United States v. American Soc. of Composers, Auth. & Pub.

• Decision Date: 07 May 1971
• Docket Number: 711281-711283.,No. 871-874,Dockets 711200,871-874
• Citation: 442 F.2d 601
• Parties: UNITED STATES of America, Plaintiff, v. AMERICAN SOCIETY OF COMPOSERS, AUTHORS, AND PUBLISHERS, Defendant-Appellee, Gary Zekley, Eddie Brandt, Appellants.
• Court: U.S. Court of Appeals — Second Circuit

442 F.2d 601 (1971)

UNITED STATES of America, Plaintiff, v. AMERICAN SOCIETY OF COMPOSERS, AUTHORS, AND PUBLISHERS, Defendant-Appellee Gary Zekley, Eddie Brandt, Appellants.

Nos. 871-874, Dockets 711200, 711281-711283.

United States Court of Appeals, Second Circuit.

Argued March 31, 1971.

Decided May 7, 1971.

Lee A. Rau, Atty., Dept. of Justice, Washington, D. C. (Richard W. McLaren, Asst. Atty. Gen., Gregory B. Hovendon, John L. Wilson, Attys, Dept. of Justice, Washington, D. C., on the brief), for plaintiff.

Arthur H. Dean, New York City (Sullivan & Cromwell, Roy H. Steyer, Joel M. Miller, Mack M. Braly, Herman Finkelstein, New York City, on the brief), for defendant-appellee.

Theodore H. Friedman, New York City (Phillips, Nizer, Benjamin, Krim & Ballon, New York City, Kant, Gordon & Meyers, Eve M. Preminger, New York City, Stephen Z. Meyers, Stuart J. Gordon, Phalen J. Hurwitz, Beverly Hills, Cal., on the brief), for appellants.

Before LUMBARD, Chief Judge, and FRIENDLY and HAYS, Circuit Judges.

HAYS, Circuit Judge:

The controversy presented by this appeal from certain orders of the United States District Court for the Southern District of New York is concerned with the distribution by the American Society of Composers, Authors and Publishers, among its members of a fund of $9,920,000.

ASCAP is an association of composers, authors and publishers of musical compositions the basic purpose of which is to protect its members against infringement of the copyrights on their works. It licenses its members' compositions for public performance and collects the royalties which it distributes to the members.

The action of which the present proceedings are a phase originated in 1941 when the United States brought an action against ASCAP alleging that certain aspects of ASCAP's methods of licensing constituted violations of the antitrust laws. A consent judgment was entered, which as subsequently modified by the Amended Final Judgment of 1950, now governs ASCAP's licensing methods.

The fund in controversy arose in the following manner:

Under the 1950 judgment the district court is empowered to fix a reasonable fee for licensing if ASCAP and the licensee are unable to agree on the fee. In 1962 Columbia Broadcasting System, Inc. and American Broadcasting Company sought a determination of the fee to be paid by them for the use of works licensed by ASCAP. During the period from 1962 until 1969 CBS and ABC paid interim fees under interim licenses from ASCAP. In 1969 ASCAP agreed with CBS and ABC on the fees to be paid and the agreement was approved by the district court. The amount paid retroactively by CBS and ABC for the use of the ASCAP licenses from 1962 to 1969, after deducting certain expenses and other payments, produced a total of $9,920,000 available for distribution.

Briefly stated the issue we are required to determine is whether the fund in controversy should be included in the regular distribution for the fourth quarter of 1970, as decided by ASCAP and approved by the district court, or, as appellants contend, should be allotted by a special distribution to the members whose compositions were performed in the years 1962 to 1969.

Appellant Zekley, as an individual, is a writer member of ASCAP. He is also a publisher member doing business as Teenie Bopper Music publishers. Appellant Brandt is a writer member. Zekley, later joined by Brandt, originally brought an action in the Superior Court of California to enjoin ASCAP's proposed distribution of the fund. On the application of ASCAP, the district court, in the course of the present proceedings, enjoined the appellants from prosecuting their action in the California court, and appellants have appealed from that order.

A procedural point raised by the appellees, the standing of appellants to bring this appeal, should logically be determined before we reach the merits and the injunction against state court action. However since the nature of the procedural issue will be more clearly apparent after a discussion of the merits, we will postpone consideration of it.

I. The Injunction Against the Action in the California Court

Appellants urge that in granting an injunction against appellants' prosecution of their action in the California state court, the district court violated the provisions of 28 U.S.C. § 2283 (1964):

"A court of the United States may not grant an injunction to stay proceedings in a State court except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments."

As the United States has argued, a variety of state court decisions would tend to frustrate the antitrust policy of the consent decree. The need for exclusive jurisdiction in the federal district court was recognized when the following provision was included in the Amended Final Judgment of 1950:

"Jurisdiction of this cause is retained for the purpose of enabling any of the parties to this Amended Final Judgment to make application to the Court for such further orders and directions as may be necessary or appropriate in relation to the construction of or carrying out of this Judgment for the modification thereof, for the enforcement of compliance therewith and for the punishment of violations thereof."

As the Supreme Court said in Atlantic Coastline R. Co. v. Brotherhood of Locomotive Engineers, 398 U.S. 281, 295, 90 S.Ct. 1739, 1747, 26 L.Ed.2d 234 (1970);

"Federal injunctive relief may be necessary to prevent a state court from so interfering with a federal court\'s consideration or disposition of a case as to seriously impair the federal court\'s flexibility and authority to decide that case."

We hold that the district court correctly enjoined the action in the state court since the injunction was "necessary in aid of its jurisdiction" and "to protect or effectuate its judgments."

II. Distribution of the Fund

The district court has approved ASCAP's action in deciding to distribute the controverted fund as an addition to the regular distribution for the fourth quarter of 1970. Under the generally applicable rule as to distribution, the distribution to writers for the fourth quarter of 1970 would be based on performance during the last three quarters of 1969 and the first quarter of 1970; the distribution to publishers would be based on the last quarter of 1969 and the first three quarters of 1970 (adjustable in April 1971 when complete data for the four quarters are available). Appellants urge that distribution of the special fund ought to be made to those for whose performance the fund was paid, i.e., it should be distributed on the basis of performance during the years 1962-1969.

It seems to us that the application of usual equitable principles would lead to the result sought by appellants.

Appellants cite as an example of the inequity of the ASCAP distribution determination the case of a publishing company which was not organized until 1970 but which, under that determination, would receive a relatively large payment, although, of course, performance of its works could not have contributed at all to the creation of the fund. The record before us does not indicate how many such examples there may be. It seems fair to assume that there would be many instances in which inequities of greater or less degree would result, since it may be taken as common experience that there would be great differences in the production and the popular success of musical compositions over a period...