Rice v. Music Royalty Consulting, Inc.

• Decision Date: 19 June 2019
• Docket Number: Case No. 18-13517
• Citation: 397 F.Supp.3d 996
• Parties: Duane RICE, as personal representative of the Estate of Bonny Rice, Plaintiff, v. MUSIC ROYALTY CONSULTING, INC., and Laura Butler a/k/a Laura Rice, Defendants.
• Court: U.S. District Court — Eastern District of Michigan

397 F.Supp.3d 996

Duane RICE, as personal representative of the Estate of Bonny Rice, Plaintiff,

v.MUSIC ROYALTY CONSULTING, INC., and Laura Butler a/k/a Laura Rice, Defendants.

Case No. 18-13517

United States District Court, E.D. Michigan, Southern Division.

Signed June 19, 2019

Joseph A. Bellanca, Howard Hertz, Matthew J. Turchyn, Hertz Schram PC, Bloomfield Hills, MI, for Plaintiff.

Brandon John Wilson, Stephen P. Dunn, Howard & Howard Attorneys PLLC, Royal Oak, MI, for Defendants.

Laura Butler, Detroit, MI, pro se.

ORDER AND OPINION GRANTING DEFENDANT'S MOTION TO DISMISS [19]

Nancy G. Edmunds, United States District Judge

Pending before the Court is Defendant Music Royalty Consulting, Inc.'s motion to dismiss. (ECF No. 19.) Defendant seeks dismissal of Plaintiff's complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). Plaintiff opposes the motion and alternatively requests leave to amend his complaint. On March 13, 2019, the Court held a hearing in connection with the motion. On March 29, 2019, the parties submitted supplemental briefing as ordered by the Court. For the reasons set forth below, the Court GRANTS Defendant's motion to dismiss. In addition, Plaintiff's remaining claims against Laura Rice are DISMISSED for lack of subject matter jurisdiction. Plaintiff's request for leave to file an amended complaint is DENIED .

I. Background

Bonny Rice ("Bonny") was a singer and songwriter best known for writing the hit song "Mustang Sally." Throughout his lifetime, Bonny held copyrights in number of musical compositions. On June 27, 2016, Bonny passed away. Before he died, Bonny sold and assigned his copyright interests in several musical compositions to Defendant Music Royalty Consulting, Inc. ("MRCI").

According to Plaintiff, MRCI is in the business of purchasing artists' interests in their musical works. In a typical transaction, MRCI pays a one-time lump sum fee in exchange for all of an artist's rights to his or her copyrights and the right to receive all future income streams associated with the works. MRCI is alleged to have a "history of taking advantage of elderly, vulnerable, and infirm artists by purchasing interests in their works for less than fair value." In this lawsuit, Plaintiff Duane Rice, Bonny's son, as personal representative of Bonny's estate, challenges the validity of the sale and assignment of Bonny's copyright interests to MRCI.

A. The transaction

On November 6, 2012, Bonny and MRCI executed a term sheet outlining the terms of a proposed sale and assignment of Bonny's rights and interests in certain of his musical compositions to MRCI for a lump sum payment of $375,000.00. On November 29, 2012, Bonny executed an Irrevocable Royalty Purchase Agreement¹ through which Bonny agreed to sell and assign to MRCI seventy-five percent of his royalty rights in the compositions comprising Broadcast Music, Inc. Account No. 000286470. Under the terms of the agreement, MRCI would receive one-hundred percent of royalty payments relating to Bonny's compositions, but would pay Bonny his twenty-five percent share of those payments. The Purchase Agreement provided that any claims Bonny had against MRCI must be brought within "one year from the accrual of claim." Bonny's wife, Defendant Laura Butler Rice, witnessed Bonny's execution of the Purchase Agreement and represented to MRCI that Bonny was "in a healthy state of mind." Both the Term Sheet and Purchase Agreement provide that Bonny received, or waived the right to receive, advice from counsel in connection with his execution of the agreement.

According to Defendant MRCI, on December 5, 2012, MRCI paid Bonny a lump sum of $375,000.00. On that same date, Bonny executed a "Songwriter Confirmation of Final MRCI Transaction and Release of MRCI", through which Bonny purportedly released all claims against MRCI, and a Confirmation of Consideration in which Bonny acknowledged receiving payment from MRCI.

Following closing, MRCI received one-hundred percent of Bonny's royalty distributions and paid to Bonny twenty-five percent of each royalty distribution relating to the compositions in accordance with the Purchase Agreement. According to MRCI, in June of 2013 Bonny expressed interest in selling to MRCI his remaining twenty-five percent interest in the compositions. On June 27, 2013, MRCI and Bonny entered into an agreement entitled "Songwriter Amendment to Irrevocable Royalty Purchase Agreement Dated 11/20/2012, Confirmation of Final MRCI Transaction, and Release of MRCI". Under the Amendment, Bonny agreed to sell and assign to MRCI his remaining twenty-five percent interest in the compositions. In exchange, MRCI paid Bonny an additional $125,000.00.

Collectively, the contract documents purport to assign Bonny's right, title, and interest to all of his compositions, copyrights, and all other rights to derive future income from his compositions. The documents also direct Broadcast Music, Inc., the performing rights organization that collects public performance licensing fees and royalties for Bonny's music, to pay all royalties derived from Bonny's works to MRCI instead of Bonny. And the documents direct music publishers, record labels, licensees, and all payors of music royalties for Bonny's compositions to pay all royalties to MRCI instead of Bonny.

B. This lawsuit and Bonny's mental capacity

Plaintiff claims Bonny lacked the mental capacity to execute the Purchase Agreement and assign his interests in the compositions. According to the complaint, on August 7, 2012, Bonny was diagnosed with Alzheimer's disease. Plaintiff alleges that Bonny had a long history with dementia even before being diagnosed with Alzheimer's disease. Plaintiff states that due to the onset of Alzheimer's disease, Bonny's cognitive abilities became significantly impaired.

Plaintiff claims Bonny's illness and mental condition forced him to rely heavily on his wife, Defendant Laura Butler Rice, for assistance with basic tasks. Laura Rice and Bonny married in November 2011. For several years prior to their marriage, Laura Rice managed Bonny's career and was allegedly compensated for her role as Bonny's manager.

Plaintiff alleges that Bonny was not involved in the MRCI transaction. Plaintiff claims that at the time of the transaction, "Bonny lacked sufficient mental ability and capacity to understand in a reasonable manner the nature and effect of the documents that he signed and the transaction that purportedly took place." According to Plaintiff, Laura Rice negotiated with MRCI to sell Bonny's interests in the compositions and handled all aspects of the negotiation and sale. Plaintiff alleges that Laura Rice improperly usurped the proceeds received from MRCI for her personal benefit and to the detriment Bonny and his estate. However, Plaintiff does not allege that MRCI was aware of Bonny's mental state at the time of the transaction. Plaintiff also does not specifically allege that either of the Defendants engaged in fraudulent conduct.

According to Plaintiff, on June 27, 2016, Bonny passed away due to complications with Alzheimer's disease.² Plaintiff alleges that on May 10, 2018 he was appointed as the personal representative of Bonny's estate. However, according to public court records submitted by Defendant with its supplemental briefing, Plaintiff became the personal representative of Bonny's estate on September 19, 2016.

On November 12, 2018, Plaintiff initiated this action as representative of Bonny's estate against MRCI and Laura Rice. Plaintiff challenges the validity of the sale and assignment, claims that Bonny's estate still owns the copyrights at issue, and contends that MRCI's receipt of royalties as a result of the transaction infringes the estate's interests in the compositions. Plaintiff alleges that Bonny lacked the mental capacity to consummate the transaction with MRCI and claims that the amount paid by MRCI to Bonny was far less than the fair value of the rights Bonny transferred to MRCI in the sale. In the complaint, Plaintiff asserts claims on behalf of Bonny's estate for declaratory relief (Counts I and II), copyright infringement (Count III), unjust enrichment (Count IV), conversion (Count V), civil conspiracy (Count VI), tortious interference with business relationship or expectancy (Count VII), and breach of fiduciary duty (Count VIII).

On December 13, 2018, the Court entered an order declining to exercise supplemental jurisdiction over Plaintiff's state law claims and dismissing those claims without prejudice. (See ECF No. 8.) The Court subsequently reinstated those claims. (See ECF No. 13.) On January 31, 2019, Defendant MRCI moved to dismiss Plaintiff's complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). Defendant asserts two primary reasons for the Court to dismiss the complaint. First, Defendant argues Plaintiff's claims should be dismissed because Plaintiff failed to tender back the amounts paid by MRCI to Bonny prior to filing suit. Second, Defendant argues Plaintiff's claims are barred by the statute of limitations, either as proscribed by the Purchase Agreement or by law. Plaintiff opposes the motion and alternatively requests leave to amend his complaint.

II. Standard of Review

A. Motion to Dismiss

Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a case where the complaint fails to state a claim upon which relief can be granted. When reviewing a motion to dismiss under Rule 12(b)(6), a court must "construe the complaint in the light most favorable to the plaintiff, accept its allegations as true, and draw all reasonable inferences in favor of the plaintiff." Directv, Inc. v. Treesh , 487 F.3d 471, 476 (6th Cir. 2007). But the court "need not accept as true legal conclusions or unwarranted factual inferences." Id. (quoting Gregory v. Shelby County , 220 F.3d 433, 446 (6th Cir. 2000) ). "[L]egal conclusions masquerading as factual allegations will not suffice." Eidson v. State of Tenn. Dep't of Children's Servs. , 510 F.3d...