Yo! Did the Beastie Boys Make a Contract With Monster Energy, or What? – Newsletter 2

Snowy Mountain

I. DJ Z-Trip Meets Monster in Lake Louise, Canada and in Court

II. A Text Message Saying “Awesome!” Created a Million Dollar Contract, So Could DJ Z-Trip’s Email Saying “Dope!” Create a Contract?

III. The Basic Requirements for Creating a Contract

IV. The Electronic Cigarettes Case Versus the DJ Z-Trip Case as Contract Creation Examples

V. Could Monster Energy Have Satisfied the Other Contract Requirements?

VI. Be Cool, But Be Careful

Sometimes (not often) a trial judge’s opinion, explaining his decision to dismiss a breach of contract lawsuit, is as interesting and entertaining as are the businesses arguing in his courtroom.  This is the case with Southern District of New York federal Judge Paul Engelmayer’s recent opinion in  Beastie Boys v. Monster Energy Company. The background of the lawsuit is discussed in various online articles, including Spin Magazine, “Beastie Boys Judge Says Monster Energy is Lawsuit Laughing Stock”, Forbes Magazine, “Did Monster Energy Make a ‘Dope’ Contract with DJ Z-Trip? Nope”, and Bloomberg Law, “Monster Energy Fails to Transfer Liability for Use of Beastie Boys Records to Deejay“.

I. DJ Z-Trip Meets Monster in Lake Louise, Canada and in Court

DJ Z-Trip (Zach Sciacca) is not a member of the Beastie Boys, which the judge describes as a famous hip-hop group “from the family tree of old school hiphop”. He created a “mash-up” remix of several of their hits and placed it on his own website (at the Beastie Boys’ request and with their permission). He was hired by Monster Energy to perform at a party at a snowboarding event in Lake Louise, Canada. Monster videotaped his performance and asked him to allow its use in a promotional video. It later added to the video music from the Beastie Boys remix on Z-Trip’s website. Z-Trip had not performed the remix music at the party. When Monster used the video to promote its brand online, the Beastie Boys sued Monster for copyright infringement for using their music without permission. Monster then sued DJ Z-Trip for fraud and breach of contract.

Judge Engelmayer describes as “risible” Monster Energy’s fraud claim against DJ Z-Trip. Its breach of contract claim against DJ Z-Trip was described as arising from a “reckless” delegation of negotiating authority to an inexperienced employee.

Monster alleged that DJ Z-Trip misrepresented his authority to represent the Beastie Boys, and that he authorized Monster Energy to use the group’s copyrighted music in the snowboarding video promotion. DJ Z-Trip answered “Dope!” to his Monster contact’s email request to “Please have a look at the video…and let me know if you approve…Once you approve, we’ll post on youtube and notify our 16M fans on fb [Facebook].”

DJ Z-Trip testified that “…no one from Monster Energy had ever asked whether portions of the Megamix could be downloaded for use in a video.” He had emailed his manager before the lawsuit that “I don’t know what went down on the Monster side, but I figured they’d also reach out to the Beasties to clear their tunes too…Didn’t know they didn’t.”

The judge decided that DJ Z-Trip had not committed fraud. He was not authorized to approve Monster’s use of the Beastie Boys music.  There was no contract offer. Even if there had been an offer, the email answer “Dope!” was not “a sufficiently clear acceptance”.  Under these circumstances, “Dope!” did not satisfy the New York state contract law requirements of a “clear, unambiguous, and unequivocal” acceptance. There was also no consideration, such as a contract duty that Monster promised to Z-Trip. Finally, the terms of the alleged contract didn’t mention or imply any copyright licenses.

II. A Text Message Saying “Awesome!” Created a Million Dollar Contract, So Could DJ Z-Trip’s Email Saying “Dope!” Create a Contract?

Here is where you might say “It’s Tricky!” (as Run-DMC once rapped). My ebook, Every1’s Guide to Electronic Contracts, discusses a 2011 federal lawsuit in the Southern District of Florida, in which the trial judge examined a series of text message exchanges between an internet advertising broker and an online retailer of electronic cigarettes. The judge decided that the final message by the retailer consisting of the single word “awesome!” was an acceptance of a contract counter-offer that obligated the retailer to eventually pay the broker $1,260,805 in fees.

It can be easy and quick to create a contract online today. There are some basic requirements that must be satisfied, however, wherever a contract is created – online, by a handshake, by a text message, or by email, or in a printed format. What follows is a brief “Contracts 101” lesson in what those requirements are, why they were satisfied in the electronic cigarettes case, and why they were not satisfied in the Monster Energy case.

III. The Basic Requirements for Creating a Contract

A contract is a promise, or a set of promises, that can be enforced in a court (or a private arbitration). There are five normal requirements for a set of promises to become an enforceable contract: 1) an “offer”, which is the first promise to do, or not do, something in exchange for 2) an “acceptance”, which is a promise to do, or not do, something in exchange for the offer, 3) an exchange of legal “consideration” by both sides, which can be the promises themselves, 4) for certain types of contracts a “writing” “signed” by the person against whom the contract is to be enforced, and 5) no defense preventing the creation of a contract. The five requirements are easy to state. Complexity arises when the requirements are applied to different fact situations.

In the old days (19th and early 20th century), judges applied a “subjective test” requiring a promise to have been made with the intention that it be a contract offer, or acceptance, in order for it to be legally enforceable. Judges said that there must be a “meeting of the minds” in order to have a legally enforceable exchange of promises amounting to a contract. This became a problem as society and industry expanded, and people didn’t know what were the true intentions of strangers with whom they did business (as if they ever really knew). As described in Part A, Chapter 4, a) of Every1’s Guide to Electronic Contracts, judges slowly accepted the reality that it was impractical to require proof that a person was serious or not when they made a promise to do something. Instead, judges substituted an “objective test”, requiring the words or actions of a person to be judged by whether a reasonable third person, who was not a party to the contract, would believe that the promise-maker had made a promise that was intended to be legally enforceable.

IV. The Electronic Cigarettes Case Versus the DJ Z-Trip Case as Contract Creation Examples

For example, in the electronic cigarettes case, CX Digital Media, Inc. v. Smoking Everywhere, Inc., discussed in Part B, Chapter 9, o) of Every1’s Guide to Electronic Contracts, a vice-president of an advertising broker and an account executive of an electronic cigarettes retailer exchanged text messages during the course of business negotiations about expanding the scope of the broker’s promotions for the retailer. This was serious business involving serious money. The broker’s text message offer was “We can do 2000 orders/day by Friday if I have your blessing…And I want the AOR [agent of record] when we make your offer #1 on network.” The retailer’s response was “NO LIMIT.” This meant that the retailer wanted the broker to promote its products with no ceiling on the number of orders per day. This was a counter-offer changing only this part of the contract. The final part of the exchange was the broker’s one word reply “awesome!”

This exchange of text messages was informal, but formality is not required for an enforceable contract to be created. Given the business nature of the parties’ existing relationship, the judge decided that the broker and the retailer, through their authorized representatives, had concluded a business deal that they both intended to be enforceable by law.

Compare the Beastie Boys v. Monster Energy Company facts. Monster Energy approached DJ Z-Trip and asked him if he had any music they could include in their snowboarding video. Z-Trip allegedly replied that he had a remix of Beastie Boys songs on his website and that it could be downloaded for free. Monster Energy used the remix in its video, and told Z-Trip that they would not make the video public until he was satisfied. Monster says Z-Trip agreed. Monster emailed a link to the video to Z-Trip with a statement “Please have a look at the video from this past weekend and let me know if you approve.” Z-Trip looked at it and emailed back his one word reaction “Dope!” along with some suggested minor formatting changes. There was NO discussion of copyright permissions, and there was NO discussion of payment to the Beastie Boys for the use of their music.

Why did Monster Energy think that it could sue DJ Z-Trip for breach of contract when it had used the Beastie Boys music in its published video without any further agreements? Upon learning of the unauthorized use of the music in the video, the Beastie Boys sued Monster Energy for copyright violations. Monster then sued DJ Z-Trip for an alleged breach of the email “contract”. Did Monster really think it had a contract with DJ Z-Trip, or was it just making the only defense it could think of, after it was caught using someone else’s property without their permission? It doesn’t take a whole lot to make an enforceable contract in today’s world. It takes more, however, than Monster Energy could prove from these facts to a reasonable third party (a judge, a jury) that a promise was made by an authorized representative of the Beastie Boys, with apparent intent that it be legally enforceable in court.

V. Could Monster Energy Have Satisfied the Other Contract Requirements?

To analyze offer and acceptance and consideration, let’s put aside the issue of the Beastie Boys’ copyrights in the music used in the video. Let’s assume that DJ Z-Trip used his own music, that he had made a similar, previous email contract with Monster Energy, and that all of his words and actions would appear to a reasonable third person to have amounted to a promise intended to be legally enforceable. Could Monster Energy have satisfied the other contract requirements? If Z-Trip’s e-mailed words amounted to a contract acceptance, then Monster’s emailed words had to be a contract offer. Although neither of their actual statements amounted to an offer or acceptance, let’s assume that, under other circumstances (for example, Z-Trip and Monster had done a contract by email previously), they were both. Was there “consideration”? Contract law does not measure the value of consideration. All that is required is an exchange of promises to either do something that each party is not legally required to do, or to refrain from doing something that a party has a legal right to do. Monster’s promise to use the music in the video (with an acknowledgement of Z-Trip’s participation and a link to his website) would be the consideration they offered. Z-Trip’s promise to let them use his re-mix would be the consideration he offered. Contract law would not ask whether or not this was a good or bad deal. It would only ask whether there was a binding contract.

Would the contract require a “writing” “signed” by the person against whom the contract would be enforced? There are several types of of contracts for which state contract law requires a signed writing. One type is a contract that will require more than one year from the time of its making to be completely performed. The ambiguity of the actual exchanged emails makes it hard to know how long Monster Energy intended to use the music remix in its promotional videos. Assuming that a signed writing would be required for this reason, DJ Z-Trip would have had to sign a writing in order for Monster to enforce a contract against him.

Could an email from DJ Z-Trip have been a “signed” “writing” that satisfies this requirement? YES! Since 1999, federal and state laws have been enacted with the purpose of allowing electronic signatures and electronic documents to satisfy the centuries-old U.S. state contract law requirements for a signed writing for certain types of contracts. An email, or a text message, or a website “I Agree” button can be a writing. The heading or other data that shows who sent an email or text message, or who clicked on an “I Agree” button, can satisfy the requirement of a “signature” on that electronic “writing”. See Every1’s Guide to Electronic Contracts for a discussion of these statutes and how they have been applied.

Finally, would there be any defense to the creation of a contract that DJ Z-Trip could successfully claim? The major defenses are: legal incapacity to contract, because of age or mental impairment; misrepresentation of contract terms; unconscionability (extreme unfairness) in contract presentation or terms; and violation of public policy. If the facts were similar to the actual circumstances in Lake Louise, the most likely successful defense would be that Monster Energy misrepresented to Z-Trip that he was being offered a contract, that he was being asked to license the use of music, and that there would be no payment for the use of music by Monster Energy.

VI. Be Cool, But Be Careful

Be careful when you send emails and text messages to people who want to do business with you!

Don’t be concerned for DJ Z-Trip. The Beastie Boys supported him against Monster’s allegations. As Judge Engelmayer concluded in his opinion:

“In musical terms, Z-Trip can now, therefore, rest at least “as cool as a cucumber in a bowl of hot sauce,” because Monster’s Third-Party Complaint against him has “got the rhyme and reason but no cause.” Beastie Boys, So Watcha Want (Capitol Records 1992).”

Image courtesy of Suat Eman at FreeDigitalPhotos.net