939 F.2d 395 (6th Cir. 1991), 90-5988, Thomas v. Gusto Records, Inc.

Docket Nº:90-5988, 90-6445.
Citation:939 F.2d 395
Party Name:B.J. THOMAS; Gene F. Pitney; Shirley Owens Alston; Doris Coley Jackson; Beverly Lee; Vernon McFadden, Jr., Plaintiffs-Appellees, v. GUSTO RECORDS, INC.; G.M.L., Inc., Defendants-Appellants.
Case Date:July 29, 1991
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit

Page 395

939 F.2d 395 (6th Cir. 1991)

B.J. THOMAS; Gene F. Pitney; Shirley Owens Alston; Doris

Coley Jackson; Beverly Lee; Vernon McFadden,

Jr., Plaintiffs-Appellees,


GUSTO RECORDS, INC.; G.M.L., Inc., Defendants-Appellants.

Nos. 90-5988, 90-6445.

United States Court of Appeals, Sixth Circuit

July 29, 1991

Argued May 10, 1991.

Rehearing and Rehearing En Banc

Denied Sept. 13, 1991.

Page 396

Ira G. Greenberg (argued), Summit, Robins & Feldesman, New York City, Samuel D. Lipshie, Boult, Cummings, Conners & Berry, Nashville, Tenn., for plaintiffs-appellees.

Jay S. Bowen (argued), Nancy A. Min, J. Mark Tipps, Bass, Berry & Sims, Grant Smith, Smith & Thompson, Nashville, Tenn., for defendants-appellants.

Before KENNEDY and MARTIN, Circuit Judges; and ENGEL, Senior Circuit Judge.

BOYCE F. MARTIN, Jr., Circuit Judge.

All the plaintiffs in this diversity action, except for Vernon McFadden who is the widower and personal representative of Addie Harris McFadden, have the unusual status of being successful popular musicians. They brought suit against Gusto Records, Inc. and G.M.L., Inc. in this Tennessee diversity action seeking royalties from the use of master recordings of their songs. Essentially, this is a breach of contract action. The case was tried without a jury and the district court awarded the plaintiffs a total of $843,209.89 plus prejudgment interest for failure to pay royalties due. Gusto and G.M.L. have appealed this judgment. The defendants do not dispute they are liable; they merely contend the amount owed is far less than the amount awarded by the district court. For the reasons which follow, we affirm.

As the district court noted, the musicians in this suit have achieved a high degree of success in "popular music." B.J. Thomas is most famous for his recording of the theme song for the movie "Butch Cassidy and the Sundance Kid," "Rain Drops Keep Fallin' on My Head." Burt Bacharach and Hal Davis wrote the song originally for Bob Dylan to record. Thomas also had a number one hit with "Another Somebody Done Somebody Wrong Song." Among his

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accolades are eleven gold records, two platinum albums, and five Grammy awards.

Shirley Owens Alston, Doris Coley Jackson, Beverly Lee and Addie Harris McFadden, members of a singing group known as the Shirelles, had their first hit, "I Met Him on a Sunday," in 1958 while they were still attending high school in New Jersey. One year later the group was successful with "Dedicated to the One I Love." Among their accolades are twelve top ten hits, including two number ones: "Soldier Boy" and "Will You Still Love Me Tomorrow," a song recently repopularized by its use in the movie "Dirty Dancing."

Gene Pitney's most successful song, "Only Love Can Break a Heart," reached number two on the popular charts in 1962. Pitney was especially successful singing movie theme songs, "A Town Without Pity" and "(The Man Who Shot) Liberty Valance," and writing songs for other popular stars, including "Rubber Ball" for Bobby Vee, "Hello Mary Lou" for Ricky Nelson, and "He's a Rebel" for the Crystalls.

As the district court aptly noted, record companies transferred the master recordings of the plaintiffs' songs through "mesne conveyances," until G.M.L. purchased them in the mid-1980's. G.M.L. owned the masters, while Gusto sold copies of them for the retail trade. Mr. Gayron "Moe" Lytle is the president, sole shareholder, and sole director of Gusto and G.M.L.

Gusto and G.M.L. concede that an owner of the master recordings incurs any royalty obligations that arise during its ownership. Defendants make this concession after having profited throughout most of the 1980's from sales and licensure of the plaintiffs' masters without much regard to this obligation. In fact, this stance of neglecting the plaintiffs' rights was consistent with most record companies who owned the plaintiffs' master recordings through much of the 1970's and throughout the 1980's.

The district court found after a five day trial that Pitney should recover $187,762.44 plus interest, that Thomas should recover $177,299.77 plus interest, and that each member of the Shirelles should recover $119,537.07 plus interest. In reaching these amounts the district court accepted, with minor exceptions, the plaintiffs' expert's testimony on custom and usage in the music industry. Most importantly, the court accepted his testimony that, absent a contractual provision to the contrary, the musician receives half of the fees received from licensing the masters to unaffiliated third parties. The trial court's decision was also based in large part upon the unseemly record keeping practices of Gusto, which forever prevent an exact determination of royalties earned by the plaintiffs. Gusto and G.M.L. timely filed this appeal.

The defendants assert the trial court erred on numerous grounds. First, they argue that clear language in the contracts of B.J. Thomas and the Shirelles prevents the consideration of evidence concerning industry custom and practice in determining royalties from domestic licensing. Thomas and the Shirelles entered into contracts with Scepter Records, Inc. in 1968 and 1961, respectively. The provisions of the two contracts in question are identical, except as to the royalty rate, and provide the following:

4. For the rights herein granted and the service to be rendered by you we shall pay you as royalty a sum equal to [4% for the Shirelles] [5% for Thomas] of the net retail list price in the United States of America based on 90% of all double-faced records manufactured and sold by us and paid for, on both faces of which are embodied only the selections recorded hereunder; and one-half of the respective amounts of such royalties of 90% of all records manufactured and sold by us and paid for on only one face of which are embodied only the selections...

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