LOS ANGELES (CN) — The Ninth Circuit Court of Appeals mostly upheld the dismissal of former Beach Boys David Marks's lawsuit against Universal Music Group over foreign streaming royalties, but left the door open for the 74-year-old guitarist to seek "declaratory relief."
The three-judge panel's decision Thursday was in line with their comments at a hearing last month on Marks's appeal.
In an unsigned order, the panel said that a federal judge in Los Angeles had been on firm ground in dismissing the breach-of-contact and fraud claims against Universal over allegations they had shortchanged Marks — who played guitar on early Beach Boys albums — on royalties from overseas streaming by deducting their foreign affiliates' costs before calculating Marks's 50%.
Since Marks's lawsuit "failed to plead a valid contract that covers digital streaming royalties," the panel said, "it also failed to plausibly allege that defendants had a contractual duty to disclose their method of calculating royalties paid for foreign digital streaming."
The problem for Marks is that Universal is paying him royalties under an agreement from 1972, when people still bought records rather than streamed their music through apps such as Spotify. Universal at some point also started paying Marks royalties from streaming revenue, out of goodwill, as the company's lawyers said, without a contractual obligation to do so.
U.S. District Judge Mark Scarsi in LA dismissed the lawsuit last year for the second time, and this time without leave to amend. The judge emphasized that Marks' breach-of-contract allegation relied on excerpts of past contracts that didn't mention digital streaming.
The judge last year also threw out Marks's claim for declaratory relief in which he requested a "judicial determination" that, if Universal doesn't have an ongoing obligation to pay him for digital streaming, the contract can be rescinded and/or the contract's purpose has been frustrated.
This was too hasty, the panel said, because under California law, Marks could still be entitled to this kind of relief, even if his breach-of-contract and fraud claims failed. Based on Marks's claim that the purpose of the 1972 contract has been frustrated by the wholesale switch from record sales to digital streaming, there was enough of a controversy remaining for him to pursue a court ruling on that issue, according to today's order.
"We reverse the district court’s dismissal of the declaratory relief claim to the extent Marks seeks a declaration that the purpose of the written agreement has been frustrated, or a declaration that he is entitled to rescission of the parties’ contract," the panel said. "We leave to the district court to decide what rights and remedies, if any, may be available if Marks is able to establish the defense of frustration."
The three judge-panel was comprised of Senior U.S. Circuit Judge Jay Bybee, a George W. Bush appointee, U.S. Circuit Judge Morgan Christen, a Barack Obama appointee, and Senior U.S. District Judge Sidney Fitzwater, a Ronald Reagan appointee, sitting by designation from the Northern District of Texas in Dallas.
An attorney for Marks and representatives of Universal Music Group didn't immediately respond to requests for comment on the ruling.
Follow @edpettersson
Subscribe to Closing Arguments
Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.
