2nd Circuit Closes Out "Turtles" Pre-72 Sound Recording Case In Favor Of Sirius

Flo & Eddie, Inc. v. Sirius, No. 15-1164-cv (2d Cir. Feb. 16, 2017).

After the New York Court of Appeals answered the Second Circuit's certified question that New York common law does not recognize a right of public performance for creators of pre-1972 sound recordings, the Second Circuit reversed the district court’s denial of Sirius's motion for summary judgment and remanded with instructions to grant Sirius's motion for summary judgment and to dismiss the case with prejudice.  The Second Circuit noted that the answer to the certified question was determinative of the other claims.

No Common Law Right of Public Performance In Pre-72 Sound Recordings; Issue Is For Legistlature

Flo & Eddie, Inc. v Sirius XM Radio, Inc., 2016 NYSlipOp 08480 (N.Y. 12/20/2016).

New York's highest court, the Court of Appeals, holds that "New York common-law copyright does not recognize a right of public performance for creators of sound recordings," answering in the negative the Second Circuit's certified question in the Flo & Eddie (Turtles) case against Sirius satellite radio concerning alleged common law copyright infringement of pre-1972 sound recordings.  In a lengthy majority opinion authored by Justice Stein, the Court discussed the historical treatment of sound-recordings at both the federal and state level, analyzed prior decisions in both New York state court and the 2nd Circuit, and ultimately held that "New York common law does not recognize a right of public performance for creators of pre-1972 sound recordings" and that the state legislature should decide "whether recognizing a right of public performance in sound recordings is a good idea.

In addition to prior decisions, the Court addressed the practice of interested stake-holders in the music industry.

Indeed, it would be illogical to conclude that the right of public performance would have existed for decades without the courts recognizing such a right as a matter of state common law, and in the absence of any artist or record company attempting to enforce that right in this state until now. The absence of a right of public performance in sound recordings was discussed at the federal level for years and became acutely highlighted in 1971, upon enactment of the Sound Recording Amendment, and again in 1995, upon enactment of the DPRA. At those times, all interested parties were placed on notice of the statute's limited rights for post-1972 sound recordings. Although parties do not lose their rights merely by failing to enforce them, the fact that holders of rights to sound recordings took no action whatsoever to assert common-law protection for at least the past four decades — when the absence of a comprehensive federal right of public performance for sound recordings was clear — supports our conclusion that artists and copyright holders did not believe such a right existed in the common law.

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Simply stated, New York's common-law copyright has never recognized a right of public performance for pre-1972 sound recordings. Because the consequences of doing so could be extensive and far-reaching, and there are many competing interests at stake, which we are not equipped to address, we decline to create such a right for the first time now. Even the District Court here, while finding the existence of a common-law copyright of public performance in sound recordings, acknowledged that such a right was "unprecedented," would upset settled expectations, and would "have significant economic consequences" (62 F Supp 3d at 352). Under these circumstances, the recognition of such a right should be left to the legislature.

Notably, the Court did not foreclose the plaintiffs' claims under other common-law theories of recovery, like unfair competition.

Finally, we note that sound recording copyright holders may have other causes of action, such as unfair competition, which are not directly tied to copyright law. Indeed, in the present case, plaintiff prevailed in the District Court on its causes of action alleging unfair competition and unauthorized copying of sound recordings. The Second Circuit concluded that defendant had copied plaintiff's recordings, but postponed the questions of fair use and unfair competition until after our resolution of the certified question (821 F3d at 270 n 4, 272). Thus, even in the absence of a common-law right of public performance, plaintiff has other potential avenues of recovery.

The concurring opinion, by Justice Fahey, agreed that the issue should be determined by the legislature but accepted the Second Circuit's invitation to opine on how to define "public performance" and stated

To that end, while I agree with the conclusion of my colleagues in the majority that the common law of this state does not recognize a right of public performance, I would answer the pertinent part of the certified question in the negative with this caveat: "public performance" does not include the act of allowing members of the public to receive the "on-demand" transmission of particular sound recordings specifically selected by those listeners.

Lastly, Justice Rivera dissented: "New York's broad and flexible common-law copyright protections for sound recordings encompass a public performance right that extends to the outer boundaries of current federal law, and ceases upon preemption by Congress."

Federal 2nd Circuit Certifies Pre-72 Question To New York's Highest Court in Flo & Eddie Case

Flo & Eddie v. SiriusXM Radio, 15-1164cv (2d Cir. Apr. 13, 2016).

In the "Turtles" case against Sirius for common law copyright infringement of pre-1972 sound recordings under New York common-law, the Second Circuit certified the question to New York's highest court, the Court of Appeals: "This case presents a significant and unresolved issue of New York copyright law: Is there a right of public performance for creators of sound recordings under New York law and, if so, what is the nature and scope of that right? Because this question is important, its answer is unclear, and its resolution controls the present appeal, we reserve decision and certify this question to the New York Court of Appeals."

The lower court had denied Sirius' motion for summary judgment, and the Second Circuit reviewed the matter de novo.  The Circuit stated "the issue before us is whether New York common law affords copyright holders the right to control the performance of sound recordings as part of their copyright ownership."  However, New York's highest court has not ruled on the issue in any prior case, and without such guidance, the Circuit was "in doubt" whether New York provides such rights under common law.  Thus, the Court found that certification to the New York Court of Appeals was appropriate.  Accordingly, the Court reserved decision and certified the following question for decision by the New York Court of Appeals:

"Is there a right of public performance for creators of sound recordings under New York law and, if so, what is the nature and scope of that right?"

Publisher Not Double Dipping Foreign Royalties Under Terms Of 1961 Agreement With Duke Ellington

Ellington v. EMI Music et al., 2014 NY Slip Op 07197, NYLJ 1202674400667 (N.Y. Court of Appeals Oct. 23, 2014).

New York's highest court affirmed dismissal of a breach of contract claim brought by Duke Ellington's heir, against Ellington's publisher (EMI), seeking unpaid royalties under a 1961 agreement.  The majority of the Court of Appeals held that, under the contract's clear and unambiguous terms, Ellington was entitled to 50% "net receipts" from foreign publishers, even if those foreign publishers were now-affiliated with the US publisher.

Plaintiff had claimed that by using affiliated foreign subpublishers, EMI was double-dipping into the entire pot of revenue generated from the foreign sale of the relevant musical compositions.  Essentially, plaintiff claimed that the amount retained by the affiliated foreign subpublishers prior to remittal of the remainder to EMI was an amount received by EMI, and therefore, when using affiliated foreign subpublishers, EMI should remit to the First Parties half of the entire amount generated from the foreign sale of the relevant musical compositions.  The trial court disagreed and dismissed the complaint; the appellate division affirmed; and the Court of Appeals affirmed.

First, as to "net revenue actually received," the Court of Appeals found that the royalty provision makes no distinction between affiliated and unaffiliated foreign subpublishers.  Therefore,  the courts below properly declined to read such a distinction into the contract as it does not appear to have been the intent of the parties that such a distinction be included, primarily because they were understandably unaware that such a change in the industry would occur.

Second, as to "any other affiliate," the Court of Appeals found that "[a]bsent explicit language demonstrating the parties' intent to bind future affiliates of the contracting parties, the term 'affiliate' includes only those affiliates in existence at the time that the contract was executed."  In other words, the publisher was not double dipping because its later-foreign-affiliates were not "affiliates" of the publisher under the contract.

There were two dissents.  In sum, the dissents found it "wrong... that, when a contract is written to bind 'any . . . affiliate' of a party, its effect should be limited to affiliates in existence at the time of contracting."  In other words, the dissent would have held that the term "affiliate" as used in the Agreement may be interpreted as appellant suggests to include EMI's foreign affiliated entities.

NY Statute of Frauds Bars Claims in Warner Acquisition

Snyder v. Bronfman, __ N.Y.3d __, 2009 NY Slip Op 08667 (N.Y. Nov. 23, 2009), holding that quantum meruit and unjust enrichment claims brought to recover the value of plaintiff's services in helping to achieve a corporate acquisition are barred by the statute of frauds contained in General Obligations Law § 5-701 (a) (10).

The deal? Defendant and a group of other investors agreed to acquire Warner Music from Time Warner for approximately $2.6 billion in cash. According to the complaint, Plaintiff was a major contributor to this success: he identified the opportunity, persuaded defendant of its merits, helped to get debt financing and obtained financial information from the target company.

New York's highest court, the Court of Appeals, found: "The essence of plaintiff's claim is that he devoted years of work to finding a business to acquire and causing an acquisition to take place — efforts that ultimately led to defendant's acquisition of his interest in Warner Music. In seeking reasonable compensation for his services, plaintiff obviously seeks to be compensated for finding and negotiating the Warner Music transaction. His claim is of precisely the kind the statute of frauds describes."