DC Circuit: Allocation of Royalties To Religious Broadcasters Was Arbitrary and Capricious

Settling Devotional Claimants v. Copyright Royalty Board, (DC Cir., Aug. 14, 2015), is a suit involving a dispute among television ministries on how to divide among themselves the royalties paid by cable operators for re-transmission of the ministries’ television broadcasts for the years 2000-2003.  Under federal law, cable operators can retransmit programs initially aired on a broadcast station without further permission, but must deposit a royalty amount set by statute.  Each year the Copyright Royalty Judges determine how the royalties should be distributed. In an earlier phase of the proceedings the Judges determined the the total amount that should be allocated to devotional-religious programs. This phase of the proceedings involved the distribution of that amount among two competing groups-- a group of 23 ministries whose copyright broadcasts were distributed (the Settling Devotional Claimants) and a second group (Independent Producers Group) that claimed to represent 7 other ministries, but was held by the Royalty Judges to properly represent only four others. The Royalty Judges rejected the methodologies urged by both parties and instead used its own approach to allocate the royalties between the two groups.  The Court of Appeals held that the Royalty Judges' allocations were arbitrary and capricious, saying in part:

[The Devotional Claimants]  argue that, after the Royalty Judges ... simply split the difference between the two parties, and that decision was arbitrary and capricious and unsupported by substantial evidence. We agree with the Devotional Claimants..... King Solomon was not subject to the Administrative Procedure Act; the Royalty Judges are.