Case: 1:10-cv-08266 Document #: 18 Filed: 07/26/11 Page 1 of 14 PageID #:98

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS THE ESTATE OF CHARLES STEPNEY, ) EIBUR MUSIC, INC., as Trustee ) THE STEPNEY LEGACY TRUST ) ) Plaintiff, ) ) v. ) ) UMG RECORDINGS, INC. ) a Delaware Corporation, ) ) Defendant. )

Cause No.: JURY TRIAL DEMANDED

FIRST AMENDED COMPLAINT Plaintiffs The Estate of Charles Stepney and Eiber Music, Inc., as Trustee for The Stepney Legacy Trust (collectively Plaintiffs), by and through their attorneys, Kayira LLP, for their First Amended Complaint against Defendant UMG Recordings, Inc., respectfully state as follows: INTRODUCTION As is often the case in the music industry, the birth and success of any one musician is a function of being at the right place at the right time with the right people. For American jazz, blues, gospel, R&B, and rock n roll musicians, that place was Chicago, Illinois, that time was the late 1950s through the early 1970s, and the right people were the people of Chess Records. With an artist roster that included notable talents such as Muddy Waters, Howlin Wolf, Bo Diddley, Chuck Berry, Marlena Shaw and Minnie Riperton, its difficult to overstate the contribution that Chess Records made to American music today. In much the same way, its difficult to overstate the contributions made by Mr. Charles Stepney to Chess Records as a producer, arranger, songwriter and musician. Mr. Stepney began his career at Chess Records in 1960 as a musician, but was promoted over the years to music supervisor, arranger, and then session manager. Almost immediately, Mr. Stepney had

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demonstrated a unique and noteworthy talent as an ardent student of the scientific and mathematical principals of music which eventually led to his promotion as a head producer at Chess Records in 1968. During his career at Chess, Mr. Stepney worked with many of the legendary artists in the Chess roster, including Muddy Waters, Howlin Wolf, and Minnie Riperton. Mr. Stepney, along with Marshall Chess, the son of Chess Records co-founder Leonard Chess, created the Grammy nominated concept band The Rotary Connection. Mr. Stepney brought his whole portfolio of musical talents as writer, musician, arranger and producer to bear as the musical muscle of The Rotary Connection. Mr. Stepneys commitment and contributions to The Rotary Connection was entirely consistent with his work with a majority of the artists under the Chess label during what many commentators refer to as the Golden Age of Chess Records. Despite Mr. Stepneys immeasurable contributions to Chess Records, he, and later his estate, have remained uncompensated for the past thirty-five years in stark contradiction to the promises made to him by Chess Records. As the successor in interest to Chess Records, UMG Recordings, Inc. has abandoned its contractual obligations to Mr. Stepneys estate despite its frequent and profitable exploitation of Mr. Stepneys work. NATURE OF THE ACTION 1. This is an action for breach of contract, accounting, and unjust enrichment under

New York common law or Illinois common law. PARTIES 2. Plaintiff The Estate of Charles Stepney (hereinafter the Estate) is the estate of the

deceased producer, artist and songwriter Charles Stepney (hereinafter Mr. Stepney), and is an estate formed under the laws of the State of Illinois. 3. Plaintiff Eibur Music, Inc. (hereinafter Eibur Music) represents the interests Mr.

Stepneys heirs as the beneficiaries of the Estate. Specifically, Eibur Music is the named Trustee for

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The Stepney Legacy Trust, a revocable living trust formed under the laws of the State of Illinois, created to receive monies payable to the Estate for the sale and/or licensing of Mr. Stepneys body of work as a producer, artist and/or songwriter. Pursuant to The Stepney Legacy Trust, Eibur Music is authorized to compromise, adjust, arbitrate, sue, defend, abandon, or otherwise deal with and settle claims in favor of or against the Trust Estate as the Trustee shall deem best. 4. Defendant UMG Recordings, Inc. is a corporation formed under the laws of the State

of Delaware, with a principal place of business at 2220 Colorado Ave., Santa Monica, California 90404 (hereinafter referred to as UMG or Defendant). Upon information and belief, UMG is the successor in interest to a catalogue of sound recordings and/or musical compositions originally produced, recorded and distributed under Chess Records, Inc., once an Illinois corporation with a place of business at 320 East 21st Street, Chicago, Illinois 60616 (hereinafter referred to as Chess Records). JURISDICTION AND VENUE 5. This Court has original jurisdiction based upon diversity of the parties, as provided

in 28 U.S.C. 1332(a). Plaintiff Estate is an estate formed under the laws of the State of Illinois. Plaintiff Eibur Music is the named Trustee for The Stepney Legacy Trust, formed under the laws of the State of Illinois. Defendant is a Delaware corporation with a principal place of business in California. The matter in controversy exceeds seventy-five thousand dollars ($75,000.00). 6. This Court has personal jurisdiction over the Defendant pursuant to 735 ILCS 5/2-

209 based on the Defendants substantial contacts with the State of Illinois. Additionally, Defendant has caused tortious injury in this judicial district by acts both within and outside this district, and regularly solicits business in this district and/or derives substantial revenue from sales of goods in this district and/or otherwise has engaged in a persistent course of conduct in this district.

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7.

Venue is proper in this Court pursuant to 28 U.S.C. 1391(a)(2) which states, in

pertinent part, [a] civil action wherein jurisdiction is founded only on diversity of citizenship may, except as otherwise provided by law, be brought only in(2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of the property that is subject to the action is situated. COUNT I (Breach of Contract) 8. Plaintiffs hereby incorporate by reference the foregoing allegations of this Complaint

as if set forth fully herein. 9. On or around March 1, 1968, Mr. Stepney entered into an exclusive producer

agreement (hereinafter the Producer Agreement). (See Producer Agreement, marked as Exhibit 1, attached hereto and incorporated herein by reference.) Upon information and belief, the Producer Agreement was executed in Chicago, Illinois. The Producer Agreement provides, in pertinent part, as follows: a) with respect to those long playing phonograph records (hereinafter LPs) embodying performances produced exclusively by Mr. Stepney, he would receive a royalty of three percent (3%) of the wholesale price for ninety percent (90%) of such records sold in the United States (Ex. 1 at 3, 4(A)(i)); with respect to single phonograph records (hereinafter Singles) produced exclusively by Mr. Stepney, Mr. Stepney would receive a royalty of one and one-half cents ($0.015) for all Singles sold over twenty-five thousand (25,000) under the authority of Chess Records (Ex. 1 at 3-4, (4)(B)(ii)); with respect to all phonograph records sold outside of the United States under the authority of Chess Records which contain performances produced [under the Producer Agreement], Mr. Stepney would receive a royalty equal to one-half (1/2) of the royalties specified in subparagraph (a), above (Ex. 1 at 3, 4(B)(i)); with respect to those master recordings embodying performances produced by Mr. Stepney with the assistance of another producer to whom Chess Records is obligated to pay a royalty, Mr. Stepney would receive the same royalty corresponding to the applicable format, multiplied by a fraction the numerator of which shall be one (1) and the denominator of which shall be 4

b)

c)

d)

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the total number of producers (including Mr. Stepney) having assisted in producing those performances (Ex. 1 at 4, 4(C)(ii)); and e) with respect to those master recordings embodying performances produced by Mr. Stepney as well as performances produced by a party other than Mr. Stepney, Mr. Stepney would receive the same royalty corresponding to the applicable format, multiplied by a fraction the numerator of which shall be the number of performances produced by Mr. Stepney and the denominator of which shall be the total number of performances embodied on those LPs (Ex. 1 at 4, 4(C)(i)). Under the Producer Agreement, those royalties due to Mr. Stepney thereunder shall

10.

be computed for the six (6) calendar month period within forty-five (45) days after June 30 and December 31 of each year so long as phonograph records embodying performances produced [thereunder] are sold and paid for. Such royalties shall be paid to Mr. Stepney within such fortyfive (45) day period and will be accompanied by appropriate royalty statements. (Ex. 1 at 6, 7.) 11. The term of the Producer Agreement was for one (1) year, with an irrevocable option

period of one (1) additional year. (Ex. 1 at 6, 6(A) and 6(B).) 12. Upon information and belief, Chess Records properly exercised its option to extend

the terms of the Producer Agreement for one (1) additional year to cover periods beginning on March 1, 1969 and ending on March 1, 1970. 13. Pursuant to the Producer Agreement, Mr. Stepney produced a volume of recordings

exclusively for Chess Records and its designees. A non-exhaustive list of those recordings is attached hereto. (See Producer Agreement Recordings, marked as Exhibit 2, attached hereto and incorporated herein by reference.) These recordings were commercially released, manufactured and/or distributed by Chess Records and its designees. Mr. Stepney has otherwise performed completely under the Producer Agreement. Upon information and belief, a substantial amount, if not all of these recordings were produced in Ten Mar Studios and/or other recording studios located in Chicago, Illinois.

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14.

Mr. Stepney received only two (2) royalty statements from Chess Records. One

royalty statement was issued to Mr. Stepney for the period ending June 30, 1972 (hereinafter the 1972 Royalty Statement). (See 1972 Royalty Statement, marked as Exhibit 3, attached hereto and incorporated herein by reference.) The second royalty statement was issued to Mr. Stepney for the period ending June 30, 1975 (hereinafter the 1975 Royalty Statement) (See 1975 Royalty Statement, marked as Exhibit 4, attached hereto and incorporated herein by reference) (hereinafter collectively referred to as the Royalty Statements). Both Royalty Statements list recordings produced pursuant to the Producer Agreement. 15. During his lifetime, Mr. Stepney did not receive any additional royalty statements for

periods following the period ending June 30, 1975. 16. On or around May 17, 1976, Mr. Stepney passed away and his rights under the

Producer Agreement passed to the Estate. He was survived by his wife and three children as his only living heirs. 17. Some time in 2008, Mr. Stepneys wife passed away, leaving his three children as his

only living heirs and only successors in interest to the Estate and the Producer Agreement. 18. On or around March 19, 2009, Mr. Stepneys three children created a revocable trust

of property, including among other things Mr. Stepneys rights under the Producer Agreement, in the Stepney Legacy Trust, naming Eibur Music as the Trustee. 19. Upon information and belief, UMG has become the final holder and designee of the

Chess catalogue, including those attendant contractual obligations, for periods beginning January 1, 1997, if not earlier. 20. Since UMG acquired the Chess catalogue, and more specifically since January 1,

2004, UMG has commercially released, manufactured, distributed and/or licensed the use of sound

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recordings produced by Mr. Stepney pursuant to the Producer Agreement and has received a substantial financial benefit therefrom. 21. Upon information and belief, Defendant collected royalties from the sale and

licensing of recordings produced by Mr. Stepney under the terms of the Producer Agreement. 22. Pursuant to the Producer Agreement, Defendant assumed a duty to pay Plaintiffs

royalties from the sale and licensing of recordings produced by Mr. Stepney. 23. Pursuant to the Producer Agreement, Defendant assumed a duty to provide Plaintiffs

with regular accountings of all royalties earned from the sale and licensing of recordings produced by Mr. Stepney. 24. Paragraph 12 of the Producer Agreement states that as a condition precedent to any

assertion by either Chess Records or Mr. Stepney that the other is in default in performing any obligation contained therein, the party alleging the default must advise the other in writing of the specific facts upon which it is claimed that the other is in default and of the specific obligation which it is claimed has been breached, and said other party shall be allowed a period of fifteen (15) days after receipt of such written notice within which to cure such default. (Ex. 1 at 8, 12.) 25. On or around June 18, 2010, Plaintiffs submitted to UMG a Notice of Default

(hereinafter the Notice) (See Notice, marked as Exhibit 5, attached hereto and incorporated herein by reference) specifically identifying the obligations breached by UMG, namely, the complete failure of UMG to account to Plaintiffs for its use of those sound recordings produced by Mr. Stepney under the Producer Agreement in the form of royalty payments, as well as demanding an accounting for UMGs use and/or licensing of those sound recordings. 26. On or around July 6, 2010, Plaintiffs extended the original fifteen (15) day deadline

stated in the original Notice in a letter delivered to UMG as a courtesy (hereinafter the

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Extension). (See Extension, marked as Exhibit 6, attached hereto and incorporated herein by reference.) 27. Since the delivery of Notice and Extension, UMG has failed to deliver the

information and materials demanded in the Notice, and has failed to cure the breach stated therein. 28. In this regard, UMGs failures to pay Plaintiffs royalties and provide regular

accountings due under the terms of the Producer Agreement constitute a material breach of the Producer Agreement. 29. Defendants failure to pay Plaintiffs royalties and provide Plaintiffs with regular

accountings due under the terms of the Producer Agreement constitutes a breach of the implied covenant of good faith and fair dealing imposed under every contract. 30. As a result of the foregoing breaches of the Producer Agreement, Defendant has

caused Plaintiffs to suffer financial damages and loss of royalties. 31. Accordingly, Plaintiffs are entitled to an award of compensatory damages in an

amount to be determined at trial, as well as an award of attorneys fees, costs, and pre-and postjudgment interest. COUNT II (Breach of Contract) 32. Plaintiffs hereby incorporate by reference each and every allegation set forth in

Count I of this Complaint as though fully set forth herein. 33. Upon information and belief, Chess Records and Mr. Stepney agreed to extend the

terms of the Producer Agreement two (2) additional years to cover periods beginning on March 1, 1970 and ending on March 1, 1972 (hereinafter the Later Agreement). 34. Pursuant to the Later Agreement, Mr. Stepney produced a volume of recordings

exclusively for Chess Records and its designees. A non-exhaustive list of those recordings is attached hereto. (See Later Agreement Recordings, marked as Exhibit 7, attached hereto and 8

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incorporated herein by reference.) These recordings were also commercially released, manufactured and/or distributed by Chess Records and its designees. Mr. Stepney has otherwise performed completely under the Later Agreement. Upon information and belief, a substantial amount, if not all of these recordings were produced in Ten Mar Studios and/or other recording studios located in Chicago, Illinois. 35. Both the 1972 Royalty Statement and the 1975 Royalty Statement list recordings

produced pursuant to the Later Agreement, further evidencing the existence and material terms of the Later Agreement. 36. Some time before or around March 16, 2009, Mr. Stepneys rights under the Later

Agreement passed to the Stepney Legacy Trust. 37. Since UMG acquired the Chess catalogue, and more specifically since January 1,

2004, UMG has commercially released, manufactured, distributed and/or licensed the use of sound recordings produced by Mr. Stepney pursuant to the Later Agreement and has received a substantial financial benefit therefrom. 38. Upon information and belief, Defendant collected royalties from the sale and

licensing of recordings produced by Mr. Stepney under the terms of the Later Agreement. 39. Pursuant to the Later Agreement, Defendant assumed a duty to pay Plaintiffs

royalties from the sale and licensing of recordings produced by Mr. Stepney. 40. Pursuant to the Later Agreement, Defendant assumed a duty to provide Plaintiffs

with regular accountings of all royalties earned from the sale and licensing of recordings produced by Mr. Stepney. 41. The Notice submitted by Plaintiffs to UMG on or around June 18, 2010 specifically

identified additional obligations breached by UMG, namely, the complete failure of UMG to account to Plaintiffs for its use of those sound recordings produced by Mr. Stepney under the Later

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Agreement in the form of royalty payments. The Notice also demanded an accounting for UMGs use and/or licensing of those sound recordings. 42. Since the delivery of the Notice and Extension, UMG has failed to deliver the

information and materials demanded in the Notice, and has failed to cure the breach stated therein. 43. In this regard, UMGs failures to pay Plaintiffs royalties and provide regular

accountings due under the terms of the Producer Agreement constitute a material breach of the Producer Agreement. 44. Defendants failure to pay Plaintiffs royalties and provide Plaintiffs with regular

accountings due under the terms of the Producer Agreement constitutes a breach of the implied covenant of good faith and fair dealing imposed under every contract. 45. As a result of the foregoing breaches of the Later Agreement, Defendant has caused

Plaintiffs to suffer financial damages and loss of royalties. 46. Accordingly, Plaintiffs are entitled to an award of compensatory damages in an

amount to be determined at trial, as well as an award of attorneys fees, costs, and pre-and postjudgment interest. COUNT III (Accounting) 47. Plaintiffs hereby incorporate by reference each and every allegation set forth in

Counts I through II of this Complaint as though fully set forth herein. 48. Pursuant to the Agreements, Defendant assumed a contractual duty to provide

Plaintiffs with regular accountings of all royalties generated from the sale and licensing of recordings produced by Mr. Stepney. 49. royalties. Defendant breached its contractual duty to Plaintiffs by failing to account for these

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50.

Due to Defendants failure to account for royalties due to Plaintiffs, Plaintiffs do not

know what royalties Defendant has received from the sale and licensing of recordings produced by Mr. Stepney, or the proper amount of royalties due to Plaintiffs. 51. Accordingly, Plaintiffs are entitled to a true and accurate accounting of all royalties

collected by Defendant from the sale and licensing of recordings produced by Mr. Stepney, and the proper amount of royalties due to Plaintiffs. COUNT IV (Unjust Enrichment) 52. Plaintiffs hereby incorporate by reference each and every allegation set forth in

Count I through III of this Complaint as though fully set forth herein. 53. Subsequent to the expiration of the Producer Agreement on or around March 1,

1970, Mr. Stepney continued to produce master recordings for Chess Records. A non-exhaustive list of those recordings is attached hereto. (See Additional Recordings, marked as Exhibit 8, attached hereto and incorporated herein by reference.) 54. Upon information and belief, a substantial amount, if not all of these recordings were

produced in Ten Mar Studios and/or other recording studios located in Chicago, Illinois. These recordings were also commercially released, manufactured and/or distributed by Chess Records and its designees. 55. Mr. Stepney delivered those recordings to Chess Records under an oral agreement

with Chess Records that he would be compensated according to terms comparable to those contained in the Producer Agreement, as evidenced by the issuance of the Royalty Statements by Chess Records to Mr. Stepney and accepted by Mr. Stepney. 56. Since UMG acquired the Chess catalogue, UMG has commercially released,

manufactured, distributed and/or licensed the use of sound recordings produced by Mr. Stepney after March 1, 1970 and has received a substantial financial benefit therefrom. 11

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57.

Upon information and belief, Defendant generated considerable revenue and

collected royalties from the sale and licensing of recordings produced by Mr. Stepney after March 1, 1970. 58. Since acquiring the Chess catalogue, including the master recordings produced by

Mr. Stepney, Defendant has retained those royalties collected from the sale and licensing of recordings produced by Mr. Stepney after March 1, 1970, and has not otherwise compensated Plaintiffs for its use of those recordings. 59. Plaintiffs have been otherwise unable to capitalize on those recordings due to

Defendants exclusive possession thereof. 60. Due to Defendants collection and retention of royalties and exclusive possession of

those recordings produced by Mr. Stepney after March 1, 1970, Defendant has been unjustly enriched at Plaintiffs expense. 61. Defendant should not in equity and good conscience be permitted to retain the

benefits bestowed on it at the Plaintiffs expense. 62. By reason of Defendants unjust enrichment at Plaintiffs expense, Plaintiffs are

entitled to recover from Defendant the sum of such unjust enrichment. 63. Accordingly, Plaintiffs are entitled to an award of compensatory damages in an

amount to be determined at trial, as well as an award of attorneys fees, costs, and pre- and postjudgment interest. PRAYER FOR RELIEF WHEREFORE, Plaintiffs pray for relief as follows: a. for the first count, an award of compensatory damages in an amount to be determined at trial; for the second count, an award of compensatory damages in an amount to be determined at trial;

b.

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c.

for the third count, a true and accurate accounting of all royalties collected by Defendant from the sale and licensing of recordings produced by Mr. Stepney, and the proper amount of royalties due to Plaintiffs; for the fourth count, an award of compensatory damages in an amount to be determined at trial; an award of attorneys fees, costs, and pre- and post-judgment interest; and all other and further relief as the Court may deem just and proper.

d.

e. f.

Respectfully Submitted, KAYIRA, LLP

By: _/s/ Eric F. Kayira__________________ Eric F. Kayira, Bar No.: 50672 Brent A. Sumner, Bar No.: 6295485 10 S. Lyle Ave. Clayton, MO 63105 Telephone: 314-727-3100 Facsimile: 314-727-3101 AND MCCAIN LAW OFFICES, P.C.,

By: _/s/Trent A. McCain_________________ Trent A. McCain, Bar No.: 5655 Broadway Merrillville, IN 46410 Telephone: 219-884-0696 Facsimile: 219-884-0692

Attorneys for the Plaintiff

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CERTIFICATE OF SERVICE The undersigned hereby certifies that a true and accurate copy of the foregoing First Amended Complaint was served via the Courts ECF system this 26th day of July 2011 to: C. Steven Tomashefsky STEIN RAY LLP Suite 1800 222 West Adams St. Chicago, Illinois 60606 Phone: (312) 641-3700 Fax: (312) 641-3701 stomashefsky@steinraylaw.com Counsel for Defendant ___/s/ Eric F. Kayira_____________________

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