A DISCUSSION OF LAW AND JOURNALISM

Variety’s Logo “Vandalized”

By Matthew Catania and Dawn L. Mikulastik

Contrary to popular opinion, settlement agreements don’t always end litigation. Exhibit A: Reed Elsevier Inc., Variety’s parent company, is suing the Californian punk band, The Vandals, despite the parties’ settlement in 2004. The dispute began when the media conglomerate took umbrage at The Vandals invoking its trademark Variety logo on the cover of its “Hollywood Potato Chip” album. (The title is a vulgar reference to dried semen left on a Hollywood casting couch) The Vandals settled out of court, agreeing to pay $2,500.00 and to eradicate all traces of the offending cover art. But now Reed Elsevier is suing the band again, this time because it believes the terms of the settlement have been breached.

In December 2009, Reed Elsevier claims it discovered the prohibited image on some websites that it alleges were controlled by the band. In February, the newsgroup’s lawyers informed the band that it was in breach and owed $50,000.00 in liquidated damages and $25,000.00 lawyers’ fees as mandated by the settlement. The band was also asked to sign an amended settlement agreement without a provision for a “cure period” and liquidated damages of $100,000.00 for the next violation.

True to its punk rock ethos, The Vandals refused to this lying down. Statements to the press and fans by Joe Escalante, the Vandals’ bassist and its attorney, have stressed that the original album art is protected by the First Amendment as parody.  And while that may be true, it’s actually irrelevant to the case at hand.  The media is mischaracterizing the current lawsuit as a free speech issue. Because the band signed the settlement agreement rather than litigating the underlying issue six years ago, only contractual issues arising from that document are up for dispute.

The band claims that it no longer uses the logo on any website under its control and that websites listed in the original complaint are maintained by third parties over whom it has no power. This may be a valid defense: the language of the settlement only requires The Vandals to take “reasonable steps” to stop third parties from using the logo.

Mr. Escalante has filed a motion to change the venue of the pending trial from federal court in Delaware to California on the grounds that a Delaware trial would be excessively burdensome to The Vandals. California is where both parties and their attorneys reside and the only state where Mr. Escalante is licensed to practice law. He believes that Reed’s choice of venue is just a way of preventing the cash-strapped band from adequately contesting the lawsuit. But the Delaware venue is specified in the same provision of the settlement agreement that contains its cure period.  By signing it, The Vandals consented to Delaware courts having personal jurisdiction. Since Reed Elsevier Properties, Inc. is a Delaware corporation, the state has jurisdiction over it. (The band says it signed the settlement under duress since it couldn’t afford to litigate, but there is no evidence of undue coercion.)

While Variety has kept mum about the lawsuit in its publications, Mr. Escalante is doing his best to publicize The Vandals’ side of the story to garner support in this costly legal conflict. The band even created a video featuring the offending album cover. This is a violation of the settlement’s confidentiality clause, and if a judge decides the confidentiality clause was a material term of the agreement, The Vandals could face additional sanctions.

On the other hand, the band may have a valid defense if it can prove that it wasn’t given its contracted thirty days to cure a breach after being notified in February. A cure period allows a party to a contract to rectify any breaches on its part within a limited time span before being liable for violating the contract. Since the offending image had disappeared from the alleged websites within a month after it was notified, the band believes it shouldn’t have to pay any damages. Reed Elsevier believes it doesn’t need to recognize a cure period for a breach that was material.

In addition, The Vandals contend that the current lawsuit is born of bad faith and therefore invalid. There is an implied duty of good faith in every contract. The Chancery Court of Delaware defines a breach of good faith as “engaging in unfair dealing, that prevents the other side of the contract from getting its fair bargain.” The band alleges that Reed Elsevier acted in bad faith by denying it the cure period that it had negotiated. The parties agreed to cooperate to promptly remove all instances of the original art from the web, but The Vandals were not informed of the breach until almost two months after the supposedly harmful image was discovered online. In its motion to deny change of venue, Reed Elsevier admits that “an additional breach was discovered … then not identified to Defendants as a way to gauge how serious an effort at curing would be.” If The Vandals can convince the court that Reed Elsevier didn’t uphold its duty to deal fairly with them, it would help their case immensely.

This lawsuit should be a lesson to all about the importance of carefully drafting and reading contracts. If you don’t want to be sued in Delaware, don’t sign a settlement that includes such a clause. Check if there’s a confidentiality clause before broadcasting a dispute in a YouTube video and posting the relevant documents to your website. If a contract allows a month-long opportunity to fully cure breaches, you can’t bring a lawsuit in good faith by ignoring this provision.

Whether anybody learns these lessons hinges on the outcome of the pending trial.

UPDATE, February 15, 2012:   The Vandals can celebrate; the suit against the group was dismissed.

Comments

2 Comments »

2 Responses

  1. The Vandals says:

    The L.A.S.I.S article calls the Vandals 1st Amendment concerns “irrelevant to the case at hand.” This is what The Daily Variety and Reed Elsevier would like the people they want to continue buying their magazine to think but it’s not true at all. In 2004, they bullied artists to sign an agreement and permanent injunction to give up their 1st amendment rights or face burdensome litigation. This underlines the need for anti-SLAPP motions in federal court cases like this. The Vandals are involved in the public process as artists. The Daily Variety and Reed Elsevier should have to prove they are damaged by our parody to the extent that public policy would favor censoring us and people like us from creating art and parody, like for instance the television program Saturday Night Live. We will seek to overturn this “contract” because it violates public policy by restricting free speech.

    This has everything to do with the 1st Amendment because it illustrates how behemoth entities (and foreign at that) can use money and access to circumvent our Constitution and punishing the vulnerable. By forcing us to give up our rights, they are effectively re-writing the Constitution, the U.S. Copyright Act, and the Fair Use Doctrine for their own financial gain, at the expense of our guaranteed freedoms.

    It is the Vandals opinion that because the Daily Variety and Reed Elsevier were allowed to commit this first atrocity with impunity, they became even more greedy and abused this injunction and settlement agreement by using it to effectively extort cash from the Vandals and their record label by coming to call again and threatening even more burdensome litigation, but this time in the punitive state of Delaware, a venue where none of Fulbright & Jaworski’s 950 attorneys that are lined up against us even bother to practice.

    It is true that there is a sentence in the settlement agreement that says Delaware could be a venue if we breached the agreement, but in the very next sentence it says we have 30 days to cure any “so called” breach of the agreement. This is a good way to ruin someone if they don’t do what you say. Tell them that you will sue them if they don’t do what you say. When they tell you they’ve don’t nothing wrong, say this to the poor unfortunate creature: “well, give me $75,000 because it will cost you more to prove that you did nothing wrong, so don’t even try, just pay me this sum that I want.”

    Fulbright & Jaworski’s first argument was that there was “no cure period at all.” When they realized this would be a tough pill to swallow for any court since the cure period was mentioned in the very next sentence after the Delaware clause, they switched their argument to this: “You haven’t cured the breach until you’ve given us $75,000 for “discovering” what we thought was a breach.”

    Mind you, this “cure” is more than the liquidated damages would be according to the agreement if we willfully breached and refused to cure. The liquidated damages were $50,000 plus reasonable legal fees. What are the legal fees to write the later asking us to pay the liquidated damages to their client? They said that amount was $25,000. And we had to sign something that said it would be double next time without a cure period.

    So this is what happens when you let greedy people circumvent the laws of this country by writing their own self-serving laws through intimidation. This kind of abuse of the court system should make everyone sick.

    The L.A.S.I.S. article states there is no evidence of undue coercion. If, without demonstrating any harm to Reed Elsevier or The Daily Variety, threatening to put a group of artists and a small business into financial ruin in 2004 is not undue coercion, then we all need to take a look at the definition of undue coercion and change it, because evidently the current version allows innocent people to be destroyed artistically and financially.

    The L.A.S.I.S. analysis of the issues involving the cure period is excellent. The Vandals bargained vigorously to have a cure period to allow for inadvertent postings of prohibited images because the Vandals understood how the internet works. A dozen or so people have the passwords to our web sites. By the time the breaches were brought to our attention, they were not there any more. We have no proof that they ever existed. To give Reed Elsevier and The Daily Variety the benefit of the doubt, it’s possible that one of our web kids that help us update the site had the wrong images up there temporarily, we don’t know but stuff like that happens. We do know that since they weren’t there by the time we heard about the lawsuit, the so-called breach has at the very least been cured. Then why are we still in this mess?

    We think it’s poor legal work on behalf of Fulbright and Jaworski, who we believe are doing a great disservice to their clients. When we repeatedly begged them to tell us where these so called “continuing” infringing images were, they would not reveal them. Later we found out that they were talking about Myspace Music, Youtube, and Amazon. According to our settlement agreement, we are not responsible for postings by 3rd parties that distribute our product. However, Fulbright & Jaworski do not know how the internet works. They thought that we control Myspace Music’s MP3 selling operation. We don’t. We’ve told them to replace that image, there’s not much else we can do. Fulbright & Jawoski could have done that if they thought the images really harmed their client. Obviously we don’t control images that Youtube fans upload. Fulbright & Jaworski thought we did. We told our fans to take the images down. They cooperated thankfully. Fulbright & Jaworski could have done that months prior. They knew about those images and we didn’t. Amazon? That’s a market place. Give us a break you idiots. We believe Fulbright & Jaworski are engaged in an ancient scam based on using the courts for intimidation. This is what they know. However, they know nothing about the internet, they have been wrong about it all, but we guess that rather than admit to their clients that they were wrong about these things, they have decided to go “all in” and just have us destroyed using every ounce of power and money they can muster with their 950 attorneys backed by the mighty parent company Reed Elsevier and their 32,000 employees.

    If these images cause harm to Daily Variety, why not send take down notices, or work with the Vandals to have them eliminated. By suing us, a thousand more have been posted with text REALLY unfavorable to their clients? At what point does this become profitable for them? So if you are thinking about working for, or hiring Fulbright & Jaworski and are not bothered by their ethics, at least consider their competence in today’s world.

    With respect to our trailer (http://www.youtube.com/watch?v=Q8GKrHSSWvs) for the upcoming film about all this and the details on the web site, those were created and uploaded after Reed Elsevier and Daily Variety invalidated any confidentiality considerations by publicly filing papers that revealed every detail of the previously confidential settlement between the parties. Even after that we held our tongues in hopes of securing a settlement from what we all thought was a misunderstanding. This technique didn’t pay off at all. They rebuffed our attempts to settle (because they thought the “myspace thing” was a smoking gun, we surmise) and then they went further and had Reed Elsevier’s lead counsel Henry Horbaczewski giving interviews about the facts of the case and even disparaging Joe Escalante’s legal reputation in the process, completely unprovoked.

    So if after that, we cannot make a documentary about our plight without breaching yet another one-sided agreement, so be it. Lock us up and throw away the key because we have already learned what happens when you do things by Reed Elsevier / Daily Variety / Fulbright & Jaworski rules. They screw you without pity. We will fight them with every thing we’ve got. Everyone should. To learn more about all this please visit http://www.vandals.com. Thanks for your support.

    The Vandals

  2. The Vandals says:

    The Vandals ended up winning this lawsuit, without a trial. The complaint was dismissed on February 15, 2012 without further settlement terms. Reed Elsevier/ Daily Variety’s Delaware Venue clause was ineffective, their 30 day cur period was, and they ended.

    Once someone files a lawsuit, making public all documents subject to a confidentiality clause, that clause is void. Thanks to everyone who supported us. We will continue to talk about this to help bring an end to abusive litigation. This is a free speech issue.
    In other news, Matthew Catania and Dawn L. Mikulastik are still eligable for employment at Fullbright & Jaworski, congratulations.