IP Law Daily, COPYRIGHT—D.D.C.: Lawsuit over statutory music royalty payments will stay in District of Columbia, (Feb 18, 2020)

By Thomas Long, J.D.

Although defending service provider Music Choice was a New York resident, there was a substantial nexus between the relevant facts and collective rights management organization SoundExchange’s chosen forum.

The federal district court in Washington, D.C., has rejected a request to transfer venue of a lawsuit over statutory copyright royalties brought by non-profit collective rights management organization SoundExchange, Inc., against digital music service provider Music Choice. The court determined that the venue requested by Music Choice—the Southern District of New York—was not an appropriate forum for adjudication of the case. Although Music Choice had an office in New York, there was a sufficient nexus between the conduct giving rise to the cause of action and the District of Columbia to warrant giving deference to SoundExchange’s choice of forum. Witnesses unable or unwilling to travel to the District of Columbia could provide videotaped testimony, and documents located in New York could be transmitted electronically. Furthermore, public interest factors did not weigh in favor of granting the motion to transfer. There was no indication that the Southern District of New York had particular expertise or knowledge regarding the Copyright Royalty Board’s "intricate administrative regulations" concerning royalty payments (SoundExchange, Inc. v. Music Choice, February 14, 2020, Walton, R.).

Parties. Headquartered in the District of Columbia, SoundExchange has been designated by the Copyright Royalty Board as the sole entity in the United States to collect and distribute royalties to copyright owners under statutory licenses granting music service providers permission to use sound recordings in exchange for royalty payments. SoundExchange has the authority to initiate audits of music service providers to verify royalty statements and payments. Music Choice—headquartered in Horsham, Pennsylvania—operates an audio service called the "Business Establishment Service," which provides multiple channels of music to subscribing retailers to play as background music.

Royalty dispute. In 2016, SoundExchange initiated an independent audit of Music Choice. The audit allegedly revealed that Music Choice failed to make timely payments of royalties and "systematically underpaid statutory royalties" for the Business Establishment Service between January 1, 2013, and December 31, 2016. SoundExchange filed suit against Music Choice on April 10, 2019, seeking recovery of unpaid royalties, late fees, and unpaid verification fees. On June 24, 2019, Music Choice filed an answer and, shortly thereafter, a motion to transfer the case to the Southern District of New York under 28 U.S.C. § 1404(a).

Request for transfer. According to Music Choice, transfer was appropriate because relevant witnesses and evidence were located in New York and Horsham, Pennsylvania, rather than the District of Columbia, and because the Southern District of New York had "a stronger interest in and connection to this dispute" than the federal district court for the District of Columbia.

Jurisdictional threshold. As a threshold issue, the court first addressed whether the action could have been brought in the New York court. Because Music Choice maintained an office in New York, it fit the definition of a "resident" of the district and was subject to the Southern District’s personal jurisdiction. Therefore, the court concluded that this venue requirement was met.

Private interest factors—factual nexus. However, there was a sufficient nexus between the conduct giving rise to the cause of action and the District of Columbia to warrant giving deference to SoundExchange’s choice of forum, in the court’s view. The parties did not dispute that the District of Columbia was SoundExchange’s home forum. In addition, the allegations at the heart of the claims concerned the sufficiency of Music Choice’s royalty payments to the SoundExchange’s License Management Department, in its District of Columbia office. SoundExchange’s decision-making, correspondence, and conduct relevant to the action occurred in the District of Columbia, including its initiation and involvement in the verification audit.

Convenience of parties and witnesses. The court next decided that the convenience of the parties did not favor either side. In addition, Music Choice did not demonstrate that the potential unavailability of live testimony from certain witnesses in the District of Columbia forum weighed in favor of a transfer, in light of the option of introducing videotaped testimony.

Ease of access to proof. The court rejected Music Choice’s argument that moving the case to New York would significantly increase the ease of access to proof. Even if Music Choice had relevant documents in its New York office, discovery in the matter was likely to be electronic, making the physical location of the documents immaterial.

Public interest factors. Turning to the public interest factors, the court reasoned that, although the Southern District of New York arguably had a higher volume of copyright cases than the District of Columbia, this was not a typical copyright case, but a case concerning the Copyright Royalty Board’s "intricate administrative regulations" concerning royalty payments. Nothing indicated that the New York forum possessed superior knowledge or expertise regarding such matters. Neither court’s docket was substantially more congested than the other. The case did not present a "localized controversy" that gave one district a greater interest in the litigation than the other. Rather, the court said, the lawsuit "could affect the distribution of vast amounts of royalties among copyright owners and corporations across the country—not just those concentrated in the Southern District of New York."

Accordingly, the court denied Music Choice’s motion to transfer the case.

This case is No. 1:19-cv-00999-RBW.

Attorneys: Emily Lauren Chapuis (Jenner & Block LLP) for SoundExchange, Inc. Diana Szego Fassbender (Orrick, Herrington & Sutcliffe LLP) for Music Choice.

Companies: SoundExchange, Inc.; Music Choice

Cases: Copyright DistrictofColumbiaNews