PHILADELPHIA (CN) - The estates of R&B duo McFadden & Whitehead, best known for their 1979 hit "Ain't No Stoppin' Us Now," do not have to sell the group's catalog to a buyer who had purchased an option on it, the Third Circuit ruled.
Gene McFadden and John Whitehead, whose act was a pillar of the Philadelphia soul sound of the 1970s, entered to an agreement in 2002 with the Pullman Group, giving it the right to purchase the group's song catalog after performing due diligence.
Pullman claimed that it found liens on the songs and notified the members that it had concerns. The duo told the company that it would respond at some point and did not, the company claimed.
When McFadden & Whitehead attempted to sell their catalog to Warner Chappell Music for $4.4 million, Pullman notified the new prospective buyers of its standing agreement with the duo.
Whitehead was murdered on the street outside his Philadelphia him on May 11, 2004, while he and his nephew were performing repairs on the younger man's car. The case was never solved.
McFadden died less than two years later, on Jan. 27, 2006, of liver and lung cancer.
After their deaths, the musicians' estates sued Pullman, claiming that it had not notified either member of its discovery of the liens.
The case was heard by arbitrators who ruled that under New York's Dead Man Statute, Pullman could not present testimony of any notice given to McFadden or Whitehead that was not in writing.
Originally enacted in 1851, the statute, CPLR § 4519, is intended to protect the decedent's estate against claims of conversations or interactions that cannot be verified.
New York is one of a dwindling number of states that still have a Dead Man's Statute on its books.
In its appeal, Pullman argued the application of the statute prevented the arbitrators from hearing critical evidence demonstrating the company's due diligence.
But in a unanimous ruling on Friday upholding the arbitrator's decision, U.S. Circuit Judge Julio Fuentes cited courts' "extremely deferential" reading of arbitration decisions and how the arbitrators choose to apply law.
"The arbitral panel reasonably chose not to consider potentially self-serving testimony about communications with persons who are no longer able to present their side of the story," Fuentes wrote.
The judge also cited Pullman's own decision to enter into arbitration, writing, " It was entirely foreseeable - even in 2002 - that an arbitral panel comprised of New York jurists might apply that state's evidentiary rules, including the Dead Man's Statute."