Curb Records, Inc. v. Samuel T. McGraw ( 2012 )

IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
July 27, 2012 Session
CURB RECORDS, INC. v. SAMUEL T. MCGRAW
Appeal from the Chancery Court for Davidson County
No. 110631IV Russell T. Perkins, Chancellor
No. M2011-02762-COA-R3-CV - Filed September 25, 2012
A recording company brought this breach of contract action against a recording artist. This
appeal involves only the trial court’s decision to deny the recording company temporary and
permanent injunctive relief. We find no error in the decision of the trial court.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed
A NDY D. B ENNETT, J., delivered the opinion of the Court, in which P ATRICIA J. C OTTRELL,
P. J., M.S., and F RANK G. C LEMENT, J R., J., joined.
Jay S. Bowen, John L. Unger, Will Parsons and Amy J. Everhart, Nashville, Tennessee, for
the appellant, Curb Records, Inc.
William T. Ramsey, Robert A. Peal and Russell A. Jones, Jr., Nashville, Tennessee, for the
appellee, Samuel T. McGraw.
OPINION
F ACTUAL AND P ROCEDURAL B ACKGROUND
We begin this opinion by addressing the posture of the case in this appeal. This is a
contractual dispute between Curb Records, Inc. (“Curb”) and Tim McGraw. As will be
discussed more fully below, the parties agreed to a bifurcated proceeding in which the trial
court would first make a “final determination whether or not Curb is entitled to prevent Mr.
McGraw, by injunction or otherwise, from recording for entities other than Curb” and then
later have a trial on the merits. The first phase of the proceedings consisted of a hearing at
which the attorneys made arguments to the court and submitted depositions, affidavits, and
other documents. By agreement of the parties, no testimony was taken. In this appeal, we
are asked to review the chancellor’s decision on this initial phase of the proceedings. It is
important to note that, since we are considering the propriety of the trial court’s
determination regarding injunctive relief, nothing in this opinion should be construed as
making factual findings binding upon the court at the second phase of the proceedings.
In March 1997, Tim McGraw and Curb entered into a recording agreement under
which McGraw would render his services as a recording artist exclusively for Curb during
the term of the agreement. The agreement provides for an initial period during which
McGraw was required to deliver three albums. After the initial period, McGraw granted
Curb six options, “each to extend the term of this agreement for one option period
commencing immediately upon the expiration of the then current period . . . and continuing
until nine (9) months after your Delivery to Curb of all Masters required during such option
period.” During each option period, McGraw was required to record and deliver to Curb “a
number of Masters sufficient for one (1) album of then customary playing time.” The
agreement contains the following key provisions concerning the duration of each option
period:
The individual producer of the Masters, and the selections to be recorded, are
subject to the mutual approval of you and Curb. . . . [Y]ou hereby agree to
record and Deliver (and Curb hereby acknowledges that you shall be permitted
to Deliver) to Curb all Masters in fulfillment of each album of your recording
commitment hereunder (excluding Greatest Hits, Live albums etc.) subsequent
to the “First LP” (as defined below) no earlier than twelve (12) months nor
later than eighteen (18) months following Delivery to Curb of the immediately
preceding album in fulfillment of your recording commitment hereunder
(excluding Greatest Hits, Live albums, etc.). At such time, if any, that Curb
elects to release any Greatest Hits album embodying Masters under this
agreement and/or the Prior McGraw Agreement, Curb may in Curb’s sole
discretion, further extend the time frame for Delivery set forth in the previous
sentences of the next such album of your recording commitment by up to a
maximum of six (6) additional months in any single instance.
The agreement further provides that Curb is the “perpetual owner of all Masters (and all
other recordings . . . embodying your performances made during the term hereof).”
McGraw recorded and delivered three albums during the initial period and one album
during each of the first four option periods. On October 22, 2010, McGraw gave 1 to Curb
a group of masters for an album entitled Emotional Traffic. The current dispute arose when
Curb refused to accept these masters in satisfaction of McGraw’s contractual obligations for
1
Curb denies that this constituted “Delivery” as defined in the agreement.
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the fifth option period.
On May 13, 2011, Curb filed a complaint for a declaratory judgment against McGraw
in which Curb alleged that McGraw was in breach of the agreement because he refused to
record and deliver the fifth option period album in accordance with the terms of the
agreement. Among Curb’s assertions is that McGraw recorded the masters for Emotional
Traffic prior to the fifth option period. The complaint includes a prayer for the following
relief:
1. That the Court declare that Tim McGraw is in breach of the Recording
Agreement because, among other things, he has failed and refused to record
and Deliver the fifth Option Period Album during the six (6) month period
ending April 20, 2011 pursuant to the terms of the Recording Agreement; and
2. That the Court declare that the Emotional Traffic Masters do not and cannot
constitute the fifth Option Period Album; and
3. That Curb Records may exercise all of the rights provided to it in the
Recording Agreement upon Tim McGraw’s failure or refusal to Deliver
Masters; and
4. That the Court declare that as he has repudiated the June 21, 2001
Settlement,2 Tim McGraw is obligated to record and Deliver a sixth Option
Period Album to Curb Records under the Recording Agreement; and
5. For compensatory damages to Curb Records; and
6. For consequential damages to Curb Records; and
7. That the Court enjoin Tim McGraw from providing personal services as a
recording artist, or agreeing to do so, other than to Curb Records for so long
as he, among other things, fails and refuses to record and Deliver to Curb
Records the fifth Option Period Album and the sixth Option Period Album
under the Recording Agreement; . . . .
McGraw counterclaimed for breach of contract, breach of implied covenant of good faith and
fair dealing, and intentional interference with business relationships.
2
In this settlement agreement, Curb agreed to reduce its options from six to five.
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On September 29, 2011, the trial court entered an agreed scheduling order providing
for “bifurcated proceeding that will first make a final determination whether or not Curb is
entitled to prevent Mr. McGraw, by injunction or otherwise, from recording for entities other
than Curb, followed by the progression of a trial on the merits.” A “Rule 65.01 hearing” was
scheduled for November 29 and 30, 2011. The trial on the merits was set for July 2012. By
agreement of the parties, the Rule 65.01 phase of the proceedings would be based solely on
documents submitted to the court and the arguments of counsel. In November 2011, Curb
filed a motion for a preliminary injunction to prevent McGraw from working as a recording
artist for any other person or entity during the pendency of the case.
After the 65.01 hearing in November 2011, the court denied Curb’s request for
injunctive relief and, on December 8, 2011, entered a memorandum and order. In denying
Curb’s request for injunctive relief, the trial court expressly reserved for adjudication at trial
“the question of whether Emotional Traffic constitutes the Fifth Option Album and whether
Mr. McGraw deprived Curb Records of its pre-approval rights, in breach of the parties’
contract.” The Court also ruled that, except for Emotional Traffic recordings, recordings
made by McGraw as of November 30, 2011 belonged to McGraw “at least to the extent that
he may control the release and distribution of those records.” Only recordings by McGraw
made on or after December 1, 2011 belonged wholly to McGraw or any company with which
he might choose to contract. The court directed that the memorandum and order be entered
as a final judgment under Tenn. R. Civ. P. 54.02, and Curb appealed.
On appeal, Curb argues that the trial court erred in concluding that Curb failed to
demonstrate irreparable harm from McGraw’s breach; and that the trial court erred in
adjudicating the ownership of the recordings at issue.
S TANDARD OF R EVIEW
A trial court’s decision to grant or deny a request for a temporary injunction is
reviewed under an abuse of discretion standard. Gentry v. McCain, 329 S.W.3d 786, 793
(Tenn. Ct. App. 2010). Similarly, the decision to grant or deny permanent injunctive relief
rests within the discretion of the trial court and is reviewed for an abuse of that discretion.
Vintage Health Res., Inc. v. Guiangan, 309 S.W.3d 448, 466 (Tenn. Ct. App. 2009);
Medtronic, Inc. v. NuVasive, Inc., W2002-01642-COA-R3-CV, 2003 WL 21998480, at *10
(Tenn. Ct. App. Aug. 20, 2003).3 Under the abuse of discretion standard, a reviewing court
3
Curb argues that, “because the trial court’s Memorandum and Order constitutes a ‘final judgment’
on Curb Records’ claim for injunctive relief,” this court should review the trial court’s decision as if it were
an appeal following a bench trial. Even if there had been a bench trial, the trial court’s decision with respect
(continued...)
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cannot substitute its judgment for the trial court’s judgment. Wright ex rel. Wright v. Wright,
337 S.W.3d 166, 176 (Tenn. 2011). Rather, a reviewing court will find an abuse of
discretion only if the trial court “applied incorrect legal standards, reached an illogical
conclusion, based its decision on a clearly erroneous assessment of the evidence, or
employ[ed] reasoning that causes an injustice to the complaining party.” Konvalinka v.
Chattanooga-Hamilton Cnty. Hosp. Auth., 249 S.W.3d 346, 358 (Tenn. 2008); see also Lee
Med., Inc. v. Beecher, 312 S.W.3d 515, 524 (Tenn. 2010).
A NALYSIS
Before addressing Curb’s arguments, we will seek to clarify the appropriate analytical
framework. The trial court addressed the issues of temporary and permanent injunctive relief
together. Under Tenn. R. Civ. P. 65.04(2), the following standards apply with respect to
temporary injunctions:
A temporary injunction may be granted during the pendency of an action if it
is clearly shown by verified complaint, affidavit or other evidence that the
movant’s rights are being or will be violated by an adverse party and the
movant will suffer immediate and irreparable injury, loss or damage pending
a final judgment in the action, or that the acts or omissions of the adverse party
will tend to render such final judgment ineffectual.
Pursuant to caselaw, there are four factors to be considered by a trial court in deciding
whether to issue a temporary injunction: the threat of irreparable harm, the balance between
the harm to be prevented and the injury to be inflicted if the injunction issues, the probability
that the applicant will succeed on the merits, and the public interest. Moody v. Hutchison,
247 S.W.3d 187, 199-200 (Tenn. Ct. App. 2007). With respect to permanent injunctive
relief, the analysis differs somewhat as, in the typical situation, the court has ruled in favor
of the applicant on the merits and must determine whether permanent injunctive relief is an
appropriate remedy. See Vintage Health, 309 S.W.3d at 467. Because, in the present case,
the parties agreed to submit the issue of permanent injunctive relief for resolution prior to a
trial on the merits, the trial court stated that it had “essentially merged the consideration of
Plaintiff’s request for a temporary injunction with Plaintiff’s request for a permanent
injunction.”
3
(...continued)
to the issuance of a permanent injunction would be reviewed under the abuse of discretion standard. See
Vintage Health , 309 S.W.3d at 466.
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I.
Curb’s first argument is that the trial court “incorrectly applied the law to the facts in
concluding that Curb Records has suffered no irreparable harm.” Thus, Curb disagrees with
the trial court’s conclusion of law concerning irreparable harm. We note that, even if we
examine the propriety of this particular decision de novo, the trial court’s ultimate
determination not to grant injunctive relief must be reviewed for an abuse of discretion.
In its conclusions of law, the trial court stated that “Curb Records has arguably shown
some likelihood of success on its breach of contract claim with respect to the timing issue
and, to a lesser extent, on the pre-approval issue.” The court went on to make the following
findings regarding irreparable harm and the appropriateness of injunctive relief:
The Court concludes that Curb Records has not made a showing of irreparable
harm sufficient to warrant the Court’s grant of a temporary injunction
preventing Mr. McGraw from continuing his recording career. Additionally,
the Court concludes that Curb Records is, in part seeking specific performance
against Mr. McGraw and that this relief is disfavored under Tennessee law.
Curb Records’ contention that Mr. McGraw can, in essence, cure the alleged
breach by recording additional songs or an additional album while affording
Curb Records pre-approval rights amounts to request for specific performance
in a personal services contract where the parties have differences that would
make this process exceedingly difficult.
Curb Records is seeking permanent injunctive relief prohibiting Mr. McGraw
from continuing his recording career as a musician for any other recording
company. This requested relief appears heavy-handed and legally
impermissible under the circumstances, given: 1) the limited nature and extent
of the alleged breach of contract upon which Curb Records has shown some
likelihood of success; 2) the fact that Mr. McGraw’s alleged breach occurred
near the end (rather than at the beginning) of a multiple-year contractual
relationship with Curb Records; 3) Mr. McGraw provides unique services as
a recording artist that the public has an interest in being made available while
this dispute proceeds through the courts, subject to any monetary judgment this
Court may award after the trial on the merits; 4) Mr. McGraw’s conduct in
recording Emotional Traffic and delivering it to Curb Records afforded Curb
Records the benefit of Mr. McGraw’s unique and extraordinary talent; and 5)
an injunction would likely have an adverse and disproportionate effect on the
body of musical recording work Mr. McGraw would be permitted to produce
during this important period in Mr. McGraw’s musical career.
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The trial court ultimately reached the following conclusion: “Under all of the unique
circumstances described in this Memorandum and Order, the Court concludes that Curb
Records will not suffer irreparable harm if Mr. McGraw records for himself or for another
record company. Curb Records has an adequate remedy at law.”
On appeal, Curb asserts that the factual findings made by the trial court necessitate
the legal conclusion that Curb suffered irreparable harm. Curb argues that “breach of an
exclusive personal services contract by a unique and exceptional performer constitutes
irreparable harm.” It is undisputed that McGraw is a unique and exceptional artist. For
purposes of ruling on injunctive relief, the trial court essentially accepted Curb’s allegations
that McGraw breached the contract.4 These two facts do not, however, necessitate a
conclusion of irreparable harm.
A court is to use its equitable power to grant injunctive relief sparingly. Vintage
Health, 309 S.W.3d at 467. The following principles are instructive:
The general rule in respect of contracts for personal services is that for breach
thereof a party must avail himself of the remedy afforded at law. It is a
familiar and well established doctrine that courts of equity will not exercise
jurisdiction to grant a decree for specific performance of a contract for
personal services except perhaps in very exceptional cases or under very
exceptional circumstances. Neither, as a general rule, will equity indirectly
enforce a contract for personal services by an injunction restraining the
employee from leaving the services of the employer, except to prevent breach
of contract by one who possesses some special, unique, or extraordinary
qualifications, where it would be difficult, if not impossible, to replace his
services, and damages obviously would be inadequate to remedy the loss.
Bunns v. Walkem Dev. Co., Inc., 385 S.W.2d 917, 923 (Tenn. Ct. App. 1964) (quoting 49
A M. J UR. 2 D Specific Performance § 134) (emphasis added). While Tennessee cases have
recognized a special exception for contracts involving unique and extraordinary services,
unique and extraordinary services do not make injunctive relief appropriate in all cases. See
Cagle v. Hybner, No. M2006-02073-COA-R3-CV, 2008 WL 2649643, at *20 (Tenn. Ct.
App. July 3, 2008).
In Cagle v. Hybner, the court considered the propriety of specific performance or an
4
While the court concluded that Curb Records had “arguably shown some likelihood of success on
its breach of contract claim,” the court made clear that it “will not make a final decision on Curb Records’
pending breach of contract claims until the conclusion of the trial on the merits.”
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injunction preventing a songwriter from composing any songs for others until the songwriter
fulfilled his obligations to a publisher under a songwriter agreement. Id. at *18-21. After
acknowledging the general rule against specific performance to enforce a personal service
contract and the limited exception regarding services for unique and extraordinary skills, the
court stated that “such extraordinary relief is not appropriate unless the court can determine
that the contract is ‘clear, definite, complete and free from any suspicion of fraud and
unfairness.’” Id. at *18-19 (quoting Johnson v. Browder, 207 S.W.2d 1, 3 (Tenn. 1947)).
Because the only basis to determine the sufficiency of the songwriter’s future performance
was the subjective opinion of the publisher, the court concluded that the contract did not
provide the required clear and definite criteria. Id. at *19. The court went on to conclude
that specific performance also was not appropriate because of the “undesirability of
compelling the continuance of personal association after disputes have arisen and confidence
and loyalty are gone.” Id. at *20 (quoting R ESTATEMENT (FIRST) OF C ONTRACTS § 379 cmt.
d (1932)).
While much of the court’s analysis in Cagle focused on specific performance, the
court also considered injunctive relief. Id. In concluding that injunctive relief was not
appropriate, the court stated:
A promise to render personal service exclusively for another will not be
enforced by injunction against serving another person if its probable result will
be to compel a performance involving personal relations the enforced
continuance of which is undesirable. Restatement (Second) of Contracts § 367
(1981). In the present matter, if Cagle is enjoined from writing songs for
anyone other than Hybner until Cagle has composed and delivered 76.52 songs
Hybner determines, in his sole discretion, to be of commercially marketable
quality, then Cagle may forever be enjoined from songwriting or may be
forced into involuntary servitude to Hybner for years. Such a circumstance
places Hybner in a position of overwhelming power, which we find to be
unfair, and thus, inequitable.
Id. Thus, although injunctive relief may be appropriate in cases involving contracts for
unique and extraordinary services, such relief may not be appropriate where the contract does
not provide sufficiently definite terms and/or where an injunction would amount to an
involuntary servitude. See also News Mart, Inc. v. State ex rel. Webster, 561 S.W.2d 752,
753 (Tenn. 1978) (injunction must describe enjoined activities with specificity); Cooper
Mgmt., LLC v. Performa Entm’t, Inc., W2001-01134-COA-R3-CV, 2002 WL 1905318, at
*3 (Tenn. Ct. App. Aug. 15, 2002) (length of injunction to be based on objective, not
subjective, standard).
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Curb cites a multitude of cases from other jurisdictions in support of its position that
the trial court should have found irreparable harm. See, e.g., Zomba Recording LLC v.
Williams,15 Misc. 3d 1118(A) (N.Y. Sup. Ct. 2007); MCA Records, Inc. v. Newton-John, 153
Cal. Rptr. 153 (Cal. Ct. App. 1979); Harry Rogers Theatrical Enters., Inc. v. Comstock, 232
N.Y.S. 1 (N.Y. App. Div. 1928); Shubert Theatrical Co. v. Rath, 271 F. 827 (2d Cir. 1921);
Philadelphia Ball Club v. Lajoie, 202 Pa. 210 (1902); Daly v. Smith, 49 How. Pr. 150 (N.Y.
Super. Ct. 1874); Lumley v. Wagner, (1852) 77 Eng. Rep. 687 (Ch); De GM & G 604. We
agree with McGraw, however, that these cases are all distinguishable from the present case
because they involved contracts for a specific length of time. In this case, the contract lacks
a specific durational limit; rather, as in Cagle, the contract would continue until Curb
determined that McGraw had met his contractual obligations. In Ichiban Records, Inc. v.
Rap-A-Lot Records, Inc., 933 S.W.2d 546, 552 (Tex. App. 1996), the court declined to
enforce by injunction a contract without a specific time limit.
Thus, even though McGraw is undisputedly an entertainer offering unique and
extraordinary services, the trial court did not err in finding that there was no irreparable harm
or in exercising its discretion to conclude that injunctive relief was not appropriate. As in
Cagle, this case involves a contract whose duration depends upon the exercise of discretion
by the party seeking the injunction. The requested injunction would essentially place
McGraw in a position of choosing between the end of his recording career or the indefinite
continuation of a relationship with Curb that has become contentious.
II.
Curb’s second main argument is that the trial court erred in concluding that Curb did
not own certain McGraw recordings.
The relevant portion of the trial court’s order provides as follows:
The Court concludes that the Emotional Traffic collection of recordings belong
to Curb Records under the parties’ contract. The Court concludes that Curb
Records did not make the requisite showing, in the context of its request for
a temporary or permanent injunction, for this Court to declare that Mr.
McGraw’s other recordings, as of November 30, 2011, belong to Curb
Records. Stated another way, recordings made by Mr. McGraw as of
November 30, 2011, except for the Emotional Traffic recordings, belong to
Mr. McGraw at least to the extent that he may control the release and
distribution of those records. Only recordings made by Mr. McGraw on
December 1, 2011 and thereafter wholly belong to Mr. McGraw and/or any
other company that he may elect to contract with for the release and
distribution of those recordings.
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(Footnote omitted). Thus, the trial court provides that, from the time that McGraw gave the
Emotional Traffic recordings to Curb in October 2010 through the time of the non-
evidentiary hearing on November 30, 2011, McGraw’s recordings other than Emotional
Traffic should be considered the property of McGraw, at least for the purposes of releasing
and distributing records. In a footnote, the court stated: “To the extent that Curb Records’
current Complaint seeks damages for these unspecified recordings, Curb Records may seek
to recover compensatory damages at the trial on the merits.” All recordings made after
December 1, 2011 belong to McGraw.
Curb objects to the trial court’s determination regarding ownership of recordings prior
to a trial on the merits. Curb argues that a proper analysis would have addressed questions
of when the fifth option period commenced, whether McGraw recorded masters in
compliance with the recording agreement, whether he delivered his final option period album
to Curb as required in the agreement, and whether nine months have expired since delivery.
These issues, however, must be resolved at the trial on the merits. As discussed above, the
parties agreed to submit the question of injunctive relief to the trial court in a non-evidentiary
hearing. Without a preliminary determination by the trial court of a dividing line concerning
the ownership of masters, the trial court would essentially have given Curb the ability to keep
McGraw from moving forward with his recording career, a result that the court found
inappropriate in denying Curb’s request for injunctive relief.
We find no error in the trial court’s preliminary determination regarding the ownership
of masters.
C ONCLUSION
We affirm the judgment of the trial court and assess the costs of this appeal against
the appellant, Curb Records. Execution may issue if necessary.
______________________________
ANDY D. BENNETT, JUDGE
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