Second Circuit questions who can sue over missing royalties in SiriusXM case

Appellate judges scrutinized whether SoundExchange, a nonprofit that collects and distributes royalties to artists, can bring a $150 million claim instead of artists themselves.MANHATTAN (CN) — A Second Circuit panel on Friday heard arguments in a $150 million music royalties case against SiriusXM that could change the landscape of how streaming payments are enforced.The appellate court is poised to rule on who has standing to recover the supposedly missing cash.SoundExchange, a nonprofit organization that collects and distributes royalties to artists, claims it does. The nonprofit company filed a lawsuit in 2023, accusing satellite radio titan SiriusXM of manipulating its accounting practices to avoid paying hundreds of millions of dollars in owed royalty payments.A lower court dismissed the case in 2025, finding that SoundExchange may have rights to collect royalties on behalf of artists but that doesn’t mean it can bring lawsuits to enforce the royalty agreements.It was a “head-scratching position,” the company claimed in legal briefs. It argued the right was given to them by Congress more than two decades ago and upheld in every prior litigation over the issue.“The court did not dispute that Congress has clearly tasked SoundExchange with ’enforcement of rights’ … but it refused to read the term ‘enforcement’ to include bringing lawsuits because Congress did not expressly say that SoundExchange may enforce those rights through ‘litigation,’” the company claimed.On Friday, U.S. Circuit Judge Richard Sullivan questioned why artists couldn’t band together and file a class action themselves.SoundExchange could help in this scenario, the judge suggested — but standing would theoretically lie with the artists.“I don’t understand why that’s such a ridiculous scenario,” the Donald Trump appointee said.SoundExchange’s lawyer, former U.S. Solicitor General Paul Clement, responded bluntly: “I think it’s a pretty ridiculous scenario, with all due respect.”“It’s a federal right to payment, and it’s enforceable in federal court,” Clement said. “It’s enforceable by my client.”The scrutinized lower court ruling — issued by U.S. District Judge Naomi Reice Buchwald, a Bill Clinton appointee in the Southern District of New York — was the first to find that SoundExchange lacks standing to federally sue over royalties.For more than a decade, the organization has been bringing similar lost royalties actions against radio broadcasters and streaming services in cases that have either been settled or referred to the Copyright Royalty Board.In this case, SoundExchange argues SiriusXM used “creative accounting” to kick some of its satellite traffic to streaming —shorting artists out of the radio cut they were entitled to under their royalty agreements.Congress green-lit the right for an independent group like SoundExchange to collect and disperse royalty payments on behalf of artists back in 2002, reasoning then that it would be far more efficient for all parties to empower a third party to handle this process as opposed to each artist individually.“We don’t want courts to interfere with an enforcement scheme that Congress has set up,” U.S. Circuit Judge Alison Nathan, a Joe Biden appointee, noted from the bench on Friday. “And it’s hard to read [17 U.S. Code §] 114 as something other than a structure by which SoundExchange is designed to collect these royalties pursuant to the statute.”Andrew Tulumello for SiriusXM countered that SoundExchange was abusing its position as a collection distribution agent and “starting to act like a private attorney general.”“Our view is that they have become a runaway, a collective, not accountable to anyone, [that] can sue us on any theory for any reason at any time,” he said.The appellate panel didn’t definitively weigh in. The three judges, which in addition to Sullivan and Nathan included Trump-appointee Steven Menashi, reserved ruling after Friday’s arguments.SoundExchange was launched as a division of the Recording Industry Association of America in 2000 before spinning off to become its own independent nonprofit in 2003. By 2018, the company announced it had paid more than $5 billion in royalties to artists.Subscribe to our free newslettersOur weekly newsletter Closing Arguments offers the latest about ongoing trials, major litigation and rulings in courthouses around the U.S. and the world, while the monthly Under the Lights dishes the legal dirt from Hollywood, sports, Big Tech and the arts.Additional Reads