Paul M. Ellington, Appellant,v.EMI Music, Inc., et al., Defendants, EMI Mills Music, Inc., Respondent.BriefN.Y.September 11, 2014To be Argued by: DONALD S. ZAKARIN (Time Requested: 15 Minutes) APL-2013-00260 New York County Clerk’s Index No. 651558/10 Court of Appeals of the 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. BRIEF FOR DEFENDANT-RESPONDENT PRYOR CASHMAN LLP Attorneys for Defendant-Respondent EMI Mills Music, Inc. 7 Times Square New York, New York 10036 Tel.: (212) 421-4100 Fax: (212) 326-0806 Date Completed: January 3, 2014 CORPORATE DISCLOSURE STATEMENT Pursuant to Section 500.1(f) of the Rules of the Court of Appeals, Defendant-Respondent EMI Mills Music Inc. hereby states that (i) it is indirectly owned by an investor group comprised of Sony Corporation of America, the Estate of Michael Jackson, Mubadala Development Company PJSC, Jynwel Capital Limited, GSO Capital Partners LP and David Geffen; and (ii) it is affiliated with various music publishing and related entities under the same common control. i TABLE OF CONTENTS TABLE OF AUTHORITIES ................................................................................... iii COUNTER-STATEMENT OF QUESTIONS PRESENTED .................................. 1 PRELIMINARY STATEMENT ................................................................................. 7 STATEMENT OF FACTS ...................................................................................... 12 Background ......................................................................................................... 12 The Parties .......................................................................................................... 14 Mills Music and Foreign Subpublishers ............................................................. 16 The 1961 Agreement .......................................................................................... 19 Commencement of This Action .......................................................................... 20 Ellington’s Allegations ....................................................................................... 21 The Trial Court Order ......................................................................................... 24 The Edward Ellington Et Al. Action .................................................................. 29 The Appellate Division Unanimously Affirms .................................................. 30 ARGUMENT ........................................................................................................... 33 I. THE UNDISPUTED DOCUMENTARY EVIDENCE CONCLUSIVELY ESTABLISHES THAT EMI MILLS DID NOT BREACH THE 1961 AGREEMENT ................. 35 A. The 1961 Agreement Unambiguously Sets Forth EMI Mills’ Contractual Obligations to Plaintiff ................................. 37 B. Applicable Case Law Refutes Ellington’s Interpretation of the 1961 Agreement ................................................. 42 ii TABLE OF CONTENTS, Continued C. Discovery Is Irrelevant and Unnecessary ............................................ 50 II. ELLINGTON HAS NEITHER PLEADED NOR PRESERVED A GOOD FAITH AND FAIR DEALING CLAIM, WHICH IN ANY EVENT IS MERITLESS .............................. 53 III. FOREIGN SUBPUBLISHERS THAT ARE EMI COMPANIES ARE NOT “AFFILIATES” UNDER THE 1961 AGREEMENT ............. 56 A. The Term “Affiliates” Includes Only Then-Existing U.S. Music Publishing Affiliates Of Mills Music, Inc. ....................... 56 B. Ellington’s Affiliate Argument Is Also Contrary To Settled Law ...... 62 CONCLUSION ........................................................................................................ 64 iii TABLE OF AUTHORITIES CASES PAGE(s) Aaron Pitter & Co. v. Segal, 173 A.D.2d 159 (1st Dep’t), modified on other gds., 174 A.D.2d 439 (1st Dep’t 1991) .................................................................. 52 Auerbach v. Bennett, 47 N.Y.2d 619 (1979) .................................................................................... 52 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) ............................................................ 42, 43, 52, 57 Biondi v. Beekman Hill House Apt., Corp., 257 A.D.2d 76 (1st Dep’t 1999), aff’d, 94 N.Y.2d 659 (2000) ..................... 34 Brooke Group v. JCH Syndicate 488, 87 N.Y.2d 530 (1996) .................................................................................... 38 Budget Rent A Car System v. K&T, Inc., Civ. A. No. 2:05-CV-3655 (WJM) (RJH), 2008 U.S. Dist. LEXIS 73024 (D.N.J. Sept. 23, 2008) ................................. 62 Croce v. Kurnit, 737 F.2d 229 (2d Cir. 1984) ...................................................................passim Elezaj v. Carlin Constr. Co., 89 N.Y.2d 992 (1997) .............................................................................. 41, 53 Ellington v. EMI Mills Music, Inc., No. 112368/2010, 36 Misc. 3d 1228(A), 2011 N.Y. Misc. LEXIS 6631 (Sup. Ct. N.Y. Co. Oct. 21, 2011) .... 29, 30, 58 Evans v. Famous Music Corp., 1 N.Y.3d 452 (2004) ................................................................................ 43, 44 Goldman v. Metro. Life Ins. Co., 5 N.Y.3d 561 (2005) ................................................................................ 33, 34 iv CASES PAGE(s) Greenfield v. Philles Records, Inc., 98 N.Y.2d 562 (2002) .............................................................................. 38, 40 Guggenheimer v. Ginzburg, 43 N.Y.2d 268 (1977) .................................................................................... 34 Hecker v. State, 20 N.Y.3d 1087 (2013) ............................................................................ 41, 53 Held v. Kaufman, 91 N.Y.2d 425 (1998) .................................................................................... 34 Jobim v. Songs of Universal, 732 F. Supp. 2d 407 (S.D.N.Y. 2010) ......................................... 44, 45, 46, 57 Kass v. Kass, 91 N.Y.2d 554 (1998) .................................................................................... 41 Leon v. Martinez, 84 N.Y.2d 83 (1994) ...................................................................................... 34 Maas v. Cornell University, 94 N.Y.2d 87 (1999) ...................................................................................... 34 Morgenthow & Latham v. Bank of N.Y. Co., 305 A.D.2d 74 (1st Dep’t 2003) .................................................................... 34 In re New York City Asbestos Litigation, 41 A.D.3d 299 (1st Dep’t 2007) .................................................................... 63 Nolan v. Williamson Music, Inc., 300 F. Supp. 1311 (S.D.N.Y. 1969), aff’d, 499 F.2d 1394 (2d Cir. 1974) ................................................................................................. 46 Nolan v. Sam Fox Publishing Co., 499 F.2d 1394 (2d Cir. 1974) .................................................................. 46, 47 v CASES PAGE(s) Reape v. New York News, Inc., 122 A.D.2d 29 (2d Dep’t 1986) ..................................................................... 39 River View Associates v. Sheraton Corp. of America, 33 A.D.2d 187 (1st Dep’t 1969), aff’d, 27 N.Y.2d 718 (1970) ..................... 39 Silvester v. Time Warner, Inc., 1 Misc. 3d 250 (Sup. Ct. N.Y. Cty. 2003), aff’d, 14 A.D.3d 430 (1st Dep’t 2005) .................................................................... 38 Simkin v. Blank, 19 N.Y.3d 52 (2012) ...................................................................................... 34 SoHo Alliance v. New York City Board of Standards & Appeals, 95 N.Y.2d 437 (2000) .............................................................................. 41, 54 Sutton v. East River Sav. Bank, 55 N.Y.2d 550 (1982) .................................................................................... 39 Tougher Heating & Plumbing Co. v. State, 73 A.D.2d 732 (3d Dep’t 1979) ..................................................................... 39 VKK Corp. v. NFL, 244 F.3d 114 (2d Cir. 2001) .......................................................................... 62 Weatherly v. Universal Music Publishing Group, 125 Cal. App. 4th 913 (Cal. App. Dep’t Super. Ct. 2004) ............................ 52 STATUTES CPLR § 3211(a)(1) ............................................................................................passim (a)(7) ............................................................................................. 13, 24 vi BOOKS PAGE(s) Al Kohn & Bob Kohn, Kohn On Music Licensing (4th Ed. 2009) .......................... 49 Donald S. Passman, All You Need To Know About The Music Business (7th Ed. 2009) ................................................................................................ 49 DICTIONARY Black’s Law Dictionary 67 (9th Ed. 2009) .............................................................. 62 Black’s Law Dictionary 661 (9th Ed. 2009) ............................................................ 63 Defendant-Respondent EMI Mills Music Inc. (“EMI Mills” or “Respondent”), by its attorneys Pryor Cashman LLP, respectfully submits this brief in opposition to the appeal of plaintiff-appellant Paul M. Ellington (“Ellington”) from the Decision and Order of the Appellate Division, First Department, dated May 2, 2013, Slip Op. 9028, No. 651668/10, affirming an Order of the Supreme Court, New York County (Fried, J.), dated October 5, 2011 and entered in the Office of the County Clerk on October 11, 2011 which dismissed Ellington’s Amended Complaint in its entirety with prejudice.1 COUNTER-STATEMENT OF QUESTIONS PRESENTED 1. Where undisputed documentary evidence – a 1961 United States copyright renewal publishing agreement – clearly and unambiguously provides for the payment of royalties to the songwriter Duke Ellington (and his successors) at the rate of 50% of the “net revenues” received by the United States publisher of the Ellington compositions from their publication outside the United States, did the lower courts err in dismissing Paul Ellington’s putative class action complaint which claimed that where foreign publication was undertaken by foreign subpublishers related to EMI Mills, such foreign subpublishers were not entitled to 1 The Supreme Court Order is found at pages 12-22 of the Record on Appeal (the “Record”). The First Department Decision and Order is found at page 599-604 of the Record. Citations to the Record are referenced herein as “R.__.” Citations to Appellant’s Brief are referred to herein as “App. Br. __.” 2 retain any subpublishing fees whereas unrelated subpublishers were entitled to retain such subpublishing fees. The Trial Court and the First Department unanimously and correctly answered this question in the negative, rejecting Ellington’s claim in its entirety, and dismissing his Amended Complaint with prejudice. 2. Where Ellington’s Amended Complaint made no claim that EMI Mills had ever increased the subpublishing fees being charged by any foreign subpublishers after some of the foreign subpublishers were acquired by companies related to EMI Mills and Ellington first argued, in opposition to EMI Mills’ motion to dismiss, that there could be a question of fact as to whether EMI Mills had increased subpublishing fees, and where, in response to such assertion, EMI Mills provided undisputed documentary evidence establishing that the applicable foreign subpublishing agreements entered into by Mills Music Inc. in the 1920’s and 1930’s granted the foreign subpublishers the right to receive and retain 50% of the income earned in their territories and obligated them to remit the remaining 50% to Mills Music, Inc. for the life of copyright; and further where the undisputed documentary evidence establishes that since acquiring Mills Music, Inc. in 1990, EMI Mills has consistently and openly accounted to and paid Ellington (and his predecessors) based on the exact same 50% of the foreign income provided in those applicable foreign subpublishing agreements, which were entered into by 3 Mills Music, Inc. decades before it was acquired by EMI and remain in effect to this day without alteration, can Ellington avoid dismissal of his Amended Complaint in which no such claim is made, by falsely claiming, on appeal, contrary to the undisputed documentary evidence, that EMI Mills “switch[ed]” from paying “market-rate subpublishing percentages of 15-25%” to a “non-market 50% foreign subpublishing percentage?” The First Department correctly noted that Ellington made no claim in the Amended Complaint that EMI Mills ever altered the percentage being received and retained by the foreign subpublishers. Such claim was first raised in Ellington’s opposition to EMI Mills’ motion, where Ellington alleged only that there was a question of fact as to whether such alteration had been made, which, in Ellington’s appeal to the First Department and again in his appeal to this Court, Ellington has now made the centerpiece of his appeal and pretends such assertion is an established fact. Had such claim been pleaded, it too would have been dismissed as it is refuted by undisputed documentary evidence conclusively showing that EMI Mills’ foreign subpublishers, both those affiliated with EMI Mills and those unaffiliated with EMI Mills, pursuant to “life of copyright” subpublishing agreements entered into in the 1920’s and 1930’s, are and always have been entitled to receive and retain 50% of the income earned in their territories and the 4 supposed pre-existing 15-25% subpublishing fee never existed and has been completely invented out of whole cloth by Ellington. 3. Where the undisputed documentary evidence – the 1961 copyright renewal agreement – plainly and unambiguously applied solely to the original United States music publishers of the Duke Ellington’s songs because it granted to those publishers the copyrights in those songs for the U.S. renewal term and therefore the defined term “Second Party” in the agreement referred only to those then-existing United States music publishing affiliates of Mills Music, Inc. which were the original U.S. publishers of the Ellington works, did the Trial Court and the First Department correctly reject Ellington’s claim that the term “Second Party” included foreign subpublishers which were not affiliated with Mills Music, Inc. at the time of the 1961 agreement and which had no United States copyright rights and were not granted any United States renewal copyright rights by Duke Ellington under the 1961 agreement? The First Department and the Trial Court unanimously and correctly rejected Ellington’s claim in its entirety finding that the term ”Second Party” did not and could not include foreign subpublishers that were not affiliated with Mills Music, Inc. at the time of the 1961 Agreement and dismissed his Amended Complaint with prejudice. 5 4. Where, decades after the 1961 agreement was executed, both Mills Music, Inc. and some of the foreign subpublishers that, in the 1920’s and 1930’s, had been granted life of copyright rights to subpublish the Duke Ellington songs in their territories by Mills Music Inc., were acquired in a series of separate acquisitions by EMI Group, Plc. (then a United Kingdom public company), can such subsequently acquired foreign subpublishers retroactively be deemed to be affiliates of EMI Mills within the defined meaning of the term “Second Party” in the 1961 agreement despite the fact that it is undisputed that they are not United States renewal copyright owners under the 1961 agreement and were also not affiliated with Mills Music, Inc. at the time of the 1961 agreement? The Trial Court, affirmed unanimously by the First Department, consistent with applicable law and undisputed documentary evidence, properly rejected Ellington’s attempt to retroactively make foreign subpublishers affiliates of Mills Music, Inc., where such foreign subpublishers had no affiliation with Mills Music, Inc. at the time that the 1961 agreement was executed and which were not United States renewal copyright owners with direct agreements with Duke Ellington as required by the term “affiliate” as used in the 1961 agreement. The Trial Court, unanimously affirmed by the First Department, therefore rejected Ellington’s attempt to convert the 1961 agreement from a “net revenue” agreement into an 6 “at source” agreement 50 years after it was executed and dismissed his amended complaint with prejudice. 5. Where the undisputed documentary evidence establishes that, for decades, EMI Mills consistently and openly disclosed to Ellington, his counsel and/or his designee the identity of all of the foreign subpublishers (including those related to EMI Mills) and that all of the foreign subpublishers were receiving and retaining 50% of the income earned in their territories and that the songwriter (and his successors) were being accounted to and paid their contractual share of royalties based on the net revenues received by EMI Mills in the United States from the foreign subpublishers (i.e. the 50% remitted by the foreign subpublishers); and where EMI paid to Ellington and/or his designee the contractual share of royalties due, may Ellington maintain a fraudulent concealment claim based upon an allegation that EMI Mills concealed the manner in which it calculated royalties owed to Ellington? The Trial Court, unanimously affirmed by the First Department, consistent with applicable law and undisputed documentary evidence, correctly dismissed Ellington’s fraudulent concealment claim finding that because EMI Mills paid Ellington strictly in accordance with the requirements of the 1961 agreement, there was nothing to conceal. 7 PRELIMINARY STATEMENT Ellington appeals from the First Department’s unanimous affirmance of the trial court’s dismissal of his Amended Complaint based on undisputed documentary evidence pursuant to CPLR 3211(a)(1). Confronted with the dismissal of the claims he actually pleaded in his Amended Complaint, Ellington added a new claim in his brief to the First Department, the claim that EMI Mills surreptitiously increased the foreign subpublishing fees from a supposed pre- existing 15% or 25% to 50% after it acquired some of the foreign subpublishers. This unpleaded (and demonstrably false) claim has become the centerpiece of Ellington’s appeal to this Court, but for good measure, he now adds yet another new claim never pleaded in his Amended Complaint, a claim that EMI Mills breached the covenant of good faith and fair dealing when it supposedly increased the foreign subpublishing fees.2 Beyond the fact that neither of these claims is pleaded in the Amended Complaint, they are also conclusively refuted by undisputed documentary evidence. In fact, there is an inverse relationship between the factual basis for Ellington’s new claims and the stridency of his denunciations of EMI Mills as he advances these claims. It is therefore not surprising that Ellington’s repeated accusations 2 Ellington suggests that EMI Mills invited and endorsed such claim. In fact, what EMI Mills said is that had EMI Mills altered the subpublishing rates to Ellington’s detriment – which the undisputed documentary evidence establishes never happened – Ellington would not be without remedy. Ellington has no such claim precisely because EMI Mills made no such alteration in subpublishing rates. 8 against EMI Mills – “double dipping” and “scam” are two favorites – have not a single Record reference. It is not for lack of discovery that the evidence is lacking. It is because the accusations are completely fabricated and are refuted by undisputed documentary evidence. The actual undisputed documentary evidence establishes that EMI Mills has not altered, one iota, the manner in which plaintiff Ellington (and his father and grandfather before him) were accounted to and paid since 1961 under the 1961 agreement (the “1961 Agreement”). [R.367-395]. Rather, just as Justice Fried recognized (despite Ellington’s current protestations to the contrary), it is Ellington, not EMI Mills, who is trying to change the terms of the 1961 Agreement from a “net revenues” agreement into an “at source” agreement in order to increase his share of royalties. Justice Fried and the First Department were not distracted by Ellington’s substitution of vehement denunciations of EMI Mills for viable pleaded claims. They recognized that Ellington’s claims are purely a pretext: Ellington is trying to use EMI Group, Plc.’s acquisition of Mills Music, Inc. in 1990 and its separate acquisition of various foreign subpublishers as a basis for converting a “net revenues” agreement that has been in effect for 50 years into an “at source” agreement. [R.570-594]. It’s not that Ellington objects to all subpublishers 9 keeping the 50% fees provided for in the 1961 Agreement. He simply believes that where the subpublisher is now an EMI company, it should get nothing. As the Trial Court and the First Department determined, Ellington’s claims, pleaded and unpleaded, are conclusively refuted by the 1961 Agreement. The applicable case law – in which “net revenues” agreements, including those involving affiliated subpublishers, have repeatedly been upheld – has been misrepresented or misunderstood by Ellington. In addition to the clear and unequivocal terms of the 1961 Agreement, every other piece of documentary evidence – the foreign subpublishing agreements and decades of royalty statements rendered twice annually to Ellington – conclusively refutes Ellington’s claims. His “evidence” consists solely of snippets from books about the music industry that he takes out of context, and even they refute his claims. Contrary to the disparaging (and unfounded) accusation that Justice Schweitzer simply cribbed Justice Fried’s decision, both Supreme Court Justices read the same contract and independently concluded that the 1961 Agreement is a “net revenue” agreement and not an “at source” agreement. Both Justices also concluded that EMI Mills consistently accounted and paid in accordance with the “net revenue” requirements of the 1961 Agreement. [R.115-121]. Finally, both Justices concluded that “affiliates” as defined in the 1961 Agreement did not include foreign subpublishers acquired decades after the 1961 Agreement was 10 signed. The First Department’s Appellate Decision fully agreed with both Justice Fried and Justice Schweitzer.3 The centerpiece of Ellington’s appeal – conspicuously absent from the Amended Complaint – is his repeated assertion that foreign subpublishers were only paid 15% to 25% under the 1961 Agreement until EMI Mills supposedly increased the subpublishing fee to 50% to “skim” additional money through its affiliated foreign subpublishers. There is not a single Record reference for this oft- repeated contention because it is simply made up. The undisputed documentary evidence establishes that Mills Music, Inc. entered into foreign subpublishing agreements decades before EMI acquired Mills Music, Inc., that those agreements granted the subpublishers the right to subpublish Duke Ellington’s songs for life of copyright and entitled them to retain 50% of the income earned in their territories (not the fictional 15% or 25%). When EMI Group acquired some of those foreign subpublishers, it inherited those life of copyright agreements. EMI Mills has not altered those agreements or the rates set forth in those agreements. [R.78, R.353, R.570-594]. 3 Ellington has not suggested that the First Department simply cribbed Justice Fried’s decision, making no independent determination. His accusation regarding Justice Schweitzer is baseless and offensive. 11 Both the Trial Court and the First Department rejected Ellington’s attempt to convert the 1961 Agreement into an “at source” agreement. Ellington pretends that both the First Department and Justice Fried somehow misunderstood his argument and that he was not really seeking to convert the 1961 Agreement into an “at source” agreement. To be clear, both Justice Fried and the First Department were entirely correct. The gravamen of Ellington’s argument is that where a foreign subpublisher is related to EMI Mills, it is not entitled to any subpublishing fee. That is, pure and simple, converting a “net revenues” agreement into an “at source” agreement.4 Both Justice Fried (as well as Justice Schweitzer) and the First Department recognized that there was no basis in the 1961 Agreement for distinguishing between affiliated and unaffiliated foreign subpublishers (rejecting the notion that the term “Second Party” included foreign subpublishers that were unrelated to 4 While Ellington appears to be willing to “limit” his “at source” demand to only those foreign subpublishers that are EMI companies, he provides no explanation for why a non-EMI subpublisher should be compensated for its subpublishing services while an EMI subpublisher, providing exactly the same services, should be required to render its services for free. [R.603]. Ellington’s share of income is not diminished by the identity of the foreign subpublisher. Had he, instead of EMI, acquired some of the foreign subpublishers, he, rather than EMI, would receive 50% of the foreign income by virtue of this acquisition and EMI would have no basis for objection to his consequent receipt of both this 50% of the foreign income and his 50% share of the “net revenues” received by EMI in the United States (for a total of 75% of the foreign income). 12 Mills Music, Inc. at the time that the 1961 Agreement was executed).5 Ellington therefore invented his unpleaded claim that EMI Mills covertly increased the foreign subpublishing fees from 15% or 25% to 50% as a pretextual basis for distinguishing between unaffiliated foreign subpublishers and affiliated foreign subpublishers. This claim, no matter how many times Ellington repeats it, exists in thin air only and is contrary to the undisputed documentary evidence. The First Department correctly affirmed the Trial Court’s dismissal of the Amended Complaint based on undisputed documentary evidence pursuant to CPLR § 3211(a)(1). Ellington’s appeal should be dismissed and the Order appealed from should be affirmed in its entirety. STATEMENT OF FACTS Background The case below was based on the alleged breach of the 1961 Agreement between Duke Ellington, his wife Edna Ellington, his son Mercer Ellington and his sister, Ruth James (identified collectively as the “First Parties”) and a group of related United States music publishing companies: Mills Music, Inc., American 5 The lack of contemporaneous affiliation of the foreign subpublishers in 1961 is only one reason why they are not within the meaning of “Second Party.” Definitionally, no foreign subpublisher, even if affiliated with Mills Music, Inc. in 1961, could possibly be a “Second Party” because the term “Second Party” only refers to United States publishing entities related to Mills Music, Inc. that directly acquired United States copyrights in songs written by Duke Ellington and which were being granted United States renewal term copyrights by the 1961 Agreement. Foreign subpublishers do not own United States copyrights. Foreign subpublishers do not have direct agreements with Duke Ellington. Their agreements and their rights derive from subpublishing agreements with Mills Music, Inc. and other United States copyright owners. 13 Academy of Music, Inc., Gotham Music Service, Inc. and their predecessors-in- interest and other then-existing affiliates of Mills Music, Inc. (identified collectively as the “Second Party”). [R.367]. The thrust of the claim Ellington pleaded in his Amended Complaint (which is quite different than the “claim” that is the centerpiece of Ellington’s appeal) is that EMI Mills allegedly breached the 1961 Agreement (and the alleged agreements of an undefined class of other writers) by paying royalties based on the net revenues received by EMI Mills in the United States after foreign subpublishers affiliated with EMI Mills received and retained a share of the foreign income. [R.70-72, ¶¶ 18-31]. The Amended Complaint studiously omitted the 1961 Agreement and failed to mention that the 1961 Agreement expressly provided for payment of foreign income on a “net revenues” basis. The Amended Complaint also failed to mention that the 1961 Agreement was a United States copyright renewal agreement and did not differentiate between affiliated and unaffiliated foreign subpublishers. EMI Mills moved to dismiss the Amended Complaint pursuant to CPLR §§ 3211(a)(1) and (7). [R 75-395]. Based on undisputed documentary evidence, the Trial Court dismissed the amended complaint in its entirety, finding that the 1961 Agreement was clearly and unambiguously a net revenues agreement which did not distinguish between affiliated and unaffiliated subpublishers; that net revenue 14 agreements have been fully enforced by the courts, including where the subpublishers are affiliated with the U.S. publisher; and, to the extent that Ellington relied on the term “Second Party” in the 1961 Agreement – which Ellington admitted was only a “secondary” or “back-up” argument [R.33, 36, 41- 42] – on its face and consistent with applicable law, such term’s reference to “affiliates” referred solely to affiliates of Mills Music, Inc. in existence at the time of the 1961 Agreement. [R.13-22]. The 1961 Agreement recognized and ratified the pre-existing subpublishing agreements, maintaining the same “net receipts” provision applicable to foreign subpublication of the the Duke Ellington songs. Ellington appealed. The First Department unanimously affirmed the Trial Court’s dismissal of the complaint [R.599-604], holding that the 1961 Agreement was unambiguous and drew no distinction between affiliated and unaffiliated foreign subpublishers. [R.601-02]. It further held that Ellington’s remaining arguments were not pleaded in the Amended Complaint and were, in any event, unavailing. [R.603-04]. The Parties Plaintiff Ellington is the grandson and one of the heirs of the legendary Duke Ellington. [R.67, ¶ 4]. Pursuant to unrelated agreements between Ellington and his siblings, Ellington is entitled a 40% share of royalties payable to the First 15 Parties under the 1961 Agreement while his siblings are entitled to 60% of the royalties. [R.70, ¶ 17]. EMI Mills, the sole named defendant in this action that both exists and has a contractual relationship with Ellington, is the successor-in-interest to Mills Music, Inc. Mills Music, Inc. was indirectly acquired by EMI Group, Plc.6 in 1990 as part of EMI Group, Plc.’s acquisition of Filmtrax, which had previously acquired Mills Music. [R.78, ¶ 5]. Ellington also named “EMI Music Publishing” and “EMI Music Publishing North America” as defendants. However, these are names, not legally existing entities (and Ellington would have no claim against them if they did exist).7 [R.79, ¶¶ 7-9; R.522-26, ¶¶ 41-55]. EMI Mills is one of approximately 100 United States-based music publishing corporations that were (at the time this case was brought) indirectly owned by EMI Group, Ltd. [R.79, ¶ 7]. All of these companies are generically and collectively referred to as “EMI Music Publishing.”8 [Id]. “EMI Music Publishing” is simply a short hand way of referring to the music publishing business conducted by the United States-based EMI publishing corporations,. [Id]. “EMI Music Publishing North America,” appears to simply be 6 EMI Group, Plc., a United Kingdom publicly traded corporation, was the predecessor to EMI Group, Ltd. It was taken private in a 2007 acquisition by Terra Firma, a Channel Islands private equity group [R.78-79, ¶¶ 5-6]. 7 Neither purported entity is listed on the website of the New York Secretary of State or on the website of any other jurisdiction precisely because they do not exist. [R.26, ¶ 54]. 8 For example, EMI Group Ltd.’s website referred to “EMI Music Publishing.” [R.421-24]. 16 a geographic designation for the location of the EMI publishing business being conducted in the United States. [R.79, ¶ 8]. There is no such company. Ellington persists in arguing about these named but non-existent defendants. They do not own or exploit songs, generate royalty income or perform any royalty accounting activities or issue royalty statements. They are names, not entities. Equally important, Ellington has a contract with EMI Mills, not with any of these non-existent named defendants. [R.79, ¶ 9, 522-526].9 Ellington also sued “EMI Music, Inc.,” which does exist but which is a record company with no relationship to Ellington.10 Mills Music and Foreign Subpublishers As documented by the 1961 Agreement, Mills Music, Inc. and its predecessors-in-interest and affiliates had entered into songwriter’s agreements with Duke Ellington pursuant to which they acquired the original United States term copyrights in songs written by Duke Ellington going back to 1927. [R.571, ¶ 3]. To enable the exploitation of Ellington’s compositions outside the United 9 Ellington points to cases in which an “EMI Music Publishing” has been mistakenly named as evidence of its existence and to the common stationery used by all of the EMI Music Publishing companies (including royalty statements), ignoring that the royalty statements actually identify the precise company that has the contractual obligation to account and pay (EMI Mills). Each independent publishing company has its own individual contracts with songwriters and their heirs, one reason (among many) why this case is not suited to class action status. [R.126-270, 524-25, ¶¶ 45-48, 522-26, ¶¶ 41-55]. 10 Ellington actually never served EMI Music, Inc. He did not technically voluntarily drop it from this case as he claims. [App. Br. at 21 n.6]. Ellington seems to feel he deserves credit for not pursuing an entity that has nothing to do with him while insisting on pursuing non-existent entities. 17 States, Mills Music, Inc. and its predecessors-in-interest and affiliates entered into foreign subpublishing agreements with music publishers located in particular foreign territories. [R.571, ¶ 4; see, e.g., R.575-94]. Consistent with standard foreign subpublishing agreements entered into by United States music publishers at the time, the foreign subpublishing agreements entered into by Mills Music, Inc. granted the foreign subpublishers the exclusive right to exploit its copyrighted compositions in given foreign territories for the life of copyright. [R.571, ¶ 4; see, e.g., R.575-94]. The financial terms of the subpublishing agreements were also consistent with the standards of the time, providing the foreign subpublishers with the right to receive and retain 50% of the income earned in their territories, remitting the remaining 50% to Mills Music, Inc. [R.571, ¶ 5; see, e.g., R.575-594]. As provided in the underlying songwriter agreements and the 1961 Agreement, Ellington’s royalties are computed on the 50% share of income received by EMI Mills in the United States (i.e., a “net revenue” or “net receipts” basis of royalty accounting). While Ellington’s Amended Complaint made no claim that EMI Mills had ever altered the terms of the original subpublishing agreements entered into by Mills Music, Inc., in trying to fend off EMI Mills’ motion, Ellington suggested that there might be an issue of fact as to whether EMI Mills had changed the foreign 18 subpublishing fee. 11 [R.403-404]. In response, even though no such claim was pleaded, EMI Mills provided the Trial Court with subpublishing agreements entered into by Mills Music, Inc. with respect to the Duke Ellington compositions, from 1928, 1933 and 1938, covering virtually all of Europe. [R.575-94]. Each of these subpublishing agreements are for life of copyright – which mean they remain operative to this day - and each of them requires the foreign subpublisher to pay to Mills Music (or its affiliates) 50% of the income earned in the subject territories, retaining the other 50% as its fee. [Id.] When EMI Group, Plc. acquired Mills Music, Inc. in 1990, the compositions in Mills Music Inc.’s catalogue, including the Duke Ellington compositions, were thus already subject to long-standing life of copyright subpublishing agreements with many different subpublishers throughout the world. EMI Group’s acquisition of Mills Music Inc. did not alter the terms of those preexisting foreign subpublishing agreements. Similarly, the separate acquisition of some of the subpublishers by EMI Group – with the acquisition price obviously based on the income of these foreign subpublishers – also did not alter the terms of these agreements. EMI Mills remains bound by the terms of these preexisting subpublishing agreements and, 11 By the time this case reached the First Department, this supposed issue of fact had become elevated into an article of faith and it is now the centerpiece of Ellington’s assertions to this Court, presented as if it were fact. It is not only not fact, it is refuted by undisputed documentary evidence. 19 contrary to the fabricated assertions in Ellington’s Brief, has never altered them. [R.572, n. 3; R.573-74, ¶¶ 12-13]. The 1961 Agreement As Justice Fried, Justice Schweitzer, and five Justices of First Department have unanimously found, the 1961 Agreement clearly and unequivocally is a “net receipts” (or “net revenue”) agreement, which was standard in the industry at the time. [R.16-20; R.363, ¶ 27; R.601-02]. The 1961 Agreement unambiguously provided that the First Parties (as defined) would be paid a royalty of 50% (or a portion of 50% if Duke Ellington was a co-author) of the net revenue actually received by the Second Party (as defined) from foreign publication of the songs. [R.364, ¶ 31]. The relevant paragraph of the 1961 Agreement providing for the payment of royalties based on foreign publication is paragraph 3(a): 3. The Second Party agrees to pay or cause to be paid to the First Parties the following royalties: (a) On all copies published, sold and paid for to the Second Party in the United States of America and Canada of the musical compositions covered by this Agreement during the term of the respective copyright in the United States, a royalty of four (4¢) cents for each pianoforte copy sold in the United States and Canada and paid for, and ten (10%) percent of the wholesale selling price after trade discounts for each orchestra arrangement sold in the United States and Canada and paid for, and a sum equal to fifty (50%) percent of the net revenue actually received by the Second Party from synchronization, background, electrical transcription, foreign publication or other exploitation, the use of said compositions by mechanical instruments, such as phonographs, music rolls, the use of the titles, dramatization and literary uses. 20 [R.370, §3(a) (emphases added)]. As established by undisputed documentary evidence, EMI Mills has consistently accounted to and paid Ellington or his predecessors-in-interest (or third parties on his or their behalf) in accordance with the foregoing contractual requirements. [R.117, ¶ 13; R.121, ¶ 23; R.126-270].12 With respect to foreign publication, EMI Mills accounted to and paid Ellington his contractual 50% share of the net revenue actually received by EMI Mills from the foreign subpublishers. [R.119-120, ¶¶ 19-21; R.126-270]. Every single royalty statement rendered by EMI Mills twice a year clearly identified the foreign subpublisher (including the foreign EMI companies), the percentage of income earned in their territory that they were remitting and retaining and exactly how that percentage and dollar amount translated into the royalties paid to Ellington. [R.117-124, ¶¶ 14-28; R.126-270]. Commencement of This Action Ellington originally commenced this action as an individual action on September 21, 2010. [R.54-59]. After EMI Mills answered the Complaint [R.60- 12 EMI Mills provided the Court with random pages from various royalty statements going back to 1994 to show that it always consistently reported and accounted to Ellington (or his designee) and that it openly and clearly disclosed not only that foreign EMI companies were subpublishers but also exactly the share of the foreign income they were retaining (50%). As Ms. Michele Shpetner stated, there is no reason to doubt that this is precisely how Mills Music, Inc. accounted and paid since 1961 since the prior accounting data was inputted into EMI’s system. [R.121, ¶23]. More to the point, the accountings by EMI Mills were exactly consistent with the terms of the subpublishing agreements so it is obvious that Mills Music, Inc. would have paid on the same basis. [R.575-594]. 21 64], Ellington filed an Amended Complaint on December 2, 2010, asserting his claims as putative class claims. [R.65-74]. Presumably hoping to maximize the potential number of class members (despite having no contractual basis for asserting a claim against any entity other than EMI Mills), Ellington added the two non-existent entities “EMI Music Publishing” and “EMI Music Publishing North America,” and the record company EMI Music, Inc. as defendants. [R.67, ¶ 2; R.78-79, ¶¶ 4-9; R.274, ¶ 8; R.352-53, ¶¶ 2-5]. Having named non-existent entities and a record company as defendants, none of which he had any contractual or other relationship with in any event, Ellington then collectively defined all of the named defendants as “EMI” (presumably to obscure the fact that he lacked standing to assert a claim against any entity other than EMI Mills) [R.67, ¶ 2], and claimed to represent a sweeping class that cannot possibly be defined or identified. [R.68, ¶ 7; R.82-83, ¶¶ 15-18; R.272-274, ¶¶ 3-7; R.354-362, ¶¶ 6-25]. Ellington’s Allegations Ignoring the plain language of the 1961 Agreement he claims was breached, Ellington’s Amended Complaint asserts that the collectively defined “EMI” improperly paid him because he was paid based on the net amount EMI Mills received from foreign EMI subpublishers after they deducted their fee rather than based on the gross amount that these foreign subpublishers received. [R.70, ¶ 22 18].13 As Justice Fried found, this claim was a transparent attempt to rewrite the 1961 Agreement from a “net receipts” contract into an “at source” agreement. [R.18-20]. Ellington also asserted, without reference to a single songwriter agreement (including his own), that members of his fanciful class of unknown and undefined members were similarly improperly paid. [R.70, ¶ 20]. Ellington also invented a claim that EMI Mills “fraudulently concealed” that it was reporting “foreign publishing revenues without including the percentage that has already been deducted by its own foreign affiliates.” [R.72, ¶¶ 29-30]. While Justice Fried and the First Department rejected these claims because there is nothing to conceal when one pays in accordance with contractual requirements [R.21], Ellington’s fraudulent concealment claim is nonetheless staggering in terms of its utter falsity. It is conclusively refuted by volumes of undisputed and indisputable documentary evidence.14 The Record contains undisputed documentary evidence establishing that, no less than twice a year for decades, EMI Mills rendered royalty statements to Ellington, his counsel in this case and/or Ellington’s designee which clearly and 13 While Ellington suggests that Paragraph 18 of his Amended Complaint asserts that EMI Mills supposedly increased the foreign subpublishing fee as a scam to skim additional income from Ellington, there is nothing in that paragraph or any other paragraph that pleads any such claim. The only claim pleaded is that where an EMI entity is the foreign subpublisher, it is not entitled to a subpublishing fee. 14 Ellington admits in his present appeal brief that the purpose of his fraudulent concealment claim is to claim additional damages by circumventing the six-year statute of limitations applicable to contract claims. [App. Br. at 29]. 23 unambiguously identify every single foreign subpublisher (including all of the territorial EMI subpublishers). Every one of the royalty statements clearly identifies the percentage (and corresponding dollar amount) of foreign income that every single foreign subpublisher (including the EMI foreign subpublishers) reported to EMI Mills (and the exact percentage and dollar amount that each subpublisher retained) and provide clear information, column by column, showing how Ellington’s own royalty income was computed and how it related to and was derived from each category of income, including the foreign subpublishing income. [R.118-119, ¶¶ 14-20; R.126-270]. Moreover, the undisputed documentary evidence also includes Ellington’s own auditor’s report establishing that he had no trouble determining the identity of the EMI foreign subpublishers and both the exact percentage and amount of the subpublishing fee that they charged. [R.556-59].15 Nothing was concealed and, as Justice Fried noted in dismissing these claims, since EMI Mills paid in accordance with the 1961 Agreement, there was nothing to conceal. [R.21]. 15 Ellington’s auditor simply argued that, notwithstanding longstanding subpublishing agreements providing for a 50% subpublishing fee, a lower percentage fee should be charged, consistent with the range of fees in contemporary subpublishing agreements. In effect, the auditor acknowledged that the contracts provide for “net receipts” accountings. 24 The Trial Court Order EMI Mills16 moved to dismiss the Amended Complaint based on CPLR §§ 3211(a)(1) and (a)(7). [R.75-76]. EMI Mills’ motion attached the 1961 Agreement and showed that it expressly provided for payment based on the “net revenue actually received” by Mills Music, Inc. from “foreign publication” of Duke Ellington’s songs. [R.362, ¶ 26; R.367-395]. EMI Mills’ also provided years of royalty statements rendered to Ellington (or his attorneys or designees) which conclusively refuted his fraudulent concealment claim. [R.118-119, ¶¶ 14- 20; R.126-270]. Finally, with respect to Ellington’s attempt to convert his individual contract claim (based on a non-form, negotiated agreement from 1961) into a class action, EMI Mills demonstrated not only that Ellington had no individual claim but that his purported class was incapable of being defined or identified. [R.82-83, ¶¶ 15-18; R.272-274, ¶¶ 3-7; R.354-362, ¶¶ 6-25]. At oral argument, Justice Fried first stated that he tended to agree with EMI Mills that Ellington’s class claim “borders almost on the frivolous” and then stated that the class action “strikes me as completely frivolous.” [R.24]. After affording Ellington full argument, Justice Fried issued his Decision and Order dismissing the Amended Complaint in its entirety. [R.12-22]. Justice Fried found the 1961 Agreement to be an unambiguous “net receipts” agreement that makes “no 16 Though technically only EMI Mills moved to dismiss, the motion addressed the non- existence of EMI Music Publishing and EMI Music Publishing North America. 25 distinction in the royalty payment terms based on whether the foreign subpublishers are affiliated or unaffiliated with the United States publisher.” [R.18-19]. Justice Fried also held that “[t]he mere fact that such agreements are no longer common is simply not a valid reason to rewrite a clear and unambiguous contract,” explicitly rejecting Ellington’s argument – recycled here – that “no reasonable person would agree to a net receipts agreement, and that such agreements are now recognized as scams.” [R.20].17 Justice Fried also rejected Ellington’s argument – which was nowhere alleged in the Amended Complaint but raised for the first time in opposition to EMI Mills’ motion as a “secondary argument” [R.401-02, ¶¶ 12-13, n.4; R.33, 36, 41-42] – that the term “Second Party” in the 1961 Agreement included future affiliates (including foreign subpublishing affiliates). [R.20-21]. As a matter of law and based on its review of the plain language of the 1961 Agreement, the Trial Court found that the term “Second Party” in the 1961 Agreement “clearly demonstrates the parties’ intent that the term means Mills Music’s affiliates in 1961.” [R.21]. 17 In fact, Ellington’s “scam” argument against “net receipts” agreements is based solely on selected and distorted snippets from two books written by music industry lawyers (Don Passman and Al Kohn). These books are not evidence and Ellington, in any event, misrepresents their contents. The books acknowledge that “net receipts” agreements are common and valid agreements and state only that “at source” agreements, which have achieved greater popularity in recent years, are more favorable to a writer. Nowhere do these books contend that “net receipts” agreements are “scams.” 26 In fact, as the terms of the 1961 Agreement make clear, Justice Fried’s decision provided but one (of many) bases on which the 1961 Agreement refutes Ellington’s attempt to expand the meaning of “affiliate” (as it is used in defining the term “Second Party”) to include not only entities that only became related to Mills Music, Inc. (or its successors-in-interest) decades after the 1961 Agreement was executed but also foreign subpublishers, which are not, by definition, even capable of being “affiliates” within the meaning of “Second Party” in the 1961 even had they been affiliated with Mills Music, Inc. at the time. Relying on Paragraph 12 of the 1961 Agreement, Justice Fried noted that Mills Music, Inc. could not possibly represent that it “had the authority to bind entities that did not yet exist or were not yet affiliated with the United States publisher.” [R.21]. Justice Fried also noted that case law specifically established that “[a]bsent explicit language demonstrating the parties’ intent to bind future affiliates of the contracting parties, the term “affiliates” includes only those affiliates in existence at the time that the contract was executed.” [Id.] While Justice Fried did not have to go any further than this to dismiss Ellington’s “secondary” “affiliate” argument, the plain text of the 1961 Agreement conclusively refutes any possible argument that any foreign subpublisher could be considered an “affiliate” of Mills Music, Inc. and therefore be within the meaning of “Second Party.” The 1961 Agreement was an agreement by which Duke 27 Ellington conveyed the United States renewal term copyrights to the existing owners of the original term copyrights. [R.367-395]. Foreign subpublishers are not owners of original term United States copyright or renewal term copyrights. Subpublishers obtain their subpublishing rights from Mills Music, Inc. and its affiliates, who were originally granted worldwide copyright rights from Duke Ellington pursuant to individual songwriter agreements. That the 1961 Agreement is purely a United States copyright renewal agreement between Duke Ellington and his heirs, on the one hand, and Mills Music, Inc. and various United States publishing companies related to it, on the other hand, is made clear in the “Whereas” clauses. Further, Paragraph 1 provides for the conveyance of the United States renewal copyrights from First Party to Second Party and Paragraph 2 authorizes Second Party to renew the United States copyrights in Duke Ellington’s name. Paragraph 5 provides Duke Ellington’s reconfirmation of the ownership of the original United States Copyrights in Duke Ellington’s songs by the various Mills Music, Inc. companies and affiliates. Paragraph 8 imposes on Second Party the obligation to account to and pay Duke Ellington (or First Party, if he is no longer alive). [R.367-395]. Simply put, foreign subpublishers, by definition, are not “affiliates” of Mills Music, Inc. for purposes of the defined term “Second Party.” Rather, “Second Party” consists solely of United States music publishing companies with which 28 Duke Ellington had entered into agreements conveying (among other things) the original term of United States copyright in his songs and to which, by the 1961 Agreement, he was conveying his United States renewal term copyrights. Foreign publishers, even if they were then affiliated with Mills Music, Inc., are not within the meaning of “Second Party” because they had no direct agreements with Duke Ellington, did not own the original United States copyrights in his songs and were not being conveyed the United States renewal copyrights by the 1961 Agreement. Foreign subpublishers do not pay Duke Ellington. They pay the United States copyright owners in accordance with their sub-publishing agreements, and the United States copyright owners, in turn, pay Ellington, based on their “net receipts” received from the foreign subpublishers, pursuant to their agreements with Ellington. As noted above, Justice Fried dismissed Ellington’s fraudulent concealment claim because the 1961 Agreement “permits defendants to employ the very method of royalty calculation of which Ellington now complains.” [Id.] Finally, because Ellington had no “legally viable” individual claims, Justice Fried dismissed Ellington’s class claims. [R.22].18 18 As EMI Mills demonstrated in its motion to dismiss, even if Ellington had an individual claim, his claims could not be asserted as class claims [R.82-83; R.354-362; R.526-529.] Justice Fried agreed that Ellington’s class claims were “frivolous.” [R.24]. 29 The Edward Ellington Et Al. Action Ellington’s siblings commenced their own individual action against EMI Mills at or about the same time that this action was commenced, making the same basic allegations made by Ellington in this action. Some two weeks after Justice Fried dismissed Ellington’s amended complaint, Justice Schweitzer issued his own Decision and Order, Ellington v. EMI Mills Music Inc., No. 112368/2010, 36 Misc. 3d 1228(A), 1228A, 959 N.Y.S.2d 88, 2011 N.Y. Misc. LEXIS 6631 (Sup. Ct. N.Y. Co. Oct. 21, 2011), which similarly dismissed Ellington’s siblings complaint. They did not appeal. Justice Schweitzer’s decision devoted more attention to the analysis of the term “Second Party” in the 1961 Agreement and reached the same conclusion as Judge Fried after an independent review of the 1961 Agreement. Justice Schweitzer found that: (i) the 1961 Agreement “makes no distinction between affiliated and unaffiliated foreign subpublishers;” id. at *4(ii) the fact that “net receipts” agreements “may no longer be considered common industry practice is simply not a valid reason to rewrite a clear and unambiguous contract;” id. at *7, and, (iii) the term “Second Party” “refers only to Mills Music, Inc. affiliates that existed at the time the Agreement was entered into.” Id. at *13.19 19 Based on his analysis, Justice Schweitzer also did not have to closely examine the text of the 1961 Agreement to also determine that “Second Party” could not possibly include foreign subpublishers, whether affiliated or unaffiliated with Mills Music, Inc. 30 Justice Schweitzer also rejected the same fraudulent concealment claim asserted by Ellington’s siblings, finding that the royalty statements sent to them and to their counsel since 2003 and available for inspection since 1990 “openly disclosed EMI’s method of accounting and payment.” Id. The Appellate Division Unanimously Affirms Ellington appealed Justice Fried’s trial court decision to the First Department. As he does in this Court, Ellington did not consider himself constrained on appeal by either the arguments he preserved below or even by the claims he has pleaded. Thus, Ellington’s appeal raised for the first time the argument that the 1961 Agreement was ambiguous and therefore was precluded from pre-discovery dismissal. In addition, despite the fact that such claim is nowhere pleaded, Ellington argued that EMI Mills had unilaterally increased the subpublishing fees of foreign subpublishers once they became affiliated with EMI Mills from 15%-25% to the allegedly “above market” rate of 50%.20 Rejecting Ellington’s arguments in their entirety, the First Department unanimously affirmed Justice Fried’s decision. The First Department acknowledged that “‘net receipts’ arrangements were standard when the [1961 Agreement] was executed,” and that, over time, independent foreign subpublishers 20 As noted, this contention first surfaced in Ellington’s opposition to EMI Mills’ motion as a supposed question of fact. [R.403-404]. By the time of the appeal to the First Department, what was previously only presented as a “question of fact” had been converted into holy writ. 31 were acquired by EMI Mills to the effect that “fees that previously had been charged by independent foreign subpublishers under the [1961 Agreement] are now being charged by subpublishers owned by EMI Mills.” [R.601]. Nonetheless, the Court agreed with Justice Fried that the distinction between an affiliated and an unaffiliated foreign subpublisher is immaterial: [T]he motion court declined to read into the royalty payment terms any distinction between affiliated and unaffiliated foreign subpublishers inasmuch as the contracting parties themselves chose not to make such a distinction. We affirm. * * * [T]he agreement…requires EMI Mills to pay Ellington’s heirs 50% of the net revenue actually received from foreign publication of Ellington’s compositions. ‘Foreign publication’ has one unmistakable meaning regardless of whether it is performed by independent or affiliated subpublishers. Given the plain meaning of the agreement’s language, plaintiff’s argument that foreign subpublishers were generally unaffiliated in 1961, when the agreement was executed, is immaterial. * * * [T]he complaint sets forth no basis for plaintiff’s apparent premise that subpublishers owned by EMI Mills should render their services for free although independent subpublishers were presumably compensated for rendering identical services. [R.601-03]. Thus, the core foundation of Ellington’s Amended Complaint – that EMI Mills’ foreign affiliates are not entitled to be paid subpublishing fees simply because they are affiliated with EMI Mills – was explicitly rejected by the First 32 Department, just as it was previously rejected by two Supreme Court Justices below (and just as it has been rejected by every other court, state and federal, that has considered the issue). After noting that Ellington had failed to make the argument to the Trial Court, the First Department also rejected Ellington’s argument that the 1961 Agreement is ambiguous, finding that the operative term from the 1961 Agreement – “foreign publication” – has “one unmistakable meaning,” which drew no distinction between publication by EMI Mills’ affiliates or independent third- parties. [R.602-03]. The Court also rejected Ellington’s unpleaded claim that EMI Mills raised the percentage of revenues retained by its affiliated subpublishers, specifically noting that the Amended Complaint “contains no allegation of any change in the basis for payment of royalties, i.e. 50% of the net revenue derived from foreign publication.” [R.603]. Finally, the First Department affirmed the Trial Court’s determination that the defined term “Second Party” encompassed “only the parties named therein and ‘other affiliates of Mills Music, Inc.’ that were in existence at the time the agreement was executed.” [R.603].21 The Court confirmed that “Second Party” 21 Again, the clear terms of 1961 Agreement exclude from the meaning of the term “Second Party” any foreign subpublishers as it plainly applies solely to United States publishing companies being granted the United States renewal term copyrights in Duke Ellington’s songs. 33 did not “include foreign subpublishers that had no existence or affiliation with Mills Music at the time of contract.” [R.603-604].22 The decisions below are consistent with well-established precedent. The dismissal of claims at the pleading stage based on undisputed documentary evidence is an appropriate means of resolving cases on the merits at an early stage where the documentary evidence conclusively refutes the claims. The documentary evidence here does just that. Beyond bombastic rhetoric and endlessly repeated denunciations of EMI Mills for engaging in a non-existent scam, Ellington’s Amended Complaint is exactly what Justice Fried and the First Department perceived it to be: an attempt, 50 years after the fact, to rewrite the 1961 Agreement to convert it from a “net revenues” agreement into an “at source” agreement. Courts do not rewrite contracts. It is respectfully submitted that Justice Fried’s Decision and Order and the Appellate Division’s affirmation thereof should be, in all respects, upheld. ARGUMENT Under CPLR § 3211(a)(1), dismissal of a complaint “may be granted where documentary evidence submitted conclusively establishes a defense to the asserted claims as a matter of law.” Goldman v. Metro. Life Ins. Co., 5 N.Y.3d 561, 571 22 Though Ellington repeatedly claims that the Appellate Division ignored or did not review his arguments [App. Br. at 6, 8, 9, 34, 40, 41, 58], in fact the court clearly stated that it had “considered [Ellington’s] remaining arguments and found them unavailing.” [R.604.] 34 (2005) (citations and quotations omitted); see also Held v. Kaufman, 91 N.Y.2d 425, 430-431 (1998) (quoting Leon v. Martinez, 84 N.Y.2d 83, 88 (1994)). While it is true that, in general, the court must “accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory,” Goldman, 5 N.Y.3d at 570-71 (emphases added, citation and quotations omitted), claims unsupported by any allegations of fact or only by “allegations consisting of bare legal conclusions as well as factual claims flatly contradicted by documentary evidence,” are not accorded such deference. Simkin v. Blank, 19 N.Y.3d 46, 52 (2012) quoting Maas v. Cornell Univ., 94 N.Y.2d 87, 91 (1999); accord Morgenthow & Latham v. Bank of N.Y. Co., 305 A.D.2d 74, 78 (1st Dep’t 2003) (“in those circumstances where the legal conclusions and factual allegations are flatly contradicted by documentary evidence, they are not presumed to be true or accorded every favorable inference”) (citing Biondi v. Beekman Hill House Apt., Corp., 257 A.D.2d 76, 81 (1st Dep’t 1999), aff’d, 94 N.Y.2d 659 (2000)) (other citations omitted). Where such documentary evidence is introduced, the criterion instead becomes “‘whether the proponent of the pleading has a cause of action, not whether he has stated one.’” Morgenthow & Latham, 305 A.D.2d at 78 (quoting Guggenheimer v. Ginzburg, 43 N.Y.2d 268, 275 (1977)). 35 Here, the undisputed documentary evidence (most specifically, but not exclusively, the governing 1961 Agreement) conclusively refutes Ellington’s claims. Consistent with the indisputable facts drawn from the documentary evidence, considered in light of applicable case law, and canons of contractual interpretation, Ellington’s claims, pleaded and unpleaded, have no basis. Moreover, Ellington’s gambit of inventing and advancing new claims for the first time on appeal cannot save Ellington’s Amended Complaint from dismissal. The unpleaded claims too are refuted by undisputed documentary evidence already in the Record. Ellington’s request to take discovery as to claims he has not pleaded and which EMI Mills has already shown to be inconsistent with undisputed documentary evidence bespeaks desperation. But it is also a deeply troubling request because it asks this Court to save Ellington’s Amended Complaint, not because there is a claim pleaded and not because Ellington, in good faith believes he has a claim, but because Ellington hopes to find a claim through the pursuit of discovery. That is not what discovery is for. I. THE UNDISPUTED DOCUMENTARY EVIDENCE CONCLUSIVELY ESTABLISHES THAT EMI MILLS DID NOT BREACH THE 1961 AGREEMENT Ellington’s amended complaint can be reduced to a single assertion: where there is a “net revenues” agreement, if, at some point in time, a foreign subpublisher and the United States original copyright owner should come to be 36 related, the contract terms become irrelevant and the songwriter (or his heirs) becomes entitled to be paid based on the gross receipts of the foreign subpublisher (i.e. “at source”) and not based on the net revenues of the United States copyright owner after the foreign subpublisher has deducted its fee for its services. There is no decisional authority for this argument. On the contrary, all of the case law rejects it. There also is no contractual support for this argument. As Justice Fried and the First Department recognized, the 1961 Agreement makes no such distinction and Ellington simply wants to convert the 1961 Agreement into an “at source” agreement from a “net receipts” agreement and there is no basis for such change. In his actual Amended Complaint (as opposed to the new claim he added in the First Department and the further new claim he has added here), Ellington claimed that EMI Mills breached the 1961 Agreement by “funneling foreign royalties through affiliated subpublishers and allowing such affiliates to retain a percentage of foreign royalties before remitting only the contractual percentage of the lesser amount to plaintiff.” [R.71, ¶ 26]. Stripped of its emotive language, Ellington’s claims that EMI Mills paid him based on the net revenues it received in the United States from its foreign subpublishers, regardless of whether the foreign subpublishers were unrelated or related to EMI Mills. As two Justices of the Supreme Court and five Justices of 37 the Appellate Division have unanimously held, that is exactly what the 1961 Agreement provides: payment based on the “net revenue actually received” by EMI Mills in the United States from “foreign publication.” Ellington’s Amended Complaint was dismissed because, as a matter of law, compliance with an agreement is not a breach of contract. A. The 1961 Agreement Unambiguously Sets Forth EMI Mills’ Contractual Obligations to Plaintiff The 1961 Agreement clearly and unequivocally provides that the “First Parties” are entitled to “a sum equal to fifty (50%) percent of the net revenue actually received by [EMI Mills] from…foreign publication” of the musical compositions listed in schedules annexed to the 1961 Agreement. [R.370, § 3(a) (emphasis added)]. Ignoring the plain language of the 1961 Agreement, Ellington’s Amended Complaint demanded that EMI Mills remit “the entire contractual percentage of total revenue actually received from foreign publishing royalties.” [R.71, ¶ 24 (emphasis added)]. While Ellington pretends that this is not a demand to change the 1961 Agreement from a “net revenues” agreement to an “at source” agreement, it is precisely that. As the Appellate Division and Justices Fried and Schweitzer found, Ellington’s claim is contrary to the clear and unambiguous language of the 1961 Agreement. [R.12-22; R.599-604]. As this Court has repeatedly held, it is a fundamental precept of contract interpretation that agreements are construed 38 according to their plain meaning. Brooke Group v. JCH Syndicate 488, 87 N.Y.2d 530, 534 (1996) (“The words and phrases used by the parties must, as in all cases involving contract interpretation, be given their plain meaning”) (citation omitted); Greenfield v. Philles Records, Inc., 98 N.Y.2d 562 (2002). See also Silvester v. Time Warner, Inc., 1 Misc. 3d 250, 256 (Sup. Ct. N.Y. Cty. 2003), aff’d, 14 A.D.3d 430 (1st Dep’t 2005) (dismissing breach of contract claim asserted by a purported class action plaintiff recording artists against certain recording companies for failure to state a claim) (citing Greenfield). Since “[t]he best evidence of what parties to a written agreement intend is what they say in their writing…a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms.” Greenfield, 98 N.Y.2d at 569 (citation & quotation omitted). Here, the plain language of the 1961 Agreement requires EMI Mills to remit to Ellington (along with his siblings) 50% of the net revenue actually received from foreign subpublishers. [R.370, §3(a)]. 23 The undisputed documentary evidence establishes that EMI Mills consistently accounted to and paid Ellington and his predecessors-in-interest in accordance with the foregoing contractual requirements and has openly and clearly disclosed precisely how it has accounted and paid. [R.117, ¶ 13; R.121, ¶ 23; R.126-270]. The royalty statements rendered 23 Again, where Duke Ellington was a co-author, the 50% royalty would be split equally among the authors. 39 by EMI Mills to Ellington or his designees or his lawyer, twice a year, year after year, are exactly consistent with the 1961 Agreement and are exactly consistent with the terms of the subpublishing agreements entered into by Mills Music, Inc. in the 1920’s and 1930’s, agreements which remain in full force and effect. [R.570- 594] Because his claims are contrary to the plain language of the 1961 Agreement, Ellington invokes a line of cases that stand for the unexceptional proposition that a contract should not be given an irrational interpretation that would defeat the intentions of the parties. See Reape v. New York News, Inc. 122 A.D.2d 29 (2d Dep’t 1986); Sutton v. East River Sav. Bank, 55 N.Y.2d 550 (1982); Tougher Heating & Plumbing Co. v. State, 73 A.D.2d 732 (3d Dep’t 1979); River View Assocs. v. Sheraton Corp. of Am., 33 A.D.2d 187 (1st Dep’t 1969), aff’d, 27 N.Y.2d 718 (1970). The problem here is that Ellington’s argument presumes that the clear language and meaning of the 1961 Agreement is “irrational.” But there is nothing irrational about “net revenues” agreements. Thus, Ellington is actually trying to make these cases stand for the proposition that a Court is free to ignore the plain language of a contract and the intent of the parties and interpret a contract 40 completely contrary to its clear language and meaning. These cases stand for no such proposition.24 As both Justice Fried and the First Department found, the 1961 Agreement is clear and unambiguous. Mills Music, Inc. (and EMI Mills) is obligated to pay Ellington royalties based on the “net revenues” received from “foreign publication.” [R.370, § 3(a)]. Nowhere does the 1961 Agreement distinguish as to whether the foreign publication services were performed by companies related to EMI Mills or companies unrelated to EMI Mills. There 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. Rewriting the 1961 Agreement due to the supposed irrationality of interpreting it to provide for the payment of royalties based on the “net revenues” received by EMI Mills from foreign publication has no legal support. The 1961 Agreement has been in effect for more than 50 years and payment on a “net revenues” basis is not only consistent with the clear language of the agreement but as even Ellington admits, “net revenues” agreements were the norm at the time. The mere fact that Ellington now wants to convert the 1961 Agreement into an “at 24 To the extent that these cases, which all precede Greenfield v. Philles Records, Inc., 98 N.Y.2d 562 (2002), could be read as Ellington hopes to read them as permitting a Court to rewrite a contract clear on its face, they would be inconsistent with this Court’s decision in Greenfield. 41 source” agreement because such agreements are more favorable does not render a “net revenues” agreement irrational.25 The 1961 Agreement does not distinguish between affiliated and unaffiliated subpublishers and decisional authority has not distinguished between the right of affiliated and unaffiliated subpublishers to receive and retain a share of subpublishing income. Ellington’s share of royalties is in no respect diminished or increased by the identity of the subpublisher. The undisputed evidence establishes that EMI Mills has not breached the 1961 Agreement and Ellington’s Amended Complaint was properly dismissed.26 25 As he did for the first time in the First Department, Ellington argues in the alternative that the 1961 Agreement is ambiguous. [App. Br. at 51-53]. As the First Department noted, Ellington did not raise this argument before the Trial Court and therefore failed to preserve it on appeal. See Hecker v. State, 20 N.Y.3d 1087, 1087-1088 (2013) (“We have no power to review either the Appellate Division’s exercise of its discretion to reach that issue, or the issue itself”) (citing Elezaj v. Carlin Constr. Co., 89 N.Y.2d 992, 994-995 (1997) (other citations omitted); SoHo Alliance v. New York City Bd. of Stds. & Appeals, 95 N.Y.2d 437, 442 (2000) (rejecting argument “raised for the first time on appeal…before us.”). In any event, “[w]hether an agreement is ambiguous is a question of law for the courts,” Kass v. Kass, 91 N.Y.2d 554, 566 (1998), and here both the Trial Court [R.18], and the Appellate Division [R.602-03], found as a matter of law that the 1961 Agreement’s “net receipts” provision unambiguously refuted Ellington’s claims. 26 As the Trial Court held, because EMI Mills accounted and paid in accordance with the 1961 Agreement, Ellington’s fraudulent concealment claim must also be dismissed as there was nothing to conceal (the Appellate Division did not explicitly discuss Ellington’s fraud claim but its decision on the breach of contract claim necessarily made it “unavailing,” along with the rest of Ellington’s “remaining arguments”). [R.21; R.604]. The fraudulent concealment claim is, in any event, refuted by undisputed documentary evidence, the royalty statements. [R.126-270]. The statements, rendered twice a year for decades, show exactly how Ellington’s royalties are derived, column by column, from the source income. [R.126-270; R.118-19, ¶¶ 17-18; R.515, ¶¶ 14-15]. Ellington’s auditor had no trouble identifying the exact percentage and amount of the subpublishing fee being charged. [R.556-59]. 42 B. Applicable Case Law Refutes Ellington’s Interpretation of the 1961 Agreement Consistent only with an appeal that studiously disregards the actual Record and is premised largely on hyperbole and unpleaded claims that are refuted by undisputed documentary evidence, Ellington ignores all of the decisional authority upholding “net revenues” agreements, including those where, like here, the foreign subpublishers were affiliated with the United States copyright owner. Indeed, because such authority is indistinguishable from this case, Ellington does not even mention the cases relied upon by Justice Fried and the First Department. [R.18-19; R.600; R.603]. Thus, Ellington ignores 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), cited by Justice Fried. [R.19] The Court’s decision in Berns arose in the context of cross-motions for summary judgment and the plaintiffs’ motion to further amend their complaint. Berns, 1999 U.S. Dist. LEXIS 17541, at *16. In that context, the Court directly addressed the “merits” of the proposed pleading. The songwriter agreement in dispute entitled the Berns heirs to “an amount equal to fifty (50%) percent of all net earned sums received and actually retained by [Screen Gems].” Id. at *3. The Berns heirs accused Screen Gems of “dilut[ing] foreign royalties by passing them through layers of EMI-affiliated entities.” Id. at *11. Rejecting a further proposed amended complaint asserting this claim, the 43 Court noted that the songwriter agreement was a “net receipts” agreement entitling the Berns heirs to 50% of the foreign income received by EMI after payment to foreign subpublishers, regardless of whether the foreign subpublishers were affiliated with EMI: [I]n a receipts agreement, the writer is entitled to be paid his share of the foreign income received by the original publisher from foreign subpublishing. For example, if $100 was collected by a subpublisher in the UK, and the British subpublisher retained 50% as its fee, remitting the remaining $50 to the American publisher, under a receipts agreement, the composer would take his share (for ex., 50%) from what the American publisher actually retained, yielding him $25. Id. at *11 n.9. As the Court’s explanation of how “net revenues” agreements operate shows, the foreign subpublisher takes its share (typically 50% of the income earned in its territory), remits the remaining 50% and the writer is paid 50% of the 50% received by the United States copyright owner. Whether the foreign subpublisher is related to the United States copyright owner (as it was in Berns) or unrelated, the economic terms are precisely the same. What Ellington repeatedly labels “double dipping” is simply the foreign subpublisher, related or unrelated, taking its contractual fee for publishing the songs in its territories. Id. at *14. Also nowhere mentioned in Ellington’s brief is this Court’s decision in Evans v. Famous Music Corp., 1 N.Y.3d 452 (2004). While addressing the issue of foreign tax credits, this Court noted that “net receipts” language, substantially 44 identical to the language in the 1961 Agreement, is a “standard term” in songwriter agreements that “establishes a mechanism for calculating the sharing of income received from the exploitation of songs.” Id. at 456, 58. Most compellingly, Ellington completely ignores Jobim v. Songs of Universal, 732 F. Supp. 2d 407 (S.D.N.Y. 2010), a case squarely on point and relied on by both Justice Fried and the First Department. First, as noted by Justice Fried [R.16], Jobim specifically acknowledges that “net receipts” agreements, not “at source” agreements, were consistent with the custom and practice in the music industry at the time that the parties in that case (and here) executed their agreement. Id. at 19. As the First Department pointed out, even Ellington admitted that “net revenues” agreements were “standard when the agreement was executed in 1961.” [R.601] But 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. Depriving a foreign affiliated subpublisher of its entitlement to fees on the same basis as any unaffiliated subpublisher would unfairly penalize affiliated subpublishers and create a windfall for the writer by improperly converting a “net receipts” agreement into an “at source” agreement. 732 F. Supp. 2d at 416. 45 In Jobim, as Ellington does here, plaintiffs claimed that they were entitled to have their royalties calculated “as a percentage of the amount that the Compositions actually generated, i.e. without deducting foreign affiliate fees from the pot.” 732 F. Supp. 2d at 416 (emphasis added). The court determined that the contract was a “net receipts” agreement and noted that the Plaintiffs’ claim “would allow Plaintiffs to collect a greater percentage than Universal since Universal would be forced to absorb all of the foreign affiliate fees,” thus defeating the purpose of a net receipts arrangement and essentially converting the subject agreement into an “at source” contract. Id. Accordingly, the Court rejected the Plaintiffs’ attempt to convert a “net receipts” agreement into an “at source” agreement where the U.S. publisher’s affiliates were the subpublishers. Id. Ellington’s claim here is actually on an even worse footing than that of the plaintiffs in Jobim. Here, the 1961 Agreement is clear on its face and it is undisputed that it is a “net revenues” agreement. In Jobim, the parties also disputed the nature of the agreement, which is why the Court looked to custom and practice at the time that the parties had entered into their contract. But the relief requested is identical. Just as the plaintiffs in Jobim sought to convert a “net receipts” agreement into an “at source” agreement where Universal used its foreign affiliates as subpublishers, so too does Ellington ask this Court to convert the 1961 Agreement into an “at source” agreement where an EMI company serves as the 46 foreign subpublisher. [See R.20, stating there is “not a valid reason to rewrite a clear unambiguous contract”]. As both Justice Fried and the First Department expressly found: “the contracting parties made no distinction…based on whether the foreign subpublishers are affiliated or unaffiliated with the United States publisher…[and] it would be improper…to read such a distinction into the contract.” [R.19; R.601- 02]. As the Court in Jobim noted, such a result would effectively gut a “net receipts” agreement and impose the cost of subpublishing exclusively on EMI Mills. Jobim, 732 F. Supp. 2d at 416. There is no basis in law or fact for altering the terms of an agreement that has been in place for 50 years. Having ignored the very case law relied on by the courts below, Ellington then builds his argument on the complete misrepresentation of two cases he contends support his position: Croce v. Kurnit, 737 F.2d 229 (2d Cir. 1984), and a case cited in Croce, Nolan v. Sam Fox Publ’g Co., 499 F.2d 1394, 1399 (2d Cir. 1974).27 Properly read, neither Croce nor Nolan provides any support for Ellington. On the contrary, they are consistent with the position of EMI Mills. Nolan simply stands for the proposition that where a writer is entitled to be paid a percentage of the income received by the original United States publisher, 27 The decision below in this case was Nolan v. Williamson Music, Inc., 300 F. Supp. 1311 (S.D.N.Y. 1969), aff’d, 499 F.2d 1394 (2d Cir. 1974). The appeal was brought by Sam Fox Publishing, Co. and, accordingly, the name of the case in the District Court is different than in the Second Circuit. 47 that original publisher cannot sell its rights as original publisher for a royalty and then only pay the writer a percentage of the royalty. In Nolan, Fox assigned its ownership of the United States copyright to Williamson and then paid Nolan based on a percentage of the royalty it was paid by Williamson rather than Williamson paying Nolan based on its “net receipts” as the copyright owner. The court found that Williamson effectively became the original U.S. publisher and that Nolan was entitled to be paid based on Williamson’s net receipts (including its net receipts from foreign subpublishers), not based on the royalty paid to Fox. Nolan, 499 F.2d at 1399. Nolan did not challenge the legitimacy of “net revenue” agreements or the obligation to pay based on net receipts from foreign subpublishers. Nolan did not dispute that he was only entitled to be paid based on the “net revenue” received by the original United States publisher from foreign subpublishers, whether affiliated or not. His only challenge was to the identity of the original U.S. publisher.28 Ellington similarly misrepresents Croce. In Croce, Blendingwell Music, Jim Croce’s publisher, was obligated to pay Croce “50% of the net sums actually received.” 737 F.2d at 231. Blendingwell issued a license to ABC Records to 28 The Second Circuit’s concern in Nolan – that “continual dilution of earnings payable to Nolan could be achieved through successive assignments” – related to the assignment of the publishing rights by the original U.S. publisher (Fox) to Williamson in return for a royalty. 499 F.2d at 1399. That concern had nothing to do with the “net receipts” provision relating to foreign subpublishers which was unquestioned in the case. 48 manufacture Jim Croce recordings and also entered into a co-publishing arrangement with Wingate, a publishing affiliate of ABC, pursuant to which Blendingwell agreed to pay Wingate 50% of the publishing income, after payment to Croce of his royalties. Id. at 232. As the Croce court explained, when record companies other than ABC paid record royalties to Blendingwell, Croce was paid 50%, Blendingwell kept 25% and paid the remaining 25% to Wingate. However, as an administrative convenience, when ABC Records paid royalties, it paid its publishing affiliate, Wingate, 25% directly and remitted the remaining 75% to Blendingwell. Id. Consistent with the songwriter agreement, between 1972 and 1980, Blendingwell properly credited Croce (and then his widow) with his share of the income being paid directly to Wingate (in effect, grossing up the revenue so that Croce would be paid his full 50% of the income inclusive of the ABC income paid directly to Wingate). However, after Croce’s widow sued on various other claims, Blendingwell unilaterally changed its accountings, paying her instead on the lesser net sum it received from ABC Records, excluding the 25% of the income that ABC Records paid directly to Wingate. Id. Based on the trial evidence, including the clear language of the songwriter’s agreement, course of dealing and taped telephone conversations, the Second Circuit upheld a jury verdict in Croce’s favor, rejecting Blendingwell’s attempt to 49 pretend that the administrative convenience of ABC Records paying Wingate directly excluded its 25% share of income from the income on which Croce’s 50% entitlement was to be calculated. Id. at 237. Contrary to Ellington’s distortion, Croce enforced a “net revenue” agreement in accordance with its terms. There was no question regarding the application of a “net revenues” provision to foreign income. Unlike here, Croce was not seeking to be paid on an “at source” basis. Rather, the claim was simply that Blendingwell had, years after the fact, tried to exclude a portion of the “net revenues” that had always been included in computing Croce’s 50% share of “net revenues.” Unlike Croce, here it is not EMI Mills that is trying to change the 1961 Agreement. It is Ellington who is trying to do so. He has received royalty statements from EMI Mills for decades [R.126-270] clearly reflecting the consistent payment of royalties computed on a “net revenues” basis and showing the identity of the foreign subpublishers, including EMI companies.29 Whether the subpublishing fee is received by a subpublisher affiliated with EMI Mills or 29 Even the passages cited by Ellington from Donald S. Passman, All You Need To Know About The Music Business (7th Ed. 2009) and Al Kohn & Bob Kohn, Kohn On Music Licensing (4th Ed. 2009), support EMI Mills’ compliance with the 1961 Agreement. These texts advise songwriters to try to secure agreements where publishing income is calculated “at source”, as a net receipts agreement prescribes that the publisher deducts “both the local share and its share” before remitting payment to the songwriter. [App. Br. at 42, citing R.455]. Thus EMI has performed exactly as a publisher under a net receipts agreement should. 50 unaffiliated with EMI Mills does not alter the amount or percentage of money paid to Ellington. As Justice Fried expressly found, there is no basis in the plain terms of the 1961 Agreement for distinguishing between subpublishers: “the contracting parties made no distinction…based on whether the foreign subpublishers are affiliated or unaffiliated with the United States publisher…[and] it would be improper…to read such a distinction into the contract.” [R.19]. Moreover, as the Court in Jobim noted, such a result would effectively gut a “net receipts” agreement and impose the cost of subpublishing exclusively on EMI Mills. There is no basis in law or fact for altering the terms of an agreement that has been in place for 50 years. C. Discovery Is Irrelevant and Unnecessary Again ignoring the clarity of the 1961 Agreement, Ellington’s appeal retreats to the last refuge of meritless claims: a plea that if only he is permitted to conduct discovery, he would supposedly be able to substantiate his allegations. Ellington’s request for discovery has two separate components, both of which are demonstrably improper for different reasons. First, Ellington argues that discovery would enable him to uncover evidence to support his unpleaded claim that EMI Mills covertly increased the subpublishers’ fees from 15% or 15% to 50%. Second, he argues that discovery would enable him to somehow support his interpretation of the 1961 Agreement. 51 Dealing with his first discovery argument, it should be stated for what it is: Ellington claims a need for discovery to obtain evidence to support a claim nowhere pleaded in his Amended Complaint. As noted above, this “claim” first surfaced in Ellington’s opposition to EMI Mills’ motion to dismiss in an affidavit submitted by his counsel. [R.403-04]. In its original incarnation, Ellington simply speculated that the subpublishing fees may have changed (this speculation solely being derived from a misreading of a snippet of Donald Passman’s book). This speculation has since morphed into an assertion of fact in both Ellington’s brief to the First Department and in his brief to this Court. It is not fact. It is not even viable speculation. In response to the speculation of Ellington’s counsel in his opposition to EMI Mills’ motion to dismiss, even though no such claim was pleaded in the Amended Complaint, EMI Mills submitted the affidavit of Audrey Ashby and attached subpublishing agreements, which remain in effect to this day, providing for the payment of 50% subpublishing fees, exactly the same subpublishing fees paid today. [R.570-594]. Ellington does not even bother mentioning this undisputed documentary evidence. Discovery is appropriate to substantiate a viable claim made in good faith. It is not appropriate to search for a claim that has not been pleaded and could not be pleaded in good faith and that has preemptively been refuted by undisputed 52 documentary evidence.30 See Auerbach v. Bennett, 47 N.Y.2d 619, 636 (1979) (declaring [in a summary judgment context] it inappropriate to allow disclosure where there is nothing in the record from the lower courts “from which it appears that essential facts may exist which could be obtained by disclosure . . . [t]o speculate that something might be caught on a fishing expedition provides no basis to postpone…” expedited judgment); Aaron Pitter & Co. v. Segal, 173 A.D.2d 159, 160 (1st Dep’t), modified on other gds., 174 A.D.2d 439 (1st Dep’t 1991) (discovery should not be allowed as a means “to embark upon a fishing expedition simply exploring the possibility of asserting a cause of action”) (citations omitted).31 Ellington’s second discovery argument, that he needs discovery on the issue of what the parties intended when entering into the 1961 Agreement, wrongly assumes that the 1961 Agreement is ambiguous. As the First Department noted, this too was an argument raised for the first time on appeal. Nevertheless, the First 30 Ignoring that the First Department noted the absence of any such claim [R.603], Ellington pretends it is contained in Paragraph 18 of the Amended Complaint. [R.70]. There is no such claim alleged there. Paragraph 18 simply complains about the exact calculation of “net revenues” performed and upheld by the Court in Berns. Paragraph 18 does not allege that EMI Mills made any change subpublishing rates: Ellington and his co-heirs still receive 25% of the gross amount collected, while the foreign subpublisher retains 50% and EMI Mills receives 25%. 31 Ellington also cites a California state court in Weatherly v. Universal Music Publ’g Group, 125 Cal. App. 4th 913 (Cal. 2d Dist. App. Dep’t Super. Ct. 2004), in which the court reversed a grant of summary judgment based on California’s “delayed discovery” rule. In Weatherly, the royalty statements reported foreign income as if it were being paid 100% at source. In fact, the affiliated foreign subpublishers were routing income through the United Kingdom which was deducting a fee of 25%. [App. Br. at 25.] and this deduction was allegedly concealed by the statements. The Weatherly agreement is a different agreement (entered into in 1974) and even the propriety of the deduction was not decided in the case. 53 Department entertained and rejected this contention, finding that the 1961 Agreement was clear on its face and unambiguous. [R.602-03]. Justice Fried also held that the 1961 Agreement was unambiguous. [R.18]. There is nothing ambiguous about the 1961 Agreement and the decisions below are clearly correct. II. ELLINGTON HAS NEITHER PLEADED NOR PRESERVED A GOOD FAITH AND FAIR DEALING CLAIM, WHICH IN ANY EVENT IS MERITLESS Not content to have invented arguments and claims advanced for the first time on appeal to the First Department, Ellington now seeks to add an entirely new claim for the first time in this Court. Claiming EMI Mills has endorsed such a claim, Ellington argues that EMI Mills breached the implied covenant of good faith and fair dealing. [App. Br. at 53-56]. Relying on his already fabricated (and unpleaded) claim that EMI Mills increased the subpublishing fee from the supposed market rate of 15% or 25% to 50%, Ellington theorizes that EMI Mills’ interpretation of the 1961 Agreement would leave it free to increase the rates to 90% and thereby breach the covenant of good faith and fair dealing. [Id.] As an initial matter, Ellington’s new claim should be disregarded because Ellington is not entitled to raise a new argument, much less a new cause of action, for the first time before the Court of Appeals. See Hecker v. State, 20 N.Y.3d 1087, 1087-1088 (2013) (“We have no power to review either the Appellate Division’s exercise of its discretion to reach that issue, or the issue itself.”) (citing Elezaj v. 54 Carlin Constr. Co., 89 N.Y.2d 992, 994-995 (1997) (other citations omitted)); SoHo Alliance v. New York City Bd. of Stds. & Appeals, 95 N.Y.2d 437, 442 (2000) (argument “raised for the first time on appeal…is not properly before us”). Here, Ellington’s new “good faith and fair dealing” claim is doubly wrong because it is based on another unpleaded (and equally fictional) claim. On the merits, Ellington’s new good faith and fair dealing claim is baseless. It is based on an already unpleaded claim about a fictional change in subpublishing rates that EMI Mills has demonstrated, by undisputed documentary evidence, never occurred. It is also based on a complete misrepresentation of EMI Mills’ position. Ellington claims that EMI Mills “conceded” that “its conduct, at an absolute minimum, is a breach of contract through a breach of the implied covenant of good faith and fair dealing, so that plaintiff’s claims cannot be dismissed on EMI’s pre-discovery motion.” [App. Br. at 54-55].32 In fact, in opposition to Ellington’s Brief to the First Department (in which he complained that he would have no remedy if EMI Mills reduced Ellington’s share of income virtually to zero), EMI Mills simply pointed out that if it were to take such action (which has never occurred), Ellington’s remedy would be provided by a claim for breach of the covenant of good faith and fair dealing. 32 By framing its supposed claim in this fashion, Ellington is plainly hoping to pretend that his existing contract claim in the Amended Complaint encompasses his recently-concocted good faith and fair dealing claim. Of course, Ellington has never pleaded a claim for breach of good faith and fair dealing. 55 Ellington’s newly minted claim is thus based on a future event hypothesized by Ellington in which EMI Mills increases the foreign subpublisher fee to 75% or even 90%. Contrary to Ellington’s assertion, there is a dispositive “principled difference” between hypothetical future events which may, if they ever occur, give rise to a viable good faith and fair dealing claim, and Ellington’s allegations in the Amended Complaint as well as the actual existing undisputed documentary evidence. [App. Br. at 54]. What exists are subpublishing agreements that have been in effect, unchanged, since the 1920’s and 1930’s, providing for the payment to subpublishers of 50% of the income earned in the foreign territories. The only thing that has “changed” is that over time, EMI Group has acquired some of the foreign subpublishers and also separately acquired Mills Music, Inc. That “change” has not altered the share of income that has been paid to Ellington and his father and grandfather before him since 1961. Ellington’s new “good faith and fair dealing claim” is theoretical and can neither be alleged in good faith nor can it be alleged for the first time on appeal. 56 III. FOREIGN SUBPUBLISHERS THAT ARE EMI COMPANIES ARE NOT “AFFILIATES” UNDER THE 1961 AGREEMENT Ellington also repeatedly contends on this appeal that the term “Second Party” as defined in the 1961 Agreement includes the foreign subpublishing affiliates of EMI Mills, therefore entitling him to be paid based on 50% of the foreign subpublishing affiliates’ receipts (converting the 1961 Agreement into an “at source” agreement). [See App. Br. at 19-20, 28, 30 n.10, 33-34, 35, 60-64]. This was an argument Ellington expressly disdained below, describing it as a “secondary” and “back-up” argument (undoubtedly because it would defeat any possible class action claim). [R.33, R.36, R.41]. Both Justices Fried and Schweitzer and the First Department correctly rejected this argument. A. The Term “Affiliates” Includes Only Then-Existing U.S. Music Publishing Affiliates Of Mills Music, Inc. As this Court will observe, Ellington advances his argument regarding the supposed meaning of the term “Second Party” as used in the 1961 Agreement in a highly unusual manner: he completely avoids any reference to the terms and conditions of the 1961 Agreement. Indeed, his argument tacitly admits that the clear terms of the 1961 Agreement refute his argument because he instead advances what can best be described as a theoretical policy argument: the term “Second Party” in the 1961 Agreement should be construed to include “EMI in any form, whether through the particular EMI subsidiary with which plaintiff 57 contracted (i.e., ‘EMI Mills’) or through its other affiliates, which is, in this case, a distinction without a difference” to prevent EMI Mills from changing the foreign subpublishing rate at its sole discretion.33 [App. Br. at 50]. Aside from the fact that contracts cannot be rewritten to satisfy some theoretical policy argument, the fundamental problem with Ellington’s argument is contractual – which is why his brief fails to mention a single sentence of the 1961 Agreement. The 1961 Agreement is clearly and unambiguously a United States renewal copyright agreement. [R.376-395]. By its express terms, it applies solely to the United States publishers – those specifically named in the agreement and their predecessors and the affiliates of Mills Music, Inc. – to which Duke Ellington had granted the original United States term of copyright in his songs and to which he was, under the 1961 Agreement, granting the United States renewal term of copyright. The term “affiliate” first appears in the definition of the parties to the 1961 Agreement. [R.367]. The definition of “Second Party” includes the named publishers (including Mills Music, Inc.) and refers to “predecessors in interest” and “any other affiliate of Mills Music, Inc.” On its face, this is a static group 33 Ellington’s “policy” argument is again based on the same set of fabricated allegations as are his other arguments, all of which are refuted by undisputed documentary evidence. Ellington’s royalties are unaffected by whether the foreign subpublisher is an EMI company or some other company, a point noted by the courts that have previously examined this same issue (see, e.g., Berns and Jobim). Ellington simply objects to EMI’s foreign affiliated subpublishers receiving and retaining the same 50% of the foreign income as is retained (without objection by Ellington) by unrelated foreign subpublishers. 58 identifiable by reference to ownership of the original term United States copyrights in songs granted by Duke Ellington and listed in the Schedules. As Justice Schweitzer’s decision noted, “[t]he reference to ‘affiliate’ in the preamble of the Agreement is written in the present tense, suggesting that it refers to affiliates at the time the Agreement was entered into.” Ellington, 2011 N.Y. Misc. LEXIS 6631, at *8-9. The meaning of the term “affiliate” for purposes of the term “Second Party” becomes clear when one parses the various “Whereas” clauses and provisions of the 1961 Agreement. [R.367-68]. In the first two “Whereas” clauses, Duke Ellington represented that he had conveyed all of the songs listed in the schedules to “Mills Music, Inc., American Academy of Music, Inc. Gotham Music Service, Inc., or any of them or any of their predecessors in interest and any other affiliate of Mills Music, Inc.” and that he had not sold or otherwise encumbered the United States renewal copyrights in the songs other than in the agreements he had already made with the “Second Party.” It is undisputed that Duke Ellington’s agreements were with United States publishers to whom he conveyed the original term United States copyrights in his songs, all of which were encompassed within the term “Second Party.” In the third “Whereas” clause, the purpose of the 1961 Agreement is clearly stated: “Second Party desires to contract with the First Parties for their interest in 59 the United States renewal copyrights in the musical compositions mentioned in Schedule ‘1’, Schedule ‘2’ and Schedule ‘3’.” [R.368]. Foreign subpublishers, by definition, obtain their right to subpublish songs pursuant to agreements with the United States owners of United States copyrights and renewal copyrights (who control the worldwide rights and convey the right to subpublish the songs outside of the United States to foreign subpublishers). They do not contract directly with the authors. Nowhere does Ellington contend that, by the 1961 Agreement, any foreign subpublishers became vested with ownership of any United States renewal copyrights. Equally important, consistent with applicable law, for the “Second Party” to be contracting with “First Parties,” the constituent members of “Second Party” would have to be in existence and affiliated with Mills Music, Inc. at the time of contracting. [R.21; R.603-04]. Paragraphs 1 and 2 of the 1961 Agreement confirm that the term “affiliate” as used in “Second Party” refers to existing United States publishing affiliates of Mills Music, Inc. Paragraph 1 provides for the assignment from First Parties to Second Party of the United States renewal copyright in the Duke Ellington songs. Paragraph 2 authorized Second Party to renew the United States copyrights in Duke Ellington’s name. Again, the owners of the original term United States copyrights and renewal copyrights were the then-existing United States publishers 60 identified as the “Second Party.” By its plain terms, it does not include any foreign subpublishers and it does not include any future entities. [R.369]. Were there any remaining doubt about the meaning of the term “affiliates” as used in the definition of “Second Party, paragraphs 5, 8 and 12 of the 1961 Agreement conclusively put it to rest. [R.371; R.374; R.375]. These provisions make it absolutely clear that the term “affiliate” as used in “Second Party” is limited to then-existing United States publishers affiliated with Mills Music, Inc. In Paragraph 5, Duke Ellington specifically confirmed that prior to the date of the agreement, Mills Music, Inc. (and the other named parties) or their predecessors in interest or affiliated companies of Mills Music, Inc. “were and are now possessed of and are entitled to the original copyrights of the musical compositions mentioned” in the schedules to the 1961 Agreement. [R.371 (emphasis added)]. Only then-existing United States copyright owners, not any foreign subpublishers, fall into this category. Paragraph 8 imposes on “Second Party” the obligation to render statements and payments to Duke Ellington and his heirs (the “First Parties”). [R.374] It is undisputed that only the United States copyright owners, not any foreign subpublishers, have the obligation to account and pay (and have for 50 years, accounted to and paid) Ellington and his father and grandfather before him. Indeed, 61 that is confirmed by the undisputed documentary evidence reflecting decades of statements and payments by EMI Mills. [R.126-270]. Finally, as the First Department [R.603-604] and both Justice Fried and Justice Schweitzer noted, Paragraph 12 of the 1961 Agreement alone conclusively refutes Plaintiff’s argument. Paragraph 12 states as follows: Mills Music, Inc., American Academy Music, Inc. and Gotham Music Service, Inc. hereby jointly and severally represent and warrant that they have the authority to sign for and bind all of the predecessors in interest and other affiliates of Mills Music, Inc. included in the term “Second Party” as hereinabove used. [R.375 (emphasis added)]. Mills Music, Inc. could not possibly have represented and warranted that it had the “authority to sign for and bind” entities that did not then exist or which were not then its “affiliates.” Consistent with how the term “affiliate” was used in the entirety of the 1961 Agreement to refer to then-existing United States publishers that were affiliated with Mills Music, Inc. and which had rights in Duke Ellington songs and were being granted the renewal copyrights in his songs, Paragraph 12 clearly provides that it was only those “affiliates” for which Mills Music had authority to sign and bind – only those entities with which it was affiliated at the time that the 1961 Agreement was signed – that were included within the term “Second Party.” 62 While Ellington’s ostrich-like approach to the plain terms of the 1961 Agreement is understandable, ignoring the plain language does not make it disappear. The term “Second Party” does not include any foreign subpublishers, whether then-affiliated with Mills Music, Inc. or not. It includes only United States music publishers that were affiliated with Mills Music, Inc. in 1961. B. Ellington’s Affiliate Argument Is Also Contrary To Settled Law Ellington’s contention that the term “affiliates” includes future affiliates is also contrary to well-settled law. Black’s Law Dictionary defines “affiliate” as a “corporation that is related to another corporation by shareholdings or other means of control; a subsidiary, parent or sibling corporation.” Black’s Law Dictionary 67 (9th Ed. 2009). This definition, which comports to how the term affiliate is used in the 1961 Agreement, refers to an existing relationship. As Justice Fried [R.21] and the First Department [R.603-04] found, consistent with both the dictionary definition and the use of the term “affiliate” in the 1961 Agreement, cases that have considered the meaning of the term “affiliate” have held that, absent explicit future-looking language, the term “affiliates” includes only those affiliates existing at the time the contract is executed. See, e.g., VKK Corp. v. NFL, 244 F.3d 114, 129-31 (2d Cir. 2001) (“The Release’s reference to ‘affiliates’ [is] stated in the present tense. Nothing . . . indicates the inclusion of future rather than present members.”); Budget Rent A Car Sys. v. K&T, Inc., Civ. A. 63 No. 2:05-CV-3655 (WJM) (RJH), 2008 U.S. Dist. LEXIS 73024, at *10-11 (D.N.J. Sept. 23, 2008) (holding that, because “[n]othing in the License Agreement suggests that the parties intended the License Agreement to extend to future corporate parents or affiliates,” an exclusive license to operate a Budget rental car business is not violated where a new affiliate – affiliated more than 25 years after the license agreement was entered – has in place licensing agreements with other entities to operate rental car businesses). The legal principle of expressio unis est exclusio alterius – “to express or include one thing implies the exclusion of the other, or of the alternative,” Black’s Law Dictionary 661 – compels the same conclusion. As shown above, nowhere does the definition of “Second Party” in the 1961 Agreement even remotely refer to future affiliates or to foreign subpublishers. Under the doctrine of expressio unis est exclusio alterius, the definition of “Second Party,” which includes existing United States publishing “affiliates” of Mills Music, Inc., excludes any entities not then-affiliated with Mills Music, Inc. and also any foreign subpublishers. See, e.g., In re New York City Asbestos Litig., 41 A.D.3d 299, 302 (1st Dep’t 2007). CONCLUSION For the reasons set forth above, it is respectfully submitted that this Court should affirm the orders of the lower courts and grant EMI Mills such other and further relief as it deems just and proper. Dated: New York, New York January 3, 2014 PRYOR CASHMAN LLP By: 9ow1-d S. '2cr--~~-~ Donald S. Zakarin Bryan T. Mohler Benjamin S. Akley 7 Times Square New York, New York 10036 (212) 421-4100 Attorneys for Defendant-Respondent EMI Mills Music Inc. 64