In a counterclaim filed Monday (Aug. 27) in the U. S. District Court for Southern New York, the Dixie Chicks struck back at Sony Records, alleging that the giant record company had breached its contract and fiduciary obligations with them, defrauded them of various royalties and engaged in racketeering on an international scale.
The Chicks are asking for a jury trial. They maintain that Sony must be charged substantial punitive damages — not simply compensatory ones — to prevent the company from repeating the alleged offenses against other artists.
One thread that runs through the 48-page counterclaim is that Sony defrauds all its artists as a matter of business policy. At no point does the trio suggest it has been singled out for corporate mistreatment. The action also stresses that “since there are only five major recording companies in the world,” the Chicks and other artists are necessarily at a disadvantage when they negotiate and renegotiate their contracts.
The counterclaim was lodged in response to Sony’s July 17 filing in the same court, demanding that the Chicks honor their recording contract, which, the company maintained, called for five more albums.
“[T]he Dixie Chicks have terminated the recording contract,” the counterclaim states, “and have no intention of ‘bargaining’ with Sony or otherwise continuing their recording career with Sony.”
Although the counterclaim charges that the record company has systematically kept the Chicks from discovering the actual amount of royalties due them, it estimates that Sony has wrongfully withheld at least $4.1 million, of which it is still withholding more than $1.4 million.
According to the counterclaim, the Chicks have sold more than $175 million worth of records. It says that Sony has resorted to several ruses to underpay the act, including under-reporting the actual number of album sales, withholding royalties to offset the cost of more album returns than could reasonably be anticipated for an act of the Chicks popularity, underpaying mechanical royalties (for songs the Chicks wrote as well as recorded), underpaying for record club and foreign sales and failing to share with the Chicks and other artists a purported $20 million settlement it received from the online music service MP3.com.
In addition, the counterclaim says that Sony urged the Chicks to use Paul Worley, then an executive vice president at the label, as a producer and that the company then paid Worley his eight percent royalty rate “on a basis substantially higher than the basis applicable to the Dixie Chicks.” The complaint continues, “Through December 31, 2000 Sony has charged the Dixie Chicks with producer royalties in respect of Mr. Worley’s services for the Second Album [Fly] in an amount at least $150,000 greater than the charge which would have been made if the producer royalties had been calculated on the basis represented by Sony to be applicable.”
The counterclaim alleges that Sony failed to account properly or pay the Chicks as it was supposed to 30 different times. It also maintains that Sony’s improper accounting and “stonewalling” requests for information have made it impossible for the Chicks to get an accurate reporting of what is due them without the court’s intervention.