Reach Music Publishing, Inc et al v. Warner/Chappell Music, Inc. et al

Filing 60

MEMORANDUM OPINION AND ORDER re: 46 MOTION for Leave to File First Amended Complaint filed by David Reeves, Reach Music Publishing, Inc. For the foregoing reasons, Plaintiffs' Motion to Amend their Complaint is denied as untimely and futile. T his Order resolves docket entry no. 46. In light of Plaintiffs' concessions in their motion to amend their Complaint that their copyrights causes of action are not viable, Plaintiffs are directed to show cause, by written submission filed by August 10, 2010 (with a courtesy copy to Chambers), why their Complaint should not be dismissed in its entirety, with prejudice. SO ORDERED. (Signed by Judge Laura Taylor Swain on 8/3/2010) (jmi)

R e a c h Music Publishing, Inc et al v. Warner/Chappell Music, Inc. et al

D o c . 60

UNITED STATES DISTRICT COURT S O U T H E R N DISTRICT OF NEW YORK - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x R E A C H MUSIC PUBLISHING, INC. and D A V ID REEVES, P la in t iffs , -vW A R N E R /C H A P P E L L MUSIC, INC. and PROTOONS, INC., D e fe n d a n t s . - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x P R O T O O N S , INC., N o . 09 Civ. 5580 (LTS)

C o u n terc laim Plaintiff, - vR E A C H MUSIC PUBLISHING, INC. and DAVID REEVES, C ou nterclaim Defendants, - and R E A C H GLOBAL, INC. and MICHAEL CLOSTER, A d d itio n al Counterclaim Defendants. - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x M EM ORANDUM OPINION AND ORDER In this action arising out of disputes concerning the ownership of nine musical co m p o sitio n s originally performed by the musical group known professionally as Run DMC (the " C o m p o sitio n s"), David Reeves ("Reeves") and Reach Music Publishing, Inc. ("Reach Music" and,

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co llectiv ely, "Plaintiffs") assert claims under the Copyright Act of 1976, 17 U.S.C. § 201 (the " C o p yrigh t Act") and state law, against Warner/Chappell Music, Inc. ("W/C Music") and Protoons In c . ("Protoons" and, collectively, "Defendants") seeking a declaratory judgment that Plaintiffs are co -o w n er s of the works and damages for Defendants' alleged breach of their duty to account to P lain tiffs for their respective shares of profits earned from exploitation of the Compositions.1 The C o u rt has jurisdiction of the action pursuant to 28 U.S.C. §§ 1331 and 1367. P laintiffs have moved to amend the Complaint based on "Songwriter Agreements" p ro d u ced in discovery that, according to Plaintiffs, demonstrate that Plaintiffs do not in fact have co p yrigh t interests in the Compositions (contrary to their allegations in the Complaint) but do provide tha t Plaintiffs are entitled to royalties. Plaintiffs' Proposed Amended Complaint ("PAC") would differ from the Complaint in four respects: the claims originally asserted under the Copyright Act w o u ld be withdrawn; W/C Music, whose potential liability rested entirely on Plaintiffs' copyright th eo ry, would no longer be named as a defendant; and two claims against Protoons, premised upon the Songwriter Agreements, would be added. The Court has considered carefully the parties' su b m issio n s. For the reasons that follow, Plaintiffs' Motion to Amend the Complaint is denied. B A C K G R O U ND F am iliarity with the proceedings and submissions to date is assumed. Facts alleged in th e Proposed Amended Complaint are taken as true for the purposes of the Court's analysis of w hether Plaintiffs' amendment would be futile. D u r in g the 1980s, Reeves co-authored certain musical compositions that were originally recorded by the musical group popularly known as Run DMC. In 1988 and 1989, Reeves

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The Court previously dismissed Plaintiffs' claim seeking a declaratory judgment that D efen d an ts are time-barred under the Copyright Act from challenging Reeves' coa u th o r s h ip of the Compositions. (Docket entry no. 19.)
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p er so n ally executed a series of six agreements (the "Songwriter Agreements") assigning his c o p yr ig h t interests in the Compositions to non-party Rush Groove Music ("Rush Groove"), P r o to o n s' predecessor-in-interest, in exchange for periodic payments to Reeves of a share of the inco m e generated from the exploitation of the Compositions. (PAC Ex. 2.) The Songwriter A greem en ts expressly contemplate the future transfer of Rush Groove's interest in the Compositions to Protoons, providing that, if Rush Groove assigns the contracts to Protoons, Rush Groove shall not " b e deemed to have delegated to Protoons . . . [nor shall Protoons] be deemed to have assumed, any of [Rush Groove's] warranties, representations, authorizations, duties, obligations, promises, agreem en ts or liabilities hereunder." (PAC Ex 2, at ¶ 9.) The Songwriter Agreements also include R e ev es' express covenant not to sue Protoons regarding the copyrights or other rights in the C o m p o sitio n s, and Reeves' release of Protoons "from all actions, suits, debts . . . claims and demands w h atso ev er . . . from the beginning of the world and continuing in perpetuity relating to the co p yrigh ts and all other rights in and to the Composition[s]." (PAC Ex 2, at ¶ 14.) Rush Groove m ade periodic accountings to Reeves pursuant to the Songwriter Agreements in 1988 and 1989. Sometime thereafter, Protoons acquired Rush Groove's ownership interest in the Compositions. On or about July 19, 2007, Reeves assigned to Reach Global, Inc. ("Reach Global"), R e ach Music's predecessor-in-interest, a 50% co-publishing and co-ownership interest and a 100% ad m in istrativ e interest in his rights in the Compositions. Reeves and Reach Global filed an action against Defendants in this Court on September 3, 2008. On September 17, 2008, the Court issued an o rd er requiring Reeves and Reach Global to demonstrate the basis for subject matter jurisdiction, after which they voluntarily withdrew their complaint. On October 3, 2008, Reeves and Reach G lo b al filed a complaint in New York State Supreme Court. That action was dismissed on April 21, 20 09 , for lack of subject matter jurisdiction. On June 12, 2009, Reach Global assigned its interest to

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R e ach Music, a plaintiff in this action. Plaintiffs filed the instant complaint in this Court on June 17, 20 09 . In each of the prior actions, as in the current Complaint in this one, Plaintiffs have asserted that they have copyright interests in the Compositions. On December 10, 2009, the Court issued its Pre-Trial Scheduling Order in this case (th e "Scheduling Order"), requiring that all applications to amend pleadings be made by January 29, 2 0 1 0, and specifying that deadlines set forth in the Scheduling Order would not be adjourned except in the Court's discretion upon good cause. (Scheduling Order ¶¶ 1, 10.) Plaintiffs received the S o n gw riter Agreements, on which their proposed amendments are based, through discovery on or abo ut January 22, 2010. (Pls.' Br. 5.) On May 7, 2010, over three months after both the deadline set fo rth in the Scheduling Order and the production of the Songwriter Agreements, Plaintiffs filed the in stan t motion to amend the Complaint. Defendant Protoons timely filed its opposition submission and Plaintiffs submitted their untimely reply submission on June 18, 2010, which the Court accepted. In their reply submission, Plaintiffs proffer excerpts from an October 17, 1998, agr eem en t between Rush Groove, Protoons, and others, that appears to transfer from Rush Groove to P r o to o n s the interests in the Compositions2 and also appears to assign to Protoons Rush Groove's o b ligatio n s to make certain royalty payments for exploitation of the Compositions. (Ross Reply D e cl. Ex. 1.) DISCUSSION F ed er al Rule of Civil Procedure 16 provides that a "schedule may be modified only for good cause and with the judge's consent." Fed. R. Civ. P. 16(b)(4). "[A] district court [may] . . . d en y[] leave to amend the pleadings after the deadline set in the scheduling order where the moving p arty has failed to establish good cause. Moreover . . . a finding of `good cause' depends on the

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Plaintiffs have only submitted three of the eight pages of the agreement.
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d ilig en c e of the moving party." Parker v. Columbia Pictures Indus., 204 F.3d 326, 340 (2d Cir. 20 00 ). It is undisputed that Plaintiffs' Motion to Amend their Complaint is untimely under th e Scheduling Order. Plaintiffs attribute the three-month time lag between their receipt of the S o n gw riter Agreements and the filing of their motion to amend to their preoccupation with the b riefing of their motion to dismiss Protoons' counterclaim. However, the latter motion was fully b riefed by March 8, 2010, two months before the present motion was filed. (Docket entry nos. 30, 3 1 , 36, 37, 39 and 40). Moreover, Reeves personally executed the Songwriter Agreements, and P laintiffs have provided no explanation as to why Plaintiffs were not aware of those contracts prior to th eir production in discovery. Plaintiffs have failed to demonstrate that they have been diligent and th e Court concludes that, under Rule 16, Plaintiffs have not made the requisite showing of good cau se to warrant modification of the Scheduling Order. Plaintiffs' motion to amend is untimely and is properly denied on that basis. C on sideration of Plaintiffs' motion under Federal Rule of Civil Procedure 15, which p ro v id es that leave to amend should be freely given "when justice so requires," Fed. R. Civ. P. 1 5 (a)(2 ), similarly warrants denial of Plaintiffs' motion. It is well-settled that leave to amend a co m p lain t may be denied in the case of undue delay, bad faith, undue prejudice, or futility of the am en d m e n t. Foman v. Davis, 371 U.S. 178, 182 (1962); State Teachers Ret. Bd. v. Fluor Corp., 654 F .2d 843, 856 (2d Cir. 1981). An amendment is futile if it would not be capable of withstanding a m otion to dismiss. See Lucente v. Int'l Bus. Machs. Corp., 310 F.3d 243, 258 (2d Cir. 2002). Defendants argue that Plaintiffs' motion to amend should be denied as futile, as well as untimely. In order to survive a motion to dismiss, a complaint must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570

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(2 0 0 7 ). For the reasons explained below, Plaintiffs' Proposed Amended Complaint does not satisfy th is facial plausibility standard. O n a motion to dismiss, a court may consider "documents attached to the complaint as an exhibit or incorporated in it by reference[.]" Brass v. American Film Technologies, Inc., 987 F.2d 1 4 2 , 150 (2d Cir. 2003). Accordingly, the Court may consider the six Songwriter Agreements attached to the Proposed Amended Complaint in evaluating Defendants' futility arguments. As noted abo ve, Reeves covenanted, in those contracts, not to bring suit against Protoons over copyright issues an d agreed to "release and discharge . . . Protoons . . . from all actions, suits, debts . . . claims and d em an d s whatsoever . . . from the beginning of the world and continuing in perpetuity relating to the co p yrigh ts and all other rights in and to the Composition[s]." (PAC Ex. 2, at ¶ 14.) Moreover, the S o n gw riter Agreements contemplate that Rush Groove may assign the contracts to Protoons and p ro v ide that, should it elect to do so, Rush Groove shall not "be deemed to have delegated to P rotoo ns . . . [nor shall Protoons] be deemed to have assumed, any of [Rush Groove's] warranties, represen tation s, authorizations, duties, obligations, promises, agreements or liabilities hereunder." (PAC Ex 2, at ¶ 9.) The contracts also specifically address the payment of royalties, making clear that Reeves' collection right is against Rush Groove, rather than against Protoons: 1 4 . [Reeves] shall look solely to [Rush Groove] for any and all payments d u e in connection with the use, reproduction and other exploitation of the C o m p o sitio n [s] . . ., even if Profile and or Protoons suspend their obligations to account and/or pay royalties or other sums to [Rush Groove]. Under no circ u m stan ces shall [Reeves] look to Profile or Protoons for any payments in co n n ectio n with the use, reproduction, or other exploitation of the C om po sition [s]. [Reeves] hereby releases and discharges . . . Protoons, Inc., . . . from all actions, suits, debts, . . . sums of money, . . . claims and demands w h atso ev er . . . which against . . . Protoons, Inc., . . . [Reeves] ever had, now h ad , or hereafter can, shall or may, have for upon, or by any reason of any m atter, cause or thing from the beginning of the world and continuing in p erp etu ity relating to the copyrights and all other rights in and to the C om po sition [s]. . . . Without limitation of the foregoing, in the event that . . .

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P rotoo ns elects to suspend its . . . obligations to [Rush Groove], neither P rofile nor Protoons shall have any obligation to [Reeves] and no such su sp en sio n shall affect the validity or enforceability of this agreement. 1 5 . This agreement . . . cannot be terminated or amended except by a w ritin g signed by all of the parties hereto. (P A C Ex 2.) The clear and unambiguous terms of the Songwriter Agreements thus preclude the p ro p o sed royalty claim against Protoons, obligating Plaintiffs to look solely to Rush Groove for any ou tstand ing royalty payments. N o r does Plaintiffs' allegation in the Proposed Amended Complaint that "Protoons has now succeeded to the direct rights and obligations of Rush Groove Music under the Songwriter A greem en ts, making [Reeves' release of Protoons] inapplicable and unenforceable" (PAC ¶ 36) suffice to overcome the anti-suit provisions of the Songwriter Agreements. Plaintiffs' original m o tio n proffered nothing more than this conclusory allegation. In their reply submission, Plaintiffs p ro ffered , in addition, three pages of what appears to be an eight-page October 17, 1998, agreement am o n g Protoons, Rush Groove and certain parties referred to as Artists, under which Rush Groove h as assigned its interests in the Compositions to Protoons and Protoons agreed, inter alia, "to assume A rtist's obligations (as assignee of Rush Groove pursuant to paragraph 6(b) of the Settlement A greem en t) to account and pay royalties to the writings and composers of the Compositions arising from the sales of phonograph records and other uses . . . of the Compositions occurring after D e cem b er 31, 1998, pursuant to the terms set forth in the Songwriter Agreements." (Ross Decl. Ex. 1, ¶¶ 5(b)-(c).) Reeves is not named as a party to this agreement, and Plaintiffs have not proffered the "Settlement Agreement" referred to therein. Plaintiffs nonetheless argue that Protoons' assu m p tio n s of the "Artist's" royalty obligations gives them the right to collect royalties from P r o to o n s and that any other result would render the Songwriter Agreements illusory and void.

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