OPINION

ELIZABETH W. MAGNER, Bankruptcy Judge.

I. Procedural History

A. Highsteppin Productions, L.L.C. v. George Porter, Jr., et al.1

Highsteppin Productions, L.L.C. ("HSP") filed suit against Porter, Batiste, Stoltz, L.L.C. ("PBS") and its individual members on December 29, 2009, in the United States District Court for the Eastern District of Massachusetts. In its Complaint, HSP demanded reimbursement in the amount of $527,000.00.2 The Massachusetts court entered a prejudgment writ of attachment requiring each defendant to escrow portions of their income.3 George Porter, Jr. ("Porter") and Brian Stoltz ("Stoltz") escrowed money in connection with the Massachusetts proceeding prior to seeking Chapter 7 relief.4

B. Bankruptcy Filings, HSP's Proof of Claim and Adversary Proceedings

Porter, Stoltz and their wives filed Chapter 7 bankruptcy petitions on September 27, 2010.5 They scheduled HSP as an unsecured creditor with a disputed debt of $504,040.06.6 On December 17, 2010, HSP filed a proof of claim for $608,878.28 in both cases.7 On December 29, 2010, HSP filed a Complaint to Determine Dischargeability of Debt against Porter and Stoltz.8

David R. Batiste, Jr. ("Batiste") filed a Chapter 7 petition on September 28, 2011 also scheduling HSP as an unsecured creditor holding a disputed claim of $504,040.06.9 HSP did not file a proof of claim in Batiste's bankruptcy but did file a Complaint to Determine Dischargeability of Debt on December 30, 2011.10 The two (2) Complaints filed by HSP were substantively consolidated by this Court on February 23, 2011.11

Porter, Stoltz and Batiste filed Counterclaims against HSP. They asserted claims for breach of contract and fiduciary duties, unfair and deceptive trade practices in violation of M.G.L. c. 93A §§ 2 and 11, copyright infringement and alter ego.12

HSP's Complaint seeks $527,000 for personal advances made to Porter, Stoltz or Batiste, deferred commissions earned on the Artists' Gross Earnings (as defined below) and PBS expenses paid by HSP during the term of their Personal Management Agreement ("PMA").13 It also alleges the debt is nondischargeable.14

Trial on the merits of this matter began on June 13, 2012 and ended on September 27, 2012. Post-trial briefs were filed on January 31, 2013.15 After submission of post-trial briefs, the Court took the matter under advisement.

II. Findings of Fact

A. The PMA

On June 2, 2003, Porter, Stoltz and Batiste formed PBS (collectively Porter, Stoltz, Batiste and PBS are referred to as "Artists"). For three (3) years, PBS handled its financial and business arrangements, paying expenses from performance revenue, then splitting the net profit in equal one-third shares.16 PBS had no outstanding debt prior to May of 2006.17

In 2005, Phillip Stepanian ("Stepanian") owned a direct marketing company, Resort Discovery, which marketed travel packages.18 Although not involved in the entertainment business, in January 2005, Stepanian emailed Porter to discuss a merchandising and marketing proposal for Porter's music and image.19

The Artists met with Stepanian on or about April 20, 2005, at Porter's house in New Orleans.20 Stepanian presented a basic concept for producing and selling merchandise, including a rough outline of different products he wanted to sell.21 Throughout 2005, Stepanian continued to discuss a merchandising and marketing deal with the Artists, circulating merchandising agreements in June and July 2005.22 Although the Artists never executed a merchandising agreement, Stepanian followed PBS through its tour schedule, attending performances and selling mainly Porter-related T-shirts and merchandise Stepanian had purchased.23

Occasionally, music CDs owned, produced and paid for by Porter, Stoltz or Batiste were also placed on Stepanian's merchandise table and sold.24 Stepanian gave the artist any amounts he collected from sales of their individual merchandise but kept any revenues from the sale of the merchandise Stepanian personally purchased.25 The Artists were neither paid a share of Stepanian's sales, nor were they given any costs to satisfy.26

As Stepanian became comfortable with the Artists, he suggested becoming PBS' personal manager.27 Stepanian believed his company, HSP, would free the Artists from having to exercise day to day management duties, thereby allowing PBS to focus on its music.28 HSP offered to create an "artist-controlled environment," allowing the musicians to decide when and where they played, as well as the content of their music.29 Although PBS was operating at a profit, Stepanian argued that with professional management, PBS could increase its exposure, play more venues for higher fees and make significantly more money.30

The Artists signed the PMA with HSP on May 8, 2006.31 The PMA had an initial 2-year term with an automatic 18-month renewal, after which PBS or its members could terminate the PMA without cause.32 The PMA was governed by Massachusetts law.33

Under the PMA, HSP is entitled to a commission on all "Gross Earnings" received by the Artists during its term with some exceptions. Paragraph 4 of the PMA defines "Gross Earnings" and sets forth the formula for calculating commissions:

With regard to expenses, HSP was allowed to incur expenses for performances and to promote or further the career of an individual artist or PBS. Specifically, the PMA states in relevant part:

HSP's authority to incur expenses without the Artists' approval was limited by the amount of any individual charge or aggregate monthly expenses. The PMA provides in relevant part:

The PMA contemplates that Artists' revenue would be collected by a business manager.37 PBS did not hire a business manager as anticipated in the PMA38 and HSP began filling the void in August of 2006.39

On August 1, 2006, Stepanian requested that PBS' booking agent, Blue Mountain Artists ("Blue Mountain"), forward all executed contracts, checks, paperwork, reports, monthly statements or other mailings to HSP.40 HSP began receiving amounts payable to PBS from Blue Mountain and all related accountings in August 2006.41 HSP also collected the amounts due after completed performances through HSP personnel traveling with the band.42 All sales of merchandise and music were funneled into HSP accounts.43

B. Commingling of Funds

Throughout 2006 and 2007, revenues and expenses of the Artists, Bonerama (HSP's other client) and HSP were commingled in a single checking account.44 It was not until October 2006 that HSP electronically sorted the deposits and withdrawals made on behalf of the Artists, HSP, or Bonerama into separate accounting records.45

On December 7, 2007, HSP established separate checking accounts for PBS and Bonerama in an effort to segregate the deposits and withdrawals of HSP, Bonerama, and PBS electronically and physically.46 Stepanian was the sole signatory on both the HSP account and PBS checking account.47 In January 2008, the income and expenses of HSP, PBS and Bonerama were split into their respective bank accounts, and HSP started paying some PBS related invoices out of PBS' checking account.48 However, HSP continued to pay most of PBS' expenses from and deposited PBS' revenue into HSP's checking account.49

C. Payments to the Artists

During 2006, the Artists collected performance fees on the road, paid tour expenses and divided the remaining cash in equal shares. In 2007, HSP began collecting revenues and remitting payments to the Artists. Before December 2007, the Artists paid for tour expenses and crew directly when on tour, then sent reconciliations to HSP for entry into HSP's accounting system.50 In November 2007, HSP began sending the Artists bi-weekly payments in set amounts.51 HSP also paid the majority of expenses,52 including crew members' payroll while on tour, out of its checking account.53 This practice continued through November 2008.

1. 1099 and K-1 Tax Forms for 2007

HSP issued 1099 tax forms to the Artists for payments made to them in 2007 through HSP's payroll system.54 HSP voided the 1099s in September or October 2008 and substituted PBS K-1s to the Artist members.55 The 2007 tax return of PBS, which Porter signed on October 20, 2008, reflected K-1 income to Stoltz of $32,500.00, Porter for $40,570.00, and Batiste for $27,570.00.56

2. 1099 and K-1 Tax Forms for 2008

After the end of 2008, HSP again issued 1099s to the Artists for payments made by HSP through its payroll or checking account during 2008.57 This time the 1099s were not voided, and PBS' 2008 tax return does not reflect any amounts paid to the Artists.58 Instead, HSP took a deduction for the payments it made to the Artists on its tax return as an expense of HSP and transmitted the 1099s to the IRS on September 10, 2009.59 Nevertheless, after suit was instituted, HSP "corrected" the 1099s by reducing the amounts paid to zero ($0) and issuing K1s in PBS' name.60 HSP then booked the amounts paid as loans due from PBS.61

3. 1099 and K-1 Tax Forms for 2009

In 2009, many of PBS' revenues and expenses were itemized on its QuickBooks account, rather than transferred from HSP's accounts through batch entry.62 However, HSP also continued to book revenues and expenses, particularly those associated with merchandise and music sales, on its books.63 HSP made no payments to the Artists, and therefore did not issue 1099s, for 2009. Neither PBS nor HSP have filed a tax return for 2009, and K-1s have not been issued.

D. HSP's Accounting of Expenses and Revenues for the Artists

1. Calendar Year 2005

HSP did not have a relationship with PBS in 2005, and Stepanian did not account to the Artists for the merchandise he purchased and sold during 2005.64

2. Calendar Year 2006

HSP's only method of accounting was through hand notes.65 In the summer of 2006, Bonnie Stockdale was hired to load a QuickBooks program onto HSP's computers and enter revenue and expense data, from Malangone's notes, for PBS.66 It took Stockdale until October 2006 to complete the data entry.67

During 2006, Blue Mountain began sending the deposits it collected on behalf of PBS to HSP. Porter collected any residual revenues after completed performances.68 Porter acted as tour manager, paid tour expenses from the cash collected and provided HSP with reconciliation reports during this period.69

After the payment of direct expenses, any remaining cash was distributed evenly between Porter, Stoltz and Batiste. HSP began incurring expenses on behalf of PBS during 2006,70 and most of its costs were directly related to touring.71 During 2006, HSP failed to provide copies of any expenses it paid or revenues it received on behalf of PBS.72 It also failed to provide copies of Blue Mountain performance fee reports, merchandise or music sales.73

PBS utilized Shannon Chabaud as its CPA, who was also Porter's personal accountant.74 HSP failed to provide an accounting of PBS' 2006 revenues or expenditures.75 Because HSP did not provide expense and revenue information, Chabaud filed the 2006 tax return without input from HSP.76 Based on Porter's accountings of performance fees collected and tour expenses paid, Chabaud calculated PBS' profit for 2006 at $54,457.00.77 HSP ultimately calculated a loss of $26,698.78 for 2006.78

3. Calendar Year 2007

No one at HSP prepared budgets for nontour expenses nor were tour budgets prepared prior to commencing a tour or its booking.79 Throughout most of 2007, Porter or HSP collected performance revenues and paid performance related expenses.80 Porter accounted for his collections and expenses noting on reports the amounts charged on the PBS American Express card.81 He also noted amounts sent directly to HSP by Blue Mountain as deposits and deducted for booking agent and HSP commissions.82 Due to expenditures paid for by HSP and unaccounted for to PBS, HSP deferred its commissions without PBS' knowledge.83 As a result, although Porter attempted to split the true net profit out of remaining cash between PBS' members, unaccounted for expenditures incurred and paid by HSP meant his calculations were inaccurate.84

In 2007, HSP began booking hotels and flights for PBS through a travel agent and paid the expenses directly.85 HSP also incurred significant nontour expenses on PBS' behalf but did not forward contracts or invoices for these services or goods to the Artists.86 Stepanian handled the expenses for promotion, sales of music and merchandise, and was only the person to authorize a nontour expense on behalf of PBS.87

As detailed below, HSP did not send the Artists a copy of PBS' 2007 profit and loss statement ("P/L") until October 2008.88 During 2007 it also failed to give the Artists any accounting of what expenses it was incurring or satisfying,89 provide copies of Blue Mountain performance fee reports, or account for merchandise and music sales.90

Stepanian testified that he offered his resources to help Artists pay for items needed to "grow the band," including additional crew which he believed necessary to project the image of a "well respected larger paid band."91 The crew for PBS from November 2007 to November 2008 was hired and paid by HSP.92

4. Calendar Year 2008

In 2008, HSP convinced PBS to terminate Chabaud's services in favor of a tax preparer HSP hired, Alan Friedman.93 Although Friedman was located in Boston near HSP, he did not verify or audit the financial information delivered to him by HSP.94 HSP acted as the direct liaison to Friedman and provided him with documents and work papers to prepare PBS' 2007 tax return.95

In July of 2008, HSP produced a 2007 P/L for PBS. The P/L reflected a loss of $62,741.57.96 It was withdrawn shortly thereafter by Stepanian due to inaccuracies.97 In October 2008, HSP delivered a 2007 P/L to Freidman also reflecting a loss of $62,074.57 for 2007. In addition, it prepared and forwarded a 2007 balance sheet ("B/S") on which it booked directly to equity a 2006 loss of $62,244 and cash disbursements in 2007 to Porter ($40,569), Batiste ($27,569) and Stoltz ($32,519).98 This created a negative retained earnings balance of $225,646 which was offset by a loan from HSP in the amount of $227,660.99

The tax return for 2007 was adjusted by Freidman because the 2007 P/L did not contain several large expenditures incurred by HSP. For example, a photography bill for $37,673.00 was omitted and instead booked directly to retained earnings on PBS' B/S.100 In addition, losses for 2006 were booked into retained earnings in 2007 without any accounting being given to PBS.101 Music and merchandise sales were not included on PBS' P/L nor were costs associated with music or merchandise production.102 Freidman adjusted the losses on PBS' return and forwarded it to Porter for signature and filing on or about October 2, 2008.103 The 2007 tax return reflected a loss of $225,933.00.104

Once Porter received the draft return, he met with Chabaud in an effort to understand its content. On October 2, 2008, Porter wrote Friedman with several questions, including the existence of the $227,660 loan.105 Freidman and Dyer explained that PBS had incurred losses of $227,661.00 in 2007, which were funded by HSP, creating a loan due to HSP by PBS.106 Porter signed the return on October 20, 2008.

With regard to revenues collected and expenses paid in 2008, HSP again failed to provide any accounting, invoices or reports to PBS throughout 2008. Despite the existence of a separate checking account for PBS, HSP continued to put PBS' revenues into its checking account and book expenses on HSP's records.107 HSP transferred the individual revenue and expense entries by batch or lump sum to PBS' QuickBooks account sometime after this suit was instituted.108

In November of 2008, Stepanian wrote an extensive email to the Artists admitting that he had never actually accounted to PBS on its financial status. Stepanian also admitted that because of the recession, he could no longer fund PBS' costs.109 Following this email, the discovery of the 2007 losses and the previously unknown $227,000 "loan" to PBS by HSP, the Artists returned to managing their expenses and performance revenues.110 Expenditures for promotion and merchandise or music sales virtually ceased.111 HSP's claim includes only $9,103.65 for expenses incurred between November 2008 and November 2009.112

5. Calendar Year 2009

HSP called a meeting with the Artists in August 2009 to examine "where they were and where they could go.113 The Artists believed the meeting would produce the accounting for expenses and revenues missing over the last three (3) years.114 HSP used the day to reintroduce each of its employees to PBS. It also presented its future vision for promotion centered on music sales and an increase in PBS' average performance rate.115 No explanation of the outstanding losses was given116 Frustrated by the perceived lack of financial information, Porter stormed out of the meeting.117 Pursuant to Paragraph 1(a) of the PMA, Porter sent notice of his intention to terminate the PMA.118

The PMA terminated on November 7, 2009.119 The revised financial documents for the previous years were not delivered to PBS until May 2011.120 The 2009 B/S dated May 6, 2011 reflects a loan payable to HSP of $534,222.54, including draws given to Batiste ($76,278.80); Porter ($170,078.78); and Stoltz ($92,728.78).121 Retained earnings had a negative balance of $263,053.61, and net income was $72,648.63.122 Neither HSP nor PBS has filed a tax return for 2009.123

E. HSP's Claim

1. Touring Revenues and Expenses

HSP claims that it is owed reimbursement for $321,303.81 in tour expenses HSP paid on behalf of PBS.124 HSP's tour expense claim is composed of costs for travel, crew wages, hotels and other costs. The Court finds the following sums were incurred and are associated with touring:

TOUR EXPENSES                         2006       2007       2008        2009

Crew                                  2,896      29,284     56,490      4,230

Airfare                               3,991      26,959     16,482      11,918

Gas                                   1,563      4,576      8,377       1,136

Van Rental                            7,638      12,093     8,581       4,662

Tolls/Parking                         911        207        1682        555

Hotel                                 10,244     11,772     29,536      6057

Per Diem Payments                     4,346      12,225     6,750       5,430

Equipment Rental/Musical Supplies     534        977        1581        2554

Venue Fees                            ---        132        540         ---

TOTAL                                 32,123     98,227     130,019     36,543125

Tour revenue earned through performance fees for years 2006 and 2009 is:

2006:   $92,605126
2007:   $150,647127
2008:   $152,379128
2009:   $159,512129

2. Merchandise Costs

(a) April 2005 through May 2006

Prior to the execution of the PMA in 2006, Stepanian incurred costs to produce merchandise promoting Porter.130 Stepanian also traveled with PBS and/or Porter when on tour in 2005 and 2006 selling merchandise at each venue.131 Although the Artists saw the merchandise, Stepanian never provided the Artists with an invoice or statement for any costs incurred, never discussed the costs or quantities associated with acquiring any merchandise Stepanian was selling, nor did PBS or the Artists individually pay any of these costs. Stepanian ordered all the merchandise and paid for the items through his checking account or personal credit card. Sales revenue was collected by Stepanian and kept by him. The Artists did not receive any share of sales.132

Paragraph 6(c) of the PMA provides the following with regard to expenses incurred in 2005 and early 2006, prior to execution of the PMA:

Prior to the PMA, drafts of a merchandising agreement were exchanged between the Artists and Stepanian however, no contract was executed. Prior to the execution of the PMA, Stepanian did not disclose the extent of amounts expended for Artist related merchandise during 2005 or 2006.134

(b) May 2006 through November 2009

After the execution of the PMA, Marie Kirschberger, a HSP employee, set up a "cost recovery" formula to allow HSP to track the sales of Stepanian's merchandise and its cost basis on HSP's books. A similar system was not added to track PBS or the individual Artists' previously owned merchandise, including music.135 New merchandise for the Artists was ordered and sold by HSP.136 Except for a general comment by Stepanian to the Artists indicating that merchandise purchased for sale and promotion would cost roughly $1.00 to $1.50 per piece, HSP never discussed the cost of any particular item, the quantities being ordered or the total cost of a merchandise order.137 HSP neither gave the Artists an invoice nor statement for any costs incurred nor did the Artists pay any charges.138 The Court finds that the following amounts were incurred by HSP for PBS or Porter related merchandise:

VENDOR                        ITEM             DATE       QUANTITY   CHARGE       EXH. NO.

Nimbit                        CDs              7/6/06     1000       1,499        159(R)

Armydogtags                   Dog tags         6/29/06    1000       1,640        159(C)

TOTAL 2006                                                           $3,139

All American Advertising      Lighters         4/23/07    500        657.33       159(B),
Specialities Bic                                                                  p.5045/5039

All American Advertising      Black Koozies    4/23/07    2500       1,709.93     159(B), p.
Specialities                                                                      5047, 5041

All American Advertising      Black Koozies    4/26/07    1500       1,031.83     159(B), p.
Specialities                                                                      5049, 5043.

Extreme Glow                  Circle Pendant   11/18/07   1000       1,641        159(I), p.
                                                                                  5101, 5103

Fred Cox Merchandising        GPJ tshirts      12/29/07   186        1,519        159(K)

Foster's Promotional Goods,   Apparel          11/15/07   various    11,866.85    159(J)
Inc.

TOTAL 2007                                                           $18,425.94

Nugs.net                      CDs              12/28/08   366        2,196        159(S)

NKC Custom Apparel            Apparel          6/17/08    0          2,576        159(D)

QRST                          T-shirts         9/3/08     300        2,017.80     159(V), p.
                                                                                  5253.

TOTAL 2008                                                           $6,789.80

TOTAL ALL PURCHASES                                                  $28,354.74

All merchandise costs were paid through

HSP's checking account and deducted on its tax returns.139 All income was also deposited into HSP's account and declared as revenue on its books.140 Only revenue derived from sales of music owned or merchandise paid for by the Artists prior to the PMA was credited into PBS' account and reflected on P/Ls.141 On occasion, the Artists were asked their thoughts on the selection of items HSP offered for sale.142 The Artists were also aware that HSP was running merchandise tables offering their music and merchandise at each venue.143 The Artists and HSP have stipulated that $76,387.15 in sales revenue was received for PBS merchandise, CDs and downloads of music.144

HSP also funded the production of several albums both for the Artists individually and as a group. Production costs associated with PBS' MooDoo release in 2008 were $14,161.24.145 Production costs for Stoltz's Up All Night were $8,309.20146 and $18,871.26147 for Porter's It's Life.148 Revenue from the sale of Porter's personal CDs and digital downloads was $22,455.67 through June 30, 2009.149 Revenue from the sale of Stoltz's personal CDs and digital downloads was $10,042.36 through June 30, 2009.150 Revenue from sale of Batiste's merchandise was $1,387.38 for the same period.151

3. Nontour or Promotional Expenses

HSP's claim seeks reimbursement for several expenditures related to promotion or outside services incurred on behalf of PBS. Specifically:

1.      Danny Clinch Photography     2/26/07                      $37,673.00152
2.      Freidman Kannenberg          10/4/08 & 9/10/09            $1,800.00153
3.      Leeway's HGMN                1/9/08                       $1,520.00154
4.      Madison House Publicity      7/6/07-3/4/09                $53,910.10155
5.      Nimbit, Inc.                 1/31/08-5/29/08              $855.00156

6.      OffBeat                      4/7/08                       $1,600.00157
7.      Powderfinger Promotions      9/07 & 9/08                  $5,625.00158
8.      Richard Quindry              7/07                         $652.53159
9.      Relix Magazine               2/07, 7/07, 10/07, 12/07     $12,166.00160
10.     David Stocker                2/21/08                      $2,000.00161
11.     Domenick Tucci               1/07-11/08                   $12,000.00162
12.     Zenbu Magazines, LLC         8/08-9/08                    $1,850.00163

For every month of the PMA, expenses in excess of $2,000.00 per month were incurred.164 All of the amounts in question also exceed $750.00 and require the consent of PBS.165

III. Law and analysis

A. Background

In the music industry, booking agents serve as a broker or liaison between musicians and venues. Booking agents regularly field calls for a musician's services and will verify availability of the artist. They then contact the artist or his personal manager if one exists, regarding the inquiry. If approval is given, the booking agent sends a standard form contract to the venue and collects a deposit. The musician signs the contract, but the deposit is retained by the booking agent until the performance is given. If all goes as planned, the balance of the contract is paid to the booking agent, musician or business manager at the conclusion of the performance. The booking agent's fee is typically ten percent (10%) of the gross revenues received under the contract.

PBS' booking agent both before, during and after the PMA was Blue Mountain, and its relationship with PBS never varied. Blue Mountain collected deposits in advance of performances it booked, deducted its commission out of the deposit after the performance occurred and sent the residual, if any, to PBS or HSP as directed.166 On a monthly basis, it itemized the amounts received on behalf of PBS and commissions deducted in a report originally delivered to PBS. After July 2006, the reports were delivered to HSP.

B. HSP's Claim for Reimbursement and PBS' Claim for Breach of Contract and Duty

HSP claims it is owed approximately $600,000.00 for funds advanced to pay tour, promotional, merchandise, music production and living expenses of the Artists. The Artists challenge the claim on the basis that HSP failed to provide account detail on revenues received and expenses paid during the PMA. As such, the Artists assert that HSP breached its contract and fiduciary duties in addition to engaging in negligent and unfair trade practices. Because the Court finds that HSP did not properly account to the Artists during the PMA, calculation of HSP's claim requires an analysis of all revenues received and expenses paid during its term.

1. Conduct of the Parties

From May 2006 to August 2006, Blue Mountain collected deposits and transmitted any residual amounts directly to PBS after its commission was deducted.167 All reporting by Blue Mountain went to PBS. The remaining sums due under performance contracts were collected by PBS after the completion of the performance. From these sums, PBS paid its travel expenses, including hotel rooms, side musician fees, rental car, gas expenses, etc. The difference or "profit" was divided between Porter, Stoltz and Batiste equally.

Because PBS could not afford personal and business managers, HSP began filling the void.168 HSP admits that it had no experience as a business manager, a fact known by the Artists. HSP alleges it had no choice but to assume responsibility for "bookkeeping" because the Artists refused to hire or to pay for a business manager. Nevertheless, the Court finds that HSP purposefully and willingly assumed the role of business manager and began taking control of the Artists' revenue streams in August 2006.169

In August 2006, HSP requested Blue Mountain send all, paperwork, reports and monthly statements to HSP. HSP also instructed Blue Mountain to forward amounts payable to PBS by check made payable to HSP.170 Whenever possible, HSP collected the amounts due after completed performances through HSP personnel traveling with the band.171 Merchandise and music sales revenue belonging to the Artists was deposited into HSP's checking and QuickBooks accounts.172 Performance fees were reported to the Artists in gross terms, at best annually, if done at all, and typically shortly prior to the extended deadline for filing tax returns.173 Revenues from music or merchandise sales were placed in reports delivered to the Artists only twice during the entire relationship.174

In February of 2007, HSP began promoting PBS and its members. As a result, it began incurring substantial nontour or promotional expenses. By November of 2007, HSP insisted on controlling all tour expenses as well. This included contracting for and paying band crew.175 Airfare, hotel rooms, meals, side musician fees, gas, etc. were incurred and paid by HSP.176 If the expense was invoiced, HSP paid the charge from its accounts.177 If it was paid on the road, generally it was paid out of cash given to the Artists prior to the start of a tour or through the use of PBS' credit card,178 which HSP paid.179 At the end of each tour, the Artists gave an accounting to HSP of all tour expenses they paid and cash on hand.180 The remaining cash was either split between the Artists as a share of their profits or held as starting cash for the next tour.181

Conversely, HSP accounted for its expenditures in at most a general, haphazard fashion, and dilatory manner. Nevertheless, HSP avers that it performed its duties under the PMA and is owed reimbursement for all amounts it incurred on the Artists' behalf. The Artists disagree citing breach of contract, MUTPA, and fiduciary duty claims.

2. Claims for Breach of Contract And Duty By HSP

Breach of contract is a failure to perform a material term for which no legal excuse exists.182 Under Massachusetts law, a plaintiff must demonstrate (1) a valid contract exists, (2) the defendant breached the contract, and (3) the plaintiff was damaged as a result.183 Damages in a breach of contract action attempt to place the plaintiff in the position it would have been in had the contract been performed.184 It is undisputed that the PMA is a valid contract. Questions remain as to whether or not HSP breached its obligations under the PMA and the extent of the Artists' damages.

As discussed in greater detail below, the PMA required HSP to perform its obligations with a standard of care it failed to achieve. As a business manager, HSP was required to exercise a fiduciary duty of loyalty and care in the exercise of its profession.185

a. Failure of HSP to Obtain Prior Consent for Expenses Paid on Artists' Behalf (PMA, Paragraph 6)

HSP's expenditures can be divided into three (3) groups, those directly related to touring, those related to promotion and those related to production of music and product. The Artists do not dispute that HSP spent its funds to satisfy tour related expenses incurred on behalf of PBS. However, they argue that the tour expenses were not reasonable and HSP failed to obtain their consent to any of the charges. The Artists also allege that HSP was grossly negligent and breached its fiduciary duties to them when it incurred the charges.

The Artists object to reimbursement of HSP's nontour expenses because 1) they were not proven at trial, and 2) they were not approved by the Artists in advance as required by the PMA.

Paragraph 6(b) of the PMA sets forth the parameters under which HSP is entitled to reimbursement for "Expenses, Loans, Advances and Statement" incurred by HSP on PBS' behalf. According to Paragraph 6(b):

HSP argues that every tour expense was reasonable, incurred within the scope of its authority and in the proper discharge of its duty. HSP also argues that it received oral approval for each of the nontour expenses and that HSP engaged in discussions with the Artists prior to incurring any expense.

(1) Tour Related Expenses

Before HSP took control over tour related expenses, the Artists were their own tour manager. Although far from wealthy, the Artists had managed to be profitable and support themselves.186 Costs were paid primarily in cash, and although not sophisticated, this method of bookkeeping had the distinct advantage of being immediate and largely accurate.

During 2007, HSP gradually assumed payment and contracted for more and more of the tour related expenses. HSP also took control over the collection of performance fees on the road. By October 2007, HSP's control over all revenue and expenditures was almost complete. This divorced the Artists from the day-to-day cash accounting they were accustomed to practicing.187 The Artists complain that HSP incurred unreasonable costs and expenses in connection with touring. They also assert that they were unaware of these costs and did not give HSP permission to incur them. Finally, they claim the costs are excessive in relation to their income.

HSP avers that the Artists were clearly aware that additional crew and associated costs were being incurred and never asked HSP to "stop spending."188 For example, HSP points to Porter's email dated March 4, 2008 asking HSP "to pay one of the road workers" as a preapproval of tour expenses.189 The email notes that the van driver for a seven-day tour called Porter because the driver had not received payment. In the email Porter noted "... I don't know what kind of deal You (sic) have made with these guys or should I say Patrick Bell, as no other crew member has called me looking for his money ..." Malangone's explanation on March 4, 2008 only lends credibility to the Artists' assertions that they were not consulted with regard to the tour expenses during 2007 and 2008. She explained:

Further, even Stepanian claimed he (HSP) was paying crew, not PBS.191

HSP also alleges that tour expenses were relatively large in relation to touring income because the Artists were unavailable for performances due to outside projects and participation in other musical groups. HSP avers that PBS' lack of revenue in relation to its touring expenses is directly attributable to the unavailability of the Artists.192 In support of its position, HSP points to the stipend program it was forced to implement in favor of the Artists.

In November 2007, Stepanian wanted PBS to play more venues on the road.193 Despite his efforts, PBS had played only ninety-six (96) shows in each of the years 2006 and 2007, roughly the same number of shows it had performed before hiring HSP.194 The revenue generated from these performances was wholly inadequate to support the expenses HSP was incurring, much less the commissions HSP was owed.195 HSP blamed the lack of revenue on its inability to book PBS into venues. It also believed that this problem was caused by the Artists' commitments to other bands or projects. In HSP's view, conflicts in scheduling were the root cause of PBS's lack of success.196 The Artists' claim that HSP failed to generate new performance opportunities and was slow to remit any profits being generated.197 As a result, the Artists were forced to seek out other avenues for revenue in order to support themselves.198

At trial, Coran Capshaw ("Capshaw"), an expert professional manager of musicians, explained that a personal manager's principal duty is to acquire performance opportunities through his contacts with venues or festivals.199 Ralph Jacodine ("Jacodine"), HSP's expert, also explained that the personal manager is responsible for scheduling tours that will generate profits. While Jacodine acknowledged that some tours or venues might be played for a loss, he opined that this should be a rare occurrence and undertaken only if the exposure for the artist outweighed the monetary loss. Even if advisable, the artist should be made aware of the trade-off long before any commitment to the tour or venue was given. The evidence offered at trial established that the Artists were available to HSP in all material respects.200 Because it is the personal manager's responsibility to secure performance opportunities and the Artists were willing and able to perform, the Court concludes that HSP's lack of experience and connections in the industry were the reasons more venues were not booked.

Until 2009, HSP never prepared much less presented the Artists with a preview or forecast of the revenues and expenses anticipated with any tour or performance. It also failed to keep them informed as to whether or not any particular tour was profitable.201 Although HSP admitted that only by playing 120 venues per year could PBS obtain profitability, it never acquired 120 opportunities for them to perform, nor were many of the opportunities secured profitable.

PBS' gross performance income did not vary substantially between May 2006 and November 2009.202 Yet PBS's touring expenses climbed exponentially under HSP's watch. During the PMA's term, annual touring costs were $32,123 (2006); $98,227 (2007); $130,019 (2008); and $36,547 (2009).

In 2006 and 2009, PBS largely controlled its touring costs. For this reason, the Court finds that the touring expenses in the amounts of $32,123 for 2006 and $36,547 for 2009 were authorized by PBS. In each of these years, costs were within $5,000 of each other on gross revenues of approximately $92,000 and $159,000 respectively. Thus, the Court concludes that increased touring costs were not necessary to generate increased income. For this reason, HSP has failed to show that its expenditures were reasonable in light of the band's performance revenue. As Jacodine, HSP's own expert, opined, it is the duty of personal managers to secure profitable venues and manage tour costs based on the anticipated revenue available. Because HSP failed to consider tour expenses in light of revenues, it breached its contract and duty to the Artists.

HSP also failed to produce any evidence that the exponential increase in touring costs was approved by PBS. The record contains unsupported assertions by HSP that PBS "knew" of HSP's increased tour spending. However, it failed to produce any evidence that PBS was aware of the amount or extent of its spending and particularly the losses HSP was generating.203 For this reason, tour expenses for 2007 and 2008 will be reduced to $36,000 per year to correct for HSP's failure to exercise reasonable care in the performance of its duties.

(2) Nontour or Promotional Expenses

The music industry is filled with professionals paid to handle parts of a musician's image, music production, touring, personal life or business affairs. Public relations professionals secure interviews on radio and television, in print and internet to promote the release of new music, tour dates or the artist generally. Photographers, graphic artists, mixing engineers and other professionals design, package or produce the music of an artist for sale. Stylists dress, coif and otherwise refine the physical appearance of an artist for performances, interviews, public appearances or any occasion of note.

Stepanian's vision included surrounding the Artists with top professionals in their fields in an effort to elevate PBS' profile and profits. In 2007 and 2008, Stepanian secured the services of publicists, web designers, photographers, travel agents, internet tracking services, graphic artists, music production experts and other musicians. In many cases, the services of these parties were not discussed with PBS. In some cases PBS did not know, until discovery was conducted in this litigation, these individuals or companies existed much less the expenses associated with their services. In other cases, PBS was aware of the services being provided but was not told of the cost. In still other circumstances, HSP gave PBS the impression that it was covering the expense as an investment in its own business.

Nontour or promotional expenses were typically incurred by HSP and paid through its account. The Artists never saw the invoices or statements reflecting the amounts incurred although PBS was aware that some of the expenditures had been incurred on its behalf.204 The Artists uniformly and consistently testified that they believed HSP was either taking personal responsibility for promotional expenses or that the expenses were being paid through revenues. It was clear that Porter, Stoltz and Batiste had no indication until October 2008 that HSP was advancing money on PBS' behalf.205 Stepanian aided in this apparent misconception by giving the Artists vague assurances or representing the costs as investments in HSP.206

PBS' success was directly linked with HSP, and in order to elevate HSP's profile, Stepanian led the Artists to believe that HSP was absorbing some promotional expenses.207 Because HSP kept its spending hidden, failed to account to the Artists for revenues or expenditures, and made its expectations for repayment purposefully vague, the Artists reasonably assumed this position.

For instance, Stepanian sent an email to Porter's daughter on June 11, 2007 discussing plans for Porter's 60th birthday party. In the email, Stepanian represented that he had:

Similarly, in a letter dated November 14, 2008 to the Artists Stepanian stated, "... [O]ver the past few years I have made enormous investments in everything that is HSP."209

Although Stepanian claimed to have discussed expenditures with the band, if done at all, it was only in the most general of ways. For example, on March 3, 2007, Porter sent an email to his fellow Artists and to Stepanian stating that his wife was asking him questions about expenses that he could not answer.210 Specially, Porter questioned whether PBS and the Artists would be financially responsible for a van Stepanian had recently purchased and whether the Artists would be paying for the Danny Clinch photography session.211 Stoltz responded to Porter's email, "[My] understanding of it all is that Phil [Stepanian] is absorbing much of the cost and is looking at it as an investment into Highsteppin' Productions."212 Stoltz's understanding was based on his prior conversation with Stepanian. Stoltz testified that upon arriving at the photography session, he realized the scale of the production and was immediately concerned about costs. When he raised the issue with Stepanian, he was told not to worry about it, that HSP "had it."213 HSP offered no credible proof that it provided any other explanation to Stoltz or responded to Porter's inquiry.

The testimony of Stepanian, Porter and Stoltz supports a finding that Stepanian linked the success of his new company, HSP, to the fortunes of PBS. Throughout the relationship, Stepanian acknowledged that the success of PBS would establish HSP in the industry of personal management. As a result, Stepanian characterized much of what he did with or for PBS as an "investment" in HSP. Rightly or wrongly, when coupled with the lack of routine accounting, requests for payment and disclosure of nontour costs, PBS was given the justifiable belief that it was not responsible for most, if not all, of these charges.

Although Stepanian testified that the Artists "knew" of several large expenditures, there is no evidence that Stepanian informed PBS of specific nontour costs. The first attempt to provide PBS with an accounting did not occur until July 2008 when a 2007 P/L was forwarded to PBS. However, it was quickly withdrawn due to inaccuracies. It was not until October 2008 when the P/L for 2007 and draft tax return arrived that the Artists first learned of HSP's deficit spending. By this time, HSP had incurred large deficits for both 2007 and 2008 funded by HSP through loans PBS was expected to repay.214

This Court is also unconvinced that HSP was aware of its own runaway spending. Stepanian himself testified that he did not know how fiscal year 2007's $227,661.00 deficit was calculated.215 The Court finds Stepanian's testimony regarding his lack of knowledge about the particulars of HSP's loans credible because of HSP's atrocious bookkeeping methods. For example, at the start of the PMA, HSP commingled all transactions for the Artists, itself and Bonerama in an single checking account. While HSP attempted to keep track of the individual transactions by client, it was not until October 2006, some seven (7) months after the PMA was executed, that the transactions were electronically mapped between the parties.

HSP's acquisition of a QuickBooks program to segregate, at least on paper, the revenues and expenses attributable to itself, the Artists and its other clients was a good first start even if tardily taken. However, this too proved problematic for HSP. While QuickBooks will maintain an internal separation of accounts, it is dependent on the correct input of data. HSP employed Dyer for this purpose. She was assisted by Malangone and Stepanian. Unfortunately, these individuals had a minimal understanding of accounting or the legal relationship between the parties. As a result, revenues owed to PBS were included in HSP's account, expenses HSP claims are owed by PBS were not booked into PBS' account and many costs were improperly booked after the close of a fiscal year through adjusting entries in some cases entered years later. HSP employed batch or lump sum adjustments to "move" expenses entered on its books to PBS' books. While this placed the expense with PBS, it failed to give the Court or PBS the detail necessary to verify the amounts being charged.

In addition, even after establishing separate checking accounts for HSP, PBS and Bonerama, HSP continued to commingle funds and pay PBS expenses from HSP's account. HSP also paid Bonerama and HSP expenses out of the account into which it deposited PBS revenue. Not only did this practice allow HSP to use client funds at will, it clouded HSP's ability to determine what it was advancing on behalf of the Artists versus what they were paying.

Based on the condition of its accounting, HSP cannot support a claim that the Artists knew HSP was advancing funds on their behalf and that negative balances were mounting in their account. This finding is supported by the minimal accountings actually delivered. For example, in 2006, the Artists were still handling their own tour expenses and collecting performance fees on the road. Based on their records, a profit of $54,457.00 had been earned, which they split evenly.216 However, because they lacked an accounting of revenues and expenses for 2006 incurred or collected by HSP, they were unaware that HSP's books reflected losses in excess of $26,000.00 a difference of $75,000.00.217 As late as October of 2008, HSP delivered a 2007 P/L for PBS showing a $62,000 loss. In fact, the loss was $227,000.218

After receiving this information, Porter responded with an email to Dyer, Chabaud, Stepanian and Stoltz that owing money to HSP was "NOT THE DEAL."219 Porter's reaction was vehement. He testified that he believed HSP was spending HSP's money to build HSP's professional brand as a personal management group. It is clear to the Court that the amounts claimed by HSP were both a surprise and did not comport with Porter's understanding of the PMA or the current state of affairs.

Following the revelations made in October 2008, HSP began its own period of reflection. On November 14, 2008, Stepanian sent an email to the Artists indicating that he needed to "make some very hard decisions in order to stay in the game."220 He stated that "over the past few years I have made enormous investment in everything that is Highsteppin' Productions.... my current financial situation requires that I make some immediate changes." Most damning for Stepanian's position is his recognition that "[i]t has been quite awhile (if ever) since we have sat down and discussed all of the band's financial details, but it is clearly time that we do so. We have compiled many detailed reports that will provide a complete insight into where we have been and where we need to go." In closing, Stepanian stated that "going forward, we will need to take each gig and tour based on a realistic budget. While I will continue to `financially help' the situation where necessary, we will need to decide the travel arrangements, hotel stays and crew based on our guaranteed income."221

As a result of Stepanian's email and the huge amounts claimed by HSP, PBS reasserted control over revenues and expenses. Beginning in November 2008 and continuing through 2009, PBS did not take an engagement without a budget reflecting anticipated tour revenue and expenses.222

The PMA contained very specific limitations on HSP's ability to incur debt on PBS' behalf. In part this was because the Artists feared exactly the situation HSP created, runaway costs, failure to disclose expenses and lack of accountability for revenues.223

The Artists' expert, Capshaw, testified that many expenses incurred by HSP on behalf of PBS were inappropriate for this particular group. For instance, Capshaw stated that incurring approximately $40,000 on photographs was a mistake based on the bands' baseline income. Spending on Madison House Publicity ("Madison House") for publicity also was out of line with the band's income. Finally, he believed that an intern could have handled the band's internet presence. In Capshaw's opinion, the nontour expenses were unreasonable and imprudent given the level of the Artists' careers. Jacodine, HSP's expert, testified that while HSP's performance as a personal manager was consistent with custom, practice and the standard of care, a reasonable business manager should provide a plan tailored to an Artists' individual needs. He also opined that no expense should ever be incurred by a manager without it first being discussed in detail with the artist, including details as to the amount of the expenditure and the benefit it might provide. Further, once a charge was incurred, the artist should receive, at least monthly, a detailed and itemized listing of each expense along with the individual revenue deposits. HSP did none of these things.

(a) Individual Expenses

(i) Danny Clinch Photography

Stepanian began the process of promoting PBS with the retention of a professional photographer, Danny Clinch, in February 2007.224 Clinch is a photographer of some renown. Evidently, the mere mention of his name signals a level of seriousness for his subject. Stepanian determined that Danny Clinch was just what PBS needed to establish itself on a national level.225

Although Stepanian explained to the Artists who Danny Clinch was and why he thought photographs by him could help their careers, he neglected to mention what a photography session with Clinch would cost. The record reflects that an estimate of Clinch's fees ($41,700.00) was sent to HSP on February 2, 2007.226 HSP booked flights on February 3, 2007.227 HSP was billed for a deposit on February 21, 2007.228 The photography session occurred on February 26, 2007. The final bill of $37,673.02 was delivered on March 3, 2007.229 HSP produced no evidence of PBS' approval to incur almost $40,000.00 in fees. In fact, HSP lacked proof that it even discussed the fee with the Artists.230 In contrast, Stoltz testified that upon arriving at the session he became concerned over its costs. He asked Stepanian what the photography session was costing and who was paying for it. Stepanian reassured Stoltz that he (HSP) had this one.231 Following the photography session, Porter also sent an email to Stoltz and Stepanian asking about the costs associated with the photography session and who was paying for it and other expenses.232 Stoltz replied that it was his understanding that HSP was covering the costs as an investment in HSP.233 Stepanian was copied on Stotlz's response but made no effort to correct or respond to the email chain between Stoltz and Porter.234 Further, the Clinch expense was never presented to PBS. It was booked as an expense of HSP, and it was not included in the 2007 P/L produced to PBS in 2008. Based on these facts, the Court concludes that HSP failed to obtain consent to incur the expense associated with the Clinch photographs and instead assumed responsibility for this expenditure as a cost of promoting itself.

(ii) Madison House

Stepanian also introduced the Artists to Madison House, a public relations firm located in Colorado. Porter, Stoltz and Stepanian met with Madison House representatives for about two (2) hours in July 2006 and went over promotional ideas. The Madison House representatives were enthusiastic about working with the Artists235 but did not discuss the cost of their services or even their scope.236 Madison House worked for the Artists on a month-to-month basis for a flat fee.237 Stepanian did not forward the Artists the monthly invoices HSP received and paid.238

Porter and Stoltz acknowledged talking to Madison House employees and participating in interviews set up by Madison House. They denied knowing how much the services cost, however. At trial, Stoltz testified that in his experience, a personal manager handled publicity in house. Although he was at the meeting with Madison House, Stoltz believed that HSP was looking for a publicist for itself or for Madison House to handle this function as part of HSP's overhead. Because PBS never received a statement for Madison House's services, nor were the costs of Madison House discussed, Porter and Stoltz were not aware that Madison House was charging them for its services.239 Madison House billed $1,800.00 per month from June 2007 to February 2009. Additional charges were added each month for clipping services, graphic design, postage, web design, fan mail, press releases, etc. The total charges paid to Madison House were $53,910.10, averaging $2,343.92 a month.240

While Madison House's services in 2007 were included in the P/L for that year, they were lumped in with other charges.241 In addition, since the 2007 P/L was not delivered to PBS until October of 2008, charges for Madison House for 2007 and 2008 had been incurred before PBS realized the enormity of the losses HSP was mounting. Madison House's services terminated in February 2009 some four (4) months after Porter made it clear that losses were not acceptable.

Based on the facts of this case, HSP has failed to provide proof that it obtained the consent of PBS to incur expenses of $53,910.10 with Madison House.

(iii) Freidman Kannenberg

The professional fees of Freidman Kannenberg are not disputed by PBS and are allowed in the amounts of $1,000.00 for services performed in 2008 and $800.00 for services performed in 2009.242

(iv) Nimbit, Inc., David Stocker, Domenick Tucci, Richard Quindry, JamBands, and Fan Marketing

Stepanian advised the Artists on multiple occasions that he intended to increase profits through internet sales, website access and email contact with their fans. To accomplish this result, HSP hired Nimbit, Inc. ("Nimbit") and David Stocker ("Stocker") to assist with website design and maintenance at a cost in excess of $5,000.00.243 In addition, Domenick Tucci ("Tucci") was paid $500 per month from February 2007 through November 2008 to maintain the Artists' Myspace pages. None of the invoices for these services were forwarded to the Artists nor were any bills, statements or detailed accountings reflecting charges given to it. As a result, the Artists had no idea these individuals or companies were working on their internet presence as outside consultants. The testimony of Stoltz was to the effect that Tucci worked in HSP's offices and he believed he was an employee of HSP rather than an independent contractor billing the Artists for his services.244 The Artists had no contact with Nimbit and had no idea it was charging them for web maintenance until discovery revealed Nimbit charges included in HSP's claim.245 PBS was aware that Stocker was working for HSP but thought his services were limited to album design, not their website.246 Richard Quindry, JamBands and Fan Marketing were also complete unknowns. Based on these facts, HSP failed to establish that it obtained approval to incur these charges from the Artists and they are disallowed.

(v) Powderfinger Promotion

Powderfinger Promotions ("Powderfinger") was retained by Stepanian to track and promote play of PBS' MooDoo release. It charged $5,625.00 for its services.247 The Artists had no idea who Powderfinger was or what it did, and HSP failed to provide bills, statements or a detailed accounting of Powderfinger's costs to the Artists after the fact.248 Under these facts, the Court finds that HSP failed to obtain the consent of the Artists to incur expenses related to Powderfinger and they are disallowed.

(vi) Advertising

Ads for PBS, their upcoming performance dates and new releases also began appearing in publications with and without the Artists' advance knowledge. However, the cost of the ads was not discussed with the Artists. Exhibit D-159 includes advertising costs:

a.     Graphic Therapy     $   940.00
b.     Off Beat            $ 1,600.00
c.     Relix Magazine      $20,500.00
d.     Zenbu Magazine      $ 1,850.00249

Stoltz admitted to seeing a 2007 ad placed in OffBeat promoting PBS' upcoming performance at Jazz Fest and Porter also saw an ad promoting him individually.250 However, the cost of either ad was not discussed prior to its placement.251 None of the Artists saw any of the other ads or discussed them with HSP. Stoltz and Porter testified that they often suggested advertising or promotional opportunities for PBS but expected HSP to discuss with them the costs in advance.252 For example, Stoltz did request that an ad be considered for Leeway's Home Grown Music Network ("LHGMN"), which HSP immediately placed without talking to the Artists about its cost.253 The Court finds the testimony of Stoltz and Porter credible. The mere suggestion of an opportunity for PBS promotion is not a blank check authorizing HSP to proceed regardless of cost. Under these facts, the Court finds that HSP failed to carry its burden of proof regarding the Artists' consent. Therefore, the costs are disallowed.

(vii) Merchandising and Music Production

According to the invoices HSP produced at trial, HSP incurred various expenses associated with the purchase of merchandise and music production. The costs were incurred from differing vendors and at various dates. Some of the charges were only attributable to an individual artist rather than the group.

In 2005, Stepanian acquired $10,363.78 in merchandise to promote Porter.254 Stepanian also claims $18,404.87 in travel expenses associated with selling this merchandise. The acquisitions were prior to the execution of the PMA and done at a time when Stepanian had no formal permission to either produce or sell anything associated with Porter or PBS. Nevertheless, Porter knew Stepanian had purchased the items because Stepanian was following Porter along his tour and selling them ad hoc at concerts. Stepanian pocketed all proceeds and never discussed the costs, revenues or any reimbursement with Porter.

In May of 2006, Stepanian inserted a clause in the PMA to capture the costs or expenses of this merchandise as an expense of PBS. The clause was never discussed with the Artists nor did Stepanian disclose the expenses or revenues he had incurred prior to the PMA's execution.255

Nothing in the relationship between Porter and Stepanian supports Stepanian's demand for reimbursement of these costs. In 2005 and early 2006, Porter knew that Stepanian was selling merchandise at his concerts. It is clear that Porter did not object to Stepanian's activities. However, it is equally clear that Porter never expected to be responsible for Stepanian's costs nor did he ever make a claim for the sales revenue Stepanian was receiving.256 At best Porter allowed Stepanian to use his image and reputation to sell items, presumably to make a profit. This was an arrangement similar to one Porter had with Tripp Billings.257 There is no evidence to support an agreement between Porter and Stepanian or HSP258 regarding the reimbursement of merchandise costs or travel expenses. There is no evidence to support any allegation that Stepanian requested or received permission to obligate Porter for these costs.

Prior to the PMA, the Court finds that there was no agreement between the Artists and HSP granting Stepanian "[T]he exclusive right to develop, produce, manufacture, package, ship, distribute, market, promote and sell merchandise embodying the name and likeness of each member of Artist and the professional names, group names, logos, trademarks and servicemarks of the Artist."259 Because no agreement existed, the sums cannot be absorbed into the PMA.

In 2006, 2007, 2008 and 2009 HSP ordered various small items to promote PBS or Porter along with t-shirts, hoodies and other items of apparel.260 Although the Artists were aware of HSP's activities and were consulted on some of the items to purchase, they were never advised as to the cost or quantities ordered.261 The only testimony adduced was that Stepanian told Porter that merchandise would cost $1.00 to $1.50 to produce.262 HSP kept all costs and revenues for these items off PBS' books, posting expenses and receipts to its own account.263 It was not until trial that HSP attempted to account for the amounts it spent and also the amounts it received. HSP's failure to properly account or submit purchase orders for merchandise to PBS establishes that it never received approval to expend more than the contract limitations for merchandise. However, because the revenues HSP derived from these items exceed their cost, HSP may claim reimbursement under a theory of quantum meriut. The total cost of merchandise purchased from May 2006 through November 2009 is $28,354.74. Of this amount, $1,519.00 is an expense of Porter alone because it represents t-shirts produced for his 60th birthday.

(viii) Costs of CD Production

Stepanian also funded the production of several albums or CDs, both for the Artists individually and as a group. HSP's claim includes $14,161.24 for production costs associated with MooDoo, a joint PBS work.264 HSP claims expenditures of $8,309.20 for the production of Up All Night for Stoltz, individually,265 and $18,871.26 for the production of It's Life, an individual work of Porter.266

Each of the Artists participated in the production of the joint work, and they are responsible for its costs.267 Stoltz and Porter are individually liable for the costs associated with the production of their albums as well.268 For the reasons specifically detailed below, none of the Artists are responsible for the costs associated with another artist's individual recording because none were consulted regarding the solo expenditures.269

(3) Payments to the Artists

Another sizeable portion of HSP's claim seeks reimbursement for amounts it paid directly to the Artists. HSP claims $309,470.31, but the evidence admitted at trial established that $204,000.00 was advanced to the Artists individually rather than as a share of PBS profits.270 The Artists assert that these sums were never intended to be a loan from HSP and that they were unaware that HSP was funding these payments through loans. They also aver that they did not authorize HSP to advance sums to them over and above what they were earning and certainly did not expect to pay living expenses through HSP loans.

HSP first delivered a money stipend to each Artist in November 2007. As previously explained, HSP believed that the Artists needed to play more venues in order to be profitable. HSP was convinced that the Artists' other business endeavors conflicted with this goal by reducing their availability to HSP. In addition, since HSP had taken over collecting performance revenue, the Artists were complaining that HSP was not sending them PBS' profits timely and they were having trouble paying living expenses.

In order to secure more of the Artists' time and provide a steady predictable income stream, HSP proposed to send regular bi-weekly amounts to the Artists. HSP separately negotiated the amount it would sent to each Artist based on their living expenses rather than the anticipated profits of PBS. Specifically, Porter was paid $10,000 per month, Stoltz $4,000 per month and Batiste $3,000 per month. At trial, HSP argued that the payments were always intended to be advances on future PBS income.

In 2008, HSP provided 1099s to the Artists for payments received in 2007.271 A 1099 is used to account for independent contract employment by the issuer to the recipient. An employer does not pay payroll tax or withhold income taxes on 1099 employees. Instead, the employee pays all associated taxes on his individual return. Generally, a limited liability company's profits are taxed to its members as reflected on K-1s.272 Porter, Stoltz and Batiste are equal members of PBS and are entitled to an equal share of PBS profits.

The separate payments to each of the PBS members were based on their living expenses rather than PBS' anticipated profits.273 Porter and Stoltz testified it was based on what they needed to live or "get by." The payments not only deviated from equal distribution to Porter, Batiste and Stoltz, they were made from HSP's payroll account and deducted on its books as a HSP expense.

The issuance of 1099s is consistent with the intention to treat the payments as an HSP expense. However, in October of 2008 when the tax returns were being prepared, PBS' own accountant, Friedman, noticed the 1099s for each of the musicians reflecting the amounts paid in 2007. Without consulting his clients, Friedman assumed this was a mistake and directed HSP to void the 1099s and issue K-1s from PBS to the Artists in the same amounts. The amounts were classified as "guaranteed payments" to each Artist. Unfortunately, Freidman failed to note that the limited liability company's operating agreement treated each member equally and did not authorize unequal distributions. Nevertheless, at Freidman's suggestion, Dyer voided the 1099s and issued K-1s.274 These accounting adjustments support the intention to treat the payments as distributions from PBS and not expenditures of HSP. Further, since PBS was not profitable, they increased its losses and by correlation, increased the amounts HSP had to advance to cover the losses.

In 2009, HSP again provided 1099s to the Artists reflecting the amounts paid in 2008. Consistent with this accounting method, the PBS P/L for 2008 did not include the amounts as advances to PBS or distributions to its members, nor did the B/S include these amounts as debt to HSP.275 HSP also paid the advances from its account and deducted the payments on its tax return. This conduct is consistent with the Artists' position that HSP was responsible for the payments.

Then in May 2011, after the 2008 returns were filed and this lawsuit was instituted by HSP, HSP reversed course, "correcting" the 1099s.276 The new amended 1099s cancelled any income to the Artists allowing HSP to claim the advances as loans. It also booked adjusting entries to both its books and those of PBS increasing the due to affiliate account for the amounts previously paid as 1099 income.

For the following reasons, the Court finds that the amounts paid to the Artists by HSP from November 2007 to November 2008 are not properly loans to PBS or its members. The disbursement of funds to the Artists was an effort to provide a steady stream of income to each artist. However, HSP ignored the fact that each Artist was an equal member of PBS and entitled to an equal share of its profits. Instead, HSP paid a different amount to Porter, Stoltz and Batiste without informing the others of this arrangement. The payments varied widely, particularly between Porter and the others.277 Stepanian not only failed to get the approval to vary the payments to the members, he instructed Porter not to discuss what he was being paid out of fear that the others would become dissatisfied.278

Under these facts, it is clear that HSP was not making the distributions to the Artists based on the PBS Operating Agreement. Instead, HSP was making individual payments to each Artist directly. While the PMA contemplates advancing funds on behalf of an individual artist to further that artist's career, it also requires the approval of the artists for any expenditure over $750.00. Given the inherent conflict of interest between the PBS members in this situation, the Court does not read the agreement to allow one (1) member to self deal at the expense of another. Further, since HSP admitted that it was a fiduciary of the Artists, it cannot rely on the singular approval of one (1) member to bind the others when the approving member was the only beneficiary of the transaction.

Because the Court finds that the Artists would not have accepted funds in excess of their profits and particularly, if from loans, HSP's claim for these advances will be limited up to the level of PBS' profits. Thus, to the extent each artist received a benefit, HSP may offset the amounts it may owe to that Artist against the stipends advanced to that Artist.

b. No Waiver

HSP alternatively asks this Court to find that the Artists' waived the PMA's prior consent provision. A waiver excuses a party from fully performing some term of a contract.279 Whether a defendant has waived performance of a contractual obligation is a question of fact. "Waiver may be manifested by words ... It would be unconscionable to permit the defendants, in view of their conduct, without notice or warning to insist upon strict performance of the contract and to forfeit all rights of the plaintiff."280

HSP alleges that the "Artists' knowledge of HSP's spending coupled with their silence" constitutes a waiver of HSP's contractual obligations. The trial testimony is replete with questions from the Artists' regarding spending281 and HSP's failure to comply. The testimony also includes attestations by Stepanian that HSP would pay for expenses because doing so would establish HSP. The Court has found the Artists' recollection of Stepanian's "I got this" responses to their questions regarding expenses to be credible. The record also supports a pattern of expenditure beyond the Artists' awareness. This Court finds no waiver on the part of the Artists.

c. Additional Claims by The Artists for Breach Of The PMA

(1) Breach of Paragraph 2

The Artists assert that HSP breached the contract by failing to "adequately and effectively `advise, counsel and assist'" Artists. The Artists claim that HSP's breach of the contract lies in its

The Court has already found that HSP breached the contract as to the expenditures and will not allow reimbursement except for the amounts listed above. The Court has also found that HSP breached its duties of loyalty and the standard of care owed the Artists. Damages for these infractions will be discussed in connection with the Artists' claim for unfair trade practice.283

(2) Breach of Paragraph 3

Artists argue that HSP breached Paragraph 3 of the PMA in because HSP did not properly engage and direct a business manager.

(a) Paragraph 3(a)(iv)

Paragraph 3(a)(iv) required that HSP:

The Court finds that HSP did not breach its obligation to secure a business manager for the Artists. The record reflects that Stepanian suggested managers to Porter and Stoltz, but they were uninterested or opposed retaining a business manager due to the additional cost.285 The employment of a business manager was at the Artists' discretion. Therefore, HSP did not breach any obligation on this point.

(b) Paragraph 3(c)

Paragraph 3(c) provides:

The Artists allege that HSP breached Paragraph 3(c) by the unauthorized and undisclosed use of the Artists' Email List after termination of the PMA and the admitted failure to deliver a copy of the Email List to Artists at the conclusion of the PMA.

The Court finds that HSP breached the PMA by utilizing the Email List after the termination of the PMA without authorization.287 HSP also failed to deliver a copy of the Email List to the Artists. The damages recoverable for breach of Paragraph 3(c) will be discussed in connection with the Artists' unfair practices claim.288

(3) Breach of Paragraph 8

Paragraph 8 of the PMA pertains to the requisite accounting. It provides:

Although the PMA specifically provides that HSP is not the Artists' business manager, HSP voluntarily assumed the role. The Artists assert that HSP breached paragraph 8 of the PMA because it failed to 1) set up bank accounts for HSP, Stepanian, PBS, the Artists and Bonerama upon commencement of the PMA; 2) set up separate QuickBooks files for HSP, Stepanian, PBS, the Artists and Bonerama upon commencement of the PMA; 3) avoid commingling the funds of HSP, Stepanian, PBS, the Artists and Bonerama; 4) avoid conversion of the funds of HSP, Stepanian, PBS, the Artists and Bonerama; and 5) provide monthly and/or quarterly accountings.

While every accounting witness opined at trial that the complained of deficiencies were a material deviation from good accounting practices and/or Generally Accepted Accounting Principles.290 The PMA does not require a business manager to deliver records except on reasonable demand. Additionally, the PMA does not require a business managers to follow Generally Accepted Accounting Principles or a proscribed accounting method. Therefore, this Court cannot find that HSP breached the PMA in either of these regards.

Instead, HSP's assumption of the role of business manager is outside the terms of the PMA and its duties are determined by the standard of care required by its fiduciary position. For the reasons set forth below, the Court does find that HSP's conduct fell so far below the standard of care required by a business manager that its conduct is actionable. The damages associated with this claim will be discussed in connection with the Artists unfair trade practices action.291

(4) Breach of Paragraph 16(b)

The Artists assert that HSP breached Paragraph 16(b) by failing to make any effort to comply with the Leaving Member/Key Person clause. Paragraph 16(b) provides:

The Artists complain that failed to replace Porter once his termination notice was delivered. HSP admittedly made no effort to replace Porter but the PMA does not require that it do so. Further, Batiste acquiesced in the termination of the PMA and offered nothing at trial to this claim. Without evidence of a desire to continue the relationship, Batiste waived any demand under this provision of the PMA. As for Stoltz, while he continued to work individually with HSP and its employees, he made no demand to continue the PMA and terminated further business dealings on or about December 29, 2009 when he was sued by HSP. Thus, he too waived any claim based on HSP's failure to substitute another musician for Porter.

C. Violation of Massachusetts Unfair Trade Practices Act

Both HSP and the Artists brought actions against each other under the Massachusetts Unfair Trade Practices Act ("MUTPA"), specifically M.G.L. c. 93A, §§ 2 and 11. The parties agree that they are "engaged in trade and commerce in Massachusetts" pursuant to the PMA. Therefore, the Court will not discuss eligibility under the statute.

MUTPA creates a private cause of action to remedy damages sustained as a result of unfair or deceptive acts or practices. The law originally was enacted to improve the commercial relationship between consumers and businessmen. "By requiring proper disclosure of relevant information and proscribing unfair and deceptive acts or practices, the Legislature strove to encourage more equitable behavior in the marketplace."292 Section 11 of MUTPA extended the statute's coverage to individuals engaged in trade or commerce in business transactions with others engaged in trade or commerce.293

Section 2 of MUTPA prohibits unfair or deceptive acts or practices in the conduct of any trade or commerce. The statute does not define "unfair" or "deceptive acts or practices." The existence of an unfair practice is determined on a case-by-case basis depending on the circumstances.294 "The circumstances of each case must be analyzed, and unfairness is to be measured not simply by determining whether particular conduct is lawful apart from c. 93A but also by analyzing the effect of the conduct on the public."295

1. Unfairness

Whether a practice is permitted by law may be considered when determining unfairness, but the legality of the act is not determinative. Likewise, the fact that an act is authorized by contract does not exempt it from scrutiny.296 "Just as every lawful act is not thereby automatically free from scrutiny as to its unfairness under c. 93A, so not every unlawful act is automatically an unfair (or deceptive) one under G.L. c. 93A."297 A court may, however, look at both statutory and common law for established notions of fairness.

An action is "unfair" if it is "(1) within the penumbra of a common law, statutory or other established concept of unfairness; (2) immoral, unethical, oppressive, or unscrupulous; or (3) causes substantial injury to competitors or other business people."298 Massachusetts courts have looked at MUTPA as an expression of public notions of fairness.

In determining whether a practice is unfair, one must evaluate the equities between the parties and their relative position and sophistication. What a defendant knew or should have known may be relevant in determining unfairness. Similarly, a plaintiff's conduct, his knowledge and what he reasonably should have known may be factors in determining whether an act or practice is unfair.299

In an arms-length transaction between two (2) business entities, the plaintiff must show a greater degree of "rascality" to establish an act is unfair within the meaning of G.L. c. 93A.300 The fairness of an act in a commercial transaction is judged by the standards of a businessman rather than those of an average individual.301 The heightened standard remains fairly liberal:

An unfair commercial practice must also result in "substantial injury ... to competitors or other businessmen."303

2. Deception

The question of whether a practice is deceptive is separate from that of fairness.304 Deceptive acts are defined as those which "could reasonably be found to have caused a person to act differently from the way he otherwise would have acted."305 The standard is an objective test of whether the general public would be deceived.306 But the plaintiff must allege that he would have behaved differently but for the deceptive act.307 It should be noted that reliance is not a prerequisite for recovery under the statute,308 but may be necessary to prove the required causal link between the deception and the injury.309 To prevail, there is no need to prove intention to deceive or that the unfair or deceptive act is intentional or wilful.310

Even if a plaintiff has not suffered an injury, it may bring a suit to obtain an injunction upon showing that the unfair business practice may cause a loss. In addition to equitable relief, an injured plaintiff may seek actual damages and is entitled to attorneys fees and costs if a violation is found, whether or not other relief is awarded.311 Damages must be casually linked to and a foreseeable result of the unlawful practice.312 The court may award up to treble damages, but no less than double damages, if it finds the violation was "knowing and wilful."

A mere breach of contract without more, is not a violation of Chapter 93A.313 A party that has not breached a contract, may nevertheless be held liable under MUTPA.314 To rise to the level of a MUTPA violation, a breach must be both knowing and intended to secure "unbargained-for benefits" to the detriment of the other party.315

3. No Violation by Artists

In addition to a claim in contract and fraud, HSP asserts the Artists violated MUTPA. The facts upon which HSP relies are the same ones as those giving rise to HSP's claims for breach of contract and fraud. The Court incorporates those facts as set forth above. Generally, HSP argues that the Artists never intended to repay the expenses incurred and induced HSP to incur losses through this deception. It also argues that the Artists' refusal to pay outstanding loans constitutes a MUTPA violation.

A party's breach of contract violates MUTPA when the party withholds payment without a good faith basis in an attempt to gain an unfair advantage.316 Conversely, a refusal to pay for goods or services because of a dispute over the amount of the bill does not give rise to a MUTPA action.317 HSP argues that Artists deceived HSP into believing they would repay the mounting debts. Under the PMA, the Artists promised to pay HSP commissions and reimburse HSP for loans to the Artists and for expenditures made on the Artists' behalf. HSP argues that the Artists knew of their obligation to reimburse HSP. For purposes of its MUTPA claim, HSP asserts that despite this knowledge, the Artists continued to incur debt that they had no intention to repay. In support of its claims, HSP cites the acceptance of various sums paid by HSP directly to the Artists whether as stipends for living expenses or personal bills. For the reasons set forth below, this Court finds the Artists did not engage in unfair or deceptive trade practices. Furthermore, the Court finds no merit in HSP's assertion that receipt of a stipend or cash to pay small personal expenses evidences a pattern of deceit.

The record is absolutely devoid of "numerous ongoing representations that [the Artists] would repay HSP."318 Although HSP claims that by accepting direct payments the Artists committed to repay the amounts, this is not the case. While HSP attempts to equate the receipt of funds with a promise of repayment, it omits any proof that the recipient knew the funds were a loan rather than a distribution of profits. In order for the Artists to have deceived HSP, HSP must prove that they knew that PBS was unprofitable and the payments were loans. The record is totally lacking on this point. Given HSP's 1) failure to account or provide status reports on profitability; 2) assurances that expenses were "investments in HSP;" 3) characterization of direct payments as "salaries;" 4) failure to include significant costs on PBS' books; and 5) failure to obtain consent from the Artists prior to incurring an expense, the evidence is sufficient to establish that the Artists had insufficient facts to understand that HSP was lending them funds or that it would demand repayment for the amounts it now claims.

HSP's claims against Artists are, at their core, a simple contract dispute. The Artists' refusal to repay the debt claimed by HSP is not a violation of MUTPA because they possess legitimate defenses to payment.

4. Violations by HSP

The Artists also seek damages against HSP for violations of MUTPA and request a finding of wilfulness. The Artists argue that HSP and Stepanian committed multiple breaches of fiduciary duty during the term of the PMA, and those breaches were sufficiently severe and pervasive enough to constitute MUTPA violations as a matter of law.

(a) Breach of Fiduciary Duty

A fiduciary relationship is established whether the relationship is one of pure agency, attorney in fact, trustee, escrow agent, partner, attorney at law or corporate director of a closely held corporation. A fiduciary holds a time-honored, selfless and hallowed position of trust. According to the Supreme Judicial Court of Massachusetts:

A fiduciary duty may arise when one party reposes trust and confidence in the integrity of another and the other party knows of this reliance and voluntarily assumes and accepts the confidence.320 Whether there is a relation of trust and confidence under particular circumstances is a question of fact.321 A fiduciary is a person to whom property or power is entrusted for the benefit of another.322 When HSP undertook the collection and disbursement of all revenues obtained by PBS, it became a fiduciary of those funds. At trial, Stepanian, HSP's experts and those offered by PBS all agreed that HSP held a fiduciary position with the Artists.323 The actions of the parties and the testimony of the witnesses leads to the inescapable conclusion that the Artists put their complete "faith, confidence and trust" in HSP's judgment, advice, counsel and guidance with regard to the collection and expenditure of funds. This Court finds a fiduciary relationship existed between HSP and the Artists.

HSP argues that the provision allowing HSP to advance money on the Artists' behalf modifies any fiduciary duty to the Artists. It argues that HSP's failure to acquire the Artists' approval constitutes a breach of contract, not fiduciary duty.324 The two (2) claims presented by the Artists are not mutually exclusive. A breach of duty may or may not be a breach of contract. Similarly, a breach of contract may or may not be a breach of duty. In this case, HSP breached the terms of its personal management contract by incurring charges without their approval and by failing to exercise proper judgment as to the expenses it incurred. It also breached an independent fiduciary duty to the Artists as their business manager by failing to account for revenues it collected and expenditures it paid on their behalf.

HSP had two basic fiduciary duties as business manager, honesty and loyalty. Those duties have been judicially construed to include the expansive duty of full disclosure, including full disclosure of all facts related to the subject-matter of the fiduciary relationship, full accountings, disclosure of conflicts of interest, disclosure of opportunities available to the principal, disclosure of the fiduciary's desire to take advantage of such opportunities, mistakes and errors in performance by the fiduciary and the avoidance of self-dealing, commingling and conversion.325

By not keeping the Artists apprised of their financial situation including the receipt of income from merchandise and digital sales, HSP breached a fiduciary duty to the Artists. HSP's failure to properly segregate the Artists' funds was a breach of duty. Commingling the Artists' funds with its own and that of other HSP clients is also a classic breach of duty. HSP's failure to account in a timely and accurate manner for all revenues and expenditures constitutes another breach of duty. Its abject failure to provide detailed accountings of revenues and expenses has led to this very suit. Even as the trial progressed, this Court was shocked and dismayed by HSP's lack of transparency and the inaccuracy in its accounting. Its experts were poorly prepared and unable to address basic questions regarding expenses or revenues. Its principal and employees were wholly deficient in their understanding of proper bookkeeping methods or the legal relationship between the parties under the PMA. Its records were inconsistent, inaccurate and ever shifting. In short, HSP failed to address the core issue of this dispute: what was earned and what was spent.

It is beyond explanation why this was necessary. Stepanian admitted his own problems to the Artists in his email of November 2008.326 The Complaint and Counterclaims clearly required HSP to prove its claims and to do so, an accounting of the revenues and expenses during the PMA's term was required. For reasons unknown, HSP failed to provide that accounting. As a result, the Court was required to reconstitute from source documents, where available, the revenues earned and expenses incurred during the PMA. Ultimately, HSP is responsible to the Artists because a client should not have to sue his fiduciary in order to obtain a full and complete accounting.

In addition, the Court finds that HSP's performance as the Artists' personal manager falls so far below the standard of care required as to be actionable under the MUTPA. Stepanian was an ardent fan, particularly of Porter, and idolized PBS' talents. Stepanian possessed infinite enthusiasm for PBS' potential but sorely lacked experience and training. Stepanian took on a task well above his abilities at a severe cost to himself and the Artists. HSP argues that all of its expenditures were for the Artists' benefit, but neglects to acknowledge that its actions also bankrupted PBS' principals. It fails to accept responsibility for its lack of transparency or reporting to the Artists either during the relationship or after suit was filed. HSP may not hide behind the best of intentions when its conduct falls so far below the standard of care as to be actionable. HSP fails to concede that its advice and counsel were so poor as to be grossly negligent.

HSP's conduct also breached its duty to the Artists individually. According to the PMA, the Artists are liable in solido for the aggregate amount of salaries and solo-project related expenses paid regardless of the specific amount received by each individual. In solido liability for the Artists may be sanctioned by the PMA, but HSP's practice of advancing funds for the benefit of a single artist without the consent of the others, crosses a fiduciary line. For example, HSP is claiming reimbursement from all three (3) Artists for Porter related merchandise and travel expenses incurred by Stepanian prior to the execution of the PMA. Those costs were incurred by Stepanian without any agreement for reimbursement by either Porter or the Artists.

The testimony reflects that Stepanian incurred the costs while he followed Porter throughout his tours. While Porter did not object to Stepanian's presence or sale of merchandise, there was absolutely no evidence to support a finding that he agreed to be responsible for Stepanian's costs. It is also critical that Stepanian never mentioned the existence or amount of this "debt" before, during or after the execution of the PMA. To obligate Porter, much less Stoltz and Batiste, to undisclosed pre-PMA expenditures that none were obligated to pay before the PMA is a breach of loyalty to all concerned.

HSP also claims reimbursement from all three (3) Artists for expenses related to solo projects incurred by Stoltz and Porter. HSP failed to disclose any of the costs incurred with the other Artists, a clear breach of loyalty to those who did not benefit. But these charges pale in comparison to HSP's actions in connection with its "salary" program.

From late 2007 to late 2008, HSP advanced $204,000.00 to the Artists through stipends. Significantly, Stepanian separately negotiated with each Artist and agreed to pay each substantially differing amounts. HSP also instructed Porter not to discuss the amount he was being paid with the others.

HSP deliberately did not inform the Artists of its inequitable distributions because doing so would have caused a rift between the Artists.327 As a fiduciary of each artist, HSP owed Porter, Stoltz and Batiste an independent duty of loyalty. As such, to obligate each artist for differing amounts without disclosure and their express consent constituted a breach of loyalty. Causation is established if the deception could reasonably be found to have caused a person to act differently.328 The causal connection between HSP's actions and the Artists' loss is glaring. Without HSP's nondisclosure, the court finds that the Artists would have reasserted control over their finances and limited the damage much sooner.

While success can never be guaranteed, HSP created a financial disaster for these Artists without their knowledge or consent. The losses sustained were a result of HSP's folly. The magnitude of HSP's incompetence and its failure to supplement its critical weakness with competent help constitutes a breach of duty for which it must answer. Regardless of good intentions, as a fiduciary, HSP cannot expect its mistakes to be covered by its clients. As such, this Court will enjoin HSP from claiming joint and several or in solido liability for any amounts paid that only benefitted a single artist.

Because HSP's discharge of its duties was substantially below the standard of care owed and it failed to disclose conflicts of interest between itself or the Artists in the management of their affairs, the Court finds that its conduct constitutes a wilful violation of MUTPA and awards the injunctive relief set froth below; and attorney's fees and costs associated with the litigation over the relative claims between the parties.

In addition and for the reasons set forth above, the Court awards the following relief:

1. HSP must account for any and all proceeds received from the sale, license, or use of merchandise or music of the Artists after June 2012 and remit the gross proceeds to the Artists' Trustee within fourteen (14) days.

2. HSP must immediately notify all parties with whom it contracted or authorized any distribution, sale, license or use of the Artists' works of the termination of its nonexclusive license in same and the corresponding termination of the third party's rights. It must also instruct the addressees to contact Trustee should they possess any property or revenue belonging to Porter, Batiste Stoltz, or PBS. Copies of confirming correspondence should be provided to the Artists within fourteen (14) days of this ruling.

3. HSP must deliver all merchandise, CDs or other product purchased or produced during the term of the PMA to the Trustee. To the extent a the merchandise or music is in the hands of a third party, HSP must recover said property and deliver it to the Trustee.

4. This ruling may require the amendment of the Artists' tax returns for tax years 2006, 2007, 2008 or 2009. To the extent amendments are possible, the Artists will be reimbursed for all fees and costs associated with the preparation of amended tax returns, as well as any penalties or interest payable on any taxes owed due to late filing or change in the amounts originally due. To the extent an amendment generates a refund, HSP is responsible for the payment of interest on the refund generated by the amended return at the federal rate from the date of the original tax return's filing through the date of receipt of the refund. To the extent an amendment cannot be filed due to the intervention of time, HSP will be responsible for the additional refund amount which might otherwise be claimed with interest at the federal rate until paid.

D. HSP's Commission Claim

1. Performance Fees

In its post-trial brief, HSP alleges commissions of $70,640.40 based on a rate of twenty-three percent (23%). The Artists assert that HSP breached Paragraph 4 of the PMA by improperly calculating its commissions. The Artists also request a forfeiture of commissions as damages for HSP's breach of fiduciary duties. The Court has already denied reimbursement of substantial costs incurred as a result of HSP's failure to obtain consent and properly discharge its responsibilities as a personal manager. Compensatory damages, attorneys fees and costs, as well as injunctive relief have been separately awarded for violations of MUTPA and HSP's breach of fiduciary duty. In light of these substantial awards and because HSP did not self deal or personally profit from its transgressions, forfeiture of its commissions is not warranted.

2. Definition of Gross Earnings and Calculation of Commissions

Paragraph 4 defines "Gross Earnings" and sets forth how commissions are to be calculated. It provides:

3. Deduction of Reasonable Tour Expenses

The Artists' allege that HSP failed to back out "reasonable tour expenses" when calculating its commission. HSP maintains that the "reasonable tour expenses" definition is limited to the laundry list of examples. The Artists assert that the laundry list is not exclusive. The Court finds that a plain reading of the contract results in the deduction of normal and reasonable costs of touring from the gross revenues before calculating the commission.329

4. Commission Schedule

Artists also argue that paragraph 4(a) requires PBS' revenues to reach base levels each calendar year before the commission rate is increased. HSP argues that a plain reading of paragraph 4(a) provides that once the historical aggregate earnings reach a higher commission level, that level is charged on all future earnings until earnings increase to the next plateau. The Court disagrees with both interpretations.

Under Paragraph 4(a), commissions are owed monthly in arrears and the commission rate is based on the aggregate earnings for the preceding twelve (12) month period. Thus, the commission rate rolls up or down each month based on the total earnings of the preceding twelve (12) month period. For example, if from May 2006 to April 2007 PBS' Gross Earnings were $108,000, HSP's commission rate for May 2007 would be seventeen point five percent (17.5%). In June 2007, the calculation would be based on Gross Earnings from June 2006 to May 2007. If that calculation produced Gross Earnings equal to $118,800, the commission rate on June 2007's earnings would be twenty percent (20%). If instead the earnings dropped to $100,000, the commission rate for June 2007 would drop to fifteen percent (15%). Based on the evidence presented at trial, the Court has calculated Gross Earnings for each month by averaging revenues and expenses incurred for each year over the twelve (12) months. Exhibits A and B to this Opinion reflect the revenue and expense calculations, commission rate and commission earned by month.330 The total commissions due to HSP are $54,496.331

E. Dischargeability of Debts Owed by Debtors to HSP

HSP argues that all debts owed to it by PBS and its members are nondischargeable under section 523(a)(2)(A) of the Bankruptcy Code. The facts of this case do not support nondischargeability.

1. Elements of Nondischargeability Finding

Section 523 of the United States Bankruptcy Code provides:

A creditor must prove nondischargeability by a preponderance of the evidence.332 All exceptions to discharge under Section 523 "must be strictly construed against a creditor and liberally construed in favor of a debtor so that the debtor may be afforded a fresh start."333 As set forth in In re Acosta, 406 F.3d 367, 372 (5th Cir.2005):

Courts may not render debts nondischargeable unless they are presented with proof that the debtor had an "intent" to deceive when the actual fraud, fraudulent representations or false pretenses occurred.334 However, "an honest belief, even if unreasonable, that a representation is true and that the speaker has information to justify it does not amount to an intent to deceive."335

a. False Pretenses, False Representations and Actual Fraud

The Fifth Circuit has distinguished the elements of false pretenses, false representations and actual fraud.336 The distinction hinges on whether a debtor's representation is made with reference to a future event, a past or existing fact.337

In order for a debtor's representation to constitute a false pretense or a false representation, it "must have been: (1)[a] knowing and fraudulent falsehood, (2) describing past or current facts, (3) that [was] relied upon by the other party."338 While "false pretenses" and "false representations" both involve intentional conduct intended to create and foster a false impression, a false representation involves an express statement, while a claim of false pretenses may be premised on misleading conduct without an explicit statement.339

To have a debt excepted from discharge based on actual fraud, an objecting creditor must prove that the debtor (1) made representations; (2) which he knew at the time were false; (3) with the intent and purpose to deceive the creditor; (4) who actually and justifiably relied on the representation; and (5) sustained losses as a proximate result.340 Actual fraud also focuses on future events, thus it is designed to entice or commit another to an act based on false representations of future events.

Fraud under Section 523(a)(2)(A) is the "positive" type of fraud as opposed to constructive fraud.341 The Fifth Circuit in Mercer reasoned that "[t]he appropriate focus with respect to a debtor's intent is whether she acted in bad faith by knowingly making a false representation."342 Actual fraud by definition consists of "any deceit, artifice, trick or design involving direct and active operation of the mind, used to circumvent and cheat another, something said, done or omitted with the design of perpetrating what is known to be a cheat or deception."343

HSP alleges that the debts owed by Porter, Stoltz, Batiste and PBS are nondischargeable under 11 U.S.C. § 523(a)(2)(A). Specifically, HSP avers that the Artists never intended to repay HSP for the advances it incurred under the PMA even though they were contractually required to do so. Based on the Artists' allegedly false promise to repay, HSP argues that it advanced funds and incurred substantial losses.

The Artists' initial promise to repay HSP for its advances is contained in the PMA. Thus, in order for this to constitute a fraud, HSP must show that at the time the PMA was executed, the Artists had no intention of ever repaying any amount owed to HSP regardless of the circumstance. In support of its position, HSP argues that in October of 2008, after first learning of the debt to HSP, the Artists, specifically Porter, evidenced their intention not to repay. HSP points to the October 2008 email exchange between Porter, Dyer and Friedman during which Porter screams in text that the amounts advanced to the Artists for the year were not supposed to be loans. HSP alleges this supports nondischargeability.

HSP also argues that the Artists were aware of the mounting debts and made no effort to stop expenditures or repay HSP. HSP relies heavily on In re Melancon344 to support its claim. The Melancon Court held that a misrepresentation is fraudulent if the maker (a) knows or believes that the matter is not as he represents it to be; (b) does not have the confidence in the accuracy of his representation; or (c) knows that he does not have a basis for the representation.345 More particularly HSP relies on the following:

The Melancon case is wholly distinguishable from the case at hand for many reasons. In Melancon, the debtor, who was a loan officer for a bank, took cash advances from her credit card to support her gambling habit. The Melancon Court denied discharge of the cash advances after finding that Mrs. Melancon had an accurate understanding of her financial position, was fully capable of properly analyzing her circumstances to determine whether she could pay additional debts, and presented no evidence concerning any prospect of repayment. As a result, when Mrs. Melancon requested cash advances, she knew she would not be able to repay them and made no attempt to cut her losses.

HSP alleges the Artists both anticipated and actually expected HSP to advance large sums of HSP's money to satisfy expenses incurred on behalf of the Artists. The Artists' state of mind is crucial to HSP's case. Due to the incredible lack of information and dearth of disclosure by HSP regarding PBS' financial status, the Court concludes that the Artists were unable to form an intent to deceive. The Artists were unaware that HSP was advancing monies to pay for the Artists' tour and professional expenditures. Based on what they knew and when they knew it, they simply did not have enough information to form an accurate understanding of their financial position or to properly analyze their ability to repay HSP's alleged claims.

For example, Porter's March 3, 2007, email to his fellow Artists and Stepanian posed several questions regarding responsibility for certain expenses.346 Specifically, Porter questioned whether PBS and the Artists would be financially responsible for a van Stepanian had recently purchased and whether the Artists would be paying for the recent photography session. Stepanian responded that the van was owned by HSP and the Artists would not be responsible for its purchase or modifications. Stepanian did not address the photography session and let Stoltz's explanation that it was an investment in HSP go uncorrected.

In July 2008 the first P/L, as well as a B/S was provided to PBS by HSP. Although the documents reflected 2007 transactions, they also reflected a loss for 2006 of $26,698.78 through a negative equity entry.347 Because PBS had handled and paid most tour expenses during 2006, the losses were principally due to nontour promotional costs incurred by HSP. These statements also reflected substantial losses incurred in 2007 ($62,747.57348) and a loan outstanding of 227,660.75.349 The outstanding loan did not balance to the P/L because HSP had booked entries directly to retained earnings rather than through expense accounts for 2006 or 2007. It is doubtful the Artists understood the significance of these documents. In any event, they were quickly withdrawn by Stepanian due to "inaccuracies" without detailed explanation.

It was not until October 2008 that the full extent of HSP's deficient spending became apparent to PBS. In October 2008, the Artists received their draft 2007 tax return, which showed a loss of $225,655 and a loan payable of $227,661.350 Prior to October 2008, PBS could not have known that HSP was spending them into bankruptcy. Further, because they did not know, they could not have made any representations to the contrary to HSP. Following October 2008, PBS reasserted control over its finances and losses incurred by HSP stopped.

This Court concludes that prior to October 2008, the Artists clearly believed, albeit erroneously, that certain nontour promotional expenses (e.g. Danny Clinch) were being subsidized by HSP as an investment in HSP's future. This assumption was not created out of thin air. Stepanian's own vague assurances and failure to account allowed this impression to take hold. His emails of July 2007 and November 2008 also provide support for the Artists' position.351 Finally, HSP's own bookkeeping indicates that it accepted revenues and took certain expenses on its own books rather than charge PBS, even after PBS' separate checking account had been established. Only after suit was filed did HSP "correct" its accounting. The Court finds that the facts lead to the inescapable conclusion that Stepanian was acting in great hope that the expenses incurred would propel the Artists into superstardom, thus benefitting both PBS and HSP.

While the PMA clearly contemplates that the Artists will be personally responsible for reimbursement of losses incurred by HSP, it also places significant restraints on HSP's ability to incur losses. As explained earlier, under the PMA, HSP was prohibited from incurring a single expense in excess of $750.00 or aggregate monthly expenses of over $2,000.00 without the express consent of the Artists. The limitations on spending in the PMA were designed to protect the Artists from runaway costs incurred by HSP without their knowledge and consent. The PMA also contemplated that all expenses incurred would be submitted monthly for payment to the Artists' business manager. Again, this provision was designed to protect the Artists against unknown and unaccounted for bills incurred by HSP on their behalf. Timely accountings were designed to avoid exactly what HSP did, incur substantial costs which it presented for payment years later.

Jacodine confirmed that industry practice required personal managers to submit invoices for services rendered and costs incurred on a monthly basis. He also confirmed that monthly accountings for all revenues received by date, amount and source were also standard practice.352 None of this was done by HSP.

HSP was unable to provide evidence that a single expenditure was presented to the Artists either before it was incurred or when it was paid. Instead, it argued the Artists' general knowledge that the service providers existed constituted both knowledge of the charge and consent to incur expenses on their behalf. HSP's position fails because most of the nontour expenditures and services were performed by companies or individuals that the Artists had never heard of or did not know had been retained (e.g., Nimbit, Inc.; Leeway's HGMN,353 Stocker, Powderfinger). Finally, Stepanian's constant assurances that he was investing in HSP through promotion of PBS supports the Artists' belief that the services of which they were aware were being subsidized by HSP.

HSP's proof of claim also itemizes payments to the Artists from November 2007 to November 2008. Referred to as "salaries" or "draws," Stepanian admitted proposing to pay the Artists biweekly, instead of after each performance. HSP claims these advances are nondischargeable because, like its other claims, PBS lured HSP into advancing funds with no intention of repayment.

HSP alleges that after learning about the deficit spending in October 2008, Porter claimed in an email that repayment to HSP was "NOT THE DEAL."354 HSP alleges that this is evidence of the Atists' bad faith. The Court finds that Porter's obvious disagreement with HSP's demands does not rise to the level of deceit nor does it indicate a pattern of luring HSP into deficit spending. PBS did not know that any deficits existed prior to October of 2008. HSP had failed to deliver an accounting for 2006, and the tax return prepared by the Artists showed a profit for that year. The results of 2007 were not delivered until October 2008, and there is no proof that HSP warned the Artists that deficits were mounting. It is exactly at this time that the bi-weekly payments ceased. Thus, HSP could not have been lured into making the bi-weekly payments on a false promise of repayment because the Artists did not understand the amounts were being made through HSP loans. When it became clear, the payments stopped and the Artists reasserted control to avoid additional losses or HSP advances.355

HSP has failed to prove that the debts allegedly owed to it are the result of false pretenses, false representations or actual fraud.

b. No Reliance by HSP on Representations by Artists

HSP must also prove justifiable or actual reliance upon a statement by PBS in order to carry its burden of proof. HSP argues that it relied on the Artists' "fraudulent misrepresentations" because "HSP advanced the monies to build PBS' brand, and HSP relied on the Artists putting their efforts into making PBS successful." HSP argues that it justifiably believed the Artists were working to "maximize PBS' success."

There is no evidence that the Artists did not work to maximize PBS' success. The Artists continued to play live shows as directed by HSP and PBS' booking agent. The situation continued until Porter's notice of intent to terminate was effective.356 Although HSP claims the Artists asked "for cash advances from the HSP ATM," HSP had total control of PBS' funds and total control regarding whether or not any request could or should be granted.

The PMA sets forth strict limitations on HSP's authority to incur expenses for PBS. It also requires regular, monthly submission of bills and statements of account. HSP also had fiduciary duties to PBS.357 The Court finds that if the Artists had known of the deficit spending and HSP's intention to seek reimbursement, they would have stopped the spending and taken back the reigns of their business sooner than November 2008. Both the PMA and the Artists' testimony establish that making money was a goal, but not losing money was paramount. Therefore, HSP has failed to establish a justifiable reliance on any representation by the Artists. For this and the additional reasons set forth above the amounts owed by Artists are dischargeable.

F. Claims of Violation of Copyrights

The Artists allege that HSP and Stepanian infringed upon their copyrights and should be cast in judgment for damages stemming from infringement. Specifically, the Artists' claim HSP violated 17 U.S.C. § 1101, more commonly known as the "Anti-Bootlegging Statute." The statute broadly prohibits unauthorized creation and trafficking in sound recordings and music videos.358 The Artists also allege violations of 17 U.S.C. §§ 106 and 115.359 This Court finds that the Artists granted a nonexclusive license to HSP and Stepanian to commercially exploit recordings of PBS' live performances. Therefore, no violation occurred.360

1. Background

Under the Copyright Act, copyright ownership automatically vests in the author or authors of an original work.361 "The author is the party who actually creates the work, that is, or the person who translates an idea into a fixed, tangible expression entitled to copyright protection."362 Copyright laws protect the authors of literary, dramatic, musical, artistic and certain other intellectual works. The protection is available to both published and unpublished works. Under section 106 of the 1976 Copyright Act, the owner of a copyright has the exclusive right:

Copyright law grants authors the right to control the work, including the decision to make the work available or withhold it from the public.364 Ownership of a copyright may be transferred in whole or in part by any means of conveyance or by operation of law. An owner may also grant a license for its use, production or distribution. An exclusive license must be in writing. Nonexclusive licenses can be granted by operation of law under a totality of the circumstances test.365

a. Authors

Under copyright law, reproduction and distribution of copyrighted musical works is allowed by mechanical license. Once a copyrighted work has been performed publically, a third party is not required to obtain a mechanical license to simply perform the work. A mechanical license is only required if a person wishes to reproduce and distribute copyrighted musical compositions (songs) on phonorecords (i.e. CDs, records, tapes and certain digital configurations). Thus, if a musician wants to record and distribute a song that was written by someone else, a mechanical license is necessary.366 Authors of original works may always perform their works without necessity of mechanical licenses.

b. Performers

A sound recording is owned by the person whose performance is reflected on the recording. The sound recording itself constitutes a property right in favor of the musicians and is in addition to the author's right in the musical composition. The right to exploit a sound recording is owned by the recording artist (voice) and musicians performing the work unless a written agreement transfers those rights to a third party. Session musicians generally relinquish and assign their performance rights to the label or band owner for a flat fee or royalty. It is also common for the main artist to have an agreement with the label regarding their relative rights in the recording.

c. Producer or Publisher

Generally, a producer or publisher of a work is the person who pays for its production. This may be the artist, composer or a third party. If the producer or publisher is someone other than the artist or if the work is one "for hire," the right of a producer or publisher in the work or performance is acquired by contract.367 Merely paying the costs of production does not entitle the producer to rights in the music. However, as explained below, it may grant the paying party a nonexclusive license under the totality of the circumstances.368 The owner of the recording (initially the performer unless a transfer or license of the right has occurred) usually has the right to and is responsible for the exclusive rights set forth in Section 106.

d. Compensation

Songwriters are compensated when their work is included on a recording. When someone produces a CD, he owes the songwriter a royalty for every CD printed regardless of the number sold.369 If a prerecorded performance is re-pressed, mechanical royalties are also due to the original publisher or artist, if self-published.

Songwriters and publishers are also paid when their works are used in a commercial, television show, movie, digitally simulcast, webcasted, streamed, downloaded, provided by an on line demand service, performed live or broadcasted. Airplay or public performance royalties are derived from money collected by Performance Rights Organizations ("PROs"). PROs collect flat or negotiated royalties from restaurants, bars, television stations and performance venues and allocate the amounts collected among musical works based on the frequency and nature of use.370 Use of PROs allows a commercial establishment to play various original works without having to separately negotiate with every artist or songwriter.

Performers receive revenue from the sale of their music and concert appearances. A recording artist currently does not receive any revenue for play of his or her hit song on the radio unless he or she was also the songwriter or publisher.

2. The Artist's Claim Against HSP for Unauthorized Distribution

The Artists' allege that HSP distributed their works through various internet companies and PBS' own website without the Artists' permission. As the PMA did not give HSP a right to distribute the Artists' works, HSP claims an irrevocable, nonexclusive license to distribute based on the Artists' knowledge and consent.

Copyright owners are free to grant multiple nonexclusive licenses for different uses of the same material.371 Under federal law, a nonexclusive license may be granted orally or may be implied from conduct.372 In Lulirama Ltd., Inc. v. Axcess Broad. Servs. Inc., supra, the Fifth Circuit held, "[w]hen the totality of the parties' conduct indicates an intent to grant such permission, the result is a legal nonexclusive license ..."373 Other circuits have limited the granting of an implied nonexclusive license to situations when: (1) a person (the licensee) requests the creation of a work, (2) the creator (the licensor) makes the particular work and delivers it to the person who requested it, and (3) the licensor intends that the licensee-requestor copy and distribute his work.374 However, the Fifth Circuit has dismissed this limitation.

In Baisden v. I'm Ready Prods., Inc., the Fifth Circuit held that an implied license could arise when the totality of the parties' conduct supported such an outcome.375 The Baisden Court reasoned that consent for an implied license may take the form of permission or lack of objection.376 HSP argues that the Artists' conduct and documentary evidence demonstrate the existence of a nonexclusive mechanical license allowing HSP the right to release and distribute the Artists' music.

After several weeks of testimony, the parties entered into a Joint Stipulation of Facts Regarding the Defendants' Copyright Infringement Claims ("Stipulation").377 The parties stipulated that all of the live recordings were made with the Artists' consent for commercial distribution.378 Further, HSP and the Artists stipulated that the Artists had consented in the distribution of the studio recordings at issue.379 Based on the Stipulation, this Court finds that a nonexclusive license to distribute the works in question was granted to HSP. As such, HSP was authorized to distribute the Artists' live performance and studio recordings for their benefit. Nevertheless, the Artists continue to complain that HSP has violated even a nonexclusive license by granting third parties exclusive distribution rights.

During litigation, the Artists learned that HSP entered into a Letter of Agreement ("Agreement") with Nugs.Net Enterprises, LLC ("nugs.net").380 Under the Agreement, HSP provided audio recordings of PBS songs, concerts and other performances, as well as recordings from the Artists' other group, solo and side projects as content ("Content"). Nugs.net then released the Content through its on demand service.381 The Artists complain that the Agreement creates an exclusive license in the live performances and studio recordings and impairs the Artists' ability to license their own works to other parties.

The Agreement provides:

The Agreement also provided that catalog works released through the COD service would be on a nonexclusive basis.383

HSP provided Content to nugs.net for distribution. Having already concluded that HSP held a nonexclusive license over the works in question, mere distribution is not a violation. However, the Artists assert that by contracting for an exclusive right of distribution, HSP has impaired their rights. Licensees are allowed to enter into exclusive or nonexclusive agreements for distribution of the works they license. The right to exclusive distribution from a nonexclusive licensee does not bind the owner of the work nor does it prohibit the owner from granting additional nonexclusive licenses to others.384 HSP's ability to grant a distribution contract is limited by the terms of its own license. As the holder of a nonexclusive right to distribute, HSP can limit its own right to distribute through others, but it cannot limit the owner from granting additional licenses. The Court reads the Agreement to limit HSP's right to grant additional distribution licenses in favor of Nugs' exclusive right. It does not limit the Artists from granting additional rights to distribution; it can only convey the right to nonexclusive distribution.

3. Revocation of the Nonexclusive License

A nonexclusive license may be revocable or irrevocable, depending on whether the license is supported by consideration.385 HSP argues that its nonexclusive license is irrevocable because it was acquired for consideration.

HSP avers that it advanced marketing and production expenses in connection with the Content; therefore, consideration was given to the Artists. In its proof of claim and as part of this suit, HSP has demanded repayment of all advances for production costs and marketing given in connection with the Artists' works. If the payments are loans repayable by the Artists, HSP did not give consideration for the production costs and the Artists did not receive any consideration. The repayment of the production expenses makes the works self-published.

HSP also argues that accounting to the Artists for revenues received and expenses paid in connection with the production and sale of music constitutes additional consideration. Pretermitting the fact HSP failed to account to the Artists for the costs and revenues derived from music sales until trial, the Court finds simply accounting for revenue or a loan is not consideration because both are part of HSP's obligation under its status as a business manager.

As previously held, HSP assumed the responsibility of business manager. As such, it insisted on collecting all revenues for digital and CD sales. Under this authority, it also controlled and paid the expenses of production. Accounting to the Artists for expenses and revenues was part and parcel of its duties as a business manager. Thus performance of accounting services in this context does not constitute additional consideration for the license because HSP already owed the Artists a duty to account. The discharge of a duty one is already bound to perform is not consideration.386

For the above stated reasons, the Court finds that the license is revocable at will because it was granted without consideration. When the Artists terminated the PMA, they evidenced a desire to end their relationship with HSP. HSP's license to distribute was terminated effective November 7, 2009.

4. Copyright Infringement for Non-PBS Works

During the course of their relationship, HSP frequently sold, online and through merchandise tables, works of the Artists generated before the PMA was signed. The Artists complain that HSP had no right to sell their works. As previously held, the Artists were aware of HSP's sale of merchandise on tables during performances. The Artists admitted at trial they both knew and accepted HSP's activities without objection. They also testified to providing music CDs for HSP to sell along side its merchandise. Therefore, the Court concludes the Artists granted HSP an implied license to sell both merchandise and music prior to the execution of the PMA.

After the execution of the PMA, HSP also sold non PBS works. Because the Stipulation does not address this issue, the Artists complain that HSP violated their copyrights on these works. HSP argues it sold merchandise and music it received from the Artists on their behalf and with the Artists' authority and knowledge. The evidence supports a finding that the Artists delivered music and merchandise to HSP to market and sell through the internet and at performance venues.387 As a result, this Court finds the Artists were fully aware of HSP's actions and authorized HSP to sell their individual works.

5. The Artists' Claim for Royalties

Royalties were paid to all third party songwriters for works used by the Artists. This includes the Artists if the work predated the PMA. In addition, royalties were also paid to third party publishers for re-pressed works. What is at issue are unpaid royalties claimed by the Artists as songwriters on works written after the PMA was signed, as well as publishing royalties for works produced by the Artists and digital royalties owed to the Artists as performers.

Because the Court has found the Artists incurred the costs of production for all works created during the PMA, the Artists are entitled to the revenues derived from their sale. While royalties to the Artists as songwriters might be owed if the works were performed by another, because they were performed by the Artists, no royalties are due. The Court also finds the Artists, as both self-publishers and performers, are entitled to revenues obtained through digital downloads of their music.

Because the Court finds that all revenues for works written or performed by the Artists during the PMA belonged to the Artists, claims for royalties are duplicative and denied.

G. Interest on Award

HSP raised two (2) independent grounds for its interest claim, 28 U.S.C. § 1961388; and M.G.L. c. 231 §§ 6B and 6C.389 The Artists also requested interest in their Counterclaim against HSP.

1. Interest Claims under 28 U.S.C. § 1961 (Post-Judgment Interest)

HSP's claim includes $81,482.63 in interest for the period of January 1, 2010 to November 26, 2010. Federal law authorizes bankruptcy courts to award post-judgment interest on any money judgment in a civil case recovered in a district court.390 The statute provides that interest is calculated from the date of the entry of the judgment. Once a judgment is obtained, it bears interest without regard to the elements for relief composing the judgment.391 Federal courts have routinely held that a bankruptcy proceeding is a "civil case" under 28 U.S.C. § 1961(a) and judgments in bankruptcy proceedings accrue post-judgment interest.392

Under the plain language of 28 U.S.C. § 1961, interest on the amount awarded accrues from the entry of this judgment, not before.393 The prevailing party is only entitled to post-petition interest from the date of judgment. The $81,482.63 claimed by HSP in its proof of claim is not post-judgment interest and cannot be allowed.

HSP and the Artists may be entitled to post-judgment interest on their awards upon entry this Court's ruling.

2. Prejudgment, Prepetition Interest Claims under M.G.L. c. 231, § 6B and 6C

(a) HSP Prepetition, Prejudgment Interest

Although the PMA does not contain an interest provision, HSP argues that Massachusetts law mandates the imposition of prejudgment interest.394 M.G.L. c. 231, § 6B reads:

M.G.L. c. 231, § 6C, which deals with contract actions, similarly provides:

M.G.L. c. 231, § 6B is inapplicable in this case because Porter, Batiste and Stoltz did not commit a tort against HSP. M.G.L. c. 231, § 6C also is inapplicable with regard to prepetition interest owed to HSP because neither PBS nor Porter, Batiste or Stoltz individually breached the PMA.

As explained below, even if this Court's ruling can be construed as a finding that the Artists' non-payment of HSP's reimbursement demand395 constitutes a breach of the PMA for purposes of M.G.L. c. 231, § 6C, HSP's claim for prejudgment interest can only extend until the dates Porter, Batiste and Stoltz filed their bankruptcy petitions. Specifically, the claim from Porter can only be allowed for the ten (10) month period between HSP's November 20, 2009 demand and the date Porter filed his bankruptcy petition. Prejudgment interest can only accrue against Stoltz for the nine (9) month period between the filing of HSP's Complaint against Stoltz and the date Stoltz filed his bankruptcy petition. Prejudgment interest can only accrue against Batiste for the twenty-one (21) month period between the filing of HSP's Complaint and Batiste's bankruptcy filing.396

Section 502(a) of the Bankruptcy Code provides that "a claim or interest, proof of which is filed under section 501 of this title, is deemed allowed, unless a party in interest ... objects." However, Section 502(b)(2) provides that "except as provided in subsections (e)(2), (f), (g), (h) and (i) of this section, if such objection to a claim is made, the court, after notice and a hearing, shall determine the amount of such claim in lawful currency of the United States as of the date of the filing of the petition, and shall allow such claim in such amount, except to the extent that — (2) such claim is for unmatured interest." (Emphasis added).

Pursuant to section 502(b)(2), the accrual of interest on prepetition claims are suspended when a bankruptcy petition is filed.397 Section 502(b)(2) provides that the claim is disallowed to the extent that "such claim is for unmatured interest." Thus, section 502(b)(2) prohibits payment of postpetition interest on prepetition unsecured claims.398

The Fifth Circuit Court of Appeals has found that "allowing the accrual of postpetition interest in favor of one (1) creditor would be "inequitable" to other creditors.399 Ultimately, 502(b)(2) "protects the debtor and its other creditors from the assertion of claims for amounts in excess of the benefit actually conveyed to the debtor."400

Similarly, a Massachusetts bankruptcy court ruled that prepetition, prejudgment interest might be contingent, disputed or unliquidated, but not unmatured.401 The court noted that while section 502(b)(2) prohibits the allowance of unmatured interest claims, the amounts accruing prepetition are allowed. It opined that "if Congress intended that contingent claims for interest be disallowed, the language of section 502(b)(2) would have included both the words "contingent" and "unliquidated."402

In the Lamarre decision, the claim for breach of contract was, as of the petition date, disputed and unliquidated. During the bankruptcy it became fixed and liquidated. At that time, the amount of interest accruing under state law also became a fixed and liquidated amount.

Under Massachusetts law, HSP is entitled to prejudgment interest.404 However, since the Court has allowed HSP's quantum meruit claim only as an offset against any amount due the Artists, HSP is not entitled to a judgment and its entire claim is disallowed.

3. Interest on PBS' Claims Against HSP

Section 502(b)(2) does not prohibit the imposition of prejudgment interest for claims by debtors against third parties. The purpose of awarding prejudgment interest is to compensate a party for the loss of the use of his money in order to make the party whole.405 Prejudgment interest in contract actions is to be calculated from the date of "breach or demand." In Sargeant v. Commissioner of Public Welfare, 383 Mass. 808, 423 N.E.2d 755 (1981), the Supreme Judicial Court held that where the record establishes the date of demand in a contract action, prejudgment interest should be awarded from that date.406 However, since the Artists are not entitled to a compensatory award other than attorney's fees, costs, and those associated with the injunctive relief, no interest is due at this time.

IV. Conclusion

For the reasons set forth above:

1. HSP's proofs of claim in the bankruptcy cases of Porter and Stoltz are disallowed in their entirely;

2. HSP's claims for breach of contract, violation of MUTPA and nondischargeability are Denied;

3. The Artists' claims for breach of contract, breach of fiduciary duty, and MUTPA violations are GRANTED in part and denied in part;

4. The Artists' claims for copyright infringement are DENIED.

Based on the findings of this Court:

1. Neither HSP nor the Artists are owed sums under the PMA due to offsetting claims;

2. HSP must account for any and all proceeds received from the sale, license, or use of merchandise or music of the Artists after June 2012 and remit the gross proceeds to the Artists' Trustee within fourteen (14) days.

3. HSP must immediately notify all parties with whom it contracted or authorized any distribution, sale, license or use of the Artists' works of the termination of its nonexclusive license in same and the corresponding termination of the third party's rights. It must also instruct the addressees to contact Trustee should they possess any property or revenue belonging to Porter, Batiste Stoltz, or PBS. Copies of confirming correspondence should be provided to the Artists within fourteen (14) days of this ruling.

4. HSP must deliver all merchandise, CDs or other product purchased or produced during the term of the PMA to the Trustee. To the extent the merchandise or music is in the hands of a third party, HSP must recover said property and deliver it to the Trustee.

5. This ruling may require the amendment of the Artists' tax returns for tax years 2006, 2007, 2008 or 2009. To the extent amendments are possible, the Artists will be reimbursed for all fees and costs associated with the preparation of amended tax returns, as well as any penalties or interest payable on any taxes owed due to late filing or change in the amounts originally due. To the extent an amendment generates a refund, HSP is responsible for the payment of interest on the refund generated by the amended return at the federal rate from the date of the original tax return's filing through the date of receipt of the refund. To the extent an amendment cannot be filed due to the intervention of time, HSP will be responsible for the additional refund amount which might otherwise be claimed with interest at the federal rate until paid. All amended returns or calculations in the event an amended return cannot be filed, are to be submitted to the Court and delivered to HSP no later than October 1, 2013.

6. This is a partial ruling and specifically reserves for later determination and after evidentiary hearing on award for the Artists' attorneys' fees and costs, as well as any amounts due under paragraph 4 above. The Court will notice a status conference between the parties to set the necessary pretrial deadlines and hearing date. This ruling will not be final until after these amounts have been determined and a judgment in accord with this Opinion and any later ruling is entered.

A judgment in accord with this Opinion will be separately rendered.