Red Apple Media, Inc. v. Batchelor

Background

Red Apple Media, Inc. alleged that it and its predecessors produced and distributed the John Batchelor Show, a radio show and podcast. The complaint described three relevant agreements. A 2012 agreement between Red Apple’s predecessor and John Batchelor, through Union River Press, concerned production of the show and later included podcast revenues. A 2015 agreement between Cumulus, another predecessor of Red Apple, and Audioboom governed Audioboom’s nonexclusive distribution of the show and the sharing of advertising revenue. In 2019, Batchelor and Audioboom entered an agreement giving Audioboom exclusive podcast-distribution rights in exchange for a share of advertising revenue.

Red Apple alleged that the later agreement improperly cut Red Apple out of podcast distribution and advertising revenue. It asserted claims for money had and received, misappropriation of corporate opportunity, unjust enrichment, unfair competition, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, breach of contract, tortious interference with contract, breach of an implied-in-fact contract, tortious interference with that implied-in-fact contract, and an accounting. Defendants Batchelor, Audioboom, and The Weiss Agency moved to dismiss some or all claims based on Copyright Act preemption and failure to state a claim. Red Apple moved to remand the case to New York state court. Malone’s fiduciary-duty claim was not included in the motion practice because Malone had not yet appeared or moved to dismiss.

Copyright Act preemption

Copyright Act preemption prevents state-law claims from asserting rights equivalent to the exclusive rights protected by federal copyright law when the claims concern copyright-related works. The court held that the John Batchelor Show satisfied the subject-matter requirement because it was the type of work covered by copyright law. The court then examined whether each state-law claim sought rights qualitatively different from copyright rights.

The court granted Audioboom’s motion to dismiss Count Seven, the breach-of-contract claim, insofar as it was based on Audioboom’s failure to remove the show from its platforms after the distribution agreement ended. That theory merely asserted a right to stop distributing the show and was therefore preempted. The court stated, however, that the portions of the contract claim based on promises to pay advertising revenue were likely not preempted; Audioboom had not moved to dismiss those portions on that ground.

The court denied the motion to dismiss Count Eight, the tortious-interference-with-contract claim against Batchelor and The Weiss Agency, on preemption grounds to the extent the claim concerned the alleged failure to pay Red Apple advertising revenue. Because a promise to pay is different from a copyright right, the court reasoned that inducing a breach of that promise was also different from a copyright infringement claim. The court noted that any portion based on inducing post-termination distribution of the show would be preempted to the same extent as the corresponding contract theory.

The court held that Counts One and Three—money had and received and unjust enrichment—were preempted. Red Apple’s theory was that defendants improperly retained advertising revenues connected to the show, but the court concluded that, without a contractual promise to pay, the alleged right to those revenues depended on an intellectual-property interest in the show. The court further reasoned that advertising revenues could constitute indirect profits recoverable under copyright law.

The court denied Batchelor’s motion to dismiss Count Six, the claim that Batchelor aided and abetted Malone’s breach of fiduciary duty. A claim requiring proof of a breach of fiduciary duty contains an additional element that makes it different from copyright infringement. The court also denied the motion as to Count Four, the unfair-competition claim, insofar as it was based on Malone’s alleged breach of fiduciary duty, but granted the motion in all other respects. The court rejected Red Apple’s argument that merely alleging the misappropriation of labor and production expenses avoided preemption.

Failure to state a claim

The court granted the motions to dismiss Count Two, misappropriation of corporate opportunity, and Count Eleven, equitable accounting, because Red Apple did not adequately allege the confidential or fiduciary relationship required for those claims against Batchelor, Audioboom, or The Weiss Agency. The court found that the allegations described ordinary, arm’s-length business relationships. It also found that the agreements described Batchelor and Audioboom as independent contractors and did not establish the required fiduciary relationship. Although the allegations concerning Weiss’s possible agency relationship were closer, the complaint inconsistently alleged that Weiss represented Red Apple, Batchelor, and Audioboom, and did not plausibly show that Weiss owed Red Apple undivided loyalty.

The court denied Batchelor’s motion to dismiss Count Nine, the breach-of-implied-in-fact-contract claim. Red Apple alleged that the parties continued performing under the former written agreement after its stated expiration. The court held that the agreement itself contemplated continued performance under its terms and that the parties’ continued conduct could also support an implied-in-fact contract.

The court denied Batchelor’s and The Weiss Agency’s motion to dismiss Count Eight for failure to state a claim. Red Apple adequately alleged at the pleading stage that Batchelor and Weiss knew about the Cumulus-Audioboom Agreement, intentionally induced Audioboom’s breach, and had a financial motive to do so.

The court granted the motions to dismiss Count Ten, tortious interference with the implied-in-fact contract, against Audioboom and Weiss. The court accepted that the alleged contract was terminable at will and held that Red Apple had not alleged the wrongful means—such as fraud, threats, or a breach of fiduciary duty—needed for interference with such an arrangement. Because this defect was sufficient, the court did not reach the defendants’ additional arguments about knowledge and intent.

Remand and jurisdiction

The court denied Red Apple’s motion to remand. Copyright Act preemption supplied federal-question jurisdiction over the removed case because at least one claim was completely preempted. The court retained supplemental jurisdiction over the remaining state-law claims because the dismissed and surviving claims arose from the same underlying events. The court explained that keeping the case would allow one federal court to continue determining the boundary between the preempted and non-preempted portions of the claims.

Disposition

The February 21, 2024 order, explained in this opinion, granted in part and denied in part the defendants’ motions to dismiss and denied Red Apple’s motion to remand. Counts One and Three were dismissed as preempted; Count Seven was dismissed only insofar as it concerned post-termination distribution; Count Four was dismissed except insofar as it was based on Malone’s alleged fiduciary-duty breach; Counts Two, Eleven, and Ten were dismissed for failure to state a claim; and Counts Six and Nine, along with the surviving portions of other claims, remained pending. Count Five against Malone also remained in the case because he had not moved to dismiss it.