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February 20, 1976

BIG SEVEN MUSIC CORP. and Adam VIII, Ltd., Plaintiffs,
John LENNON et al., Defendants, and Morris Levy, Additional Defendant on Counterclaim

The opinion of the court was delivered by: GRIESA

GRIESA, District Judge.

 This is an action alleging that defendants wrongfully prevented plaintiffs from distributing a record album. The action is brought under the anti-trust laws and common law theories. The latter theories are maintainable in the federal court under the doctrine of pendent jurisdiction.

 Plaintiff Big Seven Music Corp. is engaged in music publishing and is the owner of song copyrights. Plaintiff Adam VIII, Ltd. is in the business of marketing phonograph records and tapes. Both of these companies are owned by one Morris Levy.

 Defendant John Lennon is a singer, musician and composer and also a member of the former English rock music group known as "the Beatles." Defendant Apple Records, Inc. is a New York corporation, indirectly owned by all four of the Beatles -- Lennon, Paul McCartney, George Harrison and Richard Starkey (known as Ringo Starr). At the relevant times Lennon was president of Apple. Defendant Harold Seider is an attorney and Lennon's business advisor. Defendant EMI Records, Limited is an English corporation in the record business. Defendant Capitol Records, Inc. is a subsidiary of EMI and is in the record business in the United States. Lennon and Apple have contractual arrangements with EMI and Capitol for the distribution of records by the Beatles and the four individuals.


 Morris Levy, through his company Adam VIII, specializes in distributing phonograph records through television advertising. The records are usually compilations of song hits from earlier years, previously issued by other companies. Levy selects a group of songs, acquires the licenses and "master tapes" from the various companies and reproduces the songs on his records. Levy advertises the records on television, for mail order sales and for sales through so-called "retail fulfillment centers." Retail fulfillment centers are outlets such as Woolworth's and Montgomery Ward.

 Levy distributes records not only in the United States, but also in foreign countries through certain license arrangements.

 The present case arises from the claim by plaintiffs that Levy entered into an oral contract on October 8, 1974 with Lennon and Apple, under which Levy was granted the right to distribute through television advertising a record album of rock and roll songs recorded by Lennon. Plaintiffs' claim as originally pleaded was that this contract was for Levy to distribute the album on a worldwide basis, through both mail order and retail distribution sales. During the trial plaintiffs amended their claim, and now assert that the contract was limited to mail order sales in the United States. Although the case involves a number of claims and counterclaims on various theories, the basic issue is whether or not such a contract was made.

 A separate trial, by the Court without a jury, has been held on this issue of the existence of the contract. This opinion constitutes the Court's findings of fact and conclusions of law on the issues which have been tried.

 I hold that plaintiffs have not proved the making of the alleged contract.


 The background of the present case lies in an earlier lawsuit brought by one of the plaintiffs in the present action, entitled Big Seven Music Corp. v. Mac-Len Music, Inc., Northern Songs, Ltd. and Apple Records, Inc. (S.D.N.Y. 70 Civ. 1348). The essence of this suit was that a song written by John Lennon entitled "Come Together" infringed Big Seven's copyright in a song entitled "You Can't Catch Me," written by a rock and roll singer named Chuck Berry.

 This action was settled on October 12, 1973. Under the settlement Lennon agreed, among other things, to record three songs belonging to Big Seven in his next album.

 At the time of the October 1973 settlement agreement, Lennon was in Los Angeles, involved in recording sessions for an album of rock and roll hits of the 1950's. It was contemplated that the rock and roll album would contain the three Big Seven songs required by the October 1973 settlement. Lennon was working with one Phil Spector, a successful producer of rock and roll records. At some point these recording sessions terminated because of difficulties created by Spector. The tapes of those songs which had been recorded were appropriated by Spector. The result was that Lennon could make no further progress towards the completion of his rock and roll album.

 It was not until July 1974 that Lennon retrieved the Spector tapes. In order to obtain these tapes, Capitol paid Spector about $90,000.

 By this time Lennon was working on another album entitled "Walls and Bridges." He did not resume work on the rock and roll album. He wished to complete "Walls and Bridges" first.

 The "Walls and Bridges" album was released in September 1974. It was the next album released by Lennon following the October 1973 settlement, but it did not contain the three songs belonging to Big Seven, which the "next album" was required to contain under the settlement agreement.

 When Levy learned about this, he considered it a breach of the settlement agreement. Levy discussed the matter with Lennon's representative, Seider, and requested a meeting with Lennon. Such a meeting was held on the evening of October 8, 1974 at the Club Cavallero on East 58th Street in New York City. This is the occasion when plaintiffs claim the alleged oral contract, forming the basis of the present action, was made.


 Before discussing the evidence regarding the Club Cavallero meeting, it should be observed that Capitol was the regular distributor in North America, and EMI was the regular distributor elsewhere, for records made by the Beatles and individual members of the group. However, plaintiffs claim that, by virtue of certain contracts entered into in 1969, Apple possessed the rights to distribute Lennon's records by mail order in North America. Plaintiffs further claim that this circumstance was understood by both Levy and Lennon at the October 8, 1974 meeting, and was the basis for an agreement under which Levy would distribute Lennon's forthcoming rock and roll album by mail order in the United States.

 The relevant contracts with EMI and Capitol are as follows. In 1962 the Beatles made a contract with EMI giving EMI the exclusive right to distribute their records. A new exclusive distributorship agreement was made in 1967 between the Beatles and EMI. It appears that under other agreements EMI licensed United States distribution rights to EMI's subsidiary Capitol.

 In 1969 the parties modified these contractual arrangements. Under an agreement dated September 1, 1969 EMI granted an exclusive license to Apple to manufacture and distribute Beatles records in North America. However, the agreement required Apple to appoint Capitol as its record distributor in the United States under a form of contract approved by EMI. Moreover, the 1969 EMI-Apple agreement provided:

"8. NEITHER party may assign this agreement or any part thereof or rights hereunder without the written ...

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