David Kronemyer

My Favorite Case

December 6th, 2006 by David Kronemyer · No Comments

DAVID KRONEMYER: This is a no-brainer, my hands-down favorite is Thomas Haslem v. William A. Lockwood, a case arising in the great State of Connecticut in the year 1871. It concerned who had the right to possess a large quantity of manure that apparently “lay scattered along the side of a public highway.” The manure was made “by horses hitched to the railing of the public park” belonging to the borough of Stamford. The plaintiff employed two men to gather the manure into heaps; they started at 6:PM, and by the time they quit at 8:PM, there were 18 heaps in all (about six cart-loads, says the Court). The plaintiff then left for the evening, intending to return and pick up the manure on the following morning, whereupon he either would sell it (at the munificent rate of $1/load), or use it as fertilizer. At that point, the defendant, seeing the manure all nicely gathered in heaps, removed it, undoubtedly with the same purpose in mind. Upon realizing the defendant had absconded with what he regarded as “his” manure, the plaintiff brought suit.

The legal issue was complex: was the manure in question personal property that had been abandoned by its owners? Or, seeing as how it had become intermingled “with the dirt and ordinary scrapings of the highway,” had it become part of the real estate? If the former, the plaintiff contended he lawfully gathered it up, and had an equitable right to its possession. If the latter, the defendant contended the plaintiff could not state a case. And, even if it was “personal property,” the rightful owner was the borough of Stamford. Since it evidently wasn’t concerned about the disposition of the manure, anybody could come and take it, seeing as how the plaintiff apparently had abandoned it.

The case went all the way to the equivalent of what today would be the Connecticut Supreme Court. In a lengthy and scholarly opinion, the Court ruled in favor of the plaintiff. The Court distinguished the “becomes part of the real estate” cases on the grounds they applied only to agricultural manure, that is, manure deposited in fields, as opposed to manure deposited along the highway. The original owners of the manure, of course, were the riders of the horses who had deposited it. Seeing as how they evidently had abandoned it, and the borough of Stamford didn’t want it, the plaintiff had every right to gather it into piles. It’s true he left for the evening after having done so; but this wasn’t abandoning it. Said the Court: “[I]f a party finds property comparatively worthless, as the plaintiff found the property in question, owing to its scattered condition upon the highway, and greatly increases its value by his labor and expense, does he lose his right if he leaves it a reasonable time to procure the means to take it away, when such means are necessary for its removal?”

The Court invited readers of its opinion to imagine a teamster, driving a wagon down the highway, with a load of grain. Suppose he “discovers a rent in one of his bags, and finds that his grain is scattered upon the road for the distance of a mile. He considers the labor of collecting his corn of more value than the property itself, and he therefore abandons it, and pursues his way. ‘A’ afterwards finds the grain in this condition and gathers it kernel by kernel into heaps by the side of the road, and leaves it a reasonable time to procure the means necessary for its removal.” In light of this heart-rending example, it hardly would make sense to award the grain to ‘B’, who comes along and appropriates it for his own use.

The Court’s opinion was not written tongue-in-cheek. It strained to resolve what today we would consider to be an absurd situation, in “legalistic” terms – inadvertently revealing the inappropriateness of legal schematics and paradigms to resolve the dispute. The classification of the manure as “personal property” instead of “real property” simply was a foil for the Court to reach what it considered to be an “equitable” result. It raises all kinds of hilarious questions not considered by the Court, such as, e.g., how much dirt would have to be mixed with the manure before it became part of the real estate, itself. Setting that aside, from a practical standpoint, it’s hard to believe the parties went all the way to the Connecticut Supreme Court over $6 worth of manure.

The reason why I like the case, though, has nothing to do with abstract legal reasoning. First, there is a profound way in which most legal disputes taking the form of “who owns what” are like arguing over manure. Manure is an appropriate metaphor for the substantive content of such disputes. Second, the case reveals our cultural obsession with the possession and ownership of “things,” be they piles of manure, or, for example, intellectual property rights. It’s fetishistic, or totemistic, almost a harkening back to our days as primitive agriculturalists, or hunter-gatherers. Squatting in the corners of our caves, exploring the concept of number as we tally up how many shiny pebbles we have.

Take “copyrights,” for instance. The film and record industries now spend much of their collective energy worrying about protecting their “ownership” of these rights. They gather their film negatives and master sound recordings into corrals, much like pioneers who fear their livestock will be rustled overnight. “Let nobody else even think about our livestock,” they say, much less observe the way in which the backs of the cattle shine in the moonlight, or listen to the sonorous notes and mellifluous tonalities of their bellowing.

One of the (apparently, controversial) principles I’ve advocated in several deals I’ve done, is that, ownership of “copyright” is chimerical, because it’s hedged forward with distribution commitments, and hedged backwards with participation commitments. Properly understood, it’s a complex and entangled web of contractual relationships, that, in most instances, last forever. Given this, the “owner” of the copyright merely is an administrator at the hub of this circle. Put slightly differently, calling him the “owner” neither expands, nor decreases, his financial participation. The one exception to this principle is a legal action for violation of copyright, in which the “owner” of a properly perfected copyright can recover what the Copyright Act calls “statutory damages,” and attorney fees. So, before suing somebody for violating your copyright, you better make sure it’s properly registered. But this accounts for only a teeny tiny percentage of all of the copyrights that are filed.

For this reason, I don’t object at all if a band, for example, wants to “own its own copyright.” For whatever reason – probably, lack of understanding of these principles – this sometimes becomes a huge issue in artist negotiations, like, with Metallica, or Garth Brooks. As far as I’m concerned, they can own it until the cows come home. But that ownership will be hedged by irrevocable, non-cancellable, world-wide distribution rights for a term of years. That term may only be for a short while; it may be forever, it doesn’t derogate from applying the principle. The commercial value of most copyrights, like that of most patents, is nil. And, even the most valuable copyrights now probably will be worthless, or close to worthless, in, say, 15 years. Only a minute sliver of copyrights end up having any kind of enduring value; for the rest, the cost of commercially exploiting them most likely exceeds the variable margin that would be realized from so doing. The value of any intellectual property right is the extent to which it can be monetized over some finite period of time. In no instances does that exceed the present discount value of that revenue stream over that period of time, say, again, 15 years. So let the band “own” their silly copyrights, it doesn’t matter one way or the other.

Particularly amusing is the concept that a firm can build up a “library” of these intellectual property rights, and then fool somebody else into acquiring it, like a capital asset. As opposed, for example, to the value of the firm on a “going concern” basis – its identity in the market place, its ability to originate commercially-demanded works, the strength and caliber of its personnel. Consider, for example, a deal with which I closely was involved – EMI’s acquisition of Chrysalis Records. After about a year, EMI had absorbed Chrysalis into its cavernous maw, and there was nothing left except a bunch of old, fully depreciated Jethro Tull masters. And Leo Sayer ones, too. With an incredibly high cost basis.

Gone was the label’s identity in the marketplace; its marketing and promotional staff; its utility as an independent platform with its own unique A&R perspective; etc. etc. The same thing happened with many of EMI’s other acquisitions while I was there, such as SBK, Enigma and Priority. While it may have been a minor component, EMI couldn’t possibly have acquired those companies with a view towards the “value” of their respective catalogs, at least, not for the prices it paid. Rather, it was counting on each firm having value as a going concern. Yet, the first thing it did was to establish a set of conditions, making the achievement of that objective impossible, from both a business and creative standpoint.

A more appropriate strategy would have been to say to the management of these companies: we are going to leave you alone. Here is our timetable for investment in what you are doing. Here are the goals we expect for you to achieve. And then, leave their mitts off of it, until that period has been concluded, at which time, management either will have succeeded, or no. After all, there must have been a reason why it was thought to be a “good idea” to acquire company X to begin with; why build a self-polluting, or self-negating, element into the arrangement?

In your dreams, right?