In re Isbell Records, Inc.
774 F.3d 859 (2014)
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Rule of Law:
Under Federal Rule of Civil Procedure 50, a party waives the right to bring a post-verdict motion for judgment as a matter of law on grounds not specifically raised in its pre-verdict motion. Furthermore, under California law, contract interpretation is a question of law for the court unless interpretation turns on the credibility of conflicting extrinsic evidence.
Facts:
- In 1993, the music group Tag Team wrote and produced the song 'Whoomp! (There It Is)' and entered into a Recording Agreement with Bellmark Records.
- Alvertis Isbell was the president of Bellmark Records and also owned a separate music publishing company, Alvert Music, which he had formed in 1977.
- An exhibit to the Recording Agreement assigned fifty percent of the song's composition copyright to 'Bellmark's affiliated designee publisher'.
- In 1997, Bellmark Records filed for Chapter 7 bankruptcy.
- In 1999, DM Records, Inc. purchased all of Bellmark's assets from the bankruptcy estate 'as is, where is'.
- Following the purchase, DM Records began to commercially exploit the composition copyright for 'Whoomp!', collecting royalties from its use.
Procedural Posture:
- Alvertis Isbell sued DM Records, Inc. in the U.S. District Court for the Northern District of Texas, alleging copyright infringement.
- The case was transferred to the U.S. District Court for the Eastern District of Texas.
- The district court granted DM's motion to dismiss for lack of standing, but the U.S. Court of Appeals for the Fifth Circuit reversed and remanded for trial.
- At the close of evidence at trial, both parties filed motions for judgment as a matter of law (JMOL) under Rule 50(a).
- The district court granted Isbell's motion on the issue of copyright ownership, denied DM's motion, and submitted the question of damages to the jury.
- The jury awarded Isbell over $2.1 million in actual damages.
- DM filed a renewed JMOL under Rule 50(b) and a motion for a new trial under Rule 59, both of which the district court denied.
- DM Records, Inc., as Appellant, appealed the final judgment and the denial of its post-trial motions to the U.S. Court of Appeals for the Fifth Circuit.
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Issue:
Does a district court err by interpreting an ambiguous contract as a matter of law, rather than submitting it to a jury, when the parties present undisputed extrinsic evidence that gives rise to conflicting inferences but does not create a conflict of witness credibility?
Opinions:
Majority - Judge Higginson
No. The district court did not err by interpreting the contract as a matter of law because, under California law, it is a judicial function to interpret a written instrument unless the interpretation turns upon the credibility of conflicting extrinsic evidence. Here, although both parties offered extrinsic evidence to support their interpretation of the ambiguous term 'Bellmark's affiliated designee publisher,' none of the evidence required a credibility determination by the jury. The evidence consisted of undisputed documents and testimony from only one party to the original contract (Isbell), so the task was to draw inferences from uncontroverted evidence, which is a question of law for the court. The court also affirmed the denial of DM's post-verdict motion for judgment as a matter of law because DM raised a new 'two assignments' theory for the first time, a theory it had not raised—and in fact, had disclaimed—in its pre-verdict motion, thereby waiving the argument under Rule 50. The purpose of Rule 50 is to prevent a party from 'ambushing' the court and opposing counsel with new arguments after a verdict has been rendered.
Analysis:
This decision strongly reinforces the procedural requirement of Federal Rule of Civil Procedure 50, underscoring that a renewed motion for judgment as a matter of law cannot serve as a vehicle for new legal theories. It solidifies the 'use it or lose it' nature of pre-verdict motions, promoting judicial efficiency and preventing unfair surprise after a jury has deliberated. The opinion also provides a clear application of California's contract interpretation rules in federal court, clarifying the distinction between conflicting inferences from undisputed evidence (a matter for the judge) and conflicting testimony that requires a credibility assessment (a matter for the jury). This precedent will guide litigants in framing their trial strategies and preserving arguments for appeal.
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