Free Complaint - District Court of Delaware - Delaware

Case 1:07-cv-00418-JJF

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

HENRY G. CARTER, an individual, Plaintiff, v. INDEPENDENT PRODUCTIONS, INC., a Pennsylvania corporation, and GEORGE THOROGOOD & THE DESTROYERS, INC., a Pennsylvania corporation, Defendants.

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C.A. NO. JURY OF TWELVE DEMANDED

COMPLAINT Plaintiff Henry G. Carter ("Carter") by his attorneys, for his complaint for breach of contract, a declaratory judgment setting forth the rights and obligations of the parties and an accounting, alleges as follows: 1. 2. Plaintiff Carter is an individual residing in Delaware. Defendant Independent Productions, Inc. ("IPI") is a Pennsylvania corporation

whose registered address is R.D. 1, Box 216, London Tract Road, Landenberg, Pennsylvania 19350. 3. Defendant George Thorogood & The Destroyers, Inc. ("GTDI") is a Pennsylvania

corporation whose registered address is R.D. 1, Box 216, London Tract Road, Landenberg, Pennsylvania 19350. Jurisdiction and Venue 4. The Court has jurisdiction over this action pursuant to 28 U.S.C. § 1332(a) based

upon the diversity of citizenship of the parties. The amount in controversy exceeds Seventy-Five

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Thousand Dollars ($75,000). The Court also has jurisdiction pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201(a). 5. Venue is appropriate in this District pursuant to 28 U.S.C. § 1391(c). The Facts 6. Carter is an accomplished musician and performer who plays numerous instru-

ments including, inter alia, the saxophone, keyboards, guitar, trumpet and mandolin. Carter is also a capable vocalist and an accomplished musical arranger. 7. On or about July 4, 1979, Carter joined the rock and roll/blues band George

Thorogood and the Delaware Destroyers (the "Band"). 8. The members of Band at that time were George Thorogood, Jeff Simon, and Bill

Blough. They were, at all times pertinent herein, the other shareholders with Carter of IPI and GTDI. 9. When Carter joined the Band, it was commanding approximately $2,000 to

$3,000 per live performance. 10. The fortunes of the Band changed dramatically during Carter's tenure and the

Band enjoyed significant commercial success. At the pinnacle of its performing career, the Band commanded live performance fees in the low six figures. 11. While Carter was a member of the Band, the Band released over 16 albums, many

of which went gold, and some platinum. 12. The Band is an internationally acclaimed rock and roll/blues band that has been in

the music business in various iterations for over thirty years. IPI recently released the career retrospective of the Band: George Thorogood: 30 Years of Rock (the "Album"). The Album has been certified gold by the RIAA and was named the No. 1 top blues album for 2005 by Billboard

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Magazine. The Album has been a chart fixture since its May 2004 release holding the No. 1 spot for 42 weeks in 2005. The Organizational Structure of the Band 13. In the early 1980's, the Band formed IPI to handle its newly-developed recording

business and to, inter alia, insulate its recording revenue from potential liability exposure from the Band's touring activities. GTDI, which previously handled all Band activities, now handled only its performance, previously-existing recording contracts and touring businesses. Merchandising for the Band, including the sales of tee-shirts and other merchandise, was also handled by GTDI since about 1997. 14. Carter, at all times, held and holds an equity stake in IPI and shares royalty reve-

nue from the recordings released by IPI. Each band member was entitled to a fixed share of royalty revenue from each recording. At all times, the percentage of royalty revenue paid to the Band members was based on whether a Band member appeared on a particular album, without regard to the number of songs the Band member played on the album. Even if a Band member appeared on only one song for a particular album, the Band member would still receive the agreed-upon royalty percentage. Unlike other members of the Band, Carter often contributed several instrumental pieces on particular tracks as well as contributing back up vocals. 15. Since the mid to late 1980's, Carter has been paid 20 percent of the net royalties

generated by all record sales released under the auspices of IPI. 16. Carter is also an equity holder in GTDI. At all times during his tenure in the

Band, Carter shared in profits attributable to the Band's touring operations, along with profits attributable to all other band-related operations. Such profits were distributed by GTDI. Carter

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engaged in all business affairs of the corporation, attended semi-annual shareholder meetings, and even made capital outlays on several occasions. 17. Carter was involuntarily released from touring and recording activities of the

Band but at all times, held, and still holds an interest in IPI and GTDI. 18. Subsequent to his release, Carter was and is entitled to receive touring revenue

from GTDI in connection with the tours that Carter participated in and is entitled to be compensated for the goodwill he helped create for the Band during his two-decade tenure. 19. Subsequent to his release, Carter was and is entitled to receive recording royalties

from IPI and GTDI in connection with the albums that Carter appeared on for records distributed by, inter alia, Rounder Records, EMI Records and Eagle Entertainment. 20. Subsequent to his release, Carter has received royalty payments from IPI that are

sporadic and inexplicably reduced by a "management fee" assessed against the Band, even though Carter does not receive any management services, against the express representations of the Band's counsel that Carter's portion of recording royalties would not be expensed. Carter, despite requests, has also not been provided all royalty related sales data and contracts to ascertain whether he has, in fact, received his agreed-upon percentage of royalties. 21. On or about July 2003, Carter received his first recording royalty check from the

Band since being released. Despite the Band's representations, Carter's share of the royalties was expensed a 17 percent% management fee, for services he no longer received. 22. On or about August 2005, Carter received his first royalty check from the Album.

Carter appears on 11 of the 16 tracks on the Album. However, despite past agreements and established practice of the Band, Carter received only 11/16ths of his agreed 20 percent of the royalties and was expensed again for phantom "management fees."

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23.

Carter continues to receive recording royalties improperly expensed by manage-

ment fees. Carter continues to receive royalties from the Album improperly reduced to 11/16th, of the amount to which he is entitled and improperly expensed by management fees. Count I Breach of Contract 24. Plaintiff repeats and realleges the allegations contained in paragraphs 1 through

23 and incorporates them herein by reference. 25. IPI has breached its contract with Carter by paying royalties on a per-song ap-

pearance basis rather than the agreed and customary album appearance basis for the Album. 26. IPI has breached its contract, as supplemented by the parties, with Carter by

reducing Carter's share of royalty payments for Band management services he no longer receives since he was released from the Band. WHEREFORE, Carter demands judgment in excess of $75,000 in an exact amount to be proved at trial. Count II Accounting 27. Plaintiff repeats and realleges the allegations contained in paragraphs 1 through

26 and incorporates them herein by reference. 28. Since Carter was released from the Band in March 2003, he has not had access to

the financial information of either IPI or GTDI to ascertain whether his share of royalty payments is accurate. 29. Upon information and belief, the Band has not paid Carter all royalties from

recordings, royalties from merchandising, and revenues from touring for which he is entitled since he was released from the Band.

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30.

Carter demands an accounting from both IPI and GTDI for his agreed 20 percent

share of all recording revenue received by IPI and GTDI, his agreed 20 percent share of touring revenue from GTDI, his agreed 16 percent of merchandising revenue and compensation for the goodwill he helped create with the Band. Count III Declaratory Judgment 31. Plaintiff repeats and realleges the allegations contained in paragraphs 1 through

30 and incorporates them herein by reference. 32. 33. Carter is not and has never been in material breach of his agreement with IPI. The terms of Carter's agreement with IPI are in dispute with respect to the way

royalties will be computed, i.e., per track appearance or per album appearance, as well as Carter's liability for management fees for services he no longer receives. 34. 35. There is an actual case or controversy regarding these issues. Carter is entitled to a declaration that he shall receive royalties of 20 percent for

each Band record he appears on irrespective of the number of tracks he performs vis-à-vis the album in issue and a declaration that his share of royalties, since June 2003, shall not contain any deductions for management services and that he shall be afforded reasonable auditing rights for royalties received by IPI. Count IV Declaratory Judgment 36. Plaintiff repeats and realleges the allegations contained in paragraphs 1 through

35 and incorporates them herein by reference. 37. Carter is not and has never been in material breach of his agreement with GTDI.

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38.

Carter is entitled to a declaration that he shall receive 20 percent of touring reve-

nues generated by the Band and a declaration that his share of those revenues, since July 2003, shall not contain any deductions for management services and that he shall be afforded reasonable auditing rights for revenues received by GTDI. Count V Declaratory Judgment 39. Plaintiff repeats and realleges the allegations contained in paragraphs 1 through

38 and incorporates them herein by reference. 40. During Carter's tenure with the Band, he significantly contributed to the good will

developed in the Band's live performances and contributed to the Band's live performance revenue's exponential increase. 41. As a result of the goodwill Carter helped build up with GTDI, the touring corpo-

ration for the Band, GTDI has been able to merchandize tee-shirts and other souvenirs at concerts. Prior to his release from the Band, Carter received 16 percent of merchandizing revenue. 42. There is an actual dispute with respect to Carter's entitlement to an ongoing per-

centage of merchandizing revenue as a result of his equity position in GTDI and his contribution over two decades to the goodwill now enjoyed by GTDI. Count VI 43. Plaintiff repeats and realleges the allegations contained in paragraphs 1 through

42 and incorporates them herein by reference. 44. On September 1, 2002, the Band signed a recording contract with Eagle Records

(the "Recording Agreement").

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45.

Carter is named as an individual bound by the terms of the Recording Agreement

which provides, inter alia, that Carter may not record for any reason until the Band's obligations to Eagle under the contract are satisfied. 46. The Band has not released Carter from the Recording Agreement and Carter has

been unable to earn a living as a musician as a result of the Band's refusal. 47. The Band has breached, inter alia, the covenant of good faith and fair dealing by

refusing to release Carter from the Recording Agreement. 48. As a party bound by the Recording Agreement, Carter is entitled to a 20 percent

share of the net proceeds of royalties received from all Eagle recordings even though he does not appear on albums which were recorded subsequent to his termination from the Band, and damages for earnings and profits lost due to the Band's failure, due to bad faith, to release Carter from the Recording Agreement. WHEREFORE, As to Count I of the Complaint, Plaintiff Henry G. Carter respectfully demands judgment in his favor and against Defendant Independent Productions, Inc. in excess of Seventy-Five Thousand Dollars in an exact amount to be proved at trial, plus interest, penalties, attorneys' fees, costs of this action, and all other relief that the Court deems just and proper. As to Count II of the Complaint, Plaintiff Henry G. Carter demands an accounting for his agreed 20 percent share of all recording revenue received by IPI and GTDI since June 2003. As to Count III of the Complaint, Plaintiff Henry G. Carter demands a declaration that he shall receive ongoing royalties of 20 percent for each Band record on which he appears, regardless of the number of tracks he performs on the album in issue, a declaration that his share of revenue from June 2003 on, shall not contain any deductions for management services, a declara-

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tion of the value of the goodwill Carter created for the Band, and a declaration that he shall be afforded reasonable auditing rights for royalties received. As to Count IV of the Complaint, Plaintiff Henry G. Carter demands a declaration that he shall receive 20 percent of ongoing revenues attributable to touring operations of the Band from July 2003 on by virtue of his ongoing equity interest in GTDI, a declaration that his share of such revenues from June 2003 on, shall not contain any deductions for management services and that he shall be afforded reasonable auditing rights for revenues received. As to Count V of the Complaint, Plaintiff Henry G. Carter demands entitlement to an ongoing percentage of merchandizing revenue as a result of his contribution over two decades to the goodwill enjoyed by George Thorogood & The Destroyers, Inc., enabling GTDI readily to sell merchandise at its live performances. As to Count VI of the Complaint, Plaintiff Henry G. Garter demands a declaration that he shall receive an ongoing 20 percent share of the net proceeds of royalties received from all Eagle recordings which were recorded subsequent to his termination from the Band, and damages for losses due to the Band's bad faith failure to release Carter from the Recording Agreement.

CONNOLLY BOVE LODGE & HUTZ LLP __/s/ James D. Heisman____________ Charles J. Durante (# 800) James D. Heisman (# 2746) 1007 N. Orange Street P. O. Box 2207 Wilmington, DE 19899 (302) 658-9141 Attorneys for Plaintiff Dated: June 29, 2007

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