| Ellington v EMI Music Inc. |
| 2013 NY Slip Op 03158 [106 AD3d 401] |
| May 2, 2013 |
| Appellate Division, First Department |
| Paul M. Ellington, Appellant, v EMI Music Inc. etal., Defendants, and EMI Mills Music, Inc., Respondent. |
—[*1] Pryor Cashman LLP, New York (Donald S. Zakarin of counsel), forrespondent.
Appeal from order, Supreme Court, New York County (Bernard J. Fried, J.), enteredOctober 11, 2011, which granted a motion by defendant EMI Mills Music, Inc. todismiss the amended complaint pursuant to CPLR 3211 (a) (1) and (7), deemed an appealfrom judgment, same court and Justice, entered December 7, 2011, dismissing thecomplaint (CPLR 5501 [c]), and, so considered, the judgment unanimously affirmed,without costs.
This breach of contract action was brought to recover royalties allegedly due under aDecember 17, 1961 songwriter royalty agreement. The agreement designates thelegendary Edward Kennedy Ellington, known professionally as Duke Ellington, andnamed members of his family (collectively Ellington) as the "First Parties." A group ofmusic publishers consisting of Mills Music, Inc., American Academy of Music, Inc.,Gotham Music Service, Inc., their predecessors in interest and any other affiliate of MillsMusic are collectively designated as the "Second Party" under the agreement. EMI Millsis the successor in interest to Mills Music. According to the amended complaint, plaintiffis suing as Duke Ellington's heir and grandson.
This appeal calls for an interpretation of paragraph 3 (a) of the agreement which,where relevant, required the Second Party to pay Ellington "a sum equal to fifty (50%)percent of the net revenue actually received by the Second Party from . . .foreign publication" of Ellington's compositions. This is known in the music publishingindustry as a "net receipts" arrangement by which a composer, such as Ellington, wouldcollect royalties based on income received by a publisher after the deduction of feescharged by foreign subpublishers (see e.g. Jobim v Songs of Universal, Inc., 732F Supp 2d 407, 413 [SD NY 2010]). As stated in plaintiff's brief, "net receipts"arrangements were standard when the agreement was executed in 1961. Plaintiff alsonotes that at that time foreign subpublishers were typically unaffiliated with domesticpublishers such as Mills Music. Over time, however, EMI Mills, like other publishers,acquired ownership of the foreign subpublishers through which revenues derived fromforeign subpublications were generated. Accordingly, in this case, fees that previouslyhad been charged by independent foreign subpublishers under the instant net receiptsagreement are now being charged by [*2]subpublishersowned by EMI Mills.[FN*] Plaintiff asserts that EMI Mills has enabled itself to skim his claimed share of royaltiesfrom the Duke Ellington compositions by paying commissions to its affiliated foreignsubpublishers before remitting the bargained-for royalty payments to Duke Ellington'sheirs. In dismissing the complaint, the motion court declined to read into the royaltypayment terms any distinction between affiliated and unaffiliated foreign subpublishersinasmuch as the contracting parties themselves chose not to make such a distinction. Weaffirm.
Plaintiff asserts that the agreement is ambiguous as to whether "net revenue actuallyreceived by the Second Party" entails revenue received from EMI Mills's foreignsubpublisher affiliates. Although it was raised for the first time on appeal, we entertainplaintiff's ambiguity argument as it poses a question of law that could not have beenavoided if raised before the motion court (see Delgado v New York City Bd. ofEduc., 272 AD2d 207 [1st Dept 2000], lv denied 95 NY2d 768 [2000],cert denied 532 US 982 [2001]).
An agreement is unambiguous "if the language it uses has 'a definite and precisemeaning, unattended by danger of misconception in the purport of the [agreement] itself,and concerning which there is no reasonable basis for a difference of opinion' "(Greenfield v Philles Records, 98 NY2d 562, 569 [2002] [citation omitted]).Conversely, an agreement is ambiguous if "on its face [it] is reasonably susceptible ofmore than one interpretation" (see Chimart Assoc. v Paul, 66 NY2d 570, 573[1986]). Guided by these precedents, we find no ambiguity in the agreement which, by itsterms, requires EMI Mills to pay Ellington's heirs 50% of the net revenue actuallyreceived from foreign publication of Ellington's compositions. "Foreign publication" hasone unmistakable meaning regardless of whether it is performed by independent oraffiliated subpublishers. Given the plain meaning of the agreement's language, plaintiff'sargument that foreign subpublishers were generally unaffiliated in 1961, when theagreement was executed, is immaterial.
A court's "role in interpreting a contract is to ascertain the intention of the partiesat the time they entered into the contract" (Evans v Famous Music Corp., 1 NY3d 452, 458 [2004][emphasis added]). We note that the complaint contains no allegation of any change inthe basis for payment of royalties, i.e., 50% of the net revenue derived from foreignpublication. Moreover, the complaint sets forth no basis for plaintiff's apparent premisethat subpublishers owned by EMI Mills should render their services for free althoughindependent subpublishers were presumably compensated for rendering identicalservices. Notwithstanding plaintiff's argument, we note that the motion court correctlydetermined that the agreement's definition of "Second Party" included only the partiesnamed therein and "other affiliates of Mills Music, Inc." that were in existence at the timethe agreement was executed. The definition did not include foreign subpublishers thathad no existence or affiliation with Mills Music at the time of contract (see VKKCorp. v National Football League, 244 F3d 114, 130-131 [2d Cir 2001]). We haveconsidered plaintiff's remaining arguments and find them unavailing.Concur—Mazzarelli, J.P., Andrias, DeGrasse, Richter and Clark, JJ. [PriorCase History: 33 Misc 3d 1209(A), 2011 NY Slip Op 51827(U).]
Footnote *: As also stated inplaintiff's brief, "at source" agreements have replaced "net receipts" agreements as themusic publishing industry standard since around 1980. Under an "at source"arrangement, royalty payments to the artist are based on the grand total of earned musicpublishing revenue with all costs of collection absorbed by the publisher.