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The Oglio Entertainment Group, Inc., et al v. Hartford Casualty Insurance Company

November 1, 2011

THE OGLIO ENTERTAINMENT GROUP, INC., ET AL., PLAINTIFFS AND APPELLANTS,
v.
HARTFORD CASUALTY INSURANCE COMPANY, DEFENDANT AND RESPONDENT.



APPEAL from an order of the Superior Court of Los Angeles County, Ernest M. Hiroshige, Judge. (Los Angeles County Super. Ct. No. BC386210)

The opinion of the court was delivered by: Johnson, J.

CERTIFIED FOR PUBLICATION

Affirmed.

The trial court sustained, without leave to amend, the demurrer of the Hartford Insurance Company (Hartford) to Oglio Entertainment Group, Inc. and Carl Caprioglio's (collectively, Oglio) first amended complaint for breach of contract and breach of the implied covenant of good faith and fair dealing, based on Hartford's denial of coverage. Oglio appeals the order. We affirm.

BACKGROUND

Oglio is an independent music label based in Los Angeles County. Hartford issued a "Spectrum" business insurance policy to Oglio, effective January 13, 2006 through January 13, 2007. After Hartford disclaimed coverage when Oglio was sued by one of its recording artists during the policy period, Oglio filed an action for breach of contract and other claims against Hartford, and the trial court sustained Hartford's demurrer without leave to amend.

I. The underlying complaint by Davis against Oglio

On January 19, 2006, recording artist Mark Jonathan Davis sued Oglio in Los Angeles Superior Court. The complaint alleged that Davis was a recording artist recording and performing music under the professional name "'Richard Cheese' . . . a comedy character created by [Davis] who performs 'lounge' or 'swing-style' versions of current and popular rock, hip-hop and pop songs." As Richard Cheese, Davis had recorded four albums, performed live concerts, appeared on television programs, given interviews and performed on broadcast and satellite radio, and had his recordings featured in motion pictures. As a result, as Richard Cheese, Davis "has developed such a recognizable name among the general public over the last five years that he is able to perform and sell records featuring his musical performances all over the world."

On August 1, 2000, Davis entered into a recording agreement with Oglio, which provided that Davis, as Richard Cheese, would record an album of lounge-style recordings of popular songs (tentatively entitled Lounge Against the Machine (LATM)) for distribution by Oglio. The recording agreement was for three years (August 1, 2000 to August 1, 2003) and provided that Oglio owned the copyrights to the recordings, excluding publishing copyrights, and Oglio would pay royalties to Davis. During the three-year period, Oglio had the right to use Davis's professional name (Richard Cheese) and likeness to advertise, market, and promote the album. This included the right to use "www.richardcheese.com" as Oglio's internet domain name to promote the album. The recording agreement also prohibited Davis from recording or distributing any similar recording (lounge music interpretations of popular music) during the three-year term, and during an additional period, prohibited Davis from performing any of the music for recording by anyone other than Oglio. Oglio had the option for two years after the execution of the recording agreement and upon payment of a minimum advance of $15,000, to require Davis to record a second album on the same terms.

The complaint further alleged that LATM was a financial success "[a]s the first comedy/music album of its kind." When in 2001 Oglio attempted to exercise its option for Davis to record a second album (lounge-style versions of songs originally performed by Ozzy Osbourne), Oglio sought to reduce the advance to $7,000. After Davis refused, Oglio attempted to modify the agreement to grant Oglio the right to a third album by Davis, which Davis also refused. Oglio then threatened to hire a different artist to record similar music, and "followed through on their threats by seeking out, in bad faith and with the intention to injure [Davis]'s recording career, other potential recording artists to record competing lounge-style versions of popular songs." In 2002, Oglio released two albums: "'Diary Of A Loungeman'" by "'Bud E. Luv,'" consisting of lounge versions of Ozzy Osbourne songs, and "'Sub-Urban'" by "'Jaymz Bee & The Deep Lounge Coalition,'" another lounge-style artist (the Competing Albums). Oglio's intent was "to use the Competing Albums as a way to piggyback on the success enjoyed by [Davis]'s . . . Album and to trade on the goodwill and public recognition earned by [Davis] . . . . Both the names of the competing artists and the titles of the Competing Albums were obviously intended by Oglio to attract fans of Richard Cheese's lounge-style versions of songs and to capitalize on [Davis]'s celebrity. Oglio's actions in this regard caused injuries to [Davis] by (i) diverting sales from [Davis]'s . . . . Album to Oglio's Competing Albums, and (ii) causing ancillary damages to [Davis], such as reducing his ability to fairly negotiate with [Oglio], and reducing the value and unique goodwill of [Davis]'s Professional Name throughout the entertainment industry."

Oglio declined to exercise the second album option and notified Davis that he was "'free to record and release CDs under the name Richard Cheese.'" Davis continued to release albums, make appearances on television and radio, and perform concert engagements as Richard Cheese. After the expiration of the recording agreement on August 1, 2003, Oglio continued to use Richard Cheese as the domain name to market and promote Oglio's albums, including Davis's LATM album and the competing albums.

The complaint alleged causes of action for breach of contract, violation of Davis's right of publicity, and intentional interference with prospective economic advantage. A fourth cause of action for breach of the covenant of good faith and fair dealing alleged that after Davis refused to accept Oglio's offer of a $7,000 advance for a second album, Oglio in bad faith and with the intention to damage Davis's recording career, signed the competing artists to record and release albums similar to Davis's LATM album. Oglio recorded and released the competing albums with the intent to injure Davis's professional reputation and goodwill and to divert sales from Davis's future albums, in an attempt to "strong-arm" Davis into accepting the low advance, while the recording agreement was still in effect. As to all four causes of action, the complaint requested money damages and an injunction ordering Oglio to transfer the domain name to Davis.*fn1

II. Hartford's denial of coverage

Oglio tendered defense to Hartford, and Hartford disclaimed coverage in a letter dated February 15, 2006. Oglio asked Hartford to reconsider the denial, arguing that Hartford had a duty to defend because the complaint alleged that Oglio's "advertisements featured on the internet" constituted "'advertisement'" as used in the policy, and Davis had been injured by Oglio's "use of [Davis's] alleged proprietary name and advertising idea in connection with Oglio's promotions and marketing." Hartford again denied coverage because "[u]sing a stage name is not an 'advertising idea' as defined by the policy. Using another's domain name is not any enumerated covered offense. Even if it were, it would then fall under Exclusion p. (7)." Oglio once again asked for reconsideration, arguing that Davis's alleged injury was a violation of his right of publicity, which was included in the policy's coverage regarding the right of privacy (appropriation of Davis's name or likeness). On April 20, 2006, Hartford again disclaimed coverage, answering that the right of publicity was separable ...


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