Artists Rights Enforcement Corp. v. The Estate of Joseph Robinson, Jr. et al
Filing
64
OPINION AND ORDER re: 46 MOTION to Dismiss Counts II and III of the Amended Complaint filed by Sugar Hill Records, Inc., Leland Robinson, Sugarhill Music Publishing Inc., The Estate of Joseph Robinson, Jr. For the reasons state d above, Defendants motion to dismiss is GRANTED in part and DENIED in part. Specifically, the motion is granted with prejudice as to Plaintiff's declaratory judgment claim and denied as to Plaintiff's tortious interference claim. Plaintiff's breach of contract claim is not impacted by this opinion. The Clerk of the Court is respectfully directed to terminate the motion (Doc. 46). (As further set forth in this Order.) (Signed by Judge Edgardo Ramos on 3/29/2018) (cf)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
ARTISTS RIGHTS ENFORCEMENT CORP.,
Plaintiff,
– against –
OPINION AND ORDER
THE ESTATE OF JOSEPH ROBINSON, JR.,
LELAND ROBINSON, SUGARHILL MUSIC
PUBLISHING INC., a/k/a SUGAR HILL MUSIC
PUBLISHING, INC., and SUGAR HILL
RECORDS INC.,
15 Civ. 9878 (ER)
Defendants.
Ramos, D.J.:
Artists Rights Enforcement Corp. (“AREC” or “Plaintiff”) brings this action against the
Estate of Joseph Robinson Jr., Leland Robinson, Sugarhill Music Publishing Inc., a/k/a Sugar
Hill Music Publishing Inc. (“SMP”) and Sugar Hill Records Inc. (together, the “Defendants”).
See Compl. (Doc. 1). On March 8, 2017, the Court partially granted Defendants’ motion to
dismiss and gave AREC leave to file an amended complaint. See Order dated March 8, 2017
(Doc. 33). AREC filed its First Amended Complaint (“FAC”) on March 28, 2017 (Doc. 34).
Before this Court is the Defendants’ motion to dismiss the FAC on the grounds that: (1)
Plaintiff does not have standing to assert its declaratory judgment claim, and (2) Plaintiff did not
adequately state a claim for tortious interference with contract.
For the following reasons, Defendants’ motion is GRANTED in part and DENIED in
part.
I.
Background 1
The Court assumes familiarity with the record and its prior opinion, which details the
facts and procedural history of this case, and discusses here only those facts necessary for its
disposition of the instant motion. See Order dated March 8, 2017 (Doc. 33).
Between July 17, 1980 and January 28, 1981, several songwriters, artists and music
publishers (the “Songwriters”) entered into Exclusive Songwriters Agreements with SMP. FAC
¶ 13. 2 The Exclusive Songwriters Agreements gave SMP control over the Songwriters’ music
catalogues and in return, required it to make royalty payments and provide semi-annual royalty
reports. Id. at ¶¶ 13, 16. However, Defendants have not fulfilled their royalty payment and
notice obligations. Id. at ¶ 17.
Between April 15, 1999 and April 23, 2003, the Songwriters each signed letter
agreements with AREC, retaining AREC to investigate and recover royalties. Id. at ¶ 18; see
also Declaration of James P. Cinque in Support of Defendants’ Motion to Dismiss Counts II and
II (“Cinque Decl.”) (Doc. 47) Ex. B. 3 In exchange, AREC became entitled to 50% of the
royalties owing to the Songwriters. FAC ¶ 19.
Beginning in 1999, AREC has been engaged in litigation with Defendants over
Defendants’ delinquent royalty payments. Id. ¶ 21. Litigation filed in this District in 1999 ended
1
The following facts are drawn from allegations contained in the FAC (Doc. 34), which the Court accepts as true for
purposes of the instant motion. See Koch v. Christie’s Int’l PLC, 699 F.3d 141, 145 (2d Cir. 2012).
2
Those artists were Melvin Glover, Eddie Morris, Nathaniel Glover Jr., Guy Todd Williams, The Estate of Robert
Keith Wiggins, Sharon Green Jackson, Keith Caesar, Kevin Smith, Rodney Stone and Reginald A. Payne (together,
the “Songwriters”).
3
In considering a complaint on a motion to dismiss, a court may also consider any documents incorporated by
reference or any document that is “integral” to the complaint because the complaint “relies heavily upon its terms
and effect.” Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d Cir. 2002) (quoting Int’l Audiotext Network,
Inc. v. Am. Tel. & Tel. Co., 62 F.3d 69, 72 (2d Cir 1995)). Because AREC relies on the letter agreements to support
its claim for standing and as the basis for its tortious interference claim, the Court finds the letter agreements,
attached as Exhibit B to Mr. Cinque’s declaration, integral to the FAC.
2
in a 2002 settlement agreement; however, Defendants refused to execute the agreement. Id. ¶¶
23, 25. In response, presiding Judge Richard Berman entered an order on March 12, 2003
mandating that the Defendants “deal directly and solely with AREC” and requiring the parties to
sign a rider to the 2002 settlement agreement. Id. ¶¶ 25–26 (emphasis added).
Defendants neither executed the rider nor abided by the terms of the 2002 settlement
agreement. Id. ¶ 27. 4 The parties appeared before Judge Berman again on April 15, 2003
regarding conduct taken by Defendants allegedly on behalf of Songwriters Nathaniel Glover Jr.
and Eddie Morris. Id. ¶¶ 28–29. After this conference, Judge Berman entered another order in
which Glover and Morris reaffirmed that AREC was their “irrevocably appointed agent for . . .
the receipt of royalty reports and royalty income.” Id. ¶ 31.
AREC filed a new action in New York state court against Defendants (excluding Leland
Robinson) on May 12, 2003, alleging breach of contract, tortious interference with contract,
tortious interference with prospective economic advantage, and breach of third party beneficiary
contracts. Id. ¶¶ 34–35. On July 14, 2004, the parties met at AREC’s offices and agreed to a
settlement that would extend the deadline for Defendants’ payment and reporting obligations (the
“2004 rider”). Id. ¶ 37. Although Defendants signed the 2004 rider, they did not abide by its
terms. Id. ¶¶ 38–39. The parties thereafter moved to trial in July 2007, but settled once more on
the third day of trial. Id. ¶ 43. Under that settlement (the “2007 settlement agreement”), the
parties reaffirmed the 2002 settlement agreement and the 2004 rider. The 2007 settlement
agreement required Defendants to: (1) make twelve payments to AREC; (2) provide AREC with
copies of all licenses for Songwriters Glover and Morris; and (3) pay AREC directly for any
4
Eventually, Defendants executed the 2002 settlement agreement on June 13, 2003. Id. ¶ 36.
3
royalties owed to AREC’s clients (including a 20% “bonus” if Defendants received a license
request, or a license payment, and did not inform AREC within fifteen days). Id. ¶¶ 43–44.
Responding to what it described as “multiple breaches of the 2002 and 2007 settlement
agreements and 2004 rider,” AREC brought suit on behalf of Songwriters Morris and Glover
against Defendant Joseph Robinson, Jr. on July 25, 2012 in New York state court. Id. ¶ 52.
AREC also sent Defendants notices of default and demand letters on April 1, 2015. Id. ¶ 53.
After receiving what it believed to be unsatisfactory responses, AREC sent Defendants an email
on May 4, 2015, informing Defendants that it was terminating the Exclusive Songwriters
Agreements. Id. ¶ 57.
AREC filed this action on December 18, 2015, alleging breach of contract and seeking a
declaratory judgment that its termination of the Exclusive Songwriters Agreements was valid.
See Compl. (Doc. 1). Subsequently, Defendant Leland Robinson contacted several Songwriters
“to pressure them into terminating their relationship with AREC.” FAC ¶ 65. In June 2016,
Robinson participated in a conference call with Guy Todd Williams, in which Robinson told
Williams that Bravo TV was interested in producing a television show about Robinson and
Williams putting on a reunion tour. Id. ¶ 69. On June 28, 2016, Robinson called Williams and
told him that he wanted to deal with Williams directly and did not want to pay AREC. Id. In
response to this conduct, the Court held a conference on August 17, 2016 and entered a
stipulation and order on August 22, 2016, stating that:
For the duration of this action, Robinson on the one hand and each
of any one or more of [the Songwriters] on the other hand . . . shall
not contact or cause anyone else to contact the other either in person,
telephonically or electronically without counsel for Plaintiff . . . and
counsel for Defendants.
4
See id. ¶ 72; Doc. 29. Despite this Order, in March 2017, Defendant Robinson contacted
Songwriters Williams and Payne. FAC ¶ 73. Robinson offered Williams $15,000 to settle his
claims, and on March 24, 2017, Williams advised AREC that he would accept the settlement
offer. Id. ¶¶ 74–75.
Separately, on April 29, 2016, Defendants filed their first motion to dismiss. See Doc.
18. Defendants asserted that Plaintiff did not have standing to bring its declaratory judgment
claim, that Plaintiff improperly split the action, and that Sugar Hill Music Publishing Ltd. was a
required party to the litigation whose joinder would destroy diversity. Id. On March 8, 2017, the
Court granted the motion to dismiss as to Plaintiff’s declaratory judgment claim, and denied the
motion in all other respects. See Doc. 33. AREC subsequently filed the FAC, adding a cause of
action against Robinson, alleging that his contact with Williams constituted tortious interference.
See Doc. 34. On May 5, 2017, Defendants moved to dismiss the declaratory judgment claim for
lack of standing and the tortious interference cause of action for failure to state a claim. See Doc.
46.
II.
Legal Standards
A.
Rule 12(b)(1)
Federal Rule of Civil Procedure Rule 12(b)(1) is the proper procedural vehicle for a
motion to dismiss for lack of Article III standing rather than Rule 12(b)(6) because it concerns
“the authority of a federal court to exercise jurisdiction.” All for Envtl. Renewal, Inc. v. Pyramid
Crossgates Co., 436 F.3d 82, 88 n.6 (2d Cir. 2006).
“Dismissal for lack of subject matter jurisdiction is proper when the district court lacks
the statutory or constitutional power to adjudicate a case.” Sokolowski v. Metro. Transp. Auth.,
723 F.3d 187, 190 (2d Cir. 2013) (internal citations and quotation marks omitted). In resolving a
5
12(b)(1) motion, a court may refer to evidence outside the pleadings. Zappia Middle East
Constr. Co. v. Emirate of Abu Dhabi, 215 F.3d 247, 253 (2d Cir. 2000).
B.
Rule 12(b)(6)
Under Rule 12(b)(6), a complaint may be dismissed for “failure to state a claim upon
which relief can be granted.” Fed. R. Civ. P. 12(b)(6). When ruling on 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. Koch, 699 F.3d at 145. However, the
Court is not required to credit “mere conclusory statements” or “threadbare recitals of the
elements of a cause of action.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555 (2007)).
“To survive a motion to dismiss, a complaint must contain sufficient factual matter . . . to
‘state a claim to relief that is plausible on its face.’” Iqbal, 556 U.S. at 678 (quoting Twombly,
550 U.S. at 570). 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.” Id. (citing Twombly, 550 U.S. at 556). If the plaintiff has not “nudged [her] claims
across the line from conceivable to plausible, [the] complaint must be dismissed.” Twombly, 550
U.S. at 570.
III.
Discussion
A.
Article III Standing
In its March 8, 2017 Opinion, the Court determined that AREC could not maintain its
claim for declaratory judgment because:
It is not sufficient [to confer standing] that AREC has a beneficial
interest in the settlement agreements because the Complaint does
not bring an action based on those settlement agreements. For
AREC to show that it has an interest in the Exclusive Songwriters
6
Agreements, it must allege that the Exclusive Songwriters
Agreements provided an independent interest to the Songwriters’
agent, or the letter agreements demonstrate that AREC has an
independent interest in the Exclusive Songwriters Agreements.
AREC does not allege or provide evidence of any of the above.
See Doc. 33 at 12–13. Defendants argue that the agreements between AREC and the
Songwriters “do not convey any beneficial interest in the Exclusive Songwriters Agreements.” 5
Memorandum of Law in Support of Defendants’ Motion to Dismiss Counts II and III of the
Amended Complaint (“Defs.’ Mem.”) (Doc. 48), at 4. Plaintiff argues that while it may not have
standing to seek a declaratory judgment solely on the basis of the Exclusive Songwriters
Agreements, the relevant settlement agreements have made AREC “an intended beneficiary of
those Agreements,” giving it standing to sue. Memorandum of Law in Opposition to
Defendants’ Motion to Dismiss Counts II and III of the Amended Complaint (“Pl.’s Mem.”)
(Doc. 54), at 15.
The FAC relies more heavily than the original complaint on the role of the settlement
agreements in giving AREC an interest in the Exclusive Songwriters Agreements, but in large
part references the settlement agreements in conclusory ways. For example, the FAC now states
that “federal court orders confirmed AREC’s rights and status as the Songwriters’ irrevocable
agent, including the exclusive right to receive notices, statements and royalty payments from
Defendants that are due to the Songwriters . . . under the Exclusive Songwriters Agreements.”
FAC ¶ 20; see also ¶¶ 33, 61. The factual allegations in the FAC are substantially the same as
the allegations in the original complaint. For example, though presented more clearly in the
5
Under the letter agreements, AREC is entitled to “fifty percent of all sums and assets which are recovered as a
proximate result of [AREC’s] activities pursuant to this agreement.” See Cinque Decl. Ex. B (Williams letter
agreement). AREC was also entitled to deduct any costs “off the top” from royalties recovered before dividing
shares. Id. Finally, the Songwriters appointed AREC as attorney-in-fact “only for the purpose of depositing
[royalty and other related] funds into [AREC’s] escrow account,” which would subsequently be paid to the
Songwriters. Id.
7
FAC, both pleadings include allegations that the earlier settlement agreements established that
“Defendants shall deal directly and solely with AREC.” FAC ¶ 26; Compl. ¶ 27.
Nevertheless, AREC points to that same language in the settlement agreements in support
of its renewed arguments for standing. Id. at 15–16 (citing FAC ¶¶ 20, 26, 43). In reply,
Defendants argue that “these allegations at best would support an argument that AREC is entitled
to sue for royalties due to the Songwriters.” Reply Memorandum of Law in Support of
Defendants’ Motion to Dismiss Counts II and III of the Amended Complaint (“Reply Mem.”)
(Doc. 61), at 2.
The Court agrees with Defendants. The earlier settlement agreements convey rights to
AREC with respect to receiving notices, receiving royalty payments, and dealing directly with
the Robinson Defendants. Even assuming AREC is correct that the settlement agreements have
modified the Exclusive Songwriters Agreements to make AREC a third party beneficiary, that
would at most confer upon AREC the right to sue to enforce the Exclusive Songwriters
Agreements only as it pertains to notices and royalty payments. See BNP Paribas Mortgage
Corp. v. Bank of America, N.A., 778 F. Supp. 2d 375, 415 (S.D.N.Y. 2011) (“Status as a thirdparty beneficiary does not imply standing to enforce every promise within a contract, including
those not made for that party’s benefit.”). AREC points to no provision of the Exclusive
Songwriters Agreements, the letter agreements it entered into with the Songwriters, or the
settlement agreements that demonstrates that the Songwriters and Defendants intended to allow
AREC to terminate the Exclusive Songwriters Agreements. 6 Indeed, all of the third-party
beneficiary cases to which AREC cites in its opposition deal with a third-party suing to enforce
6
Even Plaintiff, in the FAC, states that AREC’s independent interest is “in the notices, statements and royalties due
and owing under its clients’ songwriter agreements,” not that AREC has an independent interest in the Exclusive
Songwriters Agreements as a whole. FAC ¶ 2.
8
provisions of a contract; none of them involve a third-party suing to establish termination of that
contract.
AREC also argues that whether or not it is a third-party beneficiary, it has standing to sue
under the Declaratory Judgment Act because in declaratory judgment cases, “the question . . . is
whether the facts alleged . . . show that there is a substantial controversy, between the parties
having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a
declaratory judgment.” Pl.’s Mem. at 17 (quoting MedImmune, Inc. v. Genentech, Inc., 549 U.S.
118, 127 (2007)). But the question before the Court is not whether it may, under the Declaratory
Judgment Act, determine whether the termination of a contract was valid. The question is
whether it is AREC, rather than the Songwriters, who possesses standing to enforce its attempted
termination. Because AREC has not demonstrated an independent interest in the Exclusive
Songwriters Agreements with respect to termination rights, the Court holds that it does not. 7
B.
Tortious Interference with Contract
To plead a tortious interference with contract claim, Plaintiff must allege “the existence
of its valid contract with a third party, defendant’s knowledge of that contract, defendant’s
intentional and improper procuring of a breach, and damages.” See White Plains Coat & Apron
Co., Inc. v. Cintas Corp., 8 N.Y.3d 422, 426 (2007). Defendants argue that AREC’s claim for
tortious interference should be dismissed because they have failed to allege either breach or
damages. Defs.’ Mem. at 11. 8
7
AREC has not requested leave to further amend its cause of action for declaratory judgment in the event that the
Court dismisses it. Here, because the FAC was filed only after a full round of briefing and a decision from the Court
on the question of standing, the Court finds that further amendment would be futile, and that dismissal with
prejudice is appropriate. See Loreley Financing (Jersey) No. 3 Ltd. v. Wells Fargo Sec., LLC, 797 F.3d 160, 190–
91 (2d Cir. 2015) (noting that granting amendment is more appropriate in cases where the non-moving party has not
had “the benefit of a ruling” that highlights “the precise defects” of the complaint).
8
Defendants also assert that AREC’s agreement with Williams is limited to Williams’ artist record royalties, but its
claim is based on Williams’ negotiations with Robinson over songwriter royalties. Defs.’ Mem. at 10–11. Plaintiffs
9
Specifically, Defendants point out that the FAC alleges only that Defendant Leland
Robinson improperly induced Guy Williams to anticipatorily breach his letter agreement with
AREC, which they argue does not state a claim for tortious interference. Id. (quoting FAC ¶ 96).
Defendants point to no cases in which a court has rejected a tortious interference claim based on
anticipatory breach; however, Defendants argue that as a matter of logic, if AREC has elected
“to treat the contract as breached by [Williams],” then the contractual relationship between
AREC and Williams has ended, and AREC may not assert the letter agreement is still valid.
Reply Mem. at 5–6. 9 Yet the very nature of any tortious interference claim is that a party’s
contractual relationship with a non-party was breached by virtue of the counterparty’s wrongful
interference. An anticipatory breach of contract (or repudiation) occurs when party expresses its
intent not to perform the contract in a manner both “positive and unequivocal.” Princes Point
LLC v. Muss Development LLC, 30 N.Y.3d 127, 133 (2017) (quoting Tenavision, Inc. v.
Neuman, 45 N.Y.2d 145, 150 (1978)). Unlike a breach of contract, a party affected by an
anticipatory breach has two options—it can either pursue damages for the breach immediately or
proceed as if the contract remains valid. Id. The fact that AREC has chosen to recognize the
point out that the agreement covers “any and all royalties and/or other assets which are or may be due and owing to
[Williams] as a recording artist.” Pl.’s Mem. at 19 n.6; see also Cinque Decl. Ex. B. At this stage of the litigation,
Plaintiffs have sufficiently alleged that its relationship with Williams covered songwriting royalties as well as artist
record royalties.
9
Plaintiff points to International Minerals & Resources, S.A. v. Bomar Resources, Inc. to demonstrate that “the
Second Circuit has recognized that a tortious interference claim may be based on an anticipatory breach.” Pl.’s
Mem. at 19 (citing Int’l Minerals & Res., 5 F. App’x 5 (2d Cir. 2001)). Although there was an anticipatory breach
in International Minerals, that was not the basis of the tortious interference claim. Instead, the plaintiff in that case
had a contract to purchase a ship, which the ship’s seller attempted to cancel. Int’l Minerals, 5 F. App’x at 8.
Because the plaintiff chose not to accept the anticipatory repudiation, the contract was still in force at a later point,
when the defendant convinced the ship’s seller to sell the ship to him rather than the plaintiff. Id. The basis of the
tortious interference claim was therefore the actual breach of contract—when the ship’s seller sold the ship to the
defendant—rather than the anticipatory breach—when the ship’s seller attempted to cancel the contract. Id.
Nevertheless, the Court sees no reason why an anticipatory repudiation claim cannot form the basis of a tortious
interference claim.
10
breach of its contract with Williams does not mean that it no longer has the ability to sue
Defendant Robinson to recover damages based on its contractual relationship with Williams. 10
Second, Defendants argue that even if AREC has adequately plead breach of contract, it
has not alleged that it actually sustained any damages. Defs.’ Mem. at 12. But as AREC points
out in its brief, under New York law, “when an anticipatory breach occurs . . . the non-breaching
party is entitled to claim damages for total breach.” Pl.’s Mem. at 19; see also Princes Point, 30
N.Y.3d at 133. Similarly, a plaintiff in a tortious interference with contract case is entitled to
“damages in the amount of the full pecuniary loss of the benefits of the contract.” See Int’l
Minerals & Res., S.A. v. Pappas, 96 F.3d 586, 589 (2d Cir. 1996); see also AP Links, LLC v.
Russ, 09 Civ. 5437 (JS), 2017 WL 3394599, at *8 (E.D.N.Y. Aug. 7, 2017). This includes
consequential damages. Id. Therefore, to the extent that AREC can show that Defendant
Robinson’s interference led Williams to breach (or anticipatorily breached) his contract with
AREC, AREC is correct that it would be entitled to recover from Defendant Robinson the full
benefits of its agreement with Williams—namely, “50% of all outstanding royalties owed
Williams plus an additional 20% [which is owed pursuant to the 2007 Settlement Agreement].”
Pl.’s Mem. at 21. Therefore, the Court finds that AREC has stated a claim for tortious
interference with contract.
IV.
CONCLUSION
For the reasons stated above, Defendants’ motion to dismiss is GRANTED in part and
DENIED in part. Specifically, the motion is granted with prejudice as to Plaintiff’s declaratory
judgment claim and denied as to Plaintiff’s tortious interference claim. Plaintiff’s breach of
10
To the extent that Defendants argue that AREC is now barred from claiming to represent Williams in the future on
the basis of their decision to pursue damages for breach of contract now, that issue is not before the Court and not
relevant to its decision on the instant motion to dismiss.
11
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