Opinion
Index No. 952003/2022
08-30-2024
Jan A. Roeg, Plaintiff, v. Warner Music Group Corp., ATLANTIC RECORDS GROUP LLC, D/B/A ATLANTIC RECORDS, ATLANTIC RECORDING CORP., IOANA MARIA BANU ERTEGUN, IN HER PROFESSIONAL CAPACITY AS EXECUTOR OF THE ESTATE OF AHMET ERTEGUN, Defendant.
Wigdor LLP, New York, NY (Lawrence M. Pearson of counsel), for plaintiff. Davis Wright Tremaine LLP, New York, NY (Laura Sack, Lyle S. Zuckerman, and Erik Mass. of counsel), for defendants Warner Music Group Corp., Atlantic Records Group LLC and Atlantic Recording Corporation.
Unpublished Opinion
Wigdor LLP, New York, NY (Lawrence M. Pearson of counsel), for plaintiff.
Davis Wright Tremaine LLP, New York, NY (Laura Sack, Lyle S. Zuckerman, and Erik Mass. of counsel), for defendants Warner Music Group Corp., Atlantic Records Group LLC and Atlantic Recording Corporation.
Gerald Lebovits, J.
Plaintiff, Jan Roeg, brings this Adult Survivor Act action against defendants Warner Music Group Corporation (WMGC), Atlantic Records Group LLC (ARG), Atlantic Recording Corporation (ARC), and the Estate of Ahmet Ertegun.
Plaintiff's claims against the Estate of Ahmet Ertegun were initially brought against Ioana Maria Banu Ertegun, in her representative capacity as executor of the Estate. (See NYSCEF No. 37 at ¶¶ 19-20 [amended complaint].) Ms. Ertegun passed away in December 2023. (See NYSCEF No. 104.) No substitute representative for Ahmet Ertegun's estate has yet been appointed or substituted as a party defendant in Ms. Ertegun's place. (See NYSCEF No. 121 [letter from plaintiff's counsel notifying the court that plaintiff filed a petition in Surrogate's Court on July 8, 2024, seeking appointment of a new estate representative].)
According to plaintiff, WMGC, ARG, and ARC hired plaintiff in the early 1980s as part of its talent-finding team. Plaintiff met Ertegun around 1983. Plaintiff alleges that Ertegun assaulted her in his Manhattan office during their first meeting and again soon after at a networking event at his Upper East Side apartment. (NYSCEF No. 37 at ¶ 2 [amended complaint].) Plaintiff alleges that Ertegun insinuated to her that she had to submit to his advances "to maintain her place and that of her artists." (Id. at ¶ 4.) Plaintiff alleges that Ertegun's advances and abuse continued over decades. Plaintiff contends that WMGC, ARG, and ARG's executives and management were aware of Ertegun's behavior-his boasting about sexual exploits during company meetings and "drunk, abusive conduct and hateful attitude towards women." (Id. at ¶ ¶ 5-6.) Further, plaintiff claims that her refusal to submit to Ertegun caused him to retaliate against her by withholding payments and royalties.
Plaintiff worked with Ertegun until 2003. She continued her relationship with the companies for years after that. (Id. at ¶¶ 25-26.) Ertegun was never fired.
Plaintiff raises three causes of action: (i) sexual assault against Ertegun's estate and its executors; (ii) sexual battery against Ertegun's estate and its executors; and (iii) negligence against WMG, ARG, and ARC.
ARG and WMGC (defendants) move under CPLR 3211 (a) (1) and (7) to dismiss plaintiff's negligence claims against them. The motion is granted.
DISCUSSION
I. Jurisdiction
Defendants assert that this court has no personal jurisdiction over them for alleged torts that occurred outside New York-notably an alleged assault by Ertegun of plaintiff that occurred in 2005 in Las Vegas, Nevada. This assertion is meritless.
Defendants rely on the principle that "no personal jurisdiction exists under CPLR § 302[a][2] unless the alleged unlawful acts occurred in New York State." (NYSCEF No. 53 at 5 [emphasis added].) But CPLR 302 (a) (2) does not provide the basis for personal jurisdiction over defendants in this case. The amended complaint alleges-and defendants do not dispute-that defendants' principal places of business are located in New York. (See NYSCEF No. 37 at ¶¶ 14-16.) This court may therefore properly exercise general personal jurisdiction over them under CPLR 301, rather than being limited to longarm specific personal jurisdiction under CPLR 302, as defendants would have it. (See Daimler AG v Bauman, 571 U.S. 117, 137 [2014]; accord Brocxco v Eastern Metal Recycling Terminal LLC, 211 A.D.3d 628, 628 [1st Dept 2022] ["To be subject to general jurisdiction under CPLR 301, a defendant corporation must either be incorporated in New York or have its principal place of business in New York."].)
Defendants also contend that the Adult Survivor Act (CPLR 214-j) does not cover the alleged 2005 incident, because that incident occurred out of state and therefore did not violate Penal Law § 130. (NYSCEF No. 53 at 5.) This contention is unpersuasive. The ASA shares a statutory purpose-and operative statutory language-with the Child Victims Act (CVA), CPLR 214-g. And the Appellate Division has held that the CVA applies to "conduct described in the enumerated provisions of the Penal Law"-not merely "those situations in which the conduct would subject the actor to criminal liability." (Anonymous v Castagnola, 210 A.D.3d 940, 942 [2d Dept 2022]; accord (Samuel W. v United Synagogue of Conservative Judaism, 219 A.D.3d 421, 422 [1st Dept 2023] [same].) Penal Law § 130's "territorial limitations are, thus, not a basis for excluding claims under the CVA." (Samuel W., 219 A.D.3d at 422.) That the "plaintiff was a New York resident at the time the action accrued" is sufficient for CVA purposes. (Id.)
Given that the ASA is "a functionally identical revival statute to the CVA," this court sees no reason to construe the ASA's application more narrowly than that of the CVA. (See Doe v Doe, 83 Misc.3d 408, 412-413 [Sup Ct, NY County] [Dakota Ramseur, J.] [applying the holding of Samuel W. to an ASA action].) As pleaded in the amended complaint, the ASA covers plaintiff's claims against defendants relating to the alleged 2005 incident in Las Vegas.
II. Direct Liability
Given the ASA's applicability, the question becomes whether plaintiff has stated a cause of action against defendants.
Plaintiff claims that ARC, ARG, and WMGC were negligent in their "retention, training, discipline and/or supervision of Ertegun." (Id. at ¶ 112.) Plaintiff also claims that defendants failed to provide a safe work environment for them and that defendants knew or should have known that Ertegun "regularly engaged in sexual misconduct." (Id. at ¶¶ 112-113.) According to plaintiff, ARC, ARG, and WMGC "allowed Mr. Ertegun to have the authority, opportunity, and resources to engage in sexual misconduct." (Id. at ¶ 114.) Plaintiff alleges that defendants breached their duty of care by retaining Ertegun and failing to either discipline him or terminate his employment. (Id. at ¶¶ 115-116.) This allegedly resulted in plaintiff's "physical injury, severe emotional distress, humiliation, embarrassment, mental and emotional distress, anxiety, and economic harm." (Id. at ¶ 121.)
Defendants argue that because their companies did not exist during the period in which Ertegun allegedly injured plaintiff, they had no duty to protect plaintiff from Ertegun's assaults. This court largely agrees. Plaintiff alleges that a 2004 merger created ARG and that it is directly liable for Ertegun's hiring, supervision, and retention. Defendants, however, submit ARG's certificate of incorporation, which shows that ARG was not incorporated until November 2020. (NYSCEF No. 60 at 1 [certificate of incorporation].) This evidence conclusively refutes plaintiff's contention that ARG could have been directly negligent in its conduct relating to Ertegun (since ARG was formed after Ertegun died). With respect to WMGC, defendants also submit WMGC's certificate of incorporation, which shows that WMGC has existed only since November 2003. The certificate thus similarly refutes plaintiff's contention that WMGC could have been directly negligent before 2003.
The timing of ARG and WMGC's formation does not necessarily defeat plaintiff's claims arising from post-2003 conduct-particularly the 2005 Las Vegas incident. Defendants argue that WMGC cannot be held liable for that conduct, because it was undertaken by an ARC employee (i.e., Ertegun). That is, defendants contend, WMGC is merely a holding company for subsidiaries like ARC, and as a result is not liable for ARC employees' torts. Plaintiff contends, on the other hand, that it has properly named WMGC in its "own, direct capacity," based on allegations in the complaint about "WMG's... knowledge of and participation in the negligence that caused and contributed to the harm to Ms. Roeg." (NYSCEF No. 67 at 21.) Plaintiff's contention is unpersuasive.
In the "absence of a clear indication of dominion and control, parent, subsidiary or affiliated corporations are treated separately and independently for purposes of assigning legal responsibility." (Meshel v Resorts Int'l of New York, Inc., 160 A.D.2d 211, 213 [1st Dept 1990].) Plaintiff must allege "direct intervention by the parent in the management of the subsidiary to such an extent that the subsidiary's paraphernalia of incorporation, directors and officers are completely ignored." (Billy v Consol. Mach. Tool Corp., 51 N.Y.2d 152, 163 [1980] [internal quotation marks omitted].) Although plaintiff alleges that WMGC and ARC share the same address, executive management, and resources, these allegations are insufficient to plead that WMGC exercises complete domination or control over ARC such that ARC no longer functions independently.
The branch of defendants' motion to dismiss plaintiff's claims against them for direct negligent conduct is granted.
III. Successor Liability
Plaintiff also asserts tort claims against ARG and WMGC as the corporate successors of ARC. As an initial matter, the court concludes that plaintiff's numerous and detailed allegations (NYSCEF No. 37 at ¶¶ 78-98), are sufficient to establish for pleading purposes that Ertegun and other executives had a pattern and propensity to act adversely toward women and that ARC knew or should have known about Ertegun's alleged behavior and allowed it to continue. (See Norris v Innovative Health Sys., Inc., 184 A.D.3d 471, 472 [1st Dept 2020.) The question is whether plaintiff's claims against defendants based on ARC's conduct state a cause of action.
Generally, "a corporation which acquires the assets of another is not liable for the torts of its predecessor." (Schumacher v Richards Shear Co., 59 N.Y.2d 239, 244 [1983]; see Zinbarg v Professional Bus. Coll., Inc., 179 A.D.3d 607, 607 [1st Dept 2020].) Exceptions to this rule exist when "(1) [the successor] expressly or impliedly assumed the predecessor's tort liability, (2) there was a consolidation or merger of seller and purchaser, [or] (3) the purchasing corporation was a mere continuation of the selling corporation." (Schumacher, 59 N.Y.2d at 245.)
A. Assumption of Tort Liability
Plaintiff claims that WMGC assumed the liabilities of Time Warner, ARC's owner. Plaintiff argues that WMGC took over Time Warner's businesses (including ARC) and that WMGC's 2005 Form 10-K indicates that WMGC assumed Time Warner's severance obligations. (See NYSCEF No. 67 at 10-11; NYSCEF No. 81 at 111.) Plaintiff does not, however, explain how WMGC assumed Time Warner's tort liabilities. It argues instead that defendants have not refuted that WMGC assumed Time Warner/ARC's liabilities. (NYSCEF No. 67 at 13.) But it is plaintiff's job-not defendants'-to provide allegations that support an assumption of liability. The onus is not on defendants to refute allegations not made. Nor is plaintiff any more specific about how ARG assumed ARC's tort liabilities.
This court therefore concludes that the assumption-of-tort-liability exception does not apply to WMGC or ARG.
B. Consolidation/Merger of Seller and Purchaser
To satisfy the second exception permitting successor liability, plaintiff must plead that one company acquired the assets of the other, and that indicia exist of a de facto merger: E.g., "continuity of ownership; cessation of ordinary business and dissolution of the acquired corporation as soon as possible; assumption by the successor of the liabilities ordinarily necessary for the uninterrupted continuation of the business of the acquired corporation; and, continuity of management, personnel, physical location, assets and general business operation." (Fitzgerald v Fahnestock & Co., Inc., 286 A.D.2d 573, 574 [1st Dept 2001].)
Plaintiff claims that there was a de facto merger between an entity that it calls Old WMG (which owned ARC) and WMGC. (NYSCEF No. 67 at 14-15.) Plaintiff implies that WMGC absorbed ARC's liabilities through that merger. Defendants argue that Old WMG merely refers to entities once owned by Time Warner (including ARC) and then acquired by Warner Music Acquisition Corporation (WMGA), a separate company from WMGC.
The court agrees with defendants. WMGC's Form 10-K indicates that Time Warner's interests in recording and music-publication businesses-like ARC-were acquired by WMGA. (NYSCEF No. 81 at 32.) Old WMG is merely the Form 10-K's term for Time Warner's business interests. (Id.) The Form 10-K also indicates that WMGC is the parent company of Warner Music Group Holdings (WMGH) and that WMGH is the parent company of WMGA. (Id.) Plaintiff's allegations are insufficient to support imputing liability from (i) ARC to Time Warner; (ii) Time Warner to WMGA; (iii) WMGA to WMGH; and then (iv) WMGH to WMGC.
Plaintiff also claims there was a de factor merger between ARC and ARG. But plaintiff's motion papers show, at most, that ARG's operations continue through ARC, not that the two were effectively merged. Plaintiff leans more heavily on the contention that ARG is a continuation of ARC; that contention is discussed below.
The de-facto-merger exception is also inapplicable.
C. Continuation
Plaintiff also argues that WMGC is a continuation of Old WMG (properly speaking, Time Warner's entities), that ARG is a continuation of ARC, and therefore that WMGC and ARG may be held liable for ARC's purported negligence as successors. The continuation "exception refers to corporate reorganization... where only one corporation survives the transaction; the predecessor corporation must be extinguished." (Schumacher, 59 N.Y.2d 239, 245 [1983].) But Time Warner, WMGA (which acquired Time Warner), and ARC all still exist. (See NYSCEF No. 81 at 32 [WMGC's 2005 Form 10-K] [discussing Time Warner]; NYSCEF No. 96 at 9, 17 [WMGC's 2022 Form 10-K] [noting that WMGA, ARC, and ARG are subsidiaries of WMGC].) Therefore, this exception does not apply.
Plaintiff's claims against ARG and WMGC for successor-liability-based negligence are dismissed. Additionally, to the extent that plaintiff seeks leave to amend her complaint further, she states only that she is prepared to amend her complaint to reflect the public records discussed in her motion papers. (NYSCEF No. 67 at 26.) Those records are already before the court. And plaintiff does not explain how allegations drawing on those public records would cure the pleading defects identified above.
Accordingly, it is
ORDERED that the motion of defendants Atlantic Records Group LLC and Warner Music Group Corporation's seeking to dismiss the direct and successor-liability-based claims against them is granted, and those claims are dismissed, with costs and disbursements as taxed by the Clerk upon the submission of an appropriate bill of costs; and it is further
ORDERED that the balance of the claims in this action are severed and shall continue; and it is further
ORDERED that defendants Atlantic Records Group LLC and Warner Music Group Corporation serve a copy of this order with notice of its entry on all parties and on the office of the County Clerk (by the means set forth in the court's e-filing protocol, available on the e-filing page of the court's website, https://ww2.nycourts.gov/courts/1jd/supctmanh/E-Filing.shtml), which shall enter judgment accordingly.