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Court overturns Eminem royalties verdict

Panel says team that discovered rapper was shortchanged

An appellate court panel has overturned a 2009 jury verdict in a federal suit brought by the team that discovered Eminem, who had alleged that Universal Music Group and its imprint Aftermath had shortchanged them on digital royalties from the rapper’s bestselling music.

In a ruling filed Friday in Pasadena, the Ninth Circuit U.S. Court of Appeals said that language in a disputed contract entitling the plaintiffs to a higher royalty on digital sales was “unambiguous,” and remanded the case to U.S. District Court for further proceedings.

Contrary to some reports, Eminem was not a plaintiff in the suit brought by F.B.T. Prods., which is operated by brothers Jeff and Mark Bass, and Em2M, run by Joel Martin, head of Eminem’s publishing company 8 Mile Style.

The action reveals the potentially slippery nature of royalty computations in the digital age.

Eminem was signed by F.B.T. in 1995. In 1998, the rapper’s contract was transferred to Aftermath.

The 1998 contract stated that F.B.T. was entitled to a 12%-20% royalty on records sold and a 50% rate on masters licensed to third parties. In 2003, F.B.T. and Aftermath signed a new pact that preserved those royalty rates.

A 2006 audit determined that the music companies had computed Eminem’s royalties for digital downloads and mastertones based on a lower “records sold” rate, and not the higher “masters licensed” rate.

In 2007 F.B.T. and Em2M sued UMG, Interscope Records, Aftermath plus rapper and Aftermath principal Dr. Dre’s firm Ary Inc. for breach of contract.

Ninth Circuit’s decision noted that the contractual language allowed that “even if a transaction arguably falls within the scope of the records sold provision, F.B.T. is to receive a 50% royalty if Aftermath licenses an Eminem master to a third party for ‘any’ use.”

Appeals court also vacated an award of attorneys’ fees to Aftermath.

UMG said it would file a petition for a rehearing.

Disputing an online publication’s claim that the decision establishes a legal precedent, the company added pointedly, “It should be noted that this ruling sets no legal precedent as it only concerns the language of one specific recording agreement. Any assertion to the contrary is simply not true.”