Opinion
0105551/2004.
February 1, 2008.
DECISION and ORDER
This action arises from a September 4, 1997 recording agreement (Agreement) between Charles Gambetta and Yvette Grubman, the music publishers, and defendant Wayne Nugent (Nugent) and the members of his band 'US.' Nugent signed the contract on behalf of all the members of the band except Jelani Edwards, a vocalist with the group. The other members of the band authorized Nugent to sign, in a separate agreement. Gambetta and Grubman assigned their interest in the Agreement to plaintiff Jambetta Music, Inc. (Jambetta).
In its complaint, plaintiff alleged causes of action for: 1) breach of contract; 2) unjust enrichment; 3) an injunction restraining Nugent from furnishing recording, production or publishing work to any entity other than Jambetta and requiring him to deposit all money, royalties, payments and commissions earned in the past and that will be earned in the future from such work, into Court; and 4) a declaration that the 1997 and 1998 recording contracts are in full force and effect. On July 10, 2006, another judge of this Court granted plaintiff partial summary judgment on the breach of contract claim. By further order of August 9, 2006, it granted summary judgment on the declaratory judgment claim and adjudged and declared that the 1997 and 1998 contracts are in full force and effect. It ordered that Mr. Nugent is liable on the breach of contract cause of action and directed that a trial was to be conducted on damages.
Jambetta acknowledges that it cannot go forward on this cause of action, since the quasi-contract claim for unjust enrichment is not valid where the matter is controlled by contract. See Goldman v. Metro. Life Ins. Co., 5 N.Y.3d 561, 572 (2005).
On January 18, 2007, the same court denied defendant's motion for renewal and reargument, declined both parties' requests to clarify the measure of damages and also declined plaintiff's request for a permanent injunction on the ground that the summary judgment motion had not asked for an injunction. The case was transferred to this court on January 18, 2007.
By motions of both parties, they now ask this court to delineate what the measure of damages should be. Plaintiff contends the measure of damages is all publishing and recording royalties earned by Nugent and Teraike Crawford ("Crawford"), another band member, until the contracts and options are fulfilled, even though the court in granting summary judgment did not address any portion of the contract entitling Jambetta to such damages. Plaintiff also asks for lost profits and injunctive relief. Jambetta, therefore, seeks to introduce at trial: (i) publishing and recording royalties paid to, received by and/or credited to Nugent from 1997 through the present; (ii) publishing and recording royalties paid to, received by and/or credited to Crawford from 1997 through the present; (iii) plaintiff's recording and related expenses and costs; (iv) expert testimony as to the royalties and publishing income earned by Nugent and Crawford, as well as lost profits from defendant's failure to deliver its first album pursuant to the Agreement; (v) custom and practice in the music industry; and (vi) Jambetta's counsel fees.
Defendant opposes plaintiff's motion and moves to preclude plaintiff from offering any evidence at trial of: (I) actual royalties earned by him from writing and/or producing songs independently, with his duo Midimafia or for any other artist other than Jambetta; (ii) royalties earned by Crawford; and (iii) expert testimony relating to lost profits from breach of the Agreement. Defendant contends that plaintiff is entitled to recover only the moneys it advanced to Nugent to finance the Master Recording or, in the alternative, damages equal to the money Jambetta would have earned had it promoted and marketed Nugent's songs after the breach. The motions are consolidated for disposition.
I. Facts
A. Agreement Inducement Letter
Pursuant to the Agreement, Jambetta obtained "the exclusive recording services" on an individual and collective basis for Nugent, Crawford, Duane Nugent, Jermaine Henriquez, Omar Barnes, Precious Paris, Kareem Faisan, Jelani Edwards, Mike Louisor and Jamal Peterkin (referred to in the Agreement as "Artist" and collectively known as the group "Us") throughout the "Territory" (defined as the universe). Agreement, para. 2(a). "Recording services" is not defined under the definition section of the Agreement. Nugent signed the Agreement, and the members of 'Us,' other than Jelani Edwards, were contractually bound to Jambetta pursuant to the artist assent and guarantee annexed to it as Exhibit A (Inducement Letter). The Inducement Letter provided, inter alia, that:
[a]ll of the terms, conditions and restrictions relating to Artist in the [Agreement] will be binding upon Artist (whether performing alone or as part of a group) [and] . . . Artist hereby confirms and joins in the granting to [Jambetta] of the rights specified in the [Agreement], including, but not limited to, all rights in and the results and proceeds of Artist's recording and songwriting services.
Inducement Letter, para. 3.
The length of the Agreement was measured in several different contract periods predicated upon Artist's performance. The initial contract period commenced on September 4, 1997 (the date the Agreement was signed) and was to run for 12 months after Artist "delivered" the "Minimum Recording Commitment." Agreement, para. 1(c). Jambetta was given seven option periods, each of which was "deemed to be exercised" unless Jambetta provided written notice to the contrary prior to the end of the extant contract period. Id. at para. 1(b). The "Minimum Recording Commitment" was to be completed within 120 days of the commencement of the contract and required Artist to "deliver" a sufficient number of "Master Recordings" to comprise one full-length album during the initial contract period and during each subsequent option period. Id. at para. 3. Jambetta was to determine the number of compositions on each album, "in consultation with" Artist. Id. at para. 4(a)(ii). "Delivery" was defined as:
For this decision, rather than referring to the original signees of the Agreement — Gambetta and Grubman — the court will refer to the entity who executed the contract with Nugent as Jambetta.
the actual receipt by [Jambetta] or Distributor of fully mixed and edited Master Recordings technically and commercially satisfactory to [Jambetta] or Distributor and ready for [Jambetta's] (or Distributor's) manufacture of Records, and all necessary licenses, consents and approvals (the form and content of which licenses, consents and approvals must be approved by [Jambetta] in writing).
Id. at para. 12(h). Jambetta and the distributor were to decide whether the Master Recording was technically and commercially satisfactory. Id. at para. 4(b). And, the Master Recording was not deemed delivered until Jambetta received all the necessary writings by all artists on the recordings, giving Jambetta all rights to the recording. Id. at para. 11(a)(iv)(A).
Jambetta also controlled the recording budget, was responsible for the costs of up to $100,000 the first year and $150,000 the second year and was to be reimbursed by Artist for any costs not specifically approved by it. Id. at para.5. Moreover, all recording costs, under the Agreement, were considered "Advances." Id. at para. 6. There was no provision giving Nugent and his fellow bandmates any compensation. The Master Recording and all records manufactured from it were the sole property of Jambetta, who had the exclusive copyright to them.
The Agreement contained a restrictive covenant prohibiting Artist, during the term of the contract, from rendering "any recording services for the purpose of making Records or Master Recordings for any Person other than" Jambetta. Agreement, Sec. 11 (b)(i). Further, the Agreement provided:
You will at all times indemnify and hold harmless [Jambetta] and any Licensee(s), employee(s), agents, assigns, officer(s), director(s) and/or affiliate(s) of [Jambetta] from and against any and all claims, damages, liabilities, costs and expenses, including legal expenses, reasonable attorneys and paralegal fees, arising out of or in connection with any alleged breach or breach by you of any warranty, representation or agreement made by you herein."
Id. at Sec. 11(d).
The Agreement also provided that, "[t]he failure by [Jambetta] to perform any of its obligations hereunder [, apparently at any point, ] shall not be deemed a breach of this agreement unless" Artist gives Jambetta 30 days written notice of the breach and Jambetta fails to cure it within a specified time. Artist acknowledged their services to be "special, unique, unusual, extraordinary," and of a peculiar value and that in the event of breach, Jambetta "will be caused irreparable injury and damage. . . .and shall be entitled to remedies of injunction and other equitable relief," in addition to other remedies.
Section 20 of the Agreement entitled "Co-Publishing" provided that Artist "hereby irrevocably and absolutely assign, convey and set over to [Gambetta's and Grubman's] publishing designee ("Publisher") an undivided fifty (50%) percent interest in the copyright (and all renewals and extensions thereof) throughout the Territory [defined as throughout the universe] and all other rights in and to each Controlled Composition." Section 14(b) defined "Controlled Composition" as "a Composition which (i) is written, composed or acquired (either prior to or during the Term hereof), in whole or in part, directly or indirectly, by you or Artist, or (ii) is owned or controlled, in whole or in part, directly or indirectly, by you, Artist or by any Person in which you or Artist have a direct or indirect interest." Section 20 also provided that Jambetta is the exclusive administrator of the entire copyright interest in each "Controlled Composition." As such, Jambetta would control any licensing or use of the composition, would collect the publishing income, would receive a 10% administration fee and only then, would pay the Artist his share of the publishing income.
Finally, Artist agreed to perform as a group and to notify Jambetta in writing, should any member of the group fail to perform, leave the group or perform solo. Jambetta then could continue to require service from the leaving member or terminate that member's contract, the other members' contracts or the entire group's contract upon written notice.
B. Summary Judgment Decision Subsequent Orders
In granting summary judgment to Jambetta on the breach of contract and declaratory judgment causes of action, the previous court found that defendant failed to obtain all of the required consents on the thirty-five master recordings it gave Jambetta and, thus, did not deliver the Master Recordings under the contract. By affidavit, Nugent had averred that he had delivered many songs to Jambetta between 1997 and 1999 and that Jelani Edwards had not signed the contract because Edwards had decided to leave the band and had indeed left the band in September 1997. Nugent further averred that Edwards was not on any of the songs delivered to Jambetta. Finally, he averred that 'Us' had disbanded in early 2000. The summary judgment court, however, found that Edwards, who had not given consent, was on all of the recordings, and that other artists also were on twenty-nine of the recordings. In denying defendant's motion to reargue and renew, the court rejected defendant's excuse for belatedly submitting Jelani Edwards' affidavit, which supported Nugent's position that Edwards was not on the recordings. In addition, the court refused to consider any of defendant's affirmative defenses because they were not raised in the original motion.
C. Present Motion 1. Plaintiff's Contentions
Plaintiff contends that since 1999, Nugent and Crawford have been paid substantial publishing income from their contributions to various songs that were either produced by them or by other artists. Plaintiff also contends that Nugent formed a duo called Midimafia with an aspiring rap artist known as Dirty Swift ("Swift"), in 2002. Together, the duo wrote and/or produced songs which they licensed out to other recording artists. In 2004, Nugent entered into an exclusive songwriting, co-publishing and administration agreement with Sony/ATV (the "Sony Agreement"). Pursuant to the Sony Agreement, Nugent assigned Sony/ATV his rights in a number of controlled compositions in exchange for advance and royalty payments. Plaintiff filed suit against Nugent in 2004 for his alleged breach of the Agreement. Pursuant to Section 20 of the Agreement, termed the "co-publishing" provision, but in reality an exclusive publishing provision, plaintiff alleges that it is entitled to 50% of the gross receipts earned by Nugent from any compositions he has made.
Although plaintiff terms this clause of the contract a "co-publishing" provision, it now appears to be an exclusive publishing provision. See Cowles, Music, Money and the Middleman: The Relationship Between the Songwriter and the Publisher, 1 Vand. J. Ent. L. Prac. 101 (Spring, 1999). In an exclusive publishing agreement, the songwriter contracts with one publisher; in a co-publishing agreement, he assigns rights to more than one publisher. Id. at 105.
Plaintiff is not seeking the 10% administrative fee.
With regard to royalties and lost publishing revenue, plaintiff seeks to introduce Nugent's publishing agreements with third parties and royalty statements obtained during discovery, to show the compositions for which Nugent has received publishing income. Plaintiff argues that during discovery, it made numerous demands on Nugent to provide all documents concerning any publishing income he received with respect to any compositions that he co-wrote on records made by third-parties as well as information regarding the Sony Agreement. Jambetta alleges that since Nugent did not provide any documents relating to publishing monies he made, such as royalty statements, bank records or publishing licenses, expert testimony is necessary to accurately determine how much publishing income Nugent has received for the years in question. It argues that expert testimony will illustrate the royalties that Nugent made from songs he wrote that were commercially released by other record companies in the United States and Canada since 1997. The number of sales for these recordings is obtained from Nielsen SoundScan, a service which uses a bar-code to track music sales. When a sale is made, a SoundScan bar-code records it in a database. Thus, publishing royalties can be determined based upon the number of record sales multiplied by the number of songs Nugent wrote on each record, pro rated to reflect his ownership interest in each composition.
In addition, plaintiff seeks to introduce bank statements, cancelled checks and receipts as evidence of the approximate $250,000 Jambetta purports it spent on personal advances to Nugent and 'Us' for living and travel expenses as well as pre-production, marketing and production costs. Finally, plaintiff asks to offer expert testimony to establish its lost profits from Nugent's failure to deliver the "Minimum Recording Requirement." This testimony purportedly will establish that Nugent and Crawford's success as songwriters since 1999 caused Jambetta to lose profits in the form of sales it would have received if Nugent had met the delivery requirements of the Agreement and released the expected album.
2. Defendant's Contentions
Based upon Nugent's affidavits, copies of Jambetta's web page and a portion of Charles Gambetta's deposition, defendant contends that it made good effort to satisfy the contract between September 1997 and late 1999 by delivering many songs to Jambetta, that they were rejected as not "commercially satisfactory" and lacking necessary consent from artists, that the group 'Us' split up in early 2000 and that only then did Nugent release or distribute songs to others. Defendant further contends that Jambetta, which was formed in 1998 or 1999, released nine of the songs delivered to it by Nugent without his knowledge. Defendant acknowledges that he had formed a duo named MidiMafia with a non-band member and that they write and produce music for other artists.
Although an argument can be made that these nine songs fulfilled the first album commitment, the summary judgment court held otherwise by finding Nugent breached the contract and declaring and adjudging that the 1997 and 1998 contracts were still in effect. This court is bound by those rulings.
Defendant argues that Jambetta is not entitled to lost profits since the parties did not contemplate such damages when they entered into the Agreement and since the Agreement, although it provides for remedies in case of breach, does not mention lost profits. Moreover, he notes that 'Us' was a new and unknown band and Jambetta was a new and inexperienced music company. Consequently, he argues that any evidence of lost profits cannot be proved with reasonable certainty and would be speculative. Further, he argues that Nugent's royalties are irrelevant to the issue of lost profits. The songs written and produced by Nugent and a nonmember of 'Us,' he emphasizes, were performed, promoted and distributed by other artists and companies with different resources and experience from Jambetta. Therefore, defendant argues plaintiff should be precluded from introducing evidence of lost profits or of Nugent's royalties from his post-breach writing and production efforts.
Finally, defendant contends that plaintiff should be precluded from introducing the royalties and monies he earned after the breach, as a measure of damages. First, he points out that his earnings were based both on producing and writing. He argues that, at best, a Controlled Composition, as defined by the Agreement, encompasses only earnings from his writing, not his production work. He then argues that to award plaintiff post-breach earnings would be restitution damages — a form of damages not recoverable for the breach of contract found here.
II. Conclusions of Law
A. Damages
Damages in a breach of contract action are awarded to put the injured party in as good a position as he would have been if the contract were fully performed. Freund v. Washington Square Press, Inc., 34 N.Y.2d 379, 382 (1974). Equally axiomatic is the tenet that the injured party should not recover more from the breach than he would have gained if the contract was fully performed. Freund, 34 N.Y.2d at 382. In effect, "[t]he nonbreaching party may recover general damages which are the natural and probable consequence of the breach." Kenford Company, Inc. v. County of Erie, 73 N.Y.2d 312, 319 (1989). Consequential or special
damages, however, are "extraordinary in that they do not directly flow from the breach. These extraordinary damages are recoverable only upon a showing that they were foreseeable and within the contemplation of the parties at the time the contract was made." American List Corp. v. U.S. News World Report, Inc., 75 N.Y.2d 38, 43 (1989). To determine the reasonable contemplation of the parties at the time the agreement was made, the court must look at "the nature, purpose and particular circumstances known by the parties . . . as well as 'what liability the defendant fairly may be supposed to have assumed consciously, or to have warranted the plaintiff reasonably to suppose that it had assumed, when the contract was made.'" Kenford, 73 N.Y.2d at 319 quoting Globe Ref. Co. v. Landa Cotton Oil Co., 190 U.S. 540, 544 (1903).
B. Music Contracts
The standard music recording contract is structured around a business model that recognizes that recording companies take risks by investing extensively in the development and marketing of unproven artists and must capitalize on those artists who achieve success in order to defray the costs of the artists who never make money. Note: California Labor Code Section 2855 and Recording Artists' Contracts, 116 Harv. L. Rev. 2632, 2638-9 (June 2003). The model is driven by the fact that: more than 97% of albums are unprofitable; even with successful artists, profitability is not achieved until the fourth album; albums released by a record company must sell about 400, 000 copies to produce profits; and it is impossible to predict which album will succeed. Id. at 2645-6. As a result, recording companies, typically, commit to new artists for one year and retain the ability to hold on to successful artists. Id.
A publishing contract differs from a recording contract. A music publisher acts as the agent, manager and employer of the songwriter. Cowles, supra, 1 Vand. J. Ent. L. Prac. 101 at 102-3. He obtains the rights to a particular song from the songwriter and then works to market the songwriter by introducing the songwriter to other artists and producers, promoting his songs and providing a structured business plan that best serves the needs of all those involved. Id. at 102. The publisher also obtains copyrights on the songs and licenses lesser rights to other entities. Id. at 103. These entities generally include record companies, who produce the songs for retail, and performing rights societies, who act as a central clearing house so broadcasters and other artists can obtain performance licenses to legally re-produce the songs. Id.
In return for the rights to his songs, the songwriter will get a combination of royalties and weekly or monthly advances. Id. at 109. In the short-term, up-front compensation in the form of advances is the songwriters' primary motivation for entering the agreement. Id. Generally, it will be some time before the songwriter earns any royalties, because the publisher first recoups any advances that were made. Id. In addition, the publisher will deduct between 50 to 100 percent of any of its expenses for the production of demo tapes. Id. Only after the publisher recoups its advance and expense money, will the artists receive any royalties. Administrative fees are also deducted, reducing the songwriter's final payout to less than 50% of the gross sales. Id. C. Recording Contract Damages
In the music industry, two prevailing theories exist to assess damages for the breach of a recording contract: lost profits and the actual investment the record company made in the artist. 116 Harv. L. Rev. 2632, supra at 2643.
1. Lost Profits
Plaintiff wishes to proffer expert testimony to establish it lost profits from defendant's failure to deliver the first album, in light of Nugent's and Crawford's subsequent success. Although New York permits lost profits to be collected as an item of damages, it "has long recognized the inherent uncertainties of predicting profits in the entertainment field." Zink v. Goodson Productions, Inc, 261 A.D.2d 105 (1st Dept 1999) quoting Kenford Co., Inc., v. County of Erie, 67 N.Y.2d 257, 261, 263 (1986). To recover damages for lost profits, a plaintiff must show that the damages were caused by the breach, that lost profits were contemplated by the parties when the contract was executed and that the alleged loss can be measured with reasonable certainty and are not speculative. Ashland Mgmt. Inc. v. Janien, 82 N.Y.2d 395, 404 (1993); Kenford, id. at 261; Zink., supra at 106; Awards.com LLC v. Kinko's, Inc., 42 A.D.3d 178, 183 (1st Dept 2007). Where a contract is silent as to lost profits, the court employs the "common sense" approach to determine the parties intentions by analyzing "the nature, purpose and particular circumstances known by the parties . . . as well as 'what liability the defendant fairly may be supposed to have assumed consciously, or to have warranted the plaintiff reasonably to suppose that it had assumed, when the contract was made.'" Awards, id. at 183-184. When a new business venture is involved, "a stricter standard is imposed for the obvious reason that there does not exist a reasonable basis of experience upon which to estimate lost profits with the required degree of certainty." Zinc, supra quoting Kenford, supra.
Here, Jambetta cannot demonstrate that Nugent's breach caused it to lose profits, that the parties to the agreement intended lost profits as the measure of damages or that lost profits can be reasonably ascertained. At the time the contract was executed, Nugent and the band were an unknown, inexperienced group. As defendant notes, they had "no money to rent a studio or to create new music or to conduct a promotional and marketing campaign." Jambetta did not yet exist. The court will not accept plaintiff's argument that it would have made a profit from plaintiff's first album, when neither it nor the band members had a track record or market, where 97% of records released fail, where even with successful artists, profitability is not achieved until the fourth album and where it is impossible to predict when an album will succeed. 116 Harv. L. Rev. supra at 2645-6.
Further, the Agreement is silent as to whether Jambetta would be entitled to lost profits in the event of a breach. In contrast, the Agreement goes to great lengths specifying how the parties would deal with any income that was generated and what would happen if either party failed to meet the agreed to terms and conditions. For example, regarding income: section 6 details how and when advance payments to Nugent and the other band members would take place; sections 8 — 10 speak to royalty payments; and the previously discussed section 20 concerns any publishing income derived from the sales of any controlled compositions. In reference to the failure of either party to meet the Agreement's terms and conditions: section 11 entitled "Warranties, Representations, Restrictions and Indemnities" addresses, inter alia, what Nugent or any member of 'Us' must do in the event they become aware of any unauthorized recordings and contains the previously discussed indemnification clause; section 13 entitled "Suspension and Termination" bears on how Jambetta may respond in the event Nugent fails to comply with any of the Agreement's terms and conditions; section 15 entitled "Legal and Equitable Relief" outlines Jambetta's rights in the event defendant were to breach the Agreement; and section 18 entitled "Failure of Performance" addresses the procedures in the event plaintiff were to breach its obligations under the Agreement. There is no mention of lost profits in any of these sections or, for that matter, anywhere in the 29 pages of the Agreement.
Just because the parties may have viewed the relationship as one that would make a profit does not mean the parties contemplated that either should bear the other's lost profit. See Awards, 42 A.D.3d at 184 (evidence suggesting contractual relationship as having value and potential does not mean parties contemplated liability for each other's losses). Indeed, it would have made little sense for Nugent to have agreed to profits as a measure of damages for breach, since lost profits for Jambetta would have far exceeded any royalties he could have earned either from Jambetta or any other company. In sum, "if the parties had intended to agree to pay lost profits in the event of a breach, they could have specified so just as they set forth the payment terms due . . . plaintiff's are attempting to obtain through litigation what they failed to secure at the bargaining table." Awards, supra, 42 A.D.3d 184-185.
Finally, there is no method to measure the amount of lost profits with any degree of reasonable certainty. Plaintiff's expert will purportedly measure Jambetta's lost profits by analyzing the success attained by Nugent and Crawford since 1999. Again, Nugent, Crawford and 'Us' were an unknown entity in 1999. Many of the songs they released outside the purview of the Agreement were with established, well known artists such as Nelly, G-Unit and 50 Cent. 'Us' had never released an album. See Awards, 42 A.D.3d at 185 (since defendant never made any profits there is not profit record to serve as a basis for projecting future profits). Further, Nugent released many of the disputed songs with Sony/ATV, which has vastly more resources available to promote and market the release of new songs and albums as compared to Jambetta, a start-up company. This scenario leaves too much open to conjecture and speculation as to how Jambetta would have fared, compared to an established company such as Sony, in trying to promote an unknown group to potential stardom. Given all of these factors, combined with the inherent uncertainties in predicting profits in the entertainment field in general, any testimony as to how much money the group's first album would have made, is nothing more than sheer speculation. Consequently, plaintiff's motion to offer evidence and expert testimony as to lost profits is denied. See Zink, supra, 261 A.D.2d at 106 (plaintiff's claim for lost profits in entertainment field properly dismissed since evidence was "predicated not upon the requisite reasonably certain assessment but upon nothing more than assumptions, speculation and conjecture respecting performance").
2. Actual Investment/Recording Related Expenses and Costs
Plaintiff also seeks to introduce evidence to establish the approximate $250,000 in advances it made to Nugent and members of 'Us' for recording, living and travel expenses as well as pre-production, marketing and production costs. Defendant does not oppose this request. In addition, the parties have advised the court of their intention to stipulate to the total amount of these expenses. In the event the parties do not stipulate, since these are general damages that flow directly from Nugent's breach of the Agreement, evidence regarding these advances and expenses will be permitted at trial. Of course, Nugent any introduce evidence as to the amount, if any, Jambetta of money it made from the alleged release of the 9 songs "delivered" by 'Us' to offset these expenses.
3. Publishing Royalties
Nugent and his bandmates received no salary, the business aspects of producing the songs was left to them and licensing, distribution and royalty payments, according to plaintiff, were not in play since, according to it, no songs were copyrighted and distributed.
a. Nugent
A plaintiff must offer a stable foundation to reasonably estimate the amount of royalties it would have earned had defendant not breached the contract. Freund, supra, 34 N.Y.2d 383. Defendant argues that any royalties he earned are irrelevant because they arise out of songs he wrote and/or produced at the request of and for other recording artists, not resulting from the breach of the Agreement. However, the Agreement's terms explicitly speak to this issue. The Exclusive Publishing Provision assigns to Jambetta an undivided 50% interest in any revenue Nugent earns from the copyright of any Controlled Compositions, "a Composition which (i) is written, composed or acquired (either prior to or during the Term hereof), in whole or in part, directly or indirectly, by [Nugent] or Artist, or (ii) is owned or controlled, in whole or in part, directly or indirectly, by [Nugent], Artist or by any Person in which [Nugent] or Artist have a direct or indirect interest." The fact that Nugent wrote or produced these compositions for other artists does not free him from liability under this clause. The Publishing Provision, in accordance with the definition of Controlled Composition, makes Jambetta the 'publisher' of all of Nugent's work during the contract period, gives Jambetta full control of his royalties and broadly grants Jambetta 50% of Nugent's interest in any musical compositions he wrote, composed or acquired while the Agreement was in effect. This clause clearly contemplated the scenario where Jambetta would receive a percentage of Nugent's earnings when he collaborated and co-wrote songs with other artists for outside record labels.
Plaintiff also provides a stable foundation with which to reasonably calculate the royalties Nugent earned since 1997. Defendant argues that since Jambetta did not directly market, promote and sell these compositions, "any royalties estimated . . . from those hypothetical sales, prices, promotions and markets, therefore, would be purely speculative." But, as previously noted, the fact that these royalties came from compositions Nugent made with third parties through outside record labels is exactly what the Publishing Provision contemplated. The evidence proffered by plaintiff is from actual sales that have taken place. The documentary evidence and expert testimony regarding SoundScan and bar-code tracking outlined by Jambetta will provide sufficient evidence to reasonably calculate Nugent's royalties from his writings with the required degree of certainty. See TVT v. Island Def Jam Music Group, 250 F.Supp.2d 341, 351 (S.D.N.Y. 2003) (expert testimony regarding SoundScan data admissible). Consequently, Nugent's past royalties can be measured based upon statistical evidence without undue speculation. However, in accordance with music industry standards, Nugent should be permitted to introduce evidence as to any advances and expenses that were deducted from his gross royalty payments. This "net" profit number will allow accurate calculations of the money actually paid defendant.
Although exclusive publishing clause entitles Jambetta to a percentage of Nugent's royalties, the duration of this clause raises public policy concerns. In effect, the payments and injunctive relief requested by plaintiff has no end.
The publishing clause encompasses specific performance of a personal service contract.
Specific enforcement of personal service contracts [ ] turns initially upon whether the term of employment has expired. If the employee refuses to perform during the period of employment, was furnishing unique services, has expressly or by clear implication agreed not to compete for the duration of the contract and the employer is exposed to irreparable injury, it may be appropriate to restrain the employee from competing until the agreement expires. Once the employment contract has terminated, by contrast, equitable relief is potentially available only to prevent injury from unfair competition or similar tortious behavior or to enforce an express and valid anticompetitive covenant. In the absence of such circumstances, the general policy of unfettered competition should prevail.
Id. at 404-405.
Recognizing that courts will not compel performance of a personal service contract [ see ABC, Inc. v. Warner Wolf, 52 N.Y.2d 394, 401-2 (1981)], plaintiff does not ask that Nugent be forced to record, write or produce music for it. Rather, it requests 50% of Nugent's past and future royalties and a restraint on Nugent from furnishing recording, production or publishing work to any entity other than Jambetta, in the future. By requesting 50% of Nugent's future earnings Jambetta, in essence, is asking for a interminable 50% interest in Nugent's royalty earnings. To explain, the period of the instant contract is impossible of completion since'Us' has dissolved and, as the prior court found, no acceptable initial master recording was or can be delivered. The prior court also found the Agreement enforceable and that the 120 day period in the contract for delivery of the minimum recording commitment would continue until an acceptable delivery had been made. Since delivery cannot occur, the ruling serves to extend the contract perpetually, and Nugent's employment is no longer definite.
Under New York law, where a period of employment in an express contract is indefinite, the employment is deemed 'at will' and both parties have the right to end the relationship for any or no reason. Rooney v. Tyson, 91 N.Y.2d 685, 690 (1998) (only when court discerns no definiteness or express limitation as to duration does contract become presumptively at-will terminable by either party at any time). As a result, the court finds that Nugent's motions in opposing this litigation, his relationship with Sony, and the overall circumstances constitute an apparent and manifest intention by Nugent to end his relationship with Jambetta. Consequently, this contract is at its end as of June 29, 2007, the date of Nugent's motion here. The court also notes that the purpose of an injunction is remedial, not punitive. Wolff v. Wolff, 67 N.Y.2d 638, 641 (1986). Any assessment of damages beyond the motion date, ten years post contract, would not serve any remedial purpose. Instead, it would commit Nugent to unending employment or punitive servitude, neither a natural nor probable consequence of Nugent's breach. Accordingly, plaintiff's motion for the admission of evidence as to publishing and record royalties received by Nugent and expert testimony as to the formulation and calculation of said royalties from the inception of the Agreement in 1997 through the present is granted. However, plaintiff's motion for a permanent injunction to enforce the Agreement into the future, is denied.
Although the court would be inclined to find the contract ended at a much earlier time, it is bound by the prior court's decision finding the contract in full force and effect as of August, 9 2006. Nugent's motion is his first submission to this court.
2. Crawford
Plaintiff's motion to introduce royalty and publishing revenue earned by Crawford, is denied. Crawford is not a party to this action. As before, the court must look at the Agreement to see what the parties contemplated regarding any liability Nugent might have for Crawford's conduct. See American List, supra, 75 N.Y.2d 43; Kenford, supra, 73 N.Y.2d 319 quoting Globe Ref., supra, 190 U.S. 544. Both the Agreement and Inducement Letter go to great lengths highlighting the remedies available to Jambetta in the event of a breach. For example, section 11(d) of the Agreement contains an indemnification clause whereby Nugent warrants that he will indemnify Jambetta for damages "arising out of or in connection with any alleged breach by you of any warranty, representation or agreement made by you herein." (emphasis added). Section 13 entitled "Suspension and Termination" outlines Jambetta's remedies in the event: Nugent "fails to comply with any . . . material obligations hereunder"; an act of god were to prevent enforcement of the Agreement; Jambetta, without cause, refused to allow Nugent to fulfill the "Minimum Recording Commitment "; and Nugent were to fall into bankruptcy. Further, section 15 entitled "Legal and Equitable Relief" states "[Nugent] agree[s] that [Jambetta] shall be entitled to remedies of injunction and other equitable relief to prevent or remedy any breach of [the Agreement], which relief shall be in addition to any other rights or remedies, for damages or otherwise, that [Jambetta] may have." Nothing in sections 11(d), 13 or 15 states that Nugent is liable to Jambetta for any damages arising out of Crawford's conduct.
In addition, Section 7 of the Inducement Letter states that "[Jambetta] may, in its own name, institute any action or proceeding against Artist to enforce its rights under [the Inducement Letter], the [Agreement] . . . and [Jambetta] will be entitled to equitable relief, including injunctive relief, to enforce the provisions of said agreements." Thus, if plaintiff seeks to institute an action against Crawford directly for his alleged breach of the Agreement and/or the Inducement Letter, it may do so. Only then may the issue of Crawford's royalty payments be addressed. Plaintiff has offered no evidence which indicates that Nugent was required to pay additional damages in the amount of any royalties earned by Crawford in violation of the Agreement. See Zink, 261 A.D.2d at 106 ("damages may not be merely speculative, possible or imaginary, but must be reasonably certain"). Accordingly, it is
ORDERED that plaintiff's motion to introduce trial evidence as to publishing income and royalties received by defendant Wayne Nugent is granted but only from the commencement of the contract in1997 to June 29, 2007; and it is further
ORDERED that plaintiff's motion to introduce expert testimony as to the publishing income and royalties received, is granted; and it is further
ORDERED that plaintiff's motion to introduce publishing income and royalties received by non-party Teraike Crawford is denied; and it is further
ORDERED that plaintiff's motion to introduce expert testimony as to the publishing income and royalties received by non-party Teraike Crawford, is denied; and it is further
ORDERED that plaintiff's motion to introduce evidence relating to lost profits, is denied; and it is further
ORDERED that plaintiff's motion to allow for the admission at trial of expert testimony relating to lost profits it sustained from defendant's breach of the Agreement is denied; and it is further
ORDERED that plaintiff's motion for a permanent injunction restraining defendant Wayne Nugent from furnishing recording, production, or publishing work to any entity other than Jambetta, is denied; and it is further
ORDERED that plaintiff's motion to introduce evidence of advances and expenses it made to Nugent and for production of any album, is granted.