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Independent Producers Group v. CRB, 18-1337 (2020)

Court: Court of Appeals for the D.C. Circuit Number: 18-1337 Visitors: 7
Filed: Jul. 21, 2020
Latest Update: Jul. 21, 2020
Summary: United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT Argued April 22, 2020 Decided July 21, 2020 No. 18-1337 INDEPENDENT PRODUCERS G ROUP, APPELLANT v. COPYRIGHT ROYALTY BOARD AND LIBRARIAN OF CONGRESS, APPELLEES AMAZING FACTS, INC., ET AL., INTERVENORS Consolidated with 19-1116 On Appeals from the Copyright Royalty Judges Brian D. Boydston argued the cause and filed the briefs for appellant. Martin V. Totaro, Attorney, U.S. Department of Justice, argued the cause for appellees. W
More
 United States Court of Appeals
         FOR THE DISTRICT OF COLUMBIA CIRCUIT



Argued April 22, 2020                   Decided July 21, 2020

                         No. 18-1337

              INDEPENDENT PRODUCERS G ROUP,
                       APPELLANT

                              v.

COPYRIGHT ROYALTY BOARD AND LIBRARIAN OF CONGRESS,
                    APPELLEES

                AMAZING FACTS, INC., ET AL.,
                      INTERVENORS



                 Consolidated with 19-1116


       On Appeals from the Copyright Royalty Judges


    Brian D. Boydston argued the cause and filed the briefs for
appellant.

    Martin V. Totaro, Attorney, U.S. Department of Justice,
argued the cause for appellees. With him on the brief was
Daniel Tenny, Attorney. Mark R. Freeman, Attorney, entered
an appearance.
                               2
     Matthew J. MacLean, Jessica T. Nyman, Michael A.
Warley, Gregory O. Olaniran, Lucy Holmes Plovnick, Daniel
A. Cantor, R. Stanton Jones, Michael Kientzle, Philip R.
Hochberg, and Jeremy W. Dutra were on the brief for
intervenors in support of appellees.

    Before: GRIFFITH and PILLARD , Circuit Judges, and
SILBERMAN , Senior Circuit Judge.

    Opinion for the Court filed by Circuit Judge PILLARD.

     PILLARD , Circuit Judge: Under the Copyright Act, when
a cable or satellite company retransmits programs initially aired
on broadcast stations, the Register of Copyrights collects
royalty fees under a compulsory licensing scheme and later
redistributes the fees to the appropriate copyright owners. The
Copyright Royalty Judges (the Judges) preside over royalty
distribution proceedings and settle disputes among royalty fee
claimants. Appellant Worldwide Subsidy Group LLC dba
Independent Producers Group (IPG), an agent for royalty
claimants in these proceedings, challenges a series of decisions
by the Copyright Royalty Judges denying most of its clients’
royalty fee claims for programming in the devotional and
program suppliers’ categories that was retransmitted by cable
for 2004-2009 and by satellite for 1999-2009. IPG lost the
right to pursue many of its clients’ claims as a result of a
discovery sanction and because, after the Judges held that IPG
was not entitled to a “presumption of validity” for either its
representative role or the validity of the royalty claims it
proffered, IPG failed to establish for certain claims that it was
a duly appointed agent pressing valid claims. IPG challenges
the factual grounds for those determinations and contends they
are so disproportionately harsh as to be an abuse of discretion.
It also challenges as arbitrary the Judges’ final distribution
                               3
methodologies for allocating the royalties to all eligible
claimants.

    We affirm the Copyright Royalty Judges on all three
challenges: the revocation of the presumption of validity, the
imposition of discovery sanctions, and the final distribution of
royalties.

I.   Background

     A. Statutory Structure

     Congress has prescribed a centralized clearinghouse
system for collecting royalty fees from anyone who retransmits
a copyrighted television program and for distributing the fees
to the program’s copyright holder. The Copyright Act allows
cable and satellite operators to retransmit copyrighted
programs without permission, requiring only that the operators
deposit a statutorily prescribed royalty fee with the Register of
Copyrights every six months for programs retransmitted during
that period. See 17 U.S.C. § 111(c), (d) (cable);
id. § 119(a),
(b) (satellite). The Copyright Royalty Judges annually decide
how to distribute the resulting pool of funds to the relevant
copyright holders.
Id. § 801(b)(3).
     Every July, copyright owners (or their agents) who assert
entitlement to certain royalties for transmission of their
programming during the preceding year file claims with the
Judges.
Id. § 111(d)(4)(A);
37 C.F.R. § 360.3. Each filing
entity must certify that it is authorized to file the claim. See
U.S. Copyright Royalty Judges, In re Distribution of 2004,
2005, 2006, 2007, 2008, & 2009 Cable Royalty Funds, In re
Distribution of 1999, 2000, 2001, 2002, 2003, 2004, 2005,
2006, 2007, 2008, & 2009 Satellite Royalty Funds, Nos. 2012-
6 CRB CD 2004-09 (Phase II); 2012-7 CRB SD 1999-2009
                               4
(Phase II), Memorandum Opinion and Ruling on Validity and
Categorization of Claims 5 (Mar. 13, 2015) (Claims Ruling).
Absent any challenge to that certification, the Judges afford the
filed claim a “presumption of validity,” meaning they treat the
claim as facially valid and the filer as duly authorized.
Id. The Judges
review these claims and “determine whether there exists
a controversy concerning the distribution of royalty fees.” 17
U.S.C. § 111(d)(4)(B). If there are no disputed claims, the
Judges authorize the Librarian of Congress to distribute the
fees to the claimants on a proportional basis.
Id. Only if
there
is a controversy must the Judges conduct a proceeding to
resolve disputes regarding the appropriate distribution.
Id. A copyright
royalty distribution proceeding has two
phases. During Phase I, the claimants group themselves into
categories based on the type of retransmitted broadcasting. See
37 C.F.R. § 351.1(b)(2)(i)(B);
id. § 351.1(b)(ii)(C).
The two
categories relevant here are “program suppliers” and
“devotional” programming. Claims Ruling at 1. The Judges
then calculate the total market value of all programming in each
category during the relevant year and, based on its relative
value, assign each category a percentage of the annual pool of
royalty fees. See
id. § 351.1(b)(2)(i)(B).
During Phase II, at
issue here, the Judges subdivide the fees due to a particular
category among the individual claimants in that category.
Id. Each phase
follows the same set of procedures, designed
to promote expeditious and amicable resolution among the
claimants. After the Judges announce the commencement of
distribution proceedings in the Federal Register, 17 U.S.C.
§ 803(b)(1)(A)(i), claimants petition to participate, see
id. § 803(b)(1).
A claimant may file an individual petition or join
with other claimants and share representation. 37 C.F.R.
§ 351.1(b)(2). The Act imposes a three-month “voluntary
negotiation period” during which participating claimants must
                               5
attempt to reach agreement on their relative shares. 17 U.S.C.
§ 803(b)(3).

     As to disputes the claimants are unable to resolve through
negotiation, the Judges accept written submissions, oversee a
period for discovery, and order a post-discovery settlement
period. See
id. § 803(b)(6)(C);
37 C.F.R. §§ 351.4-351.7. For
Phase I, discovery usually involves expert testimony
categorizing programs and their market shares. For Phase II,
discovery involves both proof that individual claimants in fact
represent the copyright holders and expert testimony proposing
methodologies for subdividing fees among claimants in
specific program categories.         After the post-discovery
settlement period, the Judges hear any remaining disputes and
issue final determinations on the merits. See 17 U.S.C.
§ 803(c)(1); 37 C.F.R. §§ 351.8-351.12. The Librarian of
Congress publishes those determinations in the Federal
Register and distributes the royalty fees accordingly. 17 U.S.C.
§ 803(c)(6).

    B. Procedural History

     As noted at the outset, at issue here are royalty fees for
retransmission of programming in the devotional and program
suppliers categories by cable providers during 2004-2009 and
by satellite providers during 1999-2009. There are three repeat
players who claim to represent the copyright holders of
programs retransmitted via both cable and satellite in these
categories: Appellant IPG, claiming royalties for programs in
both categories; Intervenors Settling Devotional Claimants
(SDC), claiming only for devotional programming; and
                                6
Intervenors Motion Picture Association (MPA), 1 claiming only
in the program suppliers category.

         1. The claims validity hearings

     IPG, the SDC, and MPA did not participate in the Phase I
proceedings but successfully petitioned to participate in Phase
II. See 78 Fed. Reg. 50,113, 50,114 (Aug. 16, 2013) (cable
retransmissions); 78 Fed. Reg. 50,114, 50,115 (Aug. 16, 2013)
(satellite retransmissions). On December 8, 2014, the
Copyright Royalty Judges held a five-day evidentiary hearing
to resolve disputes over the validity and categorization of
claims. They heard live testimony from five witnesses and
admitted 180 exhibits.

             a. Presumption of validity

     The SDC argued that IPG should be disqualified from
participating, or at least denied the presumption of validity,
because one of the claims advanced by IPG was a fraudulent
one on behalf of “Tracee Productions,” a fictitious entity. IPG
had purported to represent Tracee Productions in an earlier
proceeding and the Copyright Royalty Judges denied IPG’s
proffered claims the presumption of validity. In response to the
fraudulent Tracee Productions claim in the proceeding at issue
here, the Judges stopped short of debarring IPG from
representing claimants, instead again denying a presumption of
validity to IPG’s certification of its authority to represent
claimants. The Judges based that decision on two grounds:
IPG’s failure to purge its filing of false claims and the Judges’

1
  The Motion Picture Association was formerly the “Motion Picture
Association of America,” or MPAA. The Judges and other parties
commonly refer to it this way, although the correct term now seems
to be “MPA.” See Intervenors’ Br. i.
                              7
sua sponte conclusion that Raul Galaz, IPG’s principal witness,
gave false testimony concerning a document IPG produced in
discovery.

    The fraudulent “Tracee Productions” claim has a history
in which Galaz played a prominent role. Galaz in 2002 was
criminally convicted of defrauding the Copyright Office in
order to obtain cable retransmission royalties belonging to
others, and among the criminal acts to which he admitted was
fraudulent filing in several proceedings on behalf of the
nonexistent “Tracee Productions.” See U.S. Copyright Royalty
Judges, In re Distribution of 1998 and 1999 Cable Royalty
Funds, No. 2008-1 CRB CD 98-99 (Phase II), Ruling and
Order Regarding Claims 3 (June 18, 2014) (2014 Claims
Ruling); Judgment and Commitment, United States v. Galaz,
No. 02-cr-230 (HHK) (D.D.C. Dec. 23, 2002). Before that
fraud came to light, Galaz had filed a fraudulent claim on
behalf of Tracee Productions as part of his claims to the 1999
cable royalty funds for devotional programming. 2014 Claims
Ruling at 3. The fraudulent 1999 filing was not part of his
criminal conviction but, by the time the Phase II proceedings
for the 1998 and 1999 cable royalty funds for devotional
programming commenced in 2008, the facts surrounding
Galaz’s conviction were available to the Copyright Royalty
Judges and IPG had not withdrawn the fraudulent Tracee
Productions filing. The Judges therefore denied IPG the
presumption of validity in the 1998 and 1999 proceedings
because of its failure to withdraw its 1999 fraudulent Tracee
Productions claim before or during those proceedings.
Id. at 5-
11. In the instant proceedings, the Judges found especially
troubling IPG’s proffer of a Tracee Productions claim in its
1999 satellite retransmission filing because the 1998 and 1999
proceedings put it on notice that it must purge Tracee
Productions from its claim submissions.
                               8
     The Judges’ second ground for denying the presumption
of validity was Galaz’s false testimony about IPG’s 2008
satellite claims filing. IPG filed separate lists of claims for
satellite retransmissions and cable retransmissions. It argued
that both lists of claims were identical. But while IPG
produced in discovery a copy of its cable claim with
consecutive numbers of 1 to 10, it produced a copy of its
satellite claim that appeared incomplete, as indicated by pages
numbered 1 to 3 and 6 to 8. Noting the missing pages, MPA
and the SDC had moved to dismiss the claims of the 39
claimants listed on the cable claims filing but not included in
the satellite claims filing. When questioned at the claims
hearing, Galaz sought to blame the Copyright Royalty Board
(CRB or the Board) 2 for the missing pages. He testified that he
personally had gone to the Board’s records office to obtain a
copy of the claims filing and received from the Board in its
incomplete condition the version that IPG produced in
discovery. See Claims Hrg. Tr. vol. 2, 104:18-105:16. Galaz
testified that he was “certain” IPG had originally filed a
complete version with the Board, and that it was the Board that
had lost the missing pages after IPG filed its claims but before
Galaz retrieved the copy from the Board that (Galaz testified)
IPG then produced in discovery in the Phase II proceeding.
Id. vol. 5,
201:8.

     The Judges concluded that Galaz testified falsely because
the evidence showed that the incomplete copy he claimed to
have received from the Board and that IPG submitted in
discovery could not in fact have come from the Board. The
Copyright Royalty Board inscribes a sequential number on the
first page of any received claims filing. MPA obtained a

2
  The Copyright Royalty Board is the institutional entity in the
Library of Congress that houses the Copyright Royalty Judges and
their staff. 37 C.F.R. § 301.1.
                              9
certified copy of the claims filing from the Board and produced
it in discovery. The copy submitted by IPG in discovery and
the certified copy obtained by MPA from the Board, both
lacking pages 4 and 5, differed in only one respect: MPA’s
Board-certified copy contained a handwritten “193” on the first
page, whereas the copy IPG produced did not. Claims Ruling
at 8. The Judges therefore concluded that Galaz could not have
received the incomplete version submitted by IPG from the
Board’s files, because a true copy would have included the
Board’s handwritten number, as shown by the certified copy
obtained by MPA. Instead, the Judges concluded, Galaz must
have received it elsewhere, “most likely IPG’s own records.”
Id. On that
basis, the Judges concluded that IPG had failed to
submit claims on which it later sought to recover, and that
Galaz testified falsely to the contrary.

     IPG filed a motion for modification to contest the Judges’
conclusion that Galaz gave false testimony by submitting
Copyright Royalty Board records that contained certain
irregularities. The Judges rejected the motion, noting that
IPG’s new evidence showed that the Board placed numbers on
each of 237 satellite claim filings from 2008, so did “nothing
more than prove the point: the CRB numbers every claim that
it accepts for filing.” U.S. Copyright Royalty Judges, In re
Distribution of 2004, 2005, 2006, 2007, 2008, & 2009 Cable
Royalty Funds, In re Distribution of 1999, 2000, 2001, 2002,
2003, 2004, 2005, 2006, 2007, 2008, & 2009 Satellite Royalty
Funds, Nos. 2012-6 CRB CD 2004-09 (Phase II); 2012-7 CRB
SD 1999-2009 (Phase II), Order on IPG Motions for
Modification 2 (Apr. 9, 2015) (Modification Ruling I).

             b. Discovery sanction

    The SDC also argued that IPG’s royalty claims on behalf
of Creflo Dollar Ministries (Creflo Dollar), Benny Hinn
                              10
Ministries (Benny Hinn), and Eagle Mountain International
Church, dba Kenneth Copeland Ministries (Eagle Mountain),
should be struck as a discovery sanction for IPG’s failure to
produce to the SDC a particular email responsive to an SDC
discovery request. The SDC sought correspondence between
IPG and devotional programming claimants relating to
representation agreements. The withheld 2005 email, from a
lawyer named David Joe to an IPG representative, concerns
representation agreements between Joe’s “clients” and IPG. E-
mail from David R. Joe, Brewer Anthony & Middlebrook PC,
to Annie Lutzker, et al. (Nov. 23, 2005) (J.A. 2037).

     The parties dispute whether Joe is in fact an agent of any
relevant “clients,” but whether or not these producers are
accurately described as Joe’s “clients,” this email appears to
refer to agreements between IPG and Benny Hinn, Creflo
Dollar, and Eagle Mountain. In the email itself Joe described
the “matter at hand” as “the 1999 cable distribution,” and
identified the agreements that were “the subject of this
discussion” as “the sole agreement with Hinn and Creflo, and
the second of two agreements with Copeland.”
Id. Joe wrote
that “I could easily support the position that these agreements
are not in effect because they have been breached, if you think
they have not been unequivocally terminated,” and noted that
any plan on IPG’s part to represent these clients at the
distribution proceeding “needs to be put to rest immediately,
and after it is, you should, in all candor, expect that the
termination provisions will be invoked.”
Id. The SDC
claimed that the email was responsive to its
discovery request. The Judges agreed, finding that IPG had
failed to produce discovery “relating to claimants’ attempted
termination(s) of IPG’s agency,” and disallowed IPG’s claims
on behalf of the mentioned claimants, Creflo, Benny Hinn, and
Eagle Mountain. Claims Ruling at 39. In contrast to the denial
                               11
of the presumption of validity, which was not a sanction but a
refusal to afford IPG a presumption that its conduct suggested
it did not deserve, the Judges dismissed these claims as a
sanction for IPG’s discovery violation.

     IPG twice moved to modify the discovery sanction,
arguing that the email was irrelevant and the sanction too harsh.
The Judges twice denied IPG’s motions, bolstering their
decision by identifying additional discovery requests to which
the email was responsive, yet was never produced.

         2. Distribution methodologies hearings

     From April 13 to 17, 2015, the Judges held another hearing
in which they received evidence and expert testimony
regarding appropriate distribution methodologies for the
royalties in the program suppliers and devotional programming
categories. MPA offered a methodology for computing
relative royalty shares in the program suppliers category, the
SDC offered one for the devotional programming category, and
IPG submitted a methodology that it contended should be used
for both categories. The Judges faulted MPA and the SDC’s
methodologies as supported by insufficient data, and faulted
IPG’s methodology for “its reliance on volume, time of day,
fees paid and number of subscribers as measurements of value”
U.S. Copyright Royalty Judges, In re Distribution of 2004,
2005, 2006, 2007, 2008, & 2009 Cable Royalty Funds, In re
Distribution of 1999, 2000, 2001, 2002, 2003, 2004, 2005,
2006, 2007, 2008, & 2009 Satellite Royalty Funds, Nos. 2012-
6 CRB CD 2004-09 (Phase II); 2012-7 CRB SD 1999-2009
(Phase II), Order Reopening Record and Scheduling Further
Proceedings 6 (May 4, 2016) (Order Reopening Record). The
Judges declined to adopt any of the offered methodologies and
directed that the record be reopened.
Id. at 8.
The Judges “set
aside” all submissions, evidence, and testimony from the April
                               12
2015 hearing and ordered the parties to submit new evidence
for a new hearing.
Id. On motion
from MPA and the SDC, the Judges excluded
all of IPG’s evidence from the new hearing for two reasons:
First, IPG asserted without explanation that its sole witness,
economic expert Dr. Cowan, could not appear at the hearing
and so would not be subject to cross-examination. Second, the
Judges’ rules require that a party wishing to rely on the
testimony of a witness from a prior proceeding must designate
the complete testimony of that witness and include a copy of it,
37 C.F.R. § 351.4(b)(2), but IPG failed to do so. IPG’s only
evidence aside from Dr. Cowan’s written testimony consisted
of citations to testimony from witnesses in past distribution
proceedings. IPG failed to include transcripts of the designated
testimony, in violation of the Judges’ rules. See Final
Distribution Determination: Distribution of 2004, 2005, 2006,
2007, 2008, and 2009 Cable Royalty Funds; Distribution of
1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008,
and 2009 Satellite Royalty Funds, 84 Fed. Reg. 16,038, 16,040
(Apr. 17, 2019) (Final Distribution Determination). The
Judges nevertheless allowed IPG to use Dr. Cowan’s written
testimony and IPG’s other exhibits in cross-examining MPA
and the SDC’s witnesses.
Id. The Judges
denied MPA and the
SDC’s motion for summary disposition, instead conducting a
hearing with live testimony to afford IPG the opportunity to
cross-examine the witnesses.
Id. Following the
new hearing in the reopened proceeding, the
Judges concluded that MPA and the SDC had fixed the paucity
of data identified in the earlier hearing.
Id. at 16,043,
16,046.
The Judges adopted MPA’s methodology and proposed
percentages for the program suppliers category,
id. at 16,045,
and adopted the SDC’s for the devotional category,
id. at 16,048.
                               13
II. Analysis

    A. Standard of Review

     We review decisions of the Copyright Royalty Judges to
determine whether they are arbitrary, capricious, contrary to
law or unsupported by substantial evidence. See 17 U.S.C.
§ 803(d)(3) (incorporating by reference 5 U.S.C. § 706). “Our
review is ‘highly deferential.’”           Settling Devotional
Claimants v. CRB, 
797 F.3d 1106
, 1114 (D.C. Cir. 2015)
(quoting Intercollegiate Broad. Sys., Inc. v. CRB, 
571 F.3d 69
,
79 (D.C. Cir. 2009)). Objections to the Judges’ procedural and
evidentiary orders “merge[] into and [are] reviewable” as part
of the final determination. Id.. We review the Judges’
determinations that a claimant violated its discovery
obligations “with ‘extreme deference’ because the ‘conduct
and extent of discovery in agency proceedings is a matter
ordinarily entrusted to the expert agency in the first instance.’”
Indep. Producers Grp. v. Librarian of Cong., 
792 F.3d 132
,
138-39 (D.C. Cir. 2015) (quoting Hi-Tech Furnace Sys., Inc. v.
FCC, 
224 F.3d 781
, 789 (D.C. Cir. 2000)). When reviewing
royalty distribution decisions, including distribution
methodologies, “we ask only whether the Royalty Judges’
assigned allocation percentages are ‘within a zone of
reasonableness.’” Settling Devotional 
Claimants, 797 F.3d at 1114
(quoting Christian Broad. Network, Inc. v. Copyright
Royalty Tribunal, 
720 F.2d 1295
, 1304 (D.C. Cir. 1983)).

    B. Presumption of Validity

    IPG does not question the Judges’ authority to determine
when the presumption of validity applies, but challenges their
withholding of the presumption here as an abuse of discretion
for want of substantial evidence that Galaz lied. IPG further
contends that it received constitutionally inadequate process to
                               14
contest the denial of the presumption that it was an authorized
representative pressing valid claims.        Neither of these
arguments has merit.

     IPG produced evidence that the Copyright Royalty Board
sometimes makes mistakes, but nothing called into question the
evidence that the Board numbered every satellite filing it
received for 2008, the IPG filing on record with the Board
contained such numbering, and the version IPG produced did
not. IPG identifies a handful of instances in which the Board
lost an entire filing or failed to number one, and it is certainly
“not inconceivable over the course of six years for the [Board]
to have misplaced a handful of pages from a single claim filed
by IPG.” Appellant’s Br. 46 (emphasis added). But the
mismatch between the claims number on the Board’s certified
copy of IPG’s claims and that number’s absence on the copy
produced by IPG is substantial evidence of the falsity of
Galaz’s testimony that IPG originally filed a complete copy,
and only received the incomplete copy in discovery from the
Board.

     The Judges’ decision to deny IPG the presumption of
validity based on Galaz’s false testimony and the fraudulent
Tracee Productions claim was not so severe as to be an abuse
of discretion. The presumption allows efficient distribution of
royalties; without it, the Judges would have to verify agent-
client relationships and make copyright-ownership
determinations for each filer seeking copyright royalties.
When they are able to rely on the presumption, the Judges need
only resolve the particular disputes, if any, that parties may
raise concerning the distribution of royalty fees. The relative
efficiency of such a system requires the good faith of its
participants but is seriously threatened by fraud or other abuse
of the presumption. The system accommodates the Judges’
excuse of good-faith mistakes, but it certainly does not require
                               15
the Judges to treat every irregularity as a good-faith error. The
Judges’ denial of the presumption to claims pressed by
claimants who appear not to have acted in good faith and, in
the absence of evidence supporting claims bereft of the
presumption, their grant of royalties only to unquestioned
claims and claimants is reasonable and non-arbitrary.

     The only effect on IPG of the Judges’ setting aside the
presumption was to place a burden on IPG to establish its
authority to represent the copyright holders on whose behalf it
claimed royalties. “To maintain the viability of this claims
distribution process, to preserve the reliability of the
information presented to the Judges and to prevent the abuse of
asymmetric information by participants, the elimination of the
presumption of prima facie validity as to the claims IPG
purports to represent constitutes a measured and proper
response.” 2014 Claims Ruling at 11. Indeed, the Judges’
response was mild in view of IPG’s repeat filing of fraudulent
claims for a “client” previously found to be fictional and
Galaz’s obfuscatory testimony about IPG’s faulty filing. IPG’s
loss of a large number of claims is no draconian sanction but
rather the predictable and reasonable result of IPG’s failure to
document its authority to represent the copyright holders, its
failure to file a complete set of claims on their behalf, and
Galaz’s attempt to cover up the latter failure by blaming the
Board.

    There is no question here that the process IPG received
was constitutionally adequate. IPG received notice that the
presumption might be denied from both the MPA and the
SDC’s written submissions requesting that relief. IPG had the
opportunity at a hearing to testify and present evidence in
support of its position. The Judges further considered IPG’s
position as urged in its motion for modification. IPG had all
                              16
the process it was due. See Indep. Producers 
Grp., 792 F.3d at 139
n.5.

    C. Discovery Sanction

      IPG argues that its failure to produce the David Joe email
was not a violation of any discovery obligation and that, even
if it were, the sanction of dismissing the claims of the three
producers IPG purported to represent was an abuse of
discretion. It also argues that the Judges could not, consistent
with due process principles, impose anything other than a
monetary sanction without prior notice to IPG and a finding of
prejudice to the SDC. We hold that the sanction, while harsh,
was not arbitrary and capricious and did not violate due
process.

     Because the Copyright Royalty Judges are closer to the
facts at hand and better able to determine what may or may not
fall within the scope of discovery, we review their
determinations that a claimant has violated its discovery
obligations with “extreme deference.” Indep. Producers 
Grp., 792 F.3d at 142
(quoting Hi-Tech Furnace 
Sys., 224 F.3d at 789
). Even viewing their ruling without such deference, it is
plain that the David Joe email is responsive to several of the
SDC’s discovery requests. For example, the SDC’s Document
Request Number Six requested “copies of all correspondence
between IPG and Claimants with respect to the Devotional
Representation Agreements,” U.S. Copyright Royalty Judges,
In re Distribution of 2004, 2005, 2006, 2007, 2008, & 2009
Cable Royalty Funds, In re Distribution of 1999-2009 Satellite
Royalty Funds, Nos. 2012-6 CRB CD 2004-09 (Phase II);
2012-7 CRB SD 1999-2009 (Phase II), Settling Devotional
Claimants’ Written Rebuttal Statement on Claims Issues Only
15-16 & n.4 (Oct. 15, 2014) (SDC Written Rebuttal Statement),
and the SDC’s Follow-Up Request Number Six requested
                               17
documents “relating to termination or attempted termination of
IPG by any claimant,” Modification Ruling I at 5 n.5. Whether,
as IPG contends, the David Joe email itself announced no
termination or attempted termination is beside the point; the
email is clearly a communication “relating to” IPG’s
representation agreements and their potential termination. As
the Judges noted, the very purpose of requesting all documents
“relating to” a disputed issue is that “[t]he producing party
does not make a judgment call regarding what evidence might
be probative, persuasive, or admissible.”
Id. at 4.
IPG’s failure
to produce a plainly responsive document, even accounting for
IPG’s own reading of the document as ultimately exculpatory,
was a blatant discovery violation.

     Whether the imposed sanction was reasonable presents a
closer question. We evaluate the choice of sanction under the
same standards by which we judge other administrative
actions, reversing only if—taking account of the nature of their
authority and the context in which they have exercised it—
“their decision is arbitrary, capricious, contrary to law, or not
based on substantial evidence.” Settling Devotional 
Claimants, 797 F.3d at 1114
(citation omitted). It is not for us to determine
whether the Copyright Judges’ choice was the one we also
would have taken. Just as they are equipped to make the factual
determination as to whether a discovery violation has occurred,
the Judges are better positioned to evaluate the appropriate
severity of a sanction in the context of the discovery violation’s
impact on the participants and the overall proceeding.

    IPG submits various inadmissible estimations of the
proportion of the royalties to which these three producers might
otherwise have been entitled, but the Copyright Royalty Board
does not dispute that the dismissal of their claims was a
substantial loss to IPG. IPG contends that, under the standard
applicable when a district court dismisses a litigant’s claims as
                                18
a discovery sanction, the Judges’ sanction was invalid. In civil
litigation in federal court, a sanction of claim dismissal must be
justified by “(1) prejudice to the other party, (2) prejudice to
the judicial system requiring the district court ‘to modify its
own docket and operations to accommodate the delay,’ [or]
(3) the need ‘to sanction conduct that is disrespectful to the
court and to deter similar conduct in the future.’” Butera v.
District of Columbia, 
235 F.3d 637
, 661 (D.C. Cir. 2001)
(quoting Webb v. District of Columbia, 
146 F.3d 964
, 971
(D.C. Cir. 1998)); see also
id. (noting district
court authority to
sanction pursuant to Federal Rule of Civil Procedure 37(b)(2)
and the court’s inherent power to protect the integrity of the
judicial process).

     We do not think that standard is applicable here. The
discovery and sanctions regime in federal district courts is
materially different from discovery and claim verification in
distribution proceedings under the Copyright Act. The
Copyright Royalty Judges do not derive their sanctioning
power from authorities governing Article III courts; instead,
Congress empowered these specialist Judges to supervise
disbursement of broadcast royalties. The Act empowers the
Judges to “make any necessary procedural or evidentiary
rulings” in the royalty proceedings. 17 U.S.C. § 801(c). And
their “plenary grant of adjudicative authority” includes power
to impose “sanctions when necessary to ensure fairness and
maintain [the] integrity” of the copyright claims process.
Indep. Producers 
Grp., 792 F.3d at 138
n.4 (citing Atl.
Richfield Co. v. Dep’t of Energy, 
769 F.2d 771
, 775, 795-96
(D.C. Cir. 1985)). In contrast to litigation in federal court, the
copyright royalties distribution process is largely clerical,
designed to enable good-faith participants to recover their
royalties through a streamlined, amicable, administrative
procedure. The administrative hearings backstop the clerical
process, and even they stop short of full adversary trials.
                               19
Rather, where disputes arise over submitted royalty claims, the
Act provides for a period to further encourage amicable
settlement and, failing that, discovery and hearings geared
toward expeditious resolution by the Judges. IPG has cited no
authority to import discovery-sanction standards designed for
adversarial adjudication in federal district court into
proceedings crafted by Congress to suit the specific needs of
routine royalty disbursement to holders of broadcast
copyrights.

     The Judges’ choice of sanction in this case, while severe,
was not unreasonable. IPG withheld an email plainly
responsive to SDC discovery requests, and the Judges
responded by dismissing the directly implicated claims—those
mentioned in the email. The Judges “reasonably responded to
a blatant discovery violation by IPG,” Indep. Producers 
Grp., 792 F.3d at 138
, and so long as the sanction falls within
reasonable parameters, we must affirm even if a lesser sanction
might have sufficed to preserve the integrity of distribution
proceedings. IPG had notice that the Judges might dismiss its
clients’ claims because the SDC requested that the claims be
struck. IPG then had the opportunity to argue against dismissal
at a hearing and in two subsequent motions for modification,
which satisfies the requirements of due process.

    D. Distribution methodologies

    Finally, IPG objects to the final royalty distribution
methodologies selected by the Judges, contending that the
Judges had previously rejected those very methodologies for
insufficient evidence. It also argues that the exclusion of IPG’s
expert reports as noncompliant with the Judges’ published rules
elevated “form over substance” and, because it left IPG’s
claims fatally unsupported, was an abuse of discretion.
Appellant’s Br. 70. We hold that the Judges’ distribution
                               20
methodology decisions were well “within a zone of
reasonableness.” Settling Devotional 
Claimants, 797 F.3d at 1114
(quotation marks and citation omitted).

     First, the Judges were within their discretion in holding
that IPG’s expert reports failed to conform to the Judges’
published regulations in that IPG failed to attach copies of prior
testimony that it wished to designate in the new proceeding.
See 84 Fed. Reg. at 16,040 n.12 (citing 37 C.F.R.
§ 351.4(b)(2)). The Judges fairly allowed IPG to use the
reports in cross-examining the SDC and MPA’s experts, but
IPG failed to undermine the experts. When the Judges faulted
IPG for lacking evidence or expert analysis to rebut the SDC
and MPA’s experts, they were not automatically ruling against
IPG for its want of an expert, but legitimately noting that
“[c]riticism by IPG’s counsel is not a substitute for expert
rebuttal testimony.”
Id. at 16,046
.
     Second, the Judges reasonably adopted the SDC and
MPA’s methodologies once they both fixed the evidentiary
problems the Judges had initially identified. The Judges must
apportion royalties among rightsholders for specific programs
in each program-category pool. To do so, they must determine
the relative marketplace value of those programs—a
calculation highly dependent on viewership. See Indep.
Producers 
Grp., 792 F.3d at 142
. For cable and satellite
retransmission royalties, the relevant viewership data quantify
distant viewership, as the royalties are for retransmissions
elsewhere of locally aired programs. The Judges initially
faulted MPA and the SDC for lacking data showing a
correlation between local ratings and distant viewership
sufficient to justify quantifying distant viewership as a function
of local ratings. See Order Reopening Record at 2-5.
                               21
     MPA’s methodology apportioned royalties in the program
suppliers category based on the respective number of hours that
cable and satellite subscribers viewed MPA-represented and
IPG-represented programs. 84 Fed. Reg. at 16,042. Because
obtaining distant viewership data for every year was
prohibitively expensive, MPA’s expert initially used local
viewing data from 2000 to 2009 and distant viewing data from
2000 to 2003 to calculate the relationship between them and
used that formula to predict distant viewership for the years
such data were unavailable. See Order Reopening Record at 3.
The Judges held that there were too many reasons the
relationship between known local and distant viewing data
from 2000-2003 would not validly project unknown distant
viewership based on known local viewership data for the 2004-
2009 period. They found the evidence inadequate without
either (1) more contemporaneous data from which to derive a
relationship or (2) other evidence that could persuade the
Judges such data were not needed for the methodology to be
reliable.
Id. at 4.
In the new hearing, MPA supplied distant
viewership data from 2008-2009, 84 Fed. Reg. at 16,042, and
its expert relied on the new and previously submitted data to
explain that the relationship between local and distant data
observed from 2000 to 2003 did not change significantly for
the period from 2008 to 2009, see
id. at 16,043.
The Judges
reasonably held that the additional two years of distant viewing
data beyond what was submitted in the initial hearing satisfied
their first concern, and the similarity of the relationship
rendered reliable the expert’s extrapolation regarding the years
for which data remained unavailable. See
id. The Judges
reasonably accepted the new evidence as remedying their
earlier evidentiary concerns and adopted the methodology.

     The Judges had initially faulted the SDC’s methodology
for similar problems, as its expert, extrapolating from local data
from the periods in question, relied on distant viewing data
                              22
limited to February 1999 for what the expert claimed was a
statistically significant correlation between local and distant
viewership. Order Reopening Record at 5. The Judges
concluded that the SDC’s methodology suffered from a
“critical lack of data,” both because there was no evidentiary
basis to conclude that a correlation “in the 1999 data continues
unchanged throughout the entire succeeding decade” and
because, even for the local data, the SDC’s expert had relied on
evidence from a single month in each year from 1999 to 2003.
Id. As it
had with MPA’s data, the Judges held the SDC’s
methodology faulty absent more contemporaneous distant
viewing data and more local ratings data, or grounds to
conclude such data were not necessary.
Id. In the
reopened proceeding, the SDC remedied both those
evidentiary deficiencies to the Judges’ satisfaction. The SDC’s
expert added distant viewership data from 1999 through 2003
at four different times during in each year. 84 Fed. Reg. at
16,045. And he gathered complete local data for the years 2004
to 2009 and used the data to demonstrate that program ratings
from a single month (i.e., February) were representative of
ratings throughout the year.

     The Judges held that the SDC and MPA’s additional data
“presented a quantum of persuasive evidence and analysis
demonstrating a positive correlation between local ratings and
distant viewing that is consistent over time.”
Id. at 16,046
(emphasis added). IPG has offered no evidence or argument
that calls into question the reasonableness of the Judges’
conclusion, other than to raise a broadside objection to any
viewership-based methodology in Phase II proceedings—an
objection that we have repeatedly rejected. See, e.g., Settling
Devotional Claimants v. CRB, Nos. 15-1084, 15-1093, 
2017 WL 1483329
, at *1 (D.C. Cir. Feb. 10, 2017); Indep. Producers
Grp., 792 F.3d at 142
.
                         23
                        ***

    For the foregoing reasons, we affirm the final
determination of the Copyright Royalty Judges and the
underlying orders challenged on appeal.

                                           So ordered.

Source:  CourtListener

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