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08/28/02:
DKs v ATR Appeal

CONTENTS
I.   Introduction
II.  Statement of Facts
III. Procedural History
IV.  Argument on       Appeal
V.   Conclusion
      Re-Appeal
VI.  Argument on       Cross-Appeal
VII.Conclusion
      Re Cross-Appeal

III. PROCEDURAL HISTORY
A. Commencement of Action
B. Removal and Remand
C. Answer and Cross-Complaint(s)
D. Resolution of Post-Lawsuit Sales by ATR/Mordam
E. Biafraís Federal Court Action
F. Trial of the Action
G. Evidence at Trial
H. The Jury Verdicts
I. The Trial Courtís Statement of Decision
J. Judgment and Appeal(s)

III.  PROCEDURAL HISTORY

A.  Commencement of Action.

Faced with the continuing violation of its rights, the band partnership, along with East Bay Ray, Klaus Flouride and D.H. Peligro, brought this action on October 29, 1998 against Biafra and his record distributor, Mordam Records.  Their complaint sought a declaration that the license agreement between Decay Music and ATR had been terminated; that the rights to the bandís intellectual property were exclusively with the Decay Music partnership; and that partnership matters were subject to majority vote.  The complaint also sought compensatory and punitive damages against Biafra relating to his breaches of contractual and fiduciary duties to the Decay Music partnership and the other partners as well as an injunction prohibiting Biafra from exploiting DEAD KENNEDYS intellectual property without majority consent.

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B. Removal and Remand.

On November 25, 1998, Biafra removed the partnershipís case, arguing that the federal court had exclusive jurisdiction over the action under federal copyright law.  The partnership moved to remand.  The federal court agreed with the partnership that Biafra wrongfully removed the case and that it lacked subject matter jurisdiction over the action, ruling that the controversy principally involved state contract and partnership law issues. Dead Kennedys v. Biafra, 37 F.Supp.2d 1151 (N.D.Cal. 1999) (Jensen, J.).  [footnote: The federal court later awarded costs and fees to the partnership and against Biafra, finding that Biafraís removal was against "well-settled" case law.]

C. Answer and Cross-Complaint(s).

Following remand, Biafra answered the complaint and filed a cross-complaint against his three partners.  Mordam answered and cross-claimed in interpleader for resolution of whether it should pay the proceeds from the continuing, post-lawsuit distribution of records to Decay Music or to Biafra.

D. Resolution of Post-Lawsuit Sales by ATR/Mordam.

On March 14, 2000, the trial court entered judgment in interpleader in Mordamís favor, and the partnership dismissed the main action against Mordam by stipulation.  Earlier, the parties stipulated that the proceeds from the continuing, post-lawsuit sale of DEAD KENNEDYS records by ATR/Mordam would be deposited in a court-controlled trust account.  The parties agreed to distribute those proceeds according to a formula, confirmed by the trial court, requiring ATR to account for and remit to Decay Music the full net proceeds from those sales - rather than a record royalty.

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E. Biafraís Federal Court Action.

On January 24, 2000, Biafra filed an action in the U.S. District Court for the Northern District of California (Case No. C-00-00262-DLJ)  against the Decay Music partnership and his three Decay Music partners, repeating, virtually verbatim, two of the twelve causes of action from his Second Amended Cross-Complaint in this case.  This filing became the basis of a motion by Biafra to stay the proceedings here in the trial court, made a week before trial was scheduled to begin, on the ground that copyright law issues predominated and should be resolved first in the federal court.  The trial court denied this motion on learning that the federal court had granted the partnershipís motion to abstain in that proceeding.

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F. Trial of the Action.

The case was tried concurrently to the court and a jury over an approximately three-week period in May 2000.  The following claims against Biafra were submitted to the jury: breach of contract, breach of fiduciary duty, and fraud.  The same claims were submitted to the jury against East Bay Ray only on Biafraís cross-complaint.  The trial court reserved the balance of the issues on declaratory and injunctive relief (subject to the juryís "advisory" verdict), as well as Biafraís petition (made in a second amended cross-complaint filed on March 16, 2000) for dissolution of the Decay Music partnership.

G. Evidence at Trial.

The partnership called the following witnesses:

1. East Bay Ray: Founding member of DEAD KENNEDYS, guitar player, producer, songwriter, Ray formed the band, managed the band partnership, and established and maintained its relationships with third parties.  His persistence led to the revelation that ATR had underpaid the band for years - and hid it from the other band members.  His dedication to DEAD KENNEDYS as a band (among other things, having perceived a conflict, he withdrew voluntarily as a partner in ATR), and to the Decay Music partnership as a collective democracy, came at a price, however, as Biafra and members of his entourage (Werckman, Stott) made him a target and subjected him to repeated abuse.

2.  Kristin Von Till: Former General Manager of ATR, Ms. Von Till testified under subpoena to being present at the meeting in early 1998, in which Biafra embarked on his scheme to wrest control of the DEAD KENNEDYS catalog from the Decay Music partnership.  She strongly objected at the time, and was later dismissed from ATR when Biafra learned she had disclosed his fraud to East Bay Ray.  She described Ray as being shocked and "appalled" at her revelation.

3.  Michael Bonanno: Original roadie for the band and ATRís first General Manager, "Microwave" (his band moniker) testified under subpoena to the terms and conditions of the agreement between Decay Music and ATR, which he made on ATRís behalf with East Bay Ray.  He witnessed the DEAD KENNEDYS songwriting process, which he described as collaborative.  He also testified to implementing a mechanical royalty increase at ATR in 1986 (after Biafra took over sole ownership and control of ATR) for DEAD KENNEDYS songs following an increase in the federal statutory rate.

4.  Michael Ashburne: Music industry attorney for almost 30 years, Mr. Ashburne was retained by the partnership to verify the facts and circumstances of the relationship between Decay Music and ATR, and to negotiate a written license agreement on the partnershipís behalf with ATR.  He testified to Stottís insistence that monies offered the band were consideration for a new license between Decay Music and ATR for perpetual worldwide rights.  Also qualified as an expert, he confirmed that band partnerships are formed as a vehicle to create, hold, control and administer exclusive rights in music - a customary practice in the music industry.

5.  Richard F. Stott: Attorney and Biafraís childhood friend, Mr. Stott appeared under subpoena and testified that he performed legal services for DEAD KENNEDYS beginning in 1984.  Those services included, among other things, review of license agreements (e.g., Dirksen Video Agreement, Brockham Merchandising Agreement) entered into by Decay Music (and signed by Biafra) in which the partnership acknowledged, warranted and represented that it owned the rights in DEAD KENNEDYS music, artwork, designs, and trademarks.  He also acknowledged having represented the other band members in various matters and having been paid by Decay Music for band-related services - but insisted on referring to himself as "Jello Biafraís personal attorney" - and aiding Biafra in his defense of this case.

6.  Klaus Flouride: Bass player, songwriter, original band member, Klaus was "flabbergasted" by Rayís treatment at the December 1997 meeting to discuss artist-label relations.  He also confirmed that DEAD KENNEDYS songwriting was collaborative.

7.  Timothy J. Jorstad: Music industry accountant, Mr. Jorstad qualified as an expert to discuss the partnershipís damages calculations, including its claim relating to ATRís lack of promotion of DEAD KENNEDYS records, which he based on a "modest" estimate.  Mr. Jorstad testified that promotion is necessary in the record industry, and hence is common even for performers like DEAD KENNEDYS, who have not toured for many years.  In Mr. Jorstadís words, "the music industry is driven on promotion, it lives on promotion, and promotion dollars are a fact of life."

8.  Jello Biafra: Front man and lead singer for DEAD KENNEDYS, Biafra was responsible for most of the lyrics to the bandís songs, but admitted he did not read, write or play music.  He also admitted that the participants at the meeting in early 1998 to discuss Ms. Von Tillís discovery "knew [the bandís royalty rate] was wrong" but notwithstanding that, failed to reveal the royalty discrepancy to his partners, admit that royalties were owed, or pay the undisputed amount due, until long after this lawsuit was filed - and used the sum during that period as a lever to extract concessions in contract negotiations with his partners.

9. D.H. Peligro: Former RED HOT CHILI PEPPERS member, drummer, musician, songwriter - the energy and soul of the band - D.H. confirmed the DEAD KENNEDYS songwriting process involved all members of the band.
 

Biafra called the following witnesses:

1.  Winston Smith: Well-known collage artist, Mr. Smith created most of the bandís cover artwork on their record albums, as well as their inserts.  He acknowledged and agreed that he did this artwork "specifically" for DEAD KENNEDYS projects at the bandís request and for its use, including on band-related merchandise, for which he received a flat fee payment and a royalty from the partnership.  The Decay Music partnershipís payment for this artwork, and these rights, is documented in the record.

2.  Jennifer Fisher: ATRís publicist, Ms. Fisher acknowledged ATRís "paltry budget" as far as promotion of records was concerned.

3.  Jello Biafra: See above.

4.  Greg Werckman: Former long-serving General Manager of ATR, and Biafraís personal manager thereafter, he persisted in calling Ray "absurd" and "greedy" for raising what proved to be legitimate issues over how ATR was treating DEAD KENNEDYS under its contract with Decay Music.  (Feb. 28, 1997 letter from Greg Werckman to East Bay Ray.)  Although he objected to the scheme to withhold information about the royalty discrepancy from the other Decay Music partners - and later termed it a "mistake" - he took no affirmative action to advise the partnership of the true facts.

5.  Uli Elser: Mr. Elser replaced Kristin Von Till as ATRís General Manager, and continued to serve in that role through trial.  His extensive music industry experience in Europe served ATR in building its network of international distributors as it grew from a U.S.-only record label to a worldwide one following AT UKís demise.  He confirmed that ATRís gross sales figures for the years 1989 to 1999 reflected that DEAD KENNEDYS were responsible for almost half of all ATR sales dollars.

6.  Stephen Coats: Mr. Coats testified as Biafraís accounting expert.  He acknowledged the importance of promotional efforts by record labels on behalf of their artists.

7.  Robert E. Gordon: Music industry attorney, Mr. Gordon confirmed that written license agreements Decay Music had with record labels previous to ATR provided for an increase over time in the mechanical royalty paid to the partnership for the use of the bandís songs.

8.  Bryan ("Dexter") Holland: Lead singer and guitarist of the band OFFSPRING, Mr. Holland had been Biafraís friend for 15 years as of the time of trial.  He testified largely on the subject of record promotion.

9.  East Bay Ray: See above.

 *          *          *

In addition to the foregoing witnesses, the parties introduced over 70 exhibits into evidence including, among other things, the 1991 Partnership Agreement and those signed written contracts referred to in the 1991 Partnership Agreement which Decay Music entered into with various third parties over an almost 20-year history for the use and exploitation of rights in DEAD KENNEDYS music, artwork, songs, and related intellectual property.  Many of these agreements contain provisions warranting and representing that Decay Music owns or exclusively controls the rights in issue.

The partnership introduced the following documents, among others:

1.  BMI Writer Clearance Forms: Each of these forms, prepared and signed by Biafra, confirms that Biafra and the other songwriters granted rights to the Decay Music partnership and that Decay Music "owns part or all of [the] copyright and/or [the] performing right" in the bandís song).

2.  Shock Records Agreement: This exclusive license agreement acknowledges that Decay Music "has either directly or by way of exclusive license all right, title, ownership and interest including copyright" in the bandís sound recordings.

3.  Dirksen Video Agreement: This exclusive license agreement, reviewed by attorney Stott and signed by all four of the Decay Music partners, confirms that Decay Music "has exclusive ownership and control" of the bandís songs and that "it is the exclusive owner of all copyrights in the musical compositions" and, by implication, the recorded performances, appearing on the video.

4.  Brockham Merchandising Agreement: This exclusive license agreement was also reviewed by attorney Stott and signed by all the Decay Music partners (except D.H. Peligro), and confirms that Decay Music "has the right to use the name, approved artwork and designs, trademarks (if any) and approved logos associated with [DEAD KENNEDYS] and all merchandising rights relating" to the band.

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H. The Jury Verdicts.

On May 19, 2000, the jury returned two Special Verdicts.  The first Special Verdict, dealing with the partiesí claims for damages, found Biafra violated his contractual and fiduciary duties and committed fraud against his partners, and awarded $179,284 in compensatory damages to Decay Music.  The jury also found twice, by clear and convincing evidence, that Biafra was guilty of malice, oppression and fraud in his conduct toward his partners.  Following a short punitive damages phase, the jury found Biafra liable for an additional $20,000 in punitive damages to his partners.

The second Special Verdict, termed "advisory," dealt with those issues relating to the declaratory and injunctive relief portions of the case.  In it, the jury found that the Decay Music partners agreed in writing that Decay Music owned the rights to the bandís creative works; that the four band members (and Decay Music partners) did not agree, as Biafra contended, that Decay Music conducted its business on the basis of unanimous consent; and that Biafra received reasonable notice of the September 30, 1998 Decay Music partnership meeting, at which the partnership voted to terminate its license agreement with ATR.

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I. The Trial Courtís Statement of Decision.

On November 20, 2000, following a series of post-trial hearings, the trial court entered its Statement of Decision.  In it, the trial court confirmed the juryís advisory verdict, deviating only on the issue of Decay Musicís ownership of the bandís creative works.  (The trial court overturned that part of the juryís verdict and ruled, over three of the four partnersí objection, that the partners intended to and granted the partnership a plenary exclusive license in and to the rights to those works.)

Over the other partnersí objection, the trial court granted Biafraís petition for dissolution of Decay Music, finding that "antagonistic feelings have developed between partners to the extent that the partners cannot continue the partnership to their mutual advantage."  The trial court chose as the appropriate remedy in dissolution the sale of the partnershipís assets - including, by definition, the exclusive rights to all of the bandís creative works - with proceeds of the sale to be distributed to the partners in proportion to those percentages set out in the 1991 Partnership Agreement.  The trial court appointed a special master and accountant for this purpose.

J. Judgment and Appeal(s).

The trial court entered judgment on December 22, 2000.  Timely appeal and cross-appeal followed..  Dissolution of the Decay Music partnership is stayed pending these appeals. C.C.P. § 916(a).

 

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last updated 06/22/04