Federal court green-lights Daydream Believer's case for unfair business practices
March 2, 2015 – In a carefully reasoned and groundbreaking 36-page decision issued today, U.S. Magistrate Judge Jacqueline Scott Corley agreed with the arguments made by firm partners Nicholas Carlin and David Given and gave the go-ahead to a lawsuit filed by firm client Stephanie Ford Stewart against EMI Music Publishing, the world’s largest music publisher, challenging EMI’s practice of paying its own foreign affiliates 50% of foreign royalties before remitting the balance to itself, to split 50/50 with its legacy songwriters. Stewart, the widow of John Stewart, former member of the Kingston Trio and composer of hit tunes such as The Monkees’ classic "Daydream Believer," alleges that EMI's self-dealing results in a drastic reduction in her (and others') share of such royalties. Judge Corley ruled that Stewart adequately alleged that EMI engaged in unfair business practices and breached the covenant of good faith and fair dealing, stating “the implied covenant claim asserts that Screen-Gems EMI has wronged Plaintiff by paying fees to foreign sub-publishers that are grossly above market rate, thereby depriving Plaintiff of the full benefit of the 50% net receipts royalty.” Judge Corley also ruled that Stewart adequately alleged that Screen-Gems EMI, the U.S. EMI entity that Stewart’s publishing contract was with, and the EMI foreign affiliates currently retaining 50% of the foreign royalties, are in reality a single enterprise and that money earned by one is money earned by all. Stewart's case is the first in the U.S. to successfully challenge the practice of music publishers double dipping in the collection of foreign royalties for legacy songwriters with so-called "net receipts" language in their publishing agreements. In a U.K. case from the 1980s, Elton John prevailed against his music publisher on similar claims; however, in this country, songwriters have struggled. In denying EMI’s motion to dismiss Stewart’s case, Judge Corley noted that none of the U.S. cases alleged, as Stewart does here, that the EMI entities were a single enterprise, or that EMI breached the covenant of good faith and fair dealing.