5:15am PT by Eriq Gardner
A Universal Music Fire Case Could Break New Legal Ground
In 2013, Universal Music Group quietly settled a lawsuit against NBCUniversal over a raging fire that five years earlier had swept through a Hollywood studio backlot and, according to court documents at the time, destroyed a massive amount of master recordings stored there. The settlement brought to an end an embarrassing situation, or so UMG thought.
But that very settlement could become the jumping-off point for new litigation brought by musicians who recently came to learn of the extent of the damage after The New York Times published an article titled "The Day the Music Burned."
Howard King, an attorney representing several artists, has his eyes on such a lawsuit. He is keeping his client list close to vest for the time being, though in the past he has been involved in legal matters for such Universal acts as Tupac Shakur, Soundgarden and Eagles. On Tuesday, in a prelude to litigation, he demanded that UMG furnish him with a complete inventory of all master recordings, including finished songs as well as outtakes, destroyed in the fire.
In a letter to UMG chairman Lucian Grainge, King wrote, "It is important to all artists who may have been affected by this calamity to know the truth regarding the condition of their master recordings stored by Universal."
Universal won't publicly comment on the demand, but in a memo to staff, Grainge promised transparency and said a special team had been formed to respond to requests.
In the face of potential litigation, though, Universal may be careful about agreeing to hand over a full list of inventory destroyed, if only to discourage lawyers from shopping for potential clients. Moreover, the record company may also wish to preserve challenges to artists’ standing should a case be filed.
And what might a lawsuit look like? This would be no ordinary negligence case.
Sure, there would be charges that Universal breached a duty of care to its artists. That's ironic, given that UMG once made the same allegation in its old lawsuit against NBCUniversal, which leased the Los Angeles backlot vault to UMG. Similarly, artists would likely bring a claim based on something called "bailment," where one places property in the custody and control of another for safekeeping.
But here, the expectancy interest of the artists could take some unusual forms. For example, not only did some artists expect royalties from reissues of their albums, but thanks to the termination provisions of copyright law, many of those artists may have anticipated that one day, they would be able to reclaim and exploit their masters. How much is that worth?
That question could put Universal in the position of having to explain why termination rights don't apply to this fiery situation, just as it is defending a putative class action from older recording artists.
Additionally, a negligence theory just scratches the surface of potential claims in a new lawsuit over that old fire.
In most older recording contracts, artists are entitled to a 50 percent cut of licensing income. The destroyed master recordings are now gone and thus can't ever be licensed.
But hold on...what about that 2013 settlement between UMG and NBCUniversal? The terms have never been publicly revealed, but UMG surely negotiated rich financial consideration for dropping its own claims over the lost recordings. Can this be considered a use of the recordings? If so, do artists deserve a piece of the settlement? Could they argue the settlement constituted a license? These are questions that could come up in a groundbreaking lawsuit.
Of course, Universal could raise a statute of limitations defense over something that happened more than a decade ago. The Times story outlines how UMG attempted to downplay the situation and keep it quiet as possible, which foreshadows how artists would likely argue that the statute of limitations is inapplicable in the face of fraudulent concealment. Then again, those old court papers between UMG and NBCU were basically hidden in plain view. All it took was one legal reporter to dig them up.