Greenfield v. Philles Records

• Decision Date: 17 October 2002
• Citation: 98 N.Y.2d 562,750 N.Y.S.2d 565,780 N.E.2d 166
• Parties: RONNIE GREENFIELD et al., Respondents, v. PHILLES RECORDS, INC., et al., Appellants, et al., Defendants.
• Court: New York Court of Appeals Court of Appeals

98 N.Y.2d 562

780 N.E.2d 166

750 N.Y.S.2d 565

RONNIE GREENFIELD et al., Respondents, v. PHILLES RECORDS, INC., et al., Appellants, et al., Defendants.

Court of Appeals of the State of New York.

Argued September 5, 2002.

Decided October 17, 2002.

Pryor Cashman Sherman & Flynn LLP, New York City (Andrew H. Bart and David C. Rose of counsel), for appellants.

Edwards & Angell LLP, New York City (Ira G. Greenberg and Idelle R. Abrams of counsel), and Peltz & Walker (Alexander Peltz of counsel) for respondents.

Owen & Davis P.C., New York City (Henry G. Burnett and Mark D. Bradford of counsel), and Berliner Corcoran & Rowe, L.L.P., Washington, D.C. (Jay A. Rosenthal of counsel), for Recording Artists' Coalition, amicus curiae.

O'Melveny & Myers LLP, New York City (Dale M. Cendali, Diana M. Torres and Olivier A. Taillieu of counsel), Matthew J. Oppenheim, Washington, D.C., Steven Marks, Stanley Pierre-Louis and Gary Greenstein for Recording Industry Association of America, amicus curiae.

Judges LEVINE, CIPARICK, WESLEY and ROSENBLATT concur; Chief Judge KAYE and Judge SMITH taking no part.

OPINION OF THE COURT

GRAFFEO, J.

In this contract dispute between a singing group and their record producer, we must determine whether the artists' transfer of full ownership rights to the master recordings of musical performances carried with it the unconditional right of the producer to redistribute those performances in any technological format. In the absence of an explicit contractual reservation of rights by the artists, we conclude that it did.

In the early 1960s, Veronica Bennett (now known as Ronnie Greenfield), her sister Estelle Bennett and their cousin Nedra Talley, formed a singing group known as "The Ronettes." They met defendant Phil Spector, a music producer and composer, in 1963 and signed a five-year "personal services" music recording contract (the Ronettes agreement) with Spector's production company, defendant Philles Records, Inc. The plaintiffs agreed to perform exclusively for Philles Records and in exchange, Philles Records acquired an ownership right to the recordings of the Ronettes' musical performances.¹ The agreement also set forth a royalty schedule to compensate plaintiffs for their services. After signing with Philles Records, plaintiffs received a single collective cash advance of approximately $15,000.

The Ronettes recorded several dozen songs for Philles Records, including "Be My Baby," which sold over a million copies and topped the music charts. Despite their popularity, the group disbanded in 1967 and Philles Records eventually went out of business. Other than their initial advance, plaintiffs received no royalty payments from Philles Records.

Beyond their professional relationship, however, was the story of the personal relationship between Spector and plaintiff Ronnie Greenfield. They married in 1968 but separated after a few years. Greenfield initiated a divorce proceeding against Spector in California and a settlement was reached in 1974. As part of that agreement, Spector and Greenfield executed mutual general releases that purported to resolve all past and future claims and obligations that existed between them, as well as between Greenfield and Spector's companies.

Defendants subsequently began to capitalize on a resurgence of public interest in 1960s music by making use of new recording technologies and licensing master recordings of the Ronettes' vocal performances for use in movie and television productions, a process known in entertainment industry parlance as "synchronization." The most notable example was defendants' licensing of "Be My Baby" in 1987 for use in the motion picture "Dirty Dancing." Defendants also licensed master recordings to third parties for production and distribution in the United States (referred to as domestic redistribution), and sold compilation albums containing performances by the Ronettes. While defendants earned considerable compensation from such licensing and sales, no royalties were paid to any of the plaintiffs.

As a result, plaintiffs commenced this breach of contract action in 1987, alleging that the 1963 agreement did not provide Philles Records with the right to license the master recordings for synchronization and domestic redistribution, and demanded royalties from the sales of compilation albums. Although defendants initially denied the existence of a contract, in 1992 they stipulated that an unexecuted copy of the contract would determine the parties' rights. Defendants thereafter argued that the agreement granted them absolute ownership rights to the master recordings and permitted the use of the recordings in any format, subject only to royalty rights. Following extensive pretrial proceedings (160 AD2d 458; 243 AD2d 353; 248 AD2d 212), Supreme Court ruled in plaintiffs' favor and awarded approximately $3 million in damages and interest.

The Appellate Division affirmed, concluding that defendants' actions were not authorized by the agreement with plaintiffs because the contract did not specifically transfer the right to issue synchronization and third-party domestic distribution licenses. Permitting plaintiffs to assert a claim for unjust enrichment, the Court found that plaintiffs were entitled to the music recording industry's standard 50% royalty rate for income derived from synchronization and third-party licensing. We granted leave to appeal.

We are asked on this appeal to determine whether defendants, as the owners of the master recordings of plaintiffs' vocal performances, acquired the contractual right to issue licenses to third parties to use the recordings in connection with television, movies and domestic audio distribution.² The agreement between the parties consists of a two-page document, which apparently was widely used in the 1960s by music producers signing new artists. Plaintiffs executed the contract without the benefit of counsel. The parties' immediate objective was to record and market the Ronettes' vocal performances and "mak[e] therefrom phonograph records and/or tape recordings and other similar devices (excluding transcriptions)."³ The ownership rights provision of the contract provides:

"All recordings made hereunder and all records and reproductions made therefrom together with the performances embodied therein, shall be entirely [Philles'] property, free of any claims whatsoever by you or any person deriving any rights of interest from you. Without limitation of the foregoing, [Philles] shall have the right to make phonograph records, tape recordings or other reproductions of the performances embodied in such recordings by any method now or hereafter known, and to sell and deal in the same under any trade mark or trade names or labels designated by us, or we may at our election refrain therefrom."

Plaintiffs concede that the contract unambiguously gives defendants unconditional ownership rights to the master recordings, but contend that the agreement does not bestow the right to exploit those recordings in new markets or mediums since the document is silent on those topics. Defendants counter that the absence of specific references to synchronization and domestic licensing is irrelevant. They argue that where a contract grants full ownership rights to a musical performance or composition, the only restrictions upon the owner's right to use that property are those explicitly enumerated by the grantor/artist.

Despite the technological innovations that continue to revolutionize the recording industry, long-settled common-law contract rules still govern the interpretation of agreements between artists and their record producers.⁴ The fundamental, neutral precept of contract interpretation is that agreements are construed in accord with the parties' intent (see Slatt v Slatt, 64 NY2d 966, 967, rearg denied 65 NY2d 785 [1985]). "The best evidence of what parties to a written agreement intend is what they say in their writing" (Slamow v Del Col, 79 NY2d 1016, 1018 [1992]). Thus, a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms (see e.g. R/S Assoc. v New York Job Dev. Auth., 98 NY2d 29, 32, rearg denied 98 NY2d 693 [2002]; W.W.W. Assoc. v Giancontieri, 77 NY2d 157, 162 [1990]).

Extrinsic evidence of the parties' intent may be considered only if the agreement is ambiguous, which is an issue of law for the courts to decide (see W.W.W. Assoc. v Giancontieri, supra at 162). A contract 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" (Breed v Insurance Co. of N. Am., 46 NY2d 351, 355 [1978],rearg denied 46 NY2d 940 [1979]). Thus, if the agreement on its face is reasonably susceptible of only one meaning, a court is not free to alter the contract to reflect its personal notions of fairness and equity (see e.g. Teichman v Community Hosp. of W. Suffolk, 87 NY2d 514, 520 [1996]; First Natl. Stores v Yellowstone Shopping Ctr., 21 NY2d 630, 638,rearg denied 22 NY2d 827 [1968]).

The pivotal issue in this case is whether defendants are prohibited from using the master recordings for synchronization, and whatever future formats evolve from new technologies, in the absence of explicit contract language authorizing such uses. Stated another way, does the contract's silence on synchronization and domestic licensing create an ambiguity which opens the door to the admissibility of extrinsic evidence to determine the intent of the parties? We conclude that it does not and, because there is no ambiguity in the terms of the Ronettes agreement, defendants are entitled to exercise complete ownership rights, subject to payment of applicable royalties due plaintiffs.

New York has well-established precedent on the issue of whether a grantor retains any...