Between 1983 and 1986, MSI, a music company solely owned by Nealy, engaged a number of recording artists and created a catalog of popular sound recordings and musical compositions. MSI was administratively dissolved in 1986, and Nealy was arrested and later sentenced to a twenty (20) year prison term in late 1988. During Nealy’s first incarceration from 1988 to 2008, unbeknownst to and without authorization from Nealy, former MSI Vice President, producer, and recording artist, Tony Butler (“Butler”) began unlawfully transferring rights to use and exploit the Subject Musical Works.
Defendant Artist Publishing Group LLC’s (“APG”) entered into a publishing agreement with the author of the compositions at issue in this case, Tony butler, through his wholly owned company, 321 Music, LLC, pursuant to which APG agreed, inter alia, to license certain musical compositions authored by Butler to third parties, for which APG was paid a percentage of the royalties earned from those efforts (the “APG/321 Music Agreement”).
As part of a separate administration agreement between APG and Defendant Warner Chappell Music, Inc.’s (“WC”), WC assumed certain of APG’s duties in the APG/321 Music Agreement, including licensing the musical compositions to third parties in exchange for licensing fees and royalties. It was alleged that no monies earned from the licensing of the compositions at issue in this case were ever received by APG, other than the royalties it was entitled to receive as publisher pursuant to its publishing agreement with 321 Music, LLC. Those monies have been accounted to Plaintiffs in discovery in this case, totaling $125,738.81.
Both WC and APG filed Daubert motions to exclude the testimony of John Menneci.
Accounting Expert Witness
John Menneci joined Gelfand, Rennert & Feldman (GRF) in 2001 and works out of its White Plains, New York office. He currently co-heads the New York arm of GRF’s New York Royalty Examination Group.
John specializes in conducting royalty examinations on behalf of prominent recording artists, songwriters and merchandise licensors and has over 25 years of experience in this field. He has travelled across the globe to conduct examinations on behalf of the firm’s clients and has audited an array of different licensees in both the physical and digital space with great success. John also specializes in conducting due diligence and valuations in connection with copyright acquisitions and estate tax matters.
Discussion by the Court
The Menneci Report formed the basis for two opinions: (1) Defendants received $410,920.10 in gross publishing income from copyright infringements and (2) Defendants, or parties connected to Defendants, received $54,960,000 in master recording income from copyright infringement of Plaintiffs’ works.
Menneci’s conclusion that Defendants, or parties connected to Defendants, received $54,960,000 in master recording income from copyright infringement of Plaintiffs’ works must be excluded
Starting first with the eye-popping damages figure of almost $55 million, the Court held that the Report did not specify how Menneci reached this conclusion. Indeed, when asked several different times at the Hearing to provide either the methodology or data utilized in reaching this astronomical figure, Plaintiffs’ counsel was unable to provide a response. Even when the Court broke the inquiry down further by asking Plaintiffs’ counsel to explain how Menneci calculated alleged foreign income through some sort of extrapolation, Plaintiffs’ counsel was simply unable to proffer or explain the methodology employed by his damages expert.
Also, Menneci relied on whole album sales, despite the fact that only a handful of isolated tracks remain at issue in this case. In conclusion, Menneci’s calculation includes revenue generated from individual tracks not at issue here, as well as album versions that do not include a single track at issue in this case.
Menneci’s conclusion that Defendants received $410,920.10 in gross publishing income from copyright infringements must also be excluded
The Court noted that Menneci improperly included funds received by other entities in his calculations—apparently on a theory of contributory infringement by non-party Interscope Records.
In addition to being premised on an incorrect theory of recovery, Menneci’s conclusion that Defendants received $410,920.10 in gross publishing income from copyright infringements is not based on sufficient facts and data or reliable principles or methods.
Further, since these monies are not accounted for in the financial documentation produced by Warner Chappell, Menneci conceded that he “estimated” the songwriter’s share of performance income based on his “assumption” that “music publishing income is generally split 50/50 between the [song]writer and publisher.” Similarly, Menneci improperly assumed that Warner Chappell administered 100% of the musical composition for “Weekends”—when in reality, Warner only received 33% of the publishing monies. The Court held that such assumptions fail to meet the standard imposed by Rule 702 for expert testimony.
However, the Court will bifurcate this trial as to liability and damages. During the initial liability phase, Plaintiffs may attempt to establish that Defendants
should be held jointly and severally liable for the profits of other entities given the existence of a “practical partner” relationship. If the jury returns an initial verdict finding that Plaintiffs have established either a practical partnership or predicate act, the Court will hold a brief status conference with the parties as to how Plaintiffs intend to prove their joint and several damages and foreign profits damages, given that the Menneci Report is excluded in its entirety under Rule 702.
Held
The Court granted Warner’s Daubert motion to exclude the testimony of John Menneci but denied as moot APG’s Daubert motion.
Key Takeaway:
The Court decided that even a cursory review of the Menneci Report—which spans a mere five pages—indicated significant gaps in methodology and numerous missing data points. Menneci’s deposition did little to clarify his methods; on the contrary, the lack of reliable methodology was further exposed and made even more readily apparent.
Case Details:
| Case Caption: | Nealy Et Al V. Atlantic Recording Corp. Et Al |
| Docket Number: | 1:18cv25474 |
| Court: | United States District Court, Florida Southern |
| Order Date: | July 17, 2024 |
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