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Soundgarden, Tupac and Tom Petty Estates Sue Universal Music Over Fire Damage

Attorneys representing Soundgarden, Hole, Steve Earle and the estates of Tupac and Tom Petty today filed a class-action lawsuit against Universal Music Group over the master recordings destroyed in a 2008 fire, the extent of which was revealed last week in a New York Times article.

The lawsuit, obtained by Variety, seeks some “50% of any settlement proceeds and insurance payments received by UMG for the loss of the Master Recordings, and 50% of any remaining loss of value not compensated by such settlement proceeds and insurance payments.” In a 2009 legal action against NBC over the fire, UMG reportedly valued its losses from the fire at $150 million.

The fire, which destroyed an estimated 500,000 master recordings by artists ranging from Billie Holiday to Nirvana, took place in a facility UMG had rented from NBC. Sources close to the situation have acknowledged that UMG’s management at the time was not entirely forthcoming about the extent of the damage.

“UMG did not protect the Master Recordings that were entrusted to it,” the lawsuit reads. “It did not take ‘all reasonable steps to make sure they are not damaged, abused, destroyed, wasted, lost or stolen,’ and it did not ‘speak[] up immediately [when it saw] abuse or misuse’ of assets,” it continues, quoting statements from the company’s website. “Instead, UMG stored the Master Recordings embodying Plaintiffs’ musical works in an inadequate, substandard storage warehouse located on the backlot of Universal Studios that was a known firetrap. The Master Recordings embodying Plaintiffs’ musical works stored in that warehouse were completely destroyed in a fire on June 1, 2008.

“UMG did not speak up immediately or even ever inform its recording artists that the Master Recordings embodying their musical works were destroyed. In fact, UMG concealed the loss with false public statements such as that ‘we only lost a small number of tapes and other material by obscure artists from the 1940s and 50s.’ To this day, UMG has failed to inform Plaintiffs that their Master Recordings were destroyed in the Fire.”

Despite the extent of the damage, a major-label attorney told Variety on Thursday that artists’ attempts to sue UMG over the fire faced a steep challenge, because contractually most if not all of the physical master tapes were the property of UMG — not the artists. For that reason, the company was under no obligation to inform effected artists about the damage, the attorney said. The ownership distinction here comes down to the difference between the master tape or hard drive as a physical object, which in nearly all cases is the property of the label, as opposed to the copyrighted intellectual property (i.e. the sound recordings) contained on that master.

“The issue is: Who owns the thing that was lost?,” the attorney said. “I can’t say there is no recording agreement in history that says the physical master tape is owned by an artist, but in the vast majority of recording agreements, it’s owned by the record company. So even if the copyright in the sound recording reverted to the artist, the physical master tape is different — in almost all instances, it’s owned by the record company, and even if the recording agreement didn’t specify who owns it, because it was paid for the record company there’s a very strong argument that the record company owns it.”

A financial analyst, who chose to remain anonymous, amplified that point. “The harm was caused to Universal — the fire damaged their property,” he said. “And if there are any artists whose [ownership of the masters] will revert to them in the next decade or so, they could try to seek some sort of compensation — but then I assume that in any successful claim there may be an opportunity for Universal to claw that [money] back from NBC, who owned the facility.”

UMG appears already to have been paid damages for the fire. “Even as it kept Plaintiffs in the dark and misrepresented the extent of the losses,” the lawsuit continues, “UMG successfully pursued litigation and insurance claims which it reportedly valued at $150 million to recoup the value of the Master Recordings. UMG concealed its massive recovery from Plaintiffs, apparently hoping it could keep it all to itself by burying the truth in sealed court filings and a confidential settlement agreement. Most importantly, UMG did not share any of its recovery with Plaintiffs, the artists whose life works were destroyed in the Fire—even though, by the terms of their recording contracts, Plaintiffs are entitled to 50% of those proceeds and payments.”

The passage concludes: “Plaintiffs bring this class action on behalf of themselves and all similarly situated recording artists, and their heirs, successors or assigns, to recover (1) their contractual entitlement to 50% of any settlement proceeds and insurance payments received by UMG for the loss of the Master Recordings, and (2) 50% of any remaining loss of value not compensated by such settlement proceeds and insurance payments.”

Reps for UMG declined Variety’s request for comment on the lawsuit, which contains little information not already revealed in recent articles about the fire.

Earlier this week, UMG Chairman and CEO Lucian Grainge wrote to his staff in an internal memo obtained by Variety, “Let me be clear: we owe our artists transparency. We owe them answers. I will ensure that the senior management of this company, starting with me, owns this.” Reps for the company say staffers are working “around the clock” to determine the status of masters by many artists, although the lawsuit alleges that “claims to have created what it internally called a ‘God List’ that purports to identify with ‘reasonable certainty’ an inventory of all Master Recordings destroyed in the Fire.”

Although UMG did not own the facility, today’s lawsuit attempts to cast the blame on the music company by claiming it was aware of fire hazards in the building.

Citing the heavily redacted 2009 lawsuit, it claims “UMG alleged in its Second Amended Complaint that the Fire Defendants ‘failed to maintain several deluge sprinkler systems in working condition, failed to maintain in working condition several fire hydrants thereby hampering the ability of the firefighters who responded to the Fire to prevent its spread, failed to implement proper sprinkler systems, failed to follow ‘hot work; guidelines, and persistently ignored the recommendations of their fire prevention and risk assessment expert and their own experiences after a similar fire in 1990 destroyed a similar area.” It continues, “Defendants knew that the facades were constructed using untreated, flammable, highly combustible materials, creating a significant fire risk. Defendants knew that these aging, wood facades were so closely clustered, that when they ignited, the result would not merely be a fire but a conflagration. … Defendants chose to ignore this hazard.”

Variety will have more on this situation as it develops.

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