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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

IV.  ARGUMENT ON APPEAL
A.

Substantial Evidence Supports the Courtís Factual Determination that as Among the Decay Music Partners, the Bandís Musical Compositions or Songs Were Owned in the Percentages Set Out in the 1991 Partnership Agreement.

B.

Substantial Evidence Supports the Trial Courtís Determination That the 1991 Partnership Agreement Was a "Writing" Satisfying the Copyright Actís Statute of Frauds and Transferring "Ownership" From the Partners to the Decay Music Partnership

C.

The Partnershipís Exclusive Rights Did Not Terminate Upon Dissolution of the Decay Music Partnership

D.

The Partnershipís Damage Claims for Breach of Contract Against Biafra Were Not Time-Barred

E.

There Was Substantial Evidence That Biafraís Partners Detrimentally Relied Upon His Misrepresentations in His Attempt to Fraudulently Induce Them to Enter into a Perpetual Worldwide Contract with ATR

F.

Substantial Evidence Supports the Juryís Verdicts Against Biafra With Respect to UK/Europe Distribution and the Breach of Fiduciary Duty to His Partners

G. The Bandís Album Artwork Belongs to the Partnership

V. CONCLUSION RE APPEAL


IV.  ARGUMENT ON APPEAL

Biafraís arguments on appeal are taken in order.

A. Substantial Evidence Supports the Courtís Factual Determination that as Among the Decay Music Partners, the Bandís Musical Compositions or Songs Were Owned in the Percentages Set Out in the 1991 Partnership Agreement.

Biafra differs on the evidence with the trial courtís factual determination regarding ownership of the bandís musical compositions or songs.  The trial court found, in the "Findings of Fact" contained in its Statement of Decision, that the Decay Music partners "contributed in differing degrees to the composition of DEAD KENNEDYS songs" and that "the musical compositions were owned by the respective songwriters as reflected in the allocation per album" as set out in Schedule C to the 1991 Partnership Agreement.

The trial court entered its Judgment After Trial by Court on the basis of these factual findings, concluding that "[t]he musical compositions were and are owned by the respective songwriters as reflected in the allocation per album" contained in the 1991 Partnership Agreement.  (The underlying ownership allocation on a per-song basis is the foundation for the per album totals, as shown in an attachment to a post-trial pleading that the trial court accepted for this purpose.)  Substantial evidence supports the trial courtís determination here.

Three of the four Decay Music partners, as well as a disinterested witness, testified that DEAD KENNEDYS songs were authored in creative collaboration by all of the band members.  Biafra himself conceded that while he was responsible for most of the lyrics on songs he co-wrote, what became those songsí music was brought to the band as an "idea," to be developed and completed by the musician members of the band.

Supporting this was Biafraís admission that he does not read or write music, nor play a musical instrument, and that he did not sing or play music in another band before DEAD KENNEDYS.  (In one band memberís words, the notion that Biafra was responsible for authoring a complete song on his own - from start to finish - which he is urging this Court to accept - does not reflect reality: "Biafra is not really a musician, he canít like bring in a whole song like, here it is, here is a song, play this, no play A, E, D, G, B Flat and you know the rest - [that] just ainít going to happen.")  Accordingly, the Decay Music partners shared in songwriting income on all DEAD KENNEDYS songs.

The trial court relied upon the 1991 Partnership Agreement - a document reviewed, approved, dated and signed by all four of the individual litigants here - in determining that, as among the Decay Music partners, they agreed that the bandís songs were owned together in the percentages set out in that Agreementís Schedule C.  Ownership in the bandís songs would therefore reflect the actual division of songwriting income among the Decay Music partners.

Biafraís ownership evidence - from which he argues that he solely authored many of the bandís songs - consists of album sleeve and cover credits Biafra himself prepared along with artwork and packaging - all without any input from the other Decay Music partners.  (This latter point is the crux of Biafraís argument concerning the rights in and to album artwork.)  There was no evidence that any of the other band members either reviewed that packaging or approved the credits Biafra took for himself before those recordings were released to the public.

Similarly, none of the BMI clearance forms Biafra points to were reviewed and signed by all four Decay Music partners.  Only 11 (out of a total of 51) were signed by East Bay Ray; the rest were signed by Biafra or the bandís manager.  None were signed by either Klaus Flouride or D.H. Peligro.

The trial court weighed all of this evidence (some of which it mentions elsewhere in its Statement of Decision), but found it lacking on the issue.  This was not reversible error.

Biafraís selective citation of evidence leading him to a statute of limitations argument under federal copyright law fails here for the simple reason that the same substantial evidence outlined above (creative collaboration, the sharing of songwriting income, the 1991 Partnership Agreement) indicates co-ownership among the Decay Music partners of the songs in question, and therefore contradicts any repudiation of rights.

Notwithstanding the album credits, each of the Decay Music partners continued to receive their agreed-to share of songwriting income, confirmed in the 1991 Partnership Agreement, on all DEAD KENNEDYS songs.  The other partners had no economic incentive, and did not find it necessary, to object to the album credits.  In Klaus Flourideís words, the failure of album credits to reflect the true contribution of each member of the band "didnít seem to be an argument to pick" at the time.

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B. Substantial Evidence Supports the Trial Courtís Determination That the 1991 Partnership Agreement Was a "Writing" Satisfying the Copyright Actís Statute of Frauds and Transferring "Ownership" From the Partners to the Decay Music Partnership

Section 204(a) of the Copyright Act, 17 U.S.C. § 204(a), provides that "[a] transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed."  Biafra argues here, as he did in the trial court, that the transfer of the four partnersí "ownership" rights in and to DEAD KENNEDYS copyrighted works to the Decay Music partnership was "invalid" because there was no writing satisfying the statute.

The trial court disagreed.  It concluded that the 1991 Partnership Agreement was such a writing which, when taken together with other, extrinsic evidence, demonstrated the partnersí mutual intent that the Decay Music partnership act on an exclusive basis to license, control and administer the bandís intellectual property for the benefit of all the individual band members.

The 1991 Partnership Agreement was reviewed, approved, dated and signed by the four partners of Decay Music - drafted by East Bay Ray, with several changes made by Biafra.  It begins by stating the nature and subject matter of the partiesí agreement - to "put[] into writing how Decay Music is set up and has been functioning since August 1981."

The document identifies the partnership and its partners:

"Decay Music is a partnership among Jello Biafra; East Bay Ray; Klaus Flouride and D. H. Peligro."
It then acknowledges and affirms Decay Musicís rights insofar as DEAD KENNEDYS creative works are concerned:
"Decay Music administers, licenses and collects the income from Dead Kennedys projects such as recordings, videos, merchandise, etc.  See Schedule A for a list of currently released projects and their licensees."

The writing includes an inventory of works (Schedule A) as well as the exclusive and non-exclusive licensees (including ATR) as of 1991 having rights via the Decay Music partnership to DEAD KENNEDYS works.  Many of these agreements are themselves in writing, and signed by the Decay Music partners (including Biafra), also acknowledging and affirming the partnershipís exclusive rights in the bandís creative works. See, e.g., Shock Records Agreement, Dirksen Video Agreement, Brockham Merchandising Agreement.

The trial court allowed extrinsic evidence on the meaning of the 1991 Partnership Agreement.  This evidence included the testimony of witnesses, other documentary evidence, the surrounding circumstances, the conduct of the parties, and relevant custom and practice.  Biafra failed to object to, and participated in, the introduction of such evidence, arguing from his extrinsic evidence that he and the other partners did not intend to memorialize any transfer of rights into the Decay Music partnership by the 1991 Partnership Agreement.  As such, Biafra accepted and agreed to the trial courtís decision here, waiving his right to contest it.

The trial court supported its determination regarding the partiesí intent in entering into the 1991 Partnership Agreement with specific factual findings in its Statement of Decision.  The trial court also invited an "advisory" verdict (Question No. 1) from the jury on the contractís interpretation.  Having been instructed on the copyright lawís writing requirement, the jury unanimously determined that the Decay Music partners agreed that the partnership owned the intellectual property rights relating to DEAD KENNEDYS works.  [footnote: As discussed in Section V.B., below, because of conflicts in connection with the evidence presented on this issue, the trial court erred in overturning this part of the juryís verdict and ruling that the transfer by the partners into the partnership consisted of the exclusive rights in and to, but not ownership of, the bandís intellectual property.]

The extrinsic evidence here was that:

ē The bandís creative work was collaborative;

ē The partnership paid over 90% of the cost for creating these works, including album cover artwork;

ē The partnership had possession, custody and control of the "first-generation masters" (i.e., the actual tape recordings generated from the studio sessions the partnership paid for and from which record albums and compact discs are reproduced) embodying the bandís recorded performances and musical compositions;

ē In a 20-year period, no individual author or Decay Music partner ever licensed rights to these works outside either Decay Music (in almost every case) or an exclusive business entity controlled by the same four individuals;

ē Over this same period, Decay Music granted both exclusive and non-exclusive rights to third parties in these works;

ē Formation of the Decay Music partnership for the purpose of owning and controlling the bandís intellectual property on an exclusive basis for the effective life of those rights is consistent with music industry custom and practice; and

ē The partners of Decay Music (including Biafra) made warranties and representations to licensees in contemporaneous written contracts signed by them (for example, "Decay Music warrants that it is the exclusive owner of all copyrights in the [DEAD KENNEDYS] musical compositions" [Dirksen Video Agreement]), some of which were reviewed by attorneys for the band, that the rights to these works resided exclusively and on an ownership basis in the Decay Music partnership (BMI Writer Clearance Forms, Shock Records Agreement & Brockham Merchandising Agreement).

 *          *          *

In creating this partnership, and later signing the 1991 Partnership Agreement, each partner acknowledged and agreed that the Decay Music partnership would control his respective copyright interests in and to the bandís works - ceding individual non-exclusive control over the bandís creative work to the partnership as a whole and opting out of the so-called "joint works" doctrine, while providing the partners an exclusive vehicle collectively owned and controlled by them for the use and exploitation of those rights.  After all, by insisting on the existence of unanimous consent in partnership affairs, Biafra argued in the trial court that no one could license rights in these works - even on a non-exclusive basis - without his consent and participation as a partner.

Notwithstanding any conflicting extrinsic evidence on the issue, substantial evidence supports the trial courtís conclusion that, by the 1991 Partnership Agreement, the partners intended to memorialize the transfer of their respective individual rights in and to this intellectual property to the Decay Music partnership. Morey v. Vannucci, 64 Cal.App.4th 904, 913 (1998) (conflicting extrinsic evidence on construction of writing resolved by substantial evidence rule).  See also Jim Henson Productions v. Brady & Associates, 16 F.Supp.2d 259, 285-86 (S.D.N.Y. 1997) (court to weigh "other evidence" of partiesí agreement in determining whether parties intended "to effect a perpetual assignment of all rights" in copyrighted works).

Biafra re-focuses his statute of frauds argument on appeal, contending that the partnersí intent to transfer copyright ownership of the bandís creative works must be "clear" from the four corners of the 1991 Partnership Agreement and that the introduction of other evidence of the partiesí intent was an attempt to "substitute" that evidence for the writing required by § 204 of the Copyright Act.  This is not what happened in the trial court.  The proceedings there (in which Biafra acquiesced and participated) permitted extrinsic evidence to explain and clarify the partiesí intent as reflected in the 1991 Partnership Agreement.  The partiesí dispute as framed at trial wasnít over whether there was a writing - there was - it was over what that writing meant.

Biafra cites Konigsberg Intíl Inc. v. Rice, 16 F.3d 355, 359 (9th Cir. 1994), for the proposition that the 1991 Partnership Agreement fails to meet the contemporaneous "standard" of the statute.  However, the statute itself validates, as an alternative to an instrument of conveyance, "a note or memorandum of the transfer." 17 U.S.C. § 204(a).  See also Valente-Kritzer Video v. Pinckney, 881 F.2d 772, 775 (9th Cir. 1989) (if oral transfer is later confirmed in writing, transfer is valid), cert. denied, 493 U.S. 1062 (1990).

Thus, a prior oral agreement can be, as it was here, subsequently confirmed in writing by the parties, validating the grant of rights ab initio as of the time of the oral agreement. 3 Nimmer on Copyright, § 10.03[A][3] at 10-36 (1998).

In Rice, supra, 16 F.3d at 357 & n. 3, the document in issue (a letter written by author Anne Rice to the other sideís attorneys following judgment in her favor in the trial court) was neither the product of the partiesí negotiations nor executed during the life of the purported copyright license.  Here, the 1991 Partnership Agreement was the product of the partiesí negotiations and was executed while the partnership administered, licensed and controlled the copyrights at issue - which the partnership had done exclusively for the previous 10 years, and continued to do exclusively for the next 10 years, without interruption or objection.  As a result, the 1991 Partnership Agreement provides a good "reference point" (as that term is used in the Rice case) for the partiesí mutual understanding.

Similarly, "Section 204(a) liberalizes the [previous] Actís statute of frauds provision by allowing a note or memorandum to substitute for a formal, integrated instrument." 1 Goldstein on Copyright, supra, § 4.5.1 at 4:63-65.  Thus, the 1991 Partnership Agreement may lack the terms "transfer," "assign" and "copyright" and "still may suffice to evidence the [partnersí] mutual intent to transfer the copyright interest." 3 Nimmer on Copyright, supra, § 10.03[A][3] at 10-35.

As Biafra concedes, no magic words are required; the partiesí intent is "paramount." Effects Assocs., Inc. v. Cohen, 908 F.2d 555, 557 (9th Cir. 1990) (writing "doesnít have to be a Magna Carta; a one-line pro forma statement will do"), cert. denied, 498 U.S. 1103 (1991).  See also 3 Nimmer on Copyright, supra, § 10.03[A][2] at 10-36 ("the essence of the inquiry [under § 204] is to effectuate the intent of the parties").

A written instrument sufficient to satisfy § 204 can perform other functions too - such as the sale of a business, or the setting up of a partnership - without ever mentioning the word "copyright." Schiller & Schmidt, Inc. v. Nordisco Corp., 969 F.2d 410, 413 (7th Cir. 1992) (sale agreement); Oddo v. Rees, 743 F.2d 630 (9th Cir. 1984) (partnership agreement).

The language of the 1991 Partnership Agreement is simple, informal and non-technical - all to be expected in a document prepared by musicians.  Its purpose was to memorialize the partnersí previous arrangement - confirmed elsewhere in more formal documents reviewed by Stott and signed by the partners (e.g., Shock Records Agreement, Dirksen Video Agreement, Brockham Merchandising Agreement) - with respect to the bandís creative works.

The 1991 Partnership Agreement identified the rights of the partnership to administer, license, and collect the income from all uses of the works in question.  The documentís language did not contemplate sharing those functions with anyone else and, in fact, the partnership has not shared those functions with anyone else for over 20 years.  The document also inventoried the creative works in question, as well as the licenses it made with others - including Biafra - for the commercial use of those works - an indication of the partnershipís ownership and control.

If there is any public policy at stake here it is not, as suggested by Biafra, that of protecting the author of a copyrighted work from unremunerative or inadvertent transfer to another.  Decay Music is not an arms-length third-party entity, but a partnership comprised of the copyright authors and owners.  All of the partners, including Biafra, are co-equal owners in the partnership, and under California law, continue to own and control, as well as to receive all income from, the copyrights insofar as they are partnership assets. Oddo v. Rees, supra, 743 F.2d at 632.

The appropriate policy consideration here is that of predictability and certainty in copyright ownership and administration, Congressí "paramount goal" in revising the Copyright Act in 1976. Effects Assocs., Inc. v. Cohen, supra, 908 F.2d at 557 (quoting Community for Creative Non-Violence v. Reid, 490 U.S. 730, 749 (1989) [citing legislative history]).  With these copyrights residing in one business entity collectively owned and controlled by the authors of the creative works, as intended here and in the music industry generally, both economic efficiency (i.e., lower transaction costs) and financial value are fostered. Schiller & Schmidt, Inc, supra, 969 F.2d at 413 (identifying "diseconomies of divided ownership").

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C. The Partnershipís Exclusive Rights Did Not Terminate Upon Dissolution of the Decay Music Partnership.

Biafra next argues that the court-ordered dissolution of the Decay Music partnership must result in an end to its exclusive rights in and to the DEAD KENNEDYS intellectual property, with those rights reverting to the individual partners on a non-exclusive basis.  Biafra contends that because the trial court made no finding or conclusion concerning the term of the grant to the partnership by the four partners of their individual rights, "any license thereby granted was for an unspecified duration and therefore terminable at will."

This is a 180-degree reversal from the position taken by Biafra before and during trial.  His theory then was that a contract of unspecified duration effecting rights in copyright (like the agreement between Decay Music and ATR) could not be terminated at all prior to the 35-year term allowed under federal copyright law.  Biafra therefore never raised the issue of the duration of the grant into the partnership via the 1991 Partnership Agreement, and never argued that it was an agreement terminable at will, to protect this position; as a result, the other partners did not adduce direct evidence on the issue. Sommer v. Gabor, 40 Cal.App.4th 1455, 1468 (1996) ("A party is not permitted to change his position and adopt a new and different theory on appeal.")

When, five months following the juryís verdict,  Biafra first requested that finding, the trial court reacted with skepticism.  In declining to find that either the 1991 Partnership Agreement or the transfer of rights into the partnership was for "an unspecified duration" (as requested by Biafra), and ordering the sale of the partnershipís exclusive rights upon dissolution of the partnership, the trial court made an implied finding that the transfer into the Decay Music partnership of the individual partnersí rights was for the effective life of those rights. Winograd v. American Broadcasting Co., 68 Cal.App.4th 600, 610 (1998) (presumptions indulged to support trial courtís determination; any ambiguity in record resolved in favor of judgment).

Under former Corp.C. § 15031(1)(b), applicable here, the duration of a partnership established for a particular undertaking can be established by implication, and is not terminable at will. Owen v. Cohen, 19 Cal.2d 147, 150-51 (1941) (trial court finding reversed; held, while term not fixed, presumption is that partnership shall continue in manner mutually contemplated).  Accord Zeibak v. Nasser, 12 Cal.2d 1, 13 (1938).  The implication from the purpose of the Decay Music partnership as described in Section IV.B., above and as found by the trial court, was that the duration of the partnership was for the effective life of the bandís intellectual property.

This is supported by substantial evidence, including, among other things, Biafraís own testimony that the reason for the 1991 Partnership Agreement was to assure continued viability of the partnership in the event of a partnerís death.  It is also supported in the duration of the long-term contracts that the partnership entered into with third parties for the exploitation of the rights in question.  See, e.g., Dirksen Video Agreement (35-year contract for concert video).  It is further supported by the custom and practice of the music industry generally.

Biafra cites only one case here, Gardner v. Nike, Inc., 110 F.Supp.2d 1282 (C.D.Cal. 2000), affíd, 279 F.3d 774 (9th Cir. 2002), where the court ruled on the issue of whether, under the Copyright Act, an exclusive but limited licensee had the right to transfer or "sub-license" its rights to a third-party.  The court answered that question in the negative: A limited exclusive licensee has the burden of obtaining the licensorís consent before it may assign or transfer its rights, absent explicit contractual language to the contrary.

The Gardner decision has no bearing on the correctness of the trial courtís ruling compelling sale of these rights following Decay Musicís involuntary dissolution.  Biafra himself recognized that the Decay Music partnership was the "licensor" of all such rights to third parties, and not a limited licensee, as was the case in Gardner.  By the 1991 Partnership Agreement, the Decay Music partners memorialized their agreement that the partnership could assign, transfer or sub-license rights to others, and the partnership did so for almost 20 years without interruption or objection from Biafra, who at all times benefitted from this activity.

The interests at issue in the Gardner case (i.e., the preservation of the rights and control of a copyright owner) are not at issue here.  Biafra is a partner in the transferee, the Decay Music partnership, and has an equal ownership and voting interest therein.  He petitioned for Decay Musicís involuntary dissolution.  Under the decision of the trial court, he will continue to have a role in the proceedings to select a purchaser for the partnershipís intellectual property assets, should dissolution be upheld.

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D. The Partnershipís Damage Claims for Breach of Contract Against Biafra Were Not Time-Barred.

Notwithstanding that he never requested a jury instruction on the issue, Biafra contends that the damages award arising from the findings of the jury that ATR breached its contract with Decay Music by failing to promote DEAD KENNEDYS recordings and failing to pay the proper mechanical royalty for use of the bandís songs is foreclosed as a matter of law under the applicable statute of limitations, Code of Civ. Proc. § 339(1).  Assuming the Court is willing to consider the argument at all, Biafraís contention is incorrect.

Biafra claims that even in the face of multiple and continuing breaches of his agreement with Decay Music - which he does not dispute in this Court - the statute of limitations should be read to bar any action for damages for these breaches not commenced within two years of the first occasion on which the partnership could have requested relief.  In effect, Biafra urges this Court to force a wholesale forfeiture of the partnershipís rights under its contract with ATR, at least as to these two established contractual obligations of ATRís. Bollinger v. National Fire Ins. Co., 25 Cal.2d 399, 411 (1944) (statute is "technical" defense to be strictly construed so as to avoid "forfeiture" of rights).

The trial court ruled that the jury would be permitted to consider contractual damages arising within the two-year limitations period only.  In this, the trial court gave Biafra the benefit of the doubt; he had argued that the contract between Decay Music and ATR was embodied in the 1991 Partnership Agreement and was therefore in writing.  (This position buttressed other arguments Biafra was making to the trial court regarding Decay Musicís inability to terminate its license with ATR.)  As a result, the partnership presented four yearsí worth of damages to the jury.

The total amount of money due the partnership under the partiesí agreement was not a fixed sum paid out over time.  Rather, the total amount owed Decay Music by ATR was unascertainable until the date each record album or compact disc was promoted, manufactured, distributed and sold, because ATRís payment to the partnership was contingent upon those events.  Under the partiesí agreement, ATR had a continuing obligation to promote the sale of DEAD KENNEDYS records and to pay a portion of its sales proceeds to Decay Music by way of a royalty as ATR used the recordings and songs over time.

To find for Biafra under a statute of limitations defense as a matter of law and reverse the juryís award of damages would be to hold that an artist is forever barred from seeking recovery of contract damages from his record label after he has once passed up the opportunity to do so.  This would give the record label the right to continue those contractual breaches in perpetuity as well as force a forfeiture of the artistís contractual right to collect a royalty from any future sale of his creative work.  Research discloses no authority in support of such a reading of California law, and one case directly on point against it. Peterson v. Highland Music, Inc., 140 F.3d 1313, 1320-21 (9th Cir.), cert. denied, 525 U.S. 983 (1998).

Biafraís case citations, involving a wrongful termination lawsuit and a workerís compensation dispute, are inapposite.  And there is nothing to Biafraís distinction between a right and a remedy here.  The individuals who made the contract in issue were in agreement as to its terms.  There was no evidence lost, faded memories or missing witnesses on the partnershipís contractual rights.  Just because the contract was oral, allowing Biafra to "contest" its terms (he did so by pointing to the passage of time before the partnership made its claim), does not change the correctness of the result here.

Contrary to Biafraís assertion that the partnership was "relieved" of "the consequences of [its] delay," the trial courtís decision required the partnership to give up damages it proved at trial.  Under these circumstances, the trial courtís conclusion that the statute of limitations confined the jury inquiry to those damages occurring within the shortest applicable period (i.e., two years), without extinguishing the right thereto, was both proper and equitable.

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E. There Was Substantial Evidence That Biafraís Partners Detrimentally Relied Upon His Misrepresentations in His Attempt to Fraudulently Induce Them to Enter into a Perpetual Worldwide Contract with ATR.

Biafra contends that there was a lack of substantial evidence that the other Decay Music partners detrimentally relied on Biafraís misstatements Ė that they were neither deceived nor misled by these misrepresentations.  In effect, Biafra contends that his partners knew about the royalty discrepancy before he did (!), and therefore could not have relied upon his or his attorneyís falsehoods to their detriment.  Biafra also "disputes" that the jury could have reasonably found any misrepresentation on his or Stottís part.  (This latter argument is refuted in Section II.F., above.)

This case presents a far different set of facts than that in McLaughlin v. National Union Fire Ins. Co., 23 Cal.App.4th 1132, 1148 (1994), cited by Biafra, where the only alleged misrepresentation consisted of a coverage opinion by an insurer that the insured neither accepted nor believed to be correct.  In this case, prior to 1998, the other Decay Music partners received and accepted royalty statements from Biafra that they had every reason to believe were accurate and complete.

During this time period, and since at least the time Ms. Von Till became General Manager in 1996, ATR had information regarding the royalty discrepancy, and therefore knew the statements rendered to Decay Music were false.  Werckman admitted that ATR was under financial pressure at the time the underpayment began, and that DEAD KENNEDYS was ATRís "main financial source" (Feb. 28, 1997 letter from Greg Werckman to East Bay Ray).  ATR therefore had a motive to underpay DEAD KENNEDYS, its most successful and financially significant artist, from the inception of the royalty discrepancy in 1989.  (This would explain Werckmanís tepid reaction to Ms. Von Tillís discovery in 1996, when she took over as ATRís General Manager from him.)  For years, ATR shaved, ever so slightly, the amount paid on a per unit basis to the band that sold the most records on the label.

While the other partners may have had some evidence of accounting discrepancies by 1998, unlike the insureds in McLaughlin, they were not certain these existed and looked to Biafra for verification of the facts.  On their behalf, Mr. Ashburne posed the other partnersí questions to Biafra and requested an explanation.  Biafra repeatedly refused to address the issue, and denied owing these monies.

Mr. Ashburne testified that the partnership retained him to assist in confirming what the facts were.  East Bay Ray testified likewise.  Decay Music extended negotiations with ATR over a written license agreement through the end of 1998 under the illusion that Biafra was negotiating in good faith.

When Ms. Von Till revealed the information she had about the royalty discrepancy to East Bay Ray in late 1998, following almost a year of meetings, negotiations and lawyersí letters, he was "appalled; he didnít want to believe that that was really going on."  His disbelief was so great that he asked Ms. Von Till "to document the assertions that [she] was making" to him.

Soon after that point, Decay Music voted to terminate the partnershipís relationship with ATR.  But for the continuing concealment, Decay Music would have terminated its license agreement with ATR long before as a result of Biafraís dishonesty.  The delay in ending this at-will relationship damaged the partnership - in interest, attorneyís fees for Mr. Ashburne, and other compensatory damages no longer recoverable as a result of the applicable statute of limitations (some of which were in evidence) - all supporting the juryís award.

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F. Substantial Evidence Supports the Juryís Verdicts Against Biafra With Respect to UK/Europe Distribution and the Breach of Fiduciary Duty to His Partners.

Biafra contends that there was no substantial evidence to support the juryís verdict against him on his misappropriation of monies from the distribution of DEAD KENNEDYS records in the U.K. and Europe and on his breach of fiduciary duty to his partners.

Biafra says the partnership "authorized" ATR to distribute DEAD KENNEDYS records in the U.K. and Europe through September 1998, citing the testimony of East Bay Ray.  But Ray also testified that this arrangement was "temporary," to allow a reasonable transition period for Decay Music itself to find a new overseas distributor.

Instead, Biafra exceeded the bounds of this arrangement with his partners and took advantage of the situation well beyond any temporary period (reflected in the partnershipís damages claim), obstructing any attempt on Decay Musicís part to establish direct distribution in those territories.  His purpose, reflected elsewhere, was to enlarge his exclusive distribution rights to the Decay Music catalog - at a time when ATR was itself expanding its distribution network beyond the U.S. only.  In any event, no testimony supports the proposition that the proceeds Biafra received for such sales would not be shared equally among all Decay Music partners, as if the partnership had a direct contract for distribution in those territories, once the agreement with AT UK ended.

In attempting to avoid any fiduciary obligations to his partners, Biafra relies on Corp.C. § 16404(f).  Biafra concedes that this statute does not apply to this case because it did not exist under prior partnership law.  His own case citation also reveals that his argument is subject to an important qualification under previous law - namely, "absent fraud."  Since Biafra committed fraud in this case, prior law supports the result here.

Biafra cannot claim immunity for breaching his fiduciary obligations just because he was doing business with the partnership.  That ATR was a primary beneficiary of the breach does not shield Biafra from liability.  Whether Biafra was the sole proprietor or shareholder, or even a partner, in another entity that benefitted from his breach of fiduciary duty is irrelevant, and Biafra cites no law under the Uniform Partnership Act, applicable here, to the contrary.

When Biafra became the sole owner of ATR, then distributing the bandís recordings in the U.S., he remained a partner in Decay Music - with a fiduciary duty to administer partnership property in accordance with the highest standards of fidelity and good faith to his partners.  The trial court instructed the jury accordingly.

The substantial evidence previously reviewed reflects a pattern and practice of self-dealing, the placing of Biafraís own interest ahead of that of his partners, the use of partnership assets to enrich himself, and the failure to be truthful with regard to matters affecting partnership business - all in violation of Biafraís fiduciary duties to his partners, and with resulting damage.

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G. The Bandís Album Artwork Belongs to the Partnership.

The 1991 Partnership Agreement provides for an equal division of income from band artwork (mostly by way of merchandise).  The Decay Music partners have shared that income equally at all relevant times.  The Decay Music partnership also paid for all or substantially all of the band artwork.

The partnershipís first exclusive merchandise license agreement, signed by every partner (except D.H. Peligro) and reviewed by attorney Stott, includes a warranty and representation that Decay Music "has the right to use the [bandís] artwork and designs," among other things, "associated with Artist and all merchandising rights relating to Artist." (Brockham Merchandising Agreement.)  This constitutes substantial evidence that the bandís artwork, like the songs and the recordings, as well as the band name, logos, and associated marks and symbols, were intended to and should be treated as assets of the partnership, and not the individual partners. Robi v. Reed, 173 F.3d 736, 739-40 (9th Cir. 1999) (collecting cases holding that goodwill of group name normally belongs to band partnership rather than to individuals in group).

Biafra incorrectly contends that the trial court committed error in failing to make any findings concerning the partnersí ownership interest in the bandís artwork.  Contrary to Biafraís assertion that he was responsible for the artwork to the exclusion of his partners, much of the artwork is not original to Biafra, including the work of Winston Smith, for which the partnership paid.  Mr. Smith acknowledged his relationship with the partnership in granting permission for his work to be used.

Biafraís intention here is to exclude the other Decay Music partners from the use of the bandís artwork in connection with the sale of recordings and merchandise.  In the judgment, the trial court rejected this purported termination of rights and accepted the proposition that these rights belonged to the partnership.  This Court need not disturb that ruling, nor compel the trial court to make any further finding on the matter.

V.  CONCLUSION RE APPEAL

For all the foregoing reasons, this Court must affirm the trial courtís findings on those matters appealed from by Biafra.

 

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last updated 06/22/04