VI. ARGUMENT ON CROSS-APPEAL

Three questions are posed on cross-appeal:

• Did the trial court abuse its discretion in granting Biafra’s petition for dissolution of the Decay Music partnership in light of his wrongful conduct and the consequence of dissolution to the value of the partnership’s assets?

• Did the trial court err in overturning the jury’s verdict and in finding that Decay Music exclusively controlled, but did not own, the rights in and to the band’s creative works?

• Was there any evidentiary basis for the jury’s award of damages ($5,000) against East Bay Ray given its findings in his favor on liability for breach of the 1991 Partnership Agreement?

A. The Trial Court Committed Error in Granting Biafra’s Petition for Dissolution.

In March 2000, just a month before trial, Biafra amended his cross-complaint to include a cause of action for involuntary dissolution of the Decay Music partnership.  The primary ground alleged for dissolution was his partners’ breaches of "fiduciary, contractual and other duties to [Biafra]" in that they "wrongfully sued [Biafra]," "wrongfully interfered with his rights to exploit the [Dead Kennedy] works through ATR" and "wrongfully withheld payments due him."  None of these allegations were sustained at trial.

The only other ground given for Biafra’s request for dissolution, and the one apparently adopted by the trial court, was that the actions of his partners made "it not reasonably practicable to carry on the business of the [Decay Music] partnership."  The trial court made only one finding - of "antagonistic feelings" among the partners - as the basis for dissolution.  It pointed to no wrongful or antagonistic conduct (indeed, no conduct at all) of the other three partners underlying this finding.  Nor did the trial court find partnership deadlock, or an inability to continue the partnership’s business as a result of disagreement.  (In fact, the jury’s verdict was to the contrary - namely, that the partnership could and should proceed on the basis of majority vote.)  And the trial court failed to point to any evidence, because none existed, that "the partners [could] not continue the partnership to their mutual advantage."

Here, the "antagonism" originated solely with Biafra.  Biafra breached his contractual and fiduciary duties to, and committed a fraud upon, the Decay Music partnership and his three partners.  In addition, Biafra took these actions against his partners with fraud, malice and oppression, as defined by Civil Code § 3294, in conscious disregard of their rights.

Given his record of malfeasance, and where, as here, the misconduct in question is material to the subject matter of the litigation to which dissolution is a claim or defense, Biafra would normally be precluded as a matter of law from maintaining an action for dissolution under the principle that he who comes seeking equity must come with clean hands.  Rosenfeld, Meyer & Susman v. Cohen, 191 Cal.App.3d 1035, 1061 (1987).

This is especially so where dissension or disagreement is the basis for partnership dissolution, because "the partner who is the author of the ill feeling between himself and his partners will not be permitted to make the relation which he has induced the ground of a dissolution of the partnership[,] particularly where dissolution would destroy a large part of the value of the partnership business."  See 68 C.J.S. § 349(4), at 858.  Any ill feeling in this case resulted from Biafra’s conduct and cannot justify dissolution of the Decay Music partnership, especially where, as here, the consequence is that the value of  the partnership’s intellectual property assets will be eroded.
[footnote: The value of this intellectual property depends upon the ability to grant exclusive rights to third parties, who almost always require exclusivity as a condition of contracting to protect their own economic interest and to provide sufficient incentive to maximize income - a view Biafra himself espoused.  (August 11, 1997 letter from Biafra to East Bay Ray - "Mordam and I opposed exclusives at first; but now it seem obvious that an exclusive is the best way to get distributors to get off their butts and promote our releases, instead of just letting them sit on the shelf.")  As a result, most of the partnership’s licenses with others are exclusive; without a vehicle to grant exclusivity to others, the value of these rights are adversely affected.  See Schiller & Schmidt, Inc., supra, 969 F.2d at 413 (identifying "diseconomies of divided ownership" in intellectual property).  In holding the band’s recorded music hostage for over two years - despite the majority’s vote to terminate the partnership’s agreement with ATR in September 1998 - Biafra amply demonstrated that he will never agree to anyone other than himself putting the band’s records out on an exclusive basis.  In later petitioning for involuntary dissolution (more than a year and a half after that vote), Biafra’s gambit was to sacrifice the partnership - and the value of its intellectual property assets - for the hoped-for distribution of rights in-kind, in order to achieve absolute veto power over any exclusive uses of the band’s intellectual property (which the jury denied him), and to exclude his partners from any say over certain of the band’s creative works.]

In Bates v. McTammany, 10 Cal.2d 697 (1938), the Supreme Court held that "No serious contention may be made that the defendant, himself at fault, may prevail on his application for a dissolution if it would cause loss to the partnership."  The court continued that: "A court of equity, doubtless, will not assist the partner breaking his contract to procure a dissolution of the partnership, because, upon familiar principles, a partner who has not fully and fairly performed the partnership agreement on his part has no standing in a court of equity to enforce any rights under the agreement[.]"

The Supreme Court acknowledged that:

"It is true that … there can be no such thing as an indissoluble partnership, and that circumstances may arise which would make it inexpedient for a court of equity to prevent the dissolution.  Nevertheless the grounds for premature dissolution must be serious, and will not be recognized as justifiable when the suit is by the partner found to be at fault and when such dissolution will cause losses to the partnership or destruction of the value of partnership assets or property."

First, the Decay Music partners entered into their partnership for a definite undertaking - creating, owning, controlling and managing the band’s intellectual property, on an exclusive basis, for the life of these creative works (which might outlive any one or more of the individual partners).  On entering into the 1991 Partnership Agreement, the Decay Music partners memorialized this understanding (thus Biafra’s own testimony as to the reason for the writing).  None of the partners testified that they expected or intended that the partnership would terminate on the whim of one of its members.  Biafra himself never conceived of or articulated a power to elect dissolution (as explained in Section IV.C., above) until just before trial began - and did so solely for his own selfish, tactical reasons.

Second, Biafra breached his contractual obligations to his partners, as found by the jury, and was the architect of the "antagonism" he is now employing to undo his long-term contractual commitment to his partners.  None of the other partners breached the partnership agreement.

In these circumstances, Biafra was required to show that the cause for dissolution of the Decay Music partnership was "serious and justifiable" in light of his fault, and meet the evidence presented by the other partners that dissolution would cause loss to the partnership as well as destruction of the value of the partnership’s assets.  The record reflects that he did neither.  Accordingly, the trial court committed error in granting Biafra’s petition for dissolution, and this Court must reverse the trial court’s judicial decree of dissolution of the Decay Music partnership.

In the alternative, this Court must reverse and remand to the trial court for those additional findings on Biafra’s dissolution petition required by law.  Before ordering dissolution of the Decay Music partnership, the trial court must make the following findings: (1) that the ground for dissolution was serious and justifiable in light of Biafra’s fault, and (2) that dissolution would cause neither loss to the partnership nor destruction of the value of the partnership’s assets.

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B. The Trial Court Erred in Overturning the Jury’s Verdict on the Issue of the Partnership’s Ownership of Rights in the Band’s Creative Works.

The jury’s unanimous "advisory" verdict (Question No. 1) was that the four members of DEAD KENNEDYS agreed, in writing, that the Decay Music partnership owned the rights to the band’s creative works.  This includes the band’s sound recordings, musical compositions, video recordings, artwork, name, marks and associated DEAD KENNEDYS logos.  As reviewed in Section IV.B., above, substantial evidence supports the jury’s decision here.

The trial court committed reversible error in overturning this part of the jury 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 band’s intellectual property.  The trial court asked the jury to resolve conflicts in the extrinsic evidence on the issue of ownership - and nothing less.  [footnote: The partnership asked that the jury be queried on a broader range of possibilities with respect to the rights conveyed by the partners, including whether the partners agreed that "Decay Music would own, control or exclusively administer the rights to the band’s creative works." (emphasis added).  Biafra opposed this, demanding the jury be asked about ownership only - and this was the way the trial court posed the query to the jury.]   Accordingly, the jury properly made its verdict interpreting the partners’ intent as embodied in the 1991 Partnership Agreement as trier of fact.  The trial court could not stray from this finding unless it found a lack of substantial evidence supporting it.

Here, resolution in favor of the partnership’s evidence depended on an assessment of the credibility of the opposing parties’ view of their mutual intent, as well as the meaning of the 1991 Partnership Agreement.  Before the jury could interpret that document, it had to decide whether to believe the partnership’s testimony and evidence that the partners intended for Decay Music to own the intellectual property rights relating to the band, or the contrary testimony and evidence offered by Biafra that Decay Music was an administrative entity only.  It accepted the partnership’s view.

Because substantial evidence supports the jury’s verdict on this issue, this Court must reverse this part of the trial court’s Judgment, and reinstate the jury’s verdict that the Decay Music partnership owns the band’s intellectual property.

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C. The Jury Verdict Against East Bay Ray is Internally Inconsistent and Unsupported by Substantial Evidence.

Because of his central role in the partnership’s affairs, East Bay Ray was the target of Biafra’s cross-complaint against the Decay Music partnership and the other partners.  [footnote: This was a continuation of Biafra’s hostility towards East Bay Ray, in which he called Ray "absurd" and "greedy" in making what turned out to be legitimate claims on the partnership’s behalf.  This hostility continued to the end of trial, when Biafra’s counsel told the jury that Ray was "evasive" and "not to be trusted" in his testimony, and accused him of perjury and a cover-up, in closing argument.  The jury disagreed.]   Biafra abandoned the vast majority of the claims contained in that cross-complaint; all that remained at the time of trial was a mirror image of the partnership’s case against him, directed solely at East Bay Ray.

The theory of Biafra’s case against East Bay Ray, as explained by his counsel, was that partnership "monies were taken [by Ray] without permission or consent of the partners" and in violation of the partnership agreement.  These monies consisted of an approximately three (3%) percent commission Ray was paid for administering and managing the partnership.  "The issue was," as Biafra’s counsel summed up, "did [Ray] have an agreement with his partners to pay [these commissions]."

Onto this breach of contract claim, Biafra tacked on breach of fiduciary duty and fraudulent concealment claims.  Both directly related to the commissions issue.  For instance, Biafra’s only measure of damages for all three of his claims was the amount of commissions paid to East Bay Ray from Biafra’s share of partnership income over the previous 10 years - a total of about $20,000.

The jury found unanimously that East Bay Ray did not breach the partnership agreement by receiving these monies from the partnership for the work he performed on its behalf.  According to Biafra’s own theory of the case, the balance of his action against East Bay Ray is unsustainable - the jury’s unanimous verdict on Biafra’s breach of partnership agreement claim left him without a case on his remaining claims against Ray.  [footnote: The lack of any provable damages is reflected in the jury’s later finding on the breach of fiduciary duty claim, where the jury awarded no damages despite the finding of liability.  It is also reflected on the jury verdict form itself.  (The jury appeared initially to find against liability on the fraud claim against East Bay Ray, and also appeared to award no damages.)]

On its face, the balance of the jury’s verdict is arbitrary and irrational.  The jury’s verdict against East Bay Ray was unsupported by any substantial evidence, and was impossible to sustain.  A reasonable trier of fact could not have made the findings in issue given the determination on the breach of partnership agreement claim.  Accordingly, this Court must overturn these findings for lack of substantial evidence. Roddenberry v. Roddenberry, 44 Cal.App.4th 634, 651-54 (1996) (explaining substantial evidence rule).

For all the foregoing reasons, the Court should (A) reverse or reverse and remand on the trial court’s grant of Biafra’s petition for dissolution, (B) reverse the trial court’s judgment notwithstanding the jury’s verdict, and reinstate the finding that the Decay Music partnership owns the band’s intellectual property, and (C) reverse the judgment of liability, and the award of damages, against East Bay Ray.

DATED: June 27, 2002	PHILLIPS & ERLEWINE LLP
	David M. Given

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last updated 06/22/04