Def Jam Judgment Set Aside

A U.S. appellate court Tuesday reversed a federal judge’s ruling that would have required Island Def Jam Music Group and one of its former executives to pay $53 million to an independent record company, TVT Records.

The decision by the U.S. 2nd Circuit Court of Appeals in Manhattan sets aside one of the largest awards in music history and is a surprising capstone to a case that pitted the world’s largest music conglomerate against one of the nation’s most successful independent record companies.

The appellate court found that there was insufficient evidence to support claims that Def Jam, a subsidiary of Universal Music Group, and its then-chairman, Lyor Cohen, were liable for reneging on a deal that would have allowed TVT to release a potentially lucrative album featuring rap star Ja Rule.

In 2003, a federal jury ordered the label and Cohen to pay TVT $132 million in damages. Later that year, a federal judge slashed that award to $53 million.

At the time, TVT still claimed victory, and its attorney, Peter Haviland, said the pared-down verdict looked “pretty bulletproof on appeal.”

On Tuesday, however, the appellate court overturned every claim that had been submitted on appeal. TVT will still receive $126,720 in compensatory damages resulting from a breach-of-contract claim that Def Jam did not appeal.

The reversal is a personal victory for Cohen, one of the founding fathers of rap music, who had seen his reputation sullied in the dispute. At one point in the original trial, a judge implied that Cohen, who is now president of Warner Music Group, was “morally reprehensible.”

Moreover, Cohen was on the hook financially. Of the $53-million award that was reversed Tuesday, he would have been responsible for paying $3 million.

Cohen’s personal attorney, Matthew Dontzin, said the executive was delighted by the appellate court decision.

The drama might not be over, however. Haviland, TVT’s lawyer, released a statement Tuesday saying that the company would appeal the reduction in damages.

“We were forced to bring this action in part because Mr. Cohen and Def Jam denied the existence of a contract critical to our business. This court has affirmed that we did have a contract and that the defendants broke it. This is not over, and we look forward to the next round,” Haviland said.

Universal Music issued the following statement: “This is the result that we expected all along. We are pleased that the 2nd Circuit viewed the case as we did.”

The appellate ruling does not dispute that TVT had discovered Ja Rule in the early 1990s, when the rapper was part of a group known as Cash Money Click. The group recorded several songs, but TVT released no albums.

Ja Rule, born Jeffrey Atkins, later left TVT and achieved widespread popularity when he launched a solo career at Def Jam in 1998. In 2001, the president of TVT Records, Steve Gottlieb, approached Cohen about partnering on an album featuring Ja Rule reunited with his two former bandmates.

Cohen was an oddity within the rap world: The 6-foot-5 American-born son of Israeli parents got his start in music as a club promoter and road manager for the group Run-DMC. He quickly developed a reputation as a tough negotiator, allegedly poaching acts from powerhouses such as Sean “P. Diddy” Combs and telling the Financial Times, “I’m a predator.... If you haven’t nailed it down, expect for it to be taken.”

Cohen encouraged Gottlieb’s hopes for a partnership on the reunion album, lawyers alleged in the original lawsuit, because Cohen didn’t want to alienate Ja Rule, who hoped the new TVT album would aid his old bandmates.

Gottlieb said he spent more than $1 million producing and promoting the album. But before it could be released, TVT alleged, Cohen enticed Ja Rule to discard his agreement with the independent label and Def Jam withdrew permission to feature the artist. TVT filed suit in 2002 alleging breach of contract, tortious interference, fraud and copyright infringement.

Gottlieb, who founded TVT 20 years ago, has been involved in at least 40 lawsuits since 1991 with promoters, producers and artists.