What I Like About You? It’s Not Your Fulfillment of Fiduciary Duties

Rock bands are often sources of interesting contracts disputes. There’s Journey’s saga. There’s Van Halen’s infamous brown M&Ms rider. There’s No Doubt’s suit against Activision. There’s the Megadeath case, which may have even predated this Blog. And now there is the strange case of The Romantics.

It is strange because in the first case, from 2021, lead singer Walter Palamarchuk sued lead guitarist Michael Skill for diverting royalties to himself rather than having them go through Master Beat, Inc. (Master Beat), an entity formed in 1984 to facilitate the collection of royalties from the band’s hits, like What I Like About You, and Talking in Your Sleep. That suit came to an abrupt conclusion when, after being given seventeen weeks to respond to a dispositive motion, Mr. Skill submitted a copy of Mr. Palamarchuk’s brief, retyped and signed by Mr. Skill’s attorney. The court found the motion doubly convincing and awarded judgment to Mr. Palamarchuk. Mr. Skill’s attempt to file a later, untimely brief without leave of court did not change matters, beyond getting Mr. Skill’s counter-narrative out there.

Now, the tables are turned. Mr. Skill is suing Mr. Palamarchuk and Master Beat (collectively Defendants), alleging that Mr. Palamarchuk is the one who is exploiting Master Beat to serve his own interests. Defendants have filed a motion to dismiss based on res judicata and failure to state a claim.

In Skill v. Palamarchuk, the District Court for the Eastern District of Michigan denied the motion to dismiss. As to the res judicata arguments, while Defendants are correct that Mr. Skill raised claims of breach of fiduciary duty, unjust enrichment, and conversion in the earlier state court action, the current action alleges new facts that arose beginning one year after that case was adjudicated. The fact that the allegations give rise to the same causes of action does not mean that they have already been adjudicated.  Some of Mr. Skill’s claims, like his claim that Defendants made improper use of his likeness in violation of the Lanham Act, relate entirely to facts that arose beginning in 2023. Others, like his claim that Defendants released new music under the name The Romantics without notice or consultation with Mr. Skill, arose at least in part after the state court case was completed. In short, Defendants have not met their burden of showing that any of Mr. Skills claims are barred as res judicata.

As to the failure to state a claim, the Court first addresses Mr. Skills action for inspection of Master Beat’s books and records. Defendants claim Mr. Skills has provided no justification for such an inspection, but as he remains one Master Beat’s two shareholders, his right to inspection is clear under Michigan law. Mr. Skill has also properly stated a claim for breach of fiduciary duty. Defendants’ argument that he should have filed the claim as a derivative action on behalf of Master Beat puts the cart before the horse. Shareholders may bring direct actions to enforce fiduciary duties owed to them. Defendants try to get Mr. Skill’s breach of contract claim dismissed by disputing the facts, but that is no ground for dismissal on the pleadings, as disputes of fact must be resolved in favor of the non-moving party. Mr. Skill’s right of publicity and Lanham Act claims likewise survive.

It is sad when band members fall out. One hopes that the parties, facing the prospect of discovery and a trial, will find someway to settle their differences Meanwhile, let’s. return to happier times.