Clause & Effect

Record Distribution/Promissory Estoppel

The U.S. District Court for the Southern District of New York overturned a jury verdict that EMI Music Marketing was liable to a record company in a distribution deal dispute based on the label's counterclaim of promissory estoppel. EMI Music Marketing v. Avatar Records Inc., 361 F. Supp. 2d 362. EMI entered into an agreement to exclusively distribute Avatar's product in the United States for 3 years. But after Avatar became indebted to EMI Music for over $1 million, Avatar's president Larry Robinson proposed restructuring as well as extending the distribution deal for a year. EMI Music terminated the discussions and filed suit. The court granted summary judgment for EMI Music on, among other causes of action, its claim of breach of contract. The court also granted summary judgment for EMI Music on Avatar's counterclaims of breach of implied covenant of good faith and fair dealing and for unfair competition before sending the case to a jury, which awarded Avatar $25,000 in compensatory damages.

Granting EMI Music's for a judgment in its favor as a matter of law, the district court noted: “In order to hold EMI liable under the doctrine of promissory estoppel, Avatar would have had to prove by a preponderance of the evidence that EMI made an explicit promise that was clear and unambiguous; that Avatar reasonably relied on that promise; that such reliance was foreseeable; and that Avatar sustained injury by reason of its reliance.” (Avatar claimed that EMI Music's vice president of finance, Giulio Proietto, had told Larry Robinson that EMI Music had approved his proposed changes in the distribution agreement.)

Finding the jury's verdict was based on insufficient evidence, the court concluded: “Neither the Proietto Memo nor Robinson's testimony concerning Proietto's representations to him, though, contain any indication that Proietto and Robinson ever discussed or resolved the issue of the loan repayment. Because Robinson's proposal consisted of three components, a promise regarding two of those components ' even if it was clear and unambiguous ' would still be contingent on approval of the third component [regarding the loan repayment]. There is no evidence on the record to suggest that either of the parties at any time contemplated an extension of the Distribution Agreement in the absence of a resolution of the question of how EMI's loan would be repaid. Rather, the record, including Robinson's own testimony, demonstrates that the conversion of the loan into an advance was an integral component of any extension of the Distribution Agreement.”

The U.S. District Court for the Southern District of New York held that a production company that signed singer Ashanti to contracts before her stardom can proceed against the artist and her mother with a claim of breach of contract. T.E.A.M. Entertainment Inc. v. Douglas, 361 F. Supp. 2d 362. Ashanti entered into two agreements with T.E.A.M in 1997 to cover the production and shopping of her recordings to procure a recording agreement. The parties later entered into a release agreement, which promised T.E.A.M. future compensation, so that Ashanti could sign with T.E.A.M. competitor Noontime Music, which found Ashanti a deal with Sony Music for an album that was never released. Through the efforts of yet another production company, Ashanti obtained a recording contract with Universal Music Group's Murder Inc. Records, selling over one million copies of her first two albums for that label. T.E.A.M. sued seeking payment under the release agreement.

On the claim of breach of the release agreement, the district court noted that Ashanti and her mother “argue that it is plaintiff, not defendants, who breached the Release Agreement by failing to 'execute such additional agreements or documents as may be appropriate or requested to effectuate the purposes of this Agreement,' … specifically certain documents or agreements between Noontime and plaintiff necessary to effectuate the Noontime Agreement between Noontime and defendants. Plaintiff responds, however, by adducing evidence that this was because Noontime attempted to negotiate different terms between plaintiff and Noontime than those specified in the Release Agreement, so the fault was Noontime's, not plaintiff's. Although neither side's evidentiary submissions on this point are models of either clarity or consistency, there is evidence upon which a jury could decide this issue either way, and hence summary judgment must be denied.”

As for T.E.A.M's effort to have the court rescind the release agreement, the court emphasized: “Under New York law, 'rescission is an extraordinary remedy, appropriate only where the breach is found to be material and willful, or, if not willful, so substantial and fundamental as to strongly tend to defeat the object of the parties in making the contract.' … Here, however, there is evidence from which a reasonable juror could conclude that defendants breached the Release Agreement to this extent, in which case rescission of that agreement was appropriate.”

The court also allowed T.E.A.M. to proceed with an unjust enrichment claim for use of the plaintiff's studio and production services before Ashanti entered into any written agreement with T.E.A.M.

Record Distribution/Promissory Estoppel

The U.S. District Court for the Southern District of New York overturned a jury verdict that EMI Music Marketing was liable to a record company in a distribution deal dispute based on the label's counterclaim of promissory estoppel. EMI Music Marketing v. Avatar Records Inc. , 361 F. Supp. 2d 362. EMI entered into an agreement to exclusively distribute Avatar's product in the United States for 3 years. But after Avatar became indebted to EMI Music for over $1 million, Avatar's president Larry Robinson proposed restructuring as well as extending the distribution deal for a year. EMI Music terminated the discussions and filed suit. The court granted summary judgment for EMI Music on, among other causes of action, its claim of breach of contract. The court also granted summary judgment for EMI Music on Avatar's counterclaims of breach of implied covenant of good faith and fair dealing and for unfair competition before sending the case to a jury, which awarded Avatar $25,000 in compensatory damages.

Granting EMI Music's for a judgment in its favor as a matter of law, the district court noted: “In order to hold EMI liable under the doctrine of promissory estoppel, Avatar would have had to prove by a preponderance of the evidence that EMI made an explicit promise that was clear and unambiguous; that Avatar reasonably relied on that promise; that such reliance was foreseeable; and that Avatar sustained injury by reason of its reliance.” (Avatar claimed that EMI Music's vice president of finance, Giulio Proietto, had told Larry Robinson that EMI Music had approved his proposed changes in the distribution agreement.)

Finding the jury's verdict was based on insufficient evidence, the court concluded: “Neither the Proietto Memo nor Robinson's testimony concerning Proietto's representations to him, though, contain any indication that Proietto and Robinson ever discussed or resolved the issue of the loan repayment. Because Robinson's proposal consisted of three components, a promise regarding two of those components ' even if it was clear and unambiguous ' would still be contingent on approval of the third component [regarding the loan repayment]. There is no evidence on the record to suggest that either of the parties at any time contemplated an extension of the Distribution Agreement in the absence of a resolution of the question of how EMI's loan would be repaid. Rather, the record, including Robinson's own testimony, demonstrates that the conversion of the loan into an advance was an integral component of any extension of the Distribution Agreement.”

The U.S. District Court for the Southern District of New York held that a production company that signed singer Ashanti to contracts before her stardom can proceed against the artist and her mother with a claim of breach of contract. T.E.A.M. Entertainment Inc. v. Douglas , 361 F. Supp. 2d 362. Ashanti entered into two agreements with T.E.A.M in 1997 to cover the production and shopping of her recordings to procure a recording agreement. The parties later entered into a release agreement, which promised T.E.A.M. future compensation, so that Ashanti could sign with T.E.A.M. competitor Noontime Music, which found Ashanti a deal with Sony Music for an album that was never released. Through the efforts of yet another production company, Ashanti obtained a recording contract with Universal Music Group's Murder Inc. Records, selling over one million copies of her first two albums for that label. T.E.A.M. sued seeking payment under the release agreement.

On the claim of breach of the release agreement, the district court noted that Ashanti and her mother “argue that it is plaintiff, not defendants, who breached the Release Agreement by failing to 'execute such additional agreements or documents as may be appropriate or requested to effectuate the purposes of this Agreement,' … specifically certain documents or agreements between Noontime and plaintiff necessary to effectuate the Noontime Agreement between Noontime and defendants. Plaintiff responds, however, by adducing evidence that this was because Noontime attempted to negotiate different terms between plaintiff and Noontime than those specified in the Release Agreement, so the fault was Noontime's, not plaintiff's. Although neither side's evidentiary submissions on this point are models of either clarity or consistency, there is evidence upon which a jury could decide this issue either way, and hence summary judgment must be denied.”

As for T.E.A.M's effort to have the court rescind the release agreement, the court emphasized: “Under New York law, 'rescission is an extraordinary remedy, appropriate only where the breach is found to be material and willful, or, if not willful, so substantial and fundamental as to strongly tend to defeat the object of the parties in making the contract.' … Here, however, there is evidence from which a reasonable juror could conclude that defendants breached the Release Agreement to this extent, in which case rescission of that agreement was appropriate.”

The court also allowed T.E.A.M. to proceed with an unjust enrichment claim for use of the plaintiff's studio and production services before Ashanti entered into any written agreement with T.E.A.M.