Gil Enterprises, Inc. v. Delvy

• Decision Date: 12 March 1996
• Docket Number: D,No. 47,47
• Citation: 79 F.3d 241
• Parties: GIL ENTERPRISES, INC., Plaintiff-Appellant-Cross-Appellee, v. Richard DELVY, doing business as Miraleste Music, Defendant-Appellee-Cross-Appellant. Richard DELVY, Counter-Claimant, v. GIL ENTERPRISES, INC., Counter-Defendant. ockets 94-9265, 94-9305.
• Court: U.S. Court of Appeals — Second Circuit

Page 241

79 F.3d 241

38 U.S.P.Q.2d 1042

GIL ENTERPRISES, INC., Plaintiff-Appellant-Cross-Appellee, v. Richard DELVY, doing business as Miraleste Music,

Defendant-Appellee-Cross-Appellant.

Richard DELVY, Counter-Claimant, v. GIL ENTERPRISES, INC., Counter-Defendant.

No. 47, Dockets 94-9265, 94-9305.

United States Court of Appeals, Second Circuit.

Argued Sept. 6, 1995.

Decided March 12, 1996.

Appeal from a judgment entered in the United States District Court for the Southern District of New York (Lowe, J.), denying in its entirety plaintiff-appellant's complaint and granting defendant-appellee's counterclaim declaring the contract between the parties validly terminated. Reversed and remanded.

Scott L. Baker, Silverman & Shulman, P.C., New York City (Jonathan J. Ross, on the brief), for plaintiff-appellant.

Robert W. Cinque, Cinque & Cinque, P.C., New York City (James P. Cinque, on the brief), for defendant-appellee.

Before WINTER, ALTIMARI and McLAUGHLIN, Circuit Judges.

ALTIMARI, Circuit Judge:

Plaintiff-appellant Gil Enterprises, Inc. ("Gil") appeals from a judgment entered in the United States District Court for the Southern District of New York (Lowe, J.), denying in its entirety plaintiff-appellant's complaint alleging, among other things, breach of contract and tortious interference with a business relationship against defendant-appellee Richard Delvy ("Delvy") (d/b/a "Miraleste Music") and granting Delvy's counterclaim declaring his contract with Gil validly terminated. Gil contends on appeal that 1) the district court erred in determining that a sufficient "demand" had been made upon Gil to justify termination of the contract; 2) the district judge erred in failing to disqualify herself from presiding over the bench trial; and 3) the co-owner of the copyright under the contract was an indispensable party without whom a judgment could not properly be entered. While we find Gil's latter two arguments meritless, the district court mistakenly concluded that Delvy made a "demand" upon Gil within the meaning of the Agreement. Accordingly, we reverse and remand for proceedings consistent with this opinion.

BACKGROUND

Gil is a New York corporation that exploits music copyrights throughout the world. On May 24, 1963, Gil entered into a contract (the "Gil Agreement" or "Agreement") with Richard Delvy and John Marascalco ("Marascalco") (d/b/a "Robin Hood Music Co.") (collectively the "Owners"), the co-owners of the copyright to the popular song "Wipe Out" (the "Composition"). Under the Gil Agreement, Gil acquired the exclusive rights to exploit the Composition throughout the British Commonwealth of Nations and Mandated Territories (including Canada), the Republic of Ireland, and South Africa (collectively the Under the terms of the Gil Agreement, Gil retained 50% of the royalties acquired through the exploitation of the Composition. By 1988, it became clear to the Owners that modern sub-licensing contract rates were significantly lower than 50%. Accordingly, the Owners sought to renegotiate their Agreement with Gil. When Gil refused to renegotiate, the Owners declared that the Agreement was terminated and entered into a new distribution agreement under more favorable terms with Minder Music Limited.

"Licensed Territories") for the life of the copyright.

When the Owners terminated the Agreement, Gil filed suit in New York Supreme Court alleging, among other things, breach of contract and tortious interference with a business relationship. Ultimately, Marascalco, who was reluctant to join in any legal action against Gil, entered into a settlement agreement with Gil. Under the settlement agreement, Marascalco was paid several thousand dollars in past royalties plus interest in exchange for a sworn affidavit stating:

I can unequivocally state that I have been duped by Delvy into believing that Gil had breached the terms of the Subpublication Agreement and that [he] could effectively terminate same and that a new and better deal could be made for us with respect to the exploitation of the Composition in the Licensed Territory.

* * *

On behalf of Robin Hood, I state and represent that insofar as the interests of Robin Hood are concerned with respect to the Composition, the Subpublication Agreement has not been breached and that it has not been terminated nor has it expired.

After settling the suit with Marascalco, Gil dropped the New York State action and reinstated the suit in federal court, this time only against Delvy. Delvy counterclaimed, seeking a declaration that the Agreement had been legally terminated and that Gil has no further right to exploit the Composition.

The federal action was tried before Judge Mary Johnson Lowe. Throughout the trial, Judge Lowe excoriated Gil's attorney for engaging in improper questioning and acting in bad faith. After one instance of such questioning mid-trial, Judge Lowe stated:

Look, this has constantly been one problem after another. This [is] a non-jury trial. And I think that I'm going to just declare a mistrial here, send this to somebody else, and let them try it, I cannot go on this way, I think, because this plaintiff and this defendant are entitled to a fair and impartial trial.

And you know, normally, Mr. Shulman, I find that your conduct in this trial has just made it necessary for me to constantly stop you from doing things that you have just done. You do it repeatedly. You are not conducting this as a trial. And if I am going to render an impartial judgment, I am really upset by the way you are conducting it. And I cannot say as I sit here now that I can be fair because of the way you have conducted this trial.

Let me talk to you, both of you, in chambers.

In chambers, Judge Lowe discussed her frustration with Gil's attorney. Thereafter she made no further comments as to her ability to remain impartial in judging the dispute before her. She completed the trial and ultimately rendered a verdict against Shulman's client, Gil, granting Delvy's counterclaim declaring the Agreement lawfully terminated.

In post-trial submissions, Gil (the plaintiff) asserted that the district court did not have the authority to enter judgment in the case because of the failure to join an indispensable party (Marascalco) under Fed.R.Civ.P. 19 ("Joinder of Persons Needed for Just Adjudication"). The district court rejected this contention, in part due to the fact that Gil was fully aware of the existence of the "indispensable" party when it filed suit.

Gil now appeals, contending that 1) the district court erred in determining that a sufficient "demand" had been made upon Gil to justify termination of the Agreement; 2) the district judge erred in failing to disqualify herself from presiding over the bench trial; and 3) the co-owner of the copyright under the Agreement was an indispensable

party without whom a judgment could not properly be entered.

DISCUSSION

I. "Demand" For Accounting

The Gil Agreement contains several provisions concerning the accounting and reporting required under the Agreement. The relevant paragraphs provide as follows:

9. True and correct accounts shall be kept by the [Subpublisher (Gil) ], and a statement of such account as of December 31st and June 30th in each year shall be mailed to the Owner [ (Delvy and Marascalco) ] within sixty (60) days after each of said dates, whether or not any money is then due to Owner.

* * *

10. .... In the event of the failure of the [Subp]ublisher to furnish such statement of account to the Owner on the dates herein provided or in the event of the failure of the [Subp]ublisher to make payment to the Owner of any royalties due hereunder, and if the [Subp]ublisher shall thereafter fail to furnish such statements or make such payments required hereunder within sixty (60) days after receipt of written demand therefor from the Owner, the Owner shall have the right to terminate this agreement in writing effective as of any time after the end of such sixty (60) days waiting period .... (emphasis added)

According to the district court, Delvy properly terminated the Gil Agreement after making a "demand" for an accounting under Paragraph 10, with which Gil failed to comply.

The district court considered several pieces of correspondence which it viewed, in total, to justify Delvy's termination of the Gil Agreement. In a letter dated August 1, 1988, Delvy's attorney notified Gil that Delvy and Marascalco were terminating the Agreement:

Please refer to [the Gil A]greement dated May 24, 1963 between Miraleste Music and Robin Hood Music Company on the one hand ("Licensor") and Gill [sic] Enterprises, Inc. on the other hand ("Licensee") with respect to the musical composition entitled "Wipe Out".

Said agreement is hereby terminated by Licensor effective immediately by reason of Licensee's material breaches of said agreement.

On August 10, 1988, Gil replied to the termination letter as follows:

My lawyer tells me he received a letter from your lawyer ... dated August 1, 1988 in which [your lawyer] tells us that our WIPE OUT subpublication contract "is hereby terminated"....

I don't have to tell you that lawyers don't have magic wands which they can wave and magically terminate a contract.

Anyone who takes action relying on the waving of such a magic wand is leaving himself open to lots of legal consequences. You should be guided accordingly because our contract remains in full force.

Some time later, on November 29, 1988, Delvy wrote to Gil seeking additional information concerning Gil's royalty payments. The district court construed that letter to be a "demand" under Paragraph 10 of the Agreement. The November 29th letter stated:

We apologize for our delay in responding sooner to your letter of August 10, 1988, and both John [Marascalco] and I note your comment about "waving a magic wand" but we don't feel that this is same the [sic] situation. Our attorney Mr. Alfred "Kim" Guggenheim has advised us of our position...