Idle Media, Inc. v. Create Music Grp.

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IDLE MEDIA, INC. and THE DISPENSARY, LLC, Plaintiffs, v. CREATE MUSIC GROUP, INC. and KYLE REILLY, Defendants.

No. 24-cv-00805 (JLR)

United States District Court, S.D. New York

December 6, 2024

OPINION AND ORDER

JENNIFER L. ROCHON, UNITED STATES DISTRICT JUDGE

This case involves a dispute concerning allegedly overdue royalty payments associated with the distribution of sound recordings on various digital-streaming platforms. A licensing agreement entered in 2017 between Idle Media, Inc. (“Idle”), a Nevada corporation with its principal place of business in Pennsylvania, and Create Music Group Inc. (“CMG”), a Delaware corporation with its principal place of business in California, is at the center of this case (the “DatPiff Agreement”). Under the terms of the DatPiff Agreement, Idle licensed specific visual-media rights to CMG for distribution on third-party digital platforms in exchange for agreed-upon royalty payments. According to Plaintiffs, the parties subsequently expanded the terms of the Agreement to incorporate certain audiovisual works, including sound recordings owned by Idle's wholly owned subsidiary, The Dispensary, LLC (“Dispensary”). Idle and Dispensary (together “Plaintiffs”) now bring this action for breach of contract and various related state law claims against CMG and Kyle Reilly, a former employee of Idle (together “Defendants”), in connection with the licensing of those sound recordings and other audiovisual works (the “Dispensary Content”).

Now before the Court are CMG's motion to transfer venue to the Central District of California, and Reilly's and CMG's motions to dismiss the First Amended Complaint (the “FAC”). For the following reasons, this Court GRANTS CMG's motion to transfer venue to the Central District of California pursuant to 28 U.S.C. § 1404(a) and therefore DENIES as moot Reilly's motions to dismiss for improper venue and lack of personal jurisdiction.

BACKGROUND

I. Factual Allegations

The Court accepts the factual allegations in the FAC as true and draws all reasonable inferences in Plaintiffs' favor. See Costin v. Glens Falls Hosp., 103 F.4th 946, 952 (2d Cir. 2024). The Court also considers materials incorporated by reference in the FAC, integral to the FAC, or subject to judicial notice. See United States ex rel. Foreman v. AECOM, 19 F.4th 85, 106 (2d Cir. 2021); Michael Greco Prods., Inc. v. RADesign, Inc., 112 F.4th 144, 148 n.1 (2d Cir. 2024). Finally, because a motion to transfer is before the Court alongside Defendants' motions to dismiss, the Court also considers materials in affidavits, pleadings, and other papers for purposes of the motion to transfer. Mohsen v. Morgan Stanley & Co., No. 11-cv-06751 (PGG), 2013 WL 5312525, at *3 (S.D.N.Y. Sept. 23, 2013) (“In deciding a motion to transfer, a court may consider material outside of the pleadings.”).

A. The Parties

Idle is a media company incorporated in Nevada and headquartered in Pennsylvania. See Dkt. 24 (“FAC”) ¶ 12. In or around 2018, Idle started a record company called Dispensary, which was the “owner and/or exclusive licensee of various works that Idle controlled the exploitation of,” including audiovisual works and sound recordings. Id. ¶¶ 32, 34. Dispensary is likewise headquartered in Pennsylvania and is incorporated in Pennsylvania. Id. ¶ 13. During the relevant time period, Kyle Reilly was the Executive Vice President of Music for Idle. Id. ¶ 35. In that role, Reilly was responsible for operating the “Dispensary Project,” including controlling the Dispensary's sound recordings and other audiovisual works. Id. ¶ 37. Reilly resides in Los Angeles County, California. Id. ¶ 20. Plaintiffs nonetheless maintain that Reilly is subject to personal jurisdiction in this Court based on his “actions as Idle's Executive Vice President when he was employed by Idle” (a corporation not based in New York) and “his subsequent conduct related to, and in concert with, CMG” (a company that is likewise not based in New York). Id. ¶ 10. According to Plaintiffs, the Dispensary Content is “distributed to and consumed by consumers within this judicial district.” Id. ¶ 7.

CMG is a music distribution company incorporated in Delaware, with its headquarters in Los Angeles County, California. Id. ¶ 15. It does not have offices, property, or bank accounts in New York. Dkt. 34-2 (“Strauss Decl.”) ¶¶ 12-17. CMG provides “services to music artists and recording labels,” including “digital music store distribution, royalty collections from digital streaming[,] and data and analytics for earnings from the same.” FAC ¶ 16. This includes streaming the Dispensary Content at issue in this litigation through online streaming services such as YouTube, Spotify, Apple Music, and iTunes. Id. ¶ 8.

Plaintiffs further allege that “CMG enters into agreements with third parties . . . that contain New York jurisdiction clauses, including in its Disclaimer i.e. terms of service on its website.” Id. ¶ 19. CMG's terms of service on its website govern the relationship between CMG and users of its services, “including but not limited to the use of the website www.createmusicgroup.com (Website); [CMG's] applications, including but not limited to, Splits, Client Portal, Create Licensing, Account Management, Client Management, & Create Expert; its network; and [CMG's] personalized support.” Dkt. 58-1 (“Disclaimer”) ¶ 1; FAC ¶ 6. The Disclaimer also incorporates a dispute-resolution clause which provides that “[t]his Agreement is governed by the laws of the United States, and specifically, the State of New York. Any disputes arising from or related to this Agreement will be submitted to the competent court of New York, NY.” Disclaimer ¶ 10; FAC ¶ 6.^[1]

B. Factual Background

In or about May 2017, Idle entered into a written agreement with CMG whereby CMG obtained a license to distribute a “selection of visual media” that Idle “own[ed] and/or controll[ed]” on third-party platforms, websites, and applications. FAC ¶ 21; Dkt. 57-1 (“DatPiff Agreement”). The defined licensor under the DatPiff Agreement was “DatPiff” - a service owned at the time by Idle. FAC ¶ 23; DatPiff Agreement at 2. The Datpiff Agreement governed “any visual media . . . solely owned or controlled by licensor [DatPiff].” DatPiff Agreement § 1(b). Under the DatPiff Agreement, DatPiff granted CMG the “exclusive right” to distribute DatPiff's visual-media content on third-party digital platforms, id. § 1(h)4, including but not limited to Facebook, MySpace, Snapchat, and any other website and/or social media platform which contains Youtube hosted and/or embedded videos, id.§§ 1(h). In exchange, CMG would return 80 percent of the net revenue actually received by CMG from the monetization of DatPiff's content on a monthly basis. FAC ¶¶ 22, 81; DatPiff Agreement § 6.

Relevant here, the DatPiff Agreement also incorporated a mandatory forum selection clause:

This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to principles governing conflicts of laws. The parties consent and agree that all legal proceedings arising out of or relating to this Agreement shall be exclusively maintained in either the federal or state courts in New York, NY located in the State of New York, and, by execution and delivery of this Agreement, each of the parties to this Agreement accepts the exclusive jurisdiction of such courts and irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement. Each party hereto irrevocably waives any objection to the laying of venue of any such suit, action, or proceeding brought in such courts and irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.

Id. § 17. The DatPiff Agreement also contains a provision excluding third party beneficiaries, see id. § 23, and a provision providing that “[n]o modification, amendment, supplement to or waiver of this Agreement shall be binding upon the parties unless made in writing and duly signed by both parties,” id. § 24.

The DatPiff Agreement was signed by Marcus Frasier, Idle's CEO. FAC ¶ 24. According to Plaintiffs, pursuant to the DatPiff Agreement, CMG sent Idle 1099s until 2019. Id. ¶ 25. Plaintiffs assert that, “[s]ince entering into the [DatPiff] Agreement, Idle has performed by providing Idle's Visual Content to CMG, for which, for a time, CMG had been remitting the Net Revenue derived from its exploiting of Idle's Visual Content back to Idle.” Id. ¶ 27. CMG initially provided Idle with statements of its earnings by email, but subsequently switched to providing statements through its web-based client portal. Id. ¶ 28. On or about October 1, 2019, Idle sold certain of its assets related to the DatPiff platform to a third party, Medialab.AI Inc (“Medialab”). Id. ¶ 49. At that time, CMG entered into a new agreement with MediaLab to distribute the DatPiff Content. Strauss Decl. at 18-31.

Following the parties' initial agreement, Idle began to provide CMG with audio content as well. FAC ¶ 29. According to Plaintiffs, “Idle's performance of its obligation to provide Audio Content and CMG's performance under the [DatPiff] Agreement in the same manner as it performed with respect to Idle's Visual Content, constituted an amendment of the [DatPiff] Agreement.” Id. ¶ 30. At a minimum, Plaintiffs argue, the parties “entered into an implied license regarding Idle's Audio Content under the [DatPiff] Agreement.” Id. ¶ 31.

In or around 2018, Idle formed a wholly owned subsidiary, the Dispensary, for purposes of starting its own record company. Id. ¶ 32. The Dispensary was established as a record label for purposes of distributing sound recordings and...