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Distribuidora De Discos Karen C. POR A. v. Universal Music Group, Inc.

United States District Court, S.D. New York

March 15, 2017

DISTRIBUIDORA DE DISCOS KAREN C. POR A.; KAREN PUBLISHING COMPANY, Plaintiffs,
v.
UNIVERSAL MUSIC GROUP, INC., d/b/a UNIVERSAL MUSIC LATIN ENTERTAINMENT, CAPITOL RECORDS LLC d/b/a CAPITOL LATIN MUSIC, E.M.I. MUSIC NETHERLANDS B.V., JUAN LUIS GUERRA, Defendants. JUAN LUIS GUERRA, UNIVERSAL MUSICA, INC., CAPITOL RECORDS LLC, UNIVERSAL MUSIC GROUP, INC., Counterclaimants/ Third-Party Plaintiffs,
v.
DISTRIBUIDORA DE DISCOS KAREN C. POR A., KAREN PUBLISHING COMPANY, Counter-Defendants, and DISTRIBUIDORA DE DISCOS KAREN S.R.L., BIENVENIDO RODRIGUEZ, Third-Party Defendants.

          OPINION AND ORDER

          J. PAUL OETKEN, United States District Judge

         Plaintiffs Distribuidora De Discos Karen C. Por A. (“DDK”) and Karen Publishing Company (“Karen Publishing”) initiated this action against Juan Luis Guerra, Universal Music Group, Inc. doing business as Universal Music Latin Entertainment (“UMG”), Capital Records LLC doing business as Capitol Latin Music (“Capitol”), and E.M.I. Music Netherlands B.V. (“E.M.I.”), alleging copyright infringement in connection with Plaintiffs' exclusive right to reproduce and distribute Guerra's musical compositions. (Dkt. No. 1.) Defendants Guerra, UMG, Capitol, and EMI filed a counterclaim against the Karen Plaintiffs (DDK and Karen Publishing) and a third-party complaint against Distribuidora de Discos Karen S.R.L. (“DDK S.R.L.”; with the Karen Plaintiffs, “Karen”) and Bienvenido Rodriguez (“Rodriguez”). (Dkt. No. 31.) The Court also allowed Universal Musica, Inc. (“UMU”) to intervene and file, with Guerra, a counterclaim against the Karen Plaintiffs and a third-party complaint against DDK S.R.L. and Rodriguez. (Dkt. No. 30.) Rodriguez, in turn, filed a third-party counterclaim against Guerra and UMU. (Dkt. No. 56.)

         There are three motions currently before the Court: first, a motion by Karen to file a supplemental pleading adding claims against Guerra and UMU (Dkt. No. 58); second, a motion to dismiss Rodriguez's third-party counterclaim filed by Guerra and UMU (Dkt. No. 67); and third, a motion for judgment on the pleadings as to UMU and Guerra's counterclaim filed by Karen and Rodriguez (Dkt. No. 63). For the reasons that follow, the first and second motions are granted in part and denied in part, and the third motion is denied.

         I. Background[1]

         This gravamen of this action is a dispute between a composer (Guerra) and a publisher (Karen) over the ownership of the copyrights in a number of Latin pop songs. Guerra is a composer, musician, and recording artist. (Dkt. No. 59-1 ¶ 11.) Starting in 1985, Guerra began to write musical compositions for distribution by DDK. (Id. ¶ 12.) In the following years, Guerra and DDK entered into a series of agreements governing the terms of their relationship. (Id. ¶ 13.)

         In August 1988, Guerra entered into an exclusive recording agreement with DDK, in which he agreed to record albums for DDK and not re-record those songs until after the agreement expired. (Dkt. No. 69-1 (“Base Agreement”).)

         In October 1992, Guerra entered into a publishing administration agreement with Karen Publishing. (Dkt. No. 64-1 (“1992 Agreement”).) The 1992 Agreement gave Karen Publishing rights in forty-six of Guerra's compositions-the nature of this transfer of rights will be explained in greater detail below. (Dkt. No. 59-1 ¶ 13; 1992 Agreement at 13.) The parties amended the agreement in July 1994 to add an additional nine compositions to the 1992 Agreement, for a total of fifty-five compositions. (Dkt. No. 59-1 ¶ 20.)

         In October 2006, Guerra and DDK entered into an Agreement for the Partial Release of Obligations. (Dkt. No. 64-10 (“Release Agreement”).) The Release Agreement freed Guerra from his obligation to record additional songs for DDK (id. ¶ FIRST), but in exchange required him to transfer various properties to DDK, including shares in a joint-stock corporation; the master recording of a live performance of a concert given by Guerra; real property owned in the Dominican Republic; and various suites in an office building (id. ¶ SIXTH). The Release Agreement also permitted DDK to continue exploiting the recorded performances of Guerra's compositions made under the Base Agreement and prohibited Guerra from re-recording those compositions for five years, in exchange for royalties. (Id. ¶¶ THIRD, FOURTH, FIFTH.) DDK also retained the right to administer Guerra's compositions for three years. (Id. ¶ SEVENTH.) Again, the specifics of the Release Agreement will be considered in greater detail below.

         In 2014, Guerra entered into an Exclusive Administration Agreement with UMU, through which Guerra gave UMU the exclusive right to administer his compositions. (Dkt. No. 69-5.)

         DDK commenced this lawsuit in October 2013 against Guerra, UMG, Capitol, and E.M.I., alleging a single claim of copyright infringement based on the release of a CD and DVD, entitled “Asondeguerra Tour, ” which contained newly recorded versions of compositions that Guerra had recorded under the Base Agreement. (Dkt. No. 1 ¶ 20.) In July 2015, the Court granted a motion to lift a stay of proceedings and to allow UMU to intervene to assert counterclaims of copyright infringement against Karen. (Dkt. No. 30.) On April 21, 2016, Karen filed an amended answer to the counterclaims and, along with Rodriguez, a third-party counterclaim against Guerra and UMU. (Dkt. No. 56.)

         II. Legal Standard

         Motions to amend and motions for judgment on the pleadings are considered under the same standard as a motion to dismiss for failure to state a claim. See Anderson News, L.L.C. v. Am. Media, Inc., 680 F.3d 162, 185 (2d Cir. 2012) (“The adequacy of a proposed amended complaint to state a claim is to be judged by the same standards as those governing the adequacy of a filed pleading.”); Bank of N.Y. v. First Millennium, Inc., 607 F.3d 905, 922 (2d Cir. 2010) (“The same standard applicable to [Rule] 12(b)(6) motions to dismiss applies to [Rule] 12(c) motions for judgment on the pleadings.”).

         In order to survive a motion to dismiss for failure to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a plaintiff must plead factual allegations sufficient “to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is facially plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In considering a motion to dismiss, courts must accept as true all “factual allegations contained in the complaint, ” Twombly, 550 U.S. at 572, and must “draw all inferences in the light most favorable to the non-moving party's favor, ” In re NYSE Specialists Sec. Litig., 503 F.3d 89, 95 (2d Cir. 2007) (Sotomayor, J.).

         III. Discussion

         There are three motions currently before the Court. First, the Karen Plaintiffs move to file a supplemental pleading asserting claims against Guerra and UMU. (Dkt. No. 58.) Second, Guerra and UMU move to dismiss Rodriguez's third-party counterclaim. (Dkt. No. 67.) And third, Karen and Rodriguez move for judgment on the pleadings against Guerra and UMU. (Dkt. No. 63.)

         A. Karen's Motion to File a Supplemental Pleading and Guerra's and UMU's Motion to Dismiss Rodriguez's Counterclaim

         Two of the motions before the Court involve substantially similar claims: Karen's motion to file a supplemental pleading asserting claims against Guerra and UMU (Dkt. No. 58), and Guerra's and UMU's motion to dismiss Rodriguez's third-party counterclaim (Dkt. No. 67).

         Karen's proposed supplemental pleading asserts three claims against UMU and Guerra: (1) for declaratory judgment that registrations obtained by Editora El Conuco Inc. (the “Conuco Registrations”)[2] are invalid; (2) for declaratory judgment that the 2006 Release Agreement is unenforceable; and (3) for copyright infringement against UMU based on its May 2014 contract with Guerra to administer his compositions. (Dkt. No. 59-1.) These claims closely track the counterclaims raised by Rodriguez against Guerra and UMU, which are (1) for declaratory judgment that the Conuco registrations are invalid; (2) for a declaration that the Release Agreement is unenforceable; and (3) for a declaration that the Release Agreement did not transfer exclusive rights to Guerra, such that Guerra did not have exclusive rights to license to UMU in the May 2014 contract. (Dkt. No. 56 ¶¶ 32, 36.)

         Accordingly, Guerra and UMU oppose Karen's request to file a supplemental pleading and move to dismiss Rodriguez's third-party counterclaim on substantially similar grounds. As to the Conuco Registrations, Guerra and UMU argue that there is no justiciable controversy. As to the 2006 Release Agreement, Guerra and UMU argue that the claim that the Agreement was breached is time barred. And as to Karen's copyright infringement claim, Guerra and UMU argue that it fails as a matter of law, and at the very least does not apply to compositions not listed in the 1992 Administration Agreement. These issues will be addressed in turn.

         1. Conuco Registrations

         Karen and Rodriguez seek a declaration that copyright registrations for Guerra compositions filed by Conuco are invalid. Rodriguez alleges that Guerra was an officer/director of Conuco and that in applications for copyright registration, Conuco identified itself as the sole owner of the copyrights for several dozen of Guerra's compositions that were allegedly owned by Karen. (Dkt. No. 56 ¶¶ 18-20.) Rodriguez claims that but for these alleged misrepresentations, the U.S. Copyright Office would not have issued copyright certificates to Conuco. (Id. ¶ 22)

         Guerra and UMU argue that because Karen itself filed separate copyright registrations for each of those compositions, the registration requirement has been satisfied, and a declaration as to the validity of the Conuco Registrations would have no effect on the claims here. (Dkt. No. 68 at 16-18.) Indeed, Guerra and UMU expressly disclaim reliance on the Conuco Registrations for their infringement claims or for the purposes of demonstrating Guerra's ownership of the copyrights in the compositions. (Dkt. No. 82 at 17.)

         As a threshold matter, the jurisdictional prerequisite of copyright registration required by section 411(a) of the Copyright Act has been satisfied through Karen's registration of the same compositions that are the subject of the Conuco Registrations. See 17 U.S.C. § 411(a) (“[N]o civil action for infringement of the copyright in any United States work shall be instituted until preregistration or registration of the copyright claim has been made in accordance with this title.”). Even though Guerra and UMU are infringement plaintiffs in this action, section 411(a) does not require them to be the ones who registered the copyright. See, e.g., Vapac Music Publ'g, Inc. v. Tuff ‘N' Rumble Mgmt., No. 99 Civ. 10656, 2000 WL 1006257, at *2 (S.D.N.Y. July 19, 2000) (“By its terms, 17 U.S.C. § 411(a) requires only that a copyright be registered; it does not require that the plaintiff be the party who caused the registration to occur.”). Proof of Karen's registration, which is adequately adduced here, is thus sufficient to confer jurisdiction for the infringement action.

         The question, then, is whether the Conuco Registrations are relevant to the claims at issue, or instead whether a decision by the Court on this issue would amount to an impermissible advisory opinion. Here, the compositions covered by the Conuco Registrations are the subject of an infringement action brought by UMU and Guerra. Indeed, the ownership status of those copyrights is a central issue in this action, as “a plaintiff must establish . . . ‘ownership of a valid copyright'” as an essential element of an infringement claim. Kwan v. Schlein, 634 F.3d 224, 229 (2d Cir. 2011) (quoting Feist Publ'ns, Inc. v. Rural Tel. Serv. Co., Inc., 499 U.S. 340, 361 (1991)). Moreover, copyright registration “constitutes prima facie evidence of the valid ownership of a copyright.” Jorgensen v. Epic/Sony Records, 351 F.3d 46, 51 (2d Cir. 2003) ...


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