Judge Clears Proposed Settlement in Royalty Suit Against Universal

A Los Angeles Superior Court judge has given preliminary approval to a $4.75-million settlement between Vivendi Universal’s Universal Music Group and what could be as many as 300 aging and deceased recording artists who are owed royalties.

An attorney for the lead plaintiff, torch singer Peggy Lee, said it was the first class-action lawsuit to accuse a record company of employing questionable accounting tactics to cheat artists of royalties dating as far back as the 1940s.

The settlement papers, signed Monday by Judge Victoria Gerrard Chaney, characterize the agreement as “reasonable and fair.” Universal admitted no wrongdoing.

On Monday, the judge also formally declared the suit a class action, expanding the number of potential plaintiffs to nearly 300 artists who recorded with the Decca label before Jan. 1, 1962.

A final settlement could be reached by early May, after a so-called fairness hearing is held to determine whether anyone objects.

Universal, the world’s biggest record company, acquired Lee’s contract as a result of a series of mergers. Decca merged with MCA Inc. in January 1966 and was in turn purchased by Seagram Co. in 1995. The music group was renamed Universal. Vivendi acquired Seagram in 2000.

Attorneys had little comment outside court. Language in the proposed settlement prohibits each lawyer from discussing the case with the media unless a lawyer for the other side is present or approves a prepared statement.

Lee, who was signed to Decca between 1952 and 1956, contended that Universal cheated her and other artists out of millions of dollars by underreporting sales figures and overcharging for company services. Each member of the class, Lee alleged, was owed $50,000 or more.

Lee and her lawyers, Cyrus V. Godfrey and David W. Axelrod, said in their court papers that Universal’s allegedly fraudulent accounting practices included short-changing artists of earnings on CD sales by paying royalties based on the price of vinyl records. Many artists agreed to the vinyl-based royalties in the mid-1980s, before compact discs had taken hold among consumers.

Moreover, the lawsuit alleged, the company was underpaying royalties on record-club sales, and overcharged artists for album packaging and other services.

The proposed settlement comes at a time when record company business practices are under heavy scrutiny. Such acts as Courtney Love and the Dixie Chicks have alleged similar questionable accounting practices and filed lawsuits that could turn a spotlight on industry tactics.

Royalty suits against Capitol Records by Lee, band leader Les Brown and the heirs of Dinah Shore and Benny Goodman were settled in 1999. Terms of those settlements are confidential.

Specifically excluded from the Lee settlement are artists who are suing Decca individually over royalties, including country music star Loretta Lynn and the estates of Bing Crosby and Buddy Holly.

According to the Lee settlement papers, Universal will set up a $4.75-million trust account to pay any musician in the class or their heirs who agrees to join the legal action. Included in the class are music greats, living and dead, such as Pearl Bailey, Louis Armstrong, Billie Holiday, Patsy Cline, Ella Fitzgerald, the Andrews Sisters and Bill Haley and the Comets, according to Godfrey.

Lawyers have until March 8 to notify potential plaintiffs so they can decide whether to join the action, drop out, or object.

Universal lawyer Steve T. Kang told the judge that the company will begin “some real detective work” to locate the Decca artists. Under terms of the proposed settlement, a $700,000 trust will be set aside for those who can’t immediately be located and contacted, he said.

Lee, who is 81 and in ill health since a stroke in 1998, was unavailable for comment. Born Norma Deloris Engstrom in Jamestown, N.D., Lee once worked milking cows and first sang on the radio at age 14. She gained fame during the 1940s as a singer with Benny Goodman’s band, and was known during her years with Decca and Capitol Records as a sultry blond singer of jazzy torch songs.

Her Decca catalog includes standards such as “Lover,” “Black Coffee,” “My Heart Belongs to Daddy,” “Mr. Wonderful” and “I’ve Grown Accustomed to His Face.”

Lee also acted, playing the first dramatic lead in 1953’s “The Jazz Singer” and writing songs and providing the voices of several characters in Disney’s “Lady and the Tramp.” She was paid $3,500 a week for her work in the 1955 film, but in 1991 was awarded $3.83 million in videocassette profits.