Exclusive: SiriusXM Swipes Back at SoundExchange’s $150 Million Unpaid Royalties Suit, Urging Dismissal and Damages for Counterclaims

Has SoundExchange’s unpaid royalties lawsuit against SiriusXM evolved into an all-out war? The satellite radio giant is hitting back at the complaint and demanding, among other things, damages for counterclaims.

SiriusXM submitted its answer and counterclaims today, approximately one year after SoundExchange sued for north of $150 million in allegedly owed royalties. Besides covering the case in detail at the time, we’ve charted the courtroom confrontation’s twists and turns in the interim.

In summary, SoundExchange chalks up the alleged underpayment to SiriusXM’s “artificial” inflation of revenue attributable to webcasting in joint satellite and online radio packages. Royalties are calculated at different rates for each, and predictably, the plaintiff says the purported misclassification brought about massive unlawful savings for the defendant.

Now, 12 months and one venue change later, SiriusXM is swiping back harder than ever, including by refuting the complaint’s allegations.

Moving beyond that point-by-point refutation, SiriusXM’s affirmative defenses encompass but aren’t limited to arguments that the action fails to state a claim and is time barred. Consequently, the case should be tossed with prejudice, according to SiriusXM, the Pandora subsidiary of which is embroiled in a royalties lawsuit with the MLC on the compositional side.

However, far and away the most interesting component of SiriusXM’s aggressive opposition to the action is the aforementioned collection of counterclaims.

Keeping the focus on brass-tacks takeaways, SiriusXM is alleging that it “unavoidably overpaid SoundExchange significant excess royalties on revenue” from the joint satellite and online packages while it was refining its reduction and calculation methodology. Among other things, said effort to refine the calculations involved a survey to see how exactly SiriusXM subscribers were listening. With push having come to shove, SiriusXM is seeking the “recoupment of the excess royalties.”

Next, the accounting firm (Adeptus Partners) enlisted by SoundExchange to audit SiriusXM’s 2018 royalty statements, far from being truly independent as required by the CRB, maintained “loyalty and partiality to SoundExchange throughout its protracted examination of” the financials at hand, according to the defendant.

Not stopping at rattling off a laundry list of qualms with Adeptus, SiriusXM says the firm effectively “sought to nullify” its direct licenses and make it cough up overlapping payments under the statutory license to boot.

“Adeptus’s improper conduct was at the behest of its consulting client, SoundExchange, which has for years attempted to frustrate Sirius XM’s ability to exclude appropriate amounts from its Gross Revenues calculations as well as its right to engage in direct licensing,” the satellite radio company’s answer drives home of the allegedly “drawn-out and intrusive investigation.”

Moving beyond the multifaceted war of words – also at issue are the methodology specifics behind the previously noted user survey, SiriusXM’s payments stemming from the Adeptus audit, and a whole lot else – SiriusXM has formally requested a ruling in its favor when it comes to the core complaint.

Furthermore, the entity is seeking a declaratory judgement that Adeptus isn’t an independent certified public accountant as defined by the CRB and that its royalties investigation therefore “does not qualify as an audit within the meaning of” the same regulations. Lastly, SiriusXM is calling for damages in connection with the counterclaims as well as pre- and post-judgement costs and fees.