Jeffrey J. Thompkins v. Lil' Joe Records, Inc.

[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
____________ FILED
U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
No. 05-10143 February 5, 2007
_____________ THOMAS K. KAHN
CLERK
D.C. Docket No. 02-61161-CV-FAM
JEFFREY J. THOMPKINS,
Plaintiff-Counter-Defendant-Appellant,
versus
LIL’ JOE RECORDS, INC.,
LIL’ JOE WEIN MUSIC, INC.,
JOSEPH WEINBERGER,
JOHN DOE, individuals and corporations,
Defendants-Counter-Claimant-Appellees,
NAVARRE CORPORATION,
Third-Party Defendant.
______________
Appeal from the United States District Court
for the Southern District of Florida
_____________
(February 5, 2007)
Before TJOFLAT and KRAVITCH, Circuit Judges, and LAWSON,* District
Judge.
TJOFLAT, Circuit Judge:
This appeal requires us to consider what happens when a debtor-in-
possession in a Chapter 11 bankruptcy case, who negotiated the purchase of
copyrights prior to the bankruptcy proceeding, later uses the bankruptcy code to
reject those contracts that transferred ownership of the copyrights to the debtor.
Our resolution of that question determines the outcome of much of this suit by a
rap artist who created the works giving rise to the copyrights in question. The
artist sold copyrights in his works to a music recording company in exchange for a
recording contract that entitled the artist to future royalties. The recording
company later went bankrupt, becoming the debtor-in-possession. In confirming
the debtor’s reorganization plan, the bankruptcy court ordered that all of the
debtor’s contracts with the artist be rejected under the bankruptcy code and the
copyrights sold to a rival recording company and its owner, two of the defendants
in the instant case.
Years later, the artist sued the defendants, alleging that they did not actually
gain ownership of the copyrights through the bankruptcy, or if they did, they now
*
Honorable Hugh Lawson, United States Chief District Judge for the Middle District of
Georgia, sitting by designation.
2
owe him royalties. Based on that premise, the artist asserts numerous claims
sounding in federal and state law. The district court granted summary judgment in
favor of the defendants on all claims, and for the reasons set forth below, we
affirm.
I.
The pertinent facts span a period of seventeen years. We recount first the
history of the artist’s business dealings with the debtor-in-possession, then the
bankruptcy court’s administration of the debtor’s reorganization, and finally the
proceedings leading to this appeal.
A.
Jeffrey J. Thompkins (“Thompkins”) is a rap artist who performs
individually under the name “JT Money.” As teenagers in the late 1980s,
Thompkins and a partner were discovered at a Miami talent show by a member of
the somewhat notorious South Florida-based rap group 2 Live Crew. Another
member of 2 Live Crew, Luther Campbell (“Campbell”), owned a number of
variously named record labels and was in the business of developing new artists.
In May 1989, Campbell signed Thompkins to an Exclusive Recording Agreement
(the “1989 Agreement” or “Agreement”) with a predecessor company to
3
Campbell’s Luke Records, Inc. (“Luke Records”).1 Under the 1989 Agreement,
Thompkins would record albums under the group name “Poison Clan.”2
The Agreement covered a contract period of five years. Under its terms,
Thompkins was required to record and deliver master recordings (“masters”) for
production and release by Luke Records. Luke Records was given “exclusive,
unlimited and perpetual rights throughout the world” to the copyrights “in sound
recordings (as distinguished from the musical compositions embodied thereon)
recorded by ARTIST during the Term.” Thompkins also granted Luke Records a
license for “[a]ll musical compositions or material recorded pursuant to this
Agreement which are written or composed . . . or which are owned or controlled,
directly or indirectly, in whole or in part, by ARTIST and/or . . . any producer of
the masters subject hereto.”3 In exchange for its ownership of the sound recording
1
The predecessor company that signed Thompkins was Effect Records, a division of
Campbell’s Skyywalker Records (which later became Luke Records). These and all of
Campbell’s other various music business entities relevant here ultimately fell under the
ownership of Luke Records or Campbell individually. For ease of reference, we refer
collectively to all of the Luke Records and Campbell music recording and publishing entities as
“Luke Records.”
2
“Poison Clan” originally referred to both Thompkins and his original partner, Patrick
Watler. Thompkins and Watler were both parties to the 1989 Agreement, but in July 1992,
Watler apparently decided to perform with a different group and signed a letter purporting to
release any interest he had in Poison Clan. Watler’s involvement with Poison Clan is not at issue
here.
3
Thompkins also obliged himself to obtain a license on Luke Records’ behalf for any
compositions that Thompkins did not himself own or control.
4
copyrights and its license to exploit the musical compositions, Luke Records
agreed to pay Thompkins royalties according to specified rates. The Agreement
obligated Luke Records generally to “commercially release each LP [album]
recorded and delivered” by Thompkins under certain conditions, but specified:
[Thompkins] acknowledges that the sale of records is speculative and agrees
that the judgment of [Luke Records] with regard to any matter affecting the
sale, distribution or exploitation of such records shall be binding and
conclusive upon [Thompkins]. Except [for the general provision requiring
Luke Records to release completed albums], nothing contained in this
Agreement shall obligate [Luke Records] to make, sell, license, or distribute
records manufactured from masters delivered hereunder.
In addition to the 1989 Agreement, the validity of which neither party
disputes on appeal, the record contains a number of other documents that appear to
be contracts between Thompkins and various parties. Several of these suggest
that, after the 1989 Agreement was signed, Thompkins in fact signed away to
Luke Records all or part of his copyrights in the musical compositions embodied
on his albums.4 Among these documents is an addendum to the 1989 Agreement,
dated February 1992 (the “1992 Addendum” or “Addendum”), transferring to
Luke Records “an undivided 50% of the publishing interest, in all compositions of
[Thompkins] including without limitation, the copyrights therein and all renewal
4
Some of these purported agreements were technically between Thompkins and Pac Jam
Publishing (“Pac Jam”), Campbell’s music publishing company. Pac Jam was also disposed of
as part of the Campbell bankruptcy, so we include it when we refer to “Luke Records.”
5
and or [sic] extensions throughout the world.” In exchange, the Addendum recites
that Thompkins is to receive, among other things, cash advances for each album
and the entire royalty to which Poison Clan was entitled under the 1989
Agreement regardless of any future addition of other members to the group.
Thompkins signed the Addendum, which also has an unsigned blank for a
signature on behalf of Luke Records “By: Luther R. Campbell, President.”
Other documents pertain to Thompkins’s work as a “sideman” on certain
compositions and recordings created by Campbell, who performed as a solo artist
in addition to performing with 2 Live Crew and managing his music production
business. These one-paragraph letter agreements (“the Sideman Agreements”) set
forth Thompkins’s compensation for his contributions to certain of Campbell’s
solo works.5 In slightly different language, each of the Sideman Agreements
provides that the specified royalty rate and/or lump sum payment represents
Thompkins’s payment in full for his services on the listed songs and that he “will
receive no other royalties” or “no other monies.” The Sideman Agreements do not
explicitly reference the ownership of any copyrights in those works.
From 1989 through 1994 (the year in which the 1989 Agreement expired by
5
The Sideman Agreements are dated April 27, 1990; December 1, 1991; May 21, 1992;
and February 11, 1994. Each covers between one and four songs by Campbell.
6
its terms), Thompkins recorded three albums as Poison Clan: 2 Low Life Muthas,
Poisonous Mentality, and Rufftown Behavior. Luke Records distributed each of
these.
B.
On March 28, 1995, Luke Records became the subject of an involuntary
Chapter 7 bankruptcy petition filed by its creditors in the U.S. Bankruptcy Court
for the Southern District of Florida. That June, Campbell individually filed a
voluntary Chapter 11 bankruptcy petition, and Luke Records moved to convert its
Chapter 7 case into one under Chapter 11. The bankruptcy court granted Luke
Records’ motion on June 14, 1995 and jointly administered the Luke Records and
Campbell bankruptcies.6
On November 22, 1995, Thompkins filed a proof of claim in the Luke
Records bankruptcy for an unspecified amount owed to Poison Clan based on
“Services performed” and “Royalties Due – Record & Copywright [sic]” from the
period “1989 to 1994.” In deposition testimony taken in the course of the instant
case, Thompkins admitted that the address he listed on the proof of claim form
6
Although the bankruptcy court administered the two cases jointly, they were maintained
as separate cases on the bankruptcy court docket. The two case designations were In re Luke
Records, Inc., No. 95-11447 (Bankr. S.D. Fla.), and In re Luther Campbell, No. 95-12785
(Bankr. S.D. Fla.).
7
was his residence at the time and that he did, in fact, receive notices at that address
regarding the bankruptcy case.7
The bankruptcy cases continued throughout the following months, and by
mid-February 1996, Luke Records, Campbell individually, and the Official
Unsecured Creditors’ Committee in the Luke Records bankruptcy had tentatively
agreed upon a Joint Plan of Reorganization (the “Joint Plan” or “Plan”) for the two
debtors. The Joint Plan provided for the classification and treatment of all claims
in both bankruptcies, specifying that after confirmation by the bankruptcy court,
“all of the provisions of this Plan, including all appendices and other exhibits
hereto, shall be binding on the Debtor, the Estate, all Creditors, and all other
entities who are affected (or whose interests are affected) in any manner by the
Plan.” A Letter of Intent annexed as “Exhibit A” to the Joint Plan specified the
proposed terms of the Plan’s execution.
Under the Letter of Intent, the various Luke Records entities (including
Luke Records, Inc., Pac Jam, and Campbell individually) proposed to convey a
7
On February 12, 1996, the Official Unsecured Creditors’ Committee in the Luke
Records bankruptcy filed an objection to various claims, including Thompkins’s. The committee
asserted that Thompkins’s unliquidated claim was “pursuant to [an] executory contract” and
should be “disallowed and held in abeyance” pending Luke Records’ decision on whether to
accept or reject executory contracts. There is no evidence in the record that Thompkins
responded to the committee’s objections or took any other action with regard to the bankruptcy
cases.
8
number of specified assets to Lil’ Joe Records, Inc. and its owner, Joseph
Weinberger (“Weinberger”). The assets were to be transferred “free and clear of
any and all liens, claims, encumbrances, charges, setoffs or recoupments of any
kind, except as noted hereinbelow.” The assets to be conveyed included “[a]ll
worldwide rights to the masters . . . owned or controlled by Luther Campbell or
Luke Records” and “[a]ll worldwide copyrights and/or publishing interests held by
Luther Campbell, Luke Records, Inc., or Pac Jam Publishing,” except with regard
to certain other artists not at issue here. Under the agreement, Campbell and Pac
Jam would “receive no royalties, whether as artist, producer, writer, publisher, or
in any other capacity, on any of the masters or compositions being sold.” In
exchange, Lil’ Joe Records, Inc. and Weinberger agreed to pay a total of $800,000
to the two bankruptcy estates.
The Joint Plan and Letter of Intent also provided for the disposition of
executory contracts to which Campbell or Luke Records were parties. The Joint
Plan established as a default that any executory contracts not otherwise explicitly
disposed of were to be deemed rejected pursuant to 11 U.S.C. § 365 (again, with
certain exceptions not relevant here).8 The Letter of Intent proposed that “Luke
8
Section 365 provides in relevant part that “the trustee, subject to the court’s approval,
may assume or reject any executory contract . . . of the debtor. . . . [T]he rejection of an
executory contract . . . of the debtor constitutes a breach of such contract . . . immediately before
9
Records . . . shall assume and assign to [Lil’ Joe Records, Inc. and Weinberger], in
[Weinberger’s] sole discretion, . . . all existing artist and producer contracts to
which Luke Records or its affiliates and subsidiaries is a party with Poison Clan.”
(Emphasis added.) Both the Joint Plan and the Letter of Intent provided that their
terms were subject to an order of confirmation by the bankruptcy court.
In the interim between the filing of the Joint Plan and the bankruptcy court’s
confirmation order, the disposition of executory contracts remained an unresolved
issue in the bankruptcy. On February 16, 1996 – the same day on which the Joint
Plan was filed – Luke Records filed a motion pursuant to 11 U.S.C. § 365 to
determine its ability to assume and assign various contracts it characterized as
executory, including “Debtor’s Exclusive Recording Agreement with: Poison
Clan.” According to the motion, “[a] material provision of [the Joint Plan and
Letter of Intent] will be the assumption and ultimate assignment of the executory
contracts described” to Lil’ Joe Records, Inc. and Weinberger. Apparently,
however, in the weeks that followed, Weinberger thought better of that aspect of
the date of the filing of the petition[.]” 11 U.S.C. § 365(a), (g). Although the statute speaks of
assumption or rejection by “the trustee,” decisions to assume or reject executory contracts under
§ 365 may also be made by a debtor-in-possession by operation of 11 U.S.C. § 1107(a), which
generally authorizes debtors-in-possession to perform the same functions as a trustee. Sipes v.
Gen. Dev. Corp. (In re Gen. Dev. Corp.), 177 B.R. 1000, 1011 (S.D. Fla. 1995), aff’d sub nom.
Sipes v. Atl. Gulf Cmtys. Corp. (In re Gen. Dev. Corp.), 84 F.3d 1364, 1365, 1373–74 (11th Cir.
1996). It appears that in both the Luke Records and Campbell bankruptcies, the debtors were
operating under § 365 as debtors-in-possession.
10
the Plan, opting instead to exercise the discretion given to him in the Letter of
Intent and direct Luke Records to reject the contracts. On March 21, 1996, the
bankruptcy court entered an order withdrawing without prejudice Luke Records’
motion to assume and assign the contracts; setting the confirmation hearing date as
the intended deadline for any other motions to assume executory contracts; and
reiterating that “[a]ny contracts not assumed will be deemed rejected.”
On March 22, 1996, the bankruptcy court approved and confirmed the Joint
Plan and Letter of Intent, ordering that “the parties are authorized and directed to
perform thereunder” (“the Confirmation Order”). The order recites various
findings required for plan confirmation under 11 U.S.C. § 1129, including that the
Joint Plan was proposed in good faith, that it complied with the applicable
provisions of the bankruptcy code, and that “[t]he sale of Debtors’ assets to Joseph
Weinberger and Lil’ Joe Records, Inc. . . . pursuant to the terms of the Plan and the
Letter of Intent is in the best interest of each of the Debtors’ estates. . . .
[Weinberger and Lil’ Joe Records, Inc. are] independent third-party purchaser[s]
and the Letter of Intent was negotiated in good faith and at arms’-length.” Among
its specific mandates, the Confirmation Order provides:
[A]ll executory contracts and unexpired leases of the Debtors are hereby
rejected pursuant to Section 365(a) of the Bankruptcy Code. Parties to such
rejected contracts and leases are directed to file proofs of claim for rejection
11
damages . . . or be forever barred from asserting such claims. . . . All of the
assets to be transferred under the Plan, the Letter of Intent or this Order
shall . . . be transferred free and clear of any interest in such property of an
entity other than the Debtors.
Following the plan confirmation, the bankruptcy court issued orders in both
bankruptcy cases setting bar dates for claims arising from rejected executory
contracts. The order in the Luke Records bankruptcy, issued on April 4, 1996,
provided that “[a]ll of the Debtor’s executory contracts . . . , including those
exclusive recording contracts known to the Debtor shown on Exhibit ‘A’ attached
hereto and incorporated herein by reference . . . are rejected.” The first artist listed
on “Exhibit A” was Poison Clan. Parties to the rejected contracts were allowed
thirty days to file “any claims arising as a result of such rejection,” and claims not
timely filed were to be “deemed waived and will not be entitled to distribution
under the confirmed Joint Plan.” Thompkins did not file any proof of claim for
rejection damages.
As a final step in the reorganization process, the parties executed the
various transactions required under the Plan. Among these was a copyright
assignment to Lil’ Joe Records, Inc. of “all of [Luke Records’, Campbell’s and Pac
Jam’s] portion of all rights, title and interest set forth in and to the musical
compositions, comprising 100% of all worldwide rights owned by [Luke Records,
12
Campbell and Pac Jam] . . . including but not limited to the lyrics, music, and title
of the compositions, and any and all works derived therefrom, together with the
copyrights and proprietary rights therein.” The copyright assignment was
executed on April 8, 1996.
C.
Nearly six years later, on March 5, 2002, Thompkins filed the instant suit
against Lil’ Joe Records, Inc., Lil’ Joe Wein Music, Inc., and Weinberger
(hereinafter collectively, “Lil’ Joe”) in the U.S. District Court for the Northern
District of Georgia seeking damages, declaratory relief, and permanent injunctive
relief for alleged violations of the Copyright Act, 17 U.S.C. § 501, Lanham
Trademark Act, 15 U.S.C. §§ 1114, 1125, and state common law contract claims.
Later that year, the case was transferred to the Southern District of Florida, where
Thompkins filed an amended complaint on November 7, 2002 adding a claim of
fraud under Florida common law. The parties conducted discovery and filed
opposing motions for summary judgment. On March 16, 2004, after a hearing on
the motions for summary judgment, a magistrate judge issued a report and
recommendation that both motions be denied. Lil’ Joe objected to the magistrate
report. On December 7, 2004, the district court declined to adopt the report,
granted Lil’ Joe’s motion for summary judgment on the ground that the earlier
13
bankruptcy Confirmation Order precluded Thompkins’s claims, and denied
Thompkins’s motion for summary judgment. The district court entered final
judgment for Lil’ Joe on December 16, 2004. Thompkins now appeals,
challenging the district court’s order granting Lil’ Joe’s motion for summary
judgment.
II.
We review de novo a grant of summary judgment, applying the same
standard as the district court and reviewing all facts and reasonable inferences in
the light most favorable to the nonmoving party. Calhoun v. Lillenas Publ’g, 298
F.3d 1228, 1232 (11th Cir. 2002). Summary judgment is proper when “there is no
genuine issue as to any material fact and . . . the moving party is entitled to a
judgment as a matter of law.” Fed. R. Civ. P. 56(c).
The district court granted summary judgment in favor of Lil’ Joe on the
ground that the bankruptcy court’s Confirmation Order precluded all of
Thompkins’s claims in the district court. Neither the parties nor the district court,
however, refer to the precedent of this circuit governing the preclusive effect of
bankruptcy orders in subsequent collateral litigation. See, e.g., Eastman Kodak
Co. v. Atlanta Retail, Inc. (In re Atlanta Retail, Inc.), 456 F.3d 1277 (11th Cir.
2006); Kaiser Aerospace & Elecs. Corp. v. Teledyne Indus., Inc. (In re Piper
14
Aircraft Corp.), 244 F.3d 1289 (11th Cir. 2001); Wallis v. Justice Oaks II, Ltd. (In
re Justice Oaks II, Ltd.), 898 F.2d 1544 (11th Cir. 1990). We think it less than
clear whether the Confirmation Order precludes altogether Thompkins’s claims in
this case, but we find it unnecessary to enter that thicket in our review. The
essence of the parties’ quarrel on appeal is how certain assets were disposed of in
the bankruptcy; both Thompkins and Lil’ Joe now contend that the bankruptcy
reorganization gave them ownership over these assets or other collateral rights.
Although both parties couch their arguments in terms of “res judicata,” their
dispute is not simply whether Thompkins’s claims were precluded before he even
came through the courthouse door to file the instant complaint. Instead, this case
depends upon the substance of the bankruptcy reorganization of Luke Records.
Accordingly, we decline to re-examine the grant of summary judgment on
preclusion grounds, but we consider instead the merits of the parties’ respective
arguments, as we may do in our review on appeal. See Lucas v. W. W. Grainger,
Inc., 257 F.3d 1249, 1256 (11th Cir. 2001) (holding that a judgment can be
affirmed on appeal “on any ground that finds support in the record,” including
alternate grounds for summary judgment (quoting Jaffke v. Dunham, 352 U.S.
280, 281, 77 S. Ct. 307, 308, 1 L. Ed. 2d 314 (1957)). In the sections that follow,
we examine each of Thompkins’s claims or related group of claims under the
15
Copyright Act, the Lanham Act, Florida contract law, and Florida tort law of
fraud, respectively.9
III.
A.
Thompkins first asserts a claim of infringement under the Copyright Act, 17
U.S.C. § 501,10 alleging that Lil’ Joe has illegally exploited copyrights owned by
Thompkins in dozens of songs that he authored and performed on recordings.11
9
Thompkins’s amended complaint includes nine enumerated counts. Among them are
claims entitled “Injunction” and “Attorney’s Fees, Costs & Punitive Damages.” These are
clearly remedies and costs to which Thompkins is only entitled if he prevails; they are not causes
of action in and of themselves. See, e.g., Klay v. United Healthgroup, Inc., 376 F.3d 1092,
1097–98 (11th Cir. 2004) (“[I]f the plaintiff’s rights have not been violated, he is not entitled to
any relief, injunctive or otherwise.” ). The seven remaining actionable counts are pled as:
“Violation of Copyright Act,” “Violation of Lanham Act,” “Breach of Contract,” “Unjust
Enrichment,” “Promissory Estoppel,” “Rescission and Restitution,” and “Fraud.” Because the
breach of contract, unjust enrichment, promissory estoppel and rescission claims all rely on
Florida law generally pertinent to contracts, we treat those claims together.
10
17 U.S.C. § 501(a) provides, “Anyone who violates any of the exclusive rights of the
copyright owner as provided by sections 106 through 122 . . . is an infringer of the copyright[.]”
11
The specific songs for which Thompkins claims copyright ownership are listed by
name in the mandatory initial disclosures that he filed in support of his original complaint in the
Northern District of Georgia, and to which his amended complaint refers. Oddly, the record
contains no single piece of evidence compiling all the works in question and explicitly indicating
which specific titles were covered by which contracts between Thompkins and Luke Records.
This information is obviously relevant to determining the ultimate ownership of the copyrights in
the various songs.
In our review of the piecemeal record, we are able to conclude that the songs listed on
Thompkins’s initial disclosures fall into four categories: (1) songs that were released on the first
Poison Clan album, 2 Low Life Muthas; (2) songs that were released on the second Poison Clan
album, Poisonous Mentality; (3) songs that were released on the third Poison Clan album,
Rufftown Behavior; and (4) songs that were released on records by Luther Campbell as a
performer, with Thompkins performing in a “sideman” capacity. All of the first three categories
16
Thompkins created and performed these compositions either for his Poison Clan
records under the 1989 Agreement (“the Poison Clan Songs”) or in collaboration
with Luther Campbell for use on records Campbell released as a performer (“the
Campbell Songs”). We examine separately the copyright claims on the Poison
Clan Songs and the Campbell Songs.
1.
With regard to the Poison Clan Songs, Thompkins argues that any
copyrights he transferred to Luke Records under the 1989 Agreement reverted to
his ownership when Luke Records rejected the Poison Clan contracts as executory
under the bankruptcy Joint Plan.12 Thompkins further argues that, upon reversion
of songs are covered by the 1989 Agreement, as those songs appeared on albums produced under
Thompkins’s initial recording contract with Luke Records. The fourth category, discussed in
greater detail at part III.A.2., infra, is covered by the Sideman Agreements; the record contains no
evidence of any other contractual agreements governing the rights to the songs in this category.
12
We pause for a moment here to make clear what “copyrights” are at issue with regard
to the Poison Clan Songs. Lil’ Joe contends that under the confirmed Joint Plan, it came to own
copyrights in both the sound recordings and the musical compositions of the Poison Clan Songs.
As to the former, there is no dispute that Luke Records received the copyrights to the sound
recordings under the 1989 Agreement. Thus, to the extent that Lil’ Joe acquired Luke Records’
assets through the reorganization – which we discuss in the text following this note, infra – Lil’
Joe would unquestionably have gained ownership of the sound recording copyrights in the
Poison Clan Songs.
As to the latter, Lil’ Joe’s claim to ownership of the musical composition copyrights is
based on Thompkins’s assignment of all or part of those copyrights to Luke Records via two sets
of documents: the 1992 Addendum to the 1989 Agreement, and/or a series of “songwriter
agreements” executed during the term of the 1989 Agreement and purportedly transferring one
hundred percent of Thompkins’ composition copyrights in dozens of individual songs on the
three Poison Clan albums. Thompkins disputes the validity of the 1992 Addendum and the
songwriter agreements, arguing that Luke Records (and thus, Lil’ Joe) never came to own any
17
of the copyrights, those assets ceased to constitute part of the bankruptcy estate
and thus were not transferred to Lil’ Joe under the Joint Plan, notwithstanding the
language of the Plan and the various supporting documents and bankruptcy orders
suggesting that the copyrights were meant to be transferred. Accordingly,
part of the composition copyrights.
We need not consider the songwriter agreements, for the 1992 Addendum sufficiently
establishes that Luke Records owned half of the musical composition copyrights in the Poison
Clan Songs. The 1992 Addendum by its terms transferred fifty-percent ownership of the
composition copyrights to Luke Records. To the extent that Lil’ Joe acquired Luke Records’
assets through the bankruptcy, Luke Records’ half-ownership would have transferred to Lil’ Joe.
This is significant because, if Lil’ Joe is now a co-owner of the composition copyrights (in
addition to being full owner of the sound recording copyrights), Thompkins cannot maintain his
suit for infringement. See Quintanilla v. Tex. Television Inc., 139 F.3d 494, 498 (5th Cir. 1998)
(“A co-owner of a copyright cannot be liable to another co-owner for infringement of the
copyright.” (quoting Oddo v. Ries, 743 F.2d 630, 632–33 (9th Cir. 1984))); Zuill v. Shanahan, 80
F.3d 1366, 1369 (9th Cir. 1996) (same); cf. MCA Television Ltd. v. Pub. Interest Corp., 171 F.3d
1265, 1275 (11th Cir. 1999) (applying a similar principle that exclusive licensees of copyrights
cannot be liable for infringement).
Thompkins attempts to disclaim the 1992 Addendum, alleging that it is invalid because it
“was not executed by any representative of Luke [Records]” and for failure of consideration. As
a matter of law, these arguments are insufficient to free Thompkins from his obligations under
the contract. See Diaz v. Rood, 851 So. 2d 843, 846 (Fla. 2d Dist. Ct. App. 2003) (“It is clear
that a promise, no matter how slight, can constitute sufficient consideration so long as a party
agrees to do something that they are not bound to do.” (internal quotations omitted)); Dodge of
Winter Park, Inc. v. Morley, 756 So. 2d 1085, 1085–86 (Fla. 5th Dist. Ct. App. 2000)
(“Generally, it is enough that the party against whom the contract is sought to be enforced signs
it.”); Skinner v. Haugseth, 426 So. 2d 1127, 1131 (Fla. 2d Dist. Ct. App. 1983) (same).
Thompkins does not dispute the authenticity of his signature or claim that he expressly intended
that the Addendum only be valid upon signatures of all parties. Furthermore, the Addendum
itself recites Luke Records’ consideration – its promises to compensate Thompkins for his
assignment of fifty percent of the copyrights. Accordingly, we find that the 1992 Addendum is
valid and binding on Thompkins, and Luke Records held half-ownership in the composition
copyrights in the Poison Clan Songs. Thus, when we refer to “copyrights” in this subsection, we
include both the sound recording and musical composition copyrights. Furthermore, because the
1992 Addendum modified the terms of the 1989 Agreement, for ease of reference we hereinafter
include the former when we refer to the latter.
18
Thompkins argues, Lil’ Joe infringed his copyrights when it exploited them after
the plan confirmation. Lil’ Joe disputes Thompkins’s interpretation of the effect
of the Joint Plan confirmation, arguing instead that Luke Records’ ownership of
the copyrights was unaffected by its rejection of any contracts. Thus, Lil’ Joe
contends, those copyrights were transferred to Lil’ Joe among other Luke Records
assets disposed of by the terms of the Joint Plan.
The terms of the 1989 Agreement clearly transferred ownership of the
disputed copyrights to Luke Records in the course of its business relationship with
Thompkins, well before the bankruptcy. The parties now dispute the effect on
copyright ownership caused by Luke Records’ rejection of the 1989 Agreement in
the bankruptcy as an executory contract pursuant to 11 U.S.C. § 365.13 Because
13
Under § 365(a), “the trustee, subject to the court’s approval, may assume or reject any
executory contract . . . of the debtor.” This provision has spawned much litigation over the
proper definition of an “executory contract,” and courts have struggled to formulate a coherent
approach to the issue. The parties in this case have likewise grappled with the definition of the
contracts at issue between Thompkins and Luke Records. On appeal, the parties agree that the
contracts were “executory” for the purposes of § 365 and that Luke Records rejected them. But
this rare point of agreement between the parties is unique to the appeal in this case; in the district
court, Thompkins maintained exactly the opposite position, asserting that the contracts were
improperly treated as executory by the bankruptcy court.
Fortunately, we need not descend into the morass and attempt to define “executory” in
this case. The parties do not contest that issue on appeal, and even if they were so inclined, we
might otherwise be precluded from reconsidering the “executoriness” of the contracts. That issue
was already decided by various bankruptcy court orders deeming the relevant contracts to be
executory and confirming their rejection. In addition to the Confirmation Order generally
deeming any unassumed contracts to be rejected, the order setting the bar date for rejection
claims in the Luke Records bankruptcy specifically designated the “exclusive recording
contracts” with Poison Clan as rejected executory contracts.
19
post-bankruptcy ownership of the copyrights determines Thompkins’s ability to
assert copyright claims on the Poison Clan Songs in this suit, we must decide
whether Luke Records’ rejection of the 1989 Agreement had any effect on Luke
Records’ – or, more precisely, its bankruptcy estate’s – continued ownership of
those copyrights in the bankruptcy.
We hold that the rejection of the 1989 Agreement did not cause ownership
of the Poison Clan Song copyrights to revert to Thompkins; thus, the copyrights
properly passed into Luke Records’ bankruptcy estate and from there were legally
assigned to Lil’ Joe. In essence, Thompkins asks this court to deem an executory
contract rejection under § 365 to be the functional equivalent of a rescission,
rendering void the contract and requiring that the parties be put back in the
Although we do not find it necessary to reexamine whether the 1989 Agreement was
properly treated as “executory,” we note that the bankruptcy court’s approval of the rejection of
the 1989 Agreement would be consistent with the “functional approach” to “executoriness” that
we have tacitly approved in our precedent. That is, “[e]ven though there may be material
obligations outstanding on the part of only one of the parties to the contract, it may nevertheless
be deemed executory . . . if its assumption[] [or] rejection would ultimately benefit the estate and
its creditors.” Sipes v. Gen. Dev. Corp. (In re Gen. Dev. Corp.), 177 B.R. 1000, 1012 (S.D. Fla.
1995) (quoting Order on Evidentiary Rehearing Pursuant to Remand at 11–16, Sipes v. Gen.
Dev. Corp. (In re Gen. Dev. Corp.), No. 90-12231, (Bankr. S.D. Fla. Sept. 16, 1994) (emphasis
omitted)), aff’d sub nom. Sipes v. Atl. Gulf Cmtys. Corp. (In re Gen. Dev. Corp.), 84 F.3d 1364,
1365, 1374 (11th Cir. 1996). The bankruptcy court presumably determined that rejection of the
1989 Agreement would benefit the Luke Records estate by maximizing the value of the
copyrights. The enhanced value of the copyrights in turn increased the value of the estate and the
amount available to be paid to all of Luke Records’ creditors – including Thompkins, had he
properly filed a claim in the bankruptcy.
20
positions they occupied before the contract was formed.14 This is not the purpose
of § 365, nor does Thompkins cite any authority to show otherwise.
In support of his argument, Thompkins relies on the proposition that a
debtor cannot accept only the benefits of an executory contract while eschewing
the burdens. See, e.g., In re Beverage Canners Int’l Corp., 255 B.R. 89, 95 (Bankr.
S.D. Fla. 2000); 3 Collier on Bankruptcy § 365.03[1] (15th ed. rev. 2005). He also
correctly observes that § 365 of the bankruptcy code ordinarily deems rejection of
an executory contract to be “a breach of such contract . . . immediately before the
date of the filing of the [bankruptcy] petition.” 11 U.S.C. § 365(g); see also
Cohen v. Drexel Burnham Lambert Group, Inc. (In re Drexel Burnham Lambert
Group, Inc.), 138 B.R. 687, 711 (Bankr. S.D.N.Y. 1992). Thompkins apparently
concludes that because Luke Records’ rejection of the 1989 Agreement constituted
a pre-petition breach of that contract, that event somehow reverses any transfer of
asset ownership previously carried out by the rejected contract. In other words,
Luke Records’ rejection of the “burdens” of the 1989 Agreement prevents Luke
Records from keeping the “benefits,” which, in Thompkins’s view, are the
copyrights Luke Records received.
14
Thompkins also alleges a separate cause of action in his amended complaint for
“Rescission and Restitution” under Florida law. We address that claim in part III.C.2., infra.
21
It is true that a debtor must either assume an executory contract in its
entirety or completely reject it, see Byrd v. Gardinier, Inc. (In re Gardinier, Inc.),
831 F.2d 974, 975 (11th Cir. 1987), but Thompkins misunderstands the
implications of rejection under § 365. Thompkins’s argument basically calls for
an interpretation of rejection as an outright dissolution of the contract. But
rejection “does not embody the contract-vaporizing properties so commonly
ascribed to it. . . . Rejection merely frees the estate from the obligation to perform;
it does not make the contract disappear.” In re Drexel Burnham Lambert Group,
Inc., 138 B.R. at 703. More specifically, “[r]ejection has absolutely no effect upon
the contract’s continued existence; the contract is not cancelled, repudiated,
rescinded, or in any other fashion terminated.” Id. at 703 (quotations omitted); see
also Eastover Bank for Savings v. Sowashee Venture (In re Austin Dev. Co.), 19
F.3d 1077, 1082 (5th Cir. 1994) (holding that rejection under § 365(g) “does not
mean that the executory contract . . . has been terminated, but only that a breach
has been deemed to occur”); O’Neill v. Cont’l Airlines, Inc. (In re Cont’l
Airlines), 981 F.2d 1450, 1459 (5th Cir. 1993) (“To assert that a contract
effectively does not exist as of the date of rejection is inconsistent with deeming
the same contract breached.”); cf. Enter. Energy Corp. v. United States (In re
Columbia Gas Sys., Inc.), 50 F.3d 233, 239 n.8 (3d Cir. 1995) (“Rejection, which
22
is appropriate when a contract is a liability to the bankrupt, is equivalent to a
nonbankruptcy breach.”).
The Drexel Burnham Lambert Group case, cited by Thompkins himself,
presents a useful illustration of what a § 365 rejection does and does not affect.
The corporate debtor, in an attempt to avoid its prospective obligations to
compensate its former general counsel under the terms of an employment
agreement, sought to reject the agreement as executory under § 365. In re Drexel
Burnham Lambert Group, Inc., 138 B.R. at 694–95. Among the compensation
provided for in the agreement were various monetary payments, plus three stock
portfolios purchased by the former general counsel from the debtor upon
execution of the agreement and held in escrow for future disbursement. Id. at 692.
The debtor claimed that by rejecting the employment contract – the means by
which the stock portfolios were purchased and escrowed by the general counsel –
the debtor “pull[ed] the plug” on the general counsel’s rights to the escrowed
portfolios. Id. at 695.
The bankruptcy court granted the debtor’s motion to reject the contract,
resulting in a prepetition breach under the terms of § 365(g) and converting the
monetary balance owed to the general counsel into “a general unsecured claim that
can be paid in ‘tiny Bankruptcy Dollars.’” Id. at 711 (citation omitted). As to the
23
stock portfolios, however, the court “repudiate[d] Debtor’s contention that
rejection vaporizes or otherwise avoids [the general counsel’s] interest in the
escrowed funds.” Id. The terms of the agreement gave the general counsel “both
legal title and the equitable interest” in the escrowed stock, and the only right the
debtor company retained in the stock upon execution of the agreement was a
contingent interest subject to a condition subsequent, which ultimately never
materialized. Id. at 710. When the condition subsequent became moot, the
general counsel “became entitled to immediate possession” of the stocks, and that
possession was unaffected by the rejection of the contract. Id.
Like the debtor in Drexel Burnham Lambert Group, Thompkins argues that
Luke Records “pulled the plug” on its own claim of ownership over the copyrights
when it rejected the contract; thus, he contends, the copyrights could not have
been assigned to Lil’ Joe out of Luke Records’ estate. But like the bankruptcy
court in Drexel Burnham Lambert Group, other courts have observed that rejection
differently affects the unperformed portions of an executory agreement and those
provisions of the agreement that, by their nature, are fully executed. See
Rudaw/Empirical Software Prods. Ltd. v. Elgar Elecs. Corp. (In re
Rudaw/Empirical Software Prods. Ltd.), 83 B.R. 241, 246 (Bankr. S.D.N.Y.
1988); In re Executive Tech. Data Sys., 79 B.R. 276, 282 (Bankr. E.D. Mich.
24
1987) (“Section 365 addresses only future performance obligations of the parties.
It does not have any impact upon the executed portions of a contract.”); cf.
Leasing Serv. Corp. v. First Tenn. Bank Nat’l Ass’n, 826 F.2d 434, 436–37 (6th
Cir. 1987) (holding that a security interest, which was created by covenant in an
executory agreement, was fully vested and thus non-executory, leaving it
unaffected by the bankruptcy trustee’s rejection of the executory agreement)
(citing Jenson v. Cont’l Fin. Corp., 591 F.2d 477, 482 (8th Cir. 1979)). The
rejection of a pre-petition executory contract pursuant to which the debtor
acquired property does not obligate the debtor to return the property. In re
Executive Tech. Data Sys., 79 B.R. at 282; see also In re Rudaw/Empirical
Software Prods. Lit., 83 B.R. at 245–46 (“[T]he debtor cannot undo an executed
sale of property where title has passed. Such property does not revert . . . as a
result of the debtor’s rejection of the executory contract.”); In re DMR Fin. Servs.,
Inc., 274 B.R. 465, 472 (Bankr. E.D. Mich. 2002) (dictum); cf. Fain v. Irving Trust
Co. (In re Waterson, Berlin & Snyder Co.), 48 F.2d 704, 710 (2d Cir. 1931)
(holding that where copyright assignments from composers to debtor “were
absolute,” “title is in the bankrupt estate. . . . The composers cannot object if the
trustee sells the copyrights”).
There is no debate that Thompkins’s transfer of his copyrights to Luke
25
Records under the 1989 Agreement was an executed sale of property. The terms
of the Agreement leave Thompkins not even so much as a contingent interest in
the copyrights. Nor did Thompkins negotiate any specific requirements for the
sale or promotion of his records; Luke Records needed only to “commercially
release” each record, which it undisputedly did, and all matters of business
judgment in such efforts were reserved to Luke Records and binding on
Thompkins. To the extent the 1989 Agreement was “executory,” in the sense of
not being fully executed, it was only insofar as Luke Records was required to pay
Thompkins royalties based on any future sales of his records. The transfer of the
copyrights was fully executed, however, and Luke Records held full legal and
equitable title under the terms of the Agreement.
Thus, when the bankruptcy court approved the rejection of the Agreement, it
freed Luke Records from the obligation, or “burden,” to pay royalties under the
contractual terms and gave Thompkins a pre-petition claim for damages resulting
from the breach. See In re Gardinier, Inc., 831 F.2d at 976 n.2; In re Austin Dev.
Co., 19 F.3d at 1082; In re Drexel Burnham Lambert Group, Inc., 138 B.R. at 711.
It also would have released Thompkins from any outstanding obligation to
perform under the Agreement – i.e., to convey any as-yet unrealized “benefit” to
Luke Records. But the bankruptcy court’s Confirmation Order did not effectively
26
rescind the 1989 Agreement and reverse the executed transfer of the Poison Clan
Song copyrights to Luke Records. The rejection had no effect on Luke Records’
ownership of the copyrights, and they passed from the estate to Lil’ Joe under the
terms of the Joint Plan and Confirmation Order (and the later documents executing
the agreed upon and confirmed terms of the reorganization). Accordingly,
Thompkins cannot support a claim of copyright infringement against Lil’ Joe as to
the Poison Clan Songs, and we affirm the grant of summary judgment on that
claim in favor of Lil’ Joe.
2.
Thompkins’s complaint also alleges copyright infringement as to songs that
he created and performed in collaboration with Luther Campbell for use on
Campbell’s records. In his amended complaint, Thompkins alleges that he granted
Luke Records only “a non-exclusive license to exploit his performances” on these
Campbell Songs in exchange for royalties, and that the four Sideman Agreements
he signed regarding these songs did not “transfer any of Plaintiff’s ownerships
[sic] interests in the copyright in either the sound recordings or the compositions.”
There is scant evidence in the record pertaining to the Campbell Songs, and none
of it appears to address ownership of copyrights, whether in the sound recordings
or musical compositions. Presumably, under 17 U.S.C. § 201(a), Thompkins was
27
at least a co-owner of the copyrights in joint works to which he contributed.
But whether or not Thompkins might have been able to make out a claim of
infringement on the Campbell Songs, he does not specifically address that claim in
his arguments on appeal. Accordingly, we determine that the claim is waived, and
we do not consider it here. See Allstate Ins. Co. v. Swann, 27 F.3d 1539, 1542
(11th Cir. 1994) (“Issues that clearly are not designated in the initial brief
ordinarily are considered abandoned.”). Although Thompkins filed a general
notice of appeal from the entry of final judgment on all his claims, and “[a]lthough
we have a practice of reading briefs liberally to ascertain the issues raised on
appeal,” U.S. v. Milam, 855 F.2d 739, 743 (11th Cir. 1988), under no fair reading
of Thompkins’s briefs could we conclude that he asserted on appeal an argument
pertaining to his claim of infringement of the Campbell Songs. See id.
Thompkins has failed to mention these songs at all on appeal, and his initial
brief’s statement of the issues relevant to the copyright claims focus entirely on
the effect of rejection under § 365. Based on the scant record regarding
Thompkins’s claim of infringement on the Campbell Songs, it appears his theory
is that Luke Records never obtained any ownership interest in the Campbell Song
copyrights in the first instance. If that were true (and we express no opinion either
way on the issue), the Luke Records bankruptcy proceedings would be irrelevant
28
to that claim. Thompkins would ostensibly have retained whatever ownership
interest he originally had in the Campbell Song copyrights, and his infringement
claim against Lil’ Joe would be uncomplicated by the intervening transfer of assets
through the bankruptcy and its attendant affects on the parties’ rights to the assets.
Because Thompkins chose to argue on appeal only his interpretation of the effects
of rejection under § 365 – relevant only to those assets that might have transferred
through the bankruptcy, i.e., the copyrights in the Poison Clan Songs – and
because he nowhere mentions his claim regarding the Campbell Songs, we must
deem that claim to be waived. See id. (deeming an untimely-raised alternate
argument to be waived on appeal where, “[i]ntentionally or not, the appellants . . .
took an ‘all or nothing’ approach” by not appealing the district court’s decision on
the alternate ground).
B.
In addition to his copyright claims, Thompkins alleges that Lil’ Joe has
violated provisions of the Lanham Trademark Act of 1946, ch. 540, 60 Stat. 427
(codified as amended in scattered sections of 15 U.S.C.). On appeal, Thompkins
argues that Lil’ Joe runs afoul of two separate provisions of the Act: 15 U.S.C. §
29
1114,15 dealing with trademark infringement, and 15 U.S.C. § 1125,16 dealing with
false designation of origin. First, Thompkins’s § 1114 claim was not properly
raised in the district court, and thus we do not consider it here. Even a generous
reading of Thompkins’s amended complaint in light of liberal pleading rules
reveals that the complaint nowhere states a claim under § 1114. The complaint
never so much as mentions the word “trademark,” let alone alleges that
15
15 U.S.C. § 1114(1) provides in relevant part:
Any person who shall, without the consent of the registrant –
(a) use in commerce any reproduction, counterfeit, copy, or colorable
imitation of a registered mark in connection with the sale, offering for sale,
distribution, or advertising of any goods or services on or in connection with
which such use is likely to cause confusion, or to cause mistake, or to deceive; or
(b) reproduce, counterfeit, copy, or colorably imitate a registered mark and
apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs,
prints, packages, wrappers, receptacles or advertisements intended to be used in
commerce upon or in connection with the sale, offering for sale, distribution, or
advertising of goods or services on or in connection with which such use is likely
to cause confusion, or to cause mistake, or to deceive,
shall be liable in a civil action by the registrant for the remedies hereinafter
provided.
16
15 U.S.C. § 1125(a)(1) provides in relevant part:
Any person who, on or in connection with any goods or services, or any
container for goods, uses in commerce any word, term, name, symbol, or device,
or any combination thereof, or any false designation of origin, false or misleading
description of fact, or false or misleading representation of fact, which –
(A) is likely to cause confusion, or to cause mistake, or to deceive as to the
affiliation, connection, or association of such person with another person, or as to
the origin, sponsorship, or approval of his or her goods, services, or commercial
activities by another person, or
(B) in commercial advertising or promotion, misrepresents the nature,
characteristics, qualities, or geographic origin of his or her or another person’s
goods, services, or commercial activities,
shall be liable in a civil action by any person who believe that he or she is
or is likely to be damaged by such act.
30
Thompkins owns one and that Lil’ Joe used it in an infringing manner.
Thompkins apparently first attempted to assert his would-be § 1114 claim in his
response to Lil’ Joe’s motion for summary judgment. This is procedurally
improper; at the summary judgment stage, Thompkins should have sought to
amend his complaint in accordance with Federal Rule of Civil Procedure 15(a) if
he wished to add a claim. See Gilmour v. Gates, McDonald & Co., 382 F.3d
1312, 1315 (11th Cir. 2004).17
We dispose just as easily of Thompkins’s § 1125 claim for false designation
of origin. Thompkins essentially claims that by selling copies of records that he
wrote and performed, Lil’ Joe is falsely designating itself the “origin” of those
“goods,” in contravention of the statute. Thompkins does not allege that Lil’ Joe
is selling his records under someone else’s name – i.e., passing off his works as
17
Thompkins argues that his § 1114 claim was preserved through the Joint Pretrial
Stipulation filed by the parties in the district court. He cites this court’s decision in G.I.C. Corp.
v. United States, 121 F.3d 1447, 1450 (11th Cir. 1997), for the proposition that parties are bound
by their assertions in pretrial stipulations under Fed. R. Civ. P. 16. He argues that, because Lil’
Joe listed “the scope of the ‘J.T. Money’ trademark” on the Stipulation as among the remaining
issues of fact to be decided by the district court, it cannot contest the pleading of his § 1114
claim. Essentially, Thompkins argues that a defendant can stipulate away in pretrial proceedings
its objection to a claim that was never pled in any form in the complaint. Even if that were true –
G.I.C. Corp. does not stand for that proposition, and we do not decide it here – we find that
Thompkins overstates the contents of the pretrial stipulation. Lil’ Joe does not stipulate to the
existence of a § 1114 claim; in fact, neither party lists § 1114 or “trademark infringement” or any
like phrasing as among the legal issues it considers still in dispute. Under these circumstances,
we can hardly find that the pretrial stipulation indicated Lil’ Joe’s accession to the existence of a
§ 1114 claim that was never pled in the complaint.
31
those of another artist – but simply that Lil’ Joe is selling copies of Thompkins’s
works with Lil’ Joe indicated as the creator of the actual physical records. The
Supreme Court has explicitly held that such conduct does not give rise to a claim
under § 1125. Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23,
37–38, 123 S. Ct. 2041, 2050, 156 L. Ed. 2d 18 (2003) (interpreting “origin of
goods” under the statute to refer to “the producer of the tangible goods that are
offered for sale, and not to the author of any idea, concept, or communication
embodied in those goods”). Thompkins concedes on appeal that this is so;
accordingly, his § 1125 claim fails.
C.
As an alternative to his claim of copyright ownership, Thompkins alleges
four claims based on contract theories under Florida common law. We first
address Thompkins’s breach of contract claim, and then we address his remaining
contract claims together.
1.
Thompkins bases his breach of contract claim on the theory that Lil’ Joe
became liable for Luke Records’ obligations when it purchased Luke Records’
assets in the bankruptcy. Although Thompkins’s entitlement to royalties arose
entirely from his contracts with Luke Records, Thompkins alleges that Luke
32
Records is the “predecessor in interest” to Lil’ Joe, and that Lil’ Joe has
reproduced and used Thompkins’s sound recordings and musical compositions
“under the contractual agreements between Plaintiff and Luke [Records] assumed
by [Lil’ Joe].” By failing to pay him royalties in accordance with his agreements
with Luke Records, Thompkins argues, Lil’ Joe has breached those contracts.
Notably, Thompkins does not allege that Lil’ Joe breached any contract to
which it was itself an original party, nor does he claim that Lil’ Joe came to be
liable for Luke Records’ contractual obligations by execution of a novation or any
other sort of contractual device. Instead, he claims that the bankruptcy
proceedings, by operation of law, resulted in Lil’ Joe being subject to a duty to pay
royalties.18 Thompkins argues that this result is necessary to protect the authorial
18
In addition to the reorganization provisions summarized in part I.B., supra, the
Confirmation Order also specified certain binding modifications to the terms of the Joint Plan
and Letter of Intent. Among these modifications, the Order states that, “[i]n addition to the other
assets to be transferred to [Lil’ Joe] under the terms of the Plan and the Letter of Intent, Luke
Records is hereby directed to transfer and assign to [Lil’ Joe] . . . all of its right, title and interest
in and to each contract rejected pursuant to Section 365 of the Bankruptcy Code, subject to the
Liquidating Trustees’ right to assert defenses, recoupment or setoff.” This language also appears
in the Bill of Sale from Luke Records to Lil’ Joe for the master recordings themselves, which
were purportedly transferred “[t]ogether with . . . all right, title and interest in and to each
contract rejected pursuant to section 365 . . . free and clear of any and all liens, claims,
encumbrances, charges, setoffs, or any recoupments of any kind, and shall be transferred free and
clear of any interest in such property of an entity other than [Luke Records].”
In our review of the record, this language alone among all the bankruptcy court filings
suggests any possible intent by the bankruptcy court to transfer any rights or obligations under
the various Thompkins-Luke Records contracts to Lil’ Joe (as opposed to ownership of the
master recording and copyright assets themselves). Thompkins, however, does not invoke this
language in support of his contract claims against Lil’ Joe – in fact, neither party addresses it at
33
interest recognized by copyright law. According to his essentially equitable
theory, it is unfair for his royalty rights to be severed from the copyrights through
the bankruptcy.
We are not persuaded. In support of his argument, Thompkins relies
primarily on a decision of the Ninth Circuit Court of Appeals in Yount v. Acuff
Rose-Opryland, 103 F.3d 830 (9th Cir. 1996), which in turn cites Fain v. Irving
Trust Co. (In re Waterson, Berlin & Snyder Co.), 48 F.2d 704 (2d Cir. 1931). The
Yount case lends Thompkins’s argument no support, as the purchaser of the
copyrights out of bankruptcy in that case apparently did not contest that it had
assumed the royalty obligation created by the original copyright
assignment/royalty agreement entered into by the debtor. 103 F.3d at 832–33.
Yount concerned only a dispute over which of two parties was the proper recipient
of the royalties. Id. The In re Waterson, Berlin & Snyder Co. decision, on its
face, appears more pertinent. In that case, the Second Circuit held that, although a
trustee may sell copyrights out of a bankruptcy estate, “they should be sold subject
all. This is just as well, for we find the language to be inconclusive. If, as is clearly the case, the
bankruptcy court deemed the Thompkins-Luke Records contracts to be executory and ordered
their rejection, then, as a result of that unappealed order, Luke Records was freed of its obligation
to perform. Thus, Luke Records no longer owed any contractual duty that could be transferred to
Lil’ Joe as a “right, title [or] interest” in the contracts; all that remained was a rejection damages
claim that Thompkins could have asserted via a proof of claim in the bankruptcy against Luke
Records. At most, then, the above-quoted modification language would seem to have created a
null set. Accordingly, we find it does not affect this appeal.
34
to the right of the composers to have them worked in their behalf and to be paid
royalties according to the terms of the contracts.” In re Waterson, Berlin & Snyder
Co., 48 F.2d at 710. In deciding to impose an equitable servitude on the
copyrights, the court was choosing between what it saw as two possible outcomes.
Id. As the court framed the problem, either the copyright transfer might be
rescinded and the copyrights reconveyed to the authors, or the copyrights could be
sold subject to the royalty obligations entered into by the debtor. Id.
Neither of the options considered by the court in In re Waterson, Berlin &
Snyder Co. is possible within the mechanism provided by § 365 under the current
incarnation of the bankruptcy code,19 and the parties do not dispute that it is the
operation of § 365 that determines their respective rights. As we have discussed,
supra, rescission is not a possible function of § 365.20 Nor does the equitable
imposition of a royalty obligation on the post-bankruptcy purchaser of copyright
19
Of course, § 365 did not exist in its current form until 1978, decades after the Second
Circuit decided In re Waterson, Berlin & Snyder Co. See 11 U.S.C. § 365 (originally enacted as
Bankruptcy Act of 1978, ch. 3, § 365, 92 Stat. 2549). That court, however, did not refer to any
then-existing principles of bankruptcy law governing rejection of contracts, either, nor does the
opinion suggest that the trustee in that case attempted to reject the copyright transfer agreement.
For these reasons, we find the decision not to be persuasive in our consideration of the instant
case.
20
To the extent that rescission of a copyright transfer agreement is possible at all, it
would be under state law, not § 365. See Yount, 103 F.3d at 834 (“[R]ecission itself is a creature
of state law. Nothing in [In re Waterson, Berlin & Snyder Co.] suggests the contrary.” (citation
omitted)). See discussion at part III.C.2., infra.
35
assets serve the purposes of the bankruptcy code. The court in In re Waterson,
Berlin & Snyder Co. was concerned that, unless the author’s royalty rights
followed the copyrights through the bankruptcy to the purchaser of the assets, the
author may be “deprive[d] . . . of the only means of fixing the royalties which [he
has] been promised.” 48 F.2d at 710. But the bankruptcy code specifically
addresses that problem by providing that rejection of an executory contract under
§ 365(g) constitutes a pre-petition breach, and the non-debtor party to the rejected
contract becomes a general unsecured creditor who may seek contract damages
against the debtor as a pre-petition claim in the bankruptcy. See 11 U.S.C. §
502(g); Byrd v. Gardinier, Inc. (In re Gardinier, Inc.), 831 F.2d 974, 976 n.2 (11th
Cir. 1987); Eastover Bank for Savings v. Sowashee Venture (In re Austin Dev.
Co.), 19 F.3d 1077, 1082 (5th Cir. 1994); 3 Collier on Bankruptcy § 365.09 (15th
ed. rev. 2005).
Thus, the author-assignor is not left completely without recourse in the
event that his original copyrights, transferred in consideration of future royalties,
are later sold to a third party out of the debtor-assignee’s estate, free and clear of
royalty obligations due to the rejection of the original copyright transfer/royalty
agreement. In that event, the bankruptcy code explicitly provides a means by
which the author can file a damages claim against the debtor for what is deemed a
36
pre-petition breach of contract.
This was precisely the course available to Thompkins, and of which he
undisputedly did not avail himself. Luke Records’ obligation to pay royalties –
wholly a creature of its contracts with Thompkins – was rejected in accordance
with § 365 along with all Luke Records’ other contractual obligations to
Thompkins. The bankruptcy court confirmed that rejection and ordered the
non-debtor parties to rejected contracts to file proofs of claim for rejection
damages within thirty days of the date of the Confirmation Order “or forever be
barred from asserting such claims.” Thompkins had notice of these developments,
but did not file a claim for damages.21 The bankruptcy court’s disposition of the
21
Thompkins did file a proof of claim earlier in the Luke Records bankruptcy, prior to
the proposal of the Joint Plan. That proof of claim, however, only sought pre-petition royalties
on records already sold, not damages for the breach of Luke Records’ prospective obligation to
pay Thompkins royalties on future sales of his works. The proof of claim was how Thompkins
became known to the bankruptcy court as a creditor, and it resulted in his being on notice of all
the later proceedings involving the Joint Plan and its confirmation. Thompkins did not recover
anything on that proof of claim for past royalties; the creditors’ committee objected to it, and he
never did anything else to protect his rights.
Although it is not directly pertinent to this appeal, we also note that while any damages
claim Thompkins might have made for future royalties would necessarily have been somewhat
speculative, the bankruptcy code anticipates this issue and explicitly allows for the estimation of
“any contingent or unliquidated claim, the fixing or liquidation of which . . . would unduly delay
the administration of the case.” See 11 U.S.C. § 502(c)(1); Certified Class v. Charter Co. (In re
Charter Co.), 876 F.2d 866, 872–73 (11th Cir. 1989) (noting that estimation of contingent and
unliquidated claims is “mandatory” under the code, and that bankruptcy courts are thus “well
used to the estimation procedures . . . even in complex cases”). The estimation provision thus
makes it possible for a creditor in Thompkins’s position to recover some damages through the
bankruptcy where otherwise he might have little or none. In a standard contract suit for future
royalties, such as his claim here, Thompkins’s damages would be speculative and would likely
result in only nominal damages.
37
Joint Plan and the estate’s assets was consistent with the code’s scheme for
rejection damages. Thompkins simply slept on his rights, and any damages to
which he might have been entitled were waived accordingly.
Of course, while it is useful to note what Thompkins should have done to
protect his rights as against Luke Records in the bankruptcy, his potential recovery
there is not the issue that controls Thompkins’s contract claims against Lil’ Joe
here. Instead, we need only observe that, upon its rejection of the contract, Luke
Records was no longer obliged to pay royalties. In the place of royalties,
Thompkins was entitled to rejection damages from Luke Records’ estate in the
bankruptcy – none of which has anything to do with Lil’ Joe. Furthermore, the
bankruptcy court ordered that Lil’ Joe was a good faith, arms’-length, third party
purchaser, and that the assets it was purchasing were to be transferred “free and
clear of any interest in such property of an entity other than the Debtors.” Thus,
Thompkins cannot show that any of Luke Records’ obligations under its contracts
with Thompkins passed through the bankruptcy to bind Lil’ Joe. Without being
able to prove the existence of a valid contract with Lil’ Joe, he cannot maintain a
Nor does the prospective nature of the rejection damages somehow remove them from the
category of pre-petition claims to be disposed of in bankruptcy; although the damages are valued
on an estimation of future royalties, the breach for which the damages are awarded is deemed to
be pre-petition by operation of § 365(g).
38
claim for breach of contract under Florida law. See Rollins, Inc. v. Butland, ___
So. 2d ___, No. 2D05-368, 2006 WL 3686484, at *12 (Fla. 2d Dist. Ct. App. Dec.
15, 2006) (reciting the elements of a breach of contract claim).
2.
Thompkins’s remaining claims based on contract theories are more easily
resolved. In light of our above holdings, they are without merit. First, Thompkins
alleges a quasi-contractual theory of unjust enrichment, claiming that Lil’ Joe has
unjustly profited from its “misappropriation” of his works and its “receipt of
profits and monies owed and due Plaintiff from such works.” Among other
elements of an unjust enrichment claim under Florida law, a plaintiff must show
circumstances such that it would be inequitable for the defendant to retain the
benefit conferred by the plaintiff without paying for it. Nova Info. Sys., Inc. v.
Greenwich Ins. Co., 365 F.3d 996, 1006–07 (11th Cir. 2004). As we have held,
supra, however, Lil’ Joe became lawful owner of the copyrights through the
bankruptcy, and it has no royalties obligations to Thompkins. Thus, any profits
Lil’ Joe realizes from its exploitation of the copyrights that it lawfully purchased
through the bankruptcy cannot be characterized as unjust, and Thompkins cannot
maintain this claim.
Next, Thompkins makes a claim of promissory estoppel, the first element of
39
which is a representation by the defendant as to a material fact that is contrary to a
later-asserted position. Romo v. Amedex Ins. Co., 930 So. 2d 643, 650 (Fla. 3d
Dist. Ct. App. 2006). Thompkins alleges that “Defendants have made promises to
honor and pay for their exploitation of Plaintiff’s sound recordings and
copyrighted works.” We find no evidence in the record of any such
representations by Lil’ Joe to support this assertion. It is unclear what Thompkins
even intended by this claim, because the complaint contains no allegation
identifying exactly what constituted the purported promise by Lil’ Joe – or, for
that matter, the later-asserted position contrary to that promise. Nor does our
review of the record shed any significant light on what the allegedly actionable
promise might be, given that all of Thompkins’s business dealings relevant to this
case were with Luke Records, not Lil’ Joe.22
The only glimmer of a possible theory behind Thompkins’s promissory
22
We acknowledge that defendant Weinberger, prior to starting his own recording
business as Lil’ Joe Records, served as in-house counsel to Luke Records, and that Weinberger
was ostensibly involved in at least some of Luke Records’ dealings with Thompkins. But even if
Thompkins meant to allege that Weinberger individually made the promise that is the subject of
his estoppel claim, this argument is nonsensical. We fail to see how any representations
Weinberger may have made in the course of those dealings could constitute a promise to “honor
and pay for” exploitation of Thompkins’s works by Lil’ Joe – Lil’ Joe Records did not even
exist until after Weinberger left Luke Records. Moreover, Luke Records was still solvent
throughout Weinberger’s employment. Weinberger could not have known that a company he
had not yet founded would ultimately purchase and exploit some of Thompkins’s works as a
result of a Luke Records bankruptcy that had yet to happen.
40
estoppel claim comes from his reply to Lil’ Joe’s summary judgment motion in the
district court. There, in support of the claim, Thompkins asserted that
“Weinberger promised and agreed in writing to the bankruptcy court that he would
pay the artists, and then takes a contrary position.” Here again, Thompkins’s
theory is based on his misunderstanding of the bankruptcy proceedings. Lil’ Joe
made no such promise in the bankruptcy; on the contrary, Lil’ Joe has consistently
asserted that it purchased the copyrights free and clear of any obligation to pay
royalties. Accordingly, Thompkins’s promissory estoppel claim also fails.
Finally, Thompkins makes a claim for rescission and restitution. While a
party to recording contracts can properly seek rescission of those agreements
under state law, see Yount, 103 F.3d at 834, Thompkins’s theory in support of his
claim is flawed. He alleges that “Plaintiff and Defendants entered into various
agreements regarding the exploitation of Plaintiff’s Works,” and prays that “each
and every contract or license or agreement of any kind between Plaintiff and
Defendant be deemed rescinded.” Yet, as we have noted, supra, none of the Luke
Records agreements bind Lil’ Joe, and Thompkins points to nothing in the record
indicating that Lil’ Joe ever entered into any other contract that would be
41
pertinent.23 Thus, Thompkins’s claim fails the first requirement of a suit for
rescission under Florida law – that the parties to the lawsuit lie in contractual
privity. See Bland v. Freightliner LLC, 206 F. Supp. 2d 1202, 1206–07 (M.D. Fla.
2002). If Thompkins wished to seek rescission of his recording agreements, he
should have done so in a claim against Luke Records, either before or as part of
the bankruptcy proceedings. That ship has long since sailed, so Thompkins’s
claim of rescission here against Lil’ Joe must fail as a matter of law.
D.
Finally, we consider Thompkins’s claim of fraud under Florida law. The
requirements for a claim of fraud or fraudulent inducement are: (1) a false
statement regarding a material fact; (2) the statement maker’s knowledge that the
representation is false; (3) intent that the representation induces another’s reliance;
and (4) consequent injury to the party acting in reliance. See Wadlington v. Cont’l
Med. Servs., Inc., 907 So. 2d 631, 632 (Fla. 4th Dist. Ct. App. 2005); Biscayne
Inv. Group, Ltd. v. Guarantee Mgmt. Servs., Inc., 903 So. 2d 251, 255 (Fla. 3d
Dist. Ct. App. 2005).
23
In our review of the record, we find evidence of only one contract to which both
Thompkins and Lil’ Joe were parties – a “sideman” agreement for Thompkins’s contributions to
songs by an artist named Mark Ross. Ross was also a party to the agreement, which is dated
September 13, 1995. The agreement is irrelevant to this case. Thompkins does not address it in
any of his arguments, which makes sense given that the gravamen of his claims relates entirely to
the Luke Records agreements.
42
We have trouble understanding the purported basis for this claim, as it
appears Thompkins is himself unsure of the theory behind it. In his response to
Lil’ Joe’s summary judgment motion in the district court, Thompkins lumped his
fraud claim together with his claim for promissory estoppel. There, he made a
conclusory argument that Lil’ Joe misrepresented in the bankruptcy court that it
would continue to pay the non-debtor parties to rejected contracts in accordance
with Luke Records’ royalty obligations. As we observed in our discussion of the
promissory estoppel claim in part III.C.2., supra, this assertion is baseless.
Moreover, this later theory conflicts with the original theory of fraud that
Thompkins alleged in the amended complaint. In pleading his fraud count in the
complaint, Thompkins alleges four misrepresentations by Lil’ Joe. Only one of
these four alleged statements presents even a plausible basis for supporting the
claim:24 Thompkins alleges that, “[i]n order to induce Plaintiff to enter into the
Luke Agreements, Luke [Records] and Weinberger represented to Plaintiff that
24
The remaining three alleged representations are that “Defendants own 100% of the
copyrights in Plaintiff’s Works,” that “Defendant’s [sic] have no duty or obligation to account or
pay royalties to Plaintiff,” and that “the Songwriter Agreements are genuine and authentic
documents.” To the extent that Lil’ Joe made these representations to Thompkins, it is
impossible for Thompkins to prove that he relied on them to his detriment. Indeed, the very
existence of Thompkins’s lawsuit here belies any allegation of reliance on these representations–
not only did he not believe these statements to be true, but he filed this suit to challenge them.
Nor does Thompkins otherwise substantiate his alleged reliance. Thompkins seems to
misunderstand the nature of fraud; simply believing a statement to be false does not make it
fraudulent.
43
Plaintiff would receive royalties and accountings from Luke [Records].”
This theory fails all the same, however. Thompkins accuses both Luke
Records and Weinberger individually. If Luke Records – which is not a defendant
here – made misrepresentations to induce Thompkins to enter into contracts,
Thompkins perhaps could have sued Luke Records, but he cannot recover from
Lil’ Joe for Luke Records’ alleged torts. To the extent Thompkins alleges that
defendant Weinberger individually misrepresented material facts (ostensibly
during Weinberger’s employment at Luke Records), the record simply contains no
evidence to support it. While all of the contracts between Thompkins and Luke
Records are premised on royalty payments, Thompkins points to no particular
instances in which Weinberger individually represented to him that he would
receive royalties and accountings.
Even if Thompkins had submitted such evidence, we doubt his claim has
any merit. Under Florida law, a fraud claim cannot be premised on a promise to
do something in the future except where the promise “is made without any
intention of performing or made with the positive intention not to perform.”
Wadlington, 907 So. 2d at 632. Again, nothing in the record indicates that
Weinberger or Luke Records intended at the time the contracts were made not to
pay the royalties agreed upon. Additionally, we suspect this fraud claim is of the
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type barred by the economic loss rule in Florida, under which
“[m]isrepresentations relating to the breaching party’s performance of a contract
do not give rise to any independent cause of action in tort, [where] such
misrepresentations are interwoven and indistinct from the heart of the contractual
agreement.” Hotels of Key Largo, Inc. v. RHI Hotels, Inc., 694 So. 2d 74, 78 (Fla.
3d Dist. Ct. App. 1997). Here, Thompkins complains about nothing more than
that Luke Records and Weinberger did not fulfill their promises under the contract
– exactly the basis for a breach of contract claim. In any event, Thompkins’s fraud
claims are insufficient, and so they must fail.
IV.
Ultimately, this case boils down to a simple problem – Thompkins missed
his chance through the bankruptcy to recover some of the royalty money he would
have been owed by Luke Records. Having belatedly realized his error, he now
asks this court to play the role of deus ex machina, swooping in to rescue his
claims with interpretations of the bankruptcy code that ignore its premium on
finality. This we cannot do. Thompkins may think unfair the procedure that
Congress devised, but his legal arguments to overcome it are unavailing. We
AFFIRM the district court’s grant of summary judgment on all claims.
SO ORDERED.
45