ROYALTY ROUNDUP Loan-Out Companies; Limitations Defense

First, the U.S. District Court for the Northern District of California dismissed a suit by Mexican artist Graciela Beltran seeking 50% of record label income from the sale of sound-recording downloads. Beltran v. Capitol Records LLC, 12-cv-1002. Beltran claimed in her class action case that online sales of her recordings should be deemed third-party licenses made by Capitol and EMI to such digital services as iTunes, rather than calculated at lower-royalty-paying physical product sales. Beltran's complaint sought a declaratory judgment and alleged an open book account, breach of contract, breach of the implied covenant of good faith and fair dealing, and violation of California Business & Professions Code '17200 for unfair competition.

Beltran's suit was based on a 1995 agreement between EMI Latin and Beltran's loan-out entity, G.B. Tesoro Music. District Judge Yvonne Gonzalez Rogers first ruled that Beltran could proceed with her claim as a third-party beneficiary of the EMI Latin agreement. The recording contract stated: 'Graciela Beltran under G.B. Tesoro Music, professionally known as, 'Graciela Beltran,' hereafter referred to as 'You,' or 'Artist' for the purpose of making records for us.' Judge Rogers noted: 'Additional references in the agreement to 'You,' 'you' and 'Artist' create some ambiguity whether those terms refer to the loan-out company or to Beltran individually. ' Moreover, and in addition to the ambiguity in the agreement itself, royalty payments were not made to G.B. Tesoro Music, but instead were sent to Graciela Beltran and listed Beltran as the payee. These allegations are sufficient to plead a basis for standing to enforce the agreement as a third party beneficiary.'