Case: 17-15353 Date Filed: 08/07/2018 Page: 1 of 27
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT ________________________
No. 17-15353 Non-Argument Calendar ________________________
D.C. Docket No. 8:17-cv-00328-CEH, Bkcy No. 8:12-bkc-15725-KRM
In Re:
BAMBI ALICIA HERRERA-EDWARDS,
Debtor. ________________________________________________________ BAMBI ALICIA HERRERA-EDWARDS 670 76th Avenue St. Pete Beach, FL 33706-1808,
Plaintiff,
DARRYL E. ROUSON, AS CURATOR OF THE ESTATE OF BAMBI ALICIA HERRERA-EDWARDS,
Interested Party-Appellant,
versus
BERNARD EDWARDS COMPANY, LLC, 5750 Wilshire Blvd., Suite 590 Los Angeles, CA 90036-3697, JESS S. MORGAN & CO., INC., Case: 17-15353 Date Filed: 08/07/2018 Page: 2 of 27
5900 Wilshire Blvd., Suite 2300 Los Angeles, CA 90036 323-634-2400,
Defendants-Appellees.
________________________
Appeal from the United States District Court for the Middle District of Florida ________________________
(August 7, 2018)
Before MARCUS, ROSENBAUM and HULL, Circuit Judges.
PER CURIAM:
This bankruptcy case involves Bambi Alicia Herrera-Edwards
(“Herrera-Edwards”), who filed voluntary bankruptcy proceedings in 2012.
Herrera-Edwards was married to Bernard Edwards, a well-known singer,
songwriter, and producer who died in 1996. After Mr. Edwards’s death, litigation
over his estate ensued between (1) his widow, Herrera-Edwards, (2) his former
wife, Alexis Edwards, and (3) his six children.
Ultimately, the parties entered into a Settlement Agreement, and a
corresponding Co-Publishing Agreement, that divided royalties and compensation
from Mr. Edwards’s copyrights and other assets. For years, Herrera-Edwards
received a stream of income as a result of these agreements.
But in 2012, Herrera-Edwards filed for bankruptcy. In her bankruptcy
petition, Herrera-Edwards asked the bankruptcy court to reject portions of the
2 Case: 17-15353 Date Filed: 08/07/2018 Page: 3 of 27
Co-Publishing Agreement regarding the administration rights to Mr. Edwards’s
composition copyrights. Also in the bankruptcy court, Herrera-Edwards filed an
adversary proceeding against two defendants: (1) a company owned by
Mr. Edwards’s children that managed their inherited interests—defendant-appellee
Bernard Edwards Company, LLC (the “Edwards Company”)—and
(2) Mr. Edwards’s business manager—defendant-appellee Jess S. Morgan & Co.,
Inc. (the “Morgan Company”). In that separate adversary proceeding,
Herrera-Edwards sought artist and producer royalties from Mr. Edwards’s
copyrights and challenged a perpetual fee paid to the Morgan Company.
After a bench trial, the bankruptcy court issued its findings of fact and
conclusions of law, which granted the defendants’ motion for judgment on partial
findings and denied Herrera-Edwards’s motion to reject portions of the
Co-Publishing Agreement. Herrera-Edwards then moved the bankruptcy court to
amend its findings of fact or, alternatively, to grant a new trial, but the bankruptcy
court denied her motion.
Herrera-Edwards appealed the bankruptcy court’s rulings. Between oral
argument in the district court and the entry of the district court’s order (now on
appeal), Herrera-Edwards died, and Darryl E. Rouson was appointed as curator of
her estate. For the sake of simplicity, however, we address the appellant as
Herrera-Edwards throughout this opinion.
3 Case: 17-15353 Date Filed: 08/07/2018 Page: 4 of 27
On appeal, the district court affirmed the bankruptcy court’s rulings. After
careful review, we affirm the district court’s rulings.
I. BACKGROUND
These disputes center on what interests Herrera-Edwards, and now her
estate, obtained from the probate of her late husband Bernard Edwards’s estate.
Herrera-Edwards was represented by counsel at all times relevant to this action.
A. Bernard Edwards and his Music Career
Bernard Edwards co-founded the disco and funk band Chic. Mr. Edwards
coauthored, performed, and produced many popular songs, including “Dance,
Dance, Dance,” “Everybody Dance,” “Le Freak,” and “We Are Family.”
Mr. Edwards had an ownership interest in the copyrights for the compositions he
coauthored and received songwriter royalties for their use (“composition
copyrights”). Mr. Edwards also received artist and producer royalties for
performing and producing copyrighted sound recordings of these compositions
(“recording copyrights”). Although Mr. Edwards received royalties for his role in
making these sound recordings, he did not own their recording copyrights. Rather,
a recording company—in this case, Atlantic Records—owned the recording
copyrights related to Mr. Edwards’s compositions.
Based on trial testimony in the bankruptcy court, songwriter royalties are
paid whenever the words of a song are used, whether by performance or some
4 Case: 17-15353 Date Filed: 08/07/2018 Page: 5 of 27
other medium. Separately, artist and producer royalties are paid largely based on
the number of record sales for a particular recording. Consequently, when a
publishing company wants to use a recorded song, it has to buy two licenses—one
for the composition itself and one for the audio recording. The respective parties
are paid accordingly.
At some point during his career, Mr. Edwards hired Wallace Franson and
Franson’s firm, the Morgan Company, to manage his business affairs.
Mr. Edwards and Franson orally agreed that, while Mr. Edwards was a client, the
Morgan Company would be compensated at 5% of Edwards’s gross income.
B. Bernard Edwards’s Death and Probate
On April 18, 1996, Mr. Edwards died. Mr. Edwards was survived by his six
children from a former marriage, his ex-wife Alexis Edwards, and his then-wife,
appellant Herrera-Edwards. Mr. Edwards’s last will and testament named his six
children as beneficiaries, established trusts in their names, appointed Franson as
executor and trustee, and authorized Franson to substitute the Morgan Company as
executor or trustee at his discretion.
Mr. Edwards’s last will also disinherited appellant Herrera-Edwards, stating:
“I [Bernard Edwards] have intentionally and with full knowledge omitted to
provide herein for my wife [Herrera-Edwards].” But, under Connecticut law, a
surviving spouse, like Herrera-Edwards, has a statutory right to “a life estate of
5 Case: 17-15353 Date Filed: 08/07/2018 Page: 6 of 27
one-third in value of all the property passing under the will, . . . after the payment
of all debts and charges against the estate.” Conn. Gen. Stat. § 45a-436(a); see
Dinan v. Patten, 116 A.3d 275, 288–96 (Conn. 2015) (explaining that the value of
the statutory share should be calculated based on the value of the estate as of the
date of distribution). This right cannot be defeated by “any disposition of the
property by will to other parties.” Conn. Gen. Stat. § 45a-436(a).
Mr. Edwards’s estate was probated in Westport, Connecticut. During that
proceeding, appellant Herrera-Edwards filed a notice of election to take a statutory
spousal share and asserted complete ownership of the Edwards home in Westport,
Connecticut. She also filed a $10 million tort claim against Mr. Edwards’s estate
in federal court.
The probate court rejected Herrera-Edwards’s claim to the home, but granted
her election for a statutory spousal share. Both Herrera-Edwards and Mr.
Edwards’s estate appealed the probate court’s decision.
C. Mediation
While the probate court’s decision was on appeal, and the separate federal
tort action was still pending, the parties attended mediation on July 9, 1997.
Present at the mediation were Franson, Herrera-Edwards and her attorney, two of
Mr. Edwards’s adult children, a representative for one of Mr. Edwards’s minor
children, the attorney for Alexis Edwards (the ex-wife), and the attorney for Mr.
6 Case: 17-15353 Date Filed: 08/07/2018 Page: 7 of 27
Edwards’s estate. Ultimately, the parties signed and dated a handwritten
stipulation outlining the terms of a proposed settlement (“July 9th Stipulation”).
D. July 9th Stipulation and Applications for Settlement Approval
The July 9th Stipulation stated that Herrera-Edwards: (1) would release “any
claims” she had against Mr. Edwards’s estate up to the date of the stipulation; and
(2) would withdraw her federal tort action against Mr. Edwards’s estate.
In exchange, Herrera-Edwards would be assigned “full and complete ownership
and interest in 37½% of all royalties and other payments received from the
copyrights and other such interests owned by Bernard Edwards at the time of his
death.” (emphasis added). For a similar release of claims, Alexis Edwards also
would receive “a percentage of the royalties to be agreed upon” by Franson at a
later date. Those in attendance at the mediation agreed to subsequently “execute
such documents, contracts and agreements as are necessary to effectuate the terms
and conditions of this stipulation.”
On July 16, 1997, a draft settlement agreement was circulated and
Mr. Edwards’s estate filed with the probate court two applications for approval of a
settlement. One of these applications stated that “[t]he estate agrees that
[Herrera-Edwards] shall receive a participation in the income stream of the
copyrights to be received by the estate in the percentage of 37 ½ percent, net after
all expenses.” (emphasis added). The other application stated that Alexis Edwards
7 Case: 17-15353 Date Filed: 08/07/2018 Page: 8 of 27
would receive “12 ½ percent” of a similar interest. Both applications provided that
the parties planned to enter into a standard co-publishing agreement, wherein
Franson, as executor of Mr. Edwards’s estate, would act as the publisher of Mr.
Edwards’s copyrights and would exercise complete administration rights.
Herrera-Edwards and Alexis Edwards would act as co-publishers but retain no
administration rights.
In the music industry, “administrative” or “administration” rights involve
managing how a copyright is used in the marketplace. The duties of a copyright
administrator include registering the copyright, negotiating licensing agreements
with publishing companies, and collecting and disbursing income from use of the
copyrighted material. Essentially, administration rights mean commercial control
of the copyright. 1
E. Settlement Agreement
On July 30, 1997, Franson, appellant Herrera-Edwards, and the other
interested parties executed a settlement agreement (“Settlement Agreement”),
which gave Herrera-Edwards a “37 ½ percent” interest in the “income stream from
the copyrights owned by Bernard Edwards[’s] Estate,” as follows:
1 Appellant Herrera-Edwards seeks administration rights to secure “an advance” from a publishing company and then pay off her creditors in the bankruptcy court. An advance serves as a signing bonus paid against future royalties. Under these agreements, the publishing company does not pay additional royalties until it recoups the amount of the advance. 8 Case: 17-15353 Date Filed: 08/07/2018 Page: 9 of 27
[Herrera-Edwards] agrees to accept and the estate agrees to take any and all steps necessary to assign a 37 ½ percent participation in the income stream from the copyrights owned by Bernard Edwards[’s] Estate on the date of Bernard Edward[s]’s death after payment of all costs, expenses and debt related to the copyrights. The participation share of the income stream would be on a net basis after all estate, income and other taxes and administrative expenses of the estate have been paid.
(emphasis added). The Settlement Agreement gave Alexis Edwards a
corresponding “12 ½ percent” interest in the “income stream from the copyrights
owned by [the] Bernard Edwards Estate.” Herrera-Edwards and Alexis Edwards
were to receive “monthly statements while the estate . . . [was] open and quarterly
statements thereafter. . . . when all estate debts and expenses have been paid.”
The Settlement Agreement reiterated the parties’ intent to enter into a
standard co-publishing agreement and provided that “[Herrera-Edwards] and
Alexis Edwards . . . will have no administrative rights whatsoever regarding the
copyrights” of Mr. Edwards’s estate. (emphasis added). Further elaborating on the
interest transferred, a separate paragraph in the Settlement Agreement stated that
Herrera-Edwards had no administration rights in the composition copyrights,
stating:
[Herrera-Edwards] shall have the right to assign or sell her income stream only to any third party. [Herrera-Edwards] acknowledges that she has no administration rights in the copyrights and that any third party would be subject to all terms and conditions as set forth in this agreement.
(emphasis added). 9 Case: 17-15353 Date Filed: 08/07/2018 Page: 10 of 27
The Settlement Agreement also provided that the Morgan Company would
receive “a 5% fee on all deferred income and other income received by the estate
of Bernard Edwards from copyrights as a debt of the decedent.” The Settlement
Agreement was signed by all parties, including Franson, Herrera-Edwards, Alexis
Edwards, each of Mr. Edwards’s adult children, and the guardian for the one minor
child.
Also on July 30, 1997, subject to the terms of the Settlement Agreement,
Herrera-Edwards executed a general release of claims against Mr. Edwards’s
estate, the Morgan Company, and Mr. Edwards’s six children. Herrera-Edwards
also released these other parties from all contractual obligations, excepting those
contained in the Settlement Agreement.
F. Co-Publishing Agreement
On August 21, 1997, Mr. Edwards’s estate, appellant Herrera-Edwards, and
Alexis Edwards entered into a co-publishing agreement (“Co-Publishing
Agreement”), which assigned Herrera-Edwards a percentage of the “right, title and
interest” in Mr. Edwards’s composition copyrights, but expressly provided that
Herrera-Edwards had no administration rights and that Mr. Edwards’s estate had
the “sole and exclusive right to administer, control, use, exploit, and receive
income from” Mr. Edwards’s composition copyrights in perpetuity:
10 Case: 17-15353 Date Filed: 08/07/2018 Page: 11 of 27
2. Grant of Rights
(a) In consideration of all of the terms and conditions set forth herein and in the Settlement Agreement, [Edwards’s estate] hereby sells, assigns and transfers to [Herrera-Edwards] thirty-seven and one-half percent (37.5%), and to Alexis Edwards twelve and one-half percent (12.5%) in and to all the [Edwards’s estate]’s right, title and interest in the Compositions including, without limitation, all copyrights in the Compositions. To such effect, [Edwards’s estate] shall execute and deliver assignments of copyright and other documentation which may be reasonably requested to establish and record such ownership rights.
(b) [Herrera-Edwards] and Alexis [Edwards] acknowledge that they shall have no administration rights in and to the Compositions, and that they each grant to [Edwards’s estate] the sole and exclusive right to administer, control, use, exploit, receive income from, and otherwise deal in and for the Compositions, throughout the Territory, and in perpetuity.
(emphasis added).
G. Settlement Approval by the Probate Court
On September 4, 1997, the probate court handling Mr. Edwards’s estate
entered an order approving the Settlement Agreement, 2 which declared that it
resolved all claims that can be made by Herrera-Edwards against the estate:
The Court has reviewed and approved the Settlement Agreement entered into by the Estate, [Herrera-Edwards] as surviving spouse and Alexis Edwards as former spouse of the decedent. Disputed claims have been made against the estate by [Herrera-Edwards] and Alexis Edwards and the Settlement Agreement resolves all claims that can be
2 Under Connecticut law, a probate court must approve estate settlements exceeding $10,000 in value and involving a minor. See Conn. Gen. Stat. §§ 45a-151, 45a-631. With the probate court’s approval of the Settlement Agreement, Herrera-Edwards forfeited her right to a spousal share. See Sacksell v. Barrett, 43 A.2d 79, 81–82 (Conn. 1945) (acknowledging that the spousal share can be waived by agreement). 11 Case: 17-15353 Date Filed: 08/07/2018 Page: 12 of 27
made by [Herrera-Edwards] and Alexis Edwards against the estate. The children of Bernard Edwards are the sole beneficiaries under his will. The children of Bernard Edwards have agreed to all terms of the Settlement Agreement and the Court believes the Agreement is fair and equitable for the children.
H. Copyright Assignments
Nearly three years after the probate of Mr. Edwards’s estate, on January 1,
2000, Mr. Edwards’s estate (through Franson as executor) and Herrera-Edwards
executed and filed a copyright assignment in the United States Copyright Office.
The copyright assignment granted Herrera-Edwards a 37.5% interest in the
“compositions” owned by Mr. Edwards’s estate, but reserved the administration
rights to those compositions and imposed a perpetual lien to secure the 5% fee on
gross income from their use, as follows:
[Mr. Edwards’s estate] hereby sells, assigns, transfers and sets over unto [Herrera-Edwards a 37.5% undivided] portion of [the estate’s] right, title, and interest in and to the musical compositions . . . (the “Compositions”) [owned by Mr. Edwards’s estate], including . . . their titles, and lyrics . . . , reserving, however, the exclusive right to administer, control, use, exploit[,] receive income from, and otherwise deal in and for said Compositions . . . throughout the world in perpetuity . . . and subject to a lien to secure the payment to [the Morgan Company] of 5% of the gross receipts from exploitation of such assigned rights in perpetuity.
(emphasis added). Thus, although Herrera-Edwards received an ownership interest
in the composition copyrights, Mr. Edwards’s estate reserved all administration
12 Case: 17-15353 Date Filed: 08/07/2018 Page: 13 of 27
rights, and Herrera-Edwards agreed that the Morgan Company had a perpetual lien
on 5% of the gross receipts from administering the composition copyrights.
That same day, Mr. Edwards’s estate (through Franson as executor) filed a
separate assignment conveying an 8.333% ownership interest in the composition
copyrights and 16.667% of the administration rights to each of the six trusts
established for Mr. Edwards’s children. Thus, in the aggregate, the six trusts for
the children received from the estate 50% ownership of the composition copyrights
and 100% of the administration rights. Mr. Edwards’s six children then formed the
Edwards Company to manage these interests. On January 2, 2000, the children’s
six trusts (through Franson as trustee) assigned their 50% copyright interests and
their 100% administration rights to the Edwards Company.
After that time, the Edwards Company—through the Morgan Company as
its manager—remitted quarterly payments to appellant Herrera-Edwards pursuant
to the Settlement Agreement. These payments amounted to anywhere from
$700,000 to $900,000 per year and continue to this day.
The Morgan Company received a 5% fee on these payments. In 2005,
Herrera-Edwards protested the Morgan Company’s fee with a letter from her
counsel but did not pursue any legal claims against the Morgan Company at that
time. As noted, the defendants-appellees in this case are the Edwards Company
and the Morgan Company.
13 Case: 17-15353 Date Filed: 08/07/2018 Page: 14 of 27
I. Bankruptcy and Adversary Proceedings
On October 17, 2012, appellant Herrera-Edwards filed a voluntary petition
under Chapter 11 of the Bankruptcy Code (No. 8:12-bk-15725-KRM, Bankr. M.D.
Fla.). Within that bankruptcy proceeding, Herrera-Edwards filed a motion to reject
executory portions of the Co-Publishing Agreement. Had she not entered this
agreement, Herrera-Edwards argued, she would have received a spousal share of
the administration rights to Mr. Edwards’s composition copyrights. In response to
Herrera-Edwards’s motion to reject, the Edwards Company filed a motion for
summary judgment. The bankruptcy court heard oral argument on the motion to
reject and then took it under advisement pending trial.
Also in bankruptcy court, Herrera-Edwards initiated an adversary
proceeding against the Edwards Company and the Morgan Company as defendants
(No. 8:13-ap-641-KRM, Bankr. M.D. Fla.). This separate adversary proceeding
sought to establish that Herrera-Edwards had also received a 37.5% interest in
Mr. Edwards’s artist and producer royalties and that the Morgan Company was no
longer entitled to collect a 5% fee or assert a lien against her.
Thus, between her motion to reject and the adversary proceeding, appellant
Herrera-Edwards asserted three claims in the bankruptcy court: (1) that she was
entitled to 37.5% in administration rights in the composition copyrights; (2) that
14 Case: 17-15353 Date Filed: 08/07/2018 Page: 15 of 27
she was entitled to artist and producer royalties; and (3) that the Morgan Company
was not entitled to collect a 5% fee or assert a lien against her.
The bankruptcy court held a six-day joint trial on these issues. At the
conclusion, defendants the Edwards Company and the Morgan Company moved
for judgment on partial findings. See Fed. R. Civ. P. 52(c). The bankruptcy court
deferred ruling on the defendants’ motion in order to permit additional briefing.
J. Bankruptcy Court’s Post-Trial Orders
On November 2, 2016, after briefing was complete, the bankruptcy court
issued its written findings of fact and conclusions of law, ruling in favor of the
Edwards Company and the Morgan Company in the adversary proceeding and
denying Herrera-Edwards’s motion to reject in the bankruptcy proceeding.
Based on the evidence submitted at trial, the bankruptcy court found that the
probate court that handled Mr. Edwards’s estate had reviewed and approved the
Settlement Agreement as the document governing the relationship of the parties.
The Settlement Agreement, unlike the July 9th Stipulation, was signed by all
relevant parties and provided for the interests of all those affected by the resolution
of claims against Mr. Edwards’s estate. 3
As to the administration rights, the bankruptcy court determined that neither
the Settlement Agreement nor the Co-Publishing Agreement gave such rights to
3 Three of Mr. Edwards’s children were not signatories to the July 9th Stipulation. 15 Case: 17-15353 Date Filed: 08/07/2018 Page: 16 of 27
Herrera-Edwards. The bankruptcy court noted that, even if it were to reject the
executory portions of the Co-Publishing Agreement, it would not be able to rewrite
the terms of the “related and otherwise binding” Settlement Agreement. To that
end, the bankruptcy court reiterated that, in the Settlement Agreement, Herrera-
Edwards also acknowledged that she would receive no administration rights.
Likewise, the bankruptcy court noted that rejection does not allow the
bankruptcy court to divest a right that has already vested in another party to the
agreement or to undo performance that has already occurred. See Thompkins v.
Lil’ Joe Records, Inc., 476 F.3d 1294, 1306, 1308 (11th Cir. 2007) (citing cases for
the proposition that rejection does not affect the continued existence of a contract
or function to reverse transferred interests, but rather signals that a breach has
occurred). The bankruptcy court found that the administration rights to
Mr. Edwards’s composition copyrights vested in the six trusts of Mr. Edwards’s
children, when Mr. Edwards’s estate executed the copyright assignments. In turn,
the six trusts validly assigned the administration rights to the Edwards Company.
As to artist and producer royalties, the bankruptcy court concluded similarly
that the Settlement Agreement did not grant these recording royalties to
Herrera-Edwards. Rather, she received only the stated percentage of the “income
stream” from the composition copyrights, after the payment of all costs, expenses
and related debt. During trial, Herrera-Edwards pointed to payments and tax
16 Case: 17-15353 Date Filed: 08/07/2018 Page: 17 of 27
returns from Mr. Edwards’s estate during probate, which demonstrated that
Herrera-Edwards received a percentage of the “net estate” and that the estate
claimed a larger marital deduction.
Based on the trial evidence, however, the bankruptcy court found that the
Edwards Company and the Morgan Company’s witnesses offered a “plausible and
credible” explanation for the differing payments while the debts of Mr. Edwards’s
estate were still being resolved. The bankruptcy court found that, in the face of
filing deadlines and without “final documentation” available, executor Franson’s
representation to the Internal Revenue Service was merely his best effort at
explaining the expected marital deduction of Mr. Edwards’s estate, which the
bankruptcy court found to be “entirely credible.” The bankruptcy court also noted
that the quarterly payments to Herrera-Edwards reflected only income from the
composition copyrights and that, from 2000 to 2012, Herrera-Edwards never
objected to these payments until filing the adversary proceeding in the bankruptcy
court in 2013.
Lastly, as to the perpetual lien and the 5% fee for the Morgan Company’s
management services, the bankruptcy court found that the clear language of the
Settlement Agreement provided for “a 5% fee on all deferred income and other
income” and that the copyright assignment to Herrera-Edwards granted a lien on
5% of gross receipts from the composition copyrights. The bankruptcy court
17 Case: 17-15353 Date Filed: 08/07/2018 Page: 18 of 27
concluded that Herrera-Edwards had failed to present “any evidence or case law
establishing that the 5% lien is invalid or was not properly perfected.”
Alternatively, the bankruptcy court stated that any challenge to the fee was now
time-barred because, even when Herrera-Edwards protested the fee in 2005, she
failed to bring any claim against the Morgan Company until the adversary
proceeding in 2013. See Conn. Gen. Stat. §§ 52-576, 52-577 (establishing a
six-year statute of limitations for breach of contract and a three-year statute of
limitations for tort claims).
The bankruptcy court granted the Edwards Company and the Morgan
Company’s motion for judgment on partial findings, denied Herrera-Edwards’s
motion to reject executory portions of the Co-Publishing Agreement, and entered
final judgment in favor of the defendants.
Herrera-Edwards appealed the denial of her motion to reject in the
bankruptcy proceeding and the bankruptcy court’s final judgment in the adversary
proceeding. She also filed a motion for new trial, which the bankruptcy court
denied in both proceedings. Herrera-Edwards subsequently appealed those orders.
On March 8, 2017, the four appeals were consolidated in the district court, which
heard oral argument on August 17, 2017.
18 Case: 17-15353 Date Filed: 08/07/2018 Page: 19 of 27
K. District Court’s Proceedings
On November 1, 2017, the district court issued an order affirming the
bankruptcy court’s rulings on all grounds, including its final judgment in favor of
the Edwards Company and the Morgan Company; its denial of Herrera-Edwards’s
motion to reject; and its denial of Herrera-Edwards’s motion for new trial.
First, the district court concluded that, in advancing her arguments as to
administration rights, Herrera-Edwards ignored the controlling language from the
Settlement Agreement, Co-Publishing Agreement, and copyright assignments.
In each of these documents, Herrera-Edwards acknowledged that the interest
transferred to her did not include administration rights. Rather, Mr. Edwards’s
estate retained those rights and subsequently transferred them to the six trusts for
Mr. Edwards’s children and then the trusts transferred them to the Edwards
Company. Therefore, Herrera-Edwards could not move to reject executory
portions of the Co-Publishing Agreement in order to reclaim rights that she had
never obtained. See Thompkins, 476 F.3d at 1306.
Second, with regard to artist and producer royalties, the district court
determined that Herrera-Edwards had essentially conceded that the Settlement
Agreement governed and that, as established by expert testimony at trial, the
common meaning of the word “copyright” did not include income from sources
other than the written “compositions” themselves. Because Herrera-Edwards had
19 Case: 17-15353 Date Filed: 08/07/2018 Page: 20 of 27
failed to show any ambiguity in the Settlement Agreement, the district court
concluded that, under the parol evidence rule, the bankruptcy court had properly
declined to consider the July 9th Stipulation to interpret the Settlement Agreement.
The district court also concluded that the conduct of Mr. Edwards’s estate did not
establish that the parties agreed to give Herrera-Edwards an interest in
Mr. Edwards’s artist and producer royalties. The district court did not address the
statute-of-limitations issue posited by the bankruptcy court.
Third, the district court also affirmed the bankruptcy court’s findings as to
the Morgan Company’s 5% fee or perpetual lien, determining that this claim
against the Morgan Company was time-barred.
The district court entered final judgment in favor of the
defendants-appellees, the Edwards Company and the Morgan Company. This
second appeal followed.
II. DISCUSSION
A. Standard of Review
This Court serves as a “second court of review” for the bankruptcy court’s
judgment. In re Int’l Admin. Servs., Inc., 408 F.3d 689, 698 (11th Cir. 2005)
(quotation marks omitted) (quoting In re Issac Leaseco, Inc., 389 F.3d 1205, 1209
(11th Cir. 2004)); see 28 U.S.C. § 158(d). Like the district court, we review the
20 Case: 17-15353 Date Filed: 08/07/2018 Page: 21 of 27
bankruptcy court’s fact findings for clear error. Id. We review legal
determinations by the bankruptcy court and district court de novo. Id.
B. Administration Rights to the Composition Copyrights
In this appeal, Herrera-Edwards argues the bankruptcy court erred by
concluding that she did not receive the administration rights to Mr. Edwards’s
composition copyrights. Herrera-Edwards contends that, because she had an
ownership interest in the composition copyrights, she necessarily had the
administration rights to them as well. She claims that, in the Co-Publishing
Agreement, she simply delegated her administration rights to Mr. Edwards’s estate,
and thus she is entitled to reject that delegation in the bankruptcy court and reclaim
her administration rights.
Under the Copyright Act, a copyright owner is defined as the owner of
“any one of the exclusive rights” listed in 17 U.S.C. § 106, which “refers to the
owner of that particular right.” See 17 U.S.C. § 101. Section 106 states that
copyright ownership can include the “exclusive rights to do and to authorize” any
one or multiple of the following:
(1) to reproduce the copyrighted work in copies or phonorecords;
(2) to prepare derivative works based upon the copyrighted work; (3) to distribute copies and phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending;
21 Case: 17-15353 Date Filed: 08/07/2018 Page: 22 of 27
(4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly;
(5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly; and
(6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.
17 U.S.C. § 106 (emphasis added). At the same time, the Act provides that
ownership of a copyright “may be transferred in whole or in part by any means of
conveyance or by operation of law” and that the exclusive rights that make up
ownership “may be transferred [in whole or in part by any means of conveyance]”
and may be “owned separately.” 17 U.S.C. § 201(d) (emphasis added).
In this case, Mr. Edwards’s estate transferred in part an ownership interest in
Mr. Edwards’s composition copyrights to Herrera-Edwards, which did not include
administration rights. Id. Instead, the administration rights were carved out and
retained by Mr. Edwards’s estate, transferred to the trusts of his six children, and
are thus “owned separately” for purposes of the Copyright Act. Id. In one way or
another, the Settlement Agreement, Co-Publishing Agreement, and copyright
assignment all explicitly state that Herrera-Edwards had no administration rights to
Mr. Edwards’s composition copyrights.
22 Case: 17-15353 Date Filed: 08/07/2018 Page: 23 of 27
Under the Settlement Agreement, for example, the parties agreed that
Herrera-Edwards would have “no administrative rights whatsoever regarding the
copyrights.” (emphasis added). The Co-Publishing Agreement provided similarly
that Herrera-Edwards would have “no administration rights.”4 Even the copyright
assignment transferring the interest to Herrera-Edwards specified that Mr.
Edwards’s estate expressly “reserv[ed] . . . the exclusive right to administer,
control, use, exploit[,] receive income from, and otherwise deal in and for said
Compositions.” (emphasis added).
In essence, Herrera-Edwards received a property interest in Mr. Edwards’s
composition copyrights, including an “income stream” from their use and
licensing, but she never received any right to control how these copyrights would
be used or licensed.
Herrera-Edwards cannot demonstrate that she ever received administration
rights, and thus she has not shown that the bankruptcy court erred by denying her
motion to reject portions of the Co-Publishing Agreement. See Thompkins, 476
F.3d at 1306. After the Settlement Agreement, Mr. Edwards’s estate transferred
the copyright administration rights to the trusts of Mr. Edwards’s six children,
4 Herrera-Edwards focuses on the word “grant” in the Co-Publishing Agreement to suggest that she somehow received administration rights. But, taken in context, that language was just another way of saying that Herrera-Edwards “acknowledge[s] that [she] shall have no administration rights in and to the Compositions.” Indeed, even assuming arguendo that Herrera-Edwards did receive administration rights from the Co-Publishing Agreement, she granted them in perpetuity back to Mr. Edwards’s estate in the same sentence. See Thompkins, 476 F.3d at 1306, 1308. 23 Case: 17-15353 Date Filed: 08/07/2018 Page: 24 of 27
which vested upon assignment. See 17 U.S.C. § 201(d). A motion to reject
cannot be used to strip another party of a vested interest. See Thompkins, 476 F.3d
at 1307 (explaining fully executed portions of an agreement cannot be rejected);
see also In re the Ground Round, Inc., 335 B.R. 253, 261 (B.A.P. 1st Cir. 2005)
(“[R]ejection does not change the substantive rights of the parties to the
contract . . . .” (citation omitted)). Accordingly, we affirm the district court’s
ruling on this issue.
C. Artist and Producer Royalties
Herrera-Edwards also argues that the bankruptcy court erred in concluding
that she was not entitled to a share of Mr. Edwards’s artist and producer royalties.
Herrera-Edwards once again points to the July 9th Stipulation, the payments she
received during the probate of Mr. Edwards’s estate, and the tax returns filed by
Edwards’s estate before the Settlement Agreement was executed. As to the
limitations period, Herrera-Edwards contends that each quarterly payment lacking
artist and producer royalties constituted a separate breach by the defendants and
thus resulted in a separate claim accruing at that time.
As Herrera-Edwards points out, the July 9th Stipulation does refer to a
percent interest in “all royalties and other payments received from the copyrights
and other such interests owned by Bernard Edwards at the time of his death.”
(emphasis added). However, the subsequent Settlement Agreement ultimately
24 Case: 17-15353 Date Filed: 08/07/2018 Page: 25 of 27
signed by Herrera-Edwards, and later approved by the probate court, circumscribed
Herrera-Edwards’s interest to only “the income stream from the copyrights owned
by Bernard Edward[’s] Estate.” (emphasis added). By its terms, the Settlement
Agreement clearly limits Herrera-Edwards’s interest to only the copyrights owned
by Mr. Edwards’s estate—namely, the composition copyrights. As discussed
above, Mr. Edwards did not own the recording copyrights to his compositions, and
thus the Settlement Agreement did not grant Herrera-Edwards an interest in the
income related to those recording copyrights. Furthermore, the general release,
signed along with the Settlement Agreement, relieved the parties of all other
preceding contractual obligations.
The Co-Publishing Agreement and copyright assignments provide additional
evidence of what Herrera-Edwards received under the Settlement Agreement.
These documents transferred a percentage of the “right, title and interest in”
Mr. Edwards’s written “compositions” to Herrera-Edwards. The interest
transferred, and thus the applicable “income stream,” related to the written
“compositions” owned by Mr. Edwards’s estate. Moreover, trial testimony in the
bankruptcy court established that a “copyright in a composition generally refers to
the words and music” rather than to artist and producer royalties.
As to Herrera-Edwards’s other arguments, the payments made during
probate were consistent with the Settlement Agreement, as well as the necessity to
25 Case: 17-15353 Date Filed: 08/07/2018 Page: 26 of 27
settle “all estate debts and expenses” prior to issuing quarterly payments. The
bankruptcy court found that the Edwards Company and the Morgan Company’s
witnesses offered a “plausible and credible” explanation for these “net” payments
while settling the debts of Mr. Edwards’s estate. The bankruptcy court also found
that Franson’s explanation for claiming a larger marital deduction was “entirely
credible.” Herrera-Edwards has not demonstrated clear error in the bankruptcy
court’s credibility determinations on these issues.5 See In re Int’l Admin. Servs.,
Inc., 408 F.3d at 698. Thus, we affirm the district court’s ruling.
D. The Morgan Company’s 5% Fee and Perpetual Lien
Herrera-Edwards further argues that the bankruptcy court erred in finding
that the Morgan Company holds a valid perpetual lien on 5% of the gross income
due to her under the composition copyrights. She claims that the Settlement
Agreement permitted the 5% fee against only the income of Edwards’s estate,
which has been closed for over a decade, and that the Morgan Company no longer
provides a service significant enough to justify its lien or fee.
The 1997 Settlement Agreement specified a 5% fee as to the “deferred
income and other income received by the estate of Bernard Edwards from
copyrights.” (emphasis added). Subsequently, however, the estate’s 2000
copyright assignment to Herrera-Edwards expressly provided that her income
5 In any event, Herrera-Edwards’s royalty claim is likely time-barred. See Conn. Gen. Stat. §§ 52-576, 52-577. 26 Case: 17-15353 Date Filed: 08/07/2018 Page: 27 of 27
interest was “subject to a lien to secure the payment to [the Morgan Company] of
5% of the gross receipts from exploitation of such assigned rights in perpetuity.”
To the extent that there is arguably some conflict, Herrera-Edwards ignores that the
bankruptcy court conducted a six-day trial and found that Herrera-Edwards failed
to present “evidence or case law establishing that the 5% lien is invalid or was not
properly perfected.” 6 Given the documents and the trial record, we cannot say that
the bankruptcy court erred in its ultimate findings and conclusion in this case.
III. CONCLUSION
For all of these reasons, we affirm the district court’s final judgment
upholding the bankruptcy court’s orders, which denied Herrera-Edwards’s motion
to reject in the bankruptcy proceeding, granted judgment in favor of the defendants
in the adversary proceeding, and denied Herrera-Edwards’s motion for new trial.
AFFIRMED.
6 In any event, Herrera-Edwards’s claim against the perpetual lien and the 5% fee is likely time-barred. See Conn. Gen. Stat. §§ 52-576, 52-577. As the bankruptcy court posited, in 2005, Herrera-Edwards protested the perpetual lien and the 5% fee on her quarterly payments but yet did not pursue a claim. 27