5:09pm PT by Ashley Cullins
Universal Music Group Asks Court to Extinguish Backlot Fire Class Action
Universal Music Group says the 2008 backlot fire that destroyed a vault containing master recordings resulted in "heartbreaking loss," but it's under no obligation to share with artists the settlement it received almost a decade ago.
UMG says a June exposé in The New York Times Magazine and the media coverage that followed has spread speculation about the extent of the damage caused by the blaze. Shortly after its publication, a group of artists and estates, including those of Tom Petty and Tupac Shakur, filed a $100 million class action against UMG claiming it breached its agreements with artists by not sharing a settlement after cutting a deal with its insurer and the property owners.
While UMG understands the concerns about the assets that may have been lost in the fire, it says the plaintiffs' complaint isn't based on "any valid legal theory."
"The Complaint includes two breach of contract 'Claims for Relief' but conspicuously avoids reciting any language from the recording agreements that Plaintiffs accuse UMG of breaching," writes attorney Scott Edelman. "Those agreements grant UMG ownership of any master recordings and entitle the artists to royalties in specific enumerated circumstances, none of which has been or can be pleaded here. The Complaint does not and cannot plead any facts plausibly showing that UMG breached any provision in any contract."
Edelman argues that nothing in the contracts at issue "remotely entitles" artists to a share of settlement proceeds. In order to trigger a 50/50 split of revenues, UMG says it must have furnished, licensed or authorized the use by others of the master recordings and derived revenues from such use.
"Because Plaintiffs have failed to plead facts showing that a contractual obligation was breached — and, to the contrary, plead that UMG could not receive revenues implicating these contract provisions after the fire — Plaintiffs’ first breach of contract claim must be dismissed," writes Edelman.
The plaintiffs also claim UMG failed to take reasonable measures to protect the master recordings, which Edelman describes as "an amalgamation of claims for bailment and breach of the implied covenant of good faith and fair dealing." He argues bailment is only relevant if UMG had any obligation to return the property and says the contracts relied upon in the complaint make it clear the label owns the masters free and clear of any claims.
"To the extent Plaintiffs’ bailment claim is actually a claim for breach of the implied covenant of good faith and fair dealing, that too fails," writes Edelman. "According to the Complaint, the implied covenant requires that 'neither party to the contract will undertake actions to deprive the other party of the expected fruits and benefits of the contractual relationship.' ... Here, the Complaint pleads no facts showing that UMG undertook a conscious and deliberate act to destroy the recordings; and indeed, any such allegation would be implausible, because UMG was deprived of its own property as a result of a fire that it did not start."
UMG also says the relevant statutes of limitations expired years ago and the plaintiffs can't explain why they never asked about the status of their masters when the label "publicly stated that hundreds of thousands of recordings were destroyed" as part of the 2009 litigation.
Meanwhile, UMG's archivist Pat Kraus on Wednesday sent a memo to employees updating them on the status of their investigation into exactly how much damage was done.
"Over the past several weeks, our team has been working around the clock, fielding requests from approximately 275 artists and representatives," writes Kraus in the memo, which was obtained by The Hollywood Reporter. "To date we’ve reviewed 26,663 individual assets covering 30 artists. Of those assets, we believe we’ve identified 424 that could be missing or lost due to the fire, with audio assets accounting for 349 of them. Our data suggests that 22 of those could be “original masters” which are associated with 5 artists. For each of those lost masters, we have located high-quality alternate sources in the form of safety copies or duplicate masters."
He continues to say those counts "evolve by the hour" and that his team's work is just beginning. Kraus also explains that his team is working to answer questions from artists and their reps, and they are free to share whatever information they receive, but as of now UMG won't be publicly releasing the status of any specific artist's masters.
A hearing on the motion to dismiss is currently set for Nov. 4.