Federal Appeals Court Ruling Has New Jersey Singing The Blues in Music Case

In a precedential ruling issued on August 5, 2010, Singer Management Consultants Inc. v. Milgram, No. 09-2238, the United States Court of Appeals for the Third Circuit - the appellate tribunal to the United States District Court for the District of New Jersey - held that New Jersey will have to pay the legal fees for a music promoter that sued the State to stop it from enforcing its "truth-in-music" law.

The Third Circuit held that the promoter, Live Gold Operations, Inc. (“Live Gold”), which accused the State of violating its constitutional and trademark rights, was a prevailing party in the underlying litigation thus triggering the fee-shifting statute requiring the State to reimburse the promoter for its attorneys’ fees. The full reported decision can be found here.

The United States District Court initially dismissed the case and denied fees, finding the case moot because the State did an about-face once it became clear it would lose the case. Thus, the promoter, Live Gold, never obtained an order on the merits.

The District Court relied on Buckhannon Bd. & Care Home v. W. Va. Dep't of Health & Human Res., 532 U.S. 598 (2001), where the U.S. Supreme Court held prevailing party fees are not available for plaintiffs who do not win a judgment but act as the catalyst for a voluntary change in defendants' conduct.

The appeals court found Buckhannon allowed a fee award even though no judgment on the merits was reached because the State's action in backing off its initial stance was not voluntary but resulted from the action of the District Court.

The fee dispute grew out of the State's attempt in 2007 to enforce the newly enacted New Jersey Deceptive Practices in Musical Performances statute (truth-in-music law"), N.J.S.A. 2A:32B-1 et seq., which states as follows:
A person shall not advertise or conduct a live musical performance or production through the use of an affiliation, connection or association between the performing group and the recording group unless:

(a) The performing group is the authorized registrant and owner of a federal service mark for the group registered in the United States Patent and Trademark Office; or

(b) At least one member of the performing group was a member of the recording group and has a legal right by virtue of use or operation under the group name without having abandoned the name or affiliation of the group; or

(c) The live musical performance or production is identified in all advertising and promotion as a salute or tribute; or

(d) The advertising does not relate to a live musical performance or production taking place in this State; or

(e) The performance or production is expressly authorized by the recording group.
N.J.S.A. 2A:32B-2.

The truth-in-music law is aimed at impostor groups that perform under a name they have no right to use. It creates a separate offense subject to a $10,000 civil penalty for a first offense, $20,000 for a repeat and treble damages, and makes a violation illegal under the New Jersey Consumer Fraud Act.

Live Gold had organized a two-week concert series starting Aug. 18, 2007, at the Hilton Hotel in Atlantic City featuring two bands that dated back to the 1950s, the Platters and the Coasters. Shortly before the first show, the attorney general notified Live Gold that its use of the bands' names might violate the truth-in-music law.

Live Gold provided the State with evidence that it owned a common-law unregistered trademark in the names, but the State insisted that to avoid liability the concerts should be billed as a "tribute" or "salute."

The Hilton Hotel complied, but a day before the first show, Live Gold sued New Jersey Attorney General Anne Milgram seeking a temporary restraining order and injunctive relief. On the same day, U.S. District Judge Dickinson Debevoise, in Newark, granted a temporary restraining order, finding that Live Gold was likely to succeed on the merits of its claims. Judge Debevoise said the State's decision to treat unregistered trademarks differently from registered ones under the law posed a "very serious problem" and might impair "substantial federal rights," including freedom of speech.

When the parties returned before Judge Debevois for the preliminary injunction hearing on Sept. 7, 2007, the State’s deputy attorney general at first continued to assert that unregistered trademarks were not the same for purposes of the truth-in-music law, but during the argument she switched her position after Judge Debevoise repeatedly rejected it. Although Judge Debevoise did not issue a preliminary injunction he declared the State would be "bound by" its new view of the law.

On March 16, 2009, after getting the State to confirm what it said at the preliminary injunction hearing, Judge Debevoise dismissed the case, saying nothing else needed to be decided because Live Gold had effectively won the case.

But Judge Debevoise denied Live Gold's request for fees on April 7, 2009, agreeing with an earlier ruling by Magistrate Judge Esther Salas that Live Gold was not a prevailing party because he never issued a preliminary injunction or other order on the merits.

In vacating Judge Debevoise’s dismissal order, Third Circuit Judge Jane Roth, joined by her colleague Judge Ruggero Aldisert, concluded that Live Gold did prevail because it obtained complete relief based on the State's concession to its view of the law. The temporary restraining order alone might have been enough to confer prevailing party status, but the District Court went beyond that at the preliminary injunction hearing, remarked Judge Roth.

The Third Circuit returned or remanded the case back to the District Court for a determination of reasonable attorneys' fees.

Talk about a waste of the State's tax dollars! This case couldn't provide a better example.

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