DOJ's Appeal of ASCAP/BMI Consent Decrees Ruling Seen Turning on District Court Case

BMI CEO Mike O'Neill said he’s “not surprised” DOJ appealed Stanton’s ruling. “It is unfortunate that the DOJ continues to fight for an interpretation of BMI’s consent decree that is at odds with hundreds of thousands of songwriters and composers, the country’s two largest performing rights organizations, numerous publishers and members of the music community” and government stakeholders, O'Neill said in a statement. “We believe Judge Stanton’s decision is correct and look forward to defending our position.” The 2nd Circuit’s ruling “will affect the rights of more than a million American songwriters and composers, thousands of whom have expressed strong opposition to the DOJ’s position, and we are hopeful the Court will affirm Judge Stanton’s decision,” said ASCAP CEO Beth Matthews in a statement.

Justice didn't outline its planned argument before the 2nd Circuit, only filing a notice (in Pacer) with Stanton’s court Friday of its intent to appeal. Industry executives and lawyers told us they expect Justice to bring forward an updated version of the multipronged rebuttal to BMI’s lawsuit that the department argued at the District Court. Stanton ruled solely based on the language in BMI’s consent decree, while Justice noted that it examined several additional factors in reaching its consent decrees review decision. DOJ’s additional factors included the text of BMI’s membership agreements with songwriters, public statements from BMI that suggested that the PRO's licenses were full-work licenses, and public policy arguments in favor of 100 percent licensing. DOJ is likely to also argue that the consent decrees' underlying purpose is served by the 100 percent licensing language, said copyright and music licensing lawyer Karyn Ablin of Fletcher Heald.

The likelihood that the department would allow Stanton’s ruling to stand unchallenged was “quite low” given perceptions that he ignored most of the department’s review factors, said Computer & Communications Industry Association Vice President-Law and Policy Matthew Schruers. “DOJ is going to make its case based on the full set of considerations that the district court largely ignored." It “will be arguing that they have the authority to at least interpret the consent decrees in a way that they deem proper and that Stanton doesn’t have the authority to overturn their interpretation,” said Jay Rosenthal, a Mitchell Silberberg lawyer who represents music industry content owners.

DOJ will “point to language” in the consent decrees that appears to back up their claim that the decrees require 100 percent licensing, Rosenthal said. It will also be important to look at Justice’s upcoming response to a separate suit by Songwriters of North America in U.S. District Court in Washington, D.C., Rosenthal said. The SONA-led complaint claims DOJ’s 100 percent licensing language is a violation of songwriters' property rights because of the language's negative effect on songwriting partnerships. SONA committed to pursuing its case despite Stanton’s ruling (see 1609140027).

The 2nd Circuit ultimately will need to consider whether DOJ exceeded authority in its consent decrees statement and whether Stanton should have used other factors beyond the decree language in issuing his ruling, Rosenthal said. The case’s outcome at the 2nd Circuit may turn on how much deference the circuit court decides to give to Stanton’s expertise as the BMI rate court judge, Rosenthal and others told us. “The problem [the DOJ] is going to have is that the 2nd Circuit has typically deferred to the rate court judges on their own consent decrees,” said music industry attorney Chris Castle. Stanton “is the subject matter expert and unless [DOJ] can prove he did something egregious [in his ruling], I don’t see” the court overturning Stanton, said Castle.

Some stakeholders are more dubious about the 2nd Circuit’s potential willingness to defer to Stanton’s expertise in this case, a tech sector executive told us. ASCAP and BMI decided to pursue the legal side of their challenge to the DOJ review results in Stanton’s court amid perceptions that Stanton was “more favorably disposed” to overturn 100 percent licensing than ASCAP rate court Judge Denise Cote would have been, the executive said. Stanton’s ruling “was rather perfunctory” and if he had established a “full briefing schedule we might have seen [DOJ’s] argument get” a proper airing at the district court, Schruers said. “That alone doesn’t bode well for this ruling on appeal.”

The appeal is likely to stretch well into 2017, with the timeline depending mightily on “a lot of variables in appellate procedure,” Schruers said: “Unless the 2nd Circuit expedites this case” as it appeared to do with the Apple e-books case, “I don’t think you’ll see a resolution to the case here until late next year.” Such a timeline again raises questions about whether the DOJ in President-elect Donald Trump’s administration will be willing to pursue an appeal of Stanton’s ruling, Rosenthal said. “My gut reaction is that I’m not sure [a Trump administration] would care enough about this case to do something” to stop the appeal, he said. "But if you take Trump at his word” that he wants to reverse as much of the Obama administration’s agenda as possible, “one has to be prepared for the possibility” that a reversal of policy on the ASCAP and BMI consent decrees could occur.

It’s “wishful thinking to believe that Trump would dismiss the consent decrees outright” but a move to drop an appeal of Stanton’s ruling is certainly possible, Castle said. "I don't think this is a partisan issue that would skew" in the switch to the Trump administration, though the incoming administration's IP policy agenda is very unclear, Ablin said. It “remains to be seen” how a Trump DOJ would handle the 2nd Circuit appeal, a tech sector executive said. DOJ felt confident enough in the need for an appeal to pursue it after Trump’s election but turnover in political appointees at DOJ “could have some impact,” the executive said. “We just don’t know at this point.”

The 2nd Circuit appeals process is likely to draw significant interest from stakeholders given the increased importance that amicus briefs have at the appellate level, Castle and others said. DOJ is likely to draw support from many tech sector groups, Castle said. “There’s going to be a lot of activity among stakeholders to get their opinion [on the DOJ’s consent decrees decision] on the record,” Rosenthal said. It will be interesting to see which groups align with the DOJ and BMI, with songwriters and music publishers to align with BMI, Rosenthal said. CCIA hasn’t committed to filing an amicus brief with the 2nd Circuit but “this is a case we’re watching very closely” given its potential impact on the group’s members, Schruers said.