In re Waterson, Berlin & Snyder Co.

In 1929 a music publisher, Waterson, Berlin, and Snyder Company filed for bankruptcy at a time when the company was under contract with 22 composers (plaintiffs) to publish their songs and provide them with royalties. Under the contract, the composers’ assignments of their songs to the music publisher were absolute, granting the company title to work the copyrights. Under the agreement, the composers were to receive a third of the revenue minus costs from mechanical reproductions and a penny for each song sold. About one month after the composers were due to receive royalties, the music publisher filed for bankruptcy. The bankruptcy trustee (defendant) decided to sell the copyrights and invited bids with notice to potential buyers that the buyers could purchase the songs without being subject to royalty claims. The composers filed a petition seeking to have the district court either require the bankruptcy trustee to assign the copyrights to the songs back to the composers or to sell the copyrights subject to the composers’ royalty claims. The district court granted the composers rescission of the contract and instructed the bankruptcy trustee to assign the copyrights back to the composers. The composers were required to return any advance royalties they may have received. The bankruptcy trustee appealed, raising questions as to whether the trustee was permitted to sell the copyrights and whether buyers could purchase them subject to royalty claims.