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Westbound Records, Inc. v. Phonogram

OPINION FILED SEPTEMBER 5, 1979.

WESTBOUND RECORDS, INC., ET AL., PLAINTIFFS-APPELLANTS,

v.

PHONOGRAM, INC., ET AL., DEFENDANTS-APPELLEES.



APPEAL from the Circuit Court of Cook County; the Hon. DONALD J. O'BRIEN, Judge, presiding.

MR. PRESIDING JUSTICE SIMON DELIVERED THE OPINION OF THE COURT:

This appeal is related to the appeal in Bonner v. Westbound Records, Inc. (1979), 76 Ill. App.3d 736, 394 N.E.2d 1303, also decided today. In that case, a summary judgment holding that certain agreements between the plaintiffs (Bonner et al.) and the defendants (Westbound Records, Inc. and Bridgeport Music, Inc.) were void and unenforceable was reversed and remanded. To the extent that the facts and holdings set forth in the opinion in cause No. 77-542 are relevant to the disposition of this appeal, they are incorporated herein without restatement.

This is an action by Westbound Records, Inc., and Bridgeport Music, Inc. (referred to collectively as Westbound), against Phonogram, Inc., and Unichappell Music, Inc. (referred to collectively as Mercury Records). The complaint charges that Mercury Records tortiously interfered with a contractual relationship Westbound had with LeRoy Bonner and four of his associates including Clarence Satchell (sometimes hereafter referred to as the Satchell group) who were members of a rock music group known as The Ohio Players. Mercury Records is a competitor of Westbound and in the same line of business.

The circuit court granted summary judgment in favor of Mercury Records and against Westbound. In granting this summary judgment, the circuit court judge referred to the summary judgment previously granted in favor of the Satchell group and against Westbound (appealed to this court as cause No. 77-542) and incorporated the order granting summary judgment in favor of the Satchell group into the order granting summary judgment in this case. The circuit court judge then found that Westbound was "bound by equitable estoppel and res judicata from asserting herein anything other than as found" in the order granting summary judgment in favor of the Satchell group. We believe that the trial judge intended in his finding to refer to collateral estoppel or estoppel by judgment rather than to "equitable estoppel." The trial judge then found that Mercury Records could not be guilty of tortious interference with any business relationship between The Ohio Players and Westbound or of tortiously inducing The Ohio Players or the Satchell group to breach their contracts with Westbound because there were no binding contracts between them.

The issues raised by this appeal are: did the circuit court err in granting summary judgment in favor of Mercury Records and against Westbound on the ground stated in the court's order? and, are there issues of fact to be resolved in determining whether Mercury Records tortiously interfered with contractual or business relationships between The Ohio Players or the Satchell group and Westbound?

• 1 For the answer to the first question we refer to our opinion disposing of the appeal in cause No. 77-542. In that opinion we held that the circuit court erred in finding that the agreements between The Ohio Players and Westbound were void and unenforceable and we reversed and remanded the summary judgment entered against Westbound. Thus nothing decided in Bonner v. Westbound precludes Westbound by collateral estoppel, estoppel by verdict or res judicata from contending in this action that there were valid and enforceable contracts between Westbound and The Ohio Players with which Mercury Records tortiously interfered, and the circuit court judge erred in this case in so finding. The foundation for the circuit court's summary judgment in favor of Mercury Records is shattered by our decision in Bonner v. Westbound Records, Inc. Therefore, the summary judgment in this case must be reversed and remanded for further proceedings unless no issue of fact appears with respect to whether Mercury Records may have tortiously interfered with the contractual or business relationships between The Ohio Players and Westbound or induced the Satchell group to breach those agreements.

The facts presented by Mercury Records may be summarized as follows: Mercury Records first learned in the fall of 1973 that The Ohio Players were interested in a new recording contract. This information came to Mercury Records from Elzy White who at that time was not affiliated with Mercury Records, Westbound or The Ohio Players. White informed the west coast division head of Mercury Records, Denny Rosencrantz, that The Ohio Players were in search of a new recording contract and that their arrangement with Westbound was expiring. Rosencrantz referred the matter to Mercury Records' president Irwin Steinberg. Steinberg instructed Rosencrantz to pursue the matter, but first to determine if in fact The Ohio Players were available and free to contract with a new recording company. Rosencrantz then set up a meeting with The Ohio Players in Chicago, which took place on November 29, 1973.

At the meeting in Chicago The Ohio Players were represented by Elzy White, Clarence Satchell and Hubert Satchell, father of Clarence. Steinberg represented Mercury Records. At this time The Ohio Players had still not familiarized Elzy White with the terms of the existing Westbound contract. Clarence Satchell stated the terms of a new recording contract desired by The Ohio Players. Steinberg responded that these were not objectionable. But on learning that the Westbound agreement had not yet expired, Steinberg brought the discussions to an abrupt end. Steinberg said that Mercury Records could not pursue the matter because of the existing agreement with Westbound.

Satchell however persisted in discussing the matter further and represented to Steinberg that the Westbound agreement had been breached by Westbound and that it could be terminated. Steinberg responded that he could not advise Satchell on this point, but that when the agreement with Westbound was terminated, Mercury Records would be interested in further discussions of a new contract.

After the November 29, 1973, meeting, Mercury Records drafted the terms of an agreement which it planned to offer to The Ohio Players in the event they were free to execute a new recording agreement. The terms of the new agreement were discussed at a subsequent meeting with Satchell in the middle of December 1973, along with other topics he raised, including monetary advances and production control. Mercury Records informed The Ohio Players that if their relationship with Westbound was as Satchell had represented, Mercury Records would discuss the proposed topics in more detail.

Mercury Records did not have a copy of the agreement between The Ohio Players and Westbound at the time of the mid-December 1973 meeting. Subsequently, a copy of that agreement was furnished to Mercury Records, and Mercury Records determined that the agreement was terminable. The Ohio Players terminated their agreement with Westbound on January 8, 1974, and Mercury Records tendered its proposed contract with The Ohio Players which was accepted and executed on January 14, 1974.

The facts advanced by Westbound, taken from the depositions of Rosencrantz, Steinberg, Clarence Satchell and Carol Forney, Steinberg's assistant, and also based on exhibits, generally parallel the time sequence set forth by Mercury Records, but differ in several material respects from the details set forth by Mercury Records. As early as September 1973, Mercury Records was urging The Ohio Players to join its organization. Rosencrantz, head of Mercury Records' west coast division, had numerous discussions with Elzy White, who Westbound identifies as the manager of The Ohio Players. These conversations commenced in September 1973. Mercury Records reimbursed White in the amount of $50 for numerous lengthy phone calls in connection with the negotiations. The interoffice memorandum approving this expenditure was dated December 7, 1973. It was written by Forney and stated, "We are presently negotiating with * * * The Ohio Players."

Rosencrantz proposed and arranged a meeting in November 1973 in Chicago between Steinberg, White, Clarence Satchell and Hubert Satchell, his father. Before the meeting, Rosencrantz wrote to Steinberg that "at this point it looks very good and I know how bad we want this act." During the November 29 meeting in Chicago, Clarence Satchell informed Steinberg that their group was still under contract with Westbound. Satchell explained, however, that he felt their contract with Westbound had been breached and that the agreement could be broken because The Ohio Players were not receiving adequate royalty payments. Steinberg responded, "Well, the day you do that, come back and talk to me." Despite Steinberg's statement, Mercury Records presented a written proposal for an exclusive recording agreement to the Satchell group on December 7, 1973. This proposal included a $50,000 bonus for signing. The author of the letter setting forth that proposal was Forney. She admitted that it contained a detailed offer for a recording agreement between the Satchell group and Mercury Records and that she had received the details of the proposal from Steinberg himself.

The Mercury Records' proposal to the Satchell group stated that a contract between Mercury Records and the Satchell group would become effective only upon termination of the agreement between Westbound and The Ohio Players. So far as Steinberg could recall, the royalty rate proposed was the highest ...


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