Paul M. Ellington, Appellant,v.EMI Music, Inc., et al., Defendants, EMI Mills Music, Inc., Respondent.

Brief

N.Y.September 11, 2014

APL-2013-00260 New York County Clerk’s Index No. 651558/10 Court of Appeals STATE OF NEW YORK PAUL M. ELLINGTON, Plaintiff-Appellant, against EMI MUSIC INC., EMI MUSIC PUBLISHING, EMI MUSIC PUBLISHING NORTH AMERICA, Defendants, and EMI MILLS MUSIC, INC., Defendant-Respondent. >> >> REPLY BRIEF FOR PLAINTIFF-APPELLANT SCAROLA MALONE & ZUBATOV LLP Attorneys for Plaintiff-Appellant 1700 Broadway, 41st Floor New York, New York 10019 212-757-0007 Of Counsel: Richard J.J. Scarola Date Completed: January 21, 2014 To Be Argued By: Richard J.J. Scarola Time Requested: 15 Minutes TABLE OF CONTENTS TABLE OF AUTHORITIES ................................................................................... iii PRELIMINARY STATEMENT AND SUMMARY OF ARGUMENT .................. 1 I. CONTRARY TO EMI’S SUGGESTION, PLAINTIFF IS ASKING THIS COURT NOT TO REWRITE THE PARTIES’ AGREEMENT BUT TO INTERPRET IT ................................................................................................ 14 A. EMI’s Proposed Interpretation of the Agreement is Untenable and Should Be Rejected .............................................................................. 14 B. The Agreement Is, at the Very Least, Ambiguous, and this Court May So Hold ................................................................................................ 19 II. EMI HAS OFFERED NO “UNDISPUTED DOCUMENTARY EVIDENCE” THAT IT IS NOT – IN VIOLATION OF THE AGREEMENT – CURRENTLY CHARGING A FAR-ABOVE-MARKET RATE FOR ITS OWN AFFILIATED/SUBSIDIARY ENTITIES’ FOREIGN SUBPUBLISHING SERVICES ...................................................................... 22 A. Plaintiff’s Contention that EMI Has Its Own Affiliates Charging a 50% Rate for Their Foreign Subpublishing Services, Thereby Reducing Plaintiff’s Negotiated Share of Royalties, Was Clearly Pleaded and, in Any Event, Indisputably Asserted in Opposition to EMI’s Motion to Dismiss ...................................................................................................... 24 B. EMI’s “Undisputed Documentary Evidence” Allegedly Refuting Plaintiff’s Allegations on this Pre-Discovery Motion to Dismiss Is Neither Undisputed Nor Evidence of Anything Whatsoever .................... 28 III. THE RELEVANT CASELAW SUPPORTS PLAINTIFF’S POSITION, NOT EMI’S ...................................................................................................... 33 IV. PLAINTIFF’S IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING CLAIM WAS NOT WAIVED AND SHOULD BE PERMITTED TO SURVIVE .................................................................................................. 41 ii V. THE ISSUE OF “AFFILIATES” CANNOT BE RESOLVED ON THIS PRE-DISCOVERY MOTION TO DISMISS .................................................. 47 CONCLUSION ........................................................................................................ 51 iii TABLE OF AUTHORITIES Cases Alvord and Swift v. Stewart M. Muller Const. Co., Inc., 46 N.Y.2d 276, 413 N.Y.S.2d 309 (1978) ........................................................ 25, 26 Berns v. EMI Music Publ’g Inc., No. 95 Civ. 8130 (KTD), 1999 U.S. Dist. LEXIS 17541 (S.D.N.Y. Nov. 10, 1999) ........................................................................... 33, 34, 35 Bison Capital Corp. v. ATP Oil & Gas Corp., No. 10 Civ. 0714, 2010 WL 2697121 (S.D.N.Y. Jun. 24, 2010) ............................ 21 Budget Rent A Car Sys. v. K&T, Inc., Civ. A. No. 2:05-CV-3655, 2008 WL 4416453 (D.N.J. Sept. 23, 2008) ......... 50, 51 Chateau D’If Corp. v. City of New York, 219 A.D.2d 205, 641 N.Y.S.2d 252 (1st Dep’t 1996) .............................................. 46 Croce v. Kurnit, 737 F.2d 229 (2nd Cir. 1984) ....................................................................... 37, 38, 39 Dalton v. Educational Testing Serv., 87 N.Y.2d 384, 639 N.Y.S.D.2d 977 (1995) ........................................................... 42 Delgado v New York City Bd. of Educ., 272 A.D.2d 207, N.Y.S.2d 292 (1st Dep’t 2000) .............................................. 22, 46 Duration Mun. Fund, L.P. v. J.P. Morgan Secs. Inc., No. 603486-2008, 2009 WL 2999201 (Supr. Ct. N.Y. Co. Sept. 16, 2009) ............................................................ 42, 43, 45 Evans v. Famous Music Corp., 1 N.Y.3d 452, 775 N.Y.S.2d 757 (2004) ................................................................. 35 Fontanetta v. Doe, 73 A.D.3D 78, 898 N.Y.S.2d 569 (2nd Dep’t 2010) ................................................ 32 iv Hirsch v. Food Resources, Inc., 24 A.D.3d 293, 808 N.Y.S.2d 618 (1st Dep’t 2005) ................................................ 43 Jobim v. Songs of Universal, 732 F.Supp.2d 407 (S.D.N.Y. 2010) .......................................................... 35, 36, 37 JPMorgan Chase Bank, N.A. v. IDW Group, LLC, No. 08 Civ. 9116, 2009 WL 321222 (S.D.N.Y. Feb. 9, 2009) ......................... 44, 45 Leon v. Martinez, 84 N.Y.2d 83, 614 N.Y.S.2d 972 (1994) ................................................................. 25 Nolan v. Sam Fox Publishing Co., 499 F.2d 1394 (2nd Cir. 1974) ..................................................................... 37, 38, 39 Telerep, LLC v. U.S. Intern. Media, LLC, 74 A.D.3d 401, 903 N.Y.S.2d 14 (1st Dep’t 2010) .................................................. 21 Tractebel Energy Marketing, Inc. v. AEP Power Marketing, Inc., 487 F.3d 89 (2nd Cir. 2007) ............................................................................... 41, 42 Vaughns v. Kirkland, 85 A.D.3d 770, 924 N.Y.S.2d 845 (2nd Dep’t 2011) ............................................... 32 VKK Corp. v. National Football League, 244 F.3d 114 (2d Cir. 2001) .............................................................................. 50, 51 Statutes, Rules and Other Authorities 6A Carmody-Wait 2d §38:50 (2013) ....................................................................... 31 CPLR 3211(a)(1) ................................................................................................. 7, 31 NYPRAC-COMM §7:38 (2013).............................................................................. 31 SIEGEL-NYPRAC §259 (2013) .............................................................................. 31 1 REPLY BRIEF ON APPEAL FOR PLAINTIFF-APPELLANT PAUL M. ELLINGTON Plaintiff-appellant (“plaintiff”) Paul M. Ellington, by his attorneys, Scarola Malone & Zubatov LLP, submits this Reply Memorandum in further support of his appeal of the decision of the Appellate Division, First Department, dated May 2, 2013, Decision and Order, Slip Op. 9028, No. 651668/10 [R.599], affirming the earlier decision of the trial court (Supreme Court, New York County (Fried, J.)), dated October 5, 2011 [R.12], which granted the pre-discovery motion of defendant-respondent EMI Mills Music, Inc. (“EMI Mills,” and, together with all EMI parties, “EMI”), to dismiss plaintiff’s Amended Complaint, dated December 2, 2010 (the “Complaint” [R.65]). Preliminary Statement and Summary of Argument Lacking any persuasive response to plaintiff’s real claims on this appeal from a pre-discovery motion to dismiss, EMI has, both in the trial court and on appeal to the Appellate Division, employed a strategy of misdirection and misstatements, repeatedly mischaracterizing plaintiff’s claims as an attempt to turn a “net receipts” agreement into an “at source” agreement, and then aiming all its rhetorical guns loaded with falsehoods squarely at that straw man. This disingenuous approach, which EMI has trotted out as a repetitive mantra yet again in its opposition brief in this Court, cannot be allowed to carry the day. Repetition 2 does not make it so. Thus, at the very outset, plaintiff wishes to make this point clear: the issue presented by no means is about trying to turn a “net receipts” deal into an “at source” deal. Rather, the issue is the correct construction of this contract as applied to this context — where EMI has, over the years, established itself as the fox in the chicken coop in controlling the setting of percentages of, and keeping for itself, payments to its affiliates off the top of foreign royalty collection. Though plaintiff, by now anticipating EMI’s confuse-and-obfuscate litigation strategy, tried to head off this point as clearly as possible in the initial brief filed in this Court, see id. at 17, 30, 40; EMI, knowing full well that it would face a losing battle if it tried to respond to plaintiff’s actual claims on this pre- discovery motion to dismiss, has persisted undeterred with its effort at misdirection. Plaintiff, in any event, will make the point yet again: both parties in this case are in total agreement that if EMI were to enter into an arms’-length agreement with an independent foreign subpublisher, it could, per the unambiguous “net receipts” language of the 1961 agreement at issue in this case (the “Agreement”), deduct the cost of its arms’-length payments to such subpublishers prior to splitting the remainder of royalties between itself and plaintiff. It is self-evident that publishers have interests that are fully aligned with those of writers in that arms’-length scenario — they share equally in the cost of each dollar paid to an unaffiliated foreign collection agent. This is what a “net receipts” agreement — which, plaintiff agrees, the Agreement unquestionably is 3 — is all about, since, were the Agreement “at source” — which, plaintiff agrees, it is not — EMI would be obligated to split all royalties with plaintiff from the very outset, with any costs of any sort it incurs in the process of foreign subpublishing collection having to come wholly out of its own share rather than plaintiff’s share. As such, this case is simply not about the core distinction between a “net receipts” deal and an “at source” deal. What this case is about, however, is an issue no court prior to the inception of this litigation had ever squarely addressed (though, as plaintiff described in his initial brief and will reiterate later herein, the Second Circuit has sided with plaintiff in some closely analogous instances): what happens when instead of engaging in arms’-length deals with unaffiliated foreign subpublishers, which were the principal, if not the only, kinds of subpublishers around in 1961 when such deals were commonly done, the domestic publisher buys up all the previously independent foreign subsidiaries or establishes new ones as subsidiaries? Can it, then, still deduct what are now not arms’-length payments, but rather, internal transfers, payments it makes to itself, at rates it does not negotiate, but rather, selects itself, and then claim that it only “actually received” (to quote from the Agreement) what is left over after it finishes paying itself whatever it thinks is appropriate? The plain reality, of course, is that it actually received everything. This is the scenario presented by this case, where, significantly, the publisher’s interests are opposite to rather than aligned with those 4 of the writer, so that the Court must decide how this (and similar) contracts are to be interpreted in that scenario, which simply was not an issue within anyone’s contemplation when the contract was made in 1961. That this is not at all what the parties to this contract or the many like it envisioned or imagined when such contracts were entered into is self-evident. This scenario is a byproduct of a consolidation in the music publishing industry, which began many years later. [R.352-53 at ¶2] EMI’s attempt now to pretend that it is unambiguous on the face of the Agreement’s “net receipts” language that it is permitted to remit revenue to itself for its own foreign subpublishing collection efforts prior to splitting only what remains with royaltors like plaintiff cannot be squared with those realities of the changes in the industry; it is purely disingenuous. Far from reflecting a mere implementation of the Agreement’s plain terms — as EMI would have it — such an interpretation of the Agreement would lead to an absurd and unfair result none of Agreement’s signatories intended or anticipated: it would, as plaintiff has argued in his initial brief in this Court, indeed give the fox the keys to the chicken coop, and, contrary to what is the case where there are arms’-length deals with independent foreign entities, permit publishers like EMI to decide, in their sole and absolute discretion, how much they will pay themselves for their own foreign royalty collection efforts prior to dividing the rest 50/50 with musical artists. Thus, plaintiff is not asking this Court to rewrite an unambiguous agreement, as EMI would have it, but rather, to interpret that 5 Agreement, and decide whether the Agreement’s language gives or was intended to give EMI an unfettered right to control how much it takes off the top in the guise of “foreign subpublishing costs” prior to splitting the remainder between itself and writers. And, indeed, that is precisely the issue that is the foundation of plaintiff’s second point, to which EMI likewise has no valid response: while, as plaintiff has shown (a point not disputed by EMI), the legitimate arms’-length market rate for foreign royalty collection ranges from 15% to 25% of royalties [R.452], EMI is charging a whopping 50% for its own foreign collection efforts.1 The fox, in other words, has already given in to the inevitable temptation to munch on the poultry. If this Court permits it to get away with it, EMI (and other music publishers) will surely start biting off larger and larger chunks, simply by increasing what it pays its own wholly owned foreign subpublishing affiliates from the current far-above-market rate of 50% to an even higher rate that will even further eviscerate the negotiated 50/50 royalty split negotiated per the Agreement. If this case is to be simply dismissed at the pleadings stage, nothing would 1 For the avoidance of doubt, while, as discussed below, EMI extrapolates from a few very old, short-term, cherry-picked agreements with foreign subpublishers to insist, implausibly and impermissibly on this pre-discovery motion to dismiss, that it has always paid foreign subpublishers 50% of royalties, EMI offers nothing to contradict the authoritative commentaries plaintiff has cited to the effect that market rates are indeed 15%-25% [R.452], and does not dispute this fact, so that its position is reducible to an expectation that this Court will believe, on a pre-discovery motion to dismiss and without any evidence to establish such a fact in any event, that if EMI were still contracting with independent foreign subpublishers at arms’ length right now, it would be generously giving away 50% of royalties to them despite the far lower market rate. As discussed further below, this is pure nonsense. 6 preclude that unconscionable result. It is absurd to conceive — though EMI’s argument implicitly presumes — that this is what the parties to the Agreement could possibly have intended, much less that this is what they unambiguously intended. In agreeing that the publisher may pay the writer “fifty (50%) percent of the net revenue actually received [from] … foreign publication” [R.370, §3(a) (emphasis added)], the writer did not agree EMI could pay him 50% of whatever was left after any foreign subpublishing fees that EMI would choose to pay itself with unfettered discretion. EMI’s only response in its briefing in the court below to the reality that nothing would stop it — if its interpretation of the Agreement survives this case — from diluting plaintiff’s share of foreign royalties even more than it already has was to suggest that plaintiff would be protected from such further increases by recourse to a claim for breach of the covenant of good faith and fair dealing implicit in every contract under New York law. See EMI App. Div. Br. at 48-49 (stating that “[w]ith respect to Ellington’s contention that there is nothing to stop the supposedly diabolical EMI Mills from further increasing the foreign subpublisher fee to 75% or even 90% …, Ellington would have a readily available remedy were EMI to do such a thing,” and then explaining that this remedy would be “asserting breach of the covenant of good faith and fair dealing, which is implicit in every contract under New York law”). But if a hypothetical increase of this nature by EMI would give rise to such a claim, then the actual increase EMI 7 has effected (viz., 50% of royalties, as compared to the market rate of 15%-25% unaffiliated foreign subpublishers would charge [R.452]) just as firmly gives rise to that exact same claim (to the extent not recognized by this Court as a straightforward breach of contract, on the ground that permitting such an increase would, as above, plainly render the negotiated 50/50 royalty split — the most critical term of the Agreement — a virtual nullity). EMI’s admission that at some point its non-arms’-length rate setting for foreign collection through its affiliates is reviewable and actionable inexorably subsumes the very practice challenged now, but it is a challenge so far not allowed to proceed beyond the pleadings stage. It implicates the classic “distinction without a difference” for EMI to concede something is wrong at 75%, but that all is as it should be at 50% (especially given that the market rate is 15%-25%). EMI’s principal response to this argument that hoists EMI with its own petard is, on this pre-discovery motion to dismiss, to deny plaintiff’s allegation that it has upped what it charges for its royalty collection efforts; it has characterized plaintiff’s allegation as “speculation” that is contradicted by “undisputed documentary evidence.” See EMI’s Opposition Brief (“EMI’s Opp. Br.”) at 51. Under even minimal scrutiny, this pre-discovery-pleadings-stage assertion fails as both fact and as conclusive argument, with clear caselaw and other authority squarely barring EMI’s reliance on affidavits and the self-serving hodgepodge of ambiguous documents EMI attaches on its CPLR 3211(a)(1) 8 motion. First, plaintiff’s assertion that EMI has increased what it charges for foreign subpublishing collection from a 15%-25% rate charged in the market to a far-above rate of 50% is far from speculation. That 15%-25% is the market rate for such collection is plainly stated in authoritative music publishing treatises [R.452], and EMI has never denied that this is the prevailing market rate. That EMI charges 50% instead is also not anything EMI has at any point denied. See, e.g., EMI’s Opp. Br. at 51 (stating that 50% is “exactly the same subpublishing fees [EMI] pa[ys] today”). EMI’s response, rather, has been that that above- market 50% is what it has always paid to foreign subpublishers. See id. Yet EMI’s basis for this assertion on a pre-discovery motion to dismiss is nothing more than an affidavit from EMI’s own employee who does not so much as assert any personal knowledge of the issue, attaches just a few cherry-picked, time-limited older agreements from the 1920s and 1930s that set forth a 50% rate applicable in a few territories and some “random pages from various royalty statements going back [only] to 1994,” EMI’s Opp. Br. at 20, n.12, and, then, baselessly extrapolating from those transparently inadequate samples to older time periods, still stops short of making any definitive statements of fact, claiming, instead, that “there is no reason to doubt that [paying 50% to foreign subpublishers] is precisely how Mills Music, Inc. accounted and paid since 1961.” Id. (all emphases added) In fact, as plaintiff describes in the Argument below, there is every reason to doubt this unsupported, pre-discovery assertion, and EMI’s counsel’s attempt to 9 bootstrap such thin reeds of self-serving speculation, flatly contradicted as they are by plaintiff’s well-grounded allegations (that are squarely based on the undisputed leading industry literature (some quoted by EMI itelf)), into being “undisputed documentary evidence” favoring EMI is worse than specious and disingenuous. More to the immediate point, it would not so much as entitle EMI to summary judgment, much less allow it to prevail on this pre-discovery motion to dismiss. Faced with this reality, the other principal tack EMI takes is to try repeatedly to avoid the merits by making assertions to the effect that plaintiff’s claim EMI has diluted plaintiff’s contractual share of royalties by using inflated payments to its own foreign affiliates to increase its own share of royalties at plaintiff’s expense is something plaintiff only invented for the first time in opposition to EMI’s motion to dismiss rather than having pleaded in his Complaint. See EMI’s Opp. Br. at 2, 7, 10, 13, 17-18, 22, 30 & 51. Again, EMI’s assertion is contradicted by the record before this Court. First, even if this assertion were true, EMI nowhere claims or can claim that, on a pre-discovery motion to dismiss, a failure to plead a certain theory of recovery forecloses the possibility for a claim so framed in a subsequent, amended pleading, as the relevant caselaw holds.2 As EMI itself is forced to concede, the criterion on this 2 By no means should EMI now be heard to say, again disingenuously, that plaintiff believes such an amended pleading is necessary; the point is simply that if EMI’s other baseless assertions along these lines had merit, an amended pleading could, and should, be allowed to cure any perceived pleading deficiency. 10 motion is whether plaintiff “has a cause of action, not whether he has stated one.” EMI Opp. Br. at 34 (emphasis added). But more, the idea that plaintiff somehow made up the theory at issue for the first time in his brief in opposition to EMI’s motion in the trial court is, as plaintiff described in his opening brief in this Court, see id. at 32, 34, 57-58, plainly contracted by the actual language of plaintiff’s Complaint, particularly paragraph 18 thereof, which clearly states that instead of paying plaintiff 50% of its net receipts, as required by the Agreement, EMI began to dilute that share by paying its affiliates 50% off the top, leaving only 25% for plaintiff, while pocketing 75% itself. [R.70, ¶18] For all the false sound and fury it attempts to raise about plaintiff’s supposed disregard of the Record, at no point in its 64-page brief does EMI actually quote so much as a single word from this paragraph (which plaintiff reproduced in full in his opening brief in this Court, see id. at 58), and discusses it only in summary form in a footnote, see EMI’s Opp. Br. at 22, n.13, where it entirely ignores the paragraph’s actual allegations. In short, EMI’s assertion that plaintiff has changed his theory of liability is not only immaterial for purposes of this motion to dismiss but is also a total fabrication. Equally unavailing are EMI’s similar attempts to avoid the merits by claiming plaintiff, by failing to raise or plead certain facts or issues, is somehow foreclosed from arguing the ambiguity of the Agreement’s key language or asserting, as an alternative to a breach of contract theory, that EMI’s conduct 11 breaches the covenant of good faith and fair dealing implicit in every contract under New York law. EMI asserts that plaintiff argued that the key provision of the Agreement was, at the very least, ambiguous for the first time in the Appellate Division. As plaintiff conclusively demonstrates below, however, this is false; it is belied both (i) by the very first paragraph of the Argument section of plaintiff’s opposition brief filed in the trial court, in which plaintiff clearly opposed EMI’s position that the Agreement was unambiguous and argued that the issue could not be resolved in EMI’s favor; and (ii) by the fact the argument was expressly recognized by the trial court as having been made. [R.15] As for EMI’s attempt to attack plaintiff’s right to argue breach of the implied covenant of good faith and fair dealing, as plaintiff will show in the Argument below, below, under New York law, such a claim is properly presented on this record under any reading of it. Moreover, such a claim does not need to be separately pleaded where there is already a breach of contract claim because the covenant of good faith and fair dealing is implicit in the contract itself. As for plaintiff’s alleged failure to preserve this argument, this is sophistry because, as demonstrated in plaintiff’s opening brief, see id. at 8, 53-54, as well as above and further below, EMI itself suggested to the Appellate Division that plaintiff would have such a claim if it were to have increased the percentage of royalties it pays to its foreign affiliates (but denied that it had, in fact, increased that percentage), so that plaintiff, in response, 12 had merely pointed to his well-grounded fact allegations that EMI had increased the relevant percentage (as well as to the inadequacy of EMI’s vague and incomplete factual assertions to the contrary), and then proceeded to point to EMI’s own effective admission that this constituted a breach of the implied covenant. As noted, the legal theory of the implied covenant breach is inherent in plaintiff’s contract and his breach of contract claim; it is not a claim to be pleaded separately. In these circumstances, especially where EMI itself raised the issue on appeal, EMI cannot possibly claim that the issue was not preserved. But moreover, and separately and independently, even if the issue had been raised by plaintiff on appeal for the first time, this would still not constitute waiver: clear authority discussed below holds that where an issue is one of law (or legal theory) rather than a new factual allegation, it is preserved on appeal even if raised for the first time in an appellate court. Thus, for all of these reasons, EMI cannot avoid confronting the implied covenant of good faith and fair dealing, to which it has no good response. Finally, as to plaintiff’s further argument that the express language of the Agreement binds EMI’s affiliates as well as EMI itself and thus mandates that EMI and its affiliates, considered together, turn over 50% of their collective “net receipts” to royaltors such as plaintiff, EMI again attempts to disregard the pre- discovery posture of this case by trying to have this Court rule upon this issue in a factual vacuum, despite the caselaw cited by plaintiff stating this very issue (viz., 13 the meaning of the term “affiliates” in a contract) is almost invariably a question of fact. EMI’s argument that the “affiliates” language in the Agreement has to refer only to Mills Music Inc.’s (“Mills Music”) affiliates in existence in 1961 relies on out-of-context juxtapositions of this language with other parts of the Agreement, but ignores basic unresolved factual questions — such as whether, in fact, there even were any affiliates (domestic, much less foreign) of Mills Music in 1961 (and, as discussed below, there is every reason to conclude there were none). If there were no such affiliates — and EMI has not furnished an iota of evidence to the contrary — then the affiliates language simply must be forward-looking. Further, EMI’s argument ignores the critical point that the “any other affiliate” language does not identify such entities; in that light, it is apparent the contract sets this forth as a forward-looking clause to address what might arise in the future. This is, in short, not an issue amenable to any definitive resolution at this pre-discovery stage of the case. For all these reasons, as further discussed below, plaintiff asks this Court to reverse the decisions below and permit this meritorious case challenging, for the first time, a common scam in the music industry to proceed to discovery, where the full scope of EMI’s malfeasance affecting many writers beyond this one plaintiff’s predecessors can be brought to light and redressed. 14 I. CONTRARY TO EMI’S SUGGESTION, PLAINTIFF IS ASKING THIS COURT NOT TO REWRITE THE PARTIES’ AGREEMENT BUT TO INTERPRET IT There is no conceivable basis on which to hold, on a pre-discovery motion to dismiss, that the unambiguous purpose of the Agreement was to give EMI a blank check to decide unilaterally how much revenue to remit to royaltors such as plaintiff by capturing the rest of the revenue through exercising unfettered discretion in the rate at which it makes payments to its own foreign subpublishing entities. That this interpretation of the Agreement’s “net receipts” language should be rejected is either (a) apparent on the fact of the Agreement; or (b) at the very least, not amenable to resolution at the pleadings stage of this case because it presents an ambiguity to resolve at trial. A. EMI’s Proposed Interpretation of the Agreement Is Untenable and Should Be Rejected. As plaintiff explained in his opening brief in this Court, to prevail on this pre-discovery motion to dismiss, EMI must overcome the high hurdle of convincing this Court that the unambiguous intent of the parties’ negotiated 50/50 “net receipts” deal (apparently substantively identical to legions of other deals entered into in the decades near 1961 by publishers and writers) was to permit the publisher, at its sole discretion, to increase that negotiated 50% split to any number of its choosing simply by creating or buying up previously independent foreign 15 subpublishers and then paying them, i.e., paying itself, whatsoever it wished for ostensible “foreign subpublishing” services prior to dividing the remainder with the writer party. In this present instance, as plaintiff has alleged, EMI has cut plaintiff’s effective royalty percentage in half, i.e., to 25%, by engaging in this scam. [R.70, ¶18] Given that that proposition is not only unappealing but unsupportable, EMI’s only alternative in the courts below and here as well has been to dodge the core issue by repeatedly mischaracterizing plaintiff’s claim as an attempt to rewrite the contract terms to change them from creating a “net receipts” deal into an “at source” deal. This, however, is not at all what plaintiff is trying to do. His goal, rather, is to have the language of the parties’ Agreement — standard “net receipts” language in the music industry at the relevant time — interpreted. His position is that any sensible reading of that language either unambiguously turns in his favor, not EMI’s, or, at the very least, is ambiguous, necessitating further discovery as to the parties’ intent and the relevant circumstances, including then-prevailing market norms, at issue at the time the Agreement was executed, which would bear on the contract’s construction. The Agreement’s clear language, of course, requires EMI to turn over to plaintiff 50% of “net revenue actually received” from foreign royalty collection. [R.370] There is no requirement here (or anywhere else in the Agreement) that EMI make use of foreign subpublishers at all, which it does purely for its own administrative convenience, and there is indeed nothing precluding EMI or EMI 16 Mills from acting directly to make its collections in foreign jurisdictions (a point plaintiff has made repeatedly and which EMI has not refuted), but if EMI does employ such subpublishers and pays them a fee for their services, plaintiff agrees EMI needs to split with plaintiff only the “net revenue” it “actually receive[s]” after deducting such payments. This is unambiguous and is the distinction between a “net receipts” deal and an “at source” deal, as the latter would require EMI to turn over 50% of royalties to plaintiff, no matter what it itself may actually receive. But this is a far cry from EMI’s position that it is equally unambiguous that EMI may avail itself of this “net receipts” language to hire itself, whether directly or through its own subsidiaries or affiliates, in place of these arms’-length foreign subpublishers, and then pay plaintiff 50% only of what remains. EMI’s repeated suggestion that the Agreement does not distinguish between affiliated and unaffiliated subpublishers ignores the simple fact that the Agreement does not mention subpublishers at all (nor, as discussed below, does it appear there were any affiliated foreign subpublishers in 1961, when the Agreement was executed). The affiliated foreign subpublishing concept, whether designed as a scam or merely enabling one, did not even emerge widely in this industry until consolidation occurred in the late 1980s. [R.352-53 at ¶2] In that light, EMI’s choice to employ subpublishers in foreign markets is just that: a choice; there is no reason why EMI could not engage in foreign subpublishing collection itself or through arms’-length bargains where its interests in negotiating 17 for a good market rate from a foreign subpublisher are aligned with those of the writer. More to the point, in that light, it cannot be concluded that the Agreement unambiguously allows EMI to hire itself and pay itself in non-arms’-length deals to the writers’ great detriment. All the Agreement does is permit EMI, where it chooses to pay another entity at arms’ length to engage in foreign subpublishing, to deduct that cost and split only what it “actually receive[s].” There is no reason to think that this allowance should be extended to permit EMI to deduct what it pays itself, whether directly or through its own entities, since it is “actually receiv[ing]” that revenue and since allowing it to deduct such revenue would allow it, in its sole discretion, to dictate how much will be left over to split with royaltors. Where EMI is “actually receiv[ing]” the revenue, per the Agreement’s unambiguous language, it must divide all that revenue 50/50. EMI argues that “[t]here is no reason why unrelated subpublishers should be entitled to receive and retain 50% of the income earned in their territories while related subpublishers should receive nothing for the same services.” EMI’s Opp. Br. at 40. EMI could, just as easily, argue that even if it were to engage in foreign subpublishing directly, without any affiliate or subsidiary in place, there is no reason why it “should receive nothing for the same services.” But, whether it uses its own entities or performs its own foreign collections directly (permitted by the Agreement and consistent with the contract 18 duty EMI undertook), there is a reason it cannot pay itself what it could pay independent foreign subpublishers: the “actually received” language of the Agreement. Where it or its own entities are doing the work, EMI is obviously “actually receiv[ing]” the revenue, and it is doing what the Agreement both permits and requires, which means it must split that entire pool of revenue with plaintiff. As noted above, while, when EMI employs independent foreign subpublishers, it and the writer have an identical interest in making sure that those foreign subpublishers give EMI a good bargain for their services, when EMI substitutes itself or its own affiliates, it is now motivated to set a subpublishing rate that is as high as possible for those same services in order to get more of the royalty income at the writer’s expense. Thus, EMI’s proposed interpretation of the language would, as noted, allow EMI to decide unilaterally — as it has already done — what its costs of doing business in foreign markets are and then deduct those potentially inflated, non-market-rate costs prior to splitting what remains. Plaintiff discusses this issue at more length in Argument §II. below. Plaintiff’s view on this score is also endorsed by music publishing treatises that have characterized what EMI and other music publishers have done in paying their own subsidiaries or affiliates for foreign subpublishing that used to be conducted at arms’ length by independent entities as “a scam” and an “unscrupulous practice” [R.454-55], which authority plaintiff discussed at length in his opening brief in this Court. See id. at 41-45. EMI has offered and can offer no 19 cogent response to this point, and yet its view of the Agreement would put this Court in the position of holding that the Agreement’s unambiguous meaning and intent permit EMI to get away with that scam. Plaintiff’s principal contention is, thus, that his interpretation of the Agreement’s “net receipts” language is the only one that makes any sense and should, thus, be adopted by this Court on this motion. Conversely, stripped to its essence, EMI’s interpretation of the Agreement is that the Agreement allows EMI to nullify completely what is arguably the Agreement’s most important term: the negotiated 50/50 royalty split. If EMI can use language that requires turning over 50% of royalties it actually receives (after first deducting what it might pay arms’- length foreign subpublishers, if it chooses to use any) to now pay itself, whether directly or through affiliates, whatever percentage of royalties it might unilaterally designate prior to splitting what remains, the 50% number expressly set forth in the Agreement is rendered effectively meaningless. Thus, EMI’s suggested interpretation of the Agreement works an absurdity and should be rejected. B. The Agreement Is, at the Very Least, Ambiguous, and this Court May So Hold. Plaintiff, in the alternative, argues that even if this Court were to conclude that it cannot definitively hold, in the absence of any discovery, that plaintiff is correct in his interpretation of the Agreement, it is, at the absolute least, beyond any reasonable dispute that this Court cannot hold on this pre-discovery 20 motion that EMI’s extreme and irrational interpretation of the “net receipts” provision of the Agreement is the unambiguous construction of the language and the intent of the parties as a matter of law. At a minimum, that construction must be left for a trier of fact. As plaintiff has explained in his opening brief, see id. at 24-25, in 1961 when the Agreement was executed, the music industry was not consolidated as it is today, so that it was understood that foreign subpublishers, where there were any, were almost invariably independent, local entities unaffiliated with domestic music publishers, as one of EMI’s own affiants has admitted. [R.361, ¶24] Thus, at best for EMI, the meaning of the “net receipts” language, as applied to EMI’s own subsidiaries and affiliates which simply were not around (or were independent entities) in 1961, is ambiguous, and plaintiff should be allowed to take discovery and have this issue tried — after discovery on questions such as the composition of the industry and EMI’s own practices at the relevant time, with the issue of what the “net receipts” language could have meant to the Agreement’s signatories to be resolved on a full record or ultimately interpreted against the drafter. Nor should this Court pay any heed to EMI’s repeated false suggestion that plaintiff’s ambiguity argument was somehow not raised in the trial court and, therefore, not preserved on appeal. See EMI’s Opp. Br. at 41, n.25, 52- 21 53. This is a shameless fabrication, and EMI surely knows it.3 To prove the point, here is a direct quotation from very first paragraph of the Argument section of plaintiff’s April 6, 2011 brief filed in opposition to EMI’s motion to dismiss in the trial court: “Defendant would have this Court believe that the fact that plaintiff has a standard ‘net receipts’ deal makes it an ‘unambiguous,’ ‘straightforward’ proposition that EMI can use EMI-owned foreign affiliates to take money off the top prior to splitting the balance between itself and plaintiff .… All told, there is simply no way that the issue involving the proper interpretation of plaintiff’s contract could be resolved on a motion to dismiss, especially when defendant urges a reading of the Agreement that would condone a deceptive, unscrupulous practice and a result no one would have expected at the time the Agreement was signed.” Id. at 20. The trial court’s decision also plainly recognized that plaintiff had prominently featured an ambiguity argument, presenting that argument as the summary of plaintiff’s position: “In opposition [to EMI’s motion to dismiss], Ellington contends that the motion is premature on the grounds that the relevant 3 Even if plaintiff had not argued ambiguity below, EMI’s argument would still fail because ambiguity is plainly not a matter to be pleaded or argued separately on a breach of contract claim. It is inherent in arguing a contract breach that a party can and does argue that, at a minimum, failure to accept the party’s reading of the contract in the face of competing interpretations results in an ambiguity to be resolved by trial, and a court would, if necessary, naturally entertain the question of whether or not relevant contractual language is ambiguous in interpreting the contract. See, e.g., Telerep, LLC v. U.S. Intern. Media, LLC, 74 A.D.3d 401, 903 N.Y.S.2d 14, 15 (1st Dep’t 2010) (“If the court concludes that a contract is ambiguous, it cannot be construed as a matter of law, and dismissal under CPLR 3211(a)(7) is not appropriate”); Bison Capital Corp. v. ATP Oil & Gas Corp., No. 10 Civ. 0714, 2010 WL 2697121, at *8 (S.D.N.Y. Jun. 24, 2010) (“[W]hile a court is not ‘obliged to accept the allegations of the complaint as to how to construe’ a contract, it ‘should resolve any contractual ambiguities in favor of the plaintiff’ on a motion to dismiss (internal citations omitted)). Notably, EMI’s brief contains no authority supporting any contrary proposition. 22 provisions of the 1961 contract are ambiguous.” [R.15] Thus, in suggesting that this argument was somehow invented for the first time on appeal by plaintiff, EMI apparently appears to be willfully trying to deceive this Court, just as it apparently sought to deceive the Appellate Division below.4 The argument was, as demonstrated here, clearly raised by plaintiff and clearly addressed (though, in plaintiff’s view, incorrectly resolved) by the trial court. For this reason, try as it might, EMI cannot dodge the import of this argument on appeal. II. EMI HAS OFFERED NO “UNDISPUTED DOCUMENTARY EVIDENCE” THAT IT IS NOT — IN VIOLATION OF THE AGREEMENT — CURRENTLY CHARGING A FAR-ABOVE-MARKET RATE FOR ITS OWN AFFILIATED/SUBSIDIARY ENTITIES’ FOREIGN SUBLISHING SERVICES Although, as discussed at §I. above, plaintiff contends that deducting anything at all prior to splitting only what remains 50/50 is a violation of the Agreement’s “revenue actually received” language when EMI’s own entities (and therefore, EMI) rather than independent foreign subpublishers are the ones on the 4 There is no less straightforward way to put this: in observing erroneously that the ambiguity argument was raised for the first time on appeal, the Appellate Division simply appears to have failed to examine plaintiff’s trial court brief or the trial court’s decision, as quoted above. However, in any event, after making this erroneous observation, the Appellate Division correctly recognized that it nonetheless had to proceed to consider the ambiguity argument: “Although it was raised for the first time on appeal, we entertain plaintiff’s ambiguity argument as it poses a question of law that could not have been avoided if raised before the motion court (see Delgado v. New York City Bd. of Educ., 272 AD2d 207 [1st Dep’t 2000], lv denied 95 NY2d 768 [2000], cert denied 532 US 982 [2001]).” [R.602] Thus, even if EMI were correct that plaintiff had not raised the issue of ambiguity before the trial court, the issue of law would still not have been waived on appeal. 23 receiving end, the problem is compounded in this case by the fact that the very problem plaintiff points to as inevitably implicated in EMI’s proposed interpretation of the Agreement has already come to pass: per plaintiff’s allegations, EMI has used the substitution of its own affiliates or subsidiaries in place of previously independent foreign subpublishers not only to double-dip in royalties but also to hike the rate at which it does so from a market rate of 15-25% to a far-above-market rate of 50%. EMI has only two responses to this argument: it argues that (i) plaintiff raised this argument for the first time in opposition to EMI’s motion to dismiss in the trial court rather than in his Complaint; and that (ii) EMI has offered “undisputed documentary evidence” demonstrating that plaintiff’s factual allegation that EMI is now having its own entities charge a far-above-market rate for their foreign subpublishing services is untrue. As discussed below, EMI’s first point is both false and of no legal import because, even if plaintiff had not pleaded this contention (which, in fact, he did do), raising it in his trial court opposition brief was sufficient. Its second point is belied by the fact that the “undisputed documentary evidence” it has offered (a) is hotly disputed and plainly opposed to a specifically alleged fact on a pre-discovery motion to dismiss, so that (b) even viewed in the best light for EMI (a standard which of course does not apply at this motion to dismiss stage or on a summary judgment motion), it does not come 24 remotely close to establishing the proposition for which it purports to stand, (c) with EMI’s “evidence” consisting — impermissibly on a CPLR 3211(a)(1) motion — of ambiguous and incomplete documents cherry-picked from its own files and tendentiously interpreted by affidavits supplied by EMI’s own employees. For all these reasons, EMI cannot, on this pre-discovery motion, avoid dealing with the reality that it is pushing, as unambiguous, an interpretation of the Agreement that, per plaintiff’s allegations, would have this Court giving its imprimatur to EMI’s unscrupulous practice of having its own entities charge far more for foreign subpublishing services than the going market rate for those same services would be had EMI continued contracting with independent foreign subpublishers to engage in such foreign collections. That interpretation must be rejected. A. Plaintiff’s Contention that EMI Has Its Own Affiliates Charging a 50% Rate for Their Foreign Subpublishing Services, Thereby Reducing Plaintiff’s Negotiated Share of Royalties, Was Clearly Pleaded and, in Any Event, Indisputably Asserted in Opposition to EMI’s Motion to Dismiss. Lacking, as plaintiff will show below, any persuasive substantive response to plaintiff’s claim that EMI has wrongfully increased its share of the total pot of royalties by having its own affiliates charge a far-above-market rate of 50% of royalties for their subpublishing services, EMI, in what seems calculated to no purpose other than to distract this Court from the substance, reprises the same mantra full of false notes throughout its papers, suggesting that plaintiff somehow 25 invented this argument belatedly, never having pleaded it, and only came forward with it in his opposition papers to EMI’s motion to dismiss. See EMI’s Opp. Br. at 2, 7, 10, 13, 17-18, 22, 30 & 51. As discussed below, in framing that suggestion, EMI ignores the actual Complaint’s allegations, studiously avoiding so much as a single quotation from the actual Complaint paragraph that sets forth the contention and which plaintiff specifically discussed and quoted in whole in his opening brief in this Court. Moreover, since even EMI concedes that plaintiff raised the argument, at the latest, in his trial court opposition brief, see EMI’s Opp. Br. at 30, n.20 (“this contention first surfaced in Ellington’s opposition to EMI Mills’ motion as a supposed question of fact”), even if EMI were correct that plaintiff had not pleaded the argument, no legal consequence would follow from that fact, as plaintiff would be, at any rate, entitled to amend the Complaint in response to this motion to dismiss. See, e.g., Leon v. Martinez, 84 N.Y.2d 83, 87-88, 614 N.Y.S.2d 972, 974 (1994) (stating that, on a motion to dismiss, “the pleading is to be afforded a liberal construction,” “a court may freely consider affidavits submitted by the plaintiff to remedy any defects in the complaint” and “the criterion is whether the proponent of the pleading has a cause of action, not whether he has stated one”); Alvord and Swift v. Stewart M. Muller Const. Co., Inc., 46 N.Y.2d 276, 281, 413 N.Y.S.2d 309, 311 (1978) (holding, even in a summary judgment context, that “[l]ong before 26 enactment of the CPLR, … courts looked beyond the pleadings to discover the nature of the case. Even when deficiencies in the plaintiff’s complaint have induced courts to grant summary judgment in favor of defendant, amendment of the complaint has frequently been permitted or directed, even by appellate courts. It has only been the dead hand of a criticized case that influenced courts to grant summary judgment for defendant when a plaintiff’s submissions, but not its pleadings, made out a cause of action. With the advent of the modern principles underlying the CPLR, application of the archaic rule is no longer merited” (internal citations omitted)). In fact, for all the pointless noise EMI makes about this purportedly “new” theory of plaintiff’s, EMI itself tellingly does not suggest so much as once that plaintiff has somehow waived raising this theory of liability and certainly cites no caselaw supporting any such notion. This makes clear that EMI’s argument on this score is purely and wholly an effort at obfuscation and misdirection.5 In any event, as plaintiff described in his principal brief, see id. at 32, 34, 57-58, the contention that EMI has its own foreign affiliates skimming a non- market 50% of royalties off the top, thereby reducing plaintiff’s share to a mere 25%, while increasing its own to 75% clearly appears in Complaint, ¶18, which 5 More tellingly still, as discussed in the next section of this brief, EMI’s preoccupation with this quasi-waiver argument is revealing in that it focuses a pin spot on EMI’s lack of a sound response to plaintiff’s substantive argument — that EMI has used affiliates to increase grossly its foreign collection rates and keep those foreign fees for itself. 27 paragraph EMI mentions only in passing in a footnote, see EMI’s Opp. Br. at 22, n.13, and tellingly fails to quote or even describe in any detail. This is what the paragraph says: “Instead of paying plaintiff and his siblings their full 50% share of earned foreign publishing royalties, EMI diluted that share by having its own affiliates in multiple countries retain 50% of ‘revenue actually received,’ while paying plaintiff and his siblings their 50% only on the 50% remaining, so that EMI and its affiliates, all under common ownership, in reality pocketed 75% of what was actually received, remitting only 25%, rather than 50%, to plaintiff.” [R.70, ¶18] The only piece of the puzzle arguably missing from this articulation is that the market rate for foreign subpublishing is 15%-25%, a fact which is implicit in and plainly presumed by the allegation, and for which proposition plaintiff had adduced and cited authoritative music publishing treatises in opposition to EMI’s motion to dismiss. See R.452. Thus, the entire show of indignation EMI has mustered here would seem to turn on some antiquated code-pleading-like notion that plaintiff’s Complaint had to set forth sufficiently explicitly this particular subsidiary and implicit fact (which in any event is in no way within plaintiff’s peculiar knowledge, but rather, was freely ascertainable from publicly available sources). EMI’s proposition, stripped of its rhetorical bluster, is sheer absurdity. 28 B. EMI’s “Undisputed Documentary Evidence” Allegedly Refuting Plaintiff’s Allegations on this Pre-Discovery Motion to Dismiss Is Neither Undisputed Nor Evidence of Anything Whatsoever. The reason EMI employed the above-discussed strategy of misdirection in combatting plaintiff’s claim as to what it has done in having its affiliates charge a non-market 50% rate, as compared to the market rate of 15%- 25%, thereby enriching itself at plaintiff’s expense, becomes apparent when one considers EMI’s only substantive response. It has not denied it is charging 50% for the same services independent foreign subpublishers would perform for 15%- 25% of royalties; it has not denied this is recognized as a “scam” by music publishing treatises [R.454-55]; nor has it been able to point to any legal deficiency in the claim or offer any reason this Court should allow it to vitiate the 50/50 royalty split expressly provided for in the Agreement by perpetrating this known scam. Rather, it has asserted, on this pre-discovery motion to dismiss, that the claim is foreclosed by “undisputed documentary evidence.” EMI’s Opp. Br. at 22. This alleged “undisputed documentary evidence,” however, consists of a few random pages from royalty statements going back only to 1994, some cherry- picked older agreements with a few independent foreign subpublishers and a very carefully hedged statement by EMI’s own employee in an affidavit of facts that, of course, plaintiff has not yet tested in discovery. As noted below, there is no 29 conceivable way that such “evidence” should be permitted to defeat plaintiff’s specific allegations on this pre-discovery motion. EMI’s point seems to be that it has always had to pay 50% to foreign subpublishers, even when those subpublishers were independent entities.6 The “evidence” it has, consisting of the following, establishes no such thing, even on its face (and without scrutiny in discovery): • What EMI’s own brief correctly describes as only “random pages from various royalty statements going back [only] to 1994,” EMI Opp. Br. at 20, n.12. These pages are appended in an apparent attempt to show that EMI has always remitted to plaintiff only his half of 50%, i.e., 25%, of foreign royalties. Of course, since they go back only to 1994 — after the music industry consolidation that gave rise to the system of affiliated/subsidiary subpublishers that is the subject of this case — these random pages from royalty statements are irrelevant.7 6 As plaintiff noted at §I. of the Argument above, even if this were true, EMI should not be permitted to avail itself of language meant to permit it to deduct legitimate, arms’-length costs of foreign subpublishing to pay its own entities. 7 Even though EMI has apparently been using its affiliates or subsidiaries to skim 50% of foreign royalties off the top for some time prior to the filing of plaintiff’s Complaint, as a result of EMI’s misleading royalty statements, plaintiff was not and had no reason to be aware of this practice until he conducted an independent audit; for this reason, in his Complaint, he also alleged that EMI fraudulently concealed what it was doing [R.72, ¶30], so that no one who was not already on the lookout for EMI’s scam would have realized what was going on from looking through the royalty statements. Specifically, until an August 29, 2009 revision of the royalty statements fixed this particular issue [R.474], the relevant “% RECVD” column had, immediately above it, the heading “Film Production” [R.468], so that anyone examining the statements would have concluded that those royalties appearing below that column are only from such film production. The pages of discussion EMI devotes in its brief in this Court vituperating against the fraudulent concealment allegations, see id. at 22-23, simply assert that EMI provided regular royalty statements, but do not so much as mention this obvious defect in clarity with those royalty statements in any way. Because the trial court did not rule independently on the fraudulent concealment allegations, but rather, dismissed them as dependent on the substantive allegations [R.21], and because the Appellate Division did not address those allegations at all [R.599-604], plaintiff does not discuss those allegations any further here. 30 • Three cherry-picked older agreements with independent foreign subpublishers from the 1920s-1930s that EMI submitted along with its reply brief in the trial court. [R.575-94] While these agreements set forth a 50% rate for some foreign subpublishing by those particular subpublishers, they appear to be blatantly misrepresented by EMI and, hence, leave all the important questions unanswered. First, the agreements cover only a few territories [R.575-94], leaving open the obvious issue of what was going on in all the other foreign territories or why EMI did not append other agreements as exhibits. Second, EMI’s counsel makes what is, even on the face of the agreements EMI has chosen to provide, the apparently false claim that “[e]ach of these subpublishing agreements are [sic] for life of copyright,” EMI’s Opp. Br. at 18. It does so, even though one of the agreements actually has a clear three-year term [R.591, ¶12 (“The term of this agreement shall be for the period of three (3) years from the date hereof”)], with there being no clarity as to whether that agreement was renewed much less had to be renewed by EMI, and another is missing the key page on which the actual term of the agreement would have been specified [R.575-76 (skipping from p. 1 to p. 3 of the agreement)], but the top line of text carrying over onto a page that does appear in the Record shows that it may also have had a three year term [R.576 (containing the carryover text, “of three (3) years”)], while the third agreement covers just one song [R.583], and nowhere appears to state that it is for the life of the copyright [R.583-84]; all of which, of course, raises the issue of what would have happened to the foreign subpublishing rate when even those limited exemplar agreements could or would have expired and new agreements were negotiated at arms’ length. EMI has, again, not provided any such information.8 Indeed, it is more than a little suspicious that EMI appends these few three-year agreements from the 1920s and 1930s, leaving open the important questions of construction and what events occurred or might have occurred (at arms’ length) later, and then baldly asserts that their content, as ambiguous as it is in fact, is actually conclusively favorable to EMI’s position. It is not, even if such content could be considered at all on a pre-answer motion to dismiss. 8 Some of the agreements EMI appends contain ambiguous language providing for renewal as to certain compositions in the event certain conditions were met [R.580 at ¶ FIFTH; R.591 at ¶ THIRTEENTH], but it is impossible to determine from the face of the agreements whether the conditions at issue were, in fact, met, which compositions, if any, were the subject of any such renewals or on what terms any such renewals may have been negotiated. In this regard, it is noteworthy that EMI fails to include in its voluminous “evidentiary” submissions on this pre- discovery motion to dismiss any documentation of renewals of these agreements after the 1920s/1930s time period covered by the agreements EMI has chosen to furnish. 31 • Statements in affidavits by EMI’s own employees, who do not claim any personal knowledge of the issue, but conclude, in EMI’s counsel’s own words, that “there is no reason to doubt that [paying 50% to foreign subpublishers] is precisely how Mills Music, Inc. accounted and paid since 1961.” Id. (emphasis added); see also R.121, ¶23. This, of course, does not and should not assure anybody of anything. The limited record, such as it is on this pre-discovery motion, creates abundant reason for doubt. To call such cherry-picked, self-serving pages from EMI’s files, ambiguous old agreements missing critical pages and schedules and the hedged conclusions presented in affidavits of EMI’s own employees with no personal knowledge, all untested by discovery, “undisputed documentary evidence,” or even the kind of documentary evidence within the limited scope of CPLR 3211(a)(1), is beyond the pale. See, e.g., 6A Carmody-Wait 2d §38:50 (2013) (“A complaint will not be dismissed where the documentary evidence submitted with the motion contains ambiguous wording, or where the document is insufficiently detailed for purposes of granting a motion to dismiss” (collecting cases)); SIEGEL-NYPRAC §259 (2013) (“[A] CPLR 3211(a)(1) motion ‘may be appropriately granted only where the documentary evidence utterly refutes [the] plaintiff’s factual allegations, conclusively establishing a defense as a matter of law’”; “affidavits, which are the most common source of proof on most motions and which are available for use on CPLR 3211(a) motions grounded on any other paragraph, can’t be made the basis for a paragraph 1 motion”); NYPRAC-COMM §7:38 (2013) (“Affidavits and deposition transcripts are not documentary evidence entitling a defendant to relief 32 under CPLR 3211(a)(1)” (collecting cases)); Fontanetta v. Doe, 73 A.D.3d 78, 85, 898 N.Y.S.2d 569, 575 (2nd Dep’t 2010) (“As this Court held in (Berger v. Temple Beth–El of Great Neck, 303 A.D.2d 346, 347, 756 N.Y.S.2d 94), affidavits are not documentary evidence (to the same effect, see Tsimerman v. Janoff, 40 A.D.3d 242, 835 N.Y.S.2d 146 [1st Dept], and Siegel, Practice Commentaries, McKinney’s Cons. Laws of N.Y., Book 7B, CPLR C3211.10). …. In sum, to be considered ‘documentary,’ evidence must be unambiguous and of undisputed authenticity (see Siegel, Practice Commentaries, McKinney’s Cons. Laws of N.Y., Book 7B, CPLR C3211:10, at 21-22)”). This is especially the case when plaintiff has alleged, with sound basis, that the market rate for foreign subpublishing is 15%-25% of royalties, leading inevitably to the conclusion that whatever some of these short-term agreements from the 1920s or 1930s may have said is simply irrelevant, and even more so because they likely could have been renegotiated, competitively, countless times since, with new entities succeeding in place of older ones, others disappearing entirely, etc., if EMI had been acting at arms’ length. Cf. Vaughns v. Kirkland, 85 A.D.3d 770, 770, 924 N.Y.S.2d 845, 846 (2nd Dep’t 2011) (holding, in the context of CPLR 3211(a)(1) motion, that “determination of whether the [out-of-court prelitigation] settlement agreement was binding on the plaintiff would have been premature at this early stage, and inappropriate in the context of a CPLR 3211 motion”). As such, to use EMI’s own phrasing, “there is 33 no reason to doubt that” if EMI were still using independent foreign subpublishers today, it would not be generously giving away 50% of royalties to those independent foreign subpublishers when the prevailing market rate is 15%-25%. For all these reasons, EMI’s “undisputed documentary evidence,” contradicted by plaintiff’s specific allegations, authoritative treatises and common sense, cannot possibly foreclose this claim or the prospect of discovery on the claim. The claim should be reinstated. III. THE RELEVANT CASELAW SUPPORTS PLAINTIFF’S POSITION, NOT EMI’S Just as it has mischaracterized plaintiff’s claim, EMI grossly mischaracterizes the caselaw in its attempt to suggest that other courts have held in its favor on the issue now before this Court. All the cases it cites in support of the proposition that “net receipts” agreements permit it to double-dip in royalties are clearly distinguishable, and its attempt to distinguish the Second Circuit’s authority that undermines its position is unavailing. EMI starts off its discussion with the decision in Berns v. EMI Music Publ’g Inc., No. 95 Civ. 8130 (KTD), 1999 U.S. Dist. LEXIS 17541 (S.D.N.Y. Nov. 10, 1999) (Duffy, J.), does nothing more than describe a “net receipts” agreement in the context of denying permission to assert a third amended 34 complaint, raising wholly new issues for the first time, in a case that plainly had tried that court’s patience for reasons completely unrelated to the issues presented here. See id. at *11, n.9. This description is uncontroversial as far as it goes, but it in no way helps EMI’s cause, as it says nothing whatsoever to suggest that a music publisher is entitled to avail itself of such standard “net receipts” language to withhold from the pool of royalties to be split with the music artist the royalties the music publisher pays to itself, whether directly or through its affiliated or subsidiary subpublishers operating in foreign markets, especially where, as here, it pays itself an inflated, above-market rate. Notably, while EMI quotes the Berns court’s description of the claim that plaintiff would have wanted to assert, see EMI’s Opp. Br. at 42, and the court’s description of a “net receipts” deal, see id. at 43, EMI suspiciously stops quoting when it comes time to enunciate the actual Berns holding and, instead, misleadingly expects this Court to infer that Berns is directed to a claim similar to the one at issue here. In fact, the Berns court never ruled on the proposed amendment to assert a claim similar to plaintiff’s here, but rather, did not let the plaintiff there amend because of numerous factors including excessive delay and the fact that this new proposed claim, “despite its clarity and availability,” Berns, 1999 U.S. Dist. LEXIS 17541 at *4, was not alleged by plaintiff despite repeated opportunities to amend. The court then granted summary judgment not on the 35 proposed claim but on the then-existing claim, which had been entirely different. Id at *6. Thus, Berns lends no support to EMI’s position, with its only evaluative comment on the proposed claim being that it had been clear and available previously, lending support to plaintiff’s position. EMI also relies on this Court’s decision in Evans v. Famous Music Corp., 1 N.Y.3d 452 (2004), but even EMI admits the only relevance that decision has to the present case is that it found a “net receipts” provision in a music publishing agreement to be a “standard term” that “establishes a mechanism for calculating the sharing of income received from the exploitation of songs.” Id. at 456; EMI’s Opp. Br. at 448. This fact, of course, is not one disputed by anyone in this case. Finally, EMI suggests that the claim rejected in Jobim v. Songs of Universal, 732 F.Supp.2d 407 (S.D.N.Y. 2010), “is squarely on point” and somehow supports EMI’s position in this case. EMI Br. at 44. First of all, Jobim is a summary judgment decision, after full discovery on liability issues was concluded, where, moreover, the court had found the key contractual language ambiguous and relied on extrinsic evidence to inform its decision. See Jobim, 732 F.Supp.2d at 410-11, 416. Second, the issue in Jobim was whether the ambiguous language of the deal there was intended to create a “net receipts” or “at source” arrangement. See id. at 417-18 (“The Court finds that the totality of the evidence, 36 both intrinsic and extrinsic, indicates that a ‘net receipts’ arrangement is the only reasonable interpretation of the Subpublishing Agreements”). There is absolutely no indication in Jobim that the parties specifically raised or litigated the core issue here: the distinction between unaffiliated and affiliated foreign subpublishers and the fact that EMI pays affiliated foreign subpublishers an above-market rate. Not faced with a situation where anyone was raising the distinction between foreign affiliates, as opposed to unaffiliated foreign entities, or the amount of royalty revenue remitted to such subpublishers (in contrast to the present case, there is no indication in Jobim that the music publisher had started remitting a far-above- market rate to its own affiliates in order to keep more of the royalty revenue for itself), the Jobim court obviously had no occasion to rule on these crucial issues. Indeed, in Jobim, unlike here, the music publisher had and used foreign affiliates as subpublishers from the deal’s inception, with the parties’ deal, unlike here, expressly making mention of deductions for payments to affiliated foreign subpublishers,9 see id. at 417, and with the domestic publisher always 9 A paragraph in the parties’ agreement in Jobim described specific circumstances in which the music publisher would not withhold from the pool of royalties to be split those payments going to its foreign affiliates, see id. at 417 (“Paragraph 6 of the Subpublishing Agreements gives Universal the right to assign and transfer its rights under the Subpublishing Agreement to any of its subsidiaries or affiliates in the Licensed Territories, but Universal need not reduce Plaintiffs’ royalties by assigning and transferring its rights to foreign affiliates and subsidiaries”), suggesting, by implication, that when that circumstance did not apply — which, in the situation presented in Jobim, it did not, see id. (“Paragraph 6 has no application here, however, since Songs of Universal, Inc., the party to this lawsuit, did not trigger it. It is undisputed that, unlike Duchess and Leeds, Songs of Universal, Inc. did not transfer and assign its rights under the 37 having remitted income only after deducting from such affiliated subpublishers, a point of extrinsic evidence that the Jobim court had found persuasive. See id at 416. Thus, when EMI blusters that “Jobim’s larger point — which Ellington ignores because he has no effective response — is that ‘net receipts’ agreements are fully enforceable and there is nothing inappropriate about the use of foreign affiliates as subpublishers,” EMI’s Opp. Br. at 44, on the one hand, again, EMI ignores the fact that no one here is disputing that net receipts agreements are enforceable, and, on the other hand, EMI ignores the fact that Jobim involved a plaintiff claiming entitlement to an “at source” arrangement where, moreover, the language of the relevant contract expressly suggested that payments to affiliates could be deducted, without anyone having raised the affiliate vs. unaffiliated- subpublisher distinction at issue here. For all these reasons, Jobim in no way helps EMI. While EMI, as described above, grossly overstates the authority in its favor, it incorrectly minimizes the import of the decisions that support plaintiff’s position in this case. EMI attempts to distinguish the decisions in Croce v. Kurnit, 737 F.2d 229 (2nd Cir. 1984), and Nolan v. Sam Fox Publishing Co., 499 F.2d 1394 (2nd Cir. 1974), on the premise that no one in those cases challenges the legitimacy Subpublishing Agreements to its foreign affiliate and subsidiaries; rather, Songs of Universal, Inc. merely licensed its rights to its foreign affiliates and subsidiaries under an inter-company agreement”) — the affiliate fees would be deducted before the royalty split between the domestic publisher and the artist was made. 38 of “net receipts” provisions. See EMI’s Opp. Br. at 47, 49. Of course, as plaintiff has repeatedly stressed, despite EMI’s blatant attempt to misrepresent his claim, plaintiff is likewise not challenging and has never challenged “net receipts” provisions as such; his challenge is to the unscrupulous manner in which EMI is trying to apply the “net receipts” provision in this case to double-dip in royalty revenue both through the substitution of itself in place of unaffiliated foreign subpublishers and by charging a far-above-market rate for its own foreign subpublishing services. The Croce and Nolan cases wholly support plaintiff’s position in this respect. When the publisher (Blendingwell) in the Croce case tried to do essentially the same thing EMI is doing here by having a (in that case, domestic) subpublisher take 25% off the top prior to splitting the rest, the court ruled that “the term ‘net sums actually received by Blendingwell’ must be construed to include also sums that Blendingwell constructively received.” Croce, 737 F.2d at 234 (emphasis added). Just as in Croce, fees received by EMI’s own foreign affiliates are constructively received by EMI itself. EMI, in other words, has simply attempted to enlarge its own share of royalties at plaintiff’s expense by pretending that it is not receiving what is retained by its foreign affiliates. This, however, is, for all practical purposes, the same kind of behavior exposed and rejected in Croce. To put this another way, Croce stands for the proposition that 39 “net receipts” — and, still more so, the more pointed “net revenue actually received” language of the Agreement here [R.370] — means exactly what it says, viz., that all the net revenue actually received by EMI must be split with plaintiff, including the revenue constructively received by EMI through other EMI entities based in foreign territories. Only the revenue legitimately paid to other entities at arms’-length may be withheld. Croce relied on the Second Circuit’s prior decision in Nolan, where a publisher had similarly assigned its interest in a song to another publisher in return for that second publisher’s paying a percentage of royalties to the original publisher, out of which diminished total the original publisher would then pay the royaltor’s contractual percentage. Nolan, 499 F.2d at 1314. As Nolan held, however, “under the interpretation of the contract suggested by [the publisher], the continual dilution of earnings payable to [the royaltor] could be achieved through successive assignments.”10 Id. at 1399. Notably, the Nolan court also observed that its “construction of the contract does not reform the agreement in any way, but 10 EMI’s only attempt to distinguish this language fatal to the very principle EMI is trying to advance in the present case is to argue that the concern in Nolan had nothing to do with foreign subpublishers. See EMI’s Opp. Br. at 47, n.28. Indeed, it did not. The point, however, is that the relevant legal principle is indistinguishable: Nolan stands for the proposition that a publisher with whom an artist has a negotiated deal for a certain percentage of royalties cannot dilute that percentage at its sole discretion by funneling it to other entities and pretending that the revenue is then being received by someone else. While the publisher in Nolan sought to dilute the artist’s contractually mandated share of net receipts in a manner that is slightly different from the manner in which EMI has sought to dilute plaintiff’s contractually mandated 50% share of net receipts by assigning a portion of its income to affiliated foreign entities, the same legal principle articulated by the Second Circuit in Nolan applies with equal force to both cases. 40 is more likely in keeping with the intentions of the parties than is [the publisher’s] reading.” Id. This is precisely the case here. Far from trying to rewrite the Agreement or turn it into an “at source” arrangement, plaintiff is attempting to enforce the Agreement in a manner consistent with the original intent of the “net receipts” language, the obvious goal of which was to permit the publisher to deduct from the amount to be split between itself and plaintiff certain legitimate expenses, viz., market-rate foreign subpublishing fees negotiated with independent subpublishers in those foreign markets; it is completely inconsistent with that purpose to have EMI retain, through its affiliates, an above-market 50% share of foreign publication royalties prior to splitting the remainder between itself and plaintiff. Thus, despite EMI’s effort at distortion, the judicial authority that has considered issues related to those now before this Court weighs heavily in plaintiff’s favor. No court has held that a “net receipts” deal entails, permits or contemplates deducting above-market fees paid to a publisher’s own foreign affiliates, while courts have endorsed the essence of the same proposition plaintiff here advances, viz., that “net receipts” deals were never intended to give the publisher unfettered discretion to dilute the royaltor’s share by choosing to employ its own subsidiary or affiliated entities to shield from the 50/50 royalty split 41 mandated in the contract large portions of the total pool of publishing revenue that it constructively receives. IV. PLAINTIFF’S IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING CLAIM WAS NOT WAIVED AND SHOULD BE PERMITTED TO SURVIVE As is the case with respect to plaintiff’s allegation that EMI has its affiliates or subsidiaries charging an inflated rate for foreign subpublishing collections, with respect to plaintiff’s allegation that EMI has, at a minimum, violated the covenant of good faith and fair dealing implicit in every contract under New York law, EMI has no sound response on the substance and, as such, seeks to suggest the claim was somehow waived. That argument fails. On the merits, EMI — contradicting plaintiff’s claim that it is diluting plaintiff’s negotiated share of royalties and increasing its own share by charging double or more for its foreign subpublishing services as compared to what would be charged in an arms’-length arrangement — simply asserts that it has always paid/charged 50% for foreign subpublishing. See EMI’s Opp. Br. at 55. Plaintiff has already discussed at Argument §II.B. above why EMI’s alleged “undisputed documentary evidence” to this effect fails to show anything of the sort as to EMI itself, much less as to the market as a whole, and that point is beyond dispute. See also Tractebel Energy Marketing, Inc. v. AEP Power Marketing, Inc., 487 F.3d 89, 42 98 (2nd Cir. 2007) (“‘In determining whether a party has breached the obligation or covenant of good faith and fair dealing, a court must examine not only the express language of the parties’ contract, but also any course of performance or course of dealing that may exist between the parties.’ ‘Thus, whether particular conduct violates or is consistent with the duty of good faith and fair dealing necessarily depends upon the facts of the particular case, and is ordinarily a question of fact to be determined by the jury or other finder of fact’” (internal citations omitted)). As plaintiff has explained in his opening brief in this Court, EMI’s double-dipping in foreign royalties completely vitiates the negotiated 50/50 split of royalties set forth in the Agreement, and thus, “ha[s] the effect of destroying or injuring the right of the other party to receive the fruits of the contract.” Dalton v. Educational Testing Serv., 87 N.Y.2d 384, 389, 663 N.E.2d 291 (1995) (holding, in addition, that the implied covenant of good faith and fair dealing includes “any promises which a reasonable person in the position of the promise would be justified in understanding were included”). Thus, if the challenged conduct as a whole does not reflect a plain breach of contract, and is considered technically consistent with the contract, some of that conduct (in particular, paying itself above-market rates), nonetheless, at the absolute least, is conduct antithetical to the parties’ bargain and plaintiff’s rights, such that it is a clear breach of the implied covenant of good faith and fair dealing. See, e.g., Duration Mun. Fund, L.P. v. J.P. Morgan Secs. Inc., No. 603486-2008, 2009 WL 2999201, at *1 (Supr. Ct. N.Y. Co. 43 Sept. 16, 2009), aff’d, 908 N.Y.S.2d 684 (1st Dep’t 2010) (“New York courts have repeatedly affirmed that a party may be in breach of an implied duty of good faith and fair dealing, even if it is not in breach of its express contractual obligations, when it exercises a contractual right as part of a scheme to realize gains that the contract implicitly denied or to deprive the other party of the fruit of its bargain” (collecting cases)); Hirsch v. Food Resources, Inc., 24 A.D.3d 293, 296, 808 N.Y.S.2d at 621-22 (1st Dep’t 2005) (“The exercise of an apparently unfettered discretionary contract right breaches the implied obligation of good faith and fair dealing if it frustrates the basic purpose of the agreement and deprives plaintiffs of their rights to its benefits”). As noted in plaintiff’s opening brief, EMI itself has virtually conceded the validity of this claim in arguing in its briefing in the Appellate Division that plaintiff would have a remedy for a violation of the implied covenant if EMI were to increase the royalty percentage it has decided to pay its own entities even further, from the current far-above-market rate of 50% to an even-further-above- market rate 75% or 90%. See Pl.’s Br. at 53-54 & EMI App. Div. Br. at 48-49 (stating that “[w]ith respect to Ellington’s contention that there is nothing to stop the supposedly diabolical EMI Mills from further increasing the foreign subpublisher fee to 75% or even 90% …, Ellington would have a readily available remedy were EMI to do such a thing” and then explaining that this remedy would be “asserting breach of the covenant of good faith and fair dealing, which is 44 implicit in every contract under New York law”). If such a claim would, as EMI concedes, be viable were EMI to go to 75% or 90%, there is no conceptual reason that it is not valid now, when EMI has gone to 50% (as compared to the market rate of 15%-25%). Yet, despite the fact that EMI itself raised and offered this claim in its briefing in the Appellate Division, it now asserts plaintiff waived the claim by not having raised it earlier. First, plaintiff has always claimed and still claims that the conduct at issue is a pure breach of contract, and caselaw has held that there is no need to raise, in the alternative, a separate claim for breach of the covenant of good faith and fair dealing because that covenant is implicit in every agreement under New York law. See, e.g., JPMorgan Chase Bank, N.A. v. IDW Group, LLC, No. 08 Civ. 9116, 2009 WL 321222, at *5 (S.D.N.Y. Feb. 9, 2009) (“Generally, ‘[u]nder New York law, parties to an express contract are bound by an implied duty of good faith, “but breach of that duty is merely a breach of the underlying contract.” ’ Fasolino Foods Co., 961 F.2d at 1056 (quoting Geler v. National Westminster Bank USA, 770 F. Supp. 210, 215 (S.D.N.Y. 1991)). See Alter v. Bogoricin, No. 97 Civ. 0662(MBM), 1997 WL 691332, at *7 (S.D.N.Y. Nov. 6, 2007) (dismissing good faith and fair dealing claim because ‘the covenant of good faith and fair dealing is not distinct from the underlying contract, and therefore, as a general rule, the cause of action alleging breach of good faith is duplicative of a cause of action alleging breach of contract’) (citations and internal quotation marks 45 omitted). Typically, ‘raising both claims in a single complaint is redundant, and courts confronted with such complaints under New York law regularly dismiss any freestanding claim for breach of the covenant of fair dealing.’ Jordan v. Verizon Corp., No. 08 Civ. 6414(GEL), 2008 WL 5209989, at *7 (S.D.N.Y. Dec.10, 2008) (collecting cases and dismissing claim for breach of implied covenant of good faith and fair dealing without leave to replead)”).11 Thus, plaintiff’s position is simply that the breach of contract claim should not be dismissed because, if the challenged conduct as a whole is not in plain breach of the contract, at least some of the conduct at issue (the use of above-market rates, in particular) is, at the very least, a breach of the covenant of good faith and fair dealing implicit in every contract under New York law because it nonetheless “exercises a contractual right as part of a scheme to realize gains that the contract implicitly denied or to deprive the other party of the fruit of its bargain.” Duration Mun. Fund, L.P., 2009 WL 2999201, at *1. 11 Because a breach of the implied covenant claim may be maintained in addition to a breach of contract claim where it is not duplicative of the breach of contract claim by virtue of being based on a distinct factual premise, see, e.g., JPMorgan Chase Bank, N.A., 2009 WL 321222, at *5 (“to simultaneously plead breach of contract and implied covenant claims under New York law, a plaintiff must allege an implied duty that is consistent with the express contractual terms, but base its implied covenant theory on allegations that are distinct from the factual predicate for its contract claims”), plaintiff also can argue separately that EMI’s decision to avail itself of the contractual language intended to allow it to deduct costs of paying independent foreign subpublishers to, instead, pay its own affiliates, i.e., itself, is a pure breach of contract, while the further decision to increase the rate at which it pays those publishers above the market rate, thereby diluting plaintiff’s share of royalties, is a breach of the implied covenant; but because plaintiff believes the latter factual predicate also gives rise to a straightforward breach of contract claim, he sees the breach of implied covenant claim simply as an alternative basis for recovery. 46 But second, in any event, the sufficient pleading or argument of a breach of the implied covenant as a legal theory for recovery is simply an issue of law that cannot be waived on appeal. See, e.g., Chateau D’If Corp. v. City of New York, 219 A.D.2d 205, 209, 641 N.Y.S.2d 252, 254 (1st Dep’t 1996) (“The failure to raise the issue on the original motion does not bar this Court’s review. ‘“Where, as here, a party does not allege new facts but, rather, raises a legal argument’ which appeared upon the face of the record and which could not have been avoided ... if brought to [the opposing party’s] attention at the proper juncture,” the matter is reviewable.’ (Gerdowsky v Crain’s N. Y. Bus., 188 AD2d 93, 97.) In such circumstances, raising such an issue for the first time on appeal does not prejudice the opposing party’s legal position in any respect. Because the record on appeal is sufficient for its resolution and the issue is determinative, it should be reviewed”); Delgado v New York City Bd. of Educ., 272 A.D.2d 207, 708 N.Y.S.2d 292 (1st Dep’t 2000) (same). The lack of prejudice to EMI in this case is still more apparent because EMI raised the prospect of this claim in its own papers on appeal before the Appellate Division. Thus, the implied covenant claim has clearly not been waived by plaintiff and should be considered by this Court as an alternative ground upon which the conduct at issue might be redressed. 47 V. THE ISSUE OF “AFFILIATES” CANNOT BE RESOLVED ON THIS PRE-DISCOVERY MOTION TO DISMISS In response to plaintiff’s argument that the express inclusion of EMI’s “affiliates” within the definition of “Second Party” in the Agreement’s Preamble [R.367] presents yet another, alternative and express basis on which EMI may not decline to split with plaintiff revenue its own affiliates collect, EMI has suggested — as it did in the courts below — that the “affiliates” language refers only to those affiliates of Mills Music in existence in 1961, when the Agreement was executed. Though the language contains no such qualification, but rather, refers generally and simply to “affiliates,” to support this strained reading of the language on this pre-discovery motion to dismiss, EMI tries to parse the internal logic of the Agreement to suggest that those affiliates were, per the Agreement, transferring various rights and making various representations that only existing affiliates could make. See EMI Br. at 57-61. As described below, however, none of EMI’s logical casuistries help its cause or help it escape the reality that important factual questions as to the scope of the “affiliates” language remain for discovery and for a trier of fact to resolve. First, many of the provisions EMI cites in support of its argument require EMI to offer strained readings of those provisions that beg the very question to be answered by this Court in this case in addressing this secondary argument in favor of plaintiff’s position — whether “affiliates” as used in the 48 Agreement means only the then-existing affiliates of Mills Music. For instance, EMI suggests that the payment obligation imposed on EMI by paragraph 8 of the Agreement has to apply, by its nature, only to domestic entities, not to foreign affiliates, because those entities did not have the direct payment obligation. See EMI’s Opp. Br. at 60-61. Of course, one of the basic points of this case is that plaintiff contends that when those entities are affiliated with EMI or are EMI subsidiaries, and therefore, part of EMI itself, any revenue they receive is “revenue actually received” by EMI, so that this revenue should have been split with and remitted to plaintiff. As such, EMI’s claim that such entities have never done that does not in any way help its case. 12 Perhaps most importantly, however, EMI’s blanket assertion that “affiliates” has to refer to Mills Music affiliates that were around in 1961 12 EMI also relies on Justice Schweitzer’s decision in a related case for certain of its arguments regarding affiliates, trying to present this decision as some sort of independent victory on EMI’s part. However, as plaintiff noted in its opening brief, after EMI sent a copy of Justice Fried’s decision in this case to Justice Schweitzer, Justice Schweitzer’s decision in the related case had many of the same key passages appearing in Judge Fried’s decision reproduced verbatim. In an exercise aimed solely and transparently at inflaming, EMI suggests that plaintiff’s pure observation of fact on this score is somehow “disparaging,” “unfounded,” “baseless” and “offensive.” EMI’s Opp. Br. at 9, 10, n.3. EMI has, here as elsewhere, substituted strident rhetoric and barbed adjectives for actual argument, as it has in no way refuted what is plainly evident when one compares the two decisions, as plaintiff did in his opening brief. See id. at 31, n.12. Of course, plaintiff neither said nor even implied that Justice Schweitzer has done anything inappropriate. Court decisions quote and copy other court decisions as a matter of course. Rather, plaintiff has only pointed out that Judge Schweitzer’s decision, issued in short order after Judge Fried’s and reproducing key passages thereof, should not be considered an independent triumph by EMI, but rather, an instance where, after EMI’s motion in the related case had already been fully submitted to Justice Schweitzer, EMI forwarded a copy of Justice Fried’s decision to Justice Schweitzer, whereupon it was essentially adopted by Justice Schweitzer in a manner that does not indicate his decision should be read as a distinct and independent precedent. 49 inevitably raises the fact issue of whether there were any such affiliates, foreign affiliates in particular, and why, if there were any, they were not expressly mentioned in the Agreement. The Agreement includes, within the definition of “Second Party” in the Agreement’s Preamble, “MILLS MUSIC, INC., a New York corporation, AMERICAN ACADEMY OF MUSIC, INC., GOTHAM MUSIC SERVICE, INC., and their predecessors in interest, and any other affiliate of Mills Music, Inc.” [R.367 (emphasis added)]. Thus, assuming these (apparently domestic) named entities (American Academy of Music, Inc. and Gotham Music Service, Inc.) are affiliates of Mills Music, this further reference to “any other affiliate[s] of Mills Music,” but not a single one is mentioned by name or even listed in any attached schedule. This plainly raises the question whether there were any such affiliates in 1961 (foreign or otherwise). More, this reference to “any other affiliate” with not a one being mentioned by name suggests vehemently that this particular clause refers to those that may come to exist in the future (and that there were no such “other” affiliates then-existing to name). EMI certainly has not argued there were any such other affiliates in any of its papers or in any of the materials in the Record (as it surely would have done had there been any). The only obvious conclusion is that this language is meant to be a forward-looking catch-all, to allow future affiliates of Mills Music to benefit from, as well as be subject to, the Agreement, just as EMI has stepped into Mills Music’s shoes. 50 Indeed, it is by virtue of the fact that EMI, at some point, acquired Mills Music (and later turned Mills Music into “EMI Mills”) that EMI has gained any rights to the musical compositions at issue here. If the “affiliates” language were not forward-looking, it is not clear EMI could enjoy the rights it presently enjoys. All of this, in any event, remains for discovery to resolve. There is no basis on which this Court can foreclose the inquiry or deem definitively that the “affiliates” language refers only to then-existing affiliates on the current Record consisting, in almost all respects, of material EMI itself chose to include as exhibits on its pre-discovery motion to dismiss. Significantly, the caselaw cited by EMI on this point does not support its argument. VKK Corp. v. National Football League, 244 F.3d 114 (2d Cir. 2001) and Budget Rent A Car Sys. v. K&T, Inc., Civ. A. No. 2:05-CV-3655, 2008 WL 4416453 (D.N.J. Sept. 23, 2008), are the same two cases EMI has relied upon in its papers in the courts below, and plaintiff already specifically anticipated and distinguished these two summary judgment decisions in its opening brief in this Court. See id. at 61-62. In brief, both are summary judgment decisions, both limited to their facts on a fully developed record, with one considering the meaning of the term “affiliates” in the context of a backward-looking release rather than a forward-looking music publishing agreement like the one at issue here, see VKK Corp. at 130, while the other simply contains no discussion of the term “affiliates” 51 at all. See Budget Rent A Car Sys., 2008 WL 4416453, at *4. There is no actual authority in EMI’s favor on this issue. Conversely, EMI does not so much as mention in its brief the caselaw plaintiff has cited, see id. at 62-63, for the proposition that the meaning of the term “affiliates” in an agreement is almost always a question of fact that depends on matters such as the context of the relevant agreement, i.e., whether an agreement is a backward-looking release, as in the VKK Corp. case EMI cites or a forward- looking agreement like the music publishing contract at issue in this present case, whether the industry is static or constantly changing, like the music industry here, whether, as noted above, there, in fact, were any other affiliates of Mills Music in 1961 and a host of other factual questions not amenable to resolution at this stage of the case. For these reasons, EMI cannot be permitted to prevail on this issue on its pre-discovery motion to dismiss. Conclusion For the foregoing reasons, this Court should reverse the decisions of the courts below that completely failed to honor the intentions of the parties to the contract at issue by interpreting a common contractual provision in music publishing agreements to permit a massive wealth transfer from musical artists to 52 music publishers. Dated: January 21, 2014 SCAROLA MALONE & ZUBATOV LLP By _______________________________ Richard J.J. Scarola Alexander Zubatov Attorneys for Plaintiff-Appellant 1700 Broadway 41st Floor New York, NY 10019 Tel.: (212) 757-0007