Pro Music Rights, LLC v. Apple, Inc.
| Decision Date | 16 December 2020 |
| Docket Number | No. 3:20-cv-00309 (JAM),3:20-cv-00309 (JAM) |
| Court | U.S. District Court — District of Connecticut |
| Parties | PRO MUSIC RIGHTS, LLC, Plaintiff, v. APPLE, INC. et al., Defendants. |
Plaintiff Pro Music Rights, LLC ("PMR") has filed this antitrust lawsuit against more than two dozen music industry defendants including major music streaming providers and organizations that negotiate musical performance (or "play") licenses for radio and television providers and wineries. The complaint alleges scores of violations of the Sherman Act, the Connecticut Antitrust Act, and the Connecticut Unfair Trade Practices Act. Twelve of the defendants now move to dismiss for failure to state a claim upon which relief can be granted. Because I agree that PMR's complaint does not contain factual allegations that plausibly state a claim, I will grant the motion to dismiss.
PMR initially named 25 defendants, although eight of the initial defendants have been voluntarily dismissed with prejudice and others have yet to be served. See Docs. #130 at 1; #147 at 10 n.2; #172. The remaining defendants include the following eight "streaming defendants":
Doc. # 1 at 32 (¶ 140). In addition, there are four "group" defendants that PMR labels "Cartel Coordinators":
Id. at 20-23, 32 (¶¶ 66-67, 70-71, 77, 81-82, 142).
The following facts are set forth in the light most favorable to plaintiff PMR as the non-moving party. PMR is a performance rights organization ("PRO"), which licenses performers' musical works, charges buyers a periodic fee for the license to publicly perform the music in its library, and passes along the royalties to the performers that own the copyright to the music. Id. at 4 (¶ 1). PMR has developed a sizable library of works to license, but none of the defendants—who together "have complete control of the buyers' market"—have purchased PMR's licensed works or even negotiated with it in good faith. Id. at 5 (¶¶ 2-3). According to PMR, this is due to "Defendants' conspiracy and anticompetitive agreement," which constitutes "an illegal monopsony." Id. at 5 (¶ 4).
PMR alleges a longstanding "sell-side" setup: the two largest PROs—the American Society of Composers, Authors, and Publishers ("ASCAP") and Broadcast Music, Inc. ("BMI")—are subject to consent decrees with the Department of Justice ("DOJ") and rate-setting agreements, all of which are highly favorable to the defendants by allowing them to securelicenses for low prices. Id. at 7-10 (¶¶ 10-11). "The consent decrees force a contrived and restrictive licensing system that produces below-market rates and imposes a court-administered rate-setting process in the rate court that is unresponsive to market forces and unable to consider all relevant data." Id. at 35 (¶ 157).
To maintain this favorable status quo and "two-stop shopping," defendants have used a variety of aggressive tactics against PMR and two other relatively new PROs—Global Music Rights, LLC ("GMR") and SESAC, LLC—including refusal to negotiate with them or acknowledge them as legitimate sellers, agreeing to boycott PMR, disseminating strategic propaganda, supporting the existing consent decrees through comments to DOJ and other tactics, engaging in outright copyright infringement, and generally trying to force PMR to "giv[e] up or shut[] down." Id. at 6-11 (¶¶ 6, 9, 10, 12, 16, 17). The defendants purchase licenses from GMR and SESAC because they have "must have" catalogs, although some of the defendants have filed antitrust lawsuits against those two PROs. See, e.g., id. at 15, 55 (¶¶ 34, 252-53).
PMR alleges defendants "belong to a web of different trade associations and participate in various meetings, forums, conferences, private meetings and industry conventions, all of which provide forums at which they can collude to formulate their anticompetitive agreements" and that defendants have "teleconference and email discussions ... discussing, refining and entering into the anticompetitive agreement." Id. at 66-67 (¶¶ 299, 302). PMR also lists many music industry events held over the years at which "representative[s] and executives of the Cartel members met, or had the opportunity to meet, in person ... where they discussed the Cartel's anticompetitive agreement and refusal to deal with emerging PROs, including, in certain instances, PMR." Id. at 67 (¶ 302).
In addition to the trade associations that are "group" defendants, DiMa, TVMLC, and WineAmerica in turn are members of the Music Innovation Consumers ("MIC") Coalition, which has about 15 members who provide information about licensing laws and issue "propaganda" about PROs, sometimes using the same language as other defendants in statements criticizing PROs that are not covered by a consent decree. Id. at 59, 61-63 (¶¶ 265-66, 275-76, 278, 282-83). In a phone call with PMR in December 2019, NRBMLC stated that its discussion was not a negotiation and asked whether PMR had entered into other licensing agreements with other unspecified "Cartel" members. Id. at 66 (¶ 298).
PMR alleges that due to defendants' tactics, it has not been able to sell defendants its licenses at an acceptable price even though PMR estimates that it controls 7.4 percent of the market for public performance rights, behind only ASCAP and BMI. Id. at 11, 13 (¶¶ 16-17, 24). This is against defendants' self-interest, because defendants are foregoing an opportunity to have the exclusive license to PMR's catalog, which may contain hit songs. Id. at 51-52 (¶¶ 242-43).
PMR filed this lawsuit in March 2020. In August 2020, the 12 remaining defendants moved to dismiss PMR's complaint for failure to state a claim and to stay discovery until the resolution of the motion to dismiss. Docs. #146-149. In September 2020, I granted defendants' motion to stay discovery pending resolution of their motion to dismiss, finding that defendants raised at least substantial arguments for dismissal and that the other relevant factors weighed in favor of staying discovery. Doc. #164. PMR has since filed its opposition to defendants' motion to dismiss, Doc. #168, and defendants filed a reply, Doc. #173. I heard oral argument from counsel on December 10, 2020, and this ruling now follows.
When considering a motion to dismiss under Rule 12(b)(6), the Court must accept as true all factual matters alleged in a complaint, although a complaint may not survive unless the facts it recites are enough to state plausible grounds for relief. See, e.g., Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Hernandez v. United States, 939 F.3d 191, 198 (2d Cir. 2019). The "plausibility" requirement is "not akin to a probability requirement," but it "asks for more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 556 U.S. at 678. The Court need not accept statements that couch legal conclusions in the form of factual allegations or that are otherwise conclusory. See Hernandez, 939 F.3d at 198.
The 47 counts of the complaint can be grouped into three categories: claims of a conspiracy in violation of § 1 of the Sherman Act; claims of monopsonization or attempted monopsonization in violation of § 2 of the Sherman Act; and parallel claims under Connecticut state law.1 I will address each category of claims and the asserted grounds for dismissal in turn.
Section 1 claims
The first 14 counts of PMR's complaint allege that defendants violated § 1 of the Sherman Act by engaging in horizontal price-fixing and a group boycott of PMR. Doc. #1 at 70-86. Defendants argue that PMR's complaint does not contain factual allegations sufficient to allege a plausible conspiracy in violation of § 1. Doc. #147 at 16-31.
Section 1 of the Sherman Act prohibits "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States." 15 U.S.C. § 1. "Because § 1 of the Sherman Act does not prohibit all unreasonable restraints oftrade but only restraints effected by a contract, combination, or conspiracy, the crucial question is whether the challenged anticompetitive conduct stems from independent decision or from an agreement, tacit or express." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 553 (2007) (cleaned up). "[P]roof of joint or concerted action is required; proof of unilateral action does not suffice." Gelboim v. Bank of Am. Corp., 823 F.3d 759, 781 (2d Cir. 2016) (cleaned up). In order to survive a motion to dismiss under Rule 12(b)(6), a § 1 claim must have "enough factual matter (taken as true) to suggest that an agreement was made[,]" which "requires more than labels and conclusions, and a formulaic recitation of a cause of action's elements will not do." Twombly, 540 U.S. at 555-56.
PMR acknowledges that it has not alleged direct evidence of a conspiracy, but argues that it can use circumstantial evidence to support its claims and defeat the motion to dismiss. Doc. #168 at 18-20.2 That is correct: because "conspiracies are rarely evidenced by explicit agreements," they "nearly always must be proven through inferences that may fairly be drawn from the behavior of the alleged conspirators[.]" Anderson News, L.L.C. v. Am. Media, Inc., 680 F.3d 162, 183 (2d Cir. 2012) (internal quotation omitted). But as the Supreme Court...
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