United States District Court, S.D. New York
TWELVE SIXTY LLC, ARON MARDEROSIAN, and ROBERT MARDEROSIAN, Plaintiffs,
EXTREME MUSIC LIBRARY LIMITED, a division of Sony/ATV Music Publishing; EXTREME MUSIC LIMITED; VIACOM INTERNATIONAL INC.; NEW CREATIVE MIX INC.; and HYPE PRODUCTION MUSIC Defendants.
OPINION & ORDER
A. CROTTY, United States District Judge:
Sixty LLC, Aron Marderosian, and Robert Marderosian
("Plaintiffs") bring this action against Extreme
Music Library Ltd. and Extreme Music Ltd. ("Extreme
Defendants") and Viacom International Inc. and New
Creative Mix Inc. ("Viacom Defendants"), seeking
royalties and licensing fees allegedly owed under the terms
of a composer agreement. The Extreme and Viacom Defendants
each move for an order limiting Plaintiffs' recoverable
damages in their breach-of-contract claims and dismissing the
remaining claims. For the following reasons, the motions are
GRANTED in part and DENIED in part.
and Robert Marderosian, professionally known as "Heavy
Young Heathens, " have written and recorded hundreds of
musical compositions used in television shows, movies,
theatrical trailers, and video games. First Am. Compl.
("FAC") ¶ 1. On May 19, 2010, the
Marderosians, acting through their company Twelve Sixty LLC,
entered into a blanket composer agreement ("2010
Agreement") with New Remote Productions Inc. ("New
Remote"), a Viacom subsidiary. FAC Ex. 1 at pp. 1, 12.
The 2010 Agreement provided that Twelve Sixty LLC would
deliver fifty songs to New Remote in exchange for a flat fee
of $10, 000 and one-hundred percent of the "writer's
share" of public performance royalties payable by
performing rights organizations. Id. at pp. 3-4, 14,
March 7, 2011, New Remote transferred all of its rights and
obligations under the 2010 Agreement to another Viacom
subsidiary, New Creative Mix Inc. ("New Creative"),
and Plaintiffs entered into a new composer agreement
("2011 Agreement") with New Creative. FAC Ex. 3 at
pp. 2-6. The 2011 Agreement provided that Plaintiffs would
produce an additional thirty-five songs for New Creative in
exchange for $20, 000 and one-hundred percent of the
writer's share of public performance royalties.
Id. ¶¶ 7.1, 7.4, Schedule A. The 2011
Agreement further obligated New Creative to register the
songs with the appropriate performing rights organizations,
which are responsible for collecting and distributing
performance royalties. Id. ¶ 4.8. New Creative
also had the right to exploit the Plaintiffs' songs as
part of the Hype Music Library, a premium production music
library jointly owned by Viacom and Extreme, which could be
accessed by third-party licensees in return for a license
fee. Id. ¶¶ 5.1, 1.5. If Plaintiffs'
songs were exploited as part of the Hype Music Library,
Plaintiffs were entitled to receive additional compensation
in the form of fifty percent of "Gross Receipts, "
defined as income actually received by Extreme or New
Creative from licensing songs in the Hype Music Library.
Id. ¶¶7.2, 1.4, 1.6, 12.
2011 Agreement required New Creative or its assignees to
issue biannual accounting statements to Plaintiffs and
include payment of Plaintiffs' share of any Gross
Receipts. Id. ¶ 8.1. It contained a contractual
limitations period provision that required Plaintiffs to
commence any action concerning an accounting statement within
two years after the statement was rendered.
the sole remedy provision, and it provides that the scope of
any such action "shall be limited to a determination of
the amount of [Plaintiffs'] share of Gross Receipts, if
any, payable for the accounting periods in question, and
[Plaintiffs'] sole remedy shall be the recovery
thereof." Id. ¶ 8.2. It further provided
that "[a]ll disputes arising under this Agreement shall
be governed by the laws of the State of New York, and each of
the parties submits to the exclusive jurisdiction of the
federal and state courts of the State of New York."
Id. ¶ 10.8.
September 27, 2016, Plaintiffs filed suit against the Extreme
Defendants in the Central District of California. ECF 1. On
February 22, 2017, the Central District of California
transferred the case to this court, citing the choice-of-law
and forum-selection clauses. ECF 26. On March 28, 2017,
Plaintiffs filed the First Amended Complaint
("FAC"), which added the Viacom Defendants and Hype
Production Music ("Hype") as parties. ECF 49.
alleges that Defendants engaged in a fraudulent scheme to
actively conceal thousands of exploitations of
Plaintiffs' music, allowing Defendants to make millions
of dollars without paying Plaintiffs what they were entitled
to under the 2011 Agreement. FAC ¶¶ 45-46, 54.
Specifically, it alleges that the Defendants purposefully
failed to register Plaintiffs' songs with a performing
rights society so that third parties would not have to pay
Plaintiffs a writer's share of public performance
royalties, thus enticing more third parties to do business
with Defendants. Id. ¶¶ 57-58. It further
alleges that Extreme, rather than Viacom, issued the
accounting statements, which were sporadic and materially
omitted the majority of exploitations, and that Extreme
frequently offered Plaintiffs' music to third parties in
exchange for "consulting fees" instead of licensing
fees so that Defendants would not have to pay Plaintiffs a
percentage of the fees. Id. ¶¶ 54, 55, 70.
As a result, Plaintiffs raise claims for breach of contract,
breach of implied-in-fact contract, fraud, rescission, and
accounting. Id. ¶¶ 79-148.
Defendants and Viacom Defendants now move under Federal Rules
of Civil Procedure 9(b), 12(b)(6) and 12(f) to: (1) partially
dismiss Plaintiffs' two claims for breach of contract to
the extent they seek damages beyond those permitted by the
2011 Agreement; (2) dismiss Plaintiffs' claims for fraud,
breach of implied-in-fact contract, rescission, and
accounting, as well as a purported claim for breach of the
duty of good faith and fair dealing; (3) strike
Plaintiffs' demands for punitive damages and disgorgement
of profits; and (4) dismiss "Hype Music Production"
from this action because it is not a legal entity capable of
survive a motion to dismiss pursuant to Fed.R.Civ.P.
12(b)(6), a complaint must have sufficient "factual
plausibility" to allow the court "to draw the
reasonable inference that the defendant is liable."
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The
plaintiffs factual allegations must "raise a right to
relief above the speculative level" and cross "the
line from conceivable to plausible." Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 555, 570 (2007). In ruling on
a Rule 12(b)(6) motion, a court may consider both "the
allegations on the face of the complaint" as well as
"[documents that are attached to the complaint or
incorporated in it by reference." Roth v.
Jennings, 489 F.3d 499, 509 (2d Cir. 2007).
Breach of Contract
raise two separate breach-of-contract claims: one against New
Creative and MTV Networks as an alter ego of New Creative;
and one against Extreme, MTV Networks, and Hype as assignees
of New Creative's obligations under the 2011 Agreement.
FAC at pp. 35, 39. Each of these claims alleges, inter
alia, two separate breaches of the 2011 Agreement: (1) a
failure to register the songs with performing rights
organizations, so that Plaintiffs could receive the
writer's share of public performance royalties, and (2) a
failure to license the songs and pay Plaintiffs fifty percent
of the income generated from the licensing fees. Id.
¶¶ 81-83, 85-86, 96. Without differentiating
between the two alleged breaches, Defendants argue that
Plaintiffs' recoverable damages for their
breach-of-contract claims should be limited to their share of
licensing fees earned on or after July 1, 2014, due to the
sole remedy and contractual limitations period provisions in
the 2011 Agreement. Indeed, such clauses are enforceable
under New York law. See Deutsch Alt-A Sec. Mortg. Loan
Trust, Series 2006-OA1 v. DB Structured Prods., Inc.,958 F.Supp.2d 488, 498 n.6 (S.D.N.Y. 2013) ("New York