Default Judgment Entered Against Distributing Agent Originally Appearing Thru Counsel

Jeepster Recordings Ltd. v. World's Fair Label Group Inc., 09 Civ. 2155, NYLJ 3/2/10 "Decision of Interest" (S.D.N.Y. decided Feb. 22, 2010).

Plaintiff and Defendant entered into an agreement under which Defendant would become Plaintiff's North American distribution agent. Plaintiff alleges that Defendant failed to meet is distribution, accounting, and sales obligations, and withheld contractually obligated royalties owed to Plaintiff.

After the action commenced, Defendant's counsel withdrew and Defendant did not obtain alternative counsel. Thereafter, Plaintiff moved for default judgment seeking to recover monies that were allegedly improperly retained in breach of the distribution agreement.

"In this case, the allegations in the Complaint, coupled with [Defendant]'s failure to retain counsel and prosecute the case, support the entering of a default judgment and a finding that Defendant is liable for breach of the distribution agreement. "

Continuing:

"Although [Defendant] initially appeared, it has failed to retain counsel and has indicated that it does not intend to. As a corporate entity, [Defendant] can only appear through counsel. [Cit. om.]. The failure to retain counsel thus constitutes a failure to appear for further proceedings. Even though default judgments are generally disfavored, [Defendant]'s conduct indicates that it had the capability to defend itself, and its withdrawal and cessation of prosccution was willful and voluntary. While [Defendant] filed an answer and conducted some discovery, it did not raise any meritorious defenses. Finally, a denial of default judgment would prejudice [Plaintiff] because it has actively pursued its claims to recover monies under its agreement with [Defendant], and has not contributed to the default."

Label Defeats 'Inadvertent] Privilege Disclosure Claim

Fifty-Six Hope Road Music, Ltd. v. UMG Recordings, Inc., No. 08-cv-6143, NYLJ 2/10/2010 "Decision of Interest" (S.D.N.Y. decided Feb. 1, 2010).

Plaintiffs claim privileged documents (attorney client and work product) were inadvertently produced to Defendant by a non-party witness pursuant to a subpoena.

At the heart of plaintiffs' application was their contention that they "retained" the non-party to act as their "representative" in the litigation. In this role, plaintiffs disclosed to the non-party "numerous confidential communications" between plaintiffs and their counsel, which plaintiffs contend are protected by the attorney client privilege and the work-product doctrine. Plaintiffs maintain that the nonparty was included on these communications based on plaintiffs' "understanding and expectation" that he would keep the communications confidential.

The Court found that Plaintiffs failed to meet their burden of establishing that the privilege should apply to the documents at issue because, inter alia, Plaintiff did not demonstrate that the non-party was their representative or agent.

2d Cir Finds Antitrust Suit Stated Against Record Labels For Online Sales

The United States Circuit Court, Second Circuit, holds that plaintiffs' antitrust complaint alleging a conspiracy by major record labels to fix the prices and terms under which their music would be sold over the Internet states a claim for violation of Section 1 of the Sherman Act under Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). The amended complaint contains "enough factual matter (taken as true) to suggest that an agreement was made," id. at 555, and therefore states a claim.

"The present complaint succeeds where Twombly's failed because the complaint alleges specific facts sufficient to plausibly suggest that the parallel conduct alleged was the result of an agreement among defendants," Judge Katzmann said.

The defendants "agreed to launch MusicNet and pressplay, both of which charged unreasonably high prices and contained similar DRMs", and the entities did not "dramatically" drop "their prices for Internet Music (as compared to CDs), despite the fact that all defendants experienced dramatic cost reductions in producing Internet Music."

Starr v. Sony BMG, No. 08-5637-cv, NYLJ 1/14/2010 "Decision of the Day" (2d Cir. decided Jan. 13, 2010).

No Jurisdiction Over Indian Ringtone Website Under NY Long Arm

Yash Raj Films (USA), Inc. v. Dishant.com LLC, No 1:08-cv-02715-ENV-RML (E.D.N.Y. filed Dec. 15, 2009) - District Court grants pro se defendants' motion to dismiss for lack of personal jurisdiction pursuant to FRCP 12(b)(2)(4) and New York's long-arm jurisdiction statute, CPLR 302. Defendants' website - which provides access to digitized versions of Indian songs, movies and images that users may stream or download ringtones - is accessible in NY, but does not constitute transaction of business in NY, tortious conduct in NY, or out-of-state tortious conduct causing injury in NY; plaintiff's request for jurisdictional discovery denied.

EMI Sues Video Sharing Website

EMI has filed two related complaints, one by its labels and the other by its publishing units, against the video-sharing website Vimeo .

Capitol Records, LLC v. Vimeo, LLC, No. 09 CV 10101-DAB (S.D.N.Y. complaint filed Dec. 10, 2009); and, EMI Blackwood Music, Inc. v. Vimeo, LLC, No. 09 CV 10105 (S.D.N.Y. complaint filed December 10, 2009).

Both complaints claim direct, contributory and vicarious copyright infringement, and inducement to infringe. The Capitol complaint includes misappropriation and unjust enrichment claims.

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."

Labels Participate in Judicial Forum, Waive Arbitration

Lockett v. Tuff City Records, No. 602900/08, NYLJ 9/25/2009 "Decision of Interest" (Sup. Ct., N.Y. Co. Sep. 21, 2009)

Defendants, record labels and their principals, waived right to arbitration by actively participating in judicial forum. Plaintiffs' action sough monies allegedly owed for royalties. Defendants answered, but did not plead arbitration as an affirmative defense. Moreover, the arbitration demand was made nearly eight months into the litigation, after Defendants had made discovery demands. Additionally, defendants failed to establish that plaintiffs' claims were subject to the alleged arbitration clause in a 1986 recording contract because the songs at issue were recorded prior to 1986. Thus, Plaintiffs' motion to permanently stay arbitration granted.

The Court also denied defendants' motion to dismiss for misjoinder of plaintiffs; instead, the court severed the individual plaintiff's claims and ordered them to obtain a no-fee index number and serve their own complaint within 30 days.

Lastly, the Court denied defendants' motion to remove the action to Small Claims court; and denied both plaintiffs' and defendants' motions for sanctions.