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May 20, 1997

HENRY NEUMAN, individually and d/b/a WATERFRONT MANAGEMENT, INC., Plaintiff, against RUSSELL ALLEN HARMON, a/k/a RUSTY HARMON, JAMES GEORGE SONEFELD, MARK WILLIAM BRYAN, DARIUS CARLOS RUCKER, EVERETT DEAN FELBER, each individually and collectively d/b/a/ FISHCO, INC., and further professionally known as HOOTIE & THE BLOWFISH, and RICHARD NOEL GUSLER, Defendants.

The opinion of the court was delivered by: CHIN


 In March 1991, plaintiff and his management company sponsored a showcase for local musical talent in Rock Hill, South Carolina. The winner was to be offered a marketing contract with plaintiff, pursuant to which he would seek recording contracts on the winner's behalf. A little known band from Columbia, South Carolina, performing under the name "Hootie & the Blowfish," competed in the showcase and won. As a result, plaintiff entered into a marketing contract with the band and then later a management contract as well. Both agreements provided for plaintiff to receive a percentage of the band's earnings. Hootie & the Blowfish, of course, eventually became a huge success, selling millions of records.

 Plaintiff commenced this lawsuit in May 1996, alleging breach of contract, breach of fiduciary duties, fraud and misrepresentation, and seeking $ 50 million in compensatory damages and $ 100 million in punitive damages.

 This is the fourth proceeding to be filed in connection with the dispute between the parties. Plaintiff commenced arbitration proceedings against defendants in New York in July 1995; defendants brought an Article 75 proceeding against plaintiff in state court in New York in August 1995 seeking to vacate the arbitration demand; and defendants brought a declaratory judgment action against plaintiff in state court in South Carolina in February 1996.

 Defendants move to dismiss the instant complaint pursuant to Fed. R. Civ. P. 12(b)(6), contending that plaintiff's claims are barred both by the doctrine of res judicata and the terms of the Mutual Release. Alternatively, defendants ask this Court to abstain from exercising jurisdiction over this case pending resolution of the state court proceedings in South Carolina.

 Res judicata is not a bar to plaintiff's claims, however, for the validity of the Mutual Release has not been adjudicated. Moreover, factual issues exist as to the meaning and enforceability of the Mutual Release. In addition, a federal court should abstain from hearing a case only in "exceptional circumstances," and the circumstances in this case are not exceptional.

 Accordingly, defendants' motion is denied in all respects.


 A. The Parties

 Plaintiff Henry Neuman ("Neuman") is a personal manager of performing artists. He does business through his management firm, Waterfront Management, Inc. ("Waterfront Management"), which has its offices in New York City.

 Defendants are Hootie & the Blowfish (collectively, "Hootie"); its members, Darius Carlos Rucker (lead vocalist and guitarist), James George Sonefeld (drummer and vocalist), Mark William Bryan (guitarist and vocalist), Everett Dean Felber (bass guitarist and vocalist), and Russell Allen Harmon ("Harmon") (non-performing member); their attorney, Richard Noel Gusler ("Gusler"); and Fishco, Inc., a corporation through which Hootie's members transact business.

 B. The Facts

 After Hootie's victory in Neuman's showcase, the parties executed a marketing contract (the "Marketing Agreement") on May 24, 1991, granting plaintiff (1) the exclusive right for an initial six month period to pursue a recording contract on behalf of Hootie and (2) 15 percent of all funds and royalties under any recording agreement signed with a major recording company during the term of the contract. (Amend. Compl. Ex. A).

 On November 1, 1991, Hootie hired Neuman as the band's manager and executed a management contract (the "Management Contract"). Under the Management Contract, Neuman was to be the band's exclusive personal manager for a three-year term (beginning on September 13, 1991). (Amend. Compl. Ex. C, P C). Neuman also was to receive 15 percent of all "Gross Monies" that Hootie "derived from the entertainment industry," including "employment or contracts or agreements for employment . . . entered into or substantially negotiated" during the term of the Management Contract. (Id. P 4). Disputes arising under the Management Contract were to be submitted to arbitration. (Id. P 8).

 These two contracts lie at the heart of this dispute, as plaintiff contends that defendants owe him money under both the Marketing Agreement and the Management Contract. Plaintiff alleges that in the summer of 1992 Hootie acknowledged the debt but asked plaintiff to defer payment so that the money could be used for recording expenses. (Id. P 65). Plaintiff agreed, and as a result, in November 1992 the band produced its "Kootchypop" recording. (Id. PP 67-69). Hootie self-distributed this recording in South Carolina, with a liner note entry that allegedly improperly identified Rusty Harmon as the band's manager. (Id. P 72).

 In October 1993, Hootie's legal counsel Richard Gusler asked plaintiff to sign a "Mutual Release From Management Contract," but plaintiff refused. (Id. P 90; Ex. D).

 In July 1994, Hootie released "Cracked Rear View" under a recording contract signed with Atlantic Records in December 1993 -- allegedly without plaintiff's prior knowledge. This album has sold over 14 million copies to date and is the second largest selling debut album in the history of the music industry. *fn1"

 In July 1994, plaintiff attempted to contact Hootie and Gusler to demand payment of commissions he believed were due him. (Id. PP 103-05). In January 1995, defendants Gusler and Harmon arranged to meet plaintiff in New York on February 9, 1995 to discuss the Mutual Release. (Id. PP 106, 110). According to plaintiff, at that meeting, defendants Gusler and Harmon acknowledged that the Management Contract was still in effect, but threatened not to pay plaintiff any money owed to him unless he executed the Mutual Release. (Id. P 111). Plaintiff contends that defendants orally assured him that if he signed the Mutual Release (1) he would be paid all commissions due under the Marketing Agreement and the Management Contract and (2) he would be provided a position at Fishco, Inc. (Id. PP 112, 113). Plaintiff also alleges ...

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