On May 17, 2021, the Ninth Circuit Court of Appeals (i.e., the court of appeals for federal cases brought in California) affirmed a District Court decision against soul singer, Lenny Williams (“Williams”). Williams claimed that Warner Brothers Records (“Warner Brothers”) underreported its total revenue from international streaming of its artists’ music by “improperly assessing an intercompany charge.” According to Williams, this underreporting led to at least $100 million in lost revenue for Warner Brothers’ artists from 2015 to 2018. Williams stated that this underreporting had become a “standardized corporate policy” at Warner Brothers. As a result, he filed a suit against Warner Brothers as a “class representative” for all the artists Warner shorted in just the last five years. As a class representative, Williams entered a bid for class certification, meaning that the court allows the case to proceed as a “class action.”
Williams was only able to obtain limited disclosure from Warner Brothers before the District Court ruled on his bid for “class certification.” Williams stated that he was not prepared to file a bid for class certification due to his limited ability to obtain disclosure/discovery from Warner Brothers. With over 40,000 royalties’ contracts between Warner Brothers and its artists, Williams was allowed access to only 100 before moving for class certification—all of which were hand-picked by Warner Brothers.
Stating that he had no choice to file for class certification because the court set an unreasonable deadline, Williams told the court that he sought to represent three categories of artists that make up the class: (1) artists with contracts that expressly include digital streaming royalties and contain a general licensing provision whereby the artist and Warner Brothers share in “licenses” of master recordings on a 50/50 basis, (2) artists with contracts that DO NOT expressly include digital streaming royalties but contain the 50/50 licensing arrangement, and (3) artists with contracts that do not expressly include digital streaming royalties or contain a licensing provision. The claimants allege that all three classes of artists are being shorted millions and millions of dollars.
According to the Ninth Circuit, Williams’ claims were “atypical” of the proposed class members because Williams and an unknown number of other potential class members fell into the third category of artists mentioned above. Seemingly looking for reasons not to certify the class, the Ninth Circuit found that the District Court would have to determine whether an implied contract to pay streaming royalties existed between Warner and artists in the third category and that this additional factual determination may have “overwhelmed” the District Court. The Ninth Circuit further found that even if an implied contract existed, the royalty revenues earned by Williams and other artists in category three may not have covered the advances given to those artists by Warner. The Ninth Circuit further acknowledged the District Court’s concern that the unique issues faced by artists in the third category may have become the focus of the litigation, which could detract from the ability of the remaining artists to litigate their claims. Accordingly, the Ninth Circuit affirmed the decision. The court did not state whether it would allow a class to be certified for the artists in the first two categories.
Author’s Note: It is this author’s opinion that the District Court and the Ninth Circuit overlooked the fact that artists suffered an injury whether or not the royalty revenues cover Warner’s advances. Though artists whose revenues did not cover the advances were not under-compensated, these artists were still under-credited. Established Ninth Circuit precedent instructs that injuries are not “atypical” simply because they are not identical. “Typicality” is defeated only where a group of class members suffers no injury. Accordingly, this author believes the Ninth Circuit affirmed an incorrect ruling. Everybody is getting ripped off by the intercompany charge.
Lenny Williams is represented by Bobby Pouya of Pearson Simon & Warshaw LLP.
Warner is represented by Sean Commons of Sidley Austin LLP.
The case is Leonard Williams v. Warner Music Group Corp., case number 20-55419, in the U.S. Court of Appeals for the Ninth Circuit.
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