Jack Russell Music Ltd. v. 21st Hapilos Digital Distribution, Inc.

Background

Jack Russell Music Ltd. sued 21st Hapilos Digital Distribution, Inc. and Hapilos Publishing LLC, alleging that Hapilos tortiously interfered with business relationships involving music writers. Hapilos denied those allegations and asserted counterclaims against Jack Russell Music and NW Royalty Consulting LLC, a Delaware-based affiliate of Jack Russell Music.

The motion addressed three counterclaims based on four groups of emails. Hapilos alleged that the Parkinson emails and Chronic Law emails falsely stated that particular music writers had not signed agreements with Hapilos. It alleged that the Shakespeare emails and Whittaker emails falsely accused Hapilos of making incorrect registrations, failing to credit writers and artists, and hiding contract language. Hapilos pleaded a United Kingdom defamation claim in Counterclaim V, libel and trade-libel claims under Delaware law in Counterclaims VI and VII.

Rule 12(b)(6) standard

Jack Russell Music and NW Royalty moved under Rule 12(b)(6), which allows dismissal when a pleading does not state a legally sufficient claim. At this stage, the court accepted well-pleaded factual allegations as true and asked whether the allegations made liability reasonably plausible.

Libel counterclaims

Judge Furman concluded that Counterclaims V and VI did not plausibly allege defamatory statements under New York, United Kingdom or Delaware law. Under each jurisdiction’s law, a statement must tend to harm a person’s reputation in the relevant community.

The court held that the Parkinson and Chronic Law emails merely stated Jack Russell Music’s factual and legal position in an ongoing business dispute. The court did not need to resolve whether the writers actually had agreements with Hapilos because the statements, considered in context, were not defamatory.

The Shakespeare and Whittaker emails presented a closer question, but the court also dismissed claims based on those communications. It viewed the statements as loose, opinion-based or hyperbolic language made during a heated business dispute to persuade the recipients to Jack Russell Music’s and NW Royalty’s position. The court determined that the context signaled that the statements were opinions rather than actionable factual accusations.

Trade-libel counterclaim

The court held that New York law governed Counterclaim VII because New York had the most significant relationship to the claim. The court noted that Hapilos was domiciled in New York when the statements were made and alleged that its royalty collections, presumably occurring at its principal place of business in New York, were harmed. Delaware’s connection was that NW Royalty, the employer of the person who sent some of the statements, was a Delaware citizen.

Under New York law, the trade-libel counterclaim failed for the same reason as the libel claims. The court therefore did not need to resolve the unsettled Delaware-law issues that might have allowed the trade-libel claim to proceed under different standards.

Disposition

The court granted the Counterclaim-Defendants’ motion to dismiss and dismissed Counterclaims V, VI and VII. It denied leave to replead because it found the defects substantive and not curable, including through pleading under New York law. The court did not dismiss Hapilos’s tortious-interference counterclaims, Counterclaims I through IV, and directed the Counterclaim-Defendants to answer those other counterclaims within two weeks. The opinion does not decide Jack Russell Music’s principal claims.