A federal judge in California has dismissed a class action lawsuit against Universal Music Group arising from a 2008 fire that destroyed an undetermined number of master recordings from artists including Tom Petty, 2Pac, Nirvana, and others. Most of the other artists who were originally part of the suit, including Soundgarden, Steve Earle, Tupac Shakur, and Hole had withdrawn from the litigation earlier, but Tom Petty’s estate had remained as a party in the case.
Judge John A. Kronstadt of the United States District Court for the Central District of California ruled that Petty’s claims for breach of contract failed because Petty could not allege a plausible theory of breach of contract with MCA or that the contract entitled him to a portion of the money UMG recovered from its insurance claims after the fire. Petty had advanced an argument that the contract’s license language should be broadly construed to grant a royalty to the artist arising from any “use” of the masters, including insurance proceeds derived from the destruction of those masters. The court disagreed, holding that “use” in the context of a recording contract means to grant “a right to manufacture, distribute, sell and/or perform recordings.” The court also found it was “not reasonable to interpret the recovery under an insurance policy for destruction of the Master Recordings as a retroactive license for destruction on a flat fee basis.”
Additionally, the court held that Petty’s former record label MCA owned the rights to his original recordings and that the estate could not sue under a “bailment” theory since Petty did not actually hold title to the physical masters. Nor did that Petty’s MCA contract give rise to a duty from UMG to Petty that could form the basis of a negligence or other related claim centered on plaintiffs’ characterization of the UMG warehouse as a “firetrap.”
The judge dismissed the case “without prejudice,” meaning the Petty estate could refile.
UMG has long held that the factual basis of the litigation in a 2019 New York Times article, which claimed that hundreds of thousands of master records were last in the fire, was both inaccurate and overstated. The court’s ruling did not directly address the accuracy of the article. However, to the extent other recording artists’ contracts contain language highly similar to that found in the Petty-MCA agreement, those artists are likely to face an uphill battle if they seek to obtain relief in court as a result of the 2008 fire.