Collective proceedings brought by songwriters over the alleged unfair distribution of royalties have fallen at their first legal hurdle - partly on the ground that the case is ‘riven with potential conflicts’. In Rowntree v Performing Right Society the Competition Appeal Tribunal refused to grant an opt-out collective proceedings order partly because, in the event of success, the claimants themselves would have to foot their opponents’ costs. 'The central problem is that the class is, in a manner of speaking, suing itself,' tribunal chair Justin Turner KC said.

The proceedings were brought by David Rowntree, a solicitor and former drummer with the band Blur, as proposed class representative against the membership organisation that collects and distributes performing rights royalties for music. The claimants allege unfairness in the way that payments which cannot be matched to a songwriter or publisher, so-called 'black box' royalties, are distributed. 

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Granting an application by the Performing Right Society and its subsidary PRS For Music Limited to strike out the claim, the judges provisionally approved Rowntree's suitability as class representative but raised concerns about the proportionality of the third-party funded case. Legal costs were estimated at £18 million and funder LCM stood to receive up to 6.5 times the capital deployed as well as the capital itself plus 30% annual compound interest. 

If the claim succeeded, 'it is not clear how the PRS can pay costs and damages other than by diverting its revenues away from its members', the judges said. 'As matters currently stand we are not persuaded that it has been shown that the costs-benefit favours continuation of these proceedings.'

The judgment also noted the claimants' decision to change solicitors earlier this year in the four months between the original hearing and its resumption, with Wilkie Farr & Gallagher replacing Maitland Walker. The decision was made by Rowntree 'to protect the interests of the class' without consulting his advisory committee. 'It would have been preferable if [the committee's] input had been sought,' the judgment states. 

On the overall question of proportionality, the judges state: 'We are alert to the fact that, where preparation of class actions are initiated by lawyers, rather than members of the class - as in this case - it may be that it is the revenue stream to the lawyers and the funder which is the principal incentive to the pursuit of thesee proceedings rather than the benefits to the class.'

 

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