Zync Music Group, LLC v. Round Hill Music Royalty Fund II LP

Background

Zync Music Group, LLC sued Round Hill Music Royalty Fund II LP over their agreements concerning jointly owned music assets. The claims included breach of contract, breach of the implied duty of good faith and fair dealing, fraudulent inducement, conversion, accounting, trademark infringement under the Lanham Act, and state-law unfair competition.

Under the parties’ joint tenancy agreement, rights acquired during the agreement’s term would be jointly owned. When the term ended, Round Hill had to purchase Zync’s interests in those assets. The purchase price was to be determined through an appraisal process: each party would appoint an appraiser, and if those appraisers disagreed, they would appoint a third independent appraiser whose valuation would determine the price under the agreement’s specified rules.

The agreement’s term ended in October 2022. The parties later agreed to appoint appraisers, but their appraisers did not agree on the Term Asset Purchase Price or on a third appraiser. The parties continued discussing a possible separation and valuation, but those efforts did not resolve the dispute. Zync then filed this action in May 2024. Round Hill moved to compel appraisal and to stay the lawsuit while the appraisal proceeded. The court had already stayed discovery while considering that motion.

Appraisal ruling

The court treated the appraisal provision as an agreement subject to enforcement in the same manner as an arbitration agreement. It concluded that the agreement clearly required appraisal of the Term Asset Purchase Price.

Zync argued that Round Hill had waived its right to appraisal by delaying, taking steps that allegedly did not comply with the agreement, and failing to agree to Zync’s proposed third appraiser. The court rejected that argument. It explained that the right to enforce an appraisal agreement must be exercised within a reasonable time, but waiver is not lightly inferred. The court found that the start of litigation did not automatically waive the right, the agreement’s apparent 120-day appraisal timing was not an essential deadline, and the parties had continued negotiating valuation and a possible resolution before the lawsuit.

The court also found that Zync had not shown that appraisal would prejudice it. Instead, a third-party appraiser could determine the asset value before a jury could estimate damages. Because the Term Asset Purchase Price was central to resolving the dispute and an accurate valuation could support settlement, the court ordered appraisal of the Term Assets.

Stay of the litigation

The court determined that the appraisal-related issues were inseparably connected with the rest of the case. Claims 1, 2, 4, and 9 expressly referred to the value of the Term Assets. The court also found significant connections between the appraisal and the trademark, unfair-competition, and fraudulent-inducement claims because those claims involved compensation or requested remedies tied to the Term Asset Purchase Price.

The court further found that pausing the entire case would promote efficient case management. Discovery about the asset value would overlap with discovery for the other claims, and determining the value could make settlement more likely. It therefore stayed the entirety of the litigation pending the appraisal. The court warned Round Hill that it could lift the stay as to claims not inseparably connected with the asset valuation if Round Hill delayed the appraisal or otherwise prevented timely resolution.

Disposition

Round Hill’s motion to compel appraisal of the Term Assets and stay the remaining litigation pending appraisal was granted. The case was stayed pending the appraisal’s result. The parties’ appraisers were ordered to appoint a third independent appraiser by December 20, 2024. If they could not agree, either party could ask the court to select the third appraiser.

The court denied Round Hill’s separate motion for oral argument. The clerk was directed to terminate several motions, including Round Hill’s motion to dismiss, and the court stated that Round Hill could renew its motion to dismiss after the appraisal was completed.