Appeals from judgment of the United States District Court for the Southern District of New York, Thomas P. Griesa, Judge, holding that no oral contract existed between parties, that defendants were entitled to punitive damages and compensation for royalties lost as result of release of unauthorized record album and for violations of New York Civil Rights Law § 51, and that plaintiff Big Seven Music Corp. was entitled to compensation for defendant Lennon's breach of a settlement agreement. Affirmed in part, modified in part, and reversed in part.
Anderson, Oakes and Gurfein, Circuit Judges.
Everybody's hustlin' for a buck and a dime
I'll scratch your back and you scratch mine
All I can tell you is it's all show biz*fn1
The words of John Lennon above are an appropriate introduction to this case, which involves alleged broken promises and acrimony between supposed friends in the recording industry.
Big Seven Music Corp., a music publisher owning the copyright of certain songs in the popular music field, and Adam VIII, Ltd., a record company specializing in the sale of phonograph records and tapes through television advertising, sued Lennon, the well-known singer and songwriter of popular music and former member of "The Beatles"; Apple Records, Inc., which is owned by the Beatles (including Lennon); Harold Seider, Lennon's business adviser; Capitol Records, Inc., a manufacturer and distributor in the United States of phonograph records and tapes; and EMI Records Limited (EMI), Capitol's British parent, a world-wide manufacturer and distributor of phonograph records and tapes.
The complaint alleged violations of Sections 1 and 2 of the Sherman Antitrust Act, 15 U.S.C. §§ 1, 2, breach of contract, conspiracy, tortious interference with a contract, intentional falsehood, unfair competition, fraud and prima facie tort. Subject matter jurisdiction over the nonfederal claims was premised on the doctrine of pendent jurisdiction. Following a nonjury trial in the United States District Court for the Southern District of New York, Thomas P. Griesa, Judge, all of plaintiffs' claims were dismissed. 409 F. Supp. 122 (S.D.N.Y. 1976). In the first phase of this three-part appeal, plaintiffs appeal from this dismissal.
The defendants below, except for Seider, counterclaimed against Big Seven and Adam VIII and named Morris Levy, who is the president and a controlling stockholder of Big Seven and Adam VIII, as an additional defendant on their counterclaims for copyright infringement, violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), misappropriation of property rights, and, in the case of Lennon, violation of Section 51 of the New York Civil Rights Law. The court below, in an oral decision from the bench, awarded compensatory and punitive damages to all defendants except Apple, with the total amounting to $419,800, plus interest and injunctive relief. Adam VIII and Levy, against whom the damages were assessed, appeal therefrom in the second part of this appeal. Because of a settlement agreement reached during the pendency of this appeal, only the awards to Lennon, totaling $145,300, are at issue here.
The court below, having found against Big Seven and Adam VIII in connection with their breach of contract and related claims, permitted Big Seven to amend its complaint to assert a claim against Lennon alone for breach of an October, 1973, settlement of an earlier lawsuit relating to a Lennon song entitled "Come Together." On that amended complaint the district court, in the third phase of this case, awarded Big Seven damages of $6,795 and refused to grant specific performance of a portion of the agreement. From that award and refusal both Big Seven and Lennon appeal.
On the first and third phases of the appeal, we affirm the judgment of the court below. On the second phase, we reverse so much of the judgment as awarded to Lennon punitive damages, and we reduce the award of compensatory damages.
I. THE ALLEGED ORAL CONTRACT
As developed in more detail in the district court's reported opinion, 409 F. Supp. 122, the genesis of this case was an earlier suit brought by Big Seven against Apple Records and other music companies, alleging that a Lennon written song, "Come Together," infringed Big Seven's copyright in a song entitled "You Can't Catch Me." That action was settled on October 12, 1973, with Lennon agreeing as part of the settlement to record in his "next album" three songs on which Big Seven held copyrights. Lennon at that time was working on an album of rock and roll hits, not written by him, coming from the 1950s - a nostalgiatype album - and it was contemplated that this album would contain the three Big Seven songs required by the settlement. At some point after the settlement date, however, Lennon and the nostalgia album's producer, one Phil Spector, had "difficulties," as a result of which Spector took possession of the tapes made for the album. 409 F. Supp. at 124. Lennon was unable to retrieve his tapes until mid-1974, by which time he had begun work on another album, entitled "Walls and Bridges," which did not contain the three songs belonging to Big Seven, as required under the settlement agreement. "Walls and Bridges" was released in September, 1974. Levy considered this release a breach by Lennon of the "Come Together" agreement and requested a meeting with Lennon, out of which the first phase of this appeal arose.
The meeting was held on October 8, 1974, at a New York City supper club. Big Seven and Adam VIII claim that an oral agreement was reached that night by which Levy was authorized to distribute Lennon's forthcoming nostalgia album by mail order, with television advertising used to solicit orders. The district court found, however, that no such oral agreement was entered into, relying in part on the fact that Lennon did not enter the October 8, 1974, meeting "as a free agent" because Lennon and Apple were obligated to EMI and Capitol under "a complex series of agreements," 409 F. Supp. at 125. The court concluded that Levy had failed to show that an agreement was made for Levy to have United States mail order distribution rights for Lennon's rock and roll album. The court did find that there was a "tentative agreement" for Lennon to provide 15 or 16 rock ...