Chic Organization, Ltd. v. Motown Record Corp.

582 F. Supp. 812, 1984 U.S. Dist. LEXIS 18319
CourtDistrict Court, S.D. New York
DecidedMarch 23, 1984
DocketNo. 82 Civ. 3456 (WCC)
StatusPublished

This text of 582 F. Supp. 812 (Chic Organization, Ltd. v. Motown Record Corp.) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Chic Organization, Ltd. v. Motown Record Corp., 582 F. Supp. 812, 1984 U.S. Dist. LEXIS 18319 (S.D.N.Y. 1984).

Opinion

OPINION AND ORDER

CONNER, District Judge:

This is an action for breach of a written contract between plaintiff The Chic Organization, Ltd. (“Chic”) and defendant Motown Record Corporation (“Motown”), under which Chic was engaged to produce a record album to be performed by Diana Ross (“Ross”), and was granted an option to produce a second Ross album if the first album surpassed a certain level of sales. Following the successful production and release of the first album contemplated by the contract, Chic exercised its option. Unfortunately, the option album was never recorded. In fact, since the release of that first album, Ross has not made any additional recordings for Motown, and she is now under contract to RCA Records (“RCA”).

Plaintiff commenced the instant action seeking damages for Motown’s alleged liability for non-performance as to the option album, and also to collect certain royalties relating to the first recording that it claims are still due under the contract. Prior to trial, the claim for amounts due was settled pursuant to a stipulation read into the record. See tr. at 2-5. At the same time, defendant withdrew a counterclaim it had asserted in this action. See id. at 5. On September 26, 1983, the question of Motown’s liability under plaintiff’s first cause of action, which relates to the option album, was tried before the Court, sitting without a jury. This Opinion and Order incorporates the Court’s findings of fact and conclusions of law pursuant to Rule 52, F.R.Civ.P. For the reasons stated below, judgment will be entered in favor of defendant dismissing plaintiff’s complaint.

I.

Most of the facts underlying this action have been stipulated by the parties, and the few that have not can be set forth without extended discussion:

Chic is a New York corporation engaged in the business of producing musical recordings. Agreed Facts at ¶ 1. In that operation, Chic provides the services of Nile Rodgers (“Rodgers”) and Bernard Edwards (“Edwards”), both principals of the corporation, to perform the actual production of the recordings. In approximately June of 1979, Martin Itzler (“Itzler”), Secretary and General Counsel of Chic, initiated discussions with Motown concerning a proposed project for Chic’s production of a recording of a performance by Ross. [814]*814Agreed Facts at ¶¶ 2, 5; tr. at 18-19, 24. Between June and August of 1979, Itzler had a series of telephone conversations concerning the proposed project with various representatives of Motown, including Suzanne DePasse (“DePasse”), Lee Young, Jr. (“Young”), Lee Colton (“Colton”), and Robert Rosene (“Rosene”). Agreed Facts at ¶ 6; tr. at 25-26.

On the basis of these discussions, Rosene, on August 8, 1979, sent Itzler a proposed agreement between Motown and Chic, pursuant to which Rodgers and Edwards would produce a recording of Ross. Agreed Facts at ¶ 7; tr. at 26-27; see PI. Exs. 8-9. Paragraph 11(A) of the proposed agreement provided Chic with an option to produce Ross’s next album, so long as net domestic wholesale sales of the first recording exceeded $1,000,000. See PI. Ex. 9 at ¶ 11(A). Itzler scrutinized this first draft and made extensive revisions, which he then discussed with Motown’s representatives. Agreed Facts at 118; see tr. at 27-29; PI. Ex. 9 (handwritten markings reflect Itzler’s changes). Motown then prepared and sent to Itzler a second draft of the proposed agreement, which reflected the changes agreed to by Itzler and Motown’s representatives during their negotiations. Agreed Facts at ¶ 9; see tr. at 29-30; PI. Exs. 10 (red-lined copy) and 11.

When Itzler received this second draft he found that, in addition to the changes he had discussed with Motown’s representatives, it failed to provide Chic with an option to produce a second album. See tr. at 34-35. According to what Itzler was told by Motown, the option was unilaterally deleted because Motown was not sure that Ross would go along with it. See tr. at 36. Nevertheless, Itzler engaged in further discussions with Motown’s representatives and they succeeded in agreeing upon a third and final draft of the agreement, in which they reinstated a modified option provision.1 See tr. at 38. On August 28, 1979, Rosene sent Itzler a copy of that final draft. Agreed Facts at ¶ 11; see PI. Ex. 12. Chic, Rodgers, and Edwards executed that version of the agreement, which was forwarded on August 30, 1979 to Motown for signature. Agreed Facts at II12; see PI. Ex. 13. Colton, Vice President and General Counsel of Motown, signed the document on behalf of defendant, and on September 7, 1979 he sent Itzler a fully executed copy of the agreement (the “Chic/Motown Agreement”). Ross, however, was not a party to this contract.

On November 5, 1979, Rodgers and Edwards began studio production of the initial recording called for under the Chic/Motown Agreement. Agreed Facts at 1Í14. The production work was completed by approximately the beginning of April 1980, and the recording, which was ultimately entitled “Diana,” was released on May 22, 1980. Agreed Facts at ¶ 15.

On October 10, 1980, Itzler sent a letter to Young to advise Motown that Chic was exercising its option under ¶ 11(A) of the Chic/Motown Agreement to produce “one of the next two” albums recorded by Ross for Motown. Agreed Facts at ¶ 18; see PI. Exs. 17A, 17B. In a letter dated October 27, 1980, Motown acknowledged receipt of Itzler’s letter and stated:

Current evidence supports the conclusion that your option was validly exercised. Inasmuch as there are no present plans with respect to producing the “next” Diana Ross album, we are unable to indicate which album we might wish you to produce.

[815]*815PI. Ex. 18. Motown does not now dispute that the option was properly exercised. See tr. at 150.

As it turned out, subsequent to her recording of “Diana,” Ross refused to record another album for Motown. Agreed Facts at ¶ 20. Although at the time the parties entered into the Chic/Motown Agreement Ross was bound to Motown under an exclusive personal services contract dated December 24, 1973 (the “Ross/Motown Contract”), Agreed Facts at ¶ 4; see PI. Ex. 1, that contract, which had a term of seven years, expired on December 23, 1980. See id. Moreover, even before that contract expired, following the “Diana” album, Ross refused to make any additional recordings for Motown until Motown reached a new agreement with her. See tr. at 145. Although Motown made reasonable efforts to get Ross both to re-enter the studio and to agree to a new contract, those efforts proved unsuccessful. See tr. at 140-48. Ultimately, on May 12, 1981, Ross entered into a recording contract with RCA, and has since released two albums on the RCA label. Agreed Facts at ¶¶ 22-23.

II.

Stripped of its famous names and glamorous subject matter, the instant dispute involves a rudimentary question of contractual interpretation, made possible only because the underlying agreement suffers from one of the most basic flaws known to the art of contract drafting: the parties failed to provide explicitly for the occurrence of a contingent event which, unfortunately for both Chic and Motown, ultimately transpired. Contrary to both parties’ obvious expectations, Ross refused, following the “Diana” album, to continue to record for Motown.

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Related

Republic Pictures Corp. v. Rogers
213 F.2d 662 (Ninth Circuit, 1954)

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Bluebook (online)
582 F. Supp. 812, 1984 U.S. Dist. LEXIS 18319, Counsel Stack Legal Research, https://law.counselstack.com/opinion/chic-organization-ltd-v-motown-record-corp-nysd-1984.