Universal Music Defeats Legal Claims Over Destroyed Recordings in Fire

Universal Fire - Getty - H 2019
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Last June, many musicians were shocked to read a New York Times story about "the biggest disaster in the history of the music business." The story explored a 2008 fire on NBCUniversal's backlot and the extent of the damage. In the wake of this story came a putative class action from a few artists whose master recordings were feared to have been destroyed. Now, that lawsuit is on the verge of falling apart thanks to a California federal judge's decision on Monday.

Many of the original plaintiffs in the case including Soundgarden, Hole and Steve Earle dropped out along the way. There's been ongoing questions about just who was impacted by the fire, but for the most part, the litigation was being led by Jane Petty, who was once married to the late Tom Petty and owned a 50 percent interest in his older recordings thanks to a 1996 divorce agreement.

U.S. District Court Judge John Kronstadt does rule that the assignment of intellectual property rights does confer Petty with standing in the lawsuit for all claims but one that's based on alleged misrepresentations that impacted whether musicians entered into recording agreements with UMG. Petty also scores an additional big win when the judge rules the latest lawsuit over the fire isn't time-barred. Although there's a four-year statute of limitations on claims for breach of contract, the judge finds it plausible that Petty didn't discover the extent of the fire damage until last year's New York Times article.

"The allegations that UMG repeatedly assured the public that losses of Master Recordings were minimal also support the plausibility of the allegation that certain Plaintiffs, including Petty, did not know and were not 'on alert' as to possible claims arising out of the fire," writes Kronstadt. "Therefore, the FAC alleges adequately that UMG fraudulently concealed possible causes of action."

But that's where Petty's wins end. Although she can attempt an amended complaint, the judge finds her claims as currently pled to be legally deficient.

For example, there was a claim related to how artists were supposed to share in licensing income. The lawsuit attempted to characterize insurance recovery as a use or "license" of the music. And by not sharing the insurance proceeds, Universal was alleged to have breached contract.

The judge doesn't accept the theory.

"Executing the settlement agreement in the Fire Lawsuit cannot reasonably be interpreted as a retroactive license for the Fire Defendants to destroy Master Recordings in exchange for a flat fee," states the opinion. "Similarly, it is not reasonable to interpret the recovery under an insurance policy for destruction of the Master Recordings as a retroactive license for destruction on a flat fee basis."

The bailment claim failed, too. This was one based on the allegation that valuable property was placed into Universal's possession for safekeeping and that the defendant had a duty to return it.

But the judge dismisses this claim because Tom Petty's contract specifically stated that he did not retain title to master recordings. The lawsuit attempted to point to how, under the termination provisions of copyright law, he'd one day be able to recapture, but this isn't good enough for the judge, either. He writes, "Plaintiffs cite to no authority that supports the position that a possible future copyright interest reflects a bailment relationship as to the physical Master Recordings."

The decision knocks other legal claims, with the most notable one perhaps being negligence. The musicians had proceeded under the theory that their record company did, in fact, have a duty independent of the contract to preserve and protect their recordings. The judge finds some limited support for imposing a non-contractual duty, but in the specific situation with Jane Petty, whose rights were obtained by assignment, finds that circumstance to be weak. Overall, the judge grants dismissal to the claim for negligence, although again, plaintiffs do have the opportunity to amend.

In the meantime, here's the full opinion.