Wednesday, May 12, 2010
C.A. Tosses Suit Alleging Univision Extorted Silence in ‘Payola’ Case
By SHERRI M. OKAMOTO, Staff Writer
This district’s Court of Appeal yesterday upheld Los Angeles Superior Court Judge Jane L. Johnson’s decision to toss out a suit against Univision Music claiming the company tried to force a local Latino record label into keeping silent about a scheme to bribe radio stations into airing Univision’s music.
Div. Eight explained in an unpublished decision that extortion in a civil context has different elements than the crime of extortion and ruled that Univision’s reduction of monthly advances to Platino Records Inc. was not “civil extortion.”
Platino alleged that it and Univision entered into a “Record Distribution Agreement” in 2005, under which Univision agreed to distribute no less than 50 previously unreleased phonograph records produced by Platino and to pay Platino a monthly advance of $200,000 recoupable from future royalties.
Pay to Play
In or about December 2005, Platino claimed, Univision directed one of its employees, Daniel Mireles, to offer to pay radio stations if they played records, a practice referred to as “payola.” Platino’s president later learned of the payola and demanded its cessation, and Univision complied, firing Mireles, who later sued Univision for wrongful termination.
Univision then became concerned that Platino would be a witness against it in Mireles’ lawsuit and, Platino alleged, decided to “extort [Platino] into being silent” by “intentionally reduc[ing] the marketing and distribution of the product provided by [Platino] such that the sales by Univision…would not be sufficient to cover the monthly $200,000.00 advance.”
The intent was to put Platino into debt and demonstrate that Univision “had the ability to crush [Platino] financially,” the complaint said. In response to this “economic coercion,” Platino claimed, it agreed to amend the distribution agreement to provide for an advance of only $150,000.
Platino subsequently filed suit alleging Univision had breached the distribution agreement and covenants of good faith and fair dealing by failing to market and distribute Platino’s albums or by selling them at “bottom line prices.” The record company further asserted that Univision’s failures amounted to “economic extortion.”
Johnson, however, was not persuaded and granted Univision’s motion for summary judgment.
Writing on appeal, Justice Madeline Flier said Johnson ruled correctly since Platino’s admissions “largely, if not completely” stripped its claims of any substantive merit. She also said the complaint failed to state facts sufficient to constitute a cause of action for duress.
Flier noted that Platino admitted that the distribution agreement was unambiguous and enforceable, that Univision did not fail to distribute Platino’s records, that Platino regularly received royalty reports from Univision and that Platino had been paid everything it was entitled to receive.
“The fact of the matter is that Platino’s admissions are binding and conclusive,” she said.
As for Platino’s “civil extortion” claim, Flier emphasized that “the essential element of the tort is that the defendant has obtained the plaintiff’s property or money by some form of duress,” and that two aspects of the doctrine of duress were lacking in the case.
“The cases recognizing duress as a civil wrong involve situations when the plaintiff parted with money or other valuables under duress and then sought to recover the sum or valuable surrendered to the defendant,” she wrote, emphasizing that the remedy is restitution.
Platino, however, could not seek restitution because it never paid Univision anything, Flier explained. She posited that the fact that Univision decreased the monthly advances it paid Platino could give rise to a claim for damages, but could not serve as the basis for a restitution claim since “there was nothing to restore.”
“The second characteristic of duress that is absent here is that the defendant’s act that causes the plaintiff to part with something of value must be unlawful,” the justice continued.
Breach of Contract
She reasoned that Univision’s reduction in its advance payments to Platino and the alleged failure to market and distribute Platino’s records, if true, could amount to a breach of contract. However, she concluded, those acts and omissions, if true, were neither unlawful nor wrongful themselves.
Presiding Justice Tricia A. Bigelow and Justice Laurence D. Rubin joined Flier in her decision.
Jay M. Coggan, David N. Tarlow and Jessica N. Trotter of Coggan & Tarlow represented Platino Records while R. Alexander Pilmer, Xanath McKeever and Sasha K. Danna of Kirkland & Ellis represented Univision.
The case is Platino Records, Inc. v. Univision Music, LLC, B212336.
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