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Frank M. Sullivan, Iii v. Jimmy Jamison

December 1, 2010

FRANK M. SULLIVAN, III, PLAINTIFF,
v.
JIMMY JAMISON
DEFENDANT
JIMMY JAMISON AND MICHAEL STEPHAN ELLIS, COUNTERCLAIMANTS, V.
FRANK M. SULLIVAN, III (D/B/A SURVIVOR) AND SURVIVOR MUSIC, INC., COUNTER-DEFENDANTS.



The opinion of the court was delivered by: Judge Sharon Johnson Coleman

Magistrate Judge Michael Mason

MEMORANDUM OPINION AND ORDER

Plaintiff, Frank M. Sullivan ("Sullivan"), and Survivor Music, Inc. ("SMI") move to dismiss the counterclaim brought against them by Jimmy Jamison ("Jamison") and Michael Stephan Ellis ("Ellis"). The counterclaim alleges seven claims against Sullivan and SMI for breach of contract, breach of fiduciary duty, fraud, fraudulent concealment, quantum meruit, unjust enrichment, and an accounting based on Sullivan and SMI's failure to pay royalties. Sullivan and SMI contend that Jamison and Ellis are not entitled to relief because without a contract the claims fail and, even if there were a contract for payment of royalties, the claims are barred by the applicable statute of limitations. For the reasons that follow, the motion is denied.

Background

The following factual background derives from the counterclaim and attached exhibits. On November 7, 1978, Sullivan, Dave Bickler ("Bickler"), Jim Peterik ("Peterik"), Robert Gary Smith ("Smith"), and Dennis Keith Johnson ("Johnson") formed a joint venture to create the band Survivor. (Counterclaim, Exhibit 1). The joint venture agreement provided that all five original members ofSurvivor would share equally in the profits generated by the band. The joint venture agreement also provided for compensating members after they leave the joint venture. On that same date, Survivor entered into a recording contract with Scotti Brothers Records, Inc. ("Scotti Brothers"), that provided for royalties to be paid to the band. (Counterclaim ¶9, Exhibit 2). The Scotti Brothers' recording contract also provided for the removal and replacement of members. In 1983, Survivor entered an amended recording contract with Scotti Brothers. (Counterclaim ¶20, Exhibit 3).

Jamison and Ellis allege that they were members of Survivor entitled to royalties under the 1978 and 1983 recording contracts with Scotti Brothers since they each signed inducement letters as replacement members, agreeing to be bound by the terms of the contracts. (Counterclaim ¶¶ 22, 25). Jamison and Ellis also allege that Sullivan and the other members of Survivor induced them to join the band by telling them that they would enjoy all the benefits of the joint venture agreement and share equally in any profits and royalties. Ellis left Survivor around 1987, and Jamison stopped performing with Peterik and Sullivan in 1988.

Sometime in 1996, Sullivan's accountant and Survivor band manager, Charles DiGiovanni ("DiGiovanni") began reviewing Survivor's royalty statements. DiGiovanni discovered that Scotti Brothers and their successor-in-interest All American Communications, Inc. ("All American"), had not been issuing royalty statements to Survivor since the early 1990's. On February 8, 1997, DiGiovanni wrote a letter on behalf of Survivor to Michael Botros of All American, demanding payment of the royalties due the band. (Counterclaim ¶36, Exhibit 8). In the letter, DiGiovanni specifically stated that, with certain exceptions for Peterik (who was also a producer), that the royalties should be paid to the band as a whole because "[t]his allows us to square away any internal discrepancies in payments among all the band members." (Counterclaim ¶36, Exhibit 8) In April 1998, Sullivan and SMI filed suit against All American claiming $1.5 million in damages. (Counterclaim ¶39, Exhibit 9). The litigation ended in a settlement agreement. Sometime in 1999, Peterik learned of the litigation and demanded his share, and also that proceeds be distributed evenly between the members and former members of the band who performed on each of the recordings. The terms of the settlement agreement provided that Sullivan, SMI and Survivor release claims against All American through December 31, 1998. Jamison and Ellis allege that, since that date, Sullivan and SMI has received at least 80% of the royalties directly from All American and subsequent owners of Survivor's master recordings.

From 1996 to 1999, Ellis toured with Survivor, though no new albums were recorded. Ellis frequently asked Sullivan about royalties, including proceeds from "Eye of the Tiger," the band's most successful single on which Ellis performed. Sullivan allegedly told Ellis that Survivor would never receive any money due to the unfavorable terms of the 1978 and 1983 recording contracts with Scotti Brothers. During this same time frame, Sullivan was pursuing the litigation against All American and claiming $1.5 million in damages from unpaid profits and royalties .

In March 2000, Sullivan and Jamison reached an agreement for Jamison to rejoin the band and created a new entity, "Unified Music," an Illinois corporation. Under the new agreement, Jamison became a 50% partner in Survivor and believed that royalties on all of the band's recordings would be paid to Unified Music. Sullivan, DiGiovanni, and SMI allegedly acknowledged that Jamison was entitled to royalties based on his previous tenure with the band, but represented to him that Survivor still had a negative balance with the record label and it was unlikely that it would ever receive any royalties. Jamison claims he was never informed of the litigation and settlement reached with All American. Jamison also claims he was never informed that SMI, not Unified Music, was operating as the legal entity of Survivor and was receiving 80% of the royalty payments.

Around mid-2009, Jamison discovered from Peterik that Peterik had been receiving a 20% share of royalties, while Sullivan was receiving the remaining 80% directly from Sony (which now owns most of Survivor's master recordings) and paid to SMI. Jamison informed Ellis that Peterik had been receiving royalties and the instant counterclaim was filed.

Legal Standard

In order to withstand a motion to dismiss, a complaint must provide a short and plain statement of the claim showing that the pleader is entitled to relief. Fed. R. Civ. P. 8(a)(2). The allegations must be sufficient to give the defendant fair notice of the claim and its basis. Windy City Metal Fabricators & Supply, Inc. v. CIT Tech Fin. Servs., 536 F.3d 663, 667 (7th Cir. 2008). "In order to demonstrate that he is entitled to relief, however, the pleader must show through his allegations that it is plausible, rather than merely speculative, that he is entitled to relief." INEOS Polymers, Inc. v. BASF Catalysts, 553 F. 3d 491, 497 (7th Cir. 2009). When deciding to dismiss a complaint, the Court accepts all well-pleaded allegations as ...


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