Bell v Philadelphia International Records
OPINION terminating as moot 78 MOTION to Strike Plaintiff's Experts and granting 74 MOTION for Summary Judgment (Signed by Magistrate Judge Stephen Wm Smith) Parties notified.(jmarchand, 4)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
RECORDS, ET AL.,
CIVIL ACTION H-11-3327
OPINION ON SUMMARY JUDGMENT
This dispute is before the court on defendants' motion for summary judgment (Dkt.
74). After consideration of the parties' submissions, argument at a hearing on September 30,
2013, and the law, the motion is granted.1
Plaintiff Archie Bell is a recording artist who in 1968 had a hit song called “Tighten
Up” with his group Archie Bell & The Drells. “Tighten Up” was recorded on the Ovide
Records label, which subsequently sold its song catalog to Atlantic Records. Neither Ovide
or Atlantic are defendants in this case.
In 1974, Bell signed a recording contract with defendant Gamble-Huff Productions,
Inc. Under the contract all expenses Gamble-Huff incurred in making Bell's records would
be considered advances and charged against any royalties earned by the artist. Thus, Bell
would not be entitled to royalty payments until all advances were recouped by defendants.
In light of this ruling, defendants' motion to strike plaintiff's experts (Dkt. 78) will
be terminated as moot.
Bell alleges he signed without benefit of legal counsel and after only a few minutes to review
the contract, and relied on defendants' representations that they would do everything a record
company was supposed to do to ensure his success and pay him royalties. Bell recorded four
albums for Gamble-Huff.
In his complaint, Bell asserts causes of action against defendants for breach of
contract, fraud, fraudulent inducement, fraudulent concealment, misappropriation of name,
image, and likeness, and breach of fiduciary duty. Bell seeks damages, as well as the
equitable remedy of return of all master recordings he made with defendants.
Defendants move for summary judgment on the grounds that Bell's claims are timebarred, and that they do not owe Bell any royalties because his records were not successful
and defendants have not recovered the money they spent making them.2
Summary Judgment Standards
Summary judgment is appropriate if no genuine issues of material fact exist, and the
moving party is entitled to judgment as a matter of law. F ED. R. C IV. P. 56(c). The party
moving for summary judgment has the initial burden to prove there are no genuine issues of
material fact for trial. Provident Life & Accident Ins. Co. v. Goel, 274 F.3d 984, 991 (5th Cir.
2001). Dispute about a material fact is “genuine” if the evidence could lead a reasonable jury
to find for the nonmoving party. In re Segerstrom, 247 F.3d 218, 223 (5th Cir. 2001). “An
issue is material if its resolution could affect the outcome of the action.” Terrebonne Parish
Defendants also asserted a counterclaim in the nature of indemnity against Bell.
Counsel has informed the court that defendants agree to voluntarily dismiss that
counterclaim, and it is dismissed.
Sch. Bd. v. Columbia Gulf Transmission Co., 290 F.3d 303, 310 (5th Cir. 2002). In
determining whether a genuine issue of material fact exists, the court views the evidence3 and
draws inferences in the light most favorable to the nonmoving party. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 255 (1986).
Statute of Limitations
Defendants contend that Bell's claims are barred by applicable statutes of limitations.
There is no dispute that Texas law governs the statute of limitations analysis. See
Cypress/Spanish Ft. I, L.P. v. Prof. Serv. Indus., Inc., 814 F. Supp. 2d 698, 708 (N.D. Tex.
2011). The general rule is that a cause of action accrues, and the statute of limitations begins
to run, “when facts come into existence that authorize a claimant to seek a judicial remedy.”
Exxon Corp. v. Emerald Oil & Gas Co., L.C., 348 S.W.3d 194, 202 (Tex. 2011). Determining
when a cause of action accrues is normally a question of law. Id.
Breach of Contract. The statute of limitations for breach of contract is four years.
T EX. C IV. P RAC. & R EM. C ODE A NN. § 16.051; Stine v. Stewart, 80 S.W.3d 586, 592 (Tex.
2002). “It is well-settled law that a breach of contract claim accrues when the contract is
breached.” Stine, 80 S.W.3d at 592. According to the second amended complaint, defendants
allegedly breached the contract in two ways, first by not adequately promoting the group and
its recordings, and second by not remitting royalties.
Bell's objections to defendants' citations to wikipedia.com and other internet sites,
such as www.rockhall.com, are sustained as hearsay. Bell's objections to the affidavit
of Jeff Hubbard are overruled.
It is clear that the first type of breach of contract claim is time-barred. Bell made no
recordings for defendants after 1980 or 1981.4 Any failure to promote defendants' recordings
occurred, and would have been well known to Bell, long before 2007.
As to the royalty claim, a breach of contract claim accrues every time a royalty
payment is due but not paid. Lyle v. Jane Guinn Revocable Trust, 365 S.W.3d 341, 355 (Tex.
App. – Houston [1st Dist.] 2010, pet. denied) (if the terms of an agreement call for periodic
payments, a cause of action for such payments may arise at the end of each period for which
payment is due). Bell filed this lawsuit on September 9, 2011. Applying the general rules
above, Bell's breach of contract claim is barred as to all royalty payments due on or before
September 8, 2007. But Bell argues that the general rules do not apply, and that the accrual
of his cause of action was tolled by the “discovery rule” and/or defendants' fraudulent
concealment of facts.
In Texas, the discovery rule is a very limited exception to limitations and is strictly
construed by courts. Computer Assoc. Int'l, Inc. v. Altai, Inc., 918 S.W.2d 453, 456
(Tex.1996). The discovery rule applies only when: (1) the nature of the injury is inherently
undiscoverable and (2) the evidence of the injury is objectively verifiable. Id.; Wagner v.
Brown, 58 S.W.3d 732, 734 (Tex. 2001). An "inherently undiscoverable" injury is one that
by its nature is unlikely to be discovered within the prescribed limitations period, despite the
plaintiff's due diligence. S.V. v. R.V., 933 S.W.2d 1, 7 (Tex. 1996). It does not matter that
a particular plaintiff did not discover his particular injury within the limitations period.
Dkt. 74-2 at 6-7; Dkt. 74-8 at 8; Dkt. 74-19.
Wagner, 58 S.W.3d at 734. Whether an injury is inherently undiscoverable is a legal question
and is determined on a categorical basis. Id. at 735.
Bell's lack of education and sophistication and his trust in defendants may explain why
he did not investigate his rights under the contract sooner. But these traits do not make
defendants' alleged breaches “inherently undiscoverable.” The earliest royalty statement in
the record, for the period ended December 31, 1988, indicates a deficit of over $240,000 and
royalty income of only $3.73.5 Through the exercise of due diligence, Bell could have
discovered any deficiencies in his royalty payments as they occurred, and at least by
Closely related to the discovery rule is the doctrine of fraudulent concealment. Unlike
the discovery rule, fraudulent concealment is an equitable doctrine that is fact-specific. Shell
Oil Co. v. Ross, 356 S.W.3d 924, 927 (Tex. 2011). To invoke this exception, Bell must show
that the defendants “actually knew a wrong occurred, had a fixed purpose to conceal the
wrong, and did conceal the wrong.” Id. Even then, “[f]raudulent concealment only tolls the
statute of limitations until 'the fraud is discovered, or could have been discovered with
D. Ex. 20, Dkt 74-21. Defendants contend they have never paid Bell royalties, which
is consistent with Bell's deposition testimony. Dkt. 74-2 at 11. In his affidavit, Bell
contends that he received royalties for several years and then they abruptly stopped.
Dkt. 89-1, ¶ 11. If so, then the cessation of payments, which apparently occurred at
least by 1988 based on the statements in the record, triggered accrual of his cause of
Defendants contend that Bell hired Jeff Hubbard in 1995 to conduct this very due
diligence. See Dkt. 74-11. Whether or not that is true, Bell surely could have hired
someone for that purpose.
reasonable diligence.'” Id. (quoting B.P. Am. Prod. Co. v. Marshall, 342 S.W.3d 59, 67 (Tex.
There is no evidence here that defendants undertook to conceal from Bell that he was
owed royalties. The record indicates that defendants regularly provided Bell with statements
showing the negative balance on his royalty account. The Texas Supreme Court ruled in Shell
Oil that “the fraudulent concealment doctrine does not apply to extend limitations as a matter
of law when the royalty underpayments could have been discovered from readily accessible
and publicly available information before the limitations period expired.” 356 S.W.3d at 925.
While there is no evidence in this case that the information regarding the amount of royalties
due to Bell was publicly available, the court nonetheless finds inescapable the conclusion that
Bell could have discovered his alleged injury years ago with reasonable diligence.
In sum, the general statute of limitations rules governing a breach of contract cause
of action apply in this case. Bell's breach of contract cause of action is time-barred as to any
claims for royalties due on or before September 8, 2007. Bell's breach of contract claim
regarding royalties due after that date is timely, and will be considered on the merits.
Fraudulent inducement. The statute of limitations on a fraudulent inducement cause
of action is four years. T EX. C IV. P RAC. & R EM. C ODE A NN. § 16.004(a)(4). The alleged
fraudulent representations underlying this claim were made to Bell at the time he signed the
contract in 1974.7 Accepting those allegations as true, Bell still should have realized that at
least by the late eighties when he was getting royalty statements indicating he was owed
Dkt. 46, ¶24.
nothing. Because this claim accrued when the fraud could first have been discovered with
reasonable diligence, and does not accrue anew each time a royalty payment is missed, it is
Breach of fiduciary duty. The statute of limitations on a breach of fiduciary duty
claim is also four years. T EX. C IV. P RAC. & R EM. C ODE A NN. § 16.004(5). The general rule
is that the cause of action accrues when the claimant knows, or in the exercise of reasonable
diligence should know, of the wrongful act and resulting injury. Dunmore v. Chicago Title
Ins. Co., 400 S.W.3d 635, 641 (Tex. App. – Dallas 2013, n.p.h.). Bell alleges that before the
contract was and for many years thereafter, defendants represented that they were “taking
care of” him and “doing right by him.” 8 Bell further alleges that defendants' refusal to
provide a full accounting leads to the conclusion that defendants are diverting his royalties
for their own use.9
Setting aside the issue of whether any defendant meets the definition a fiduciary, the
court concludes, as discussed above, that reasonable minds could not disagree that Bell could
have discovered his alleged injury long ago through the exercise of reasonable diligence. By
his own admissions, Bell either never received royalties, or stopped receiving them many
years ago. The record establishes that defendants made it clear to Bell many years ago that
Second Amended Complaint (Dkt. 46), ¶ 16.
Id. ¶¶ 16-18.
they did not intend to pay him any royalties until they recouped advances.10 Thus, Bell's
breach of fiduciary duty claim is time-barred.
Misappropriation of name, image, and likeness. This is a claim for invasion of
privacy. Under Texas law, this tort is subject to a two-year statute of limitations. Stevenson
v. Koutzarov, 795 S.W.2d 313, 319 (Tex. App. – Houston [1st Dist.] 1990, writ denied).
Defendants contend that this action accrued at the time of contracting and is time-barred. Bell
has presented no evidence, or argument, from which the court can deduce a basis for accrual
of the cause of action within the two year limitations period. It is apparently Bell's contention
that the contract is unenforceable and thus defendants never had a right to use his name,
image, or likeness in any way. Again, any such cause of action should have been known to
Bell through the exercise of reasonable diligence long ago, and in any event more than two
years before he filed suit. This cause of action is also time-barred.
Merits of Breach of Contract Claim.
The substantive law of New York applies to the merits analysis pursuant to the choice
of law provision of the 1974 contract. Dkt. 46-1, ¶ 25. As an initial matter, the court holds
that Bell cannot assert a breach of contract claim against non-contracting parties. M.
Paladino, Inc. v. Lucchese & Son Contr. Corp., 669 N.Y.S.2d 318, 319 (2d Dept. 1998).
Gamble-Huff Productions, Inc. signed the contract, and shortly thereafter, in December 1975,
See Dkt. 74-21.
assigned its rights to Assorted Music, Inc.11 Although all defendants apparently are affiliates,
“absent a showing of complete dominion and control by one over the other, two separate
companies are regarded as distinct legal entities.” See Sheridan Broadcasting Corp. v. Small,
798 N.Y.S.2d 45, 46 (1st Dept. 2005). There is no showing of “complete dominion” here.12
Thus, Bell can assert this claim only against Assorted Music, as Gamble-Huff's assignee.13
The essential elements of a breach of contract claim are the existence of a contract,
the plaintiff's performance under the contract, the defendant's breach of the contract, and
resulting damages. Morpheus Capital Advisors LLC v. UBS AG, 962 N.Y.S.2d 82, 86 (1st
Dept. 2013). Defendants contend that Bell has waived any breach of contract claim by failing
to object within 6 months of receiving his royalty statements, and alternatively that Assorted
Music has properly accounted for Bell's royalties.
Contractual waiver. The 1974 contract provides:
All royalty statements and all other accounts rendered by us to you hereunder
shall be binding upon you and not subject to any objection by you for any
reason whatsoever unless specific objection in writing, stating the basis
thereof, is given to us within six (6) months from the date rendered.
Dkt. 46-1, ¶ 9(b).
Bell does not specifically address defendants' waiver argument, but appears to argue
(without expressly saying so) that paragraph 9 of the contract should not be enforced because
It is true that royalty statements were issued by Philadelphia International Records.
While this is evidence of shared or delegated responsibility, it is not sufficient to
show “complete dominion.”
Claims against Gamble-Huff are time-barred.
the contract is unconscionable. Bell further contends that fact questions about the amount of
royalties due prohibit summary judgment.
An unconscionable contract is one that is so grossly unreasonable as to be
unenforceable because of an absence of meaningful choice on one party together with
contract terms that are unreasonably favorable to the other. Emigrant Mtge. Co., Inc. v.
Fitzpatrick, 945 N.Y.S.2d 697, 699 (2d Dept. 2012); Gillman v. Chase Manhattan Bank, 534
N.E.2d 824, 828 (N.Y. 1988). Substantive unconscionability “appear[s] in the content of the
contract per se,” while procedural unconscionability entails “an examination of the contract
formation process and the alleged lack of meaningful choice.” Id. Both are necessary to
establish unconscionability. Gillman, 534 N.E.2d at 828. Bell's allegations regarding his lack
of time for meaningful review, lack of legal counsel, and lack of education and sophistication
go only to procedural unconscionability. See also Dabriel, Inc. v. First Paradise Theaters
Corp., 952 N.Y.S.2d 506, 510 (1st Dept. 2012).
The facts surrounding the execution of the contract are disputed. Memories on all
sides have faded. But even if it is true that Bell traveled to Philadelphia and met alone with
Gamble and Huff who put the contract in front of him only briefly and told him to sign it, it
does not follow that he had no “meaningful choice.” There is no evidence he was pressured
to sign it immediately or told not to read it nor to consult with an attorney. Moreover, there
is nothing per se unconscionable about the 6-month objection period, and Bell does not argue
otherwise. The provision is unambiguous. And while other provisions in the contract might
be complicated, this one is not. The court cannot rewrite the clear terms of the contract under
the guise of interpretation. Greenfield v. Philles Records, Inc., 780 N.E.2d 166, 170-71 (N.Y.
There is a potential fact question as to whether Bell timely objected to royalty
statements post-September 2007. Bell's counsel did send multiple letters beginning in January
2008 indicating that Bell was investigating his royalty rights. Those letters could liberally be
construed as objections to the royalty statements sent to Bell. However, even if there is a
factual dispute regarding Bell's compliance with the contractual objection period, it does not
defeat summary judgment because Bell cannot create a genuine issue of material fact as to
defendants' lack of recoupment of over $240,000 in advances.
Bell's summary judgment affidavit states that he never received cash advances from
defendants.14 Bell's recollection is contradicted by documents in the record,15 but even if true
it is not dispositive. Defendants are entitled to recoup advances for many things, such as
studio time and musicians, not just cash advances to Bell. Defendants have produced records
accounting for over $190,000 in such expenses.16 While these records may not be complete,
Bell has no evidence to contradict them. And Bell has submitted no evidence that income
from the recordings he made for defendants has been sufficient to trigger his right to royalties
under the contract.
Dkt. 89-1, ¶ 10.
Bell argues that he must be entitled to money because in 2007 Assorted licensed their
entire catalogue of master recordings, including those by Archie Bell & The Drells, to Sony
for a lump sum advance of $2,000,000. But works by numerous artists were included in the
bundle, and there is no indication as to what portion, if any, of the $2,000,000 was based on
the value of Bell's work. In any event, under the terms of that 2007 contract, Assorted was
required to repay the advance out of royalties which it earned as owner of the master
recordings. In other words, the agreement with Sony did not alter Assorted's contracts with
the various artists whose work was in the catalog.17 Statements sent to Bell from 2007
through December 2012 show that Bell continued to receive credit for a small amount of
royalties after the Sony deal.18
Bell further argues that there is a fact issue in this case because defendants cannot
account for the difference between their current representation that they are still owed
approximately $230,000, and Gamble's deposition testimony that they spent over $800,000
making his records.19 Defendants' do not contend that they spent over $800,000 making the
records. Instead, defendants contend they spent “over $200,000 out-of-pocket producing
plaintiff's albums, and to date these initial costs have never been recouped.” 20 Defendants
rely on a 1980 letter to counsel in a garnishment action, as well as the affidavit of Asbury and
Dkt. 74-4, ¶ 13.
Gamble Dep., at 91-92 (Dkt 89-2).
Dkt. 74 at 3.
accompanying documents.21 Gamble's deposition testimony cannot create a fact question to
save Bell's case when taking that testimony as true would only prove that the deficit on Bell's
account was even greater than claimed.
The court concludes that defendants are entitled to summary judgment on the merits
of Bell's breach of contract claim.
For the reasons discussed above, defendants' motion for summary judgment (Dkt. 74)
is granted as to all of Plaintiff's claims.
The court will enter a separate final judgment.
Signed at Houston, Texas on October 22, 2013.
See citations in Dkt. 74 at 3.
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