Free Essay. United States Court of Appeals, Ninth Circuit

In 1980, Dale Bozzio, Terry Bozzio, and Warren Cuccurullo established the band missing persons. Dale Bozzio personified the beats and the look of the new wave scene in the 1980s Los Angeles (Bozzio v. EMI GROUP LTD n.p). Capitol Records registered the band, and the individual artists two years later. The contents of the pact mandated the artists comprising Missing Persons to create master recordings that Capitol would sell and patent (Bozzio v. EMI GROUP LTD n.p). In return, Capitol pledged to "pay royalties at rates starting from 20% to 24% for every sale made in the country and Canada, and a further 7 to 8% for sales made in the rest of the world (Bozzio v. EMI GROUP LTD n.p). The artists would also get 50% of Capitol's net royalties from the patent. The following year, Bozzio and other band members formed "Missing Persons Inc.," in California to function as a loan-out firm through which they would offer services to Capitol (Bozzio v. EMI GROUP LTD n.p). Capitol subsequently entered into a new pact, dubbed the "Loan-Out Agreement with the Missing Persons Inc, in place of the individual band members as per the previous contract. In the new agreement, each member executed an Artist Declaration (Bozzio v. EMI GROUP LTD n.p). Bozzio's declaration mentioned that she should accept to look solely to Missing Persons Inc. for the payment of her fees, and will not impose any claims against Capitol. The music group was subsequently disbanded in 1986 under the California Revenue and Taxation Code Section 23301 due to a lack of paying its taxes (Bozzio v. EMI GROUP LTD n.p). It prompted Dale Bozzio, the leading woman of Missing Persons Inc. to initiate a putative class action lawsuit at the Federal district court in the Northern District of California for alleged breach of Contract and other offenses against EMI Group Ltd (Bozzio v. EMI GROUP LTD n.p).

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Issues Presented by the Case

The district court was presented with a lawsuit alleging that Capitol failed to "adequately account for and pay its recording artists and music producers for money it had received and continues to get from the licenses of its recorded music catalog for the sale of mastertones, streaming music, and digital downloads (Bozzio v. EMI GROUP LTD n.p)." Capitol moved to refute Bozzio's claim. They mainly argued that Bozzio could not file a suit, since she expressly agreed in the Artist Declaration to "seek solely to" the loan-out corporation for royalty payments, and pledged to "not impose any claim in this regard against Capitol" (Bozzio v. EMI GROUP LTD n.p). Bozzio indicated that she was an intended third-party beneficiary of the agreement, and the individual right to sue the corporation was not in the pact. In a nutshell, what Bozzio tried to mean is that the Artist Declaration "only barred an artist from imposing a claim against EMI, where there is a complaint between individual band members over the internal allocation and spread of royalties that have been already been properly audited for and paid by the record label" (Bozzio v. EMI GROUP LTD n.p). In the court of appeal, Bozzio claims that the suspended status of the contracting corporate party is not relevant when the party bringing the action is a third-party recipient of the contract and district court's dismissal of the lawsuit on the grounds of reversible error is not fair (Bozzio v. EMI GROUP LTD n.p).

Holding

After listening to the statement of both the plaintiff and the defendant, the district court granted the defendant "Capitol" a motion to dismiss the case. The court held out that allowing Bozzio to sue as a third-party recipient of the recording contract would allow her to "use the organization's entity to contract and gain the benefits of the corporate form (Bozzio v. EMI GROUP LTD n.p). It would also permit her to retain the right to sue as a person, third party beneficiary even when the company could not explain its failure to comply with its corporate responsibilities. In response, Bozzio timely appealed the case to the U.S. Court of Appeal for the Ninth Circuit (Bozzio v. EMI GROUP LTD n.p).

The Court of Appeal agreed with the plaintiff that the district court has made a mistake in holding out that if Bozzio is a third-party beneficiary, she should not bring an action, whereas the Missing Persons, Inc. is disbanded. The Court of Appeal has also suggested that a third-party beneficiary complaint may process regardless of the "promisee's" inability to sue (Bozzio v. EMI GROUP LTD n.p).

Summary of the Court's Reasoning

The California Court of Appeal does not regard the inability of the promisee to an agreement to be an absolute hindrance to a lawsuit by a third-party beneficiary. The decision followed a Supreme Court's interpretation. The Court of Appeal used "Performance Plastering v. Richmond American Homes," as the basis of the verdict (Bozzio v. EMI GROUP LTD n.p). Therefore, the panel concluded that Bozzio had the ability to bring a lawsuit as a third-party recipient, while not undermining the legal intent. They further ruled out that Bozzio's ability to sue postponed was not meant for resolution at the dismissal stage, and is a fact-bound inquiry (Bozzio v. EMI GROUP LTD n.p).

Works Cited

Bozzio v. EMI GROUP LTD., 811 F.3d 1144 (9th Cir. 2016).