Twelve Sixty LLC v. Extreme Music Library Limited

Background

The plaintiffs were Twelve Sixty LLC, Aron Marderosian, and Robert Marderosian. The defendants were Extreme Music Library Limited, Extreme Music Limited, Viacom International Inc., New Creative Mix Inc., and Hype Production Music. The case involved agreements concerning songs created by the Marderosians and the payment of licensing and public-performance royalties.

The plaintiffs originally asserted 11 claims. After transfer from the Central District of California and later amendments and rulings, the case was narrowed. The court had previously dismissed claims including fraud, breach of implied-in-fact contract, rescission, and accounting, and struck demands for punitive damages and disgorgement of profits. The parties also dismissed the first breach-of-contract claim with prejudice, leaving the second breach-of-contract claim and claims alleging breach of the implied covenant of good faith and fair dealing.

The relevant 2011 Agreement provided for payments connected to the exploitation of the plaintiffs’ works. Section 7.3 allowed blanket licensing income to be apportioned on a “fair, reasonable and practicable basis,” with the method left to the company and the music-library transferees’ “sole discretion.” Section 7.4 provided that the plaintiffs could receive their writers’ share of public-performance income, while the company retained the publisher’s share and other publishing income.

Motions to Strike Evidence

The court denied the plaintiffs’ motion to strike the declaration of Chris Woods, TuneSat’s chief operating officer, submitted in support of the defendants’ motion to exclude Karen Rodriguez’s testimony. The court found that any prejudice to the plaintiffs was minimal and that they had opportunities to address the declaration.

The court granted in part and denied in part the plaintiffs’ motion to strike evidence supporting the motion to exclude Robert Kohn. The court declined to strike two publicly available consent decrees involving the American Society of Composers, Authors and Publishers and Broadcast Music, Inc. It granted the motion as to a letter from BMI’s attorney because the plaintiffs’ hearsay objection was meritorious.

The plaintiffs also sought to strike declarations and other materials supporting the defendants’ summary-judgment motions. The court dismissed those motions as moot because it could exercise its discretion to consider only admissible evidence when deciding summary judgment.

Expert Testimony

The court granted the defendants’ motion to exclude Robert Kohn’s expert testimony under Federal Rules of Evidence 702 and 703 and the standard requiring reliable and relevant expert evidence. Kohn proposed to testify about music-industry customs and practices and to interpret provisions of the parties’ contracts. The court concluded that substantial portions of his report offered legal argument and contract interpretation, matters for the court rather than expert testimony. The court also found that his opinions lacked a sufficiently reliable methodology and analytical connection between the methods used and his conclusions.

The court denied the defendants’ motion to exclude Karen Rodriguez’s expert testimony. Rodriguez used TuneSat data and BMI royalty statements to estimate unpaid public-performance royalties and other amounts. Although the defendants argued that she misread the TuneSat data and greatly overstated the number of detections, the court found that her report used discernible methods that could be evaluated. The court treated the defendants’ objections as challenges to the conclusions and data, rather than grounds to exclude the testimony entirely.

Summary Judgment

The court granted both defendants’ motions for summary judgment. Summary judgment is a ruling entered without a trial when the record shows no genuine dispute over a fact that could affect the outcome and the moving party is entitled to judgment under the law.

As to the breach-of-contract claim against Extreme, the plaintiffs argued that Extreme improperly apportioned blanket licensing income. The court held that Section 7.3 gave Extreme discretion to choose the allocation method and that the plaintiffs presented no evidence that Extreme exceeded that discretion. The court also held that the agreement entitled the plaintiffs to fees Extreme received from third-party licensees, and Viacom was not a third party under the agreement. The court therefore granted summary judgment for Extreme on the breach-of-contract claim.

The court also granted summary judgment for Extreme on the implied-covenant claim. It found no evidence that Extreme’s allocation method deprived the plaintiffs of a benefit promised by the contract, that Extreme licensed the music below market rates, or that Extreme had an enforceable duty to monitor or supervise broadcasters’ cue sheets. The court also rejected the plaintiffs’ attempt to revive previously dismissed fraud theories through the implied-covenant claim.

As to Viacom, the plaintiffs alleged that Viacom failed to submit, review, and correct cue sheets and improperly used the plaintiffs’ songs without payment. The court held that Viacom could not be treated as a third party because the parties had stipulated that Viacom assumed the rights and obligations under the 2011 Agreement. The court further held that the plaintiffs provided no evidence that Viacom had a contractual or legal duty to police cue sheets in the way the plaintiffs asserted. The court also found that the plaintiffs’ interpretation of the TuneSat data was not sufficiently probative to allow a reasonable jury to rule for them.

Disposition

Judge Paul A. Crotty entered the following dispositions: the motion to strike evidence supporting the motion to exclude Rodriguez was denied; the motion to exclude Rodriguez was denied; the motion to strike evidence supporting the motion to exclude Kohn was granted in part and denied in part; the motions to strike evidence supporting the summary-judgment motions were dismissed as moot; the motion to exclude Kohn was granted; and both defendants’ motions for summary judgment were granted. The clerk was directed to close the listed motions and the case.