Overrated Productions, Inc. v. UMG Recordings, Inc.
19-56504
| 9th Cir. | Jul 20, 2021Background
- Overrated Productions (plaintiff) and Universal International Music B.V. (UIMBV) are parties to a 1977 license/royalty contract. The contract pays Overrated 19% of the amount “received by us” for masters licensed on a flat-fee or royalty basis.
- UIMBV licensed recordings through affiliates; affiliates retained portions of licensing proceeds. Overrated argued royalties should be calculated on affiliate receipts (or consolidated receipts) rather than amounts UIMBV actually received.
- Overrated also challenged UIMBV’s classification of digital downloads as “records sold,” which under the contract carry a 4% royalty rather than 19%.
- The district court granted summary judgment for UIMBV on breach, implied covenant, accounting, discovery, amendment, and alter ego issues, struck certain Overrated evidentiary submissions, substituted Dennis Lambert as an individual judgment debtor, and awarded fees to UIMBV. Overrated appealed.
- The Ninth Circuit affirmed in all respects, interpreting the contract as unambiguous, upholding evidentiary rulings and discovery denials, rejecting implied covenant and accounting claims, and affirming substitution of Lambert and the fee award.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether “us” (royalty base) includes UIMBV affiliates’ receipts | “Us” should include affiliate or consolidated receipts, producing higher royalties | “Us” refers only to UIMBV (predecessor-in-interest); royalties calculated on amounts UIMBV actually receives | Court: “Us” means UIMBV only; no breach for affiliate arrangements |
| Whether digital downloads are “records” (4% v. 19%) | Downloads are not “records sold”; should get 19% royalty | Contract’s broad "record" definition includes devices/means to record/transmit sound, covering downloads | Court: Downloads fall within the contract’s definition of “record”; 4% rate proper |
| Implied covenant of good faith and fair dealing | UIMBV’s affiliate arrangements and royalty accounting frustrated Overrated’s expectations | Contract expressly permits assignments/affiliate arrangements; implied covenant cannot prohibit what contract allows | Court: No implied-covenant breach because conduct expressly permitted by contract |
| Accounting claim (need for judicial accounting) | Overrated needs an accounting to determine amounts owed | Overrated failed to show any balance only ascertainable by accounting | Court: Dismissed accounting claim; no showing an accounting was required |
| Motion for leave to amend (timeliness/futility) | Overrated sought leave to amend at summary-judgment stage | Amendment submitted at deadline, after discovery and dispositive-motion deadlines; would prejudice UIMBV and cause delay | Court: Denial as moot/not abused; amendment would be untimely and prejudicial |
| Denial of further discovery (Rule 56(d)) | Overrated sought discovery on streaming and suspense accounts; claimed facts existed to oppose SJ | Overrated failed to specify facts sought, show they exist, or explain necessity; did not move to compel or audit | Court: Denial not an abuse of discretion; Rule 56(d) requirements unmet |
| Alter ego / substitution of individual judgment debtor & fee apportionment | Overrated argued affiliates were separate and fees should be apportioned | District court found undercapitalization, sham entity, Lambert’s control; UIMBV defended against alter-ego claims so fees were common | Court: Affirmed substitution of Lambert and fee award without apportionment |
Key Cases Cited
- Revitch v. DIRECTV, LLC, 977 F.3d 713 (9th Cir. 2020) (contract interpretation to give effect to mutual intent)
- F.B.T. Productions, LLC v. Aftermath Records, 621 F.3d 958 (9th Cir. 2010) (distinguishable precedent on royalties/technology issues)
- Yeager v. Bowlin, 693 F.3d 1076 (9th Cir. 2012) (abuse-of-discretion review for evidentiary rulings at summary judgment)
- Zhang v. Am. Gem Seafoods, Inc., 339 F.3d 1020 (9th Cir. 2003) (foundation required for admissible evidence)
- Wolf v. Walt Disney Pictures Television, 76 Cal. Rptr. 3d 585 (Cal. Ct. App. 2008) (implied covenant cannot forbid what contract permits)
- Guz v. Bechtel Nat’l Inc., 8 P.3d 1089 (Cal. 2000) (principles on contractual rights and employment law analogs cited for good-faith analysis)
- Teselle v. McLaughlin, 92 Cal. Rptr. 3d 696 (Cal. Ct. App. 2009) (standards for when an accounting is required)
- Foman v. Davis, 371 U.S. 178 (U.S. 1962) (factors for denying leave to amend)
- Stevens v. CoreLogic, Inc., 899 F.3d 666 (9th Cir. 2018) (requirements for Rule 56(d) discovery showing)
- Katzir’s Floor & Home Design, Inc. v. M-MLS.com, 394 F.3d 1143 (9th Cir. 2004) (substitution of individual judgment debtor when individual controlled litigation)
- Reynolds Metals Co. v. Alperson, 599 P.2d 83 (Cal. 1979) (no apportionment required for fees incurred on issues common to fee-eligible and non-fee-eligible claims)