Nelson's estate is represented by Neville Johnson and Douglas Johnson with Johnson & Johnson.
By LIZ POTOCSNAK, Courthouse News Service, October 05, 2011
LOS ANGELES (CN) – The Estate of Rick Nelson claims Capitol Records grossly underreported royalties owed and is Bogarting $100 million to $250 million in so-called “unmatched income” that Capitol claims it cannot link to any particular artist.
“Capitol is in possession of $100 million – $250 million in so-called ‘unmatched income' – large caches of income that Capitol claims it cannot link to any particular artist,” according to the Superior Court complaint. “On information and belief Capitol is perfectly capably of ascertaining the amounts due to Nelson LLC from the unmatched income cache, yet has refused to do so and doesn't want to do so.
“Indeed, on information and belief, Capitol has intentionally tried to make it harder for royalty auditors to discover the information so that royalty artists could be paid monies legitimately due them. Capitol has refused to allow independent auditors the access to the unmatched report from inception to date, or access to any other documentation needed to ascertain the amount on behalf of Nelson LLC.”
The Estate claims Capitol made things even harder for artists by moving income formerly held in separate accounts into a general account with other assets.
The Estate claims Capitol refused to provide “crucial information” for an audit this year, and was “purposefully disregarding” a royalty increase that was supposed to have begun in 1992.
According to the complaint: “On or about May 21, 1992 Nelson LLC received a letter from Capitol (‘the Letter') informing them that Capitol was implementing a new royalty calculation on sales of music for ‘Legacy' artists from the 1950's, 60's and 70's – a classification into which Rick fell. The new royalty rate was increased for Nelson LLC from five percent (5%) of ninety percent (90%) of records sold (an outmoded and extraordinarily low rate that was commonplace in the 1950's and 60's when artists' rights were often blatantly disregarded), to ten percent (10%) ‘[o]f the retail list price for all full price albums' for ‘all domestic and foreign sales.' The Letter also promised Nelson LLC fifty percent (50%) of ‘net receipts' on ‘sales or uses by our licenses.'” (Parentheses and brackets in complaint.)
But the 2011 audit showed “that (1) Capitol was accounting improperly, (2) Capitol was refusing to provide crucial information regarding royalties from the songs, (3) Capitol was purposefully disregarding the royalty increase outlined in the 1992 letter, (4) Capitol would not provide information as to so-called ‘unmatched income' to which Nelson LLC was entitled,” according to the complaint.
Nelson's estate says Capitol did not pay the increased royalties, and also is cheating on digital royalties, whose rates are “grossly inequitable.” The Estate claims Capitol takes discounts on digital recordings for bogus “anticipated costs (such as breakage of physical records, or physical distribution) that simply do not apply to digital sales of the same music.”
The Estate says Capitol cannot assert the statute of limitations as a defense, because Nelson LLC was led to believe that Capitol was maintaining fair accounting, so the Estate did not know it had a reason to file a complaint.
“Defendants were aware that they manipulated the accounting in such a manner that made it impossible for Nelson LLC to ever receive proper compensation from Rick's compositions or songs in the ordinary course of events,” the complaint states.
The Estate adds: “In yesteryear, Capitol was one of the major records in America. Today, Capitol is crippled and operated by a skeleton crew as it prepares itself to be sold off.”
Nelson's estate seeks disgorgement, restitution, accounting, damages and punitive damages on 10 counts, including breach of contract, unjust enrichment, money due, conversion, fraud, negligent misrepresentation, unfair business practices and breach of faith and fair dealing.
It is represented by Neville Johnson and Douglas Johnson with Johnson & Johnson.
Best remembered today for his hits, “Travelin' Man,” and “Hello, Mary Lou (Goodbye, Heart),” Nelson co-starred in the 1950s hit TV show, “Ozzie and Harriet,” and from 1957 to 1973 recorded 53 songs that made the Billboard top 100, including 20 songs on the Top 10, according to the complaint. He died in a 1985 plane crash.
According to Joel Selvin's 1990 book, “Ricky Nelson: Idol for a Generation,” in 1958 Nelson made the immortal statement: “Anyone who knocks rock ‘n' roll either doesn't understand it, or is prejudiced against it, or is just plain square.”