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Ninth Circuit:
Attempt by Ex-Beach Boy to Rescind 1962 Deal Precluding Recovery of Digital Royalties Fails
Opinion Rejects Argument That Contract Providing Plaintiff Percentage of Sales of Physical Records Must Be Rescinded in Light of ‘Supervening’ New Technology
By a MetNews Staff Writer
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DAVID MARKS musician |
The Ninth U.S. Circuit Court of Appeals held yesterday that a motion for judgment on the pleadings was properly granted against a former member of The Beach Boys band who sought rescission of a decades-old record deal providing for royalties only on the sales of physical records based on the “supervening circumstance” of the development of digital streaming.
In a memorandum opinion, signed by Senior Circuit Judge Jay S. Bybee, Circuit Judge Morgan Christen, and Senior District Court Judge Sidney A. Fitzwater of the Northern District of Texas, sitting by designation, the court found that the rockstar’s attempt to get out of the agreement based on “frustration of purpose” and a “partial failure of consideration” lacked merit.
On May 13, 2021, David Marks filed a federal class action complaint against UMG Recordings Inc., a successor in interest to Capitol Records LLC, and other related parties, asserting claims for breach of contract, fraud, declaratory relief, and other causes of action.
All causes of action were eventually dismissed by District Court Judge Mark C. Scarsi of the Central District of California for failure to state a claim, pursuant to Federal Rule of Civil Procedure 12(b)(6). In 2023, the Ninth Circuit affirmed the dismissal as to all claims but one, saying:
“We reverse the…dismissal…to the extent Marks seeks a declaration that the purpose of the written agreement has been frustrated, or a declaration that he is entitled to rescission of the parties’ contract.”
Rescission Sought
Marks then filed an amended class action complaint seeking rescission of the agreement and the return of his rights to the music, asserting:
“Defendants…have a problem. For many decades before the modern era of digital music, Defendants or their predecessors had signed standard contracts….[presuming] that the record labels’ main business was, and would always be, the sale of phonorecords embodying the signatory artists’ performances, which formerly constituted the virtual entirety of the recordings’ monetary earnings. Accordingly, these Agreements neither addressed nor contemplated the possibility of ‘digitally streaming’ music directly to consumers or the royalties to be paid.”
The filing continues:
“While this omission did not pose an issue when such technology was nascent, digital streaming now accounts for 84% of all recorded music consumption. In other words, Defendants are now administering large swaths of Agreements that are no longer supported by their original consideration, and to leave them as such would have meant risking both a public relations crisis and a wave of artists seeking to rescind their depreciated Agreements and reclaim their works.”
After Defendants filed a motion for judgment on the pleadings, Scarsi granted the request, without leave to amend, saying:
“[T]he Court will not find the ‘contract is…rendered voidable because [Marks] is disappointed’ with the transformation of the record industry.”
Ninth Circuit’s View
Marks argues that his agreement, and similar ones affecting other purported class members, should be rescinded under Civil Code §1689(b)(4), which provides for such relief “[i]f the consideration for the obligation of the rescinding party, before it is rendered to him, fails in a material respect from any cause.”
Bybee, Christen, and Fitzwater noted that “Marks conceded in the prior appeal that Defendants had no express obligation to pay him royalties for digital streaming pursuant to the agreement and this panel concluded that Marks failed to establish that the parties impliedly modified their written contract to include such royalties.”
Under these circumstances, they opined:
“The failure to receive a benefit that Marks concedes the contract does not provide him—royalties other than those associated with physical records—does not constitute a failure of consideration.”
Turning to his contention that the doctrine of frustration of purpose provides a basis for rescission, the judges pointed out that the principle is an “excuse for nonperformance” that applies whenever a supervening event causes the destruction of the expected value of performance.
Applying the doctrine to the facts asserted in Marks’ operative complaint, they concluded:
“Marks has no ongoing obligations for which he seeks to excuse nonperformance….Because Marks has no performance obligations, frustration of purpose does not apply.”
The case is Marks v. UMG Recordings Inc., 24-1756.
Marks was a guitarist for The Beach Boys on their first four albums released between 1962 and 1963, including on such hits as “Surfin’ Safari,” “Surfer Girl,” and “Little Deuce Coupe.” He reunited with the band for their 50th anniversary tour in 2012.
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