10:24am PT by Eriq Gardner
Irving Azoff Song Licensing Outfit Gains Edge in Antitrust Battle With Radio Stations
Thanks to a magistrate judge's recommendation on Wednesday, a key legal battle that could determine the future of songs on the radio may be headed away from Pennsylvania in what would represent an initial victory for Irving Azoff's Global Music Rights, which is attempting to boost licensing income for Bruce Springsteen, Bruno Mars, Pharrell Williams and other superstars.
Global Music Rights is an upstart that competes with ASCAP and BMI, two performance rights organizations that, thanks to consent decrees with the U.S. government, must issue blanket licenses to radio stations upon request. GMR has a more free hand to negotiate the public performance of song compositions, at least for the time being. That's because GMR is fighting antitrust claims made by the Radio Music License Committee, which represents some 10,000 radio stations throughout the nation.
RMLC sued GMR in Pennsylvania, while GMR sued RMLC in California.
It's the contention of the radio stations that GMR is an "unlawful monopolist" demanding "supra-competitive" prices for licenses to works by John Lennon, Prince, Jon Bon Jovi and others. GMR responds that its repertory only includes 74 songwriters and that it has "a single-digit share of radio spins." In other words, GMR may have an illustrious clientele, but it doesn't believe it is a monopolist. However, if it does win, other musicians may choose to bolt ASCAP and BMI, which continues to fight the government over those consent decrees. And if GMR beats the antitrust claims, it would have the power to take its songs off of radio unless those 10,000 radio stations agreed to fork over more money.
The location where the battle will be fought between GMR and RMLC is important largely because a few years ago, an East Coast judge looked at another small performance rights organization called SESAC and issued an injunction upon a finding that there were no substitutes for a SESAC blanket license. Eventually, SESAC had to pay TV stations a $58.5 million settlement to resolve antitrust claims. Thus, RMLC sees advantage to fighting the case in Pennsylvania.
As the parties squared off over the forum, the situation became heated.
GMR offered the radio stations an interim license for rights to perform hit songs with the caveat that if Pennsylvania radio stations accepted, this couldn't be used as evidence to show that the case belonged in Pennsylvania. RMLC demanded the interim license be on "non-discriminatory terms" and asked the judge for an injunction, lest radio stations suddenly found themselves without the ability to perform songs authored by Don Henley, Eddie Vedder and Ira Gershwin, to name three more GMR clients. Fighting this demand was O'Melveny attorney Daniel Petrocelli, whose other big antitrust case at the moment is representing AT&T against the government over the Time Warner merger.
With that background comes the recommendation yesterday by U.S. Magistrate Judge Lynn Sitarski, who had to consider whether GMR had sufficient contact with Pennsylvania to establish jurisdiction over the licensing outfit.
RMLC asserted that GMR had national contacts, and that was enough for an antitrust defendant.
But Sitarski writes that "GMR’s contacts with states other than Pennsylvania cannot be aggregated in order to obtain personal jurisdiction over GMR in this forum."
The judge then points out that GMR resides in California, not Pennsylvania, and that the negotiations over a licensing agreement took place outside the Keystone State.
"GMR has no jurisdictionally significant contacts, ties, or relations with Pennsylvania," she writes. "The Amended Complaint does not allege — and the record does not contain any evidence of — a single affirmative act through which GMR purposefully directed any of its activities at the forum state, or purposefully availed itself of the privilege of conducting activities within the forum state. GMR has not invoked the benefits and protections of Pennsylvania’s laws. Accordingly, there is no need to consider the other two factors for evaluating specific personal jurisdiction — whether RMLC’s claims arise out of or relate to at least one of GMR’s activities in the forum and whether an exercise of jurisdiction over GMR would otherwise comport with fair play and substantial justice."
Sitarski later adds in her report (read here) that RMLC's assertions about the injuries experienced by the Pennsylvania radio stations aren't enough to establish contact with the state, and even if there was harm, RMLC has not demonstrated that GMR "expressly aimed" conduct at the state.
Sitarski recommends dismissing the case, which would allow the California lawsuit to proceed after a stay is lifted. The district court judge has to sign off on the recommendation, which comes as Cumulus Media, the nation's second largest radio company, filed for bankruptcy.