Judge Says Slacker Must Pay $10M Unpaid Royalties, Despite Warning Of ‘Devastating’ Impact
Written by djfrosty on November 18, 2022
A federal judge says he won’t undo his ruling that Slacker owes nearly $10 million in unpaid music royalties to SoundExchange, seemingly unmoved by the streamer’s warning that the ruling will have a “devastating” impact on the company’s finances.
SoundExchange claims Slacker’s parent LiveOne has failed to pay royalties for years, and last month won a ruling requiring the streamer to hand over $9,765,396. Slacker said last month that the huge judgment could trigger financial ruin for the company – a warning SoundExchange urged the court to disregard.
In a decision issued Wednesday, Judge André Birotte Jr. did exactly that. He ruled that the seven-figure judgment was simply the result of an agreement that Slacker itself had signed – and noted that the streamer was not actually legally disputing the terms of that deal.
“Defendants cannot argue that the judgment is a result of ‘excusable neglect’ or that it is ‘without fault,’ when the judgment was entered pursuant to stipulation that defendants negotiated for and assented to,” Judge Birotte wrote. “Because Defendants signed the stipulation, and in fact do not dispute the amount of money Plaintiff is entitled to, the court finds the judgment is fair, adequate, and reasonable.”
SoundExchange, which collects performance royalties for sound recording copyrights, sued LiveOne in June, claiming the company had stopped paying artists and labels way back in 2017. And it claimed that a subsequent audit revealed it had been underpaying for years before that.
Court records show the two sides entered into the repayment plan in 2020, which gave Slacker two years to pay off its debts. But in the June lawsuit, SoundExchange claimed that Slacker had quickly failed to live up to the terms of the agreement.
“By refusing to pay royalties for the use of protected sound recordings, Slacker and LiveOne have directly harmed creators over the years,” SoundExchange president and CEO Michael Huppe said at the time. “Today, SoundExchange is taking a stand through necessary legal action to protect the value of music and ensure creators are compensated fairly for their work.”
Just a few months into the litigation, SoundExchange played an unusual legal trump card. On Oct. 12, the group invoked a so-called consent judgment, which had been inked and pre-signed by execs at Slacker back in 2020 as part of the repayment plan. Under the terms of that earlier deal, if Slacker ever defaulted again, its executives agreed that a judge should enter a so-called judgment against the company for the full sum owed.
On Oct. 13, Judge Birotte did so, ordering the Slacker to pay $9,765,396, which covered both unpaid royalties and late fees. He also permanently barred the company from using the so-called statutory license, an important federal provision that makes copyright licenses for recorded music automatically available to internet radio companies like Slacker and Pandora at a fixed price.
A week later, Slacker asked the judge to overturn his own ruling, saying it had been procedurally improper. To support the request, Slacker warned the judge had quickly caused other creditors to call in other debts owed, threatening “economic damage” to the company that would be “unsustainable.”
“Plaintiff’s surreptitious request for entry of judgment has triggered LiveOne’s default on two substantial senior secured notes which are secured by all of LiveOne’s and their subsidiaries assets,” the streamer wrote.
SoundExchange urged the judge to deny the request, saying it had spent years “indulging” the company’s “many excuses for non-payment,” and that it had simply become time for the streamer to be legally forced to pay up: “Five years is long enough.”
In Wednesday’s decision, Judge Birotte sided with SoundExchange, ruling there was no legal wiggle room for Slacker to challenge an agreement signed by its own executives. The judge said that unless there is proof of “fraud or misconduct” – and there is none – there was no reason to undo the ruling. And he was unmoved by the company’s warnings of economic ruin.
“Defendants argue that the ‘repercussions will be devastating to LiveOne, its employees, and to its creditors,” the judge wrote. Defendants, however, have failed to explain what balance is actually due, whether defendants’ creditors have elected to require immediate payment, or how the repercussions will actually impact its business or livelihood.”
A representative for Slacker parent LiveOne did not immediately return a request for comment on the decision.
Read the entire decision here: