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Gomba Music Inc. v. Avant
Citations: 225 F. Supp. 3d 627; 2016 WL 7100255Docket: Case No. 14-11767
Court: District Court, E.D. Michigan; December 5, 2016; Federal District Court
The court issued an opinion denying Plaintiff Harry Balk's motion for partial summary judgment, granting Defendants' motion for summary judgment, and granting in part and denying in part Third-Party Defendant Sixto Rodriguez's motion for summary judgment. Balk claimed he had exclusive rights to Rodriguez's songs through contracts signed in the late 1960s but alleged that Rodriguez conspired with Defendant Clarence Avant to release the album *Cold Fact* without his knowledge, falsely attributing the songs' authorship. The album, which initially failed in the U.S., became a hit in South Africa, a fact Rodriguez was unaware of until later publicized in the documentary *Searching for Sugarman*. However, undisputed discovery evidence indicated Balk did little to support Rodriguez and effectively abandoned their arrangement, undermining his claims to ownership of the songs from *Cold Fact*. The court evaluated motions regarding Balk's ownership interest in the songs and the timeliness of his claims, ultimately concluding that Balk's claims lacked merit, while addressing the contract claims filed by Interior Music Corp. against Rodriguez. The case centers on the rights to nine songs from *Cold Fact*, which were published by Avant's company, with the critical agreements made between Rodriguez and Balk's entities in the 1960s. The agreements included an exclusive management deal and a writer agreement that granted ownership rights to Gomba Music, Inc. for songs created during the contract term. The relationship between Balk and Rodriguez yielded minimal results, as evidenced by the limited number of recorded songs and the registration of only one song, 'Forget It,' under copyright, which was also included in *Cold Fact*. In 1967, Balk became an employee of Motown Records, which limited his relationship with Rodriguez and led to Balk not renewing their recording agreement when it expired in mid-1968. Following this, Impact ceased releasing new records, and Balk stopped performing under the management agreement, stating he would not manage anyone at Motown. Evidence indicates Balk assigned an exclusive songwriter’s agreement with Gomba to Jobete, Motown’s publishing arm, as Jobete claimed they held a valid assignment from Balk in a 1969 communication. However, Balk contested the assignment during his deposition, although he acknowledged assigning Gomba’s rights to copyrighted material to Jobete. In December 1967, Gomba assigned half of its rights to various compositions, including those of Rodriguez, to Jobete, and in March 1971, assigned the remaining interests. Gomba's operations effectively ceased after Balk's transition to Motown, and by 1971, the state of Michigan voided Gomba's charter due to Balk not filing an annual report for 1969. Both Balk and Rodriguez confirmed that Rodriguez did not receive any financial benefits from their arrangement, with Rodriguez stating he gained nothing beyond a ride in a Cadillac. After Balk's move to Motown, Rodriguez independently registered nine songs with the Copyright Office between October 1968 and August 1969, using names like 'Sandraven, Inc.' and 'Sixth Prince, Inc.' for ownership purposes, without mentioning his name, Sixto. Rodriguez asserted that forming these entities was his initiative, independent of Clarence Avant’s involvement. Collaborating with producers Mike Theodore and Dennis Coffey, Rodriguez was reportedly deemed free from Balk's management, which Balk himself allegedly confirmed. In early 1969, Theodore and Coffey recorded a demo tape of Rodriguez and sent it to Clarence Avant, seeking to secure a deal for him. Avant expressed interest in signing Rodriguez but was aware that Rodriguez's existing contracts with Balk posed a potential barrier. In April 1969, Rodriguez's attorney, Robert McCall, sent Avant copies of these contracts, noting that Rodriguez had not received any compensation from them, and suggested that they were effectively expired. Avant's attorneys deemed the contracts "worthless" and advised McCall to inform Balk and Jobete Music that Rodriguez would not honor the assignment due to the contracts being dormant. Following this advice, Rodriguez signed a "Notice of Breach and Recission" in May 1969, stating that he viewed the agreements as breached due to non-performance and would not recognize the assignments. Jobete responded, asserting the validity of their assignment and dismissing Rodriguez's notice as ineffective. In reply, Avant indicated he would seek a recording contract and planned to negotiate the exclusive songwriter contract later. Rodriguez recorded "Cold Fact" in summer 1969, and in February 1970, he assigned his rights to disputed songs to Avant's publishing company, Interior Music Corp. Subsequently, on March 2, 1970, he signed both a recording agreement with Sussex Records and a songwriter agreement with Interior, assigning his rights and ensuring he could transfer them free of any claims. "Cold Fact" was released that month. The album produced by Theodore and Coffey was released on Sussex Records, featuring 12 songs performed by Rodriguez. Of these, two songs were credited to Harvey, Theodore, and Coffey, while the remaining ten were previously registered by Rodriguez under Sandraven, Sixth Prince, or Jesus Rodriguez, with credits reflecting either Sixth Prince or Jesus Rodriguez. Rodriguez stated that he chose these credits to protect his material independently of Avant's involvement, a claim supported by Avant's assertion of having no role in that decision. Theodore claimed Avant's contribution was limited to funding, without attending recording sessions. Balk, aware of Rodriguez's performance in the album, believed Theodore's assertion that Jesus, rather than Sixto, wrote the songs, leading him to refrain from further investigation. In contrast, Theodore and Coffey were uncertain about Rodriguez's first name, assuming he authored the songs. A telegram from Jobete, claiming rights to Rodriguez's songs, went unanswered until Balk's lawsuit nearly fifty years later. Following the release of "Searching for Sugarman" in 2012, Balk discovered Rodriguez's authorship and filed a lawsuit on May 2, 2014, against Avant and Interior, alleging fraud on the copyright office, seeking declaratory judgment on ownership of the songs, claiming fraudulent concealment and tortious interference, and asserting copyright infringement. Interior countered with a third-party complaint against Rodriguez for breaching his songwriter’s agreement. All parties have requested summary judgment on various claims, with Balk seeking partial summary judgment on his ownership and timeliness of claims, while defendants and Rodriguez sought dismissal of these claims and the third-party complaint, respectively. Each party’s motion for summary judgment involves distinct standards based on who bears the burden of persuasion. If a party seeks summary judgment on a claim where it does not hold the burden at trial, it can meet its initial requirement by demonstrating a lack of evidence supporting the opposing party’s case. The non-moving party must then present specific facts indicating a genuine issue for trial. The court assesses whether the evidence indicates sufficient factual disagreement to necessitate a trial or if the evidence overwhelmingly favors the moving party, warranting a decision as a matter of law, always viewing the evidence in the light most favorable to the non-moving party. For claims where the moving party bears the burden of persuasion, the initial burden is more demanding; it must provide evidence compelling enough that no reasonable jury could disbelieve it. The court similarly views this evidence favorably towards the non-moving party. In the case at hand, A. Balk and the Defendants each seek summary judgment regarding the timeliness of Balk’s claims, which were filed over 40 years after the release of Cold Fact. Balk’s state-law claim, labeled as “Fraudulent Concealment/Tortious Interference with Contract and Fraud,” relies on Michigan's fraudulent concealment statute to extend the limitation periods for his claims. This statute allows a claim to be filed within two years of discovery if the defendant has fraudulently concealed the claim’s existence or the liable party’s identity. To succeed, Balk must prove the defendant engaged in affirmative actions or misrepresentations to prevent discovery; mere silence is inadequate. Evidence suggests that Defendants, particularly Avant, actively concealed Rodriguez's authorship of the songs. Avant was aware of Rodriguez’s agreement with Balk before the album's release and acknowledged receiving a copy of the agreement from Rodriguez’s attorney. Despite doubting the agreement's validity, Avant expressed a desire for Rodriguez to record for his company, indicating efforts to mitigate potential disputes. Cold Fact's release involved misattribution of song authorship, crediting Sixto Rodriguez's work to Jesus Rodriguez, Sixth Prince, and Sandraven. Although Avant and Rodriguez testified that Avant did not decide on these attributions, Avant claimed Rodriguez had informed him he wrote the songs. The songs appeared on an album financed by Avant, released on his label, and published by his company, Interior, raising questions about the defendants' claims of innocence regarding the concealment of Rodriguez's authorship. To survive summary judgment, Balk must provide evidence beyond mere concealment; he must demonstrate that his inability to discover the cause of action was due to the defendants' actions rather than his own neglect. The court emphasized that knowledge sufficient to prompt a reasonable investigation is crucial, and Balk must be accountable for facts he should have discovered with reasonable diligence. Multiple indicators suggested Balk was aware of potential claims by the time Cold Fact was released in March 1970. In 1969, Balk had knowledge that Rodriguez no longer recognized their songwriting agreement, despite denying he recalled a letter from Rodriguez disavowing it. Additionally, Balk knew Rodriguez was performing the disputed songs and was alerted by the album cover, which credited "Sixth Prince," a name that could be a pseudonym, similar to "Rod Riguez," which Balk had previously used for Rodriguez. Furthermore, the inclusion of the song "Forget It" on the album, identical to a song Balk had previously copyrighted, heightened the suspicion. Despite Balk's claims that he transferred interest in the song to Jobete and that his secretary handled copyright registrations, the court found his arguments unpersuasive, as he retained a half-interest in the song and acknowledged a similarity in his signature on the registration. Balk asserts that "Forget It" is not part of the current litigation, having assigned his interest in the song to Jobete in 1971. However, his financial interest or administrative role regarding "Forget It" is deemed irrelevant. The key issue is that Balk recorded one of the few compositions by Rodriguez on an album he claims he had no reason to believe featured Rodriguez's work. The album cover indicated Sixto Rodriguez as the true author, listing all songs published by Interior Music (BMI), a performing rights organization that manages rights and collects fees for songwriters. Rodriguez’s ten songs for "Cold Fact" were registered with BMI in 1970, confirming his authorship. An expert from BMI confirmed that this information was publicly accessible and should have been pursued by Balk, who did not investigate Rodriguez's authorship despite Jobete's telegram asserting rights to Rodriguez's works. Balk’s testimony reveals he did not obtain or adequately review the album, contradicting his attorneys' claims that he at least reviewed it upon its release. Balk primarily relies on a vague memory of being informed by Mike Theodore that Rodriguez's brother wrote the songs, but he failed to clarify the timing or details of this conversation. This lack of diligence in light of clear indications of Rodriguez's authorship raises questions about Balk's claim and his inaction over several decades despite apparent red flags. Theodore's testimony raises doubts about the occurrence of a specific conversation, questioning why Balk filed a summary-judgment motion regarding it. Theodore claimed ignorance of Jesus Rodriguez and assumed the Rodriguez who worked with Balk was the songwriter. The evidence suggests no concealment by the Defendants that would have prevented Balk from discovering his state-law claim by 1970, with several indicators that should have alerted him to potential claims by March 1970. Balk had opportunities to investigate his claims but failed to do so until much later, coinciding with potential financial gain from Rodriguez. Consequently, the Defendants are entitled to judgment as a matter of law. Regarding federal copyright law, Count II of the Second Amended Complaint seeks a declaratory judgment on Balk's ownership of the Cold Fact compositions. Under the Copyright Act, infringement claims have a three-year statute of limitations, accruing when a plaintiff is aware or should be aware of a violation (discovery rule). In contrast, ownership claims accrue three years from explicit repudiation of ownership. The Court questions whether the repudiation rule applies in this case, as it is typically limited to close relationships, such as contractual co-authors. It remains unclear who would need to repudiate Balk's rights—Rodriguez or the Defendants. Extending the repudiation rule to non-close relationships could create uncertainty in copyright enforcement. Some courts view explicit repudiation as a means of demonstrating knowledge under the discovery rule, with ownership claims accruing when a diligent plaintiff is put on inquiry regarding their rights. Despite this, the Court opts to apply the explicit repudiation rule, affirming that the Appellants' ownership claim is not time-barred since no such repudiation occurred by Sony or the Appellants, contrary to the limitations typically observed in close-relationship disputes. A copyright ownership claim accrues when a party is made aware that their ownership is disputed. In this case, despite the absence of a direct contract between Balk and Avant, their competing contracts for the same compositions suggest a close relationship that may qualify for this rule. Balk was not explicitly informed of any repudiation of his rights regarding the compositions from the album "Cold Fact" at the time of its release. A notice from Rodriguez to Balk in May 1969 questioning the validity of his agreement with Gomba implied a repudiation of Balk's rights, but it did not specifically address the songs registered for copyright by Rodriguez, which complicates the assertion of clear repudiation. Defendants' actions, including the use of alias authorship in credits and copyright assignments, indicate an attempt to avoid Balk's ownership claim, making it difficult to assert that his rights were plainly repudiated. As a result, Balk's ownership claim is timely. In contrast, copyright infringement claims have different accrual rules, beginning when a party is aware or should be aware of a potential violation. Each new infringing act restarts the three-year statutory period. Citing previous cases, it is noted that while Balk’s ownership claim is valid due to unclear repudiation, his infringement claim may be untimely if he had prior notice of exploitation of the songs. The court referenced a lack of clear authority on what constitutes being "chargeable" with knowledge, suggesting an "inquiry notice" standard may apply, whereby indications of possible misconduct prompt further investigation. Balk was deemed to have had knowledge of a potential infringement claim related to Cold Fact's release decades earlier but failed to conduct a diligent investigation until he saw a financial opportunity. His infringement claim is thus limited to actions occurring after May 2, 2011, which is three years prior to filing the complaint. The claim of fraud on the copyright office is also considered untimely, accruing at the time of Cold Fact's release, although the court notes a lack of consensus on whether this constitutes a cause of action or a defense. Both Balk and the Defendants sought summary judgment regarding Balk's ownership rights to the Cold Fact compositions, with the Defendants arguing that the exclusive songwriter’s agreement between Gomba and Rodriguez was abandoned. The court concurred, referencing Michigan contract law which allows for a contract's abandonment to be inferred from the parties’ actions. It was determined that substantial evidence supports the claim of abandonment, and Balk did not present sufficient evidence to dispute this, leading to the conclusion that he lacked ownership interest in the disputed songs. Balk acknowledged in his deposition that upon his employment with Motown Records in 1967, he was prohibited from operating his publishing company, Gomba, which was a party to a songwriter's agreement. He confirmed that he could not compete with Motown and its publishing entity, Jobete, stating that this restriction was the reason he assigned Gomba's material to Jobete. Balk testified that while working for Motown, he could not manage Gomba or accept songs for publication without conflicting with Motown's interests. Subsequently, Gomba assigned half of its rights to various compositions to Jobete in December 1967. By 1971, Gomba's charter was voided due to Balk's failure to file necessary reports, effectively leading to the company's dissolution. Later, in a post-deposition affidavit, Balk attempted to clarify his earlier statements, claiming that the agreement not to compete applied solely to signing new artists and did not affect existing contractual rights. However, this assertion contradicted his prior testimony and could not create a factual dispute. Additionally, a notice from Rodriguez in May 1969 indicated that Balk's contracts with him were considered breached due to non-performance, which Balk did not contest. Testimony from colleagues suggested that Balk intentionally distanced himself from Rodriguez, believing him to be unstable. Balk failed to investigate potential claims regarding the authorship of songs on the album *Gold Fact*, despite clear indications that Rodriguez may have authored them. Upon the album's release, Balk did not assert any claim to Rodriguez's compositions, undermining his position. In response to the Defendants’ motion for summary judgment, Balk argued that he performed under the Gomba Songwriter Agreement concerning songs already recorded in 1967, but the evidence he cited pertained only to Jobete's administration of these songs, not his own involvement. Balk had previously assigned half of his rights to several of Rodriguez's compositions to Jobete before the album's release and the remainder afterward, which does not counter the claim that he abandoned the songwriter agreement. During oral arguments, Balk's counsel claimed Balk's role was merely to collect and distribute royalties; however, there is no evidence that the relevant songs generated royalties or that Balk effectively performed this role before he assigned his interests to Jobete in March 1970. This assignment occurred months prior to the expiration of the songwriter agreement, further indicating Balk's abandonment of the contract. Consequently, there are no genuine issues of material fact regarding Balk's rights to the compositions on *Gold Fact*, and summary judgment is justified in favor of the Defendants on Balk's claims, as he lacks ownership rights to the songs in question. Additionally, Rodriguez is entitled to summary judgment concerning the Defendants’ third-party complaint, which relates to claims of breached warranties and representations contingent upon Balk proving that the Defendants were aware of any faulty warranty made by Rodriguez. Defendants argue that the claim against Rodriguez is solely a derivative liability claim, essentially attempting to transfer liability for damages claimed by Balk. However, since Balk's claims are being dismissed, there is no liability to transfer, leading to the dismissal of Interior’s breach of warranty claim as moot. Rodriguez seeks judgment as a matter of law regarding claims of failing to cooperate in litigation. His songwriter agreement with Interior mandates cooperation, but this claim does not depend on the outcome of Balk’s claims. Evidence indicates that Rodriguez’s former attorneys may not have fully cooperated with Interior, as they were involved in preparing Balk's litigation against Defendants. This raises a genuine issue of material fact regarding Rodriguez's cooperation under the agreement. Rodriguez also requests to limit damages to royalties, arguing that costs and damages related to claims against Interior should be treated as advances against royalties due under his agreement. However, he has not demonstrated that this provision was intended to be an exclusive remedy. Consequently, Balk’s motion for partial summary judgment is denied, Defendants’ motion for summary judgment is granted, and Balk's second amended complaint is dismissed. Rodriguez's motion for summary judgment is granted in part and denied in part, with Count I of the third-party complaint dismissed. The Court refrains from commenting on the album's success, as it is not pertinent to the case at hand. The registration record for "Establishment Blues" is incomplete, lacking the initial registration, but a subsequent copyright assignment identifies Jesus Rodriguez as the author and Sixth Prince, Inc. as the assignee. McCall communicated to Avant that he also notified Motown Records. Registration details indicate a "W" next to Sixto Rodriguez's name, signifying him as the writer, and a "P" next to Interior’s name, designating it as the publisher, according to the Defendants’ expert. There is a dispute regarding whether Balk transferred the songwriter's agreement from Gomba to Jobete, with substantial evidence suggesting such an assignment occurred. Jobete has repeatedly claimed to hold rights to Rodriguez's music in writing, though Balk denies assigning the agreement and no written evidence of this assignment exists. Balk’s testimony, despite being self-serving, cannot be dismissed outright by the Court. The failure-to-cooperate claim, linked to a now-dismissed third-party breach-of-warranty claim, raises procedural concerns regarding its retention in the case; however, Rodriguez has not argued for its dismissal on these grounds.