FS Media Holding Co. (Jersey) Limited v. Harrison et al

Filing 15

OPINION AND ORDER re: #103732 #9 MOTION to Dismiss filed by Lionel Harrison, Artists Rights Enforcment Corp., Charles Rubin. For the foregoing reasons, Defendants' motion to dismiss is denied. The Clerk of Court is directed to close this motion (Docket No.9). A conference is scheduled for November 1, 2013 at 4:30 p.m. (Signed by Judge Shira A. Scheindlin on 10/24/2013) (rsh) Modified on 11/7/2013 (ca).

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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FS MEDIA HOLDING CO. (JERSEY)
LIMITED,
Plaintiff,
OPINION AND ORDER
- against­
13 Civ. 3144 (SAS)
LIONEL HARRISON, ARTISTS RIGHTS
ENFORCEMENT CORPORATION, and
CHARLES RUBIN,
Defendants.

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SHIRA A. SCHEINDLIN, U.S.D.J.:
I.

INTRODUCTION

PlaintitIFS Media Holding Co. (Jersey) Limited ("FSMH") brings
this diversity action against defendants, alleging (1) breach of contract against
Lionel Harrison, individually and as personal representative of the Estate of
Wilbert Harrison ("Harrison"), (2) tortious interference with contract against
Artists Rights Enforcement Corporation ("AREC") and Charles Rubin, (3)
conversion against Harrison, AREC, and Rubin, and (4) money had and received
against AREC and Rubin. l Defendants now move to dismiss Count Two (tortious
interference against AREC and Rubin), a portion of Count Three (conversion

See Amended Complaint and Jury Demand ("Am. Compl.").

1

against Harrison and Rubin), and a portion of Count Four (money had and received
against Rubin) on various grounds.2 For the following reasons, Defendants’
motion is denied.
II.

BACKGROUND 3
A.

The Parties
FSMH, a Jersey corporation with its principal place of business in

Jersey, acquired all of First State Media Group (Ireland) Limited (“FSMG”)’s
“right, title, and interest in and to FSMG’s assets, including the assets acquired
from Harrison under the Royalty Agreement” in September 2008.4 For purposes of
this motion, FSMH also refers to FSMG prior to this transfer of assets.
Wilbert Harrison, who died in 1994, wrote and composed a musical
composition, “Let’s Stick Together” a/k/a “Let’s Work Together” (the
“Composition”).5 Lionel Harrison, his son and sole heir, is entitled to receive all of

2

See Defendant’s Memorandum of Law in Support of Their Motion to
Dismiss, in Part, Plaintiff’s First Amended Complaint; Defendant’s Reply
Memorandum of Law in Further Support of Their Motion to Dismiss, in Part,
Plaintiff’s First Amended Complaint.
3

Unless otherwise noted all facts are drawn from the Amended

Complaint.
4

Am. Compl. at 3–4.

5

See id. at 4.
2

his father’s interest in the “royalties attributable to Wilbert Harrison’s authorship
interest” in the Composition (the “Royalties”).6 Lionel Harrison currently resides
in Florida.
AREC, a New York corporation with its principal place of business in
New York, entered into an agreement with Harrison on May 14, 1997, where
AREC agreed to collect royalties owed to Harrison in association with the
Composition (“AREC Agreement”).7 Rubin, a resident of New York, is the
founder and acting president of AREC.8
B.

The Royalty Agreement
Through the Royalty Asset Purchase and Sale Agreement executed on

November 15, 2007 (the “Royalty Agreement”), Harrison granted FSMH exclusive
rights to all Royalties in the Composition.9 Specifically, through the Royalty
Agreement, Harrison “sells, conveys, assigns, transfers and sets” all of his “right,
title, interest, benefits and entitlements” in all “fees, royalties, revenues . . . derived
directly or indirectly from Harrison’s authorship interest in the Composition . . .

6

Royalty Asset Purchase and Sale Agreement (“Royalty Agreement”),
Ex. A to Am. Compl., at § 1(c)(i). See also Am. Compl. at 4.
7

See Royalty Agreement at § 1(a); Am. Compl. at 4–5.

8

See Am. Compl. at 4.

9

See Royalty Agreement at § 1(c)(i).
3

regardless of whether paid by EMI, BMI or any other person or party.”10 The
Royalty Agreement granted FSMH the “sole, exclusive and perpetual right
throughout the world and universe to collect, receive and retain such Royalties.”11
Upon closing, Harrison delivered an “executed copy of the relinquishment and
waiver of AREC’s rights” (“Waiver and Relinquishment of Rights”), releasing
AREC and Harrison from the AREC Agreement.12 In return, FSMH paid Harrison
a total of $1,825,000, with the first payment due at closing, and the second and
final payment due on June 1, 2008.13
FSMH alleges that in contravention of the Royalty Agreement, it has
only received a single royalty payment even though it timely paid Harrison the full
$1,825,000 purchase price.14 According to FSMH, Rubin sent FSMH the bi-annual
royalty payment from EMI Music Publishing, Inc. (“EMI”) on March 19, 2008, for
the period ending December 31, 2007.15 FSMH alleges that this was the only
payment that Defendants were obliged to send in order to receive the second
10

Id. §§ 1(c)(i), 1(u), 2(a).

11

Id. § 1(c)(i).

12

Id. § 4(b)(iv). See also Am. Compl. at 6.

13

See id. § 3(a)–(b).

14

See Am. Compl. at 6.

15

See id. at 6–7.
4

installment of the purchase price.16
After FSMH paid its second and last installment of the purchase price
on June 1, 2008, EMI continued to send royalty payments to AREC, who cashed
the checks and transferred the funds to Harrison in accordance with the
arrangement specified in the AREC Agreement.17 From June 30, 2008 through
December 31, 2012, EMI paid a total of $347,755.40 in royalties due on the
Composition to AREC, yet those payments were never sent to FSMH.18
C.

FSMH’s Actions for Breach of Contract, Tortious
Interference, Conversion, and Money Had and Received
FSMH’s tortious interference with contract claim alleges that

AREC and Rubin “intentionally and improperly procured” Harrison’s breach
of the Royalty Agreement by retaining and transferring to Harrison royalty
payments rightfully belonging to FSMH under the Royalty Agreement.19
FSMH alleges that Harrison and AREC executed the Waiver and
Relinquishment of Rights, whereby AREC surrendered rights to all royalties

16

See id.

17

See id. at 8.

18

See id. at 7–10.

19

Plaintiff’s Reply to Defendant’s Memorandum of Law in Support of
Their Motion to Dismiss, in Part, Plaintiff’s First Amended Complaint (“Opp.
Mem.”), at 8.
5

associated with the Composition, and that AREC and Rubin acted in bad
faith by keeping these payments and inducing Harrison’s alleged breach of
the Royalty Agreement.20 In fact, FSMH avers that despite Harrison owing
all future royalty payments to FSMH pursuant to the Royalty Agreement,
Harrison continued to employ the payment structure set out in the AREC
Agreement, by which AREC collects royalty payments and distributes fifty
percent of their value to Harrison, retaining the remainder for its services.21
FSMH claims that under the Royalty Agreement and the
Waiver and Relinquishment of Rights, AREC, Rubin, and Harrison have
wrongfully taken control of the royalty payments, which rightfully belongs
to FSMH.22
Finally, FSMH claims that AREC and Rubin cashed the royalty
checks rightfully belonging to FSMH, and that under equitable principles,
whatever amount that they had personally obtained from those checks
belongs to FSMH.23

20

See id. at 9; Am. Compl. at 12.

21

See Am. Compl. at 5, 12.

22

See id. at 12–13.

23

See id. at 13–14.
6

III.

APPLICABLE LAW
A.

Motion to Dismiss
In deciding a motion to dismiss pursuant to Rule 12(b)(6), the court

must “accept[ ] all factual allegations in the complaint as true, and draw[ ] all
reasonable inferences in the plaintiff’s favor.”24 The court evaluates the
sufficiency of a complaint under the “two-pronged approach” advocated by the
Supreme Court in Ashcroft v. Iqbal.25 First, a court “can choose to begin by
identifying pleadings that, because they are no more than conclusions, are not
entitled to the assumption of truth.”26 “Threadbare recitals of the elements of a
cause of action, supported by mere conclusory statements” do not suffice to
withstand a motion to dismiss.27 Second, “[w]hen there are well-pleaded factual
allegations, a court should assume their veracity and then determine whether they
plausibly give rise to an entitlement for relief.”28
To survive a Rule 12(b)(6) motion to dismiss, the allegations in a

24

Wilson v. Merrill Lynch & Co., 671 F.3d 120, 128 (2d Cir. 2011)
(quotation marks and citation omitted).
25

556 U.S. 662, 679 (2009).

26

Id.

27

Id. at 663.

28

Id. at 664.
7

complaint must meet a standard of “plausibility.”29 A claim is facially plausible
“when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.”30
Plausibility “is not akin to a probability requirement;” rather, plausibility requires
“more than a sheer possibility that a defendant has acted unlawfully.”31 For the
purposes of a 12(b)(6) motion, “a district court may consider the facts alleged in
the complaint, documents attached to the complaint as exhibits, and documents
incorporated by reference in the complaint.”32
B.

New York Law Governs the Tortious Interference, Conversion,
and Money Had and Received Claims
The Royalty Agreement contains a New York choice of law and

choice of forum provision:
This Agreement shall be deemed to be made in the State of New
York and its validity, construction and effect shall be governed by
the laws of the State of New York applicable to agreements
wholly performed therein. All disputes under this agreement shall
be submitted exclusively to the state or Federal courts located in
New York County in the State of New York, each party hereby

29

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 564 (2007).

30

Iqbal, 556 U.S. at 678 (quotation marks and citation omitted).

31

Id. (quotation marks and citation omitted).

32

DiFolco v. MSNBC Cable LLC, 622 F.3d 104, 111 (2d Cir. 2010)
(citing Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002)).
8

agreeing to submit to the jurisdiction of said courts.33
A federal court sitting in diversity applies the choice of law rules of the state in
which it sits.34 Under New York Law, “[a]bsent fraud or a violation of public
policy, a court is to apply the law selected in the contract as long as the state
selected has sufficient contacts with the transaction.”35 Neither party disputes
the applicability of the Royalty Agreement’s choice of law provision, which
designates New York law as controlling.36 Accordingly, FSMH’s claims are
governed by New York law.
C.

Governing Law
1.

Tortious Interference with Contract

“Under New York law, the elements of tortious [intentional]
interference with contract are (1) ‘the existence of a valid contract between
the plaintiff and a third party’; (2) the ‘defendant’s knowledge of the
contract’; (3) the ‘defendant’s intentional procurement of the third-party’s

33

Royalty Agreement at § 19(i).

34

See Schwartz v. Liberty Mut. Ins. Co., 539 F.3d 135, 147 (2d Cir.
2008) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496–97 (1941)).
35

Fieger v. Pitney Bowes Credit Corp., 251 F.3d 386, 393 (2d Cir.

2001).
36

See Royalty Agreement at § 19(i).
9

breach of the contract without justification’; (4) ‘actual breach of the
contract’; and (5) ‘damages resulting therefrom.’”37
2.

Conversion

To state a claim for conversion under New York law, a plaintiff
must allege facts sufficient to establish that the defendant acted without
authorization, the defendant exercised dominion or right of ownership over
property belonging to the plaintiff, the plaintiff has made a demand for the
property, and that demand has been refused.38 However, “[d]emand is not
always required in order to make out a claim for conversion. It is required
only when the original possession is lawful.”39 “[W]here the defendant
holds the property unlawfully . . . ‘no demand and refusal are necessary to

37

Kirch v. Liberty Media Corp., 449 F.3d 388, 401–02 (2d Cir. 2006)
(quoting Lama Holding Co. v. Smith Barney Inc., 88 N.Y.2d 413, 424 (1996)).
Accord Catskill Dev., L.L.C. v. Park Place Entm’t Corp., 547 F.3d 115, 124–25
(2d Cir. 2008).
38

See Seanto Exports v. United Arab Agencies, 137 F. Supp. 2d 445,
451 (S.D.N.Y. 2001).
39

Reserve Solutions, Inc. v. Vernaglia, 438 F. Supp. 2d 280, 288
(S.D.N.Y. 2006) (holding that when the original possession is lawful, “the demand
serves to put the party in possession on notice that she holds the property
wrongfully and the possession becomes an unlawful conversion once that party
refuses the rightful owner’s demand for the property”).
10

render the defendant liable.’”40 “Unlawfulness,” furthermore, does not
require theft.41 “Rather, ‘[i]t is sufficient if there be interference with the
owner’s dominion over his property to the exclusion of his rights.’”42
Plaintiff must also “demonstrate legal ownership or an immediate superior
right of possession to a specific identifiable thing.”43
“Money can be the subject of a conversion action ‘where there
is a specific identifiable fund, and an obligation to return or otherwise treat
in a particular manner the specific fund in question.’”44 However, an action
for conversion of money may not lie “‘where damages are merely being
sought for breach of contract.’”45 “[P]laintiff must allege acts that are
40

Leveraged Leasing Admin. Corp. v. PacifiCorp Capital, Inc., 87 F.3d
44, 49 (2d Cir. 1996) (quoting Nat Koslow, Inc. v. Bletterman, 23 Misc. 2d 340,
343 (Sup. Ct. N.Y. Co. 1960)). Accord Frink Am., Inc. v. Champion Rd.
Machinery Ltd., 43 Fed. App’x 456, 458–59 (2d Cir. 2002).
41

Id. at 50.

42

Id. (quoting Mendelson v. Boettger, 257 A.D. 167, 169–70 (2d Dep’t

1939)).
43

Gateway Overseas, Inc. v. Nishat Ltd., No. 05 Civ. 4260, 2006 WL
2015188, at *7 (S.D.N.Y. July 13, 2006) (quotation marks and citation omitted).
44

Id. (quoting Manufacturers Hanover Trust Co. v. Chemical Bank, 160
A.D.2d 113, 124 (1st Dep’t. 1990)).
45

Moses v. Martin, 360 F. Supp. 2d 533, 541 (S.D.N.Y. 2004) (quoting
Peters Griffin Woodward, Inc. v. WCSC, Inc., 88 A.D. 2d 883, 884 (1st Dep’t.
1982)).
11

unlawful or wrongful as distinguished from acts that are a mere violation of
contractual rights.”46 A conversion claim may only succeed if the party
alleges a wrong that is distinct from any contractual obligations.47
Conversion claims are governed by a three-year statute of limitations.48
3.

Money Had and Received

Under New York law, “an action for money had and received
lies when ‘(1) defendant received money belonging to plaintiff; (2)
defendant benefitted from the receipt of money; and (3) under principles of
equity and good conscience, defendant should not be permitted to keep the
money.’”49 Such an action is “precluded where there is an express contract
between the parties addressing the same subject matter.”50 Traditionally, a
46

Global View Ltd. Venture Capital v. Great Cent. Basin Exploration,
L.L.C., 288 F. Supp. 2d 473, 479 (S.D.N.Y. 2003) (citation omitted). Accord
Calcutti v. SBU, Inc., 223 F. Supp. 2d 517, 523 (S.D.N.Y. 2002).
47

See Briarpatch Ltd. v. Geisler Roberdeau, Inc., 148 F. Supp. 2d 321,
328 (S.D.N.Y. 2001).
48

See Civil Practice Law and Rules § 214(3).

49

Panix Promotions, Ltd. v. Lewis, No. 01 Civ. 2709, 2002 WL 122302,
at *2 (S.D.N.Y. Jan. 22, 2002) (quoting Aaron Ferer & Sons Ltd. v. Chase
Manhattan Bank, Nat. Ass’n, 731 F.2d 112, 125 (2d Cir. 1984)). Accord Miller v.
Schloss, 218 N.Y. 400, 407 (1916).
50

Kalimantano GmbH v. Motion in Time, Inc., No. 12 Civ. 6969, 2013
WL 1499408, at *17 (S.D.N.Y. Apr. 12, 2013) (citing Parsa v. State, 64 N.Y.2d
143, 148 (1984)).
12

money had and received claim is available “if one man has obtained money
from another, through the medium of oppression, imposition, extortion, or
deceit, or by the commission of a trespass.”51
IV.

DISCUSSION
A.

Tortious Interference with Contract
FSMH has pled all of the elements for a tortious interference with

contract claim against AREC and Rubin. For the purposes of this motion, it is
undisputed that a valid contract existed between Harrison and FSMH, and that
AREC and Rubin had knowledge of it. It is also undisputed that Harrison breached
the contract by failing to send FSMH his royalty payments and that damages
resulted from the breach. Neither AREC nor Rubin is a party to that contract.
Thus, the only element in dispute is the third element — the intentional
procurement by either AREC or Rubin of Harrison’s breach of the Royalty
Agreement without justification. To plead a tortious interference claim, FSMH
must allege facts that make it plausible that AREC and Rubin intentionally and
improperly induced Harrison to breach the Royalty Agreement. The Second
Circuit has noted with regard to the third element, that “a plaintiff may recover if
she can demonstrate that the ‘defendant’s deliberate indifference result[ed] in a

51

Miller, 218 N.Y. at 408.
13

breach of [the] contract.’”52
FSMH alleges that AREC and Rubin understood that EMI’s royalty
payments from December 2007 onwards belonged to FSMH, less any previously
agreed upon administrative fee.53 Thus, AREC’s decision to cash the subsequent
royalty checks despite knowing their true owner and to pay Harrison in accordance
with the terms of the AREC Agreement, gives rise to a plausible inference that
AREC induced Harrison to breach the Royalty Agreement in order to continue
receiving royalty payments.54
FSMH also alleges that Rubin tortiously interfered with FSMH’s
Royalty Agreement. As an initial matter, Rubin signed the AREC agreement and
the Waiver and Relinquishment of Rights in his capacity as the acting President of
AREC.55 After Rubin executed the Waiver and Relinquishment of Rights, he knew
that EMI was not forwarding the royalty payments to FSMH and was, in fact, still
sending them to AREC.56 Moreover, FSMH explicitly alleges that Rubin acted in
52

Valley Lane Indus. Co. v. Victoria’s Secret Direct Brand Mgmt.,
L.L.C., 455 Fed. App’x 102, 105–06 (2d Cir. 2012) (quoting Carvel Corp. v.
Noonan, 3 N.Y.3d 182, 190 (2004)).
53

See Am. Compl. at 7.

54

See id. at 9.

55

See id. at 5–6.

56

See id. at 6–7.
14

bad faith and retained the royalty payments for his “personal pecuniary gain,”
supporting an inference that Rubin had incentives to procure Harrison’s breach of
the Royalty Agreement and did in fact do so.57 These claims are sufficient to
establish a plausible tortious interference claim against Rubin.
B.

Conversion
FSMH argues that Rubin and Harrison’s respective retention of the

royalties for the periods at issue constitutes conversion. As an initial matter,
FSMH has adequately pled that Rubin and Harrison knew that they wrongfully
possessed the royalty payments, and thus a showing of demand and refusal is
unnecessary.58 FSMH has met the remaining elements for a conversion claim
against Rubin. FSMH alleges that AREC cashed the royalty checks and “retained
the money in accordance with the arrangement detailed in the [AREC]
Agreement,” even though the money rightfully belonged to FSMH.59 FSMH
further argues that the express terms of the AREC Agreement authorized both
AREC and Rubin to retain fifty percent of all royalty payments collected.60 Thus,

57

Opp. Mem. at 9.

58

See Am. Compl. at 5–10. See also Frink Am., Inc., 43 Fed. App’x at

458–59.
59

Am. Compl. at 7; see also Opp. Mem. at 3.

60

See Opp. Mem. at 11.
15

FSMH properly states a claim for conversion against Rubin.
In order for FSMH to maintain a conversion action against Harrison, it
must not be duplicative of FSMH’s breach of contract claim. Because damages
beyond those available for the breach of contract claim are available, the
conversion claim against Harrison is not duplicative.61 The money at issue here is
specifically identifiable as royalty payments for the period from 2008 to the
present.62 Under the Royalty Agreement, Harrison was obliged to transfer the
royalty payments to FSMH yet he failed to do so, thus interfering with FSMH’s
superior possessory right.63 Punitive damages are available in conversion claims
but not in breach of contract claims.64 FSMH alleges that Harrison continued to

61

See Ad Rendon Commc’ns, Inc. v. Lumina Americas, Inc., No. 04 Civ.
8832, 2007 WL 2962591, at *4–5 (S.D.N.Y. Oct. 10, 2007). (“[E]ven if a plaintiff
meets all of the elements of a conversion claim, the claim will still be dismissed if
it is duplicative of a breach of contract claim . . . . [S]imilarly, a conversion claim
will ‘be deemed redundant when damages are merely being sought for breach of
contract.’”) (quoting Rolls-Royce Motor Cars, Inc. v. Schudroff, 929 F. Supp. 117,
124 (S.D.N.Y. 1996)).
62

See Am. Compl. at 7.

63

See Royalty Agreement at § 6(a) (“Seller shall, and Seller shall cause
each Seller Related Party to, upon receipt, turn over to Buyer (and in no event later
than fifteen (15) business days of receipt), any and all Royalties received by Seller
or any Seller Related Party regardless of when earned . . . without offset or
deduction of any kind or for any reason.”).
64

See Fraser v. Doubleday & Co., 587 F. Supp. 1284, 1288 (S.D.N.Y.

1984).
16

retain royalty payments collected from EMI without authorization and in willful
defiance of FSMH’s superior right of ownership for several years.65 Such
allegations are sufficient to establish a plausible inference that Harrison
maliciously or recklessly disregarded FSMH’s superior possessory rights, as
required in order to warrant punitive damages.66 Accordingly, the motion to
dismiss the conversion claim against Harrison is denied.
C.

Money Had and Received
FSMH has properly pled a claim for money had and received against

Rubin because FSMH has no contractual relationship with Rubin. FSMH alleges
that Rubin wrongfully withheld money to which FSMH is rightfully entitled under
the Royalty Agreement. Because FSMH has sufficiently alleged that Rubin
personally received some of that money and should not be permitted to keep it,
FSMH has stated a claim for money had and received.

65

See Am. Compl. at 13.

66

See Pure Power Boot Camp, Inc. v. Warrior Fitness Boot Camp,
L.L.C., 813 F. Supp. 2d 489, 526 (S.D.N.Y. 2011) (“‘To sustain a claim for
punitive damages in tort, one of the following must be shown: intentional or
deliberate wrongdoing, aggravating or outrageous circumstances, a fraudulent or
evil motive, or a conscious act that willfully and wantonly disregards the rights of
another.’”) (quoting Don Buchwald & Assocs., Inc. v. Rich, 281 A.D. 2d 329, 330
(1st Dep’t. 2001)); Fraser, 587 F. Supp. at 1288 (“[D]efendant’s alleged
conversion was accomplished with malice or reckless disregard of plaintiffs’ rights
as [is] required to justify punitive damages.”).
17

V.

CONCLUSION

For the foregoing reasons, Defendants' motion to dismiss is denied.
The Clerk of Court is directed to close this motion (Docket No.9). A conference is
scheduled for November 1,2013 at 4:30 p.m.

SO ORDERED:

Dated:

New York, New York
October 24, 2013

18

- Appearances For Plaintiff:
Daniel N. Guisbond, Esq.
Michael S. Elkin, Esq.
Thomas Patrick Lane, Esq.
WINSTON & STRAWN LLP
200 Park Avenue
New York, NY 10166
[phone]

For Defendants:
Oren J. Warshavsky, Esq.
Maryanne Stanganelli, Esq.
BAKER & HOSTETLER LLP
45 Rockefeller Plaza
New York City, NY 10111
[phone]

19