Hall v. Protoons Inc.

Background

Orville Hall and Phillip Price, professionally known as “The Showboys,” brought a breach-of-contract action against Protoons Inc. The parties entered into a 1985 recording and publishing agreement under which The Showboys created musical compositions and recordings, assigned specified rights to Protoons, and received royalties. The agreement required Protoons to provide semiannual royalty accounting statements.

The Showboys created four compositions under the agreement, including “Drag Rap.” Although the agreement was terminated in 1988, the termination did not change Protoons’ rights in the compositions or its obligation to pay royalties. The Showboys alleged that Protoons failed to pay royalties and provide accounting statements beginning March 9, 2015. Protoons did not dispute that it had suspended payments and reporting, but argued that it could do so because The Showboys breached contractual warranties concerning third-party rights.

Protoons contended that “Drag Rap” copied a distinctive nine-note sequence from the theme song of the television program “Dragnet.” Protoons also asserted that the alleged copying exposed it to potential copyright claims. The opinion states that no third party had asserted a copyright-infringement claim concerning “Drag Rap,” and that Protoons and its administrators had continued commercially exploiting the compositions without interruption.

Motions and Contract Claim

The Showboys moved for summary judgment on their breach-of-contract claim, and Protoons filed a cross-motion for summary judgment on that claim and its counterclaims. Summary judgment is appropriate when the evidence shows no genuine dispute over a fact that could affect the result and the moving party is entitled to judgment under the law.

Applying New York law, the court found that the agreement existed, The Showboys had adequately performed their obligations, Protoons had breached the agreement by withholding royalties, and The Showboys had suffered damages. The court rejected Protoons’ argument that the alleged use of the Dragnet sequence established a contractual breach. Protoons had not produced evidence of a valid copyright in the Dragnet theme or other non-speculative evidence showing that “Drag Rap” infringed a third party’s rights.

The court also held that Protoons had not shown that any alleged breach was material. A material breach is a serious breach that defeats the central purpose of the agreement. The court found that the agreement’s central purpose was for Protoons to administer and commercially exploit the compositions in exchange for paying royalties. Protoons had continued licensing and profiting from the compositions, and the agreement separately allowed it to withhold royalties in an amount consistent with a third-party claim while such a claim was being determined. The court therefore granted The Showboys summary judgment on their breach-of-contract claim.

Counterclaims

The court granted The Showboys summary judgment on Protoons’ first, second, and third counterclaims. The opinion describes these counterclaims as alleging breaches of the agreement, the termination, and the duty of good faith and fair dealing.

The court rejected Protoons’ good-faith counterclaim. Protoons argued that The Showboys acted improperly by taking legal and other aggressive steps rather than using cooperative approaches, failing to demand an audit, hiring multiple lawyers, and filing the lawsuit. The court held that the implied duty of good faith and fair dealing does not require a party to use cooperative methods or refrain from taking legal action to enforce contractual rights. The court found that The Showboys’ alleged conduct did not destroy or injure Protoons’ right to receive the benefits of the agreement.

Protoons also sought a declaratory judgment stating, among other things, that “Drag Rap” infringed the Dragnet theme and that The Showboys breached the agreement and termination. The court denied Protoons’ request for a declaratory judgment and dismissed Protoons’ fourth and final counterclaim.

Joinder of the Alleged Dragnet Rightsholder

Protoons argued that the complaint should be dismissed because the alleged Dragnet rightsholder, identified in the opinion as David W. Schumann doing business as Dragnet Music Company, was an indispensable party under Rule 19 of the Federal Rules of Civil Procedure. Rule 19 addresses when a person must be joined because the court cannot provide complete relief without that person, the person’s interests could be impaired, or existing parties could face inconsistent obligations.

The court held that Schumann was not a necessary party. His absence did not prevent the court from deciding whether Hall, Price, or Protoons breached their agreement, and he was not a party to that agreement. The court also found that his interests in the Dragnet theme would not be impaired and that his absence would not create a substantial risk of inconsistent obligations. The court expressly did not decide whether “Drag Rap” infringed the Dragnet theme as a matter of copyright law. It held only that Protoons had not produced enough evidence for a reasonable jury to find that The Showboys breached the agreement or termination. The court therefore did not grant Protoons summary judgment on the joinder ground.

Disposition

Judge Analisa Torres granted The Showboys’ motion for summary judgment, denied Protoons’ cross-motion for summary judgment, granted summary judgment to The Showboys on Protoons’ first, second, and third counterclaims, and dismissed Protoons’ fourth counterclaim. The court directed The Showboys to file a proposed judgment consistent with the order by September 3, 2024.