Grammy-nominated songwriter and record producer Kevin Risto has filed a class action lawsuit against SAG-AFTRA, the American Federation of Musicians and the trustees of the Intellectual Property Rights Distribution Fund, claiming the unions violated their fiduciary duty to session musicians and backup singers by taking a 3% service fee on all royalties they’re owed.
Risto, who has written and produced songs for Justin Bieber, Jennifer Lopez, 50 Cent and Frank Ocean, claims that SAG-AFTRA collected more than $1.7 million in service fees in 2016 that it was not entitled to – and has been collecting similar fees since 2013. The suit (read it here), filed June 22 in Los Angeles Superior Court, wants the union to repay the money and stop collecting it in the future.
The suit notes that federal law grants the owner of a copyright in a sound recording the exclusive right to perform and reproduce it publicly by means of a digital audio transmission. Sound Exchange, an affiliate of the Recording Industry Association of America, is the sole U.S. entity authorized to collect royalties due from these songs. It then turns the performers’ share of the money over to the fund, which was established by the unions to distribute the royalties to members and non-members alike.
The suit states that prior to its merger with SAG in 2012, AFTRA distributed these royalties without ever collecting a service fee, but that after the merger, the fund’s trustees – all of whom are officials or members of the unions – approved granting the unions a 3% service fee on the royalties they distribute.
The suit claims that the defendants “were trustees of the Fund, but were acting with deep conflicts of interest to the benefit of the unions, by which they were employed. This service fee reduces the amount of capital in the Fund and therefore reduces the amount of money available to the beneficiaries of the Fund.”
According to the suit, “Defendants violated their duties to the Trust when authorizing the service fee and diverting funds away from the Fund and to the unions. The service fee is purportedly paid to the unions for the provision of certain data and representation of ‘Fund interests.’ However, all of the obligations conferred on the unions in the service agreement were activities that the unions were already performing as a benefit to its members. No new consideration was provided by the unions in exchange for the service fee.” The suit also alleges that the defendants violated the terms of the service agreement by paying the trustees’ expenses.
Risto, who is not a member of either union, is represented by attorneys Paul Kiesel and Neville Johnson of Kiesel Law LLP In Beverly Hills.