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.