SAN FRANCISCO (CN) - The frontwoman of a former 1980s rock band may sue the band's record label as a third-party beneficiary in a contract case, the Ninth Circuit ruled Tuesday.
Dale Bozzio, who fronted the band Missing Persons, sued Capitol Records and EMI Group in 2012 for breach of a recording contract, claiming that the recording companies improperly treated download and streaming sales as record sales rather than revenue from licensing.
As a result, she claimed, the band members were paid a lower royalty rate than the one provided for in their recording contracts.
When Capitol Records first entered into a personal services agreement with the band in 1982 it was with the members as individual artists, the Circuit's 21-page opinion said.
But then the members formed the corporation Missing Persons Inc. to serve as a loan-out company through which they would provide services to Capitol, and Capitol entered into a new contract with the corporation rather than the individuals.
Since Missing Persons Inc. is now a suspended corporation, Bozzio filed her 2012 complaint as a third-party beneficiary.
A federal judge dismissed the suit, finding that "regardless of Bozzio's standing to bring claims as a third-party beneficiary, she cannot sue to enforce the agreement when the [suspended] contracting corporation would have no capacity to do so."
The Circuit's three-judge panel reversed the decision.
Writing for the panel, Circuit Judge Morgan Christen said that the judge improperly concluded that Missing Persons Inc. lacked capacity to sue.
"No California case has decided whether a party's status as a former shareholder or officer of a suspended corporation negates that party's ability to bring suit as a third-party beneficiary of a contract entered into by the corporation," Christen said.
She added that "the record does not support the district court's finding that Bozzio has control over the defunct corporation and an ability to revive it."
Christen also said that the Circuit could not affirm the district court on the ground that Bozzio waived the benefits of the Missing Persons Inc. contract.
"We agree with Bozzio that whether she forfeited the ability to sue as a third-party beneficiary is a fact-bound inquiry ill-suited to resolution at the motion to dismiss stage," she said.
"On remand, a record can be developed that will allow consideration of Bozzio's claim that she was an intended third-party beneficiary of the agreement."
Christen also held that contrary to the district court's holding, amendment of Bozzio's complaint may not have been futile.
For example, "likely because the parties failed to brief the issue, the court's order did not take into account that California's tax code may allow Bozzio to revive Missing Persons Inc. without paying back taxes," she said.
The Circuit remanded to the district court for further proceedings.
Bozzio's attorney Cadio Zirpoli, with Saveri & Saveri in San Francisco, praised the panel's decision.
"Our client, Dale Bozzio was one of many recording artists who have been systematically underpaid royalties for digital downloads for years," Zirpoli said. "We are happy that the Ninth Circuit agreed with us and we hope this decision paves the way for more recording artists to receive the royalties they contracted for and are entitled to."
Attorneys for EMI and Capitol did not immediately respond to emails requesting comment on Tuesday.
With a blend of new wave and hard rock, Missing Persons had some success in the early 1980s, particularly with the gold-selling album "Spring Session M." A pair of singles from that album each reached number 42 on the Billboard Hot 100 charts in 1982.
The band briefly reunited for a 30th anniversary tour in 2011, but a comeback never materialized.
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