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TVT RECORDS v. ISLAND DEF JAM MUSIC GROUP
February 13, 2003
TVT RECORDS AND TVT MUSIC, INC., PLAINTIFFS,
THE ISLAND DEF JAM MUSIC GROUP AND LYOR COHEN, DEFENDANTS.
The opinion of the court was delivered by: Marrero, District Judge.
DECISION AND AMENDED ORDER
On August 20, 2002, plaintiffs TVT Records and TVT Music, Inc.
(collectively "TVT") commenced this action against defendants The Island
Def Jam Music Group and its principal Lyor Cohen ("Cohen," and
collectively "IDJ"), alleging copyright infringement and related state
law claims. In an earlier proceeding in this litigation, the Court, after
an evidentiary hearing on September 23, 24, and 30, 2002, granted in part
and denied in part TVT's motion for a preliminary injunction directing
IDJ not to interfere with the delivery of certain recordings at issue
here. IDJ now moves for summary judgment pursuant to Rule 56 of the
Federal Rules of Civil Procedure and, in the alternative, for partial
summary judgment under Rule 56 and for judgment on the pleadings pursuant
to Rule 12(c) of the Federal Rules of Civil Procedure. In an Order dated
February 4, 2003 this Court granted in part and denied in part IDJ's
motion and indicated that its findings, conclusions, and reasoning would
be detailed in a subsequent decision. Accordingly, the Order of February
4, 2003 is amended to incorporate the discussion set forth below.
This case arises from a licensing dispute between TVT and its principal
Steve Gottlieb ("Gottlieb") and IDJ concerning the distribution and
exploitation of musical works created by Jeffrey Atkins, who is
professionally known as Ja Rule ("Ja Rule"), and Irving Lorenzo, who is
professionally known as Irv Gotti ("Gotti," and together with Ja Rule, the
"Artists").*fn1 Under an agreement dated March 2, 1998 (the "Ja
Rule Agreement") between IDJ's predecessor-in-interest, Rush Associated
Recordings, and Ja Rule, IDJ is entitled to Ja Rule's exclusive services
as a recording artist. Pursuant to an agreement dated February 11, 1999,
which was extended by
agreement dated December 17, 2001 between IDJ's
predecessor-in-interest, Island/Mercury Records, and Gotti, IDJ is
entitled to Gotti's services as a record producer and talent-finder.
In an agreement entitled "Heads of Agreement Between Murderers Inc./Irv
Gotti And Jeffrey Atkins (p/k/a `Ja Rule') And Tee Vee Toons, Inc.
(`TVT')" dated July 2, 2001 (the "Heads of Agreement"), TVT contracted
with Ja Rule and Gotti to record, produce, and exploit an album (the "CMC
Album") featuring the performances of Ja Rule, Christopher Bristole
("Bristole"), and Otha Miller ("Miller," and collectively the "CMC
Artists").*fn2 Under the Heads of Agreement, four previously recorded
CMC tracks would be reworked and supplemented with at least eight newly
recorded tracks featuring the CMC Artists, including Ja Rule, to comprise
the CMC Album. The Heads of Agreement, through various guarantees and
indemnities, charges the Artists with securing any approvals, consents,
and permissions necessary for them to satisfy their obligations under
The delivery date for the new recordings as contemplated by the written
Heads of Agreement was November 1, 2001. This delivery date was later
changed to reflect the schedules of the Artists and the timing of other
contemplated album releases. TVT and the Artists ultimately agreed that
the new tracks would be supplied to TVT in time for release in November
2002. In the interim, the Artists continued to work on the new recordings
for the CMC Album, and by May 2002, approximately eleven new tracks had
been recorded. In May 2002, Ja Rule and Gotti announced a fortheoming
release of the CMC Album. In the summer of 2002, IDJ included a
promotional card in a compilation disc produced by Gotti which announced
the fortheoming release of the CMC Album. Also in the summer of that
year, Universal Music Publishing Group, an affiliate of IDJ, announced on
its internet site the CMC Album's forthcoming release.
TVT recognized that IDJ's assent to the project envisioned by the Heads
of Agreement (the "CMC Project") was necessary, and it accordingly
endeavored to negotiate for IDJ's consent in mid-to-late 2001. In the
process, Cohen and Gottlieb outlined a profit sharing arrangement. In a
letter dated October 22, 2001, William Leibowitz ("Leibowitz"), outside
counsel for TVT, sent IDJ execution copies of what TVT understood to be
the written embodiment of an agreement in which IDJ assented to the CMC
Project, termed the Side Letter Agreement (the "Side Letter"), and asked
that they be signed and returned. TVT maintains that IDJ agents
repeatedly assured Leibowitz that IDJ assented to the CMC Project and
that executed copies of the Side Letter would be supplied. In a letter
dated November 15, 2001, Leibowitz again asked IDJ to supply executed
copies of the Side Letter, indicating that TVT had relied on
representations of consent and assurances that executed copies would be
forthcoming. In the spring of 2002, Leibowitz spoke with Brian Robinson
of IDJ ("Robinson") about the Side Letter and IDJ's assurances, and
Robinson indicated that he would inquire into the matter and then contact
Leibowitz with an update. Executed copies of the Side Letter were
never returned to TVT. Instead, in a letter from Robinson to Leibowitz
dated August 14, 2002, IDJ informed TVT that IDJ was rejecting the
agreement embodied in the Side Letter.
In or around June 2002, TVT granted IDJ's request for a license to use
a musical composition and a TVT sound recording entitled "Get Tha
Fortune" in a digital video disc entitled "Irv Gotti Presents: The Inc."
TVT asserts that it relied on representations that IDJ had assented to
the CMC Project, believing the publicity from IDJ's video disc would
benefit the market performance of the CMC Album contemplated for release
later that year. TVT granted IDJ permission to utilize this material
prior to IDJ's written renunciation of the Side Letter.
A motion for summary judgment should be granted where "the pleadings,
depositions, answers to interrogatories, and admissions on file, together
with the affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to a judgment as
a matter of law." Fed.R.Civ.P. 56(c). See Rodriguez v. Hahn,
209 F. Supp.2d 344, 346 (S.D.N.Y. 2002) (citing Celotex Corp. v.
Catrett, 477 U.S. 317, 322-23 (1986)). The role of the Court is not to
resolve issues of fact but, rather, "to determine as a threshold matter
whether there are genuine unresolved issues of material fact to be
tried." Gibson v. Am. Broad. Cos., 892 F.2d 1128, 1132 (2nd Cir. 1989).
The moving party bears the initial burden of "informing the district
court of the basis for its motion" and identifying the matters that "it
believes demonstrate the absence of a genuine issue of material fact."
Celotex, 477 U.S. at 323. The nonmoving party "must support with specific
evidence his assertion that a genuine dispute as to material fact does
exist," id., 477 U.S. at 324, and "may not rely on conclusory allegations
or unsubstantiated speculation," Scotto v. Almenas, 143 F.3d 105, 114
(2nd Cir. 1998). The opposing party's showing of a genuine dispute must
be grounded in concrete evidence sufficient to support a reasonable
jury's rendering a verdict in his favor. See Anderson v. Liberty Lobby,
477 U.S. 242, 248, 256 (1986) ("The mere existence of a scintilla of
evidence in support of the [non-movant's] position will be
insufficient."); Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio
Corp., 475 U.S. 574, 587 (1986). All ambiguities and reasonable
inferences drawn from the underlying facts must be resolved in the light
most favorable to the party opposing the motion. See United States v. One
Tintoretto Painting Entitled "The Holy Family With Saint Catherine and
Honored Donor", 691 F.2d 603, 606 (2nd Cir. 1982) (citing United States
v. Diebold, Inc., 369 U.S. 654, 655 (1962)).
The standard for granting a Rule 12(c) motion for judgment on the
pleadings is the same as that governing review of a Rule 12(b)(6) motion
for failure to state a claim upon which relief can be granted. In either
case, the Court "must accept all allegations in the complaint as true and
draw all inferences in the non-moving party's favor." Patel v.
Contemporary Classics of Beverly Hills, 259 F.3d 123, 126 (2nd Cir.
2001); Irish Lesbian & Gay Org. v. Giuliani, 143 F.3d 638, 644 (2nd
Cir. 1998). Additionally, "[t]he court will not dismiss the case unless
it is satisfied that the complaint cannot state any set of facts that
would entitle [the plaintiff] to relief." Patel, 259 F.3d at 126; see
Valmonte v. Bane,
18 F.3d 992, 998 (2nd Cir. 1994). In the course of its
review, the Court may refer "to documents attached to the complaint as an
exhibit or incorporated in it by reference, to matters of which judicial
notice may be taken, or to documents either in plaintiffs' possession or
of which plaintiffs had knowledge and relied on in bringing suit." Brass
v. Am. Film Tech., Inc., 987 F.2d 142, 150 (2nd Cir. 1993) (citation
omitted); see Bernstein/Glazer, LLC v. Babbitt, No. 99 Civ. 1195, 2000 WL
322778, at *3 (S.D.N.Y. March 28, 2000).
B. COPYRIGHT INFRINGEMENT
TVT alleges copyright infringement in IDJ's use of "Get Tha Fortune,"
which TVT owned, in the "Irv Gotti Presents: The Inc." video. IDJ asserts
in defense that it received a license from TVT for its use of this
material. TVT responds that this license was fraudulently obtained by IDJ
and therefore invalid. Gottlieb, TVT's principal, testified at the
preliminary injunction hearing that TVT would not have granted IDJ this
license in the absence of IDJ's representations of assent to the CMC
Project and assurances that execution copies of the Side Letter would be
produced. (Declaration of Pamela Gurley dated January 17, 2003 ("Gurley
Decl."), Ex. A at 300-301, 313-314.)
A fraudulently induced copyright license is invalid. See, e.g., Topps
Chewing Gum, Inc. v. Imperial Toy Corp., 686 F. Supp. 402, 406 (E.D.N.Y.
1988). Fraudulent inducement under New York law requires that TVT
establish, among other things, that TVT actually relied on
representations by IDJ and that such reliance was reasonable. See Turtur
v. Rothschild Registry Int'l, Inc., 26 F.3d 304, 310 (2nd Cir. 1994);
Computerized Radiological Servs. v. Syntex Corp., 786 F.2d 72, 76 (2nd
Cir. 1986). IDJ argues that the record presents no disputed issue of
material fact as to these two elements, and that the evidence compels the
Court to reject TVT's asserted invalidity of IDJ's license. The Court
1. Reliance On The Asserted Representations
Assuming for purposes of argument that IDJ in fact did make certain
representations amounting to assent to the CMC Project, IDJ argues that
the evidence compels a finding that TVT did not rely on any such
representations when it granted IDJ permission to use "Get Tha Fortune."
IDJ points to testimony by Leibowitz who stated that when structuring the
terms of the Heads of Agreement, he included certain strong guarantees
and indemnification clauses that imposed on the Artists the obligation to
secure any necessary permissions and approvals. (Declaration of Robert
J. Eddington dated November 18, 2002 ("Eddington Decl."), Ex. I at
56-57.) IDJ argues that because the onus was on Ja Rule and Gotti to
obtain any necessary permissions and produce the musical works, TVT's
decision to license "Get Tha Fortune" did not depend on assurances by IDJ
that it consented to the CMC Project.
While the Artists may have been responsible to TVT for any losses of
investment if the CMC Project were it to fail, such indemnification is
clearly not the reason TVT entered into the Heads of Agreement. Rather,
TVT's goal was to distribute and exploit the CMC Album; any
indemnification owed to TVT by the Artists is quite obviously a fallback
safety provision. Accordingly, assuming representations and assurances
amounting to IDJ's assent were made, a reasonable jury could conclude
that TVT relied on them in pursuit of this superior result, namely, the
exploitation of the CMC Album.
Furthermore, TVT asserts a second benefit arising from these assurances
that induced it to grant IDJ the license: publicity. Bryan Leach
("Leach"), a TVT executive, testified at the preliminary injunction
hearing on this matter that the summer release of IDJ's video would help
to prepare and excite the market for a November release of the CMC
Album. (Gurley Decl., Ex. A at 38.) Assuming the representations and
assurances asserted by TVT actually occurred, and that the CMC Album was
to have been distributed and exploited by TVT, then this marginal
increase in market performance also would have benefitted TVT.
In light of these added potential benefits, the Court concludes that
IDJ's argument, that the obligations imposed upon the Artists by certain
indemnification and guarantee provisions of the Heads of Agreement
preclude a finding that TVT relied on the ...