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Judge cuts back lawsuit against Warner Music over international royalty deductions

By Chris Cooke | Published on Monday 12 June 2023

A US judge last week cut back a lawsuit filed by members of the rock band Orleans against Warner Music over the way the major has been processing and paying streaming royalties. Some of the claims made by the band in the lawsuit were dismissed, although some remain.

At the core of the litigation filed by Orleans members John Hall and Lance Hoppen is a common gripe in the artist community: record companies allowing their foreign subsidiaries to make deductions on digital income and then calculating the artist royalty based on what is received by the label in the artist’s home country after those deductions. Which obviously reduces the total payout to the artist.

Hall and Hoppen also claimed in their lawsuit that bad communication on the part of the major meant they had previously assumed their artist royalty on streams was being calculated based on ‘at-source income’, ie what the major was paid by the streaming service, not what was received by the home label after the foreign subsidiaries had taken their cut. Which meant they hadn’t been prompted to take action on this before.

After the two musicians went legal on all this last June, Warner tried to have the case dismissed. And last week the judge overseeing the dispute accepted some of the arguments presented by the major, in doing so cutting some specific legal claims from Hall and Hoppen’s lawsuit. She also said that only the Warner Music parent company and the label Orleans specifically signed to – Elektra – can be listed as defendants. Hall and Hoppen had also listed a number of other Warner labels.

However, some of the musicians’ claims still stand. For example, wrote the judge, while the band’s 1974 record contract “did not give the plaintiffs a right to the streaming royalties they seek, it did impose an obligation on [Warner/Elektra] to provide the plaintiffs with royalty statements, which then triggered a time-limited opportunity to contest the calculation of the payments”.

“The plaintiffs argue that the defendants prepared those royalty statements in bad faith, to conceal inter-company charges and avoid contestation based on the deduction of those charges. Assuming that there was at least some possibility that the plaintiffs could have obtained higher payments if they had known about and contested the inter-company charges, then that would amount to a plausible claim of violation of the duty of good faith and fair dealing”.

We await to see how this dispute now moves forward.