Great American Music Machine, Inc. v. Mid-South Record Pressing Co.

Singer-songwriter Ralph Harrison (plaintiff) had never performed professionally and was unknown in the entertainment industry when a national sorority adopted one of his songs as its theme song. Friends and associates joined a partnership to promote Harrison and spent $30,000 recording an album, then contracted with Mid-South Record Pressing Company (Mid-South) (defendant) to press 40,000 copies. The parties discussed the venture’s plan to incorporate into Great American Music Machine, Inc. (GrAMM) (plaintiff) and sell stock publicly, and Mid-South assured the partners the record would be high quality. Mid-South was to send 8,000 copies to a record-distribution company and mail the other 32,000 copies directly to sorority members with a letter asking to remit $5 to GrAMM in exchange for $1 toward a sorority service project. GrAMM prepaid the postage for the mailings. Mid-South ran a test pressing that GrAMM approved, started production, and shipped about 8,000 copies to sorority members and 4,000 to the distributor, but the records were defective. Mid-South pressed and mailed another batch. GrAMM accepted the second batch but refused to pay the $13,025 contract price and sued for breach of contract seeking to recover its production, marketing, and carrying costs until GrAMM successfully had a public offering. GrAMM claimed the confusion and delay cost it $500,000 in underwriting a brokerage firm had pledged toward GrAMM securities, but the evidence did not show why the underwriting fell through. Mid-South had a record-company president and a disc jockey testify that the album was not particularly good and had little market potential, even with a high-quality first pressing. GrAMM offered no reliable evidence as to market potential.