## Facts

- MCA Records, Inc. and Olivia Newton-John entered an exclusive recording contract on April 1, 1975.
- Newton-John agreed to record and deliver two albums per year for an initial two-year period, with MCA holding three one-year renewal options.
- The contract allowed MCA to extend the agreement’s term if Newton-John failed to deliver recordings when due.
- MCA agreed to pay royalties plus nonreturnable advances: $250,000 per album during the initial period and $100,000 per album during option years; Newton-John bore production costs.
- Newton-John timely delivered three albums; a fourth was delivered late; after MCA exercised an option to renew, no further recordings were delivered.
- MCA paid Newton-John approximately $2.5 million in royalties and nonreturnable advances.
- The parties filed cross-actions for breach of contract seeking damages and injunctive relief; Newton-John also sought declaratory relief.
- The trial court issued a preliminary injunction restraining Newton-John from recording for any entity other than MCA while the action was pending, or until April 1, 1982 if that date occurred during the pendency.
- Newton-John appealed the preliminary injunction.

## Issues

1. Whether a preliminary injunction enforcing an exclusivity (negative covenant) in a personal services contract is invalid absent a contractually guaranteed minimum annual compensation required by California Civil Code § 3423(5) and Code of Civil Procedure § 526(5).
2. Whether an injunction restraining an artist from recording for others is improper where the artist claims the company “suspended” her.
3. Whether the injunction required an express showing or finding of irreparable injury to support preliminary relief.
4. Whether the injunction was improper insofar as it purported to restrain Newton-John until April 1, 1982, potentially extending beyond the contract’s permissible duration.

## Decision

- The Court of Appeal affirmed the grant of a preliminary injunction enforcing the exclusivity provision.
- The court held the statutory minimum-compensation requirement was satisfied by the contract’s nonreturnable advances, which exceeded $6,000 per year.
- The court rejected the claim that Newton-John had been suspended in a manner that would bar an injunction; she remained free to perform under the agreement.
- The court concluded the trial court could infer irreparable harm and that explicit findings were not required on this record; appellate review favored reasonable inferences supporting the order.
- The court modified the injunction to remove language that could operate to extend the restraint beyond the contract’s lawful term; preliminary relief may preserve the status quo but may not prolong the contract.

## Legal Principles

- A court may enjoin a party to a personal services contract from performing for others only if the contract guarantees at least the statutory minimum annual compensation under Civil Code § 3423(5) and Code of Civil Procedure § 526(5).
- Large, nonreturnable advances specified in the contract can constitute the guaranteed minimum compensation for purposes of enforcing a negative covenant.
- An injunction enforcing exclusivity is not barred merely by allegations of “suspension” where the contracting party has not actually prevented the performer from rendering services under the contract.
- In reviewing preliminary injunctions, appellate courts view the evidence and inferences in the light most favorable to the prevailing party and defer to the trial court’s discretionary judgment.
- A preliminary injunction’s role is to maintain the parties’ positions pending adjudication; it may not be used to extend a personal services relationship beyond its lawful or agreed duration.

## Conclusion

The court upheld a preliminary injunction preventing Newton-John from recording for other companies because the contract guaranteed compensation far exceeding the statutory minimum and the trial court could infer irreparable harm, but it modified the order to eliminate any language that could extend the restraint beyond the contract’s lawful term.


MCA Recs., Inc. v. Newton-John, 90 Cal. App. 3d 18 (Cal. Ct. App. 1979)