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"The Youngbloods" (Perry Miller P/K/A Jesse Colin Young; Lowell Levinger v. Bmg Music

January 6, 2011

"THE YOUNGBLOODS" (PERRY MILLER P/K/A JESSE COLIN YOUNG; LOWELL LEVINGER; JERRY CORBITT MINA BAUER, THE WIDOW OF JOE BAUER; AND MANAGER STUART KUTCHINS), ON BEHALF OF ITSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFF,
v.
BMG MUSIC,*FN1 DEFENDANT.



The opinion of the court was delivered by: Kevin Nathaniel Fox United States Magistrate Judge

AMENDED MEMORANDUM AND ORDER*fn2

On March 23, 2007, plaintiff "'THE YOUNGBLOODS' (Perry Miller p/k/a Jesse Colin Young; Lowell Levinger, Jerry Corbitt, Mina Bauer, the widow of Joe Bauer, and manager Stuart Kutchins), ON BEHALF OF ITSELF AND ALL OTHERS SIMILARLY SITUATED," commenced this class action, for breach of contract and a declaratory judgment against "SONY BMG MUSIC ENTERTAINMENT, A Delaware General Partnership," for failure to account properly and pay for digital music download and mobile phone ringtone royalties. Subsequently, the plaintiff amended the complaint and replaced the defendant with "BMG MUSIC" ("BMG"). Before the Court is BMG's motion to stay the proceedings and for leave to amend its answer, pursuant to Federal Rule of Civil Procedure 15(a)(2).

BACKGROUND

On August 15, 1966, BSM Music Productions, Inc. ("BSM"), entered into an agreement with BMG's predecessor, Radio Corporation of America Records, RCA Victor Record Division, to furnish the personal services of Perry Miller, p/k/a Jesse Colin Young, Joe Bauer, Jerry Corbitt and Lowell Levinger, p/k/a The Youngbloods, for the purpose of recording and making records. On September 1, 1995, to resolve a lawsuit, entitled The Youngbloods v. Bertelsmann Music Group, Inc., Civil Action No. C95 2054 VRW, regarding royalties under the 1966 agreement, a settlement agreement was reached "by and among PERRY MILLER, p/k/a JESSE COLIN YOUNG, LOWELL LEVINGER and JERRY CORBITT, constituting the surviving members of the band formerly known as THE YOUNGBLOODS, a California unincorporated association ("The Youngbloods"); HERBERT S. GART, as successor in interest to BSM MUSIC PRODUCTIONS, INC. ("Gart"); and BMG MUSIC, d/b/a THE RCA RECORDS LABEL, as successor in interest to Radio Corporation of America (RCA Record Division[)] ("RCA")." The 1995 settlement agreement resolved the dispute among the parties "regarding The Youngbloods' entitlement to revenues from the licensing by RCA of sound recordings by the Youngbloods for use in movies, television and advertising (hereinafter sometimes referred to as 'master use licensing')," prior to and including the date of the agreement. As consideration for the settlement agreement, BMG paid money, and, as part of the consideration for the settlement agreement, The Youngbloods and Gart made certain representations and warranties, including the following:

(a) Perry Miller, p/k/a Jesse Colin Young, Lowell Levinger and Jerry Corbitt are the surviving members of the band formerly known as The Youngbloods, and each of them has full right and authority to enter into this Agreement and the Amendment being executed contemporaneously herewith.

(b) No other person or entity, including, without limitation, BSM Productions, Inc. and William Morris Agency, Inc., or either of them, has any right, title or interest, or any other claim, in or to any of the revenues payable to The Youngbloods under this Agreement or under the Amendment to be executed contemporaneously herewith.

(d) Joe Bauer, a former member of The Youngbloods and a participant in the creation of the Masters, is deceased. Any and all rights and interests of Mr. Bauer to revenues from the use of the Masters have descended to Mr. Bauer's widow, Mina Bauer, who expressly disclaims any interest in the proceeds of the use of the Masters as set forth in this Agreement and in the Amendment.

Contemporaneously to making the 1995 settlement agreement, an amendment to the 1966 agreement ("the 1995 amendment") was signed between BMG and Perry Miller, p/k/a Jesse Colin Young, Lowell Levinger and Jerry Corbitt, "individually and collectively p/k/a 'The Youngbloods,'" providing, inter alia, the following paragraph ("Paragraph 2"):

2. The following text shall be added to the end of subparagraph 4(a) of the [1966] Agreement: "If RCA receives income from the use of Master Recordings hereunder in synchronization with motion picture or television soundtracks or in Videos (as hereinafter defined) thereof, or if RCA licenses the use of any Master Recording hereunder on a flat fee or cent-rate basis, RCA shall accrue and additional royalty hereunder of fifty (50%) percent of the net amount of such income so received by RCA."

In recent years, a new method of commercial exploitation of recorded music, known as music download services, has developed, which does not require the manufacture or distribution of physical records. According to the plaintiff, the music download services provider companies, including Apple, Buy.com. Liquid Digital Media (Walmart.com), Zune, Rhapsody/Urge, Music Net and Napster, have obtained licenses from the major record companies, such as BMG, authorizing them to distribute, via digital downloads, each of their respective catalogues of master recordings. Using music download services, customers pay a fee to download a copy of a master recording in the form of a digital audio file, copying the file from the music download provider to the consumer's personal digital storage device. Some music download providers, such as Apple's iTunes, charge 99 cents for a single musical track that the consumer may store on a maximum of five authorized devices, such as an iPod. Other music download providers, such as Napster, operate a subscription service that allows consumers to download musical performances for a set monthly fee, enabling them to play the musical performances, contingent upon the consumer's continuing payment of the monthly subscription charge. The plaintiff alleges that, for example, of the 99 cents charged to consumers, by Apple, for each music download, The Youngbloods receive approximately 4.7 cents, when they should receive in excess of 30 cents.

Mobile phone ringtones and ringbacks represent another method through which music recordings are licensed. A master ringtone is a portion of a master recording converted into a digital file that consumers download directly to their mobile phones to customize the sound of the phone when they receive a call, paying between $1 and $3 per ringtone downloaded. Similarly, a master ringback is a portion of a master recording digitally converted into a file downloaded by the consumers on their mobile phones to customize the sound they hear when placing a call, which costs between $1 and $3 per downloaded ringback. Consumers purchase mobile phone ringtones and ringbacks from ringtone providers, including mobile phone companies, such as AT&T, Wireless, Sprint, T-Mobile and Verizon Wireless. These companies license master recordings directly from record companies or content owners, or from aggregators who license master recordings from record companies and content owners and convert those recordings into various digital formats. According to the plaintiff, ringtone providers have obtained licenses from major record companies, such as BMG, authorizing them to distribute and sell master ringtones and ringbacks.

The plaintiff alleges BMG failed to render to it and other artists accurate accounting statements and to account for and credit properly royalties for digital music download and mobile phone ringtone and ringback uses, during the period between January 1, 1962, through December 31, 2002, generated by BMG's licensing of the plaintiff's and other class members' master recordings to the third-party licensees. BMG maintains that, in August 2010, while conducting depositions, it learned, for the first time, that the representations and warranties made to it by the 1995 settlement agreement signatories were false when made. On August 23, 2010, BMG commenced an action in the United States District Court for the Northern District of California for, inter alia, rescission and breach of the 1995 settlement agreement and the 1995 amendment. On August 31, 2010, the defendant filed this motion to stay the proceedings and for leave to amend its answer.

MOTION TO STAY THE PROCEEDINGS

Legal Standard

[T]he power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants. How this can best be done calls for the exercise of judgment, which must weigh competing interests and maintain an even balance.

Landis v. N. Am. Co., 299 U.S. 248, 254-55, 57 S. Ct. 163, 166 (1936). "The decision whether or not to stay . . . a proceeding rests within a district judge's discretion." Adam v. Jacobs, 950 F.2d 89, 92 (2d Cir. 1991). [The party moving] for a stay must make out a clear case of hardship or inequity in being required to go forward, if there is even a fair possibility that the stay for which he prays will work damage to some one else. Only in rare circumstances will a litigant in one cause be compelled to stand aside while a litigant in another settles the rule of law that will define the rights of both. Considerations such as these, however, are counsels of moderation rather than limitations upon power. . . . . . . We must be on our guard against depriving the processes of justice of their suppleness of adaptation to varying conditions. Especially in ...


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