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Judge Tosses Lawsuit Over 2008 Universal Music Warehouse Fire

A federal judge on Monday dismissed claims from Tom Petty’s widow that he and other recording artists were owed proceeds of a music label’s massive insurance settlement following a 2008 fire that destroyed several master recordings.

LOS ANGELES (CN) — A federal judge on Monday dismissed claims from Tom Petty’s widow that he and other recording artists were owed proceeds of a music label’s massive insurance settlement following a 2008 fire that destroyed several master recordings.  

In 2019, an article in the New York Times Magazine claimed a June 1, 2008, fire at Universal Studios Hollywood destroyed 500,000 audio recordings, videos and other media documenting the work of legendary artists, including Chuck Berry, Buddy Holly, Nirvana and Louis Armstrong.

The magazine article claimed several master recordings of historic songs were destroyed in the fire, such as The Kingsmen’s “Louie Louie,” Bill Haley & His Comets’ “Rock Around the Clock” and Bo Diddley’s “Bo Diddley/I’m a Man.”

FILE - In a Sunday, Sept. 17, 2017 file photo, Tom Petty and the Heartbreakers perform at KAABOO 2017 at the Del Mar Racetrack and Fairgrounds, in San Diego, Calif. A California real estate agent and self-proclaimed “super fan” says he’s extended an offer to buy the Florida home of Petty. Kevin Beauchamp tells The Gainesville Sun he quickly made an offer of $175,000 for the nearly 1,200-square-foot (111-sq. meter) home after seeing the home’s current owner Brandy Clark mention on a Petty Facebook fan club that she might sell it. (Photo by Amy Harris/Invision/AP, File)

Following the article’s publication, artists including Steve Earle and the estates of Tom Petty and Tupac Shakur filed a federal class action lawsuit alleging Universal Music Group, also known as UMG, owed them $100 million in damages.

Artists alleged in the June 2019 complaint the world’s largest record company failed to properly store the master recordings and violated its contract with artists to protect the materials.

The label failed to inform artists about master recordings lost in the 2008 fire and also concealed information about the approximately $150 million the company gained from insurance claims, according to the lawsuit.

“UMG concealed its massive recovery from Plaintiffs, apparently hoping it could keep it all to itself by burying the truth in sealed court filings and a confidential settlement agreement,” the complaint states.

An attorney for the label said in a November 2019 court hearing that artists seeking a cut of the insurance settlement have no stake in the matter because recordings belong solely to the company.

Scott Edelman of Gibson Dunn, an attorney for UMG, told U.S. District Judge John A. Kronstadt at the hearing that UMG is the undisputed owner of the recordings and that artists’ contracts over them mention payment through royalties only, not insurance claims.

Edelman said the fire had no impact on artists’ ability to collect royalties or release new remastered albums, as Soundgarden did in 2015.

Mark Hatch-Miller of Susman Godfrey, an attorney for the artists, told Kronstadt at the hearing the case is about “negligent storing” by UMG, not insurance recovery, since the label was aware of substandard conditions at the warehouse.

Artists argued in court documents that any digitized backups of masters would have no effect on their demands in the complaint.

In March, a UMG archivist found after an initial review of the damage that less than 1% of recordings lost in the fire belonged to artists who submitted inquiries to the label.

Nearly all artists withdrew from the case last month, leaving only Petty’s widow Jane Petty and Earle as plaintiffs, though artists had the option to rejoin the case later as class members.

Earle voluntarily withdrew from the case on March 23.  

Kronstadt said in a 28-page order Monday the artists’ lawsuit failed to sufficiently demonstrate the label’s conduct was reckless and that it was obligated to share part of the fire settlement agreement.

“Therefore, the First Amended Class Action Complaint fails to allege sufficiently that Plaintiffs were entitled to royalty payments under the relevant contracts from UMG,” the order states. “As a result, the [complaint] fails to allege the amount of royalty payments that was allegedly converted by UMG.”

Artists argued UMG failed to disclose in recording contracts information on how media would be stored but Kronstadt ruled Monday the complaint failed to state a misrepresentation claim. 

“The [complaint] fails to allege adequately that there was a duty to disclose at the time that the contract was negotiated and entered,” the order states. “Nor are there allegations that later contracts were negotiated and entered between Tom Petty and UMG with respect to which there were obligations to disclose.”

A UMG spokesperson praised the ruling.

“Judge Kronstadt’s decision fully dismisses the Soundgarden litigation and entirely rejects the only remaining plaintiff’s arguments. As we have said all along, the New York Times Magazine articles at the root of this litigation were stunning in their overstatement and inaccuracy. As always, we remain focused on partnering with artists to release the world’s greatest music," the spokesperson said in a statement.

Kronstadt also ruled that artists failed to demonstrate that recording agreements included an implied entitlement to revenue shares.

“Executing the settlement agreement in the fire lawsuit cannot reasonably be interpreted as a retroactive license for the fire defendants to destroy master recordings in exchange for a flat fee,” the order states.

Petty did prove that her husband did not learn about the fire damaging master recordings until the 2019 New York Times Magazine article. 

“The allegations that UMG repeatedly assured the public that losses of master recordings were minimal also support the plausibility of the allegation that certain plaintiffs, including Petty, did not know and were not ‘on alert’ as to possible claims arising out of the fire,” the order states. “Therefore, the [complaint] alleges adequately that UMG fraudulently concealed possible causes of action.”

The complaint was dismissed without prejudice and Kronstadt ruled Petty’s claims were not time-barred and granted her leave to amend the complaint. 

Attorneys for Petty did not immediately respond to a request for comment on the ruling.

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