A federal court in California has dismissed a key element of Fred Durst’s explosive lawsuit against Universal Music, in which the Limp Bizkit frontman accuses the major of operating a royalty system “deliberately designed to conceal artists’ royalties and keep those profits for itself”.
It’s a definite set back for Durst, although the judge has given him the opportunity to submit an amended complaint and, on that basis, his legal team remain positive, promising that, not only will an amended filing be forthcoming, but Universal “will not get away” with its current conduct “at the expense of artists”.
Durst wants to cancel his old deals with Universal on the basis the major is in breach of contract for failing to report and pay royalties on time. As a result of him rescinding his past contracts, Durst reckons the music company owes him at least $200 million.
However, Universal has argued that rescission of past contracts would only be possible if there was “total failure” on its part to meet contractual commitments. Judge Percy Anderson agrees, while also concluding that Durst and his team have “not plausibly alleged the type of ‘substantial’ or ‘total failure’ in the performance of the contracts that could support rescission of the parties’ agreements”.
Although Durst can now amend and resubmit his lawsuit, if he still can’t convince the judge that there is a case for rescinding his old Universal contracts, his entire litigation will fail, at least in the federal court.
Having issued a ‘notice of rescission’ against Universal last September, Durst claimed the major was now infringing his copyrights and owed him mega-bucks in declaratory relief. He also made claims of breach of contract and unfair business practices under Californian state law.
However, the claims of copyright infringement and for declaratory relief both rely on the court deciding that the ‘notice of rescission’ was valid, ie that there is, in fact, a basis for cancelling the old deals. And if Durst can’t make a case for copyright infringement, the federal courts will no longer have any jurisdiction over the lawsuit, and he’ll have to take his state law complaints to a California state court.
Despite the set back, Durst’s lawyer honed in on the fact his client can now submit an amended complaint when speaking to Law360. He said that Anderson “gave us the opportunity to amend our complaint further – in order to keep litigating in [federal court]”, before adding, “the facts speak for themselves. Universal will be held accountable for its actions and will not get away with its conduct at the expense of artists”.
Durst’s dispute relates to three separate deals with Universal: an original record deal between Limp Bizkit and indie label Flip Records, which in turn was allied with Universal’s Interscope; a direct deal between Limp Bizkit and Interscope; and a separate agreement in relation to Durst’s own label Flawless Records, which operated as an imprint of Universal for a time.
In his lawsuit, Durst claims that Universal failed to provide all the royalty reporting that was required under his old contracts, and then failed to pay millions in royalties that were due after he and his band finally paid off past advances and other recoupable expenses in 2019.
When a new business manager identified that millions in royalties were owing, Durst gave Universal 30 days to pay the outstanding money. The major did make the payments, but not within 30 days.
Durst presented multiple arguments for rescinding his old contacts, all of which were rejected by the court. That included the claim that the various deals between Durst and Universal had been “fraudulently induced” because the major “never had any intention to comply with its contractual obligations to pay royalties”.
Needless to say, Universal denied that allegation, also claiming that, once Limp Bizkit had recouped, it actually tried to make contact with the band to arrange payment of royalties but a former business manager working for the band incorrectly stated that they had sold their royalty rights to a third party.
In his judgement, Anderson also notes that Universal paid millions in advances as part of its deals with Durst, as well as committing to cover substantial costs around the production and distribution of his recordings.
Having paid those advances and covered those costs back in the day, any recent grievances about royalty reporting and late payments are not enough to justify cancelling the deals, with Anderson citing legal precedent that says “alleged failure to pay royalties does not constitute a total failure of performance”.
Another argument in favour of rescinding the old deals related to the California Business And Professions Code, and claimed that Universal’s conduct was in violation of California’s “public policy in favour of timely paying workers, including artists, all of their wages, compensation and royalties”.
On that, Anderson rules that Durst’s team failed to provide any legal precedent that says a public policy argument can circumvent the need to demonstrate a ‘substantial’ or ‘total failure’ on Universal’s part in order to cancel the old deals.