things ownership, licensing and performance rights. In light of the disagreement between Papa's-June and McLean at the time McLean endorsed the checks, the notations on the royalty statements indicate nothing more than the fact that the royalty checks are for an amount equal to thirty percent of the total royalties for the jointly written songs on the "She" album. Cf. 1 Patry, supra, at 392 (transfer agreements should be construed in favor of copyright transferor because section 204(a) reflects the policy judgment that copyright owners should retain all rights unless specifically transferred).
Papa's-June's claims for breach of contract, quasi-contract, restitution, declaratory judgment and tortious interference with contractual relations are all premised on the allegation that the terms of the Co-Publishing Agreement govern the jointly written songs on the "She" album. Because the complaint does not allege a signed writing as required by section 204(a), there was no transfer of copyright ownership between Papa's-June and McLean, and the jointly written songs on the "She" album are not governed by the terms of the Co-Publishing Agreement. Papa's-June and McLean each have an equal undivided interest in the copyright in these songs and an independent right to license and perform them. Therefore, McLean's motion to dismiss the non-fraud claims for failure to state a claim is granted.
Papa's-June also argues that the alleged agreement with McLean affects only the division of royalties, not McLean's copyright interests in the jointly written songs on the "She" album. This argument is not consistent with the allegations of the complaint. The complaint alleges that the songs on the "She" album are governed by all the terms of the Co-Publishing Agreement, including the provisions regarding ownership of the copyright and the right to perform and license the songs. (First Am. Compl. PP 3, 26, 43-44.) However, an agreement concerning royalties does not constitute a "transfer of copyright ownership" within the meaning of 17 U.S.C. § 101. To the extent that Papa's-June has a good-faith basis upon which to allege that there was an agreement concerning the collection and distribution of royalties for the songs on the "She" album, it may so amend the complaint within the next thirty days.
II. Fraud Claim
The complaint alleges that when McLean submitted his lyrics to Connick, McLean never intended that the jointly written songs on the "She" album would be governed by the terms of the Co-Publishing Agreement. (First Am. Compl. P 55.) McLean, however, knew that Connick and Papa's-June believed that the songs on the "She" album would be governed by the terms of the Co-Publishing Agreement. (Id. P 58.) According to the complaint, by not disclosing his secret intention to seek a different arrangement for the songs on the "She" album, McLean fraudulently induced Connick to use his lyrics. (Id. P 60.) The issue is whether McLean can be held separately accountable on a claim of fraud for failure to disclose his intention not to perform in accordance with the Co-Publishing Agreement.
In Sabo v. Delman, 3 N.Y.2d 155, 160, 164 N.Y.S.2d 714, 716, 143 N.E.2d 906 (1957), the New York Court of Appeals held that a promise made with the undisclosed intention of not performing constitutes a misrepresentation of a material fact upon which an action for rescission may be predicated. See also Channel Master Corp. v. Aluminium Ltd. Sales, Inc., 4 N.Y.2d 403, 408, 176 N.Y.S.2d 259, 263, 151 N.E.2d 833 (1958) (one who fraudulently misrepresents himself as intending to perform an agreement is liable regardless of whether the agreement is enforceable). It is important to note that the allegedly fraudulent representations at issue in Sabo were not contained in the contracts between the parties. They were alleged to be express representations made to induce contracts for assignment of patents. 3 N.Y.2d at 158-59, 164 N.Y.S.2d at 715-16.
Most courts that have subsequently considered the issue have held that a contract claim cannot be converted into a fraud claim by the addition of an allegation that the promisor intended not to perform when he made the promise. E.g., Caniglia v. Chicago Tribune-New York News Syndicate, Inc., 204 A.D.2d 233, 234, 612 N.Y.S.2d 146, 147 (App. Div. 1st Dep't 1994); Guterman v. RGA Accessories, Inc., 196 A.D.2d 785, 786, 602 N.Y.S.2d 116, 117 (App. Div. 1st Dep't 1993); Gordon v. Dino De Laurentiis Corp., 141 A.D.2d 435, 436, 529 N.Y.S.2d 777, 779 (App. Div. 1st Dep't 1988); Comtomark, Inc. v. Satellite Communications Network, Inc., 116 A.D.2d 499, 500, 497 N.Y.S.2d 371, 372 (App. Div. 1st Dep't 1986); Spellman v. Columbia Manicure Mfg. Co., 111 A.D.2d 320, 323, 489 N.Y.S.2d 304, 307 (App. Div. 2d Dep't 1985); L. Fatato, Inc. v. Decrescente Distrib. Co., 86 A.D.2d 600, 601, 446 N.Y.S.2d 120, 121-22 (App. Div. 2d Dep't 1982); Chase v. United Hospital, 60 A.D.2d 558, 559, 400 N.Y.S.2d 343, 344 (App. Div. 1st Dep't 1977); Wegman v. Dairylea Coop., Inc. 50 A.D.2d 108, 113, 376 N.Y.S.2d 728, 734-35 (App. Div. 4th Dep't 1975); Miller v. Volk & Huxley, Inc., 44 A.D.2d 810, 810, 355 N.Y.S.2d 605, 606-07 (App. Div. 1st Dep't 1974); PI, Inc. v. Quality Prods., Inc., 907 F. Supp. 752, 761 (S.D.N.Y. 1995); Sudul v. Computer Outsourcing Servs., 868 F. Supp. 59, 62 (S.D.N.Y. 1994); Best Western Int'l, Inc. v. CSI Int'l Corp., 1994 U.S. Dist. LEXIS 11815, *12, 1994 WL 465905, at *4 (S.D.N.Y. Aug. 23, 1994); cf. New York University v. Continental Ins. Co., 87 N.Y.2d 308, 1995 N.Y. LEXIS 4752, *11, 1995 WL 761955, at *3 (N.Y. Dec. 27, 1995) (general allegations that defendant entered into a contract while lacking the intent to perform it are insufficient to support claim for fraud). Contra Bibeau v. Ward, 193 A.D.2d 875, 877, 596 N.Y.S.2d 948, 950 (App. Div. 3rd Dep't 1993); Stewart v. Jackson & Nash, 976 F.2d 86, 89 (2d Cir. 1992); Bower v. Weisman, 650 F. Supp. 1415, 1423 (S.D.N.Y. 1986).
To maintain a claim for fraud, a plaintiff must allege: (1) a legal duty separate and apart from the contractual duty to perform, see Van Neil v. Berger, 632 N.Y.S.2d 48, 48 (App. Div. 4th Dep't 1995); Strasser v. Prudential Sec., Inc., 630 N.Y.S.2d 80, 82 (App. Div. 1st Dep't 1995); Locascio v. Aquavella, 185 A.D.2d 689, 690, 586 N.Y.S.2d 78, 79 (App. Div. 4th Dep't 1992); Mastropieri v. Solmar Constr. Co., 159 A.D.2d 698, 700, 553 N.Y.S.2d 187, 189 (App. Div. 2d Dep't 1990); Tesoro Petroleum Corp. v. Holborn Oil Co., 108 A.D.2d 607, 607, 484 N.Y.S.2d 834, 835 (App. Div. 1st Dep't 1985); Sudul, 868 F. Supp. at 63; Best Western Int'l, Inc., 1994 U.S. Dist. LEXIS 11815, *15, 1994 WL 465905, at *4-5; G.D. Searle & Co. v. Medicore Communications, Inc., 843 F. Supp. 895, 909 (S.D.N.Y. 1994); (2) a fraudulent representation collateral or extraneous to the contract, see Deerfield Communications Corp. v. Chesebrough-Ponds, Inc., 68 N.Y.2d 954, 956, 510 N.Y.S.2d 88, 89, 502 N.E.2d 1003 (1986); Sforza v. Health Ins. Plan of Greater New York, Inc., 210 A.D.2d 214, 214-15, 619 N.Y.S.2d 734, 736 (App. Div. 2d Dep't 1994); McKernin v. Fanny Farmer Candy Shops, Inc., 176 A.D.2d 233, 234, 574 N.Y.S.2d 58, 59 (App. Div. 2d Dep't 1991); Wallace v. Crisman, 173 A.D.2d 322, 322, 573 N.Y.S.2d 654, 654 (App. Div. 1st Dep't 1991); Metropolitan Transp. Auth. v. Triumph Advertising Prods., Inc., 116 A.D.2d 526, 527, 497 N.Y.S.2d 673, 675 (App. Div. 1st Dep't 1986); PI, Inc., 907 F. Supp. at 761; Sudul, 868 F. Supp. at 63; or (3) special damages proximately caused by the fraudulent representation that are not recoverable under the contract measure of damages, see Deerfield Communications, 68 N.Y.2d at 956, 510 N.Y.S.2d at 89-90; Wallace, 173 A.D.2d at 322, 573 N.Y.S.2d at 654; Tuck Indus. v. Reichhold Chems., Inc., 151 A.D.2d 565, 566, 542 N.Y.S.2d 701, 702 (App. Div. 2d Dep't 1989); Metropolitan Transp. Auth., 116 A.D.2d at 527-28, 497 N.Y.S.2d at 675; Tesoro, 108 A.D.2d at 607, 484 N.Y.S.2d at 835; Lehman v. Dow Jones & Co., 783 F.2d 285, 296 (2d Cir. 1986); Sudul, 868 F. Supp. at 63; Best Western Int'l, Inc., 1994 U.S. Dist. LEXIS 11815, *15, 1994 WL 465905, at *5; Landgarten v. Noise Cancellation Technologies, 1993 U.S. Dist. LEXIS 11088, 1993 WL 312999 at *3 (S.D.N.Y. Aug. 11, 1993).
The recent decision of the New York Court of Appeals in Graubard Mollen Dannett & Horowitz v. Moskovitz, 86 N.Y.2d 112, 629 N.Y.S.2d 1009, 653 N.E.2d 1179 (1995), does not change the law in this area. Graubard was a suit by a law firm against a former partner who, it was alleged, breached his fiduciary duty and his retirement contract when he persuaded a major client to leave the firm with him. The firm also asserted a claim for fraud based on oral promises made by the former partner at the time the retirement agreement was presented to the partnership for its approval, promises which the former partner never intended to honor. Although the Court of Appeals concluded that the law firm had stated a viable fraud claim, it also held that apart from the contract, the former partner owed his firm a fiduciary duty not to solicit clients of the firm prior to his resignation. Id. at 119, 629 N.Y.S.2d at 1013. Moreover, the oral representations that were the basis of the fraud claim were collateral to the provisions of the retirement agreement. Id. at 116, 629 N.Y.S.2d at 1011. Thus, Graubard is consistent with the lower court decisions cited above.
The complaint does not allege a fraud claim that is sufficiently distinct from the breach of contract claim. It merely appends allegations about McLean's state of mind to the claim for breach of contract. There is no allegation that McLean owed Connick or Papa's-June a duty separate and apart from the alleged obligations under the Co-Publishing Agreement. Papa's-June does not allege that McLean's fraudulent representations were collateral to the Co-Publishing Agreement. Nor does Papa's-June seek special damages attributable to the fraud that are not recoverable under the contract claim. Because the only fraud alleged arises out of the same facts that serve as the basis for the breach of contract claim, Papa's-June's fraud claim fails to state a claim for fraud on which relief can be granted. Locascio, 185 A.D.2d at 690, 586 N.Y.S.2d at 79. The fact that Papa's-June's non-fraud claims are barred by the writing requirements of the Copyright Act does not change this conclusion. See Gutterman, 196 A.D.2d at 785-86, 602 N.Y.S.2d at 117 (dismissing fraud claim where breach of contract claim is barred by Statute of Frauds); McKernin, 176 A.D.2d at 234, 574 N.Y.S.2d at 59-60 (same); Chase, 60 A.D.2d at 559, 400 N.Y.S.2d at 344 (same). Therefore, McLean's motion to dismiss the fraud claim pursuant to Fed. R. Civ. P. 12(b)(6) is granted.
For the foregoing reasons, McLean's motion to dismiss the complaint in its entirety is granted. Papa's-June is granted leave to file an amended complaint within thirty days alleging claims other than fraud to the extent that it has a good-faith basis upon which to allege that there was an enforceable agreement concerning the collection and distribution of royalties for the jointly written songs on the "She" album.
Dated: New York, New York
April 11, 1996
MIRIAM GOLDMAN CEDARBAUM
United States District Judge