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Love can make you happy, but it takes royalties to make a music producer rich. In a court battle over the rights to the songs “Love Can Make You Happy” and “Fireball,” the 3rd U.S. Circuit Court of Appeals has rejected a plea by the original producer for a cancellation of his contract with a record label. The unanimous three-judge panel, affirming a non-jury trial verdict by Chief U.S. District Judge James T. Giles, found that plaintiff Gilbert A. Cabot has “an adequate remedy at law” to redress the Jamie Records Co.’s failure to account and pay royalties. But the court, in Cabot v. Jamie Record Co., nonetheless handed Cabot a minor victory by holding that Giles had erred in giving half of the royalties to Cabot’s former partners. Cabot, who was represented on appeal by Alfred W. Putnam Jr. of Drinker Biddle & Reath, was a music producer in the late 1960s, marketing records under the Sundi Records label. Cabot and Frank Edmondson later formed RendezvousTobac Music Co. In 1969, Cabot entered into a master purchase agreement with Jamie Record Co. in which he sold the master recordings and all rights to “Fireball” and “Love Can Make You Happy.” Jamie Record paid $1,000 for each of the songs and promised to pay royalties and to give Cabot a bi-annual accounting. Both songs went on to become hits, and “Love Can Make You Happy” became a gold record. But the business relationship soon soured as Jamie Record failed to send out financial statements every six months as it had promised and made only irregular royalty payments between 1969 and 1986. Jamie Record’s president, Harold Lipsius, later suspended all royalty payments to Sundi Records, claiming that Cabot had breached their agreement by licensing the song “Love Can Make You Happy” to another company and because of confusion about who was the proper payee when Edmondson claimed he was entitled to 50 percent. In 1996, Cabot filed suit in the U.S. District Court for the Eastern District of Pennsylvania seeking a rescission of the contract, arguing that he should be allowed to recapture his copyrights due to Jamie Record’s failure to pay royalties. Cabot also argued that Jamie Record had failed to “exploit” the value of the songs, a “failure of consideration” that he said warranted rescission. At trial, Cabot alternatively asked that the court consider cancellation of the contract. Judge Giles ordered Jamie Record to pay “all sums presently payable” but found that RendezvousTobac was entitled to half of the royalties. But Giles refused to rescind or cancel the contract. On appeal, Cabot did not challenge the denial of rescission but said Giles had erred by refusing even to consider his request for cancellation. Putnam argued that cancellation is available under Pennsylvania law and that Giles erred by rejecting the theory on the grounds that it is unavailable and “inconsistent with the rationale underlying the concept of rescission.” But U.S. Circuit Judge Anthony J. Scirica said the court did not need to decide whether “partial rescission” or cancellation is available under Pennsylvania law because Giles had correctly held that Cabot had an adequate remedy at law and therefore was not entitled to equitable relief. Scirica found that rescission is appropriate only in “extraordinary circumstances,” when the plaintiff has suffered a “fundamental” breach that “affects the very essence of the contract and serves to defeat the object of the parties.” Putnam pointed to the 9th U.S. Circuit Court of Appeal’s decision in Peterson v. Highland Music in which the court upheld rescission for failure to pay royalties for the song “Louie, Louie.” But Scirica said Peterson was different since none of the royalty payments were ever made. By contrast, Scirica said, Cabot was paid $1,000 advances on royalties and received more than $60,000 from Jamie Record since then. And since 1991, he said, Cabot has also received more than $10,000 from BMI. But Scirica sided with Cabot on a final issue by vacating an order in which Judge Giles said Edmondson was entitled to 50 percent of the royalties. Scirica’s unpublished opinion was joined by U.S. Circuit Judge Theodore A. McKee and visiting Senior U.S. District Judge Harold Ackerman of the District of New Jersey. Jamie Record Co. was represented by attorney Hugh J. Bracken of Media, Pa.

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