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Capitol Records, Inc. v. Vee Jay Records

MARCH 19, 1964.

CAPITOL RECORDS, INC., PLAINTIFF-APPELLEE,

v.

VEE JAY RECORDS, INC., DEFENDANT-APPELLANT.



Interlocutory appeal from the Circuit Court of Cook County; the Hon. CORNELIUS J. HARRINGTON, Judge, presiding. Order of January 15, affirmed, order of January 30, reversed, and order of February 5, vacated.

MR. JUSTICE BRYANT DELIVERED THE OPINION OF THE COURT:

Rehearing denied April 7, 1964.

This is an interlocutory appeal from an order entered on January 15, 1964, granting a temporary injunction "restraining and enjoining until further order of the court, the defendant, Vee Jay Records, Inc., its agents, attorneys and servants from manufacturing, selling, distributing or otherwise disposing of or advertising the sale by it, its agents, attorneys and servants of any and all recordings by the vocal group commonly referred to as the `Beatles'"; and from an order entered on January 30, 1964, denying the petition of defendant. Vee Jay Records, Inc., to dissolve the temporary injunction issued on January 15, 1964. Subsequent to the last mentioned order this court entered an order on February 5, 1964, staying the force and effect of the injunction pending argument of the appeal from the denial of the motion to dissolve.

Before proceeding further, we will indicate the disposition of this appeal. We believe that the order granting the temporary injunction was properly issued and should be affirmed. We believe that the order denying the motion to dissolve the injunction should be reversed and is now left undisposed of. We are also vacating our own order staying the force and effect of the injunction.

Before reasoning the above conclusions, a chronological background of the procedure is in order. On January 13, 1964, Capitol Records, plaintiff herein, presented its verified complaint for injunction followed on January 14 by a motion to the court for a temporary injunction. The defendant, Vee Jay Records, for various reasons, was given until January 15th to file an answer. On January 15th, defendant appeared with a motion entitled "motion to strike" which alleged a valid existing contract between Vee Jay Records and defendant, Transglobal Music Co., Inc., and which motion incorporated by reference the complaint in a certain cause of action filed in the Supreme Court of New York, entitled Vee Jay Records, Inc. v. Capitol Records, Inc., Swan Records, Inc. and Transglobal Music Co., Inc. This complaint was accompanied by an affidavit of Jay Lasker, Vice-President of Vee Jay Records, which may or may not have been verified. On January 15, upon petition of plaintiff, Transglobal Music Co., Inc. was added as a party defendant. On that same day Transglobal filed its answer admitting all the allegations in the plaintiff's complaint except that which pertained to the financial condition of defendant, Vee Jay Records. *fn1

On January 15, the court ordered: (1) that the "motion to strike filed by Vee Jay Records, Inc., defendant, is overruled and denied, and said defendant is ordered to answer said plaintiff's complaint within thirty days"; and (2) that Vee Jay Records be enjoined until further order of the court.

On January 23, defendant petitioned for a substitution of attorneys and the court so ordered. On the same day a verified answer was filed for Vee Jay Records controverting the allegations in Capitol's original complaint. Along with this, a petition to dissolve the injunction was presented alleging that the original verification on behalf of Capitol Records was faulty inasmuch as the person verifying "could not have knowledge of the facts alleged therein, particularly those facts regarding the relationship between defendants, Vee Jay Records, Inc. and Transglobal Music Co., Inc."

On January 30, the court ordered that the petition of Vee Jay Records to dissolve the temporary injunction be denied without holding a hearing on the motion. This appeal followed and we granted a stay because no hearing had been held prior to ruling on the motion to dissolve the temporary injunction, although the question was referred to a master on a general referral.

The questions which we are presented with, again in chronological order are: (1) whether the complaint of Capitol Records was properly verified; (2) whether the motion made by Vee Jay, entitled "Motion to Strike" should be considered a motion to strike or an answer; (3) whether the temporary injunction was properly issued; (4) whether the motion to dissolve was properly denied.

Although to date there has never been any kind of hearing as to the merits it is important to note that both Capitol Records and Vee Jay Records claim that each has a superior right to manufacture and sell "Beatles" records in the United States. Although prior to this suit there was only one duplication in recordings between the parties, each party alleges that it has expended considerable funds to promote the "Beatles" in the United States and that the other party is unfairly reaping the benefits of these expenditures.

The rights of Vee Jay Records stem from a contract entered into in January, 1963, allowing it an exclusive license to manufacture and sell "Beatles" recordings in the United States under certain conditions for five years. This contract was entered into with Transglobal which in turn secured its rights from EMI. There are allegations that the Vee Jay contract was terminated because of failure to make statements of sales and failure to pay royalties. There are certain rights to four recordings which Vee Jay may possess following termination, but there are allegations that these rights, if they exist, do not extend to thirteen other songs which presently appear on an LP being marketed by Vee Jay. *fn2 Capitol, on the other hand, secured its rights directly from EMI following the alleged termination of Vee Jay's contract rights.

The status quo to be maintained prior to these proceedings is difficult to ascertain in the absence of any proceedings going to the merits. For the purpose of this appeal, however, the situation as set forth in Capitol's verified complaint must be accepted. This status quo contemplates a situation where the Vee Jay rights have been terminated with no rights to the four recordings overlapping and Capitol Records alone having the right to manufacture and sell "Beatles" recordings in the United States.

The first point raised by Vee Jay is that the complaint of Capitol Records is not verified because the affidavit of Robert E. Carp, secretary of Capitol, although stated to be within his own knowledge, is actually a verification on information and belief.

Mr. Carp's verification went to the relationship between Transglobal and Vee Jay. We believe that there is no basis to this objection. The motion entitled "Motion to Strike" made no mention of this and, indeed, stated just the opposite that: "Capitol Records, Inc. and Transglobal Music Co., Inc. are owned by Electrical and Musical Industries, Ltd., and as such, had full knowledge of the existing contract between Transglobal and defendant and all information pertinent thereto." The rule applicable in this situation was stated in City of Chicago v. Larson, 31 Ill. App.2d 450, 453, 176 N.E.2d 675 (1961):

". . . where the facts are of necessity within the defendant's knowledge and not within the plaintiff's knowledge, but are stated by the plaintiff to be true, a complaint is not perforce defective. 21 ILP Injunctions, sec 162."

In Weingart v. Weingart, 23 Ill. App.2d 154, 164-165, 161 N.E.2d 714 (1959) and Callahan v. Holsman, 351 Ill. App. 1, 4, 113 N.E.2d 483 (1953) the requirement was pointed out to be "a highly technical principle" and a "snare and pitfall for the unwary member of the profession." Both cases relied upon Mr. Justice Bristow in Karlock v. New York Cent. ...


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