McKenzie-Morris v. V.P. Records Retail Outlet, Inc.

Background

Shauna McKenzie-Morris, a singer-songwriter who performs as “Etana,” sued entities related to VP Records and Greensleeves Publishing, Ltd. She proceeded without a lawyer when she filed the operative third amended complaint. Her claims arose from recording and publishing agreements entered between 2007 and 2014.

McKenzie-Morris alleged that VP Records failed to pay royalties under a 2007 recording agreement after recovering advances and expenses. She also alleged that Greensleeves failed to pay royalties under songwriter and co-publishing agreements. Her complaint asserted three breach-of-contract claims, a copyright-infringement claim, a fraud claim, and an accounting claim.

The defendants filed a partial motion to dismiss under Rule 12(b)(6), which tests whether a complaint states a legally sufficient and plausible claim. They sought dismissal of the three non-contract claims and part of the first breach-of-contract claim. They argued that the challenged contract allegations were a new claim, that the copyright and fraud claims were untimely or otherwise deficient, and that the accounting claim was displaced by copyright law.

Court’s Analysis

First breach-of-contract claim

The defendants sought dismissal of paragraphs 106 and 107 of the complaint, arguing that those paragraphs asserted a new claim concerning the inclusion of certain works on two albums. The court construed McKenzie-Morris’s complaint liberally because she was proceeding without a lawyer. It read the paragraphs as connected to her allegation that the defendants improperly charged her royalty account for expenses, reducing the royalties she received under the 2007 recording agreement.

The court held that paragraphs 106 and 107 were part of the existing first breach-of-contract claim, not a separate claim. Because a motion to dismiss cannot remove only part of a claim, the court denied the motion as to those paragraphs.

Copyright claim

The court granted the motion as to the copyright claim because it was barred by the Copyright Act’s three-year statute of limitations. The court characterized the claim as an ownership dispute because McKenzie-Morris alleged that she owned copyrights in certain sound recordings while the defendants claimed copyright ownership.

The relevant albums were released in 2008, 2011, and 2013, and their packaging identified VP Music Group Inc. as the copyright holder. The court held that those copyright notices put a reasonably diligent plaintiff on notice of the ownership dispute. The claim therefore became untimely by 2016, while McKenzie-Morris did not bring the case until 2022.

McKenzie-Morris argued that equitable estoppel should prevent the defendants from relying on the limitations period. The court rejected that argument because she did not show that the defendants made a specific misrepresentation to her that caused her to delay filing suit. The court also noted that the emails supporting her allegations provided facts that should have prompted further inquiry into the relationship between VP Records and Greensleeves.

Fraud claim

The court granted the motion as to the fraud claim. It found that many of the allegations did not satisfy the requirements for fraud because they were conclusory, duplicated the contract claims, or did not identify the alleged fraudulent statements with the required detail.

The court had previously found that allegations concerning an October 2008 email from Olivier Chastan could state a fraud claim against VP Records. In the current opinion, however, the court held that the claim was untimely. The email was sent more than six years before the 2022 lawsuit, and the email’s sender information and signature identified connections to VP Records that should have led McKenzie-Morris to investigate the relationship between VP Records and Greensleeves. The court therefore granted the motion to dismiss the fraud claim as time-barred.

Accounting claim

The court granted the motion as to the accounting claim because it was preempted by the Copyright Act. Preemption means that federal copyright law displaces a state-law claim when the claim concerns a copyright-covered work and seeks rights equivalent to copyright rights.

The court concluded that McKenzie-Morris’s accounting claim concerned the defendants’ alleged misappropriation and exploitation of works in which she claimed copyright ownership. Because the claim sought an accounting of profits and royalties connected to those works and did not include an additional feature making it qualitatively different from a copyright claim, the court held that it was preempted and dismissed it.

Disposition

The court’s conclusion states that the defendants’ motion to dismiss was GRANTED IN PART. The court denied the motion as to paragraphs 106 and 107 of the first breach-of-contract claim. It dismissed the copyright claim as time-barred, the fraud claim as time-barred, and the accounting claim as preempted by the Copyright Act.

The court also denied McKenzie-Morris leave to amend the complaint again. It reasoned that further amendment would be futile because additional facts would not change the conclusions that the copyright and fraud claims were time-barred or that the accounting claim was preempted.