Mtume v. Sony Music Entm't

JAMES MTUME, Plaintiff, v. SONY MUSIC ENTERTAIMENT, Defendant.

18 Civ. 6037(ER)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

August 19, 2020

OPINION AND ORDER

Ramos, D.J.:

James Mtume ("Mtume") initiated this copyright action against Sony Music Entertainment ("Sony"). After the Court denied its motion to dismiss, Sony filed an answer asserting certain counterclaims against Mtume. Through its counterclaims, Sony seeks to recover for the purported overpayment of licensing fees that Sony inadvertently paid Mtume. These licensing fees relate to the same works relevant to Mtume's claims, as well as a number of others. Mtume moves to dismiss all counterclaims. For the reasons set forth below, the motion is GRANTED in part and DENIED in part.

I. BACKGROUND

In his Amended Complaint, filed on August 13, 2018, Mtume, a musician, alleges claims under the copyright laws of the United States relating to his purported termination of rights conveyed to Sony for three works created pursuant to a 1977 agreement between Mtume and CBS Records, Sony's predecessor (the 1977 Agreement"). (Doc. 11.) The Amended Complaint also seeks declaratory judgment, an accounting, and recovery for three claims of copyright infringement. (Id.)

After the Court denied Sony's motion to dismiss, Sony filed its Answer to the Amended Complaint. In its Answer, Sony also asserts four counterclaims, for: (1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3) unjust enrichment; and (4) declaratory judgment. Sony's counterclaims all stem from allegations that "[d]ue to an inadvertent internal accounting error," Sony overpaid record royalties to Mtume and/or his designees for works created pursuant to the 1977 Agreement. (Doc. 39 ("Counterclaims") ¶ 12.)

In 1983, Ifland Corporation¹ and CBS entered into another agreement (the "1983 Agreement") that created new recording obligations for Mtume, subject to different royalty rates than those prescribed in the 1977 Agreement, and which terminated Mtume's recording obligations under the 1977 Agreement. (Id. ¶ 10.) The overpayments at issue in Sony's counterclaims relate to works created pursuant to the recording obligations in the 1977 Agreement, not the 1983 Agreement. According to Sony, however, Sony inadvertently paid Mtume at the royalty rates prescribed by Paragraph 9 of the 1983 Agreement, rather than the rates called for in Paragraph 6 the 1977 Agreement. (Id.) Separately, Sony also alleges that it inadvertently paid Mtume "mechanical royalties for digital exploitation of certain musical compositions embodied in the sound recordings created pursuant to the 1977 Agreement at the statutory rate rather than the controlled composition rates specified in Paragraph 23 of the 1977 Agreement." (Id. ¶ 13.)

Sony alleges breaches of both the 1977 Agreement and the 1983 Agreement. Paragraph 6 of the 1977 Agreement specifies certain royalty rates that "Producer will pay to Artist in respect of recordings made hereunder." (Doc. 56-1 ("1977 Agreement") ¶ 6.) Paragraph 23 ofthat agreement, which relates to mechanical licenses for musical compositions recorded pursuant to the 1977 Agreement, specifies other rates that "Producer will be required to pay. . .." (Id. ¶ 23(a).) The 1983 Agreement, too, has a provision relating to the royalties "CBS will pay. . .." (Doc. 56-2 ("1983 Agreement") ¶ 9.) Lastly, as relevant to the Court's consideration of the instant motion, the 1983 Agreement also includes a paragraph—Paragraph 11—entitled "Royalty Accountings," describing, among other things, when CBS will compute royalties, when CBS will provide statements regarding those royalties, and, most relevant here, requiring that Mtume repay CBS in the event that "CBS makes any overpayment." (1983 Agreement ¶ 11.)

II. LEGAL STANDARD

a. 12(b)(1): Lack of Subject Matter Jurisdiction

Federal Rule of Civil Procedure 12(b)(1) requires that an action be dismissed for lack of subject matter jurisdiction when the district court lacks the statutory or constitutional power to adjudicate the case. Fed. R. Civ. P. 12(b)(1). The party asserting subject matter jurisdiction carries the burden of establishing, by a preponderance of the evidence, that jurisdiction exists. Morrison v. Nat'l Australia Bank Ltd., 547 F.3d 167, 170 (2d Cir. 2008) (quoting Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000)). "On a Rule 12(b)(1) motion challenging the district court's subject matter jurisdiction, the court may resolve the disputed jurisdictional fact issues by referring to evidence outside of the pleadings, such as affidavits. . .." Zappia Middle East Constr. Co. v. Emirate of Abu Dhabi, 215 F.3d 247, 253 (2d Cir. 2000); see also Morrison, 547 F.3d at 170 (citing Makarova, 201 F.3d at 113). When evaluating a motion to dismiss for lack of subject matter jurisdiction, the court accepts all material factual allegations in the complaint as true but does not draw inferences from the complaint favorable to the plaintiff. J.S.ex rel. N.S. v. Attica Cent. Sch., 386 F.3d 107, 110 (2d Cir. 2004) (citing Shipping Fin. Servs. Corp. v. Drakos, 140 F.3d 129, 131 (2d Cir. 1998)).

b. 12(b)(6): Failure to State a Claim

"To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly, 550 U.S. at 556). The plaintiff must allege sufficient facts to show "more than a sheer possibility that a defendant has acted unlawfully." Id. (citing Twombly, 550 U.S. at 557). However, this "flexible 'plausibility standard'" is not a heightened pleading standard, In re Elevator Antitrust Litig., 502 F.3d 47, 50 n. 3 (2d Cir. 2007) (citation omitted), and "a complaint . . . does not need detailed factual allegations" to survive a motion to dismiss, Twombly, 550 U.S. at 555.

The question on a motion to dismiss "is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Sikhs for Justice v. Nath, 893 F. Supp. 2d 598, 615 (S.D.N.Y. 2012) (quoting Villager Pond, Inc. v. Town of Darien, 56 F.3d 375, 378 (2d Cir. 1995)). "[T]he purpose of Federal Rule of Civil Procedure 12(b)(6) is to test, in a streamlined fashion, the formal sufficiency of the plaintiff's statement of a claim for relief without resolving a contest regarding its substantive merits" or "weigh[ing] the evidence that might be offered to support it." Halebian v. Berv, 644 F.3d 122, 130 (2d Cir. 2011) (internal citations and quotation marks omitted). Accordingly, when ruling on a motion to dismiss pursuant to Rule 12(b)(6), the Court accepts all factual allegations in the complaint as true anddraws all reasonable inferences in the plaintiff's favor. Nielsen v. Rabin, 746 F.3d 58, 62 (2d Cir. 2014); see also Twombly, 550 U.S. at 556 ("[A] well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable. . .."). "For purposes of this rule, the complaint is deemed to include any written instrument attached to it as an exhibit or any statements or documents incorporated in it by reference." Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir. 2002) (internal quotation marks omitted).

II. DISCUSSION

Mtume moves to dismiss Sony's counterclaims on the grounds that (1) the Court lacks subject matter jurisdiction over Sony's claims; (2) Sony fails to state a claim for breach of contract; (3) Sony's breach of the implied covenant of good faith and fair dealing are duplicative of the breach of contract claims; (4) Sony's unjust enrichment claim is duplicative of the breach of contract claims; (5) part of Sony's unjust enrichment claim is time-barred; (6) Sony's breach of contract and unjust enrichment claims are barred by the doctrine of voluntary payment; and (7) Sony's declaratory judgment claim is duplicative of the breach of contract and unjust enrichment claims. The Court addresses each argument in turn.

A. The Court's Subject Matter Jurisdiction Over Sony's Counterclaims

Sony invokes the Court's supplemental jurisdiction as a basis for the Court to decide its counterclaims against Mtume.

When, as here, a court has original jurisdiction over some claims in an action, it may also exercise supplemental jurisdiction over other claims when they "form part of the same case or controversy." 28 U.S.C. § 1367(a). The central inquiry is whether the two sets of claims "derive from a common nucleus of operative fact," such that a plaintiff would ordinarily be expected to try them all in a single proceeding. Shahriar v. Smith & Wollensky Rest. Grp., Inc., 659 F.3d234, 245 (2d Cir. 2011); Lyndonville Sav. Bank & Trust Co. v. Lussier, 211 F.3d 697, 704 (2d Cir. 2000). "In determining whether two disputes arise from a 'common nucleus of operative fact,' [courts within the Second Circuit] have traditionally asked whether 'the facts underlying the federal and state claims substantially overlap[] . . . [or] the federal claim necessarily [brings] the facts underlying the state claim before the court." Achtman v. Kirby, McInerney & Squire, LLP, 464 F.3d 328, 335 (2d Cir. 2006) (quoting Lyndonville, 211 F.3d at 704)).

Where the requisites of § 1367(a) are satisfied, a court may only decline supplemental jurisdiction if it is statutorily required, see § 1367(b) (restricting the exercise of supplemental jurisdiction when premised on diversity jurisdiction), or if they have the discretion to do so:

The district courts may decline to exercise supplemental jurisdiction over a claim under subsection (a) if—

(1) the claim raises a novel or complex issue of State law,

(2) the claim

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