U.S. v. American Soc. of Composers, Authors and Publishers
| Decision Date | 22 August 1994 |
| Docket Number | D,Nos. 1206,1412,s. 1206 |
| Citation | 32 F.3d 727 |
| Parties | 1994-2 Trade Cases P 70,713, 1994 Copr.L.Dec. P 27,307, 32 U.S.P.Q.2d 1125 UNITED STATES of America, Plaintiff-Appellee, v. AMERICAN SOCIETY OF COMPOSERS, AUTHORS AND PUBLISHERS, Defendant-Appellee, In the Matter of the Application of Steve KARMEN, Petitioner-Appellant. ockets 92-6184, 93-6284. |
| Court | U.S. Court of Appeals — Second Circuit |
Charles M. Newman, New York City (Neal R. Platt, of counsel), for petitioner-appellant Steve Karmen.
Allan Blumstein, New York City (Jean H. McMahon, Paul, Weiss, Rifkind, Wharton & Garrison, I. Fred Koenigsberg, White & Case, Ross Charap, of counsel), for defendant-appellee American Soc. of Composers, Authors and Publishers.
Robert J. Wiggers, Dept. of Justice, Washington, DC (Anne K. Bingamen, Asst. Atty. Gen., Diane P. Wood, Deputy Asst. Atty. Gen., Robert B. Nicholson, Gregory B. Hovendon, Dept. of Justice, of counsel), for plaintiff-appellee U.S.
Before: CARDAMONE and MINER, Circuit Judges, and PARKER, District Judge. *
Jingles, as most everyone knows, are a constant sound presence on radio and television. Jingle writers who are members of the American Society of Composers, Authors and Publishers (ASCAP) have tried for over 15 years to convince ASCAP to give jingles greater royalty weight. Appellant Steve Karmen, a member of ASCAP, is a prolific writer of many enormously successful jingles, such as, "I Love New York," "Aren't You Glad You Use Dial," "Weekends Were Made For Michelob," "Nationwide Is On Your Side," and scores of others for leading advertisers such as Hertz, Budweiser, Ford, Pontiac, Hershey Chocolate, Midas Muffler, Liberty Mutual, Plymouth and Wrigley's Gum.
In 1981 as a result of Karmen's and other jingle writers' efforts, ASCAP raised the weight accorded jingles from one percent to three percent of a "use credit"--ASCAP's basic unit of distribution. Karmen, believing this increase insufficient, has sought in eight separate legal challenges over the past 12 years to gain greater weight for the use of jingles. He presently appeals from an order of the United States District Court for the Southern District of New York (Conner, J.) dated June 26, 1992 denying his motion to vacate or modify an arbitration award; and from an order of the same court dated September 7, 1993, denying his motion to vacate the June 26, 1992 order for lack of subject matter jurisdiction.
Appellant's complaint is that ASCAP is his fiduciary and is not paying him fairly from the moneys it receives for licensing his songs that were aired. Although he won at arbitration over this dispute, he says he is nonetheless in the position of having lost, because the arbitrators refused to set a new jingle weight, and a consent decree between ASCAP and the government makes arbitration his only remedy.
To aver, as petitioner does, that the consent decree between the government and ASCAP has left him in a legal limbo or set him on a road that leads nowhere has a plaintive but not persuasive sound. Although the arbitrators voided the three percent award for jingles--theoretically restoring the previous one percent rate--the Board of ASCAP in 1991 restored the three percent rate, and by reducing the weight of commercials, increased the number of credits for jingles by 16 percent, placing Karmen in a better position than he was in prior to arbitration. His continuing actions suggest some chagrin at the lack of results, capsulized in the title of Henry Blossom's old song: "I Want What I Want When I Want It."
ASCAP, founded in 1914, is an unincorporated membership association, comprising 55,000 writers and publishers. The members grant the association a nonexclusive right to license for public use nondramatic performances of their works. ASCAP takes in substantial revenues from these use licenses. The revenues, less deductions for operating expenses, are distributed to the members. The percentage of profits that each member receives depends upon the type of use to which that member's composition is put--whether the work is performed as a theme, background music, a jingle, cue music, bridge music, or used in a feature performance. The system of classification and distribution is detailed in ASCAP's Articles of Association.
There are two major organizations of music copyright holders, ASCAP, with three million songs in its repertory, and the smaller Broadcast Music, Inc. (BMI), founded in 1939, with one million songs. See ASCAP v. Showtime/The Movie Channel, Inc., 912 F.2d 563, 565 (2d Cir.1990). In 1941 the government sued ASCAP under the Sherman Act, 15 U.S.C. Sec. 1, alleging antitrust violations in its dealings with persons seeking licenses and in its dealings with its members. One goal of the government was to insure that the distribution of revenue to ASCAP members be made on a "fair and non-discriminatory" basis. See Sam Fox Publishing Co. v. United States, 366 U.S. 683, 686, 81 S.Ct. 1309, 1311, 6 L.Ed.2d 604 (1961).
Later that same year ASCAP and the government entered a consent decree. The In 1950 the consent decree was superseded by an Amended Final Judgment (consent judgment), which ordered that ASCAP's distribution to members be made "on a basis which gives primary consideration to the performance of the compositions of the members as indicated by objective surveys of performances (excluding those licensed by the members directly) periodically made by or for ASCAP." United States v. ASCAP, 1950-1951 Trade Cas. (CCH) p 62,595 at 63,755 (S.D.N.Y.1950). The consent judgment was modified again ten years later by a consent Order entered by the same court in 1960 (the 1960 Order). See United States v. ASCAP, 1960 Trade Cas. (CCH) p 69,612 (S.D.N.Y.1960).
decree includes a requirement that revenues be distributed on an equitable basis. ASCAP's by-laws, the consent decree continues, shall provide that money received for public performance for profit of the members' copyrighted musical compositions shall not be distributed on any basis other than "the number, nature, character and prestige" of the members' compositions, how long the works have been part of the Society's catalog, "and popularity and vogue of such works, all to be determined in a fair and non-discriminatory manner." United States v. ASCAP, 1940-1943 Trade Cas. (CCH) p 56,104 at 405 (S.D.N.Y.1941)
The 1960 Order specified how the performance surveys were to be conducted. Revenue distribution to ASCAP members was to be made on the basis of an objective scientific survey, replacing a somewhat arbitrary survey that gave undue emphasis to network broadcasting performances. The new survey increased radio, nightclub, and dance hall sampling. The 1960 Order also established a new system of "Weighting Rules" to determine the value of the various uses of the music licensed by ASCAP, and put into effect an initial "Weighting Formula" to be used by ASCAP when determining the amount of distribution to be made to each member.
When an ASCAP composition is performed and picked up on the survey it is given a value under the Weighting Rules. The basic unit for distribution purposes is a "use credit." By increasing his or her number of use credits, a member's revenue is increased. Id. at 76,467. Pursuant to the 1960 Order, ASCAP must seek court approval before amending the Weighting Rules, and must give the government 30 days notice before amending the Weighting Formula. The 1960 Order also required ASCAP to establish a review board and an arbitration mechanism to resolve members' complaints regarding the distribution of revenues. Id. at 76,472. The initial formula allocated one percent of one use credit to jingle writers for each broadcast.
In its Membership Agreement and Articles of Association, ASCAP incorporated much of the language from the consent judgment and the 1960 Order. For example, Article 14, Sec. 6A adopts the language of the consent judgment in providing that in determining each member's share of royalties, the Classification Committee must Section 6B of Article 14 sets forth a procedure for resolution of disputes over distributions in the same language as the 1960 Order, requiring the aggrieved member to protest to a Board of Review, with a right to appeal to a panel of the American Arbitrators Association (AAA).
As a jingle writer, Karmen joined ASCAP in 1972, giving it a nonexclusive right to license the broadcast of his jingles. By doing so, Karmen agreed to the terms of its Articles of Association and Membership Agreement, including the provision that requires him to arbitrate any disputes concerning royalty distributions. When he joined ASCAP the initial jingle weight of one percent remained in effect. Karmen and other jingle writers began lobbying in 1977 for a Because Karmen believed this increase insufficient, he filed a complaint with the Board of Review in accordance with the dispute resolution procedure in the Articles of Association. In a 26-page decision, the Board denied his request to replace the three percent rule with one giving a greater weight for jingles. Karmen exercised his right to appeal this decision to an AAA panel, which affirmed the decision of the Board of Review.
greater weight for jingles. In 1981 ASCAP's Board of Directors increased the value to three percent. We note that the government has...
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