Surviving Carpenter Says UMG Owes $2 Million in Royalties

LOS ANGELES (CN) — In a new lawsuit, The Carpenters’ surviving member claims Universal Music Group cheated him and his late sister Karen of more than $2 million in royalties from digital and online sales of songs by their 1970s pop group.

Suing on his own behalf and for the Estate of Karen Carpenter, Richard Carpenter claims Universal Music has paid only a “minuscule fraction” of the amount owed for digital downloads of their recordings sold through iTunes, Amazon and similar services.

The Superior Court lawsuit, filed Wednesday, also names the Carpenters’ longtime record label A&M, which became part of Universal Music in 1998.

With hits such as “We’ve Only Just Begun” and “Close to You,” The Carpenters sold more than 100 million records and won three Grammy Awards.

“However, rather than reward the Carpenters’ longstanding loyalty and honor their legacy, defendants have withheld substantial sums owed to the Carpenters,” the complaint states.

The 16-page lawsuit includes 60 pages of attachments, including a 1976 recording contract and subsequent correspondence between A&M and the Carpenter siblings.

Universal Music Group’s communications office did not respond to an email seeking comment Thursday.

Carpenter says in the lawsuit that UMG paid him and his sister’s estate royalties on revenue from digital downloads as though the money came from sale of physical records. That amounts to no more than 15 percent of the suggested retail price of each item, based on the copy of the Carpenters’ contract attached to the complaint.

Carpenter says the defendants should have paid the Carpenters 50 percent of their income from digital downloads under the contract’s provision for royalties on licensing fees.

The litigation reignites a years-old music business controversy over whether digital downloads and licenses should earn artists’ royalties at the rate set for “mechanical” royalties or at the higher rate for licensing deals.

Before the digital age, licensing deals typically concerned the use of a recording in a movie or television show, said Lawrence Iser, Carpenter’s attorney at Kinsella Weitzman Iser Kump & Aldisert. Mechanical royalty rates are lower to offset the costs of producing the physical records, tapes or CDs.

In a significant decision involving rap artist Eminem, the Ninth Circuit held in 2010 that sales of recordings as downloads or ringtones should be treated as licensing deals and that artists should be paid the higher rate.

“A record company’s grant of limited rights to digital service providers to sell permanent downloads and ringtones constitutes a license, not the sale of a record,” the Ninth Circuit ruled in F.B.T. Productions v. Aftermath Records, according to Carpenter’s new lawsuit.

After that Ninth Circuit ruling, a wide range of musicians, including the estate of Rick James, the band White Zombie and many others sued their record companies for more royalties. Most were filed as class actions and have been settled, according to Daniel Warshaw, with Pearson Simon & Warshaw, who was a class counsel in suits against Universal Music Group and Warner Music Group.

Carpenter says in his complaint that Universal’s refusal to pay him and his sister the 50 percent royalty is “particularly egregious” because the defendant in the Eminem case, Aftermath Records, is a Universal label.

The Carpenters twice brought in “specially trained accountants” to audit Universal’s books, and they found royalty underpayments of more than $1.5 million for the years 2008 through 2014. Yet despite 10 months of negotiations, the company “rejected most of the Carpenters’ claims and offered to pay them only a minuscule fraction of the monies owed to them,” according to the complaint.

“We did try to work it out with them,” Iser said in an interview Thursday.

The audits uncovered numerous other errors in how Universal paid the Carpenters during those years, according to the lawsuit. For instance, the company undercounted some downloads, and used the wrong base price for some record and CD sales. It also refused to give the auditors copies of certain documents, including receipts for employee travel expenses.

Overall, the complaint identifies nearly 20 sets of alleged underpayments, totaling about $2.3 million.

Carpenter seeks more than $2 million in damages for breach of contract, breach of faith, and declaratory judgment that digital downloads should be treated as licenses, not sales of records.

Karen Carpenter died at 32 in 1983, from complications of anorexia nervosa. Her death brought the subject of eating disorders into public consciousness and raised awareness of anorexia and similar disorders.