## Facts

- Contemporary Mission, Inc., a nonprofit corporation of Roman Catholic priests, created and owned rights to a rock opera recording titled *VIRGIN*.
- On August 16, 1972, Contemporary and Famous Music Corp. executed a recording agreement granting Famous exclusive rights to manufacture and sell records from the *VIRGIN* master recording in exchange for royalties.
- The *VIRGIN* agreement imposed express promotional obligations on Famous, including selecting within the first year a person to personally oversee nationwide promotion and maintaining contact with Contemporary about promotion.
- The parties also entered a second contract (the “CRUNCH” agreement) covering additional recordings.
- Famous later sold its record division to ABC Records and purported to assign its interests in the *VIRGIN* and CRUNCH agreements to ABC.
- Contemporary alleged Famous (i) failed to use reasonable efforts and to perform promotional obligations for *VIRGIN*, and (ii) improperly assigned the agreements without securing ABC’s performance and without discharge of Famous’s own duties.
- At trial in the Southern District of New York, a jury found for Contemporary on liability (including breach of the *VIRGIN* agreement).
- The district court excluded Contemporary’s proffered statistical evidence supporting prospective damages (future lost royalties), and Contemporary cross-appealed that evidentiary ruling.

## Issues

1. Whether sufficient evidence supported the jury’s finding that Famous breached the *VIRGIN* agreement by failing to use reasonable promotional efforts and by its conduct surrounding the assignment to ABC.
2. Whether Contemporary gave contractually sufficient notice of breach under the CRUNCH agreement, and whether Famous remained liable after assigning the CRUNCH agreement to ABC.
3. Whether the district court erred by excluding statistical evidence offered to prove prospective damages for future lost royalties as too speculative.

## Decision

- The Second Circuit affirmed the liability judgment that Famous breached the *VIRGIN* agreement, holding the trial record supported a finding that Famous did not use reasonable efforts to promote the recording.
- The court held the assignment to ABC did not, without a release/novation, discharge Famous from its contractual obligations under the agreements.
- The court held Contemporary’s notice under the CRUNCH agreement was sufficiently specific to satisfy the contract’s notice provision.
- The court ruled the exclusion of the statistical prospective-damages evidence was erroneous because there was a stable foundation for a reasonable estimate of lost royalties.
- The court remanded for reconsideration of admissibility of the prospective-damages evidence and for recalculation of damages if the evidence is admitted, while otherwise affirming the judgment.

## Legal Principles

- In royalty-based exploitation contracts, contractual language and the parties’ relationship may support a duty to use reasonable efforts to promote and exploit the work; formal compliance with isolated promotional steps may still be insufficient if overall efforts are commercially unreasonable.
- Assignment of contractual rights does not relieve the assignor of its contractual duties absent a clear release or novation by the non-assigning party.
- Contractual notice provisions are satisfied when the notice is sufficiently specific to alert the counterparty to the claimed default and afford an opportunity to address it.
- Lost profits or royalties are recoverable when supported by a stable foundation permitting a reasonable estimate; damages proof need not be mathematically exact, and statistical/market evidence may be admissible despite forecasting uncertainty.

## Conclusion

The Second Circuit largely upheld the jury’s breach findings in a recording-and-royalty dispute, reaffirmed that assignment to a third party does not discharge the assignor’s duties without a release, and required reconsideration of excluded evidence supporting future lost-royalty damages.


Contemporary Mission, Inc. v. Famous Music Corp., 557 F.2d 918 (2d Cir. 1977)