received from MINT.
The complaint noted that Audiam's revenue during the disputed payment period includes payouts from four separate Spotify settlements via lawsuits that had been filed before SOCAN acquired Audiam; and that the payout formula includes provisions for adjustment calculations for payments that occur subsequent to a period for work prior to the period.
The lawsuit seeks payment in the amount of $16 million as well as interest on that amount, legal fees and whatever "other relief" deemed just and proper.