April 22, 2013

Capitol's Motion To Dismiss Class Action Denied

Davis v. Capitol Records, LLC, No. 4:12-cv-01602-YGR  (N.D. Cal. filed 04/18/13) [Doc. 73].

Plaintiff brought the action as a member of the music group, “The Motels,” and a shareholder, beneficiary, and/or successor-in-interest of the now-dissolved The Motels Music Corporation, Inc.  She brought the complaint alleging a nationwide class action for breach of standard recording contracts and for statutory violations of California law against Defendant Capitol Records, LLC (“Capitol”).  Plaintiff alleged that Capitol failed to account properly for royalties stemming from the licensing of musical performances or recordings produced by Plaintiff and putative class members under contract with Capitol, which were then were utilized by digital content providers, such as music download providers, music streaming providers, and ringtone providers, for digital download, streaming and distribution.  Capitol moved to dismiss for failure to state a claim under Fed. R. Civ. P. 12(b)(6).

First, Capitol argued that the claims were time-barred under the parties' agreement relating to objecting to royalty statements.  However, the Court found that Plaintiff's allegations "arguably support a basis for tolling of the contractual limitations period."  (Emphasis added).  Accordingly, the motion to dismiss on limitations grounds was denied.

Second, Capitol moved to dismiss Plaintiff's claim for declaratory relief as duplicative of her claim for
breach of contract.  The Court held that it could not determine, as a matter of law, that declaratory relief would be duplicative or otherwise inappropriate such that it should be dismissed at the pleading stage.

Third, Capitol moved to dismiss Plaintiff;s claim for breach of the implied covenant of good faith and fair dealing on the grounds that it is duplicative of her breach of contract claim. The Court disagreed.

Fourth, Plaintiff alleged a claim for violation of California Business & Professions Code section 17200, California’s Unfair Competition Law (“UCL”), based upon all three prongs of the statute – that is, unfair, unlawful, and fraudulent conduct. Capitol sought to dismiss the claim to the extent it is based upon either unlawful or fraudulent conduct.  As to the fraud prong, the Court found that Plaintiff's pleadings contained sufficient particularity to survive.  As to the unlawful prong, the Court found that, "Where, as here, the complaint alleges systemic conduct meant to breach the terms of, or deny the benefits of, agreements between the defendant and a group of similarly situated parties, it is sufficient state a claim for an unfair business practice in violation of the UCL."

Fifth, the Court struck Plaintiff's demand for punitive damages.