*1 Pending before the Court is a Letter Motion by Respondent Broadcast Music, Inc. (“BMI”) for a protective order precluding Petitioner Radio Music License Committee, Inc. (“RMLC”) from seeking discovery regarding BMI's 2022 change to a for-profit business model and 2023 sale to New Mountain Capital (“NMC”). (BMI 8/26/24 Ltr. Mot., ECF No. 82.) For the reasons set forth below, BMI's Letter Motion is GRANTED.

I. BMI And Its Consent Decree

BMI is one of the largest performing rights organizations (“PROs”) in the country. United States v. Broad. Music, Inc., 275 F.3d 168, 171 (2d Cir. 2001). BMI grants licenses to music users, collects license fees from them and distributes the royalties among its affiliated copyright holders. Id. BMI represents over 22.4 million musical works created and owned by more than 1.4 million songwriters, composers and music publishers. See BMI website, https://www.bmi.com/about [https://perma.cc/YQ2Q-LV2R].

BMI entered into a consent decree with the Department of Justice in 1966 (the “BMI Consent Decree”). (BMI Consent Decree, ECF No. 82-1.) The BMI Consent Decree requires BMI to grant a license to all music users who request one, and to quote the applicant a reasonable fee for such license.[1] (See id. § XIV(A).) If BMI and the applicant cannot agree on a final fee during a mandatory negotiation period, either can apply to the U.S. District Court for the Southern District of New York “for the determination of a reasonable fee.” (Id.) This aspect of the BMI Consent Decree is referred to as a “ ‘rate court’ mechanism.” Broad. Music, Inc. v. DMX Inc., 683 F.3d 32, 37 (2d Cir. 2012).

“In the[ ] rate court proceedings, the burden proof is on [BMI] to establish the reasonableness of the fee it seeks.” DMX, 683 F.3d at 44-45 (citing BMI Consent Decree § XIV(A)).[2] “If [BMI] establishes that its requested rate is reasonable, then the [rate] court shall adopt it.” Id. at 45 (citing BMI Consent Decree § XIV(A)). “If [BMI] is unable to establish that its requested rate is reasonable, then the rate court shall determine a reasonable fee based on all the evidence, including a proposal from the music user.” Id. (citing BMI Consent Decree § XIV(A)).

“The rate court is responsible for establishing the fair market value of the music rights, in other words, the price that a willing buyer and a willing seller would agree to in an arm's length transaction.” United States v. Broad. Music, Inc., 426 F.3d 91, 95 (2d Cir. 2005) (“Music Choice IV”) (cleaned up) (citation omitted). “Benchmarks, or agreements reached after arms’ length negotiation between other similar parties in the industry, are often used by the rate court in determining the fair market value of the music.” DMX, 683 F.3d at 45 (citation omitted). In assessing whether an agreement provides a valid benchmark, the Court must

Music Choice IV, 426 F.3d at 95 (cleaned up) (citations omitted).

II. BMI's Change In Business Model And Sale

Historically, BMI had operated as a not-for-profit organization. (RMLC 8/29/24 Ltr. Resp., ECF No. 85, at 1.) On March 9, 2022, it was publicly disclosed that BMI's Chief Executive Officer had sent an internal note to BMI employees on March 4, 2022, stating in part that BMI “ha[d] hired outside advisors to help [BMI] explore strategic opportunities that could further grow the value of [its] affiliates’ music and [its] business.” Tim Ingham, BMI Hires Goldman Sachs to ‘Explore Strategic Opportunities’. Could It End Up Selling?, Music Business Worldwide (Mar. 9, 2022) [https://perma.cc/85JF-WXBQ].

In October 2022, BMI publicly announced that it would be changing to a for-profit business model. See Jem Aswad, BMI Is Changing to a For-Profit Business Model, Variety (Oct. 12, 2022) [https://perma.cc/QM9J-ZEGF]. In November 2023, it was publicly announced that NMC, a private equity firm, would be acquiring BMI, subject to approval by BMI's shareholders and regulatory review, and that the transaction was expected to close in the first quarter of 2024. See Ben Sisario, Music Licensing Giant BMI Sells to Private Equity Firm, New York Times (Nov. 21, 2023) [https://perma.cc/Q3S7-XDHP]. In February 2024, BMI publicly announced that the transaction received the necessary shareholder and regulatory approvals required for closing and that NMC therefore had completed its previously announced acquisition of BMI. See BMI Press Release, New Mountain Capital Announces the Closing of its Majority Growth Investment in BMI (Feb. 8, 2024) [https://perma.cc/4DUF-B58E].

III. RMLC And Its Initiation Of This Action

RMLC is a non-profit Tennessee corporation that represents the interests of commercial radio stations concerning music licensing matters, including the negotiation and documentation of licenses from PROs, including BMI. (Am. Pet., ECF No. 46, ¶ 1.) The most recent RMLC licensing arrangements between RMLC and BMI covered the license period January 1, 2017, through December 31, 2021. (Id. ¶ 20.) In December 2021, RMLC had made a written application on its members’ behalf to secure reasonable license fees and terms from BMI for the license term from January 1, 2022 through December 31, 2026 (the “License Term”). (Id. ¶¶ 3, 18; see also Ex. D to BMI 8/26/24 Ltr. Mot, ECF No. 82-4, at 3.[3]) In March 2022, a few days after BMI's CEO announced that BMI had hired outside advisors to help BMI explore strategic opportunities (see Background Section II, supra), BMI made a fee quote to RMLC that proposed raising the headline rate of its license more than seventy percent. (RMLC 8/29/24 Ltr. Resp. at 1.) In May 2022, RMLC made a rate proposal to BMI, but BMI never responded. (Am. Pet. ¶¶ 24-25.)

*3 On June 15, 2022, RMLC filed this action seeking a determination of reasonable final license fees for the License Term.[4] (Pet., ECF No. 1.) RMLC filed an Amended Petition on August 10, 2023. (See Am. Pet.) RMLC uses as a reference in its Amended Petition the rates in RMLC's most recent agreements with BMI and ASCAP. (See id. ¶¶ 20-21.) By contrast, in its Response to the Amended Petition, BMI asserts that an increase in rates is warranted based upon significantly higher rates negotiated between Global Music Rights, LLC (“GMR”)[5] and RMLC itself or other large radio stations groups, many of which are represented by RMLC. (See Ans. to Am. Pet. ¶¶ 60-63.)

IV. Disputed Discovery Requests

On September 8, 2023, RMLC served document requests upon BMI seeking documents related to BMI's change in business model and sale. (Ex. B to BMI 8/26/24 Ltr. Mot., ECF No. 82-2, at 1.) RMLC served additional requests related to the same topics on May 3, 2024. (Id. at 1-2.) Thereafter, “[i]n an effort to reach compromise,” RMLC stated in an August 14, 2024 letter to BMI that RMLC had “narrowed” its requests to the following:

(Ex. C to BMI 8/26/24 Ltr. Mot., ECF No. 82-3, at 3.)

BMI declined to produce documents pursuant to these narrowed requests, and on August 26, 2024, filed the instant Letter Motion seeking a protective order precluding the RMLC from seeking production of documents related to BMI's change in business model and sale, or from making inquiries related to the same during depositions. (BMI 8/26/24 Ltr. Mot. at 3.) On August 29, 2024, RMLC filed its response arguing that the Court should deny BMI's request for a protective order and instead compel BMI to produce the requested documents. (See 8/29/24 RMLC Ltr. Resp. at 3.)

Both BMI's request for a protective order and RMLC's request to compel require the Court to determine whether the documents and information sought properly are discoverable. See New York v. Solvent Chem. Co., 214 F.R.D. 106, 108 (W.D.N.Y. 2003) (court may issue protective order if information sought is irrelevant); Sadofsky v. Fiesta Prod., LLC, 252 F.R.D. 143, 152 (E.D.N.Y. 2008) (denying in part motion to compel where information sought not relevant).

Rule 26 of the Federal Rules of Civil Procedure permits the parties to obtain discovery regarding any nonprivileged matter that is “relevant to a party's claim or defense and proportional to the needs of the case ....” Fed. R. Civ. P. 26(b)(1). It is within a Magistrate Judge's discretion to decide whether discovery requests are relevant and proportional. See Energizer Brands, LLC v. My Battery Supplier, LLC, No. 19-CV-06486 (AMD) (CLP), 2021 WL 4972597, at *3 (E.D.N.Y. Oct. 26, 2021).

After careful review of the record before the Court, including the Letter Motion and response, the pleadings and the parties’ discovery correspondence, the Court finds, in its discretion, that discovery related to BMI's change in business model and sale are not relevant to the claims or defenses in this action. BMI's change in business model and its sale do not impact the fair market value of the music rights, which is the ultimate issue at the heart of this action.[6] See Music Choice IV, 426 F.3d at 95.

*4 In arguing in support of the relevance of the requested discovery regarding BMI's change in business model and sale, RMLC points to the temporal proximity in March 2022 between two events: (1) the announcement by BMI's CEO that BMI had hired outside advisors to help BMI explore strategic opportunities, and (2) BMI's fee quote to RMLC reflecting a “whopping license fee increase.” (RMLC 8/29/24 Ltr. Resp. at 1, 3.) As BMI notes, the timing of these two events was fortuitous since BMI was obligated under the BMI Consent Decree to provide a rate quote within 90 days of receiving a license application, which it received in December 2021. (Ex. D to BMI 8/26/24 Ltr. Mot. at 4.) Furthermore, in March 2022, at the time that BMI made its rate quote, there had been no change in BMI's business model and there had been no sale. BMI did not change to a for-profit status until October 2022, the sale to NMC was not initiated until November 2023 and the sale did not close until February 2024. (See Background Section II, supra.)

RMLC also argues that BMI should be compelled to produce the requested discovery because “RMLC is entitled to probe the economic circumstances motivating [BMI's] quote” in March 2022. (RMLC Ltr. Resp. at 2.) Again, BMI's change in business model and sale did not occur until much later. In any event, BMI's motivation in making its quote is not at issue. The question before the Court is whether BMI can establish that its requested rate is reasonable (and, if not, to determine what a reasonable fee is).[7] See DMX, 683 F.3d at 45.

Even assuming, arguendo, that BMI's change in business model and sale were somehow relevant to a claim or defense in this case, the Court finds, in its discretion, that discovery regarding these topics is not proportional to the needs of the case. In this case, the Court must determine the fair market value of the music rights in question. The discovery sought by RMLC is, at best, a sideshow.

For the foregoing reasons, BMI's motion for a protective order is GRANTED. It is hereby ORDERED that RMLC is precluded from seeking production of documents related to BMI's change in business model and sale, and from making inquiries related to the same during depositions.