Giving A Little Bit From Now On

The United States Court of Appeals for the Ninth Circuit reversed a judgment in litigation between former Supertramp bandmates and directed a favorable result for the plaintiffs

Douglas Thomson, John Helliwell, and Robert Siebenberg (“Plaintiffs”), former members of the world-renowned rock band Supertramp, brought this breach of contract action against their former bandmates Rodger Hodgson and Rick Davies, as well as Delicate Music, a sub-publishing company formed by Hodgson and Davies (“Defendants”). In 1977, the parties entered into a publishing agreement which allocated specific percentages of songwriting royalties among the band members and their manager, David Margereson. The royalties were distributed in the manner prescribed by the agreement until 2018, when Hodgson and Davies—Supertramp’s principal songwriters—said “Goodbye Stranger,”  and abruptly stopped paying the songwriting royalties due Plaintiffs. The ensuing dispute proceeded to a jury trial, during which the district court ruled as a matter of law that Defendants were legally entitled to unilaterally terminate the agreement after a “reasonable time” because “the contract contains no express duration nor has sufficient evidence been presented that there can be an implied duration based on the surrounding circumstances, including execution of or the nature of the ’77 agreement specifically.”

On appeal, Plaintiffs ask that Defendants continue to “Give A Little Bit” of Supertramp’s songwriting royalties until the band’s songs cease generating revenue. But Defendants believe that “From Now On,”  they are no longer obligated to share royalties because the publishing agreement was terminable after a reasonable time. We agree with Plaintiffs, and reverse and remand with instructions to enter judgment in Plaintiffs’ favor on the question of liability.

The 1977 agreement had been reached in a period when the band was “hurting financially”

The band members and Margereson agreed that the publishing royalties would be collected, administered, and distributed by Delicate Music, Hodgson and Davies’s joint sub-publishing company. Hodgson testified that he agreed to allocate the publishing royalties because he wanted “[t]o keep the band functioning and happy” and “want[ed] the band to be successful” and to keep “[t]ouring.” Siebenberg, however, testified that there was no discussion that “the song income sharing was only going to last until record royalties started being paid” during or after the January 1977 meeting in which Margereson presented the 1977 Agreement to the band, or during the December 1977 meeting in which the 1977 Agreement was ultimately signed. The 1977 Agreement did not designate an end date or indicate that it would continue in perpetuity.

Then they struck gold

In 1979, the band released its fourth album, Breakfast in America, which sold over 30 million copies worldwide. On the heels of the album’s success, Supertramp entered into the most lucrative record deal in Supertramp’s history with A&M. It was only after Breakfast in America’s release that the band members finally began earning recording royalties. Following the success of the album, the band orally amended the 1977 Agreement in 1983 to provide that Hodgson and Davies would each receive 32.15% of the publishing revenue, and Plaintiffs and Russel Pope, the band’s sound engineer, would each receive 7.14% of the publishing revenues from the exploitation of the songs on the band’s most recent album, Famous Last Words. The revenue splits for the earlier albums remained the same.

As Yogi Berra might say, It ain’t over until it’s over

This is telling, as there were multiple occasions at which it would have been a natural point for Defendants to terminate the 1977 Agreement if they truly believed it to be terminable at will, such as: (1) when the band began receiving record royalties in 1981; (2) when the band renegotiated their deal with A&M Records in what was the most lucrative deal that A&M had offered a recording artist up to that date; or (3) when Margereson, Pope, or Hodgson left Supertramp. And yet, despite Hodgson’s purported belief that the 1977 Agreement could be unilaterally terminated, neither he, Davies, nor Delicate Music took the opportunity to do so until 2018.

Indeed, perhaps the most obvious point at which the 1977 Agreement would have been terminated had Defendants truly believed it to be terminable at will was when Hodgson left Supertramp in 1984. Based on trial testimony, his exit from the band was not amicable—rather, Hodgson testified that he felt that he was “forced out.” But rather than terminate the royalty payments to Plaintiffs to receive 50% of the publishing revenue moving forward, Hodgson instead reaffirmed his contractual obligation to Plaintiffs by merely seeking out the band’s commitment that he would “continue” to receive 32.15% of Famous Last Words’ publishing royalties and 27% of Supertramp’s earlier albums’ publishing royalties—in other words, what he was already entitled to under the 1977 Agreement. Moreover, the 1984 Agreement used the term “in perpetuity” to describe Hodgson’s continuing right to receive his contractual share of the publishing revenue allocated to him under the 1977 Agreement. This supports that the parties mutually understood that the allocations set forth in the 1977 Agreement were not terminable at will as Defendants suggest.

(Mike Frisch)