Monday, October 23, 2006

CAB Gets SOCAN + NRCC radio increase sent back to CB by FCA

On October 14, 2005 the Copyright Board gave SOCAN and NRCC an increase in the tariff payable by commercial radio stations amounting to about 30% by the Board’s own estimate. The hearing had taken place in May, 2004 - about 18 months earlier.

The Canadian Association of Broadcasters (“CAB”) - which was largely responsible for the establishment of the predecessor the Board to deal with the predecessor of SOCAN about 70 years ago - was very upset, calling the decision “aberrant and unreasonable” and referring, controversially, to the Board as “renegade”.

After only one week of deliberation, the Federal Court of Appeal (“FCA”) on October 19, 2006 has granted, with costs, a judicial review application by the CAB on the basis of “the inadequacies of the Board's reasons respecting the quantification of the royalty increases attributable to both the historical undervaluation of music, and the greater efficiencies achieved by the industry through its use of music”.

The FCA declined to reverse the Board on its alleged failure to take into account the “cumulative royalty burden” resulting from the “proliferation in the number of rights holders to be compensated”. This additional burden - of course - flows from the decision of Parliament in 1997 to recognize neighbouring rights.

The decision was written by Mr. Justice John Evans, who is not a only a judge of the Federal Court of Appeal but is the co-author of the leading Canadian treatise on administrative law. He said:

[16] The Board is entitled to the greatest deference in the exercise of its discretion to set a rate and, accordingly, the discretionary decisions lying at the heart of its expertise are reviewable only for patent unreasonableness. However. it must explain the basis of its decisions in a manner that enables the Court on Judicial review to determine on the basis of the reasons, read in context, whether the decision was rationally supportable. When an administrative tribunal's decision is reviewable on a standard of reasonableness, its reasons are the central focus of a judicial review: Law Society at New Brunswick v. Ryan, [2003] 1 S.C.R. 247, 2003 see 20, at paras. 48-9, 54-55.

[17] In my view it was not sufficient in the circumstances of this case for the Board to justify its quantification of the undervaluation by merely referring to the evidence taken as a whole. It is not enough to say in effect: "We are the experts. This is the figure: trust us." The Board's reasons on this issue served neither to facilitate a meaningful judicial review, nor to provide future guidance for regulatees.
(Emphasis added)

This appears to be a victory - for at least the time being - for the CAB.
But the really interesting question is what effect this could have on the Board itself. The Board already takes considerable time - often well over a year - to render its reasons, which are invariably carefully written and which hitherto been considered close to “bullet proof” in terms of appellate deference to rate calculation, review of the evidence and the other matters in which the Board is presumed to have great expertise. Traditionally, the FCA has refused to get involved in such issues unless there is “patent unreasonableness” in the decision.

Now, however, it seems that Board must now explain in greater detail how it gets to its bottom line. And in some respects, more detailed reasoning may open up even more possibilities for judicial review. Merely referring to the often voluminous evidence filed before it is no longer going to be sufficient.

The new regime set forth by Justice Evans may also lead to the need for the Board to evaluate more critically and analyse the quality of the evidence it relies upon, and why it is being relied upon. Evidence at the Board is often less than convincing. It is sometimes hearsay by any measure and is sometimes submitted by persons whose independence as experts could be readily challengeable in a court of law because they have a close ties with the collective that retains them to testify before the Board.

Below the tip of this iceberg is the fact that Parliament has chosen to largely delegate - some might say “abdicate” - a lot of power to the Board to not only determine terms, conditions and rates of tariffs but to effectively make law from square one. This is in stark contrast to many royalty issues in the USA, which are spelled out in often gruesome detail.

At the other end of the spectrum from broad law making, the Board routinely rules on procedural matters such interrogatory disputes (the Board’s somewhat analogous procedure to discoveries - except that there is no oral examination). There are often significant disputes as to what is relevant or too burdensome. Almost invariably, the Board provides no or at most extremely brief reasons for its procedural rulings.

Justice Evan’s decision will create a dilemma for the Board. There is already criticism, that that Board often takes well over a year following a hearing to render a decision. And the lead up to the hearing is often a couple of years. And in recent years, the Board’s panels have usually consisted of only three of its five members. In a report in Lawyers Weekly, September 8, 2006, Arnold Ceballos reported that Mr. Justice Vancise, the judicial Chair of the Board, recently acknowledged in a Toronto speech that there are substantial delays. Judge Vancise reportedly stated that “If the Supreme Court of Canada can render a decision in six months I can see no reason why this Board cannot do better”.

The Judge certainly and commendably seems to be trying to help to move things along. Of course, it’s not easy to compare statistics here. It’s an interesting question as to whether the Supreme Court of Canada is the most appropriate proxy for a benchmark for pendency of decisions . But that is a subject for discussion elsewhere. The immediate question is whether the need for more detailed decisions result in even longer delays in the release of decisions at the Copyright Board?

It will be interesting to see what the Board will do about this particular decision. It apparently has to hold another hearing - and to give more detailed reasons. There may be new evidence. The FCA said “On these issues of quantification, the Board may invite the parties to supplement the existing record with new evidence and submissions.” Will “may” mean “must”? If so, could it be virtually a de novo hearing? Also, the two members who did not hear the case before must now be involved. Will they review the previous record or should they hear the case all over again? Will this mean another three person panel or a full five member panel, which has been rare in recent years? This is all very interesting - and will undoubtedly be very costly to the parties in fees alone.

Will the Board change the result - or will it reiterate its previous decision - but with more “adequate” reasoning? Could it result in an even higher tariff? And when will we know the answer?


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