Judge Dismisses Universal Music Lawsuit Stemming from 2008 Fire

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Judge John A. Kronstadt has dismissed the lawsuit filed against Universal Music Group (UMG) by artists (and artists’ estates) whose master tapes were damaged in the 2008 Universal Studios fire.

Digital Music News has documented the long-running legal battle since it began in June 2019. Soundgarden, Hole, and Steve Earle, as well as the estates of Tupac Shakur and Tom Petty (the latter was represented by ex-wife Jane Petty, who owns a piece of Tom’s catalog), sought a portion of Universal’s insurance payout from the aforementioned fire, which destroyed far more master tapes and original recordings than executives initially indicated.

The case shed additional light on the extent of the 2008 fire—and reassured some of the plaintiffs that their works had remained intact. (Many other artists, including Beck, Nirvana, R.E.M., and Jimmy Eat World, did suffer master-tape losses in the fire, but opted not to join the lawsuit.) Significantly, all the plaintiffs except Jane Petty had withdrawn from the case at the time of Judge Kronstadt’s dismissal.

Judge Kronstadt dismissed all six of Jane Petty’s claims without prejudice. First, the breach of contract argument, which centers on the idea that Jane Petty is owed insurance money due to the fact that her ex-husband’s master tapes were licensed to UMG, was denied because the plaintiffs’ legal team failed to demonstrate that the masters were “licensed on a flat-fee basis.” In other words, the agreement between Petty and UMG relates chiefly to traditional forms of licensing revenue as opposed to payment for using the masters themselves.

Next, the bailment contract argument—that UMG had assumed possession but not ownership of the master tapes—was denied because “Tom Petty did not retain title [actual ownership] to the Master Recordings.” Similarly, Judge Krondstadt too denied that UMG violated its “implied covenant of good faith and fair dealing,” because it relied on the assumption that the Tom Petty-UMG deal was a bailment contract.

The lawsuit’s third leg (alleging negligence) was dismissed because UMG didn’t have a legal obligation “to exercise reasonable care to avoid economic loss in storing its own property,” while the fourth leg (relating to alleged “reckless conduct” from UMG) was denied largely because of the latter conclusion—that Universal Music hadn’t been legally required to take steps to protect the masters.

Finally, the fifth and sixth arguments, relating to conversion and misrepresentation by omission, were tossed without prejudice because the Petty-Universal Music contracts relate exclusively to royalties (and not the value of the masters themselves) and because genuine omission wasn’t established by the plaintiffs, respectively.

At the time of this writing, Universal Music hadn’t publicly responded to the lawsuit’s dismissal. Yesterday, CEO Lucian Grainge revealed that he’s on his way to a full recovery following a weeks-long battle with the novel coronavirus.