The lawsuit, which was originally filed on behalf of music consumers in New York in 2007 and combined 28 similar suits filed from December 2005 through July 2006, accuses the labels of scheming to fix prices and terms for selling music online.

But a lower court judge dismissed the lawsuit in October 2008. Today the 2nd U.S. Circuit Court of Appeals in Manhattan ruled that the lawsuit could proceed because alleged facts put forth by the plaintiffs supported their claims.

Defendants are the usual subjects – Universal Music Group, Warner Music Group, EMI Music North America and Sony BMG Music Entertainment.

According to the lawsuits, the labels allegedly conspired to charge at least 70 cents a song for downloads although their costs were much less than placing music in record stores, and that record companies agreed on an approximate 70 cent wholesale price floor when other download services began offering music at a cheaper rate.

The lawsuits also claimed the record companies signed distribution agreements in joint ventures allowing them to communicate among themselves about matters such as pricing, terms and use restrictions.

In delivering its ruling, the appeals court also noted how eMusic charges 25 cents for songs that come with no restrictions, and pointed out that the major labels have refused to do business with the subscription service, which is second in popularity only to iTunes.

The appeals court also said the New York State attorney general is well under way to proving the alleged price fixing, and that the issue is the subject of two separate investigations by the Department of Justice.