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LEVERT v. PHILADELPHIA INTERNATIONAL RECORDS

United States District Court, E.D. Pennsylvania


April 9, 2004.

EDDIE LEVERT, WALTER WILLIAMS d/b/a THE O'JAYS, and O'JAYS GIGS, INC.
v.
PHILADELPHIA INTERNATIONAL RECORDS, ASSORTED MUSIC, INC., GAMBLE-HUFF, KENNETH GAMBLE, CHUCK GAMBLE, LEON HUFF and THE RIGHT STUFF, A DIVISION OF CAPITAL RECORDS, INC

The opinion of the court was delivered by: RICHARD B. SURRICK, District Judge

MEMORANDUM & ORDER

Presently before the Court is Plaintiffs' Complaint and Application for Temporary Restraining Order and Injunctive Relief Pursuant to Fed.R.Civ.P. 65. (Doc. No. 1.) On April 2, 2004, Plaintiffs filed the complaint and requested that we temporarily restrain Defendants from releasing a music record entitled "Together We Are One" (hereinafter, "Together"). On April 6, 2004, with the parties' consent, we entered an order temporarily restraining Defendants from distributing any additional copies of "Together"*fn1 and scheduling a hearing for April 7, 2004, to hear evidence on Plaintiffs' request for a preliminary injunction. Upon consideration of the evidence presented at that hearing, arguments of counsel, and all papers filed with the Court, we will deny Plaintiffs' request for a preliminary injunction. We will also dissolve the temporary restraining order we previously issued in this case. I. BACKGROUND

Plaintiffs Edward Levert and Walter Williams are singers and performers who form the musical group known as The O'Jays.*fn2 The O'Jays have been recording music for more than forty years and have achieved great success. Notably, The O'Jays have recorded more than fifty records, including nine "platinum records" and ten "gold records".*fn3

  The O'Jays signed several recording contracts with Defendant Assorted Music Inc., d/b/a Philadelphia International Records ("PIR"), beginning in the early-1970's. The O'Jays recorded music pursuant to recording contracts with PIR until the mid-1980's. At issue in this case is the recording contract The O'Jays signed with PIR in 1979 (the "Contract"). The songs on Together were recorded by The O'Jays during the term of the Contract.*fn4 Plaintiffs claim that Defendants breached the Contract and therefore seek to enjoin the release of Together. They claim that the songs comprising Together are of inferior quality and that their release will irreparably tarnish The O'Jays' reputation in the music industry. Plaintiffs also claim that Defendants are liable for fraud, unjust enrichment, and breach of fiduciary duty. Defendants argue that we should deny Plaintiffs' request for a preliminary injunction because Defendants did not breach the Contract and because pursuant to the Contract Defendants acquired the right to release the songs on Together. Defendants also deny that they are liable for fraud, unjust enrichment, or breach of fiduciary duty. The songs comprising Together were recorded during the term of the Contract but were not previously released. Williams testified that when the O'Jays were recording songs for PIR, The O'Jays would record approximately fifteen songs for each proposed record. Seven or eight of those songs would then be selected for release on the record. The remaining songs were not released but the recordings of those songs were retained by PIR (the "Unreleased Songs"). During the time that The O'Jays recorded songs for PIR, The O'Jays recorded many Unreleased Songs.*fn5

  Plaintiffs claim that in 1999 they asked Defendants if they would help Plaintiffs secure a contract to produce and distribute a record that included only songs owned by The O'Jays. Defendants offered instead to produce a record comprised in part of songs owned by the O'Jays, and in part of Unreleased Songs, which were owned by Defendants. Plaintiffs agreed to this proposal. Levert even recorded part of one song to support this proposal. However, Defendants were unable to secure an agreement with a distributor to distribute the proposed record. Plaintiffs then entered into an agreement with another record company and were able to produce and distribute a record comprised solely of songs owned by The O'Jays.

  Sometime later, Defendants decided to produce and distribute a record that included only the Unreleased Songs. The parties presented conflicting evidence as to when Plaintiffs learned of Defendants' intentions. However, it is clear that as early as August, 2003, there were negotiations between Plaintiffs and Defendants over the Defendants' proposal to release a record comprised of the Unreleased Songs. In October, 2003, Plaintiffs learned that Defendants were actually pursuing this proposal. Sometime thereafter, Plaintiffs learned that Defendants planned to release Together on April 6, 2004. On April 2, 2004, Plaintiffs filed this action to enjoin the release of Together.

 II. ANALYSIS

  1. Legal Standard Applied to a Request for a Preliminary Injunction

  "An injunction is an extraordinary remedy, which should be granted only in limited circumstances." Novartis Consumer Health, Inc. v. Johnson & Johnson Consumer Pharms. Co., 290 F.3d 578, 586 (3d Cir. 2002) (quotations omitted). Before issuing an injunction, the moving party must show that the following four factors favor issuing the injunction: "(1) the likelihood that the moving party will succeed on the merits; (2) the extent to which the moving party will suffer irreparable harm without injunctive relief; (3) the extent to which the nonmoving party will suffer irreparable harm if the injunction is issued; and (4) the public interest." We will only issue an injunction if all four factors favor relief. AT & T V. Winback & Conserve Program, Inc., 42 F.3d 1421, 1427 (3d Cir. 1994).

  2. Likelihood of Success on the Merits

  a. Breach of Contract

  The Contract is to be construed consistent with Pennsylvania law. (Compl. Ex. A ¶ 23.) Under Pennsylvania law, the interpretation of a contract is an issue of law. Banks Eng'g Co., Inc. v. Polons, 697 A.2d 1020, 1022 (Pa. Super. 1997). "[T]he goal of contract interpretation is to discover the parties' objective mutual intent." Duquesne Light Co. v. Westinghouse Elec. Corp., 66 F.3d 604, 613 (3d Cir. 1995). Pennsylvania law "is firmly settled that the intent of the parties to a written contract is contained in the writing itself." Id. (quotations omitted). Where "the parties have reduced their agreement to writing, Pennsylvania courts presume that the parties' mutual intent can be ascertained by examining the writing." Id.

  As a preliminary matter, we must determine if the contract is clear or ambiguous. Id. A contract is clear and unambiguous if it is subject to only one reasonable interpretation. Sanford Inv. Co. v. Ahlstrom Mach. Holdings, Inc., 198 F.3d 415, 420-21 (3d Cir. 1999). However, whether contractual language is "clear and unambiguous may not be apparent without cognizance of the context in which the agreement arose." Steuart v. McChesney, 444 A.2d 659, 662 (Pa. 1982). Thus, in deciding whether contractual language is ambiguous, Pennsylvania law permits courts to consider, among other things, "the words of the contract, the alternative meanings suggested by counsel, and the nature of the objective evidence to be offered in support of that meaning." Sanford, 198 F.3d at 421. In this case, the parties did not present any extrinsic evidence to show that the Contract contained an ambiguity. Accordingly, we will look only to the Contract in determining the parties' mutual intent.

  In their complaint, Plaintiffs allege that Defendants breached the Contract in six ways. They claim that Defendants breached: (1) the Contract in that Defendants plan to release Together without Plaintiffs' authorization; (2) paragraph 29(a) of the Contract which requires Defendants to release each "Album" recorded under the Contract within 120 days of delivery of such Album to Defendants; (3) paragraph 32(f) which contemplates that the Unreleased Songs would be released in the form of 45 r.p.m. singles; (4) a provision that requires Defendants to submit to The O'Jays an estimated budget of production and other costs prior to the release of records; (5) paragraph 30(b) which requires Defendants to obtain The O'Jays' approval for album covers and any use of the O'Jays' likeness; and (6) paragraph 32(d) which requires Defendants to pay The O'Jays an advance in the event Defendants decide to release Unreleased Songs.*fn6 (Compl. ¶¶ 24-32). We will address the merits of each of Plaintiffs' claims.

  (1) Authorization to Release Together

  Defendants respond to the claim that they do not have the right to release Unreleased Songs by referring us to paragraph 5 of the Contract, which states:

All master recordings recorded hereunder and all matrices and phonograph records manufactured therefrom, together with the performances embodied thereon, shall be entirely our [Defendants'] property, free from any claims whatsoever by you [The O'Jays] or any person deriving any rights or interest from you. Without limiting the generality of the foregoing, we and/or our subsidiaries, affiliates and licensees shall have the unlimited right, from time to time, to manufacture, by any method now or hereafter known, phonograph records and other reproductions, on any medium or devices now hereafter known, of the master recordings made hereunder, and to sell, transfer or otherwise deal in the same throughout the world under any trademark, trade name, and label, or to refrain from such manufacture, sale and dealing.
(Id. Ex. A ¶ 5.)

  It appears that paragraph 5 gives Defendants the unlimited right to release songs recorded pursuant to the Contract, such as the songs comprising Together. In addition, there was a dearth of evidence presented on this issue at the preliminary injunction hearing. Under the circumstances, we are compelled to conclude that Plaintiffs have not shown a likelihood of success with respect to this claim.

  (2) Paragraph 29(a) of the Contract

  With respect to Plaintiffs' claim that Defendants breached paragraph 29(a), we look to that paragraph, which states:

We [Defendants] shall release in the United States each Album recorded under this agreement, within 120 days following delivery to us of such Album, provided you [The O'Jays] have fulfilled all your material obligations hereunder and provided that we have sufficient Master Recordings and materials available at the times required by us to enable us to meet that release commitment under our normal release schedule, except that we shall have the option to reasonably extend such 120-day period if we determine in good faith that the release of any such album within such period would adversely effect the sale of phonograph records embodying your performances released after the date of this agreement.
(Id. ¶ 29(a).) If Defendants failed to timely release an Album, The O'Jays could demand that they release the Album:
If we [Defendants] fail to comply with subparagraph 29.a. you [The O'Jays] shall have the right to notify us within fifteen (15) days after the end of the applicable period concerned of your desire that the term of this agreement be terminated if we do not so comply within sixty (60) days after our receipt of such notice. . . .
(Id. ¶ 29(b).)

  An "Album" is defined as:

one or more twelve-inch 33 1/3 r.p.m. records, or the equivalent thereof, sold in a single package, including all Sides, whether or not released, which are recorded in connection with a specific album project, but not including Sides which were recorded in connection with any other album project. (A "disco. single" shall not be deemed an Album.)
(Id. ¶ 22(b).)

  Plaintiffs presented no evidence as to when Together was delivered to Defendants. We have no way of knowing whether Defendants failed to timely release Together. Moreover, Plaintiffs did not demand that Defendants release Together in accordance with paragraph 29(b). On the contrary, they brought this lawsuit to prevent the release of Together. In sum, we conclude that Plaintiffs have not shown a likelihood of success with respect to this claim. (3) Paragraph 32(f) of the Contract

  With respect to Plaintiffs' claim that Defendants breached paragraph 32(f), we look to that paragraph, which states:

It is understood that the provisions of this paragraph 32 are included in this agreement because we [Defendants] understand that the costs of recording the Unreleased Sides have been paid for by us and charged to your [The O'Jays] royalty account. Accordingly, it is the intent of the parties to eventually exploit such Unreleased Sides and to allow you to participate, in the manner described above, in the advance monies (as described above) we may receive from third parties as the result of such exploitation of such Sides
(Id. ¶ 32(f).)

  "Unreleased Sides" is apparently not defined in the Contract. "Unreleased Masters" is defined generally as those songs recorded by The O'Jays pursuant to the Contract but that were not commercially released or included in Albums. (Id. ¶¶ 32(a), (b).) "Side" is defined as "a Recording of sufficient playing time to constitute one side of 45 r.p.m. record, but not less than two and one-quarter minutes of continuous sound." (Id. ¶ 22(t).)

  We see nothing in paragraph 32(f) that supports Plaintiffs' contention that the Contract required that Unreleased Songs be released only in the form of a 45 r.p.m. record. Paragraph 32(f) merely sets forth the parties' intent that "Unreleased Sides" would be released. Other subparts of paragraph 32 clearly give Defendants the right to release "Unreleased Masters", which include the kinds of songs comprising Together:

If we decide, at any time during or after the term hereof to cause the Unreleased Masters to be manufactured and distributed, we shall pay the following sums to you: . . . .
(Id. ¶ 32(d).)

  Again, we conclude that Plaintiffs have not shown a likelihood of success with respect to this claim.

 

(4) Defendants' Obligation to Provide Royalty Statements
  With respect to Plaintiffs' claim that Defendants breached a provision of the Contract that requires Defendants to submit to The O'Jays an estimated budget of production and other costs prior to the release of records, Plaintiffs do not point to a provision in the Contract to support this claim. Paragraph 10(a) sets forth the obligation of Defendants to provide statements to The O'Jays showing the royalties earned for each record produced pursuant to the Contract:

 

We [Defendants] will compute royalties payable to you [The O'Jays] hereunder within ninety (90) days after June 30 and after December 31 of each year during which records made hereunder are sold for the preceding six (6) month period, and will render accountings for and pay such royalties, except as provided in paragraph 17 hereof, less any unrecouped advances within such ninety (90) days except with respect to sales of records upon which royalties are payable to us by a distributor thereof. We will be responsible for payment of your royalties on such sales only after receipt by us from such distributor of the royalties applicable to such sales. We will have the right to hold reasonable reserves against returns and exchanges not exceeding twenty-five percent (25%) of all royalty bearing Records shipped during the corresponding accounting period. Returns will be prorated between "free" and royalty bearing records in the same manner as originally shipped. Reserves will be liquidated within one (1) year after the date established.
(Id. ¶ 10(a).)

  Nothing in Paragraph 10 requires Defendants to submit royalty statements prior to the release of any record. Plaintiffs have not shown a likelihood of success with respect to this claim.

  (5) Paragraph 30(b) of the Contract

  With respect to Plaintiffs' claim that Defendants breached paragraph 30(b), paragraph 30(b) states:

In addition, the Album cover artwork to be utilized with respect to each Album released by us [Defendants] hereunder and photographs of your [The O'Jays] likeness to be utilized in connection with major advertisements regarding you or your recordings hereunder shall be subject to your reasonable approval, it being specifically agreed that any inadvertant [sic] use by us of unapproved material shall not constitute a material breach of this agreement; provided that we shall use our reasonable efforts to correct such inadvertant [sic] usages.
(Id. ¶ 30(b).)

  Plaintiffs presented no evidence that they objected to the Together album cover or the use of The O'Jays' likeness in connection with Together. Accordingly, we conclude that Plaintiffs have not shown a likelihood of success with respect to this claim.

  (6) Paragraph 32(d) of the Contract

  With respect to Plaintiffs' claim that Defendants breached paragraph 32(d), that paragraph, states, in part:

In the event that we [Defendants] sell any Unreleased Masters pursuant to an agreement which does not provide for the payment of any advance and/or royalty (computed in accordance with the applicable agreement or agreements under which such Masters were recorded) to you [The O'Jays] or lease any Unreleased Masters we shall make a payment to you in an amount equal to (i) 33 1/3% of our net receipts (after the deduction of all copyright, AFM and other applicable third party payments) ("net receipts") from our vendee or licensee with respect to Unreleased Masters embodying your performance as artists and/or (ii) 16 2/3% of our net receipts from such vendee or licensee with respect to Unreleased Masters produced by you. . . .
(Id. ¶ 32(d).)

  Even if Paragraph 32(d) requires Defendants to pay The O'Jays an advance, it is not clear whether Defendants would have to pay any money to Plaintiffs, or would be entitled to deduct such payments from Plaintiffs' recoupment account in accordance with other provisions of the Contract. Plaintiffs have not shown a likelihood of success with respect to this claim. In any event, this particular claim clearly would not support the issuance of a preliminary injunction as it is subject to a remedy at law. Acierno v. New Castle County, 40 F.3d 645, 653 (3d Cir. 1994).

  b. Fraud/Unjust Enrichment

  Count III of the complaint is entitled "Fraud, Unjust Enrichment, Failure to Pay Royalties or Provide Accounting." At the hearing, Plaintiffs presented no evidence or arguments in support of this claim. Moreover, the basis of Plaintiffs' fraud claim appears to be the Defendants' purported failure to pay Plaintiffs royalties or account for those royalties. These are the same allegations that form the basis of Plaintiffs' breach of contract claim. Under the "gist of the action" doctrine, where, as here, a tort involves actions arising from a contractual relationship, the plaintiff is limited to an action under the contract. Haymond v. Lundy, Nos. 99-5015, 99-5048, 2000 WL 804432, at *8 (E.D. Pa. June 22, 2000). Thus, we conclude that Plaintiffs have not shown a likelihood of success with respect this claim.

  c. Breach of Fiduciary Duty

  Plaintiffs also claim that we should enjoin the release of Together because Defendants have breached fiduciary duties owed to Plaintiffs by failing to pay Plaintiffs royalties or account for those royalties. Defendants do not cite any legal basis for their claim that Defendants owed Plaintiffs fiduciary duties and we are aware of none. Moreover, again, the "gist of the action" doctrine bars this tort claim. Haymond, 2000 WL 804432, at *8. Plaintiffs have not shown a likelihood of success with respect to this claim.

  3. Irreparable Harm

  Because Plaintiffs have failed to show a likelihood of success on any of their claims, we need not address whether they have shown that they would be irreparably harmed by the release of Together. Nevertheless, we conclude that Plaintiffs have failed to show irreparable harm. We note that Plaintiffs have admitted that in 1999 they agreed that Defendants could release some Unreleased Songs as part of a record proposal that was later abandoned. Plaintiffs' agreement to release some of the Unreleased Songs casts doubt on their claim that the release of such dated material would irreparably tarnish their reputation in the music industry. It appears to us that the dispute between these parties has more to do with the financial aspects of their relationships than their professional standing.

  Because Plaintiffs have failed to show a likelihood of success on the merits or irreparable harm, we need not consider whether any other factors favor granting a preliminary injunction, and we will deny their request.

  An appropriate Order follows. ORDER

  AND NOW, this 9th day of April, 2004, upon consideration of the Complaint and Application for Temporary Restraining Order and Injunctive Relief Pursuant to Fed.R.Civ.P. 65 (Doc. No. 1), and all papers and evidence offered in support thereof and opposition thereto, it is ORDERED that Plaintiff's Application is DENIED. It is further ORDERED that the Order of this Court of April 6, 2004 temporarily restraining Defendants is DISSOLVED.

  IT IS SO ORDERED.


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