Lyor Cohen and Island Def Jam Music Group will not be writing multimillion-dollar checks to Steve Gottlieb's TVT companies, now that an appeals court reversed a $54 million judgment over Ja Rule recor

NEW YORK -- Lyor Cohen and Island Def Jam Music Group will not be writing multimillion-dollar checks to Steve Gottlieb's TVT companies, now that an appeals court reversed a $54 million judgment over Ja Rule recordings.

What remains after the June 14 U.S. Second Circuit Court of Appeals opinion is a $126,720 judgment against IDJ for breach of contract, which the label did not appeal.

The case is an example of the high-stakes strategies of litigation lawyers -- and the unpredictability of judges and juries.

TVT's counsel, Peter Haviland with Akin Gump Strauss Hauer & Feld, successfully focused the District Court jury in 2003 on claims that could reap large monetary awards, painting a picture of fraud and wrongful, intentional conduct. The breach of contract claim, which could not ultimately include punitive damages, seemed to play a minor role.

Haviland showed that Ja Rule in 1998 rekindled a relationship with producer Irv Gotti, who formed Murder Inc. as a joint venture with IDJ.

TVT in 2001 approached Gotti and Ja Rule, who previously recorded tracks with members of Cash Money Click for TVT, to record a new album with CMC. This required IDJ's consent.

Although reluctant to consent, Cohen as IDJ's chairman did not want to alienate Ja Rule by refusing his request. IDJ was renegotiating its deals with the artist and Gotti.

So TVT entered a contract with Ja Rule, Gotti and Murder Inc. to record the CMC album, subject to IDJ's consent. As the artists began recording, the parties had still not completed a "side letter agreement," which IDJ signed but never sent to TVT's lawyer, who received only assurances the deal was done.

About ten months later, with Gotti re-signed to IDJ, the label forbade TVT from releasing Ja Rule's recordings -- after TVT had developed promotional materials, including a sampler CD and DVD of CMC tracks that IDJ distributed as part of the deal.

TVT sued Cohen and IDJ, contending that they never intended to cooperate and instead sabotaged the CMC album. TVT claimed it spent more than $1 million producing and promoting the album that IDJ persuaded Gotti and Ja Rule not to deliver. The jury found IDJ and Cohen liable for fraud, interference with the TVT/Gotti/Ja Rule contract and copyright infringement of the sampler tracks. IDJ also breached the oral consent contract.

Although the completed CMC album was delivered to Gottlieb before the trial ended, the jury awarded TVT about $25 million to compensate for its losses and about $108 million in punitive damages. The judge reduced the award to about $54 million.

The masterstroke for IDJ and Cohen attorneys was not appealing the contract award, freezing it at $126,720 -- far less, even, than TVT's attorney's fees. Then the lawyers attacked the larger claims with what proved to be lethal legalities for TVT.

Andrew Frey with Mayer, Brown, Rowe & Maw convinced the court that IDJ's oral contract was part of the TVT/Gotti/Ja Rule deal, so the label and Cohen could not be liable for third-party interference. Further, any hidden intent to breach the oral contract was remedied by the contract claim, so it was not fraudulent under New York law.

Paul Gardephe with Patterson, Belknap, Webb & Tyler persuaded the court to throw out the punitive damages, arguing that they may only be awarded when the wrongful conduct was directed toward harming the public at large rather than individual parties like TVT.

The court also knocked out the copyright infringement claims and attorney's fees.

"Lyor is extremely relieved to be vindicated of the charges that he had committed fraud," Frey says.

Chuck Ortner with Proskauer Rose in New York, who represented IDJ and Cohen during the liability phase of the trial and IDJ during the damages phase, tells ELW that the trial team is gratified that the appellate court followed the arguments they made at trial, agreeing with their position.

While TVT's options -- asking the appellate judges to reconsider the opinion or the U.S. Supreme Court to review the case -- are unlikely to change the outcome, according to several industry lawyers who spoke with ELW, Haviland is not calling the case a checkmate yet. "This is not over, and we look forward to the next round."