Claims In 'Sugarman' Case Survive Dismissal; Rights Transferred To Defunct Publisher's Shareholder By Operation Of Law

Gomba Music, Inc. v. Avant, No. 14-cv-11767, 2014 BL 330905 (E.D. Mich. Nov. 24, 2014).

The Court dismissed a corporate music publisher's case in the Sugarman / Sixto Rodriguez case because the company had been administratively dissolved by the State of Michigan in 1971 for failure to file certain papers, but the claims by the company's sole shareholder survived because when the company dissolved, any interests it held were transferred to him by operation of law.  The Court found that whether under the 1976 or 1909 Copyright Acts, by operation of law [Mich. Comp. Laws § 450.1855a], any rights that the company had in the compositions transferred to its sole shareholder when the corporation dissolved.  The Court also found that the decision to sue in the company's name was due to a mistaken belief that the entity would be reinstated and that it was necessary to sue in the company's name because it was the original assignee of rights; accordingly, the Court allowed substitution of the shareholder for the defunct company he formerly owned as sole proprietor, pursuant to Fed. R. Civ. P. 17.

Thereafter, the Court addressed the sufficiency of the causes of action.  First, the Court held that the plaintiff could assert fraud on the copyright office as a declaratory judgment action to attack the prima facie validity of defendants' copyrights in the compositions.  Second, the Court held that the plaintiff could assert a declaratory judgment claim that he is the exclusive owner of the copyright in the compositions because it was plausible that plaintiff was not placed on notice of his claims until sometime after the release of the film Waiting for Sugar Man in July 2012 and therefore plausible that he timely filed his claim for declaratory judgment in May 2014.  Third, the Court held that plaintiff could assert fraudulent concealment claims, and that the claims were not time-barred, because the name of the artist with whom plaintiff had an exclusive agreement (Sixto Rodriguez) was completely absent from the album credits, there were affirmative statement that others wrote the works, the plaintiff had limited motivation to investigate further given the "commercial failure" of the  album at the time it was released, the artist Sixto Rodriguez was under an exclusive contract with the publisher plaintiff, and, later, copyright registrations were issued based on representations that others wrote the works.  Lastly, the Court found that the copyright infringement claim also was not time-barred, and though the plaintiff may be precluded from certain statutory damages/attorneys' fees based on the timing of his attempted registration, that did not bar the claims.