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UNITED STATES v. AMERICAN SOC'Y OF COMPOSERS

February 5, 1996

UNITED STATES OF AMERICA, Plaintiff, - against - AMERICAN SOCIETY OF COMPOSERS, AUTHORS AND PUBLISHERS, Defendant. In the Matter of the Application of STEVE KARMEN, Petitioner, for an Order Vacating or Modifying an Arbitration Award.


The opinion of the court was delivered by: CONNER

 Petitioner Steve Karmen has once again sought this court's intervention in his long-running dispute with the American Society of Composers, Authors and Publishers ("ASCAP") over the amount of royalties that he receives for performances of his compositions. For the reasons set forth below, petitioner's application is denied.

 BACKGROUND

 ASCAP is an unincorporated membership society of over 50,000 music composers, lyricists and publishers who own the copyrights to more than four million musical compositions. Each member has granted ASCAP a non-exclusive right to license the public performance rights to his or her compositions. ASCAP serves as licensing agent and collects royalties.

 ASCAP operates under a consent judgment ("Consent Decree"), originally entered in 1941 and subsequently amended, that settled an antitrust suit brought by the United States against ASCAP. This court has retained jurisdiction under Section XVII of the Consent Decree to oversee its ongoing implementation. Section XI of the Consent Decree sets forth the general terms under which ASCAP is required to distribute the royalties that it collects to its members. The distribution system is outlined in detail in attachments to an order of this court dated January 7, 1960 ("1960 Order") that amends the Consent Decree. Attachment C to the 1960 Order contains the weighting rules, which are deemed to be part of the Consent Decree and which establish the guidelines within which ASCAP may assign different weights to different kinds of performances. A separate weighting formula establishes the precise weight given to each type of performance. ASCAP may unilaterally alter the weighting formula, within the limits set by the weighting rules, upon thirty days' written notice to the government. Any objection that the government may have to the proposed changes is to be heard in this court.

 Petitioner Karmen, the writer of an extensive body of successful commercial jingles, has been a member of ASCAP since 1972. When Karmen joined ASCAP, the weighting formula awarded 1% of a use credit for each performance of a jingle. *fn1" In 1981, after extensive lobbying by jingle writers for a higher value, ASCAP's Board of Directors proposed an increase in the value from 1% to 3%. The government approved the increase. Karmen was not satisfied with the Board's action and filed a protest in accordance with the procedure mandated by the 1960 Order and set forth in ASCAP's Articles of Association. See 1960 Order, at § V(D), attached as Exhibit B to Affidavit of Jean H. McMahon, dated June 16, 1995; ASCAP Articles of Association, art. XIV, at § 4, attached as Exhibit C to McMahon Aff. Karmen's complaint was first heard by ASCAP's Board of Review ("Board"). After a lengthy proceeding, the Board denied petitioner's request to replace the 3% rule with one giving a greater weight to jingles. Karmen thereafter exercised his right to appeal the Board's decision to a panel of the American Arbitration Association ("Panel"), which affirmed the decision of the Board.

 In September 1991, after holding several meetings to discuss this issue, the Board reinstated the 3% rule and made certain other changes to the weighting formula. ASCAP estimated that the changes would have the effect of increasing the amount of credits awarded to jingle performances by about 16%.

 Karmen again applied to this Court to vacate the Panel's decision, claiming that the decision was not final because the Panel failed to establish a new weight or to direct ASCAP's Board to do so. In addition, petitioner requested this court to determine the weight that ASCAP should accord to jingle performances. We denied petitioner's application on June 26, 1992. We held that the Panel's decision was final because it exhausted the Panel's mandate and that petitioner lacked standing to invoke the power of this court to set the weight for jingle performances. See United States v. ASCAP/Application of Steve Karmen, 1992 WL 167383 (S.D.N.Y. June 26, 1992). Karmen then moved to vacate that order on the ground that this court lacked subject matter jurisdiction to hear the claims that petitioner himself had raised before the court. On September 7, 1993, we denied petitioner's motion. We held that we had subject matter jurisdiction over petitioner's application by virtue of our ongoing responsibility under Section XVII of the Consent Decree for construing and enforcing the Consent Decree, as amended by the 1960 Order. See United States v. ASCAP/Application of Steve Karmen, 832 F. Supp. 82 (S.D.N.Y. 1993). On August 22, 1994, the Second Circuit affirmed our decisions on both motions. See United States v. ASCAP/Application of Steve Karmen, 32 F.3d 727 (2d Cir. 1994).

 On October 3, 1994, petitioner sent a demand letter to ASCAP. Petitioner contended that as a direct result of his protest, the jingle rate was increased 16%. He argued that under Section V(D) of the 1960 Order and Article XIV, § 4, of ASCAP's Articles of Association, ASCAP was obligated to pay him that 16% increase from the date on which he registered his complaint. Petitioner therefore requested payment in the amount of 16% of the royalties that he received from ASCAP between 1981 and September 1991, when the changes to the weighting formula took effect. Karmen also asked for an accounting of payments made to jingle writers after September 1991 in order to establish that the 16% increase had, in fact, occurred. Finally, in the event that the accounting established that the 16% increase had not actually occurred, he sought payment for any deficiency in the amount of royalties that he has received since September 1991. See Exhibit A, attached to Affidavit of Steve Karmen, dated May 1, 1995.

 An exchange of correspondence among petitioner, ASCAP and the government followed. ASCAP and the government took the position that petitioner was not entitled to the payments that he sought. See Letter of Ross Charap, dated Dec. 5, 1994, attached as Exhibit D to Karmen Aff.; Letter of Maureen T. Casey, dated Jan. 9, 1995, attached as Exhibit F to Karmen Aff. When ASCAP did not comply with petitioner's demands, petitioner filed the instant application. He requests this court to compel ASCAP to grant him the relief that he sought in his demand letter.

 DISCUSSION

 With respect to petitioner's request for retroactive payment covering the Period from 1981 to 1991, we are not persuaded by ASCAP's exhaustion argument. Petitioner's claim for retroactive payment is based on ...


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