Ellington v Sony/ATV Music Publ. LLC
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Ellington v Sony/ATV Music Publ. LLC 2010 NY Slip Op 33887(U) July 7, 2010 Supreme Court, New York County Docket Number: 650233/09 Judge: Barbara R. Kapnick Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various state and local government websites. These include the New York State Unified Court System's E-Courts Service, and the Bronx County Clerk's office. This opinion is uncorrected and not selected for official publication. [*FILED: NEW YORK COUNTY CLERK 07/12/2010 1] INDEX NO. 650233/2009 NYSCEF DOC. NO. 28 RECEIVED NYSCEF: 07/12/2010 SUPREME COURT OF THE STATE OF NEW YORK - NEW YORK COUNTY PRESENT: 31.- BARBARA R. KAPNICK PART \ndex Number : 650233/2009 ELL\NGTON, PAUL M. INDEX NO. ; SONY/ATV MUS\C PUBL\SHtNG . !\ . Sequence Number : 001 ·I ', MOTION DATE \MOrfON.~.NO; ~·:· .....:.:.. ~··., .: .:·~.: ....:~:·.-:;:·:~~\'··' ... ·.·.·--~... :, DISMISS ACTION \~:)~~':·0f·.·,7P~: '' ---···" > ' ¢ ¢ ¢ .;.:-- :· ¢"',L ·i·.'.·~,~:>: oor · ·. · ·. . . . . . , . _:.-· ;·' : ¢ ¢ h. ¢ ¢ t"""'t1cn~. numbt11'8d 1tD _ _ were read on this motion to/for_.- - - - - - - PAPERS NUMBERED Notice of Motion! Order to Show Cause - Affidavits - Exhibits ... .. rn z 0 (/J <C w a: CJ Answering Affidavits - Exhibits ------------- Replying Affidavits _ _ _ _ _____,,__~--------- Cross.. Motion: 0 YesXNo Upon the foregoing papers, it is ordered that this motion wz ui= ~ (/J _. ::> _. ..., 0 0 LL. .... UJ c :c MOTION ti Dt!C101!D IN ACCORDANCI! wmt ACCOMPMfVM ~ANDUM neo ¢DN w .... cc a: cc 0 ~ w LL a: > _. ...I ::> LL. t- () w CL rn w a: ~ w rn <C (.) z 0 j:: 0 ~ > '' RECE\VED JUL 0 S'l.o\fi RTOFFlCE MOT10N SEUMP:goURT- cML NVSSUPR ·.· [* 2] SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK: IA PART 39 ------ -------------------------------x PAUL M. ELLINGTON, Plain ti DECISION/ORDER Index No. 650233/09 Motion . No. 001 -againstSONY/ATV MUSIC PUBLISHING LLC, FAMOUS MUSIC CORPORATION and FAMOUS MUSIC, LLC, -------------- Defendants. ---------------------x BARBARA R. KAPNICK, J.: This action arises out of an agreement (the "Agreement") entered into on or about May 10, 1989, by defendant Famous Music Corporation, 1 and plaintiff Paul M. the grandson of Edward Kennedy "Du along with other members of Siblings"). Viacom, Ellington ("Mr. Ellington"), " Ellington ("Duke Ellington") , Ellington family (the "Ellington Under the Agreement, Famous Music, then a division of came to control rights in copyrights to certain musical compositions created by Duke Ellington and to use the name and keness of Du Ellington in conjunction with compos (the "Agreement"). As part of Famous Music's duties under the Agreement, Famous Music had, inter alia, Ellington compos connection wi ions, them, ma the obligation maximize the to administer 1 ties t Duke to be earned in in true and correct royalty accounts Famous Music Corporation changed its corporate structure in December 2006, becoming Famous Music, LLC. (Famous Music Corporation and Famous Music, LLC shall be collectively referred to herein as "Famous Music"). [* 3] and pay over designated songwriter 1 s share of royalt s to the Ellington Siblings. Plaintiff claims that in or about August Sony/ATV Music Publishing LLC ("Sony/ATV") 2007, acquired Famous Mus from Viacom, without his consent or knowledge. Plai claims that he learned about the acquisition for a royalty statement defendant ff further first time in March 2008, which was issued by Sony/ATV and appeared on Sony/ATV letterhead. Mr. Ellington, through his counsel, thereafter attempted to determine the precise nature of the relationship between Sony/ATV and Famous Music and whether Famous Music still existed. However, plaintiff claims that he was unable to reach the individuals at Famous Music, many of whom had been employed in their capacit for long periods of t and with whom Mr. s Ellington and his attorneys had had longstanding relationships, because they were no longer employed by Famous Music or Sony /ATV in their former capacities. By letter dated August 15, 2008, Dale D. Esworthy, Sony/ATV's Senior Vice President, Administration, responded to plainti counsel's inquiries as follows: Regarding your questions about the relationship between ·Sony/ATV Music Publishing LLC and Famous Music LLC, Sony/ATV purchased Famous from Viacom in August 2007. As part of that transaction Sony/ATV acquired Famous' interest in the Ellington Compositions. While Famous still technically exists as a corporate entity, it is 2 's [* 4] wholly owned by Sony/ATV. Sony/ATV obligations to Viacom with respect Compositions. By letter dated August 27, s to 2008, Mr. no continuing the Ellington lington, through s counsel, informed Sony/ATV that he had never been previously informed of, consulted about or asked to consent to any such action on Famous' part, and that he does not consent to them. such, please be advised that we are entitled to treat Famous's actions as a repudiation of the Agreement and proceed accordingly. In pla the first cause of action Amended of iff seeks a declaration that Famous Mus Agreement, Complaint, has repudiated the that the Agreement has been terminated and that Mr. Ellington is now relieved of any obligations under the Agreement, with his rights pert ning to the Duke Ell the Agreement reverting to him. otherwise provided for In the alternat the , plaintiff claims transfer void is not on compositions as as to Mr. to the extent that ington's rights, the intervention of Sony/ATV into the relationship between Famous Music and Mr. Ellington has caused Mr. Ellington to incur signi cant expense and lost earnings. inconvenience, substant Specifically, Sony/ATV sought in a letter dated April 25, 2008 to withhold $212,444.62 in due to the Ellington S ~negative adjustments" from royalties ings under the Agreement to account for 3 [* 5] alleged mistakes royalt Famous Music had made ing such adjustments in were calcu in prior periods going back to 2000. Plaintiff wrongfully aims applied that these because: (i) negative all or virtually all the adjustments concerned mechanical royalties for which Famous Music was a mere Siblings, rights conduit between i.e., to such neither Famous Music nor Sony /ATV ever had any royalties; adjustments" concerned and made by other publishers and the Ellington Famous .. ( l l ,) the $168,229.60 "negative legedly mistaken payments that were due Music before March 3, 2002, putting such payments outside the six-year statute of limitations set forth in CPLR § 213; {iii) pursuant to paragraph 2 (a) of the Agreement, Famous Music had an obligation to maintain "true and accurate accounts," and plaintiff was entitled to and did rely on those calculations; {iv) pursuant to paragraph 2(c) (vi) of the Agreement, statements that Famous Music issued were also "deemed binding" upon Mr. Ellington and, Famous Mus thus, could not be retroactively revised by or its purported successor; and (v) the recovery of payments that were made voluntarily by Famous Music is barred by the voluntary payment doctrine. By letter dated December 3, 2008, Sony/ATV acknowledged that a debit to the Ellington Parties' royalty account in the amount of $212,444.362 has been adjusted to reflect the correct debit in the amount $41,401.49. Therefore, the difference now due the Ellington Parties is $171,043.13 (the "Ellington Payment"}, of which $68,417.25 (40% of 4 [* 6] $171,043.13) share. 2 (the "Debit Payment"), equals your ient's Plaintiff further claims that Sony/ATV made a royalty payment to an incorrect third party and refused to forward payment to lington funds, Siblings. has demanded Sony /ATV, a release royalties, as well as a re lington Siblings had these funds, but the which was eventually any claims to repaid the the remaining se as to any of the other claims the inst Sony/ATV prior to s payment of lington Siblings have refused to grant any such release. In the ing Agreement, second cause of action, that: (i) by assigning plaintiff away seeks obligations a jugment under the iling to pay royalties due under the Agreement on the dates specified there and refusing to pay royalties due despite acknowledging plaintiff's ent lement to such royal ties, defendants have breached the Agreement; (ii) the Agreement , there been terminated; and (iii) Mr. Ellington is entitled to re of sion Agreement and is thus relieved of any obligations under the Agreement, with his rights pertaining to the Duke Ellington compositions reverting to him. There is no dispute that a payment in the amount of $68,417.25 was made in June 2009, after this action was commenced. 1 5 [* 7] The Amended Complaint also seeks to recover: (a) damages in the amount of $68,417.25, plus interest, for breach of contract based on Sony/ATV's withholding the "negative adjustments" which Sony/ATV acknowledged were improperly made (third cause of action) and for damages in said amount, as well as punitive damages, for conversion (fourth cause of action); (b) damages for breach of contract for the remaining "negative adjustments" (fifth cause of action); (c) damages for breach of fiduciary duty based on Paragraph 9 (a) of the Agreement which provides that "no fiduciary relationship is created hereby (excegt [emphasis supplied] as to the payment of monies ... )"; plaintiff claims that Sony/ATV breached their fiduciary duties to plaintiff (i) by making negative adjustments to plaintiff's account, withholding royalty payments on that basis and then failing to repay the withheld monies despite acknowledging that such monies were owed; due (ii) by failing to make timely payment of royal ties for the semi-annual period concluding on December 31, 2008; and (iii) by making payment of royalties due to plaintiff to an unauthorized account four years out of date (sixth cause of action); (d) damages for breach of contract, based on Sony/ATV' s failure to make the royalty payment for the semi-annual period concluding on December 31, 2008 within 60 days of that date and announcing their intention not to make payment of such royalties until March 31, 2009, in violation of Agreement (seventh cause of action); and 6 paragraph 2 (a) of the [* 8] {e) damages ion of r unjust amounts enrichment, illegitimately based c on imed Sony/ATV's as "negat adjustments" and based on its unilateral postponement of the date on which pl they were obligated to make royalty payment to iff reflecting the semi-annual period concluding on December 31, 2008 (eighth cause of action). Defendants now move ran order pursuant to CPLR and (7) dismissing the first, second, s § 3211(a) (1) and eighth causes of action with prejudice. 3 First cause of action Defendants de cl a argue that the first cause of action a ion that the Agreement has been repudiated based on assignment from Famous Music to Sony/ATV must be dismissed because there is nothing in the Agreement that prohibits assignments. of Stralem, 303 AD2d 120, 122 Mat that u[u]nder New York language which , contracts are expressly prohibits Dep't 2003), which See, ld ly assignable absent assignment (citations omitted) . "~ Defendants concede that plainti 's remaining claims involve factual issues that cannot be disposed of on a motion to SS. 4 In fact, the Agreement defines t Corporation "(or s designated affil entity, it no such designat shall relieve Famous of any liabil hereunder)". 7 [* 9] Plaintiff, however, constitutes a contract assigned. contends that the subject personal services, Agreement which may not be See, In re Compass Van & Storage Corp., 65 BR 1007 (U.S. Bankr. Ct., EDNY 1986). However, defendants argue that there is no basis to find that the Agreement is a personal services contract, since it involves the sale of assets, i.e., the ownership and administration rights in the catalogue of completed songs, and does not provide for the rendering of any personal services. Alternatively, plaintiff argues that it has long been the law that a party repudiates a contract "where [that) party, before the time of performance arrives, puts it out of his power to keep s contract" (citations omitted) . Stated otherwise, a party repudiates a contract when it ~voluntar[il]y disable[s] itself from complying" with its contractual obligations (citation omitted). Computer Possibilities Unlimited v Mobil Oil (1st 't 2002), lv to app denied, 100 Plaintiff contends that by ., 301 AD2d 70, 77 d 504 (2003). transferring its rformance obligations under the Agreement to Sony/ATV, Famous Music likewise voluntarily disabled itself from complying with 8 s contractual [* 10] obligation. Thus, plaintiff argues that Famous Music repudi the Agreement. Defendants, however, Unlimited v Mobil contend Oil Corp., to Agreement. assure that Moreover, did not divest ntiff receive unlike the s Possibilities Unlimited, Mus pl Inc. did enter into a conf l Computer Possibilities supra is distinguishable from the instant case because Famous Mus ability that v Mobil the self of the benefit of the ion presented in Computer Oil Corp., supra, Famous ing agreement. Defendants further argue that plaintiff's contractual right to receive royalt s has not been affected, and that Famous Music has continued since 2007 to perform under the Agreement under Famous Music~s new owner, i.e., Sony/ATV. 5 Based on the papers submitted and the oral argument held on the has on February 18, 2010, this Court finds that plaintiff led to state a claim for repudiat of the Agreement. Accordingly, that portion of defendants' motion seeking to dismiss the first cause of action is granted. In fact, defendants contend that there was never even an "assignment" of the Agreement, since Sony/ATV simply purchased Famous Music from 9 [* 11] Second cause of action Defendants next move to dismiss plaintiff's second cause of action which seeks, inter alia, rescission of the Agreement. It is well settled [i] n order to justify the intervent of equity to rescind a cont a party must al fraud in the inducement of the ract; failure of consideration; an inability to perform the contract r is made; or a breach in the contract which substant lly defeats the purpose thereof ( ion omitted). If rescission is based upon a breach of the contract, breach must be "material and willful, or, if not will , so substantial and fundamental as to strongly tend to feat the object of the parties in making the contract" (citations omitted). Babylon Associates v Suffolk Co., 1984). See also, Jacobs 101 AD2d 207, 215 (2nd Dep' t vate Equity, LLC v 450 Park LLC, 22 AD3d 347 (1st Dep' t 2005). Defendants argue so substantial and plaintiff has mater 1 as to de to allege a breach the purpose of the contract. 6 aintiff argues in opposition that the Complaint alleges the fendants' acts were 'material and will 6 Defendants further contend that plaintiff is attempting to convert his minimal claim for $16,560.00 in unpaid royalt s into a aim to res a contract under which the Ellington S ings have received llions of dollars in advances and· roya ies over the past twenty years. IO [* 12] However, even were there a sufficient determine that fundamental the alleged breaches sis for this Court to are so substantial and as to strongly tend to defeat the objective of the Agreement, rescission should not be granted where, as here, is an adequate remedy Assn., 26 AD3d 628 (2006); stol law. (3 See, Brooks v Dep't 2006), lv to Oaks, L. P., v Citibank, Key Trust Co. Nat'l . dism'd, 6 NY3d 891 N.A., (1st 272 AD2d 258 Dep' t 2000) . Accordingly, di portion of defendants' motion seeking to ss the second cause of action is granted. cause of action Defendants breach absent next argue that the sixth cause of action fiduciary duty must be dismissed on the grounds special circumstances, publi and a wr r the relationship between a music (or, in this case, his successors) does not rise to fiduciary obligations. Plaintiff argues opposition that the existence of a fiduciary relationship is established by the plain language Pa 9(a) of the Agreement since the payment of monies, statement in If spute involves "the which constitutes an exception to the prior Paragraph 9 (a) which relationship is created hereby". 11 provides that "no fiduciary [* 13] Defendants alternatively argue that the sixth cause of action must be dismissed as duplicative of plaintiff's claim for breach of contract. It is well settled that "[a] cause of action r breach of fiduciary duty which is merely duplicative of a breach of contract claim cannot stand (c ation omitted)." ~villiam Kaufman Org. v Graham & James, 269 AD2d 171, 173 (1st Dep't 2000). Here, plainti 's c im for breach of fiduciary duty seeks the identical relief sought in Therefore, that portion intiff's breach of contract of defendants' motion ims. seeking to dismiss the sixth cause of action is granted. ghth cause of action Finally, de ndants argue that the eighth cause of action for unjust enrichment must be dismissed on the ground that said claim is barred by the existence of a valid contract. Plaintiff argues that this portion of the motion must be denied as premature since plaintiff is permitted to plead such a claim in the alternat 12 [* 14] However, defendants have not disputed the existence or validity of the Agreement. Accordingly, that portion of defendants' motion seeking to dismiss the eighth cause of action is granted. Defendants shall serve an Answer to the third, fourth, fifth and seventh causes of action within 30 days. A conference shall be held in IA Part 39, 60 Centre Room 208 on September 15, at 2010 10: 00 a. rn. to schedule al 1 outstanding discovery. This constitutes the decision and order of this Court. Dated: July 'l , BA~NICK 2010 J.S.C. 13 reet,
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