Sherman Nealy v. Warner Chappell Music, Inc.

60 F.4th 1325
CourtCourt of Appeals for the Eleventh Circuit
DecidedFebruary 27, 2023
Docket21-13232
StatusPublished
Cited by13 cases

This text of 60 F.4th 1325 (Sherman Nealy v. Warner Chappell Music, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eleventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sherman Nealy v. Warner Chappell Music, Inc., 60 F.4th 1325 (11th Cir. 2023).

Opinion

USCA11 Case: 21-13232 Document: 54-1 Date Filed: 02/27/2023 Page: 1 of 19

[PUBLISH] In the United States Court of Appeals For the Eleventh Circuit

____________________

No. 21-13232 ____________________

SHERMAN NEALY, an individual, MUSIC SPECIALIST, INC., a Florida Corporation, Plaintiffs-Appellants, versus WARNER CHAPPELL MUSIC, INC., a Delaware Corporation, ARTIST PUBLISHING GROUP, L.L.C., a Delaware Limited Liability, Corporation,

Defendants-Appellees. USCA11 Case: 21-13232 Document: 54-1 Date Filed: 02/27/2023 Page: 2 of 19

2 Opinion of the Court 21-13232

Appeal from the United States District Court for the Southern District of Florida D.C. Docket No. 1:18-cv-25474-RAR ____________________

Before WILSON, JORDAN, and BRASHER, Circuit Judges. BRASHER, Circuit Judge: This appeal requires us to answer a question of first impres- sion about the Copyright Act’s statute of limitations that has di- vided our sister circuits. The Copyright Act has a three-year statute of limitations. 17 U.S.C. § 507(b). Under our circuit’s discovery ac- crual rule, claims about the ownership of a copyright are timely if a plaintiff files suit within three years of when the plaintiff knew or reasonably should have known that the defendant violated the plaintiff’s ownership rights. Invoking that discovery rule, the plain- tiffs in this case—Sherman Nealy and Music Specialist, Inc.—filed this copyright action seeking, among other things, damages for in- fringement they allege occurred more than three years before they filed this lawsuit. Despite our discovery rule, the defendants—Warner Chap- pell Music, Inc. and Artist Publishing Group, LLC—contend that the plaintiffs cannot recover damages for anything that happened more than three years before they filed suit. See Sohm v. Scholastic, Inc., 959 F.3d 39, 49-50 (2d Cir. 2020) (accepting this argument). USCA11 Case: 21-13232 Document: 54-1 Date Filed: 02/27/2023 Page: 3 of 19

21-13232 Opinion of the Court 3

That is, they do not dispute that a plaintiff can file suit over harm that occurred more than three years earlier; they just say that the plaintiff cannot recover any damages. This is so, they say, because the Supreme Court’s decision in Petrella v. Metro-Goldwyn- Mayer, 572 U.S. 663 (2014), bars retrospective relief for any in- fringement occurring earlier than three years from the date of a copyright lawsuit. In response, the plaintiffs contend that the de- fendants’ argument is contrary to the text of the Copyright Act and takes out of context Petrella’s statements about claims that were timely because of a different accrual rule. See Starz Ent., LLC v. MGM Domestic Television Distrib., LLC, 39 F.4th 1236, 1242-44 (9th Cir. 2022) (accepting this argument). The district court certified the following question for inter- locutory appellate review: whether damages in this copyright ac- tion are limited to a three-year lookback period as calculated from the date of the filing of the complaint. After briefing and with the benefit of oral argument, we agree with the plaintiffs. We hold that, when a copyright plaintiff has a timely claim under the dis- covery accrual rule for infringement that occurred more than three years before the lawsuit was filed, the plaintiff may recover dam- ages for that infringement. I.

This interlocutory appeal arises from Music Specialist, Inc. and Sherman Nealy’s copyright infringement suit against Warner Chappell Music, Inc.; Artist Publishing Group, LLC.; and Atlantic USCA11 Case: 21-13232 Document: 54-1 Date Filed: 02/27/2023 Page: 4 of 19

4 Opinion of the Court 21-13232

Recording Corporation. Because we must decide a pure question of law in this interlocutory appeal, we provide the following back- ground only as context for our decision. To be clear, “our descrip- tion of the facts is not binding on the district court as the actual facts will be established later at trial.” Mitsubishi Int’l Corp. v. Car- dinal Textile Sales, 14 F.3d 1507, 1511 n.2 (11th Cir. 1994). At its core, MSI and Nealy’s suit alleges that Warner, Artist, and Atlantic are infringing their copyrights to certain musical works because the defendants are using the works based on invalid licenses to the copyrights that they obtained from third parties. The licenses are invalid, MSI and Nealy say, because MSI and Nealy, not the third-party licensors, are the owners of the copyrights. The story of MSI and Nealy’s alleged copyright ownership begins in the 1980s. In 1983, MSI was incorporated under Florida law with Tony Butler listed as president in the articles of incorpo- ration. Later amendments to the articles of incorporation listed Nealy as MSI’s president and Butler as its vice president. MSI was Nealy’s first venture in the music industry. He provided the fund- ing for MSI’s operation, and Butler was a disc jockey who had more knowledge than Nealy about the music industry. Butler authored or co-authored all the musical works at issue in this case. From 1983 to 1986, MSI recorded and released one album and several singles on vinyl and cassette. Those singles include all the works involved in this case, each of which is registered with the United States Copyright Office. Then, in 1986, MSI dissolved as a corporation and remained an inactive corporation until its USCA11 Case: 21-13232 Document: 54-1 Date Filed: 02/27/2023 Page: 5 of 19

21-13232 Opinion of the Court 5

reinstatement in 2017 with Nealy as owner, president, and share- holder. Although it dissolved in 1986, MSI’s business did not cease until 1989 when Nealy began serving a prison sentence following a conviction for distributing cocaine. Nealy was released in 2008. While Nealy was in prison, Butler formed another company named 321 Music, LLC and began licensing the rights to musical works from the MSI catalog. In February 2008, Atlantic obtained a license from Butler and 321 to interpolate “Jam the Box,” one of the works at issue in this case, into the artist Flo Rida’s hit song “In the Ayer.” Then, in July of that same year, Artist and Warner en- tered into an agreement with Butler and 321 that purportedly made Artist and Warner the exclusive administrators of the music pub- lishing rights to all the musical works at issue in this case. Nealy did not authorize anyone to exploit the rights to the MSI catalog while he was in prison. And Nealy did not continue his involvement in the music industry or with MSI while in prison. After Nealy left prison, he learned that another third party, Robert Crane, was distributing works from the MSI catalog. MSI and Nealy’s legal consultant Jonathan Black met briefly with Crane and his lawyers in June 2008 to discuss Crane’s use of the MSI cat- alog. But nothing came of that meeting. Nealy recalled “letting them know that [he] was home [from prison] and that they had [his] music.” But he also “didn’t know what to do.” And so, he took no further action before returning to prison in 2012 to serve an- other sentence, which he completed in the fall of 2015. USCA11 Case: 21-13232 Document: 54-1 Date Filed: 02/27/2023 Page: 6 of 19

6 Opinion of the Court 21-13232

Before Nealy returned to prison, litigation over the rights to the works ensued between Crane’s companies, Atlantic, Artist, Warner, Butler, and 321. But Nealy was not a party to this litigation and contends he did not learn of it until after serving his second prison sentence. Once he returned to prison, Nealy again did not have any involvement in the music industry.

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60 F.4th 1325, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sherman-nealy-v-warner-chappell-music-inc-ca11-2023.