[Author's note: This originally ran in The 910 in 1992. It appears here by permission of both the author and The 910. A few changes were made in the text for this posting, because a few things bugged me after I saw them in print! As this is copyrighted material, I'd advise you not to violate the reserved rights; after all, O.J.'s Dream Team is now looking for work!
"Here comes old flat top, he comes groovin' up slowly"In paying homage to Chuck Berry, one of his musical influences, in the song "Come Together", John Lennon could not have imagined that he was opening himself up to not one, but two lawsuits.
Most fans of John Lennon are at least somewhat aware that John was sued by Morris Levy in the mid-1970's over a dispute regarding the album "Roots," a mail-order record distributed by one of Levy's companies. The fact that there was such a lawsuit is often mentioned in Lennon biographies and in other books about the careers of the Beatles, especially when Lennon's 1975 album "Rock and Roll" is discussed, and the original Roots album has become a collectable among Lennon fans. This article will examine the second case brought by Morris Levy against Lennon, and Lennon's counterclaim, both at the federal district court level and on appeal to the U.S. Court of Appeals, Second Circuit. (footnote1) The information contained in this article will come primarily from those written opinions, and any information not found therein will be contained in a footnote.
Several defendants were named. Lennon was identified by the trial judge as
"a singer, musician and composer and also a member of the former English rock music group known as `the Beatles.'"
He was also referred to as the president of Apple Records, Inc., another defendant in the suit. Capitol Records and EMI Records, Lennon's record companies in the U.S. and abroad, were also sued. One other person, Harold Seider was also named as a defendant, and was identified as "an attorney and Lennon's business advisor." The Defendants (except Seider) all countersued Levy.
The case was settled out of court on October 12, 1973 (and will be referred to herein as "the `Come Together' settlement"). As part of the settlement, the lawsuit was dropped in return for Lennon's promise to record three songs belonging to Big Seven for his next album. (footnote 2) At the time of the settlement, Lennon was in Los Angeles working on an album of rock and roll hits of the 1950's. The judge stated that "Lennon was working with one Phil Spector, a successful producer of rock and roll records. At some point these recording sessions terminated because of difficulties created by Spector." (footnote 3) Spector appropriated the tapes and Lennon did not retrieve them until July 1974, when Capitol Records paid $90,000.00 for them.
By that time, Lennon had commenced work on the "Walls and Bridges" album, and did not resume work on the oldies albums. " Walls and Bridges" was released in September, 1974, and was the next album released by Lennon following the settlement in October, 1973, but did not contain the three songs belonging to Big Seven as specified in the terms of that settlement. (footnote 4) Levy considered this to be a breach of the October 12, 1973 agreement and requested a meeting with Lennon to discuss the situation.
As for what transpired at the October 8, 1974 meeting, the parties were in agreement that the discussions started about the problems that Spector had caused in completing the oldies album. All agreed that the discussion turned to the possibility of Lennon completing the album and having it marketed by Levy through television promotion. Lennon was unquestionably interested in such a marketing move, partly because he was concerned that the delay in completion of the oldies album had somehow diminished its chance of success if marketed through normal channels, and partly because he was interested in using a different means of promotion and distribution.
It was also conceded by the parties that the question arose about Lennon's ability to grant Levy the rights to market this album. The complete conversation was a matter of contention between the parties. Levy testified that he had told Lennon and Seider that permission of Capitol was not needed for mail order distribution in the United States, and that Levy based this opinion on a published interview with Allen Klein (Playboy, Nov. 1971) and a private discussion with Klein in 1973. (footnote 5) Lennon and the other defense witnesses recalled that Levy was told that permission from EMI was needed before any rights, mail order or otherwise, could be granted to him. In any event, it was clear that despite Levy's assurances to the contrary, the parties recognized on October 8, 1974 that there was a potential impediment to the contract.
Following the meeting, there were several meetings and discussions that were brought up at trial in support of Levy's contention that a contract had been made on October 8, 1974. For example, Lennon invited Levy to hear the Spector tapes the next day and Lennon accepted Levy's invitation to rehearse at Levy's farm in Ghent, New York prior to the recording of the additional songs necessary to complete the album. Following the meeting, Lennon made statements to friends that he was making an album for Levy and in mid-November, gave Levy some rough tapes of the songs he intended to include on the oldies album.
Meanwhile, there was activity as far as the business end of the matter was concerned. Levy met with Seider and Michael Graham, an attorney for Lennon in mid-November, 1974. At this meeting, there were some discussions about what Levy's costs in producing and promoting the record would be, so as to get some idea as to what Levy's profit and Lennon's royalty would be. Seider also made some attempts to contact EMI about a possible arrangement with Levy, but Seider did not talk to anyone with Capitol or engage in substantial discussions with EMI until early January, 1975. In late December, John and Julian Lennon, with May Pang, were Levy's guests in Florida. Seider came to Florida to secure Lennon's signature on some documents to dissolve the Beatles' partnership and while there, Levy urged Seider to pursue the matter with EMI, and Seider agreed to do so.
On December 31, 1974, an attorney for Lennon sent a letter to Levy stating that Lennon was prepared to go forward with the second phase of the "Come Together" settlement, (footnote 6) and made no mention of the oldies album. Levy wrote back on January 9, 1975, stating the "Come Together" settlement had been superseded by a new agreement, and Levy would be marketing Lennon's record "throughout the world by use of television advertising." About this time, Capitol Records became active. It requested a meeting with Seider, who explained to Capitol for the first time what had transpired during the previous three months. Understandably, Capitol met this news with little enthusiasm. Capitol then met with Lennon and Seider in Los Angeles and it was decided that Lennon's oldies album would be marketed through Capitol.
After learning from Seider that Lennon's record would be issued by Capitol Records, Levy decided that he would nevertheless proceed, using the tapes Lennon had given him in November, 1974. Levy released his version, called "Roots," in early February, 1975; Capitol rush-released its version, called "Rock `n' Roll" about February 15, 1975. Capitol threatened legal action against those involved in the manufacturing and distribution of Roots, and production of Roots halted shortly thereafter.
In order to prevail, Levy had the burden of showing that a contract had been formed at the meeting on October 8, 1974. The judge stated that at the very least, Levy would have to show that an agreement had been reached by which Lennon would grant Levy the rights to distribute an album of Lennon's songs and that Levy was to pay Lennon or Apple a royalty, with the amount of the royalty being specified with reasonable certainty.
Levy had difficulties in stating what the terms of the contract. Early in the legal proceedings, Levy had made some sworn allegations to the effect that the October 8, 1974 agreement granted Levy worldwide rights for distribution through both mail order and retail outlets. After the trial commenced, Levy realized that such a contract was not possible, and conceded that EMI had exclusive rights to Lennon's records outside of North America, and had exclusive rights to distribute his records through retail channels in North America. So, during the trial, Levy amended his complaint to state that the contract only covered mail order sales in North America. (footnote 8)
For his proof on this issue, Levy related his version of the
meeting in which he gave Lennon advice about his contract with
EMI. In addition to reading excerpts from the Playboy interview
and hearing what Levy claimed he was told by Klein in 1973, the
judge examined the actual contract between Apple and Capitol,
approved by EMI. The pertinent part of the agreement said the
Apple hereby grants to Capitol . . . all of the rights which Apple derives under the Licensing Contract except . . .(ii) the distribution by mail direct to consumers.
Levy, of course, said that this supported his position that Lennon was free to enter into the contract with Levy. Lennon and the other defendants contended that the mail order distribution rights discussed in the contract referred to "record club" distribution, not the type of mail order business Levy intended to carry out. The defense also cited an underlying restriction in the EMI-Apple contract, which prohibited any party assigning that agreement or any part of it without the consent of the other party, and stated that the Capitol contract was subject to those restrictions as it had to be approved by EMI.
The judge never had to decide who was right on their interpretation of the Apple-Capitol contract, because he ruled that there was no contract. He found that Levy failed to prove that those in attendance at the October 8, 1974 meeting singled out the United States mail order rights from all other rights, and then agreed that Lennon had the ability to convey those limited rights to Levy. He further stated that there also was no evidence that Lennon had shown a willingness to go along with such a distribution scheme, even if he had the ability to do so. Levy's own testimony was that both retail and mail order
distribution was discussed at the Club Cavellaro meeting, and had Lennon agreed to forgo Levy's retailing plan, something along those lines would have been discussed. The judge found that the October 8, 1974 meeting resulted in a tentative agreement for Lennon to provide 15 or 16 songs in the event that Lennon in fact made a record for Levy, but at this meeting no agreement was reached as to the amount or method of calculation of Lennon's royalty.
That then left one final matter, and that is the issue of damages to Levy for Lennon's breach of the "Come Together" settlement. There was no question that "Walls and Bridges" was chronologically the "next album" after the settlement of October, 1973, but the court found that the words "next album", in the context of the agreement, referred to the planned oldies album. Lennon had recorded three songs owned by Levy's company, Big Seven, but only "You Can't Catch Me" and "Ya Ya" actually appeared on "Rock `n' Roll"; the third, "Angel Baby", was not included on the Capitol release. Levy claimed that the omission of "Angel Baby" caused damages not only in the lost royalties from "Rock `n' Roll" sales, but also from the additional lost revenue that Levy would have had when other artists heard the song and covered it as well. Levy tried to persuade the court that "Angel Baby" would have been performed by numerous other artists after Lennon released it. Levy relied on the fact that the song "Close to You" had generated about two-thirds of its post-1970 royalties from cover records. The court gave little weight to this argument, stating that one track on an album by Lennon would not have the same exposure as a "hit single" like the Carpenters' version of "Close to You" and thus, there would not likely be a rash of new versions of "Angel Baby". Levy was awarded $6,795 in damages for Lennon's breach of the "Come Together" settlement.
Lennon's claim can be summarized as having three main parts. First, he maintained that the release of Roots and the resulting rush-release of "Rock `n' Roll" caused the latter album to sell less copies than it normally would have done, and therefore Lennon made less money on the royalty payments than he otherwise would have. Second, he asserted that the list price of "Rock `n' Roll" was reduced because of "Roots," and thus his share of the proceeds was also lessened. Third, he claimed his reputation was damaged by the shoddy quality of the album jacket and music of "Roots."
The trial court found that Lennon had suffered damages in the amount of $145,300.00 by Levy's unauthorized release of "Roots." The verdict in Lennon's favor was affirmed but modified on appeal. Before looking at the method used to determined this figure by the district court, and why it was reduced on appeal, an examination of what transpired after the release and recall of "Roots" is necessary.
Although Levy had been warned that Capitol was claiming rights to this material, Levy released his record on the Adam VIII label, with a list price of $4.98 per album and $5.98 per tape, which was two dollars per unit less than the standard market price for albums and tapes in February, 1975. Shortly after the release of the "Roots" album, television commercials were aired in a few markets. Capitol and Lennon contacted the stations and Adam VIII's suppliers, who then refused to handle "Roots." A total of 1,270 copies of "Roots" was sold, with gross revenues of less than $7,000, which did not cover the cost of production and marketing of the album.
As previously mentioned, Capitol rush-released its album several weeks earlier than it would have been released. However, there was no proof that this affected the album's jacket, or the quality of the recording and production. Capitol's version was called simply "Rock `n' Roll," and was listed for $5.98 per album and $6.98 per tape, so it could compete effectively with the Levy release after it was discounted by the retailers. At the time damages were determined, the album had been out for over a year, and had sold 342,000 copies in the United States, despite generally unfavorable reviews, despite the album not being new compositions and despite a recession that caused record sales to be down generally some 15-25%". United States figures were used because "Roots" had not been released elsewhere.
To this point in Lennon's career, he had released several solo albums. The district court decided to try to average the sales totals of some of Lennon's records to try to come up with a fair figure as to what "Rock `n' Roll" should have done, and used "Walls and Bridges" and "Shaved Fish" (the two records issued immediately before and after "Rock `n' Roll," with total American sales of 425,000 units and 408,000 units, respectively), as his basis for a projection for the low side of potential sales, which was set at 425,000, the same as "Walls and Bridges." The judge then looked at the actual Canadian sales figures for "Rock `n' Roll" and then arrived at the high side figure of projected U.S. sales at over 525,000 units for "Rock `n' Roll," given the past sales figures of Lennon's releases in Canada as compared to the U.S.
All in all, the trial court found that Lennon lost an estimated 100,000 units as a result of Levy's album. Given Lennon's royalty rate of 66 cents per unit, Lennon was awarded $66,000 for lost sales. Levy also had to pay Lennon $.10 per album actually sold worldwide, because "Rock `n' Roll" was sold for a dollar less per unit, due to the perceived competition from "Roots," for an additional payment of $43,700. Of this total award of $109,700, $9,400 was withheld for payment to the American Federation of Musicians, leaving Lennon with a total award on lost royalties of $100,300.
The appellate court agreed that Lennon was entitled to some compensation for the loss of royalties, but did not approve of the manner in which the loss was computed. The appellate court noted that several of Lennon's albums were not used in making the determination of what the sales of "Rock and Roll" would have been. The album "Imagine," Lennon's best seller to date (sales in 1975 of over 1.5 million) and his three worst-selling albums, "Two Virgins," "Unfinished Music No. Two: Life with the Lions," and "Wedding Album" (each of which sold between 20,000 and 50,000 copies) were all disregarded, presumably as aberrations.
The court also noted that the sales of "Sometime in New York City" were only 164,000 copies and "Mind Games," the album preceding "Walls and Bridges," had sold 376,000 units. The appeals court held it was wrong to exclude "Mind Games" from the calculations since Lennon had cited the Canadian sales of "Mind Games" to the district court, which was used to place the "upper limit" projection of what "Rock `n' Roll would have sold. It was never explained why "Sometime in New York City" was not used to make the projections; Levy claimed that if that album was included in the calculations, "Rock `n' Roll" actually sold more copies than the figure of 321,000 one would get by averaging all post-1972 releases. (footnote 12)
Once the appellate court decided that the sales of "Mind Games" must be included with those of "Walls and Bridges" and "Shaved Fish" in making calculations, the average sales for those records was 403,000, some 61,000 more than "Rock `n' Roll." Lennon's award was thus reduced to $40,260 ($.66 X 61,000), less any fees owed to the American Federation of Musicians.
However, the president of Capitol Records gave testimony that actually helped Levy in this regard. Mr. Menon (no first name given) testified that the competition of "Roots" was only one of three factors that determined the list price of "Rock `n' Roll" would be $5.98. He also cited the condition of the marketplace in the first quarter of 1975, and the fact that the album was not one of original compositions by Lennon as considerations. He also testified that the demand for the product would have been the same at $5.98 or $6.98, and thus there would have been no decrease in sales. Based on this testimony, the appellate court reduced Lennon's award for damages due to the reduced list price of "Rock `n' Roll" from $43,700 to $14,567 (less the AFM fees), stating that the best Lennon could prove was that one-third of the extra dollar of lost revenue was due to Levy's unauthorized release of "Roots."
However, the appeals court tossed out the punitive damage award. Lennon had not shown that Levy was guilty of any evil motives, and in fact, the court found there was ample evidence to indicate there was no serious blameworthiness on Levy's part. In addition to the tentative agreement that was found to have existed between Lennon and Levy, the court also found that the whole matter could have been avoided if Lennon's agent, Seider, had promptly revealed the substance of the October 8, 1974 meeting to Capitol. The court further found that Levy's position on the Apple-Capitol contract was at least partially correct, although simplistically misplaced. There was no gross fraud, as the album was a set of performances by Lennon, even though the album erroneously claims that Lennon authorized the release. Thus, the $10,000 award for punitive damages was reversed. Therefore, the final award to Lennon totalled $84,912.96, and Levy received a judgment for $6,795.
I found it curious that the two hit singles from "Walls and Bridges" didn't propel it to more sales than slightly over 400,000. Given subsequent claims and lawsuits, it makes me wonder if Lennon had been provided accurate figures for his sales. In any event, the sales of "Mind Games," with only one hit single should have tipped off the court that Lennon was not damaged by Levy's action. "Rock `n' Roll" had only a cover of "Stand By Me", which barely cracked the top twenty in America.
And damages for the loss of revenue due to the reduced list price is also a bit far-fetched. Since most records are discounted anyway (as I recall, $6.98 records sold for $5.47 in my local Wal-Mart), the notion that the sales price of "Roots" had anything to do with the decision to knock a dollar off the list price of "Rock `n' Roll" approaches the realm of fantasy. Even the president of Capitol, whose company would stand to receive 90% of the award for lost revenue didn't support this position very well.
As for damages to Lennon's reputation, the statute under which Lennon sued would have guaranteed him something if Levy was found to have used Lennon's likeness in an unauthorized manner. My vote would have been for $1.00. By 1975, Lennon had been busted for drugs, had a widely covered separation from his wife which featured drunken binges in L.A., had been filmed nude for Yoko's movie, "Self-Portrait," and the "Two Virgins" cover, had been associated with political leftists, and had fought publicly with his former bandmate, Paul McCartney. How Levy damaged Lennon's reputation in any way is still a mystery to me. Those that loved him, still did; those that didn't, still didn't.
But don't cry for Levy. He knew better. He had been in the business long enough to know what a record contract contains and what it takes to formulate a valid contract, especially with an artist already working for another label.
One final observation that needs to be made is that the judges in this case, both trial and appellate, were hopelessly out of their league in dealing with these issues. A couple of quotes will illustrate that point. Regarding the recession that affected sales in early 1975, the exact quote was: "despite the fact that teenage purchasing power was at the time affected by a recession . . ." These judges didn't realize that Lennon's audience did not primarily consist of teenagers at this time.
In discussing the condition of the "Roots" cover and record, the judges said that the out-of-tune track and indistinct voices were "reasonably clear even to appellate ears unused to Lennon's style of music". This conjures notions of the judges, sitting in chambers, trying to figure out the words to "Bony Maronie"! Still, all things considered, I think the judges all did the best they could. It just wasn't within their field to tell Lennon that his album didn't sell as well as he would have liked because it wasn't a great record. The buying public and rock press did that.
To send email to the author click here
1. Big Seven Music Corp. and Adam VIII, Ltd. v. John Lennon, et al, 409 F. Supp. 122 (1976); same case name on appeal--554 F.2d. 504 (1977). These abbreviations mean that to find this case in a law library, ask the librarian for volume 409 of the Federal Supplement, and look at page 122 to see the opinion from the trial judge, and for volume 554 of the Federal Reporter, Second Series, on page 504 to see the decision on appeal.
2. Even though the companies that controlled Lennon's and McCartney's publishing interests were involved, there does not seem to be any indication that McCartney was affected in any way by the lawsuit or the settlement, despite the fact that the offending song was credited to "Lennon-McCartney". It is widely recognized by that time as "John's song", and John took responsibility for the settlement.
3. While Spector, not a party to this litigation, made a handy scapegoat, and while his conduct was certainly erratic, one must recall that this was during John's "lost weekend" in Los Angeles, a period of his life that was hardly marked by stable behavior.
4. One such song did appear on "Walls and Bridges." "Ya Ya", which was published by one of Levy's companies, closed out the second side, and was a duet between John and his eleven year old son, Julian. However, this fact is not mentioned anywhere in the court's opinion.
5. Fans of the Beatles need no introduction to Allen Klein, the man that tried to get managerial control of the Beatles after the death of Brian Epstein, and eventually did exercise some control over Lennon, Starr, and Harrison. It is interesting that Levy would quote Klein as a source of valuable information in a meeting in which Lennon was attending, as Lennon had severed ties with Klein by that time, and wrote a song on "Walls and Bridges" that expressed his opinion of Klein.
6. Just what this "second phase" of the settlement was supposed to be is not clear from reading the court's opinion. The agreement was that three songs in Levy's catalog would be on Lennon's "next album", and the next one released after the settlement was "Walls and Bridges." Also, the name of the attorney that wrote the letter is omitted from the text of the opinion. Presumably, it was not the aforementioned Michael Graham. Graham would have had knowledge of the discussions with Levy; some of Lennon's other attorneys may not have been informed as to these negotiations.
7. Contrary to popular belief, it is possible for a oral contract to be enforced. (There are some agreements that must be in writing to be enforced, such as contracts regarding the sale of real estate.) However, in order to have a legally binding agreement, several factors must be present, including what the law calls "a meeting of the minds" A contract must also be definite in its terms, or at least clear enough that the meaning and intent of parties can be determined. Of course, the best and most common practice is to reduce the terms of an agreement to writing so that each party can see what the other believes the agreement to be. If a party then believes the other to have broken the agreement, the interpretation of the contract setting forth the rights and obligations of the parties is much easier when the terms are written.
8. It is not uncommon for parties to amend their pleadings after the initial complaint is filed, because depositions are taken and documents exchanged that causes the parties to better understand their position. It is less common, but not completely unheard of, for a party to amend their complaint several days into trial. However, the amendment Levy made was such a radical change in his position that the Court noted that his difficulty in formulating the terms of the contract would have itself been sufficient to cast doubt on the existence of the necessary meeting of the minds.
9. New York Civil Rights Law 51 gave Lennon a claim for the unauthorized use of his name and picture. This law provides for both compensatory and punitive damages.
10. Neither the amount awarded to the companies, nor the terms of the settlement were revealed in the written opinion. It is not terribly unusual for parties to compromise after a trial and before the appeal is decided, especially if both sides are running up big legal bills, and if the prevailing party is afraid that delay might cause the judgment to be harder to collect.
11. Through February, 1976, "Rock `n' Roll" had sold about 65,000 copies in Canada, about 19% of what had been sold in the U.S. However, there was some difficulty in using Canadian figures. In comparison of the sales figures for the U.S. and Canada for "Mind Games" and "Walls and Bridges," Lennon's sales in Canada were 12.5% of the total sales in the United States. Lennon's best seller, Imagine, sold only about 8% of the U.S. total. This factor, along with some of the other intangibles, such as the Canadian economy and the tastes of the purchasers in that market, made the use of these figures less than totally persuasive evidence as to the damage caused by "Roots."
12. It's not clear exactly what the Lennon position was. Simple math would show that the average would be highest if all records from "Imagine" through "Shaved Fish" were used. "Live Peace in Toronto" and "John Lennon/Plastic Ono Band" were not mentioned. It appears that the Lennon camp was determined to leave out the three poorest sellers, and "Sometime in New York City," and to do so, had to maintain that records issued that long ago could not reasonably be used to estimate the sales of "Rock `n' Roll."
13. Note the use of worldwide figures in this section. Although Lennon and his companies would have been free to charge whatever list price they chose in the rest of the world without fear of competition from Roots, the dollar reduction was uniform throughout the world.
14. In New York, the standard for an award of punitive damages is one of "moral culpability" on the wrongdoer's part, involving "evil and reprehensible motives or gross fraud". In general, punitive damages are assessed to punish the defendant and to discourage others from acting in a similar manner. They are often called "exemplary damages", because one purpose to make an example of the defendant. One sees punitive damages often in cases against large companies that hide or ignore data about the safety of their products, thus causing peril to consumers. They are also common in slander and libel cases.
15. Nicholas Schaffner, "The Beatles Forever," page 166. Schaffner made a similar observation about Harrison on page 192: "Perhaps 'Dark Horse' and 'Extra Texture' had broken the fans' habit of snapping up his albums on the strength of Harrison's name alone." I see the same thing happening with Lennon's sales. Double Fantasy was heavily promoted, and didn't do poorly before Lennon's death, but I don't think anyone believes it would have sold as many copies had John lived.