Antitrust Law Daily Wrap Up, TOP STORY—S.D.N.Y.: Performing rights organization settles monopolization, trade restraint claims for $58.5M, (Feb 20, 2015)

By Greg Hammond, J.D.

A class of local commercial television stations has secured a $58.5 million settlement with SESAC, LLC—a performing rights organization (PRO)—for allegedly engaging in anticompetitive practices of issuing collective licenses for rights to perform the copyrighted music of its members. The federal district court in New York certified the class, approved the settlement, and granted the television stations’ request for attorney fees (Meredith Corp. v. SESAC, LLC, February 19, 2015, Engelmayer, P.).

Background. Named plaintiffs Meredith Corp., The E.W. Scripps Co., Scripps Media, Inc., and Gray Television Group, Inc. filed suit, on behalf of a class of local commercial television stations, against SESAC, alleging that SESAC took steps to providing an “all or nothing” license for rights to play the music of all of SESAC’s affiliates. SESAC was therefore able to set exorbitant prices for its blanket license, despite stations’ lack of interest in purchasing the entire SESAC repertory. Specifically, Meredith alleged that SESAC and its affiliates violated the Sherman Act by combining to unlawfully restrain trade, and by conspiring to monopolize the market for the performance rights to the musical works within SESAC’s repertory.

The parties reached a settlement agreement in October 2014, in which SESAC agreed to pay $58.5 million into a settlement fund. Of the total, $16 million was designated for reimbursement to the plaintiffs’ counsel for attorney fees and expenses, with the remaining $42.5 million to be allocated to local stations for the alleged overcharges they paid for the license, on a pro rata share of license fees each class member paid.

In addition, SESAC agreed to conduct restrictions for a period of 20 years, in which it will: (1) offer all local stations a blanket license and viable alternatives; (2) relieve local stations from the threat of copyright infringement claims during the pendency of license negotiations; (3) enter into binding arbitration when the Television Music License Committee and SESAC are unable to reach agreement on industry-wide license fees or terms; and (4) not prohibit or interfere with the ability of SESAC’s affiliates to enter into direct licenses with local stations. The plaintiffs have now moved for an order certifying a settlement class and approving the settlement and the plan of allocation of the settlement proceeds.

Certification. The court granted the plaintiffs’ motion for class certification for settlement purposes, with the class defined as: All owners of full-power local commercial television stations in the United States and its territories that obtained licenses from SESAC during the period from January 1, 2008, to October 31, 2014, including those owned and operated by the ABC and CBS television networks as well as NBCUniversal Media, LLC, but excluding local television stations that are owned and operated by the Univision and Telefutura (now known as UniMas) networks.

First, the court found that the proposed class met all of the requirements of Federal Rule of Civil Procedure 23(a) because: (1) the proposed settlement class consists of owners of more than 1,200 local television stations, demonstrating sufficient numerosity; (2) a number of questions of fact and law exists that are common to the proposed class regarding whether SESAC and its affiliates engaged in an unlawful agreement to fix prices, the relevant product market, whether SESAC has monopoly power in the market, and others; (3) all of the class member’s claims arise from the same course of events regarding SESAC’s alleged blanket licenses, and each class member must make similar legal arguments to demonstrate SESAC’s liability; and (4) there was no evidence that any conflict exists between the interests of the named plaintiffs and the members of the proposed settlement class, and plaintiffs’ counsel were found to be highly skilled and well-suited to represent the class.

The court additionally found that resolution of the central issue in this case—whether SESAC and its affiliates engaged in anticompetitive conduct—will not vary among class members, and that the proposed settlement has a unitary and reasonable formula for measuring damages and allocating the net settlement fund among the class, meeting the predominance requirement of Rule 23(b)(3). Further, resolving the claims of the many television stations through the class action mechanism was “clearly superior” to any other available method of resolution, the court decided.

Fair, adequate, and reasonable. The court also found that the terms of the settlement were fair, adequate, and reasonable. Specifically, it noted that the settlement was procedurally fair due to the arms-length negotiations, extensive discovery conducted, and counsels’ ability to thoughtfully assess the potential outcomes of the case. The settlement was also found substantively fair, because the complexity, expense and likely duration of the case; the positive reaction of the class; counsel’s ability to make thoughtful assessments as to the strengths and weaknesses of each party’s case; the risks of establishing liability and of negligible damages; the substantial cost of the settlement to SESAC; and the reasonableness of the settlement in terms of monetary recovery and long-term conduct relief.

The plan of allocation also was deemed fair and adequate, due to its simplicity, and because the settlement will be distributed by the Television Music License Committee on a pro rata basis, it treats the class members equitably, and no class member objected.

Attorney fees. The plaintiffs’ request for attorney fees and costs also was approved by the court. Specifically, under the settlement agreement, $11.8 million would be allocated to plaintiffs’ attorneys for legal fees and slightly over $4.2 million would be used to recompense plaintiffs’ counsel for expenses incurred in the action. The court concluded that the attorney fees in this case, representing 20.2 percent of the settlement fund, was well within the mainstream of fee awards approved for class counsel in the district, was below the lodestar method, and met all of the Goldberger factors. The substantial expenses were also deemed reasonable and necessary, given the complexity and length of the antitrust case.

The case number is 09 Civ. 9177 (PAE).

Attorneys: Bruce Alan Colbath (Weil, Gotshal & Manges LLP) for Meredith Corp., The E.W. Scripps Co., Hoak Media, LLC, Scripps Media, LLC, and Gray Television Group, Inc. Gregory P. Joseph (Joseph Hage Aaronson LLC) for SESAC, LLC.

Companies: Meredith Corp.; The E.W. Scripps Co; Hoak Media, LLC; Scripps Media, LLC; Gray Television Group, Inc.; SESAC, LLC

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