5:31am PT by Eriq Gardner
'Spinal Tap' Lawsuit: Judge Tosses Harry Shearer, Fraud Claim From Profits Case
All but one of the co-creators of This Is Spinal Tap have been dealt a setback in a closely watched profits case over the 1984 rock mockumentary. On Thursday night, U.S. District Judge Dolly Gee granted Vivendi's motion to dismiss the companies belonging to Harry Shearer, Rob Reiner and Michael McKean from the case. Additionally, the judge rejected a fraud claim. If the plaintiffs can take any hope from the ruling, it's that the judge is permitting Christopher Guest to proceed and allowing an amendment that could conceivably see the other three to attempt to directly sue.
Shearer's Century of Progress Productions originally brought the lawsuit and made headlines everywhere with the allegation that despite decades of cult success, the creatives had just $81 in merchandising income and $98 in musical sales income to show for it. The complaint was later amended to add Guest and the loan-out companies belonging to Reiner and McKean.
The major problem area for the plaintiffs, who demanded up to $400 million in damages, is their contractual standing to sue. Vivendi argued that the co-creators' ownership of a contracting party — Spinal Tap Productions, which had its own deals with Vivendi subsidiaries — does not confer third-party beneficiary status.
In an order on the motion, Gee mostly agrees with Vivendi. She lets Guest proceed, but not the others.
The judge writes that inducement letters — the one between Spinal Tap Productions and the companies belonging to Shearer, Reiner and McKean for their work on the movie — provide they "are obligated to perform services — not receive rights or other benefits." The judge does find some intent that the three companies were to benefit from the underlying Spinal Tap deal, but she upholds precedent that those who are "only incidentally benefited by performance of a contract [are] not entitled to enforce it."
On the other hand, the judge, for purposes of this stage in the case, does conclude that the co-creators are intended third-party beneficiaries. That's why Guest, who didn't sue through any loan-out vehicle, is being allowed to move forward. It's likely that Shearer, Reiner and McKean may attempt to be re-added as plaintiffs without their own loan-out vehicles in the way.
As to the fraud claim — the one that would conceivably bring the largest amount of monetary damages — the judge agrees with defendants that allegations arising from wrongful accounting practices, revenue collection and enforcement of intellectual property are too vague about the timing of events and statements made from a StudioCanal executive to survive pleading standards.
The rejected plaintiffs will get another shot to amend their complaint to cure deficiencies. Judge Gee is dismissing with leave to amend.
However, although it's certainly possible that the Spinal Tap co-creators can add details about the when, where and what to revive the fraud claim, they will still have to overcome other Vivendi arguments pertaining to statute of limitations as well as an objection that the fraud claim is merely a dressed-up contract claim.
Regardless of Thursday's decision, the case continues. Guest himself can tout having survived a dismissal challenge while Spinal Tap Productions is still a co-plaintiff in the case as well, and could offer hope to the others. The lawsuit may also need to explore potential counterclaims related to Shearer's notices of copyright termination over publishing and recording rights in Spinal Tap songs.
The full decision is below. The plaintiffs are represented by a team led by Peter Haviland at Ballard Spahr, while the defendants are being handled by Robert Schwartz at Irell & Manella.
"The Court has invited us to amend our complaint to clarify the individual rights of each of the co-creators, and we will do so promptly," said Haviland in reaction to the ruling. "We will also be adding further facts to highlight Vivendi's history of fraud in this case, and to address equally important issues of copyright reversion and so-called 'works for hire'.”
Added Shearer, "England’s loudest band will be heard."