Black Sheep’s $750M Lawsuit Against Universal Over Spotify Royalties Is Dismissed

Black Sheep‘s class action lawsuit against media giant Universal over the alleged withholding of Spotify royalties has been dismissed.

According to Reuters, Manhattan District Judge Jennifer Rochon claimed that the Hip Hop duo waited too long to bring their case before the court, and that the statute of limitations had therefore run out. What’s more, Judge Rochon ruled that the duo couldn’t support their remaining claims of UMG unlawfully underpaying its artists.

The crux of Black Sheep’s claim stemmed from the accusation that the media giant withheld more than $750 million in royalties from all of their artists — not just the “The Choice Is Yours” rappers — thanks to a so-called “sweetheart deal” with Spotify, of which UMG owns a 3 percent stake.

The $750 million number is derived from a September 2021 Universal report that valued its stake in Spotify at approximately $1.7 billion. The lawsuit alleged a “substantial portion” of that stake stems from the shares Universal and its subsidiaries acquired in or around 2008.

As for exactly how many artists are involved, Black Sheep couldn’t provide an exact number, but they believed “it encompasses at least thousands of artists whose identities can be readily ascertained from Universal’s records.”

Black Sheep alleged that Universal accepted both cash and company stock from Spotify in exchange for music from their artists, and then turned around and only counted the cash when it distributed royalty payments.

In the lawsuit, Black Sheep stated that the “previously undisclosed” deal violated the contract they have with former Universal subsidiary Polygram dating back to the ’90s, which requires Universal to pay 50 percent of all net receipts connected to exploitation of the duo’s music.

“In the mid-2000s, Universal struck an undisclosed, sweetheart deal with Spotify whereby Universal agreed to accept substantially lower royalty payments on artists’ behalf in exchange for equity stake in Spotify – then a fledgling streaming service,” the docs stated.

“Yet rather than distribute to artists their 50 percent of Spotify stock or pay artists their true and accurate royalty payments, for years Universal shortchanged artists and deprived plaintiffs and class members of the full royalty payments they were owed under Universal’s contract.”

It continued: “For approximately a decade, Universal omitted from the royalty statements Universal issued to plaintiffs that it had received Spotify stock in connection with the ‘use or exploitation’ of Black Sheep recordings.”

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At the time, a UMG spokesperson called the allegations “false and absurd.”

Spotify, however, did not provide any comment.

It is unclear if Black Sheep have additional recourse after this dismissal.