## Facts

- Members of the Kingsmen recorded “Louie, Louie” in the 1960s.
- In 1968, they assigned the master recordings to Scepter Records in exchange for a 9% royalty interest in profits and licensing fees.
- The master-recording rights were later transferred to Gusto Records, Inc. and G.M.L., Inc.
- Highland Music, Inc. acted as licensing agent, negotiating licenses for use of the recording.
- The Kingsmen alleged they never received royalty payments despite substantial exploitation of the recording.
- In 1993, the Kingsmen sued seeking rescission of the 1968 assignment under California law, relying on defendants’ conduct and omissions within the four-year limitations period.
- After rescission was granted, Gusto and G.M.L. failed to promptly deliver the physical masters, and Highland continued licensing activity, leading to civil contempt proceedings.

## Issues

1. Whether the Kingsmen’s 1993 rescission claim was barred by California’s four-year statute of limitations for rescission of a written contract.
2. Whether rescission properly restored ownership of the master recordings to the Kingsmen and required defendants to cease exploitation and deliver the masters.
3. Whether the district court properly imposed civil contempt sanctions for noncompliance with the rescission judgment and related injunctive orders.

## Decision

- The Ninth Circuit affirmed the judgment granting rescission of the 1968 assignment and restoring ownership of the master recordings to the Kingsmen.
- The court rejected defendants’ statute-of-limitations defense, holding the rescission claim could be grounded on defendants’ conduct within the four-year period.
- The court affirmed the rejection of defendants’ declaratory-judgment effort to limit the effect of rescission.
- The court affirmed civil contempt sanctions against Gusto, G.M.L., Highland, and an associated individual for failing to comply with the rescission judgment and injunctions, including continued licensing and failure to deliver the masters.

## Legal Principles

- Under California law, rescission of a written contract is subject to a four-year limitations period; a rescission claim may be timely when based on actionable conduct within the limitations window, including ongoing failures to perform continuing obligations such as accounting and royalty payment.
- Rescission is restorative, returning the parties as nearly as possible to their pre-contract positions; rescission of an assignment of masters restores ownership to the assignor and extinguishes the assignee’s contractual exploitation rights.
- After rescission, parties and their agents must comply with implementing orders, including transferring possession of masters and ceasing licensing inconsistent with the rescission judgment.
- Civil contempt sanctions are appropriate to enforce clear and definite court orders when a party has notice and fails to take reasonable steps to comply.

## Conclusion

The Ninth Circuit upheld rescission restoring the Kingsmen’s ownership of the “Louie, Louie” master recordings, found the action timely because it relied on conduct within the limitations period, and sustained contempt sanctions to enforce compliance and stop post-judgment exploitation.


Peterson v. Highland Music, Inc., 140 F.3d 1313 (9th Cir. 1998)