Tvt Records v. Island Def Jam Music Group

279 F.Supp.2d 366

TVT RECORDS and TVT Music, Inc., Plaintiffs, v. The ISLAND DEF JAM MUSIC GROUP and Lyor Cohen, Defendants.

The Island Def Jam Music Group, A Division of UMG Recordings, Inc., Counterclaimant, v. TVT Records, Inc. and Steve Gottlieb, Counterclaim-Defendants.

No. 02 CIV. 6644(VM).

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

September 2, 2003.

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James E. d'Auguste, James Philip Chou, Akin, Gump, Strauss, Hauer & Feld, L.L.P., New York, NY, Peter L. Haviland, Rhonda R. Trotter, Akin Gump Strauss Hauer & Feld, LLP, Los Angeles, CA, Tuneen E. Chisolm, Akin, Gump, Strauss, Hauer & Feld, L.L.P., New York, NY, for TVT Records, TVT Music, Inc.

Michael T. Mervis, Proskauer Rose LLP, Mary Mulligan, Esq., Universal Music Group, New York, NY, for the Island DEF Jam Music Group.

Robert J. Eddington, Proskauer Rose LLP, Michael T. Mervis, Alexander Kaplan, Proskauer Rose LLP, Mary Mulligan, Esq., Universal Music Group, Matthew S. Dontzin, James M La Rossa, New York, NY, for Lyor Cohen.

DECISION AND ORDER

MARRERO, District Judge.

TABLE OF CONTENTS
Page
I. BACKGROUND ............................................................... 372
 II. FACTS .................................................................... 373
III. DISCUSSION ............................................................... 375
     A. STANDARDS OF REVIEW ................................................... 375
     B. DEFENDANTS' RULE 50(b) MOTIONS ........................................ 376
        1. Tortious Interference With Contractual Relations: Parties to the
             Heads of Agreement and Economic Justification .................... 376
        2. Tortious Interference with Contractual Relations: Scope of Cohen's
             Employment ....................................................... 378
        3. Fraud By Fraudulent Concealment: Duplicative of Breach of Contract
             and the Defendants' Duty To Disclose ............................. 380
        4. Copyright Infringement: Validity of the Licenses and Knowledge of
             Ownership ........................................................ 381
        5. Standing of TVT Music, Inc. ........................................ 383
        6. Punitive Damages: Existence of Malice and a Public Aim ............. 384
        7. Double Recovery .................................................... 384
        8. Loss of Goodwill ................................................... 385
        9. Loss of Profits .................................................... 387
     C. DEFENDANTS' MOTIONS FOR A NEW TRIAL ................................... 390
        1. Trifurcation of the Trial .......................................... 391
        2. Size of the Awards ................................................. 391
        3. References to Vivendi Universal .................................... 391
        4. Private Investigator ............................................... 392
        5. Transactional Counsel for Gotti and Murder Inc. .................... 394
        6. Comments By TVT's Counsel .......................................... 394
           a. Legal Standard .................................................. 394

           b. Legal Limits on the Size of Punitive Damage Awards .............. 395
           c. Confidential Information and TVT's Independent Dispute with
                Prudential Securities Corp. ................................... 396
           d. Representations Concerning IDJ's Counterclaims .................. 398
           e. Enron ........................................................... 399
           f. Subornation of Perjury .......................................... 400
           g. Characterization of Materials Delivered for the CMC Album ....... 402
           h. Pattern of Behavior ............................................. 403
        7. Weight of the Evidence ............................................. 403
           a. Basis for Finding a Breach of the Heads of Agreement ............ 403
           b. Economic Justification .......................................... 405
           c. Validity of the Copyright Licenses for Use of "The Rain" and
                "Get Tha Fortune" ............................................. 406
     D. TVT'S MOTION FOR RETURN, RECALL, AND DESTRUCTION OF
          INFRINGING MATERIALS ................................................ 407
     E. TVT'S MOTION FOR PREJUDGMENT INTEREST ................................. 409
 IV. CONCLUSION AND ORDER ..................................................... 413

I. BACKGROUND

On August 20, 2002, plaintiffs TVT Records and TVT Music, Inc. (collectively "TVT") commenced this action against defendants The Island Def Jam Music Group ("IDJ") and its chairman Lyor Cohen ("Cohen," and collectively with IDJ, the "Defendants"), alleging copyright infringement and related state law claims arising out of the production of a certain music album. The Court held an evidentiary hearing on September 23, 24, and 30, 2002, after which it granted in part and denied in part TVT's motion for a preliminary injunction essentially prohibiting any use of disputed album materials pending final resolution of the surrounding issues, including ownership, at trial. Trial of the parties' dispute commenced on March 10, 2003 in bifurcated liability and damages phases before the same jury. On March 21, 2003, the jury returned a verdict of liability against IDJ for breach of contract and against both Defendants for tortious interference with contractual relations, fraud by fraudulent concealment, and willful copyright infringement. The jury assessed compensatory and punitive damages on May 6, 2003 at the damages phase in the aggregate amount of approximately $132 million.¹

Now before the Court are the Defendants' post-trial motions for judgment as a matter of law pursuant to Fed.R.Civ.P. 50(b) and for a new trial and/or remittitur pursuant to Fed.R.Civ.P. 59. Also before the Court are TVT's motions for return, recall, and destruction of master recordings and infringing materials pursuant to § 503(b) of the Copyright Act of 1976 (the "Copyright Act"), 17 U.S.C. § 101 et seq., and for the setting of the date for accrual of prejudgment interest.² For the reasons discussed below, Defendants' motions for judgment as a matter of law are DENIED, Defendants' motions for a new trial are DENIED, TVT's motion for the return, recall, and destruction of infringing materials is GRANTED IN PART and DENIED IN PART, and TVT's motion for the setting of the date for accrual of interest is GRANTED. Defendants' motions for remittitur are addressed in a separate Decision and Order, issued as TVT Records v. The Island Def Jam Music Group, 279 F.Supp.2d 413, 2003 WL 22056308, No. 02 Civ 6644, slip op. (S.D.N.Y.2003), and accompanying this ruling.

II. FACTS³

This case arises from a licensing dispute between TVT and its principal Steve Gottlieb ("Gottlieb") and IDJ concerning the distribution and exploitation of musical works created in significant part by Jeffrey Atkins, who is professionally known as Ja Rule ("Ja Rule"), and produced by Irving Lorenzo, who is professionally known as Irv Gotti ("Gotti," and together with Ja Rule, the "Artists"). Under an agreement dated March 2, 1998 between IDJ's predecessor-in-interest, Rush Associated Recordings, and Ja Rule, which was extended by an agreement dated August 16, 2003 between IDJ and Ja Rule, IDJ is entitled to Ja Rule's exclusive services as a recording artist. Pursuant to an agreement dated February 11, 1999 between IDJ's predecessor-in-interest, Island/Mercury Records, and Gotti, which was extended by an agreement dated December 17, 2001 between IDJ and Gotti, IDJ is entitled to Gotti's exclusive services as a record producer and talent-finder.

In an agreement entitled "Heads of Agreement Between Murderers Inc./Irv Gotti And Jeffrey Atkins (p/k/a `Ja Rule') And Tee Vee Toons, Inc. (`TVT')" dated July 2, 2001 (the "Heads of Agreement"), TVT contracted with Ja Rule and Gotti— and Gotti's company, Murder Inc. ("Murder Inc.")—to record, produce, and exploit an album (the "CMC Album") featuring the performances of Ja Rule, Christopher Bristole, and Otha Miller (collectively the "CMC Artists").⁴ Under the Heads of Agreement, four previously recorded CMC tracks would be reworked and supplemented with at least eight newly recorded tracks featuring the CMC Artists, including Ja Rule, to comprise the CMC Album. The Heads of Agreement, through various guarantees and indemnities, charges the Artists with securing any approvals, consents, and permissions necessary for them to satisfy their obligations under this contract.

The delivery date for the new recordings as contemplated by the written Heads of Agreement was November 1, 2001. This delivery date was later changed to reflect the schedules of the Artists and the timing of other contemplated album releases. TVT and the Artists ultimately agreed that the new tracks would be supplied to TVT in time for release in November 2002. In the interim, the Artists continued to work on the new recordings for the CMC Album, and by May 2002, approximately eleven new tracks had been recorded. During this time, TVT continued to pay the Artists' recording costs, the CMC Album and its fall 2002 release were publicized by both TVT and Gotti, as well as by IDJ's publishing affiliate, and TVT arranged and paid for a photo shoot for the Artists to further promote the CMC Album. Also during this interim time, Gotti's contract with IDJ was renegotiated in late 2001, and Ja Rule's contract with IDJ was renegotiated in early to mid-August of 2002.

TVT recognized that IDJ's assent to the project envisioned by the Heads of Agreement was necessary, and it accordingly endeavored to negotiate for IDJ's consent in...