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Cartagena v. Homeland Insurance Co. of New York

United States District Court, S.D. New York

December 16, 2019



          McMahon, C.J.

         Plaintiffs Joseph A. Cartagena (p/k/a “Fat Joe”) (“Cartagena”) and Sneaker Addict Touring, LLC (“Sneaker Addict”) bring this insurance coverage action against Defendant Homeland Insurance Company of New York (“Homeland”) arising from the policy Homeland issued Plaintiffs (the “Policy”). Homeland has refused to provide Plaintiffs with a defense in an underlying action entitled Elliott v. Cartagena et al., No. 19-cv-1998 (NRB) (the “Elliott Lawsuit”), presently pending before another judge of this Court. Plaintiffs assert claims for (i) breach of contract; (ii) breach of the implied covenant of good faith and fair dealing; and (iii) a declaration that they are entitled to coverage in the Elliott Lawsuit.

         Homeland originally moved to dismiss the complaint for failure to state a claim on two grounds: (i) the Policy excludes the claim asserted in the Elliott Lawsuit because Elliott was an independent contractor or joint venturer, and (ii) the various causes of action asserted by Elliott are not “perils” covered by the Policy. Plaintiffs opposed the motion but did not cross-move for summary judgment. It quickly became clear to the Court that these issues, which involve nothing more than construction of an unambiguous contract, could be disposed of on summary judgment. Accordingly, on November 25, 2019, I issued an order converting the motion to dismiss to a motion for summary judgment (Fed. R. Civ. P. 12(d)), and invited the Parties to deal with the motion on that basis. (Dkt. No. 20). Plaintiffs and Homeland filed additional papers on December 6, 2019 (Dkt. Nos. 21, 22).

         Treating the motion as a motion for summary judgment, Homeland's original motion is granted only as to Count II. The remainder of its motion is denied, and summary judgment is awarded to Plaintiffs on the remaining issues raised by the motion - namely, whether the Elliott Lawsuit alleges “covered perils” and whether Exclusion B applies. Plaintiffs are entitled to judgment as a matter of law on the undisputed facts. The fact that Plaintiffs made no motion is of no moment, since on a motion for summary judgment the Court may enter judgment in favor of any party, including a non-moving party, who is entitled thereto, after giving reasonable notice. Fed.R.Civ.P. 56(f)(1). The Court's notice that the motion was being converted and request for further submissions satisfies the requirements of Rule 56(f).

         There remain in the case several other bases for Homeland's denial of coverage. The Parties were ordered to complete discovery on those issues within 90 days.


         The Policy

         Cartagena is a renowned hip-hop artist professionally known as “Fat Joe, ” and the sole member of his company, Sneaker Addict. (Compl. ¶ 12, Dkt. No. 1; Dkt. No. 7). Both plaintiffs are citizens of Florida. (Compl. ¶¶ 3-4; Dkt. No. 7).

         Homeland is an insurance company with its principal place of business in New York. (Compl. ¶¶ 10-11). On January 18, 2019, Homeland issued Plaintiffs a $1, 000, 000 claims-made Music Professional Liability Insurance Policy (the “Policy”). Cartagena and Sneaker Addict are both Named Insureds under the Policy. (“Policy” at 4, 17, Dkt. No. 14).

         The Policy provides coverage for certain claims brought against the Insureds that arise from their music publishing, producing, recording, songwriting, distributing, licensing, and performing, including specifically: “infringement of copyright, plagiarism, Piracy, and misappropriation of ideas under implied contract or other misappropriation or ideas or information.” (Id. at 11, 18).

         Under Exclusion B, the Policy excludes coverage for claims brought “against the Insureds by any past, present or future Insured, joint venturer or Independent Contractor” who is either (1) seeking compensation, an accounting or recovery of profits or royalties, or (2) claiming an ownership interest in the Insured's music or lyrics. (See Id. at 20, 21).

         When a claim is covered by the Policy, Homeland must defend the underlying lawsuit on behalf of the Insureds and indemnify the Insureds for any judgment or settlement, subject to the limits of liability and retention. (Id. at 18-20).

         The Underlying Lawsuit

         Eric A. Elliott (p/k/a Fly Havana) (“Elliott”) filed a lawsuit (the “Elliott Lawsuit”) against Plaintiffs, among others, in the Southern District of New York in March of 2019 (“Elliott Compl., ” Ex. 2 to Def.'s Mot. to Dismiss, Dkt. No. 9-2).

         One of Cartagena's hit recordings is “All the Way Up.” (Compl. ¶ 13). According to the complaint in the Elliott Lawsuit (the “Elliott Complaint”), Elliott and Shandel Green (p/k/a Infared) (“Green”) created an unfinished version of the song “All the Way Up.” (Elliott Compl. ¶ 8). At the time, Elliott “supported the song being shopped to Fat Joe [Cartagena] so it could be further developed and released.” (Id. ¶ 13). In the following months, Cartagena and other artists added to the unfinished version to create the final version of the song, which went on to become a double platinum recording. Elliott allegedly knew none of this. (Id. ¶¶ 9, 34-38).

         Elliott claims that he is a joint author and joint owner of the final version. However, Cartagena, Green, other contributing artists, and various entities are listed as authors on the copyright registrations for the final released versions of “All the Way Up.” (Id. ¶¶ 108-09). The same authors are listed on the song's registrations with BMI and ASCAP, two performing rights organizations. (Id. ¶ 110). Elliott is not listed as an author on any registration.

         When Elliott heard the final version of “All the Way Up” on the radio, he confronted Cartagena and asked why he had not received any credit or compensation for his work. (Id. ¶¶ 38-42). The two spoke by telephone. While Cartagena said he “initially thought Elliott had nothing to do with the song, ” he eventually concluded that Elliott had written and performed on the unfinished version. (Id. ¶¶ 40). Cartagena allegedly offered to give Elliott “‘some bread' up front, ” more money later, and to work with Elliott in the future. (Id. ¶ 42).

         A week or so later, Cartagena met with Elliott, gave him a check for $5, 000, and made him sign a contract. (Id. ¶¶ 48-56). According to Elliott, Cartagena represented that the contract memorialized his offer that Elliott would get some money up front, more money later, and would have an opportunity to work with Cartagena in the future. (Id. ¶ 54). Elliott now alleges that Cartagena's statements were knowingly false representations. (Id. ¶ 55).

         Elliott alleges that he has not received any credit or compensation for his contribution to the song beyond the single $5, 000 check. (Id. ¶ 104).

         In his lawsuit, Elliott seeks a declaration that he is either the sole author and owner of the composition and sound recording of “All the Way Up, ” or a joint author and owner with Plaintiffs. (Id. ¶¶ 222-86, Counts I-IV). Elliott also brings several state law claims against the defendants, including claims for an accounting, constructive trust, unjust enrichment, quantum meruit, conversion, moneys had and received, breach of fiduciary duties, and negligence/gross negligence. (Id. ¶¶ 287-331, Counts V-XII). Finally, Elliott brings several claims for fraud/negligent misrepresentation and civil conspiracy against Cartagena and Green and their related entities (including Sneaker Addict) arising out of their alleged effort to cut Elliott out of his fair share. (Id. ¶¶ 332-55, Counts XIII-XIV).

         Elliott specifically says that his lawsuit “is not an infringement action, ” and he does not bring a copyright infringement claim. (Id. ¶¶ 3, 222-355). And indeed, his claim of joint authorship would be inconsistent with a copyright infringement claim, since joint authors may not sue one another for infringement. Weissmann v. Freeman, 868 F.2d 1313, 1318 (2d Cir. 1989); Korman v. Iglesias, 736 F.Supp. 261, 264 (S.D. Fla. 1990).

         Plaintiffs Seek Defense from Homeland Under the Policy

         Cartagena submitted a claim to Homeland under the Policy for coverage for the Elliott Lawsuit. (Compl. ¶¶ 15-17).

         Homeland denied Cartagena's claim because (i) the Policy excludes claims brought by an Independent Contractor (Elliott); (ii) the causes of action alleged in the Elliott Lawsuit are not perils covered by the Policy; and (iii) Cartagena allegedly knew before Homeland issued the Policy that Elliott was likely to make a claim, but falsely represented that he was unaware of any situation that could give rise to a claim. (Id. ¶¶ 18-19).

         At present, Plaintiffs are defending against the Elliott Lawsuit on their own. They filed the instant lawsuit in order to obtain coverage.


         To survive a motion to dismiss, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556).

         The Court may grant summary judgment, even for a non-movant, where a party is entitled to judgment as a matter of law on undisputed facts. Fed.R.Civ.P. 56(f)(1).[1]

         Choice ...

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