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Clause & Effect

By ALM Staff | Law Journal Newsletters |
May 30, 2007

Record-Distribution Agreements/ Contract Breach. The U.S. District Court for the Eastern District of Michigan decided that unresolved issues of fact as to whether a distributor or a record label abandoned a record-distribution agreement precluded summary judgment for either party on breach claims by the distributor. TeeVee Toons Inc.(TVT) v. Overture Records, 05-71243. TVT and Overture Records entered into a five-year agreement under which TVT would press and distribute Overture's product. Overture then entered into an exclusive licensing agreement with artist Esham Smith and the band Natas for the artists' existing product, and an exclusive recording agreement for the artists' new product.

A notice-and-cure provision in the TVT/Overture distribution agreement stated: 'Other than a breach of the exclusivity provisions hereof, no breach of this Agreement by Overture shall be deemed material unless within 60 days after TVT learns of such breach, TVT serves written notice on Overture specifying the nature thereof and Overture fails to cure such breach, if any, within 30 days after receipt of such notice (or 10 business days in the case of a failure by Overture to pay a sum certain). No breach of this Agreement by TVT shall be deemed material unless within 60 days after Overture learns of such breach, Overture serves written notice on TVT, specifying the nature thereof and TVT fails to cure such breach, if any, within 30 days after receipt of such notice (or 10 business days in the case of a failure by TVT to pay a sum certain).'

TVT claimed that Overture ceased communicating with it in 2001 and Overture claimed the same of TVT. Meanwhile, in a dispute over payment of an advance, Overture released Natas (but not Esham) from the recording agreement. Larry Santos, the father of Overture Records owner Scott Santos, soon founded Number 6 Records and signed Natas to his label. Scott Santos brokered a deal for Koch Entertainment to distribute Number 6's product. TVT later sued Overture and Number 6 and Scott and Larry Santos. (The district court found that TVT had no breach claim against Larry Santos.)

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