Zappa v. Rykodisc, Inc.

• Decision Date: 17 August 2011
• Docket Number: No. 08 Civ. 396(WHP).,08 Civ. 396(WHP).
• Citation: 819 F.Supp.2d 307
• Parties: Adelaide Gail ZAPPA & Adelaide Gail Zappa as sole trustee of The Zappa Family Trust u/t/d November 15, 1990 a California Revocable Trust, Plaintiffs, v. RYKODISC, INC., Defendant.
• Court: U.S. District Court — Southern District of New York

819 F.Supp.2d 307

Adelaide Gail ZAPPA & Adelaide Gail Zappa as sole trustee of The Zappa Family Trust u/t/d November 15, 1990 a California Revocable Trust, Plaintiffs,

v.RYKODISC, INC., Defendant.

No. 08 Civ. 396(WHP).

United States District Court, S.D. New York.

Aug. 17, 2011.

Ira Stephen Sacks, Ira S. Sacks, Law Office LLP, Robert Jason Grand, Dreier LLP, New York, NY, Jordan D. Susman, Miles J. Feldman, Stanton Lawrence Stein, Liner Grode Stein Yankelevitz Sunshine Regenstreif & Taylor, Los Angeles, CA, Mark D. Passin, Mark D. Passin, Dreier Stein Kahan Browne Woods George, Santa Monica, CA, for Plaintiffs.

Stephen R. Buckingham, Matthew Richard Savare, Lowenstein Sandler PC, Roseland, NJ, for Defendant.

MEMORANDUM & ORDER

WILLIAM H. PAULEY III, District Judge:

Plaintiff Adelaide Gail Zappa (“Gail Zappa”), widow of rock legend Frank Zappa (“Zappa”), individually and as sole trustee of the Zappa Family Trust (collectively, “ZFT”), brings this action against Defendant Rykodisc, Inc. (“Ryko”) alleging, inter alia, violations of the Copyright Act, 17 U.S.C. § 101 et seq. and breach of contract. Ryko asserts several counterclaims, also for copyright infringement and breach of contract. All parties move for partial summary judgment. For the following reasons, Ryko's motion is granted in part and denied in part. ZFT's motion is denied.

BACKGROUND

I. The 1994 Agreement and 1999 Settlement

Frank Zappa released more than sixty albums before his death in 1993, when all rights, title and interests in his sound recordings passed to ZFT. In 1994, ZFT entered into an agreement with Ryko (the “1994 Agreement”), pursuant to which Ryko paid $20 million for “certain rights in and to the actual versions and mixes of the sound recordings commercially released or exploited with the authority of Zappa prior to October 6, 1994” (the “Subject Masters”). (ZFT Counterstatement of Material Facts Pursuant to Local Rule 56.1 (“ZFT 56.1 Counterstmt.”) ¶ 1; Declaration of Matthew Savare dated Mar. 19, 2010 (“Savare Decl.”) Ex. A: 1994 Agreement.) Paragraph 1.1 of the 1994 Agreement provides in relevant part:

[ZFT] hereby sell[s], transfer[s] and assign[s] to Ryko ... all right, title and interest ... to all sound recordings of the performances of [Zappa], alone and/or with other performers, which have heretofore been commercially released or exploited by or with the Authority of [Zappa] or parties deriving rights from [Zappa].

(1994 Agreement ¶ 1.1.) These rights were conveyed for “whatever kind and nature in any and all media now existing or hereafter discovered, developed, or devised in any jurisdiction throughout the universe in perpetuity.” (1994 Agreement § 1.1.) However, paragraph 12.11 provides that “[n]o remixes, edits, changes in technical standards or other changes will be made by Ryko to the Subject Masters which would impact the integrity of the work as embodied in 1610 or 1630 ¹ final version of each of the Subject Masters delivered.” (1994 Agreement ¶ 12.11.) ² ZFT retained the rights to “Vault Masters, which are defined as master recordings other than the Subject Masters.” (1994 Agreement ¶ 2.1.) Paragraph 8.4, titled “Tangible Materials,” provides that ZFT shall “deliver to Ryko ... the best copies available of all tangible assets, physical materials and/or embodiment of the Subject Masters ... [in] 1610s or 1630s of the final version of each Subject Master or the equivalent thereof.” (1994 Agreement ¶ 8.4.)

In 1997, ZFT asserted claims against Ryko for alleged breaches of the 1994 Agreement. These claims were resolved in 1999 (“1999 Settlement”). (ZFT Counterstmt. ¶ 2; Savare Decl. Ex. D: 1999 Settlement.) The 1999 Settlement stated in part that:

The Zappa Parties ... hereby release Ryko ... from all actions, causes of action, suits, claims, and demands ... based upon facts of which the Zappa Parties have knowledge ... [including claims] based on all manner of exploitation as of the date hereof by Ryko of sound recordings featuring the performances of Frank Zappa ....

(1999 Settlement ¶ 4(a).)

II. Strictly Commercial

In 1995, Ryko released an album titled Strictly Commercial: The Best of Frank Zappa (“Strictly Commercial”), which contained the Vault Master tracks “Yellow Snow,” “Joe's Garage,” and “Montana.” (Savare Decl. Ex. C: Expert Report of Matthew Hurewitz (“Hurewitz Rep.”).) A Japanese import version of Strictly Commercial, released in 2002, also contained the Vault Master track “Dancin' Fool.” ZFT has identified three additional albums that also contained these Vault Master tracks: The Best of Frank Zappa, released in 2004; a Rykodisc 20th Anniversary album, released in 2004; and an alternate version of Strictly Commercial, release date unknown. (Hurewitz Rep.) Prior to 1999, Gail Zappa was aware that Ryko had “released one version of a compilation CD called ‘Strictly Commercial: The Best of Frank Zappa’ in physical CD form.” (Declaration of Adelaide Gail Zappa dated Apr. 9, 2010 (“Gail Zappa Decl.”) ¶ 48.) However, she contends that she was aware of its use as a “physical promotional CD” but only “later” discovered that it was being sold. (Gail Zappa Decl. ¶ 48.) Although she does not provide a timeframe for her discovery, a 1996 fax from Ryko to Gail Zappa noted that “[e]very Christmas season [Ryko] will be focusing on Strictly Commercial ... as a ‘great gift idea.’ ” (Savare Decl. Ex. K: Fax from Jill Christiansen to Gail Zappa, Jan. 4, 1996.) In addition, royalty statements from 1997 show payments made for sales of Strictly Commercial. (Savare Decl. Ex. M: Royalty Statements.)

III. The Restricted Cuts

Three Subject Masters—“Watermelon in Easter Hay,” “Black Napkins,” and “Zoot Allures”—were defined as “Restricted Cuts” under the 1994 Agreement and were subject to limitations on their use. (ZFT Counterstmt. ¶ 12; 1994 Agreement ¶ 12.4.) Under paragraph 12.4, Rykodisc agreed that the Restricted Cuts “will not be coupled with other master recordings or licensed for individual synchronization use or otherwise used individually ... and such masters may only be used on those Albums of Subject Masters they have heretofore been on.” (1994 Agreement ¶ 12.4.)

In 2004, Ryko contracted with Apple to distribute in digital format certain Zappa albums and songs on iTunes. (Declaration of Miles J. Feldman dated Apr. 9, 2010) (“Feldman Decl.”) Ex: 12: Agreement Between Apple and Ryko dated Jan. 23, 2004 (“Apple Agreement”). The Apple Agreement stated that “[e]xcept for a special circumstance, such as ... a contractual restriction, [Ryko] shall otherwise make all e-masters available to Apple hereunder for sale on the Online Store in both a so-called ‘single’ format and in a ‘multi-track album’ format.” (Apple Agreement ¶ 2(c).) On August 9, 2005, the Zappa catalog became available on iTunes. (Savare Decl. Ex. P: Email from A. Cimini to T. Enright et al., Aug. 11, 2005, 18:00.) Prior to that time, Ryko advised Apple frequently that the Restricted Cuts were subject to certain limitations. ( See, e.g., Savare Decl. Ex. R: Email from Abby Cange to Thomas Enright et al., May 24, 2005, 13:29 (“Please note that some albums have track restrictions.”); Savare Decl. Ex. S: Email from Abby Cange to bybarra@ apple. com, July 18, 2005, 17:11 (“[A]ttached is a file which specifies all [Z]appa track/album restrictions. I want to make sure you guys know about these restrictions, since some albums have to be full album download only, and some tracks can only be sold as part of a full album download.”).) ZFT has identified zero downloads of “Watermelon in Easter Hay,” one download of “Black Napkins,” and fifty downloads of “Zoot Allures” in singles format.

The Apple Agreement further provided that “[Ryko] hereby grants a nonexclusive right to Apple [to] ... perform and make thirty (30) second clips of [Ryko] Content available by streaming (“Clips”) to promote the sale of applicable eMasters on the online store.” (Apple Agreement ¶ 2(a)(ii).)

IV. MOFO, Lumpy Money, and Hot Rats Vinyl

Under the 1994 Agreement, Ryko acquired the rights to the Zappa albums Freak Out, We're Only In It For the Money (“WOIIFTM”), and Hot Rats, as Subject Masters. Ryko asserts counterclaims based on three related ZFT releases: The MOFO Project/Object (“MOFO”), Lumpy Money, and a vinyl release of Hot Rats (“Hot Rats Vinyl”). Zappa released “Freak Out!” in 1966. (1994 Agreement ¶ 1.1; Savare Decl. Ex. A–1: Schedule A to the 1994 Agreement (“Schedule A”), at ZAP632, ZAP656.) Forty years later, ZFT released “MOFO,” an acronym for “the making of Freak Out,” as 2– and 4–CD packages. (Savare Decl. Ex. DD: MOFO Liner Notes.) The MOFO liner notes state that Disc 1 is the “Original Vinyl Stereo Mix” of Freak Out. (Ex. DD.) Gail Zappa concedes that Disc 1 is “the entire Freak Out album in its original sequence.” (Savare Decl. Ex. EE: Deposition of Gail Zappa dated Sept. 21, 2009 (“Gail Zappa Dep.”) 216.) It is composed of “the same performances that are on the Ryko version of Freak Out ... [and] not alternate takes that were at a different time.” (Gail Zappa Decl. 216.) Joe Travers (“Travers”), ZFT's “Vaultmeister,” stated that Disc 1 of MOFO was created from “the same tape that was used to create the original vinyl release of Freak Out back in the 1960s.” (Savare Decl. Ex. FF: Deposition of Joe Travers dated Sept. 21, 2009 (“Travers Dep.”) 216.)

In 1968, Zappa released WOIIFTM. (Schedule A at ZAP709.) Forty years later, ZFT began selling Lumpy Money, a 3–CD set that included the “1968 Original Mono Mix” of WOIIFTM as part of Disc 1 and the “1984 UMRK Remix, originally released on CD [in] 1986” as part of Disc 2. (Savare Decl. Ex. GG: Lumpy Money Liner Notes.) The 1968 Original Mono Mix was composed of “the same performances that are on the Ryko version of [WOIIFTM]. It's just a different mix ... derived from the same source recordings.” (Travers Dep. 64.) The 1984 UMRK Remix was released by Ryko prior to 1994. (Travers Dep. 66.)

In 1969, Zappa released Hot...