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Universal Music Files Motion to Dismiss Lawsuit From Artists Claiming Fire Damage

Universal Music Group filed a motion on Wednesday to dismiss a class-action lawsuit from attorneys representing Soundgarden, Hole, Steve Earle and the estates of Tupac and Tom Petty over master recordings reportedly destroyed in a 2008 fire, the extent of which was revealed last month in a New York Times article.

UMG argues that the musicians cannot pursue a claim because UMG owned the master recordings that were destroyed.

“The Complaint does not and cannot plead any facts plausibly showing that UMG breached any provision in any contract,” the motion states.

According to UMG, the typical recording contract provided that “all masters … shall, from the inception of their creation, be the sole property of [UMG], in perpetuity, free from any claims by you.”

UMG also argues that the fire damage was publicly disclosed years ago, and that the suit should therefore be thrown out because the statute of limitations has expired.

The lawsuit against UMG, which was filed last month, 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 Los Angeles 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, however within hours of the article’s publication, UMG disputed the author’s characterization of the destruction caused to the company’s archives, saying the article contains “numerous inaccuracies, misleading statements, contradictions and fundamental misunderstandings of the scope of the incident and affected assets.” Sources also tell Variety that the list of affected artists has been inflated and in some cases is based on incomplete or inaccurate information, including hand-written records and former employees’ memories.

“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 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.”

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.”

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.

Last month, 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.”

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