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Daisley v. Blizzard Music Limited (US)

United States District Court, C.D. California

May 1, 2017

ROBERT DAISLEY
v.
BLIZZARD MUSIC LIMITED (US) ET AL.

          Present: The Honorable CHRISTINA A. SNYDER

          CIVIL MINUTES - GENERAL

         Proceedings: DEFENDANTS' MOTION TO DISMISS OR STAY ACTION (Dkt. 41, filed March 8, 2017)

         I. INTRODUCTION

         On August 8, 2016, plaintiff Robert Daisley filed this action in the District Court for the State of Nevada against defendants Blizzard Music Limited (US) (“Blizzard US”) and John Michael “Ozzy” Osbourne. Dkt. 1, Ex. 1 (“Compl.”). On August 31, 2016, defendants removed this case to federal court in Nevada. Dkt. 1. On February 22, 2017, the U.S. District Court for the District of Nevada granted defendants' motion to transfer this case to this district. Dkt. 26.

         Plaintiff asserts three claims: (1) fraud against Blizzard US, (2) fraud against Osbourne, and (3) accounting against both defendants. Compl. ¶¶ 97-130. The gravamen of plaintiff's complaint is that defendants deprived plaintiff of his rightful compensation because Blizzard U.S. improperly deducted 15 percent from its gross receipts before remitting payments to its parent company, Blizzard Music Limited (UK) (“Blizzard UK”), which distributes royalties to plaintiff.

         On March 8, 2017, defendants filed a motion to dismiss or stay this action pending arbitration or, alternatively, to dismiss this action for failure to state a claim on which relief may be granted. Dkt. 41 (“Motion”). Plaintiff filed his opposition on March 27, 2017, dkt. 43 (“Opp'n), and defendants filed their reply on April 10, 2017, dkt. 46 (“Reply”).

         Having carefully considered the parties' arguments, the Court finds and concludes as follows.

         II. BACKGROUND

         Plaintiff alleges the following facts.

         Plaintiff is a musician and composer who co-authored songs on two albums- Blizzard of Ozz and Diary of a Madman-with Osborne, among others. Compl. ¶¶ 3, 19-31, 112. Plaintiff refers to the songs on these two albums collectively as the “Disputed Compositions.” Id. ¶ 32.

         Blizzard U.S. is a Nevada corporation that is the wholly-owned subsidiary of Blizzard UK. Id. ¶ 11. Osbourne is the president, treasurer, director, and CEO of Blizzard US, and served as the lead vocalist on Blizzard of Ozz and Diary of a Madman. Id. ¶¶ 12, 85.

         On July 1, 1980 and February 1, 1981, plaintiff assigned his author share of the copyrights for the Disputed Compositions to Blizzard UK. Id. ¶¶ 34, 36. Plaintiff refers to these assignment contracts as the “Songwriter Agreements.” Id. ¶ 33.

         Blizzard UK administers the copyrights for the Disputed Compositions and is responsible for the collection and distribution of royalties to plaintiff. Id. ¶ 39. The royalties are earned through various types of licenses and sales, which plaintiff refers to collectively as “Commercial Exploitations.” Id.

         Under each of the Songwriter Agreements for the Disputed Compositions, Blizzard UK is required to “pay or cause to be paid to the Composer/Author in respect of said work . . . 90 percent . . . of all gross royalties and other payments received by the Publisher in respect of sound recordings, piano rolls, and all other devices for audibly and visual reproducing the said work for sale or hire in the United Kingdom of Great Britain and northern Ireland.” Id. ¶ 41. For income earned through Commercial Exploitations in the United States and other territories, Blizzard UK was required to pay plaintiff “90 percent . . . of all monies received in respect of the right to record the said work on sound tracks for use with cinematograph, television and other films, and to the right to use said work (whether prerecorded or not) in any television or other programme.” Id. ¶ 42. On information and belief, plaintiff alleges that Osbourne relied on Blizzard U.S. to serve as the publisher for the Disputed Compositions in the United States, including the Commercial Exploitation of the Disputed Compositions. Id. ¶ 43.

         Since the execution of the Songwriter Agreements, Blizzard UK has provided royalty statements to plaintiff twice a year, which are required to represent accurately payments in accordance with the terms of the Songwriter Agreements, including (a) that Blizzard UK received 100 percent of the agreed-upon license fee; (b) the share to be allocated to the recipient for the specific Disputed Composition; and (c) the royalty rate applied. Id. ¶ 44.

         In or around February 2014, plaintiff-concerned about his royalty statements and the amount of compensation received as a result of the Commercial Exploitation of the Disputed Compositions-attempted to conduct a comprehensive inspection of the books and records for the Disputed Compositions. Id. ¶¶ 55-57. The audit, conducted by Audit Time, LLC, revealed that Blizzard U.S. improperly deducted 15 percent for the gross receipts on Commercial Exploitations negotiated by Blizzard US. Id. ¶ 63. As a result, only 85 percent of the gross receipts collected by Blizzard U.S. were transferred to Blizzard UK. Id. ¶ 64. However, Blizzard UK represented to plaintiff that the 85 percent was “100 percent” of the gross receipts on the royalty statements and allegedly concealed from plaintiff the withholding of 15 percent of the royalties owed to him. Id. ¶ 65.

         None of plaintiff's royalty statements disclosed this deduction of income and none of the Songwriter Agreements contained any rights for Blizzard U.S. or Blizzard UK to undertake the extra deductions. Id. ¶¶ 66-67.

         On October 2, 2014, plaintiff raised his concerns about fraudulent conduct with Blizzard UK's counsel, Sheridans. Id. ΒΆ 70. On October 16, ...


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