A federal jury in New York found powerhouse record label Island Def Jam and its chairman, Lyor Cohen, liable for fraud and copyright infringement in a dispute over a still-unreleased album that involves some of the rap world's biggest names.
The eight-member panel sided unanimously with independent label TVT Records, which had accused Cohen and Def Jam of reneging on a deal that would have allowed TVT to release an album featuring rap sensation Ja Rule, now one of Def Jam's marquee stars.
New York-based TVT is seeking a damage award of more than $30 million. The jury is set to consider damages on April 28.
Def Jam, a New York division of Universal Music Group, said it plans to appeal the verdict.
"Since the jury was not allowed to consider all of the evidence presented in this case, we are confident that when they do, we will prevail," a Def Jam spokesman said Monday.
The lawsuit was filed in August, shortly before the planned release date of a TVT album with new recordings and remixes of work that Ja Rule had recorded as part of a rap act, Cash Money Click, under a 1994 contract with the independent label. TVT later dropped Ja Rule from its roster.
By 2001, the rapper had turned into a star for Murder Inc., a joint venture label affiliated with Def Jam and run by producer Irv Gotti.
But, according to the suit, the rapper decided to "honor his prior commitments" to his former rap group partners by completing a debut album that had been delayed by the incarceration of Cash Money Click member Christopher Black.
The suit said Ja Rule and Gotti obtained Def Jam chief Cohen's approval and made a deal to release the album through TVT, which paid a $400,000 advance to start recording work.
TVT and Def Jam, the suit said, also hammered out a "side letter," in which TVT agreed to pay the Vivendi Universal-owned label a cut of the album profits in exchange for letting the rapper and producer participate.
Based on that deal, according to the suit, TVT spent hundreds of thousands of dollars to finance the artists' production of at least 11 songs for the album over the next several months.
During 2002, Def Jam used one of those songs, "The Rain," on its own "Irv Gotti Presents: The Inc." album, without TVT's permission, the suit said. And in August, Def Jam rejected the terms of the "side letter" deal.
"The evidence was overwhelming," said Peter Haviland, a lawyer for TVT.
"The verdict against Mr. Cohen, personally, for fraud shows that there are some very serious problems confronting Def Jam and Universal Music Group."
Cohen is one of the music industry's most prominent executives.
A former tour manager for pioneering rap act Run-DMC, Cohen later joined then-independent Def Jam and helped turn it into one of the leading rap labels. Vivendi eventually acquired the label in a complex series of corporate mergers.
According to court documents, Cohen's testimony on the witness stand didn't always jibe with his earlier sworn statements.
In court papers, Cohen said he had told Gotti that he would not allow the producer's participation in the TVT project.
On the stand, however, he testified that he didn't recall telling Gotti that he couldn't proceed with the project.
The suit is the latest controversy to dog Def Jam. In January, federal agents raided the offices of its Murder Inc. affiliate in a money-laundering probe. Def Jam said it has violated no laws.
Also in January, several radio programmers told The Times the label had purchased advertisements designed to inflate airplay statistics for Mariah Carey's recent song "Through the Rain."
The ads initially registered with monitoring service Nielsen Broadcast Data Systems as genuine plays of the song.
The label said the ads were not meant to affect the data.