DMX Music, Inc. v. Muzak LLC and CVS Pharmacy, Inc.

DMX sued CVS and Muzak in California over an agreement to provide music programming services to the CVS drugstore chain.

Retained by Sheppard Mullin Richter & Hampton

DMX sued CVS and Muzak in California over an agreement to provide music programming services to the CVS drugstore chain. Counsel for CVS and Muzak retained George Strong, a managing director of Cornerstone Research, as the damages expert.

Mr. Strong opined that Muzak appropriately priced CVS’s contract above both its fixed and variable costs.

DMX claimed that Muzak had engaged in predatory pricing to win a contract to provide music programming services to CVS. Under California law a company cannot price a product or service below its fully allocated costs (which include both fixed and variable costs). Mr. Strong was asked to determine whether any damages should be awarded to DMX. After analyzing Muzak’s cost structure and constructing a pricing model based on fully allocated costs, Mr. Strong opined that Muzak appropriately priced CVS’s contract above both its fixed and variable costs. The case settled in mediation.