Jack Russell Music Ltd. v. 21st Hapilos Dig. Distribution

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JACK RUSSELL MUSIC LTD., Plaintiff/Counter-Defendant, v. 21ST HAPILOS DIGITAL DISTRIBUTION, INC. et al., Defendants/Counter-Claimants, v. NW ROYALTY CONSULTING LLC et al., Counter-Defendants.

No. 23-CV-4906 (JMF)

United States District Court, S.D. New York

June 26, 2024

OPINION AND ORDER

JESSE M. FURMAN, UNITED STATES DISTRICT JUDGE:

At its heart, this case is a dispute between Plaintiff Jack Russell Music Ltd. (“JRML”), a music publishing company based in the United Kingdom, and Defendants 21st Hapilos Digital Distribution, Inc. and Hapilos Publishing LLC (together, “Hapilos”), music distribution and publishing companies based in New York. In its principal Complaint, JRML alleges that Hapilos tortiously interfered in JRML's business by poaching music writers who had contractual relationships with JRML. See ECF No. 1 (“Compl.”).^[1] In its Amended Answer and Counterclaims against JRML and N.W. Royalty Consulting LLC (“NWRC”), a Delaware-based affiliate of JRML Hapilos denies these claims and alleges that, in fact, it was JRML and NWRC that tortiously interfered in Hapilos's business by poaching music writers who had contractual relationships with it. See ECF No. 35 (“Am Answer”), ¶¶ 102-09.

More relevant here, Hapilos also brings three claims of libel based on four sets of emails:

• The “Parkinson emails” between Clare Ram, an employee of JRML, and a representative of the Performing Rights Society for Music (“PRS”), a performing rights organization (“PRO”), on which Hapilos was copied. In an email dated December 22, 2022, Ram represented to PRS that Dwayne Ryan Parkinson, a contested client between JRML and Hapilos “never signed a deal with Hapilos” and that “[JRML's] agreement pre-dates the Hapilos agreement and our writer has not terminated his agreement.” Id. ¶ 116; see also id. Ex. 2. Ram advised PRS to “not accept [Hapilos's] claim and maintain [JRML's] claim” as to “all Mr Parkinson's works.” Id. ¶ 116. Hapilos alleges that Parkinson in fact signed a contract with Hapilos in December 2018. Id. ¶ 117.

• The “Shakespeare emails” between Louise Cook, a JRML representative, and Brandon Samuel Shakespeare, a Hapilos client. In an email dated September 13, 2022, Cook wrote Shakespeare: “As you may or may not know, we are having issues with Hapilos registering the publishing to themselves for the songs that they are releasing.” Id. ¶ 123; see also id. Ex. 4. After discussing two of Shakespeare's works as examples, Cook proceeded to advise Shakespeare: “Please be aware that this can happen for any songs released through Hapilos. They have also been found to be claiming on the masters so be very careful who you distribute with.” Id. ¶ 123. Two days later, Cook followed up on the same email chain to inform Shakespeare that JRML “will work to get the [] registrations amended” and that its “issue lies solely with Hapilos, as they are the ones who keep making incorrect registrations.” Id. ¶ 126. Geri Richardson, an NWRC representative, then forwarded the email chain to a representative of Broadcast Music Inc. (“BMI”), a PRO with which Hapilos maintains an agreement. Id. ¶ 124.

• The “Whittaker emails” between Geri Richardson, the NWRC representative, and Madison Fields, a BMI representative. In an email dated March 31, 2022, Richardson wrote Fields:

None of our writers have terminated their agreements yet Hapilos keeps registering titles for our writers that are under our agreements and not just with N.W. Collections but with just about every other publisher out there, at least in the reggae genre.

They don't register the titles with the correct information. They constantly leave off writers and in many instances don't give credit to the artist.

I don't understand why Hapilos doesn't have to provide a letter of termination from each writer that they claim to have a publishing agreement for? Hiding a publishing clause on page 7 of a distribution agreement doesn't constitute a valid publishing agreement.

Id. ¶ 132; see also id. Ex 5. Hapilos alleges that these statements imply that Hapilos was engaging in fraudulent behavior and that it was “dishonest with its own Clients by attempting to ‘hide' contract language from them,” even though Hapilos “engages in none of this behavior.” Id. ¶ 133.

• The “Chronic Law emails” between Ram of JRML and Akeem Cummings, JRML's and NWRC's client. In an email dated March 27, 2023, Ram advised Cummings that JRML “will add to [its] claim against Hapilos” with respect to several songs, and added: “We also note that Chronic Law [a recording artist] is not signed to Hapilos.” Id. ¶ 135; see also id. Ex. 6. On September 25, 2023, Richardson forwarded the entire email chain to BMI. Id. ¶ 136. Hapilos alleges that “Chronic Law did indeed sign a contract with [Hapilos] on April 14, 2020” and that both Ram and Richardson were aware of that contract. Id. ¶ 137.

As pleaded in its Amended Answer, Hapilos brings a counterclaim for violation of the United Kingdom's Defamation Act of 2013 based on the Parkinson emails, see id. ¶¶ 169-76 (Counterclaim V), and claims for libel and trade libel under Delaware law based on the Shakespeare emails, the Whittaker emails, and the Chronic Law emails, see id. ¶¶ 177-85 (Counterclaim VI), ¶¶ 186-91 (Counterclaim VII). JRML and NWRC now move, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, to dismiss these counterclaims. See ECF No. 39 (“Countercl.-Defs.' Mem.”). They do not move to dismiss Hapilos's counterclaims regarding tortious interference (Counterclaims I through IV). See Am. Answer ¶¶ 139-68.

DISCUSSION

In deciding a Rule 12(b)(6) motion to dismiss counterclaims, a court must accept all well-pleaded facts alleged in the counterclaims as true and draw all reasonable inferences in the nonmoving party's favor. See LaFaro v. N.Y Cardiothoracic Grp., PLLC, 570 F.3d 471, 475 (2d Cir. 2009). To survive a motion to dismiss, a counterclaim must include “enough facts to state a claim for relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 547 (2007). A claim is plausible on its face when the complainant has pleaded “factual content that allows the court to draw the reasonable inference that the defendant is liable for misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). The complainant must nudge its claims across the line “from conceivable to plausible.” Twombly, 550 U.S. at 570. In other words, to state a valid counterclaim, a complainant must show more than a “sheer possibility” that the counterclaim-defendant acted unlawfully and cannot rely on mere “labels and conclusions.” Id. at 555.

A. Libel (Counterclaims V and VI)

Hapilos's libel counterclaims - that is, Counterclaims V and VI - fail to clear the plausibility threshold. That is true whether New York law, United Kingdom law, or Delaware law applies - an issue on which the parties spill most of their ink.^[2] See, e.g., Fin. One Publ'g Co. Ltd. v. Lehman Bros. Special Fin., Inc., 414 F.3d 325, 331 (2d Cir. 2005) (noting that, under New York law, courts do “not have occasion to embark on a choice-of-law analysis in the absence of an ‘actual conflict' between the applicable rules of two relevant jurisdictions”). That is because, under the law of all three of these jurisdictions, Hapilos must show that the emails at issue were “defamatory,” which is a legal question to be resolved by the court in the first instance. See Palin v. N.Y. Times Co., 940 F.3d 804, 809 (2d Cir. 2019) (New York law); Page v. Oath Inc. 270 A.3d 833, 842 (Del. 2022) (Delaware law); Monroe v. Hopkins [2017] EWHC 433, ¶ 23 (QB) (United Kingdom law). Further, the meaning of the term “defamatory” is materially identical in all three jurisdictions, namely “tend[ing] to expose a person to public contempt, hatred, ridicule, aversion or disgrace.” Davis v. Boeheim, 24 N.Y.3d 262, 268 (2014); Cousins v. Goodier, 283 A.3d 1140, 1148 (Del. 2022) (“A statement is defamatory when it ‘tends so to harm the reputation of another as to lower him in the estimation of the community or to deter third persons from associating or dealing with him.'”); Corbyn v. Millett [2021] EWCA 567, ¶ 9 (20 April 2021) (“To be defamatory, the imputation must be one that would tend to have a ‘substantially adverse effect' on the way that people would treat the claimant.”).

Measured against these standards, Hapilos's libel counterclaims fall short.^[3] That is plainly true insofar as Counterclaims V and VI are based on the Parkinson emails and the Chronic Law emails. In both sets of emails, Ram simply advised the corresponding PRO that the client at issue was not signed to Hapilos. See Am. Answer Ex. 2; Id. Ex. 6. Putting aside the matter of whether Parkinson and Chronic Law were, in fact, signed to Hapilos such statements are not “defamatory” by the standards of New York, Delaware, or United Kingdom law as they merely “reflect[] JRML's factual and legal position in an inter-business dispute.” Countercl.-Defs.' Mem 16. An examination of the content of the communications as a whole, as well as their “tone and . . . apparent purpose,” Steinhilber v. Alphonse, 68 N.Y.2d 283, 293 (1986); accord Agar v. Judy, 151 A.3d 456, 481 (Del. Ch. 2017); Corbyn v. Millett [2021] EWCA 567, ¶ 23, confirms that Ram, as JRML's representative, made these statements to protect JRML's interests against what was perceived (rightly or wrongly) to be encroachment by Hapilos. See Am. Answer Ex. 2, at 1 (Ram asserting that “Parkinson has never signed a deal with Hapilos” in response to a copyright analyst's notification that Hapilos's general agreement registration as to Parkinson “is conflicting with the current claimant in [JRML's] system”); Id. Ex. 6, at 2-3 (Ram proactively noting that ...