Ellington v. EMI Music, Inc.
| Decision Date | 23 October 2014 |
| Docket Number | No. 156,156 |
| Parties | Paul M. ELLINGTON, Appellant, v. EMI MUSIC, INC., et al., Defendants, and EMI Mills Music, Inc., Respondent. |
| Court | New York Court of Appeals Court of Appeals |
24 N.Y.3d 239
21 N.E.3d 1000
997 N.Y.S.2d 339
112 U.S.P.Q.2d 1760
2014 N.Y. Slip Op. 07197
Paul M. ELLINGTON, Appellant
v.
EMI MUSIC, INC., et al., Defendants
and
EMI Mills Music, Inc., Respondent.
No. 156
Court of Appeals of New York.
Oct. 23, 2014.
Scarola Malone & Zubatov LLP, New York City (Richard J.J. Scarola and Alexander Zubatov ), for appellant.
Pryor Cashman LLP, New York City (Donald S. Zakarin, Bryan T. Mohler and Benjamin S. Akley of counsel), for respondent.
OPINION OF THE COURT
ABDUS–SALAAM, J.
In this breach of contract action, we have been asked to interpret the terms of a royalty provision contained in a 1961
United States copyright renewal agreement between the legendary Edward Kennedy “Duke” Ellington (Duke Ellington) and Mills Music, Inc. (now EMI). We hold that the disputed terms of the Agreement are clear and unambiguous. Thus, we affirm the Appellate Division.
I
Plaintiff Paul Ellington, an heir and grandson of Duke Ellington, commenced this breach of contract action to recover royalties allegedly due under a royalty provision contained in a copyright renewal agreement dated December 19, 1961. The Agreement designates Duke Ellington and named members of his family as the “First Parties.” The Agreement is expressly binding upon all of Duke Ellington's heirs and assigns. The Agreement defines “Second Party” as consisting of a group of music publishers including Mills Music, Inc. (whose successor in interest is respondent EMI) as well as “AMERICAN ACADEMY OF MUSIC, INC., GOTHAM MUSIC SERVICE, INC., and their predecessors in interest, and any other affiliate of Mills Music, Inc.” (Agreement, preamble).
The Agreement assigned to the Second Party the right to renew the United States copyright to certain musical compositions written by Duke Ellington, specified in Schedules 1, 2, and 3 of the Agreement, subject to the payment of royalties. Accordingly, the music publishers designated as the Second Party owned the copyright to the relevant compositions and were required to renew the copyrights on behalf of Duke Ellington. Specifically, the Agreement states that Duke Ellington confirms that “Mills Music, Inc., American Academy of Music, Inc., and Gotham Music Service, Inc., or any of their predecessors in interest or any other affiliated companies of Mills Music, Inc., not specifically mentioned, were and are now possessed of and are entitled to the original copyrights of the [relevant] musical compositions” (Agreement ¶ 5).
Paragraph 3 (a) of the Agreement, the royalty provision at issue, requires the Second Party to pay the First Parties “a sum equal to fifty (50%) percent of the net revenue actually received by the Second Party from ... foreign publication” of the relevant musical compositions (Agreement ¶ 3 [a] [emphasis added] ). This type of provision is known as a “net receipts” arrangement under which a composer, such as Duke Ellington, would collect royalties based on income received by a publisher after the deduction of fees charged by foreign subpublishers (see
e.g. Jobim v. Songs of Universal, Inc., 732 F.Supp.2d 407, 413 [S.D.N.Y.2010] ). At the time the Agreement was executed, foreign subpublishers were typically unaffiliated with domestic music publishers. Recently, however, many domestic publishers, including EMI, have affiliated with foreign subpublishers and it is this development that forms the basis of plaintiff's claim of breach of contract.
Pursuant to limited audit rights allowed by contract, plaintiff requested an audit of EMI. During the audit plaintiff discovered that EMI had begun using affiliated foreign subpublishers, who retained 50% of the royalties generated from the foreign sale of the relevant musical compositions originally retained by the unaffiliated subpublishers. The remaining 50% was split equally between EMI and the First Parties as required by the royalty provision.
Plaintiff commenced this action against EMI alleging breach of contract and fraudulent concealment, and also requested declaratory and injunctive relief.1 Plaintiff claimed that by using affiliated foreign subpublishers, EMI was double-dipping into the entire pot of revenue generated from the foreign sale of the relevant musical compositions. Essentially, plaintiff claims that the amount retained by the affiliated foreign subpublishers prior to remittal of the remainder to EMI is an amount received by EMI, and therefore, when using affiliated foreign subpublishers, EMI should remit to the First Parties half of the entire amount generated from the foreign sale of the relevant musical compositions. By failing to do so, he alleges that EMI has breached the Agreement by diluting his share of the royalties.
EMI moved to dismiss plaintiff's complaint pursuant to CPLR 3211(a)(1) and (7), arguing that its method of accounting and payment is consistent with the terms and conditions of the Agreement. In opposition, plaintiff argued that the terms of the Agreement are ambiguous and he therefore needed discovery.
Supreme Court granted EMI's motion, and dismissed the amended complaint in its entirety (Ellington v. EMI Music, Inc., 33 Misc.3d 1209[A], 2011 N.Y. Slip Op. 51827[U], 2011 WL 4907781 [Sup.Ct., N.Y. County 2011] ). The court held that “[t]he royalty payment provision is clear and unambiguous” (id. at *4). “[T]he contracting parties made no distinction in the royalty payment terms based on whether the foreign subpublishers are affiliated or unaffiliated with the [domestic] publisher” and thus, the court
determined “it would be improper at any time, but especially now, some 50 years after the date of the [Agreement]'s execution, to read such a distinction into the [Agreement]” (id. ). The court also held that “[a]bsent explicit language demonstrating the parties' intent to bind future affiliates of the contracting parties, the term ‘affiliates' [in the definition of Second Party] includes only those affiliates in existence at the time that the contract was executed” (id. at *5).
The Appellate Division affirmed (
Ellington v. EMI Music Inc., 106 A.D.3d 401, 964 N.Y.S.2d 141 [1st Dept.2013] ), holding that Supreme Court “correctly determined that the [A]greement's definition of ‘Second Party’ included only the parties named therein and ‘other affiliates of [EMI]’ that were in existence at the time the [A]greement was executed,” which “did not include foreign sub-publishers that had no existence or affiliation with [EMI] at the time of contract” (id. at 403, 964 N.Y.S.2d 141 ). This Court granted plaintiff leave to appeal (21 N.Y.3d 865, 2013 WL 4791134 [2013] ).
II
Where the terms of a contract are clear and unambiguous, the intent of the parties must be found within the four corners of the contract, giving a practical interpretation to the language employed and reading the contract as a whole (see Greenfield v. Philles Records, 98 N.Y.2d 562, 569, 750 N.Y.S.2d 565, 780 N.E.2d 166 [2002] ; W.W.W. Assoc. v. Giancontieri, 77 N.Y.2d 157, 162–163, 565 N.Y.S.2d 440, 566 N.E.2d 639 [1990] ). “The words and phrases used by the parties must, as in all cases involving contract interpretation, be given their plain meaning” (Brooke Group v. JCH Syndicate 488, 87 N.Y.2d 530, 534, 640 N.Y.S.2d 479, 663 N.E.2d 635 [1996] ; see Quadrant Structured Prods. Co., Ltd. v. Vertin, 23 N.Y.3d 549, 564, 992 N.Y.S.2d 687, 16 N.E.3d 1165 [2014] ; J. D'Addario & Co., Inc. v. Embassy Indus., Inc., 20 N.Y.3d 113, 119, 957 N.Y.S.2d 275, 980 N.E.2d 940 [2012] ).
An agreement is unambiguous “if the language it uses has ‘a definite and precise meaning, unattended by danger of misconception in the purport of the [agreement] itself, and concerning which there is no reasonable basis for a difference of opinion’ ” (Greenfield, 98 N.Y.2d at 569, 750 N.Y.S.2d 565, 780 N.E.2d 166, quoting Breed v. Insurance Co. of N. Am., 46 N.Y.2d 351, 355, 413 N.Y.S.2d 352, 385 N.E.2d 1280 [1978] ). Ambiguity in a contract arises when the contract, read as a whole, fails to disclose its purpose and the parties' intent (see Brooke Group v. JCH Syndicate 488, 87 N.Y.2d 530, 534, 640 N.Y.S.2d 479, 663 N.E.2d 635 [1996] ), or when specific language is “susceptible of two reasonable interpretations” (State of New York v. Home Indem. Co., 66 N.Y.2d 669, 671, 495 N.Y.S.2d 969, 486 N.E.2d 827 [1985] ; see Chimart Assoc. v. Paul, 66 N.Y.2d 570, 573, 498 N.Y.S.2d 344, 489 N.E.2d 231 [1986] ). “The best evidence of
what parties to a written agreement intend is what they say in their writing ... a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms” (Greenfield, 98 N.Y.2d at 569, 750 N.Y.S.2d 565, 780 N.E.2d 166 [citation and internal quotation marks omitted] ).
Plaintiff argues that two terms in the Agreement are ambiguous: (1) the phrase “net revenue actually received” in the royalty provision and (2) the term “any other affiliate” in the definition of Second Party.
A. “Net Revenue Actually Received ”
As stated, the royalty provision provides that the “Second Party” will pay to the “First Parties” “a sum equal to fifty (50%) percent of the net revenue actually received by the Second...
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