What is the rationale of Reach Music v Warner Chappell Music, and what is the impact on contractual relationships?

case study below

Reach Music Publ'g, Inc. v. Warner/Chappell Music, Inc.

United States District Court for the Southern District of New York

November 10, 2014, Decided; November 10, 2014, Filed

09 Civ. 5580 (KBF)

Reporter

2014 U.S. Dist. LEXIS 159139 *; 112 U.S.P.Q.2D (BNA) 1896 **; 2014 WL 5861984

REACH MUSIC PUBLISHING, INC. et al., Plaintiff, -v-

WARNER/CHAPPELL MUSIC, INC. et al.,

Defendants.PROTOONS INC., Counterclaimant, -v-

REACH MUSIC PUBLISHING, INC. and DAVID

REEVES, Counterclaim Defendants, -and- REACH

GLOBAL INC. and MICHAEL CLOSTER, Additional

Counterclaim Defendants.

Subsequent History:

Costs and fees proceeding at,

Motion granted by, in part

Protoons Inc. v. Reach Music

Publ'g, Inc., 2016 U.S. Dist. LEXIS 20482 (S.D.N.Y.,

Feb. 19, 2016)

Prior History:

Reach Music Publ'g, Inc. v. Warner

Chappell Music, Inc., 988 F. Supp. 2d 395, 2013 U.S.

Dist. LEXIS 180073 (S.D.N.Y., 2013)

Core Terms

covenant, Songwriter, parties, rights, compositions,

Music, damages, songs, counterclaim, attorneys',

breach of contract, summary judgment, contractual,

lawsuit, assign, tortious interference, material fact,

contracts, unconscionable, costs, breach of covenant,

transferred, argues, breach of contract claim, attorney's

fees, asserts, genuine, Writer, summary judgment

motion, prevailing party

Counsel:

[*1]

For Reach Music Publishing, Inc,

Plaintiff: Russell Alexander Smith, Smithdehn LLP, New

York, NY.

For David Reeves, Plaintiff: Francis Xavier Dehn, Smith

Dehn LLP, New York, NY; Russell Alexander Smith,

Smithdehn LLP, New York, NY.

For Warner/Chappell Music, Inc., Defendant: Christine

Lepera, Jane G Stevens, LEAD ATTORNEYS, Mitchell

Silberberg & Knupp LLP (NY), New York, NY; Francis

Xavier Dehn, Smith Dehn LLP, New York, NY; J.

Matthew D. Williams, Mitchell Silberberg & Knupp

L.L.P.(DC), Washington, DC.

For Protoons Inc, Defendant, Counter Claimant:

Christine Lepera, Jane G Stevens, LEAD ATTORNEYS,

Mitchell Silberberg & Knupp LLP (NY), New York, NY;

Bradley James Mullins, Mitchell Silberberg & Knupp LLP

(NY), New York, NY; J. Matthew D. Williams, Mitchell

Silberberg & Knupp L.L.P.(DC), Washington, DC.

For Michael Closter, Reach Global, Inc., Defendants:

Francis Xavier Dehn, Smith Dehn LLP, New York, NY;

Russell Alexander Smith, Smithdehn LLP, New York,

NY.

For Reach Global, Inc., Michael Closter, Reach Music

Publishing, Inc, Counter Defendants: Francis Xavier

Dehn, Michael Simeon Delehanty, Smith Dehn LLP,

New York, NY; Jonathan James Ross, Caplan & Ross,

LLP, New York, NY; Russell Alexander

[*2]

Smith,

Smithdehn LLP, New York, NY.

For David Reeves, Counter Defendant: Francis Xavier

Dehn, Michael Simeon Delehanty, Smith Dehn LLP,

New York, NY; Russell Alexander Smith, Smithdehn

LLP, New York, NY.

Judges:

KATHERINE B. FORREST, United States

District Judge.

Opinion by:

KATHERINE B. FORREST

Opinion

[**1897]

OPINION & ORDER

KATHERINE B. FORREST, District Judge:

Run-D.M.C. released "Run's House" and several other

songs in the late-1980s; decades later, these songs are

at the center of a copyright ownership dispute. The

instant action arises out of a series of contracts that

counterclaim defendant David Reeves, who co-wrote

the Run-D.M.C. compositions, signed with the publisher

Page 2 of 11

Rush Groove Music ("Rush Groove") in 1988 and

1989.

1

In those Songwriter Agreements, Reeves

transferred to Rush Groove his interest in numerous

Run-D.M.C. compositions, in exchange for a share of

future income generated from the compositions. Rush

Groove, however, only paid Reeves through 1990.

The dispute deals with the questions of (1) whom

Reeves can sue to enforce his rights, and (2) if the

Songwriter Agreements left him with any mechanism by

which he could recover royalty fees. The contracts state

that the only entity from which Reeves can collect is

Rush Groove; but Reeves asserts that a suit against

Rush Groove would be fruitless as that entity went out

of business. Instead, he turned to Protoons Inc., another

music publisher, who is also an assignee of Rush

Groove's interest in the Run-D.M.C. compositions.

The Songwriter Agreements expressly contemplated the

transfer of Rush Groove's interest in the compositions to

Protoons, and included an express covenant that

Reeves not sue Protoons regarding his rights in the

songs. Protoons was deemed a third-party beneficiary

of the Songwriter Agreements. Reeves and Rush

Groove also agreed that the prevailing party

[*4]

in a

suit "between the parties" would be liable for attorneys'

fees; Reeves and Protoons disagree about that

provision's applicability to their covenant not to sue.

In 2007, after becoming indigent while songs like "Run's

House" continued to have commercial success, Reeves

entered into an agreement with Reach Global, yet

another music publisher.

2

In that agreement, Reeves

transferred to Reach a portion of the copyright interest

in the same Run-D.M.C. compositions already owned by

1

The so-called Songwriter Agreements consist of multiple

contracts for individual songs. The Court analyzes the

contracts through the single exemplar contract provided by the

parties a contract for the song "Run's House" signed by

Reeves, the other co-writers,

[*3]

and Rush Groove on May 1,

1988. (Counter-Resp. of Protoons, Inc. to Countercl. Defs.'

Resp. to Protoons Rule 56.1 Statement of Undisputed Facts in

Supp. of its Mot. for Summ. J. and Resp. to Counterstatement

of Material Facts in Opp'n to Protoons' Mot. For Summ. J.

("C.P. 56.1 C.R.") at 10, ECF No. 238, Lepera Decl. 2, Ex.

1.)

2

Michael Closter is the principal and sole owner of both Reach

Global, Inc., and Reach Music Publishing, Inc. (C.P. 56.1 C.R.

at 4.) Reach Global is the predecessor-in-interest

[*5]

of

Reach Music. Hereinafter, the Court refers to Closter, Reach

Global, Inc., and Reach Music Publishing, Inc. simply as

"Reach."

Protoons in exchange for $55,000. Reeves and Reach

then filed this action on June 17, 2009 against Protoons

and

Warner/Chappell

Music

Publishing

("Warner/Chappell).

3

(ECF No. 1.) In that initial action,

Reeves and Reach asserted that they were co-owners

of the Run-D.M.C. compositions, and that Protoons and

Warner/Chappell must account for any income received

from exploitation of the compositions over the prior two

decades.

Protoons

asserted

counterclaims

on

November 20, 2009 (ECF No. 23), and the complaint

[**1898]

was ultimately dismissed on August 12, 2010

(ECF No. 61).

4

Protoons counterclaims (1) against Reeves for breach

of contract for bringing suit in violation of the covenant

not to sue, and (2) against Reach for tortiously

interfering with the Songwriter Agreement by inducing

Reeves to sue Protoons in violation of the covenant not

to sue.

On March 28, 2014, following a long period of discovery,

the parties cross-moved for summary judgment on the

counterclaims. (ECF Nos. 212, 216.) On May 19, 2014,

the summary judgment motions were fully briefed, and

on May 29, 2014, the matter was transferred to the

undersigned judge. The Court finds in Protoons' favor

on both claims. Reeves long ago sold all rights to the

subject songs including his entire copyright interest

in exchange for royalty payments. In that agreement,

Reeves acknowledged that the songs could be

transferred

[*6]

to Protoons but that he would only ever

seek royalty payments from Rush Groove; he also

expressly relinquished any right to seek royalty

payments from Protoons. The contractual language to

which Reeves agreed is plain, standard, and valid.

Rather than seek relief from Rush Groove or its

principals, Reeves instead initiated litigation against

Protoons. Reach purported to acquire an interest in the

songs to which Reeves long ago gave up all rights, and

then initiated legal proceedings on their and his behalf.

Years of litigation ensued. Reach had ample warning

that Reeves had signed away his rights in the Run-

D.M.C. songs; however, there is a triable issue as to

whether they had sufficient prior knowledge of the

particular covenant not to sue in the Songwriter

3

Warner/Chappell Music Publishing is not a party to this

counterclaim action. They were party to the original action as

they had acquired rights to the Run-D.M.C. compositions

through Protoons.

4

Protoons amended its counterclaims on November 24, 2010

(ECF No. 68).

2014 U.S. Dist. LEXIS 159139, *2

;

112 U.S.P.Q.2D (BNA) 1896, **1897

Page 3 of 11

Agreements. While Protoons did not have to produce

the Songwriter Agreements for the breach of contract

claim, its failure to produce the document, offer

sufficient detail of the covenant not to sue, or otherwise

insure that Reach had sufficient knowledge, means that

Protoons cannot win summary judgment on this claim.

For these reasons, and as set forth below, Protoons'

motion for summary judgment is GRANTED and

Reeves and Reach's

[*7]

motion is DENIED as to the

breach of contract; both parties' motions are DENIED as

to the tortious interference claim.

I. FACTUAL BACKGROUND

5

David Reeves is a songwriter who co-wrote a number of

compositions which were recorded by the musical group

Run-D.M.C. in the 1980s. (C.P. 56.1 C.R. at 8.) In 1988

and 1989, Reeves executed a number of Songwriter

Agreements in which he transferred his interest in those

songs to Rush Groove, a music publishing company, in

exchange for a share of the profits generated from the

songs. (Id.) The parties dispute the circumstances under

which those contracts were executed, as well as their

legal validity and enforceability. (Id.)

Reeves and Reach concede that Reeves signed the

agreementsor, at very least, that it is his signature

that appears on them. (Countercl. Defs.' Counter-Resp.

and Resp. to Protoons' Resp. and Counterstatement of

Material Facts ("C.D. 56.1 C.R.") at *4,

6

ECF No. 241;

C.P. 56.1 C.R. at 10-11.)

Reeves asserts that he does not recall signing the

Songwriter Agreements and, in any event, did not

understand their contents or effect at the time of signing

[*8]

that he would, by signing them, assign his

copyright to Rush Groove. (C.D. 56.1 C.R. at *4-5.)

7

5

The following facts are undisputed by the parties except

where otherwise indicated.

6

This document is not paginated.

7

Protoons argues that the Court should disregard these

allegations on the basis of the "sham issue of fact" doctrine,

"which prohibits a party from defeating summary judgment

simply by submitting an affidavit that contradicts the party's

previous sworn testimony."

In re Fosamax Products Liability

Litigation, 707 F.3d 189, 193 (2d Cir. 2013)

cert. denied,

133

S. Ct. 2783, 186 L. Ed. 2d 234 (2013)

. Protoons points to

sections of Reeves' deposition as sworn testimony that it

contends contradict his allegations on this point. (E.g., C.D.

56.1 C.R. at *4.) However, " [i]f there is a plausible explanation

for discrepancies in a party's testimony, the court considering

a summary judgment motion should not disregard the later

Reeves alleges that he was not provided with copies of

[**1899]

the contracts. (Id. at *20.) The parties do

agree that Reeves was not represented by counsel at

the meeting where he signed the agreements, although

Protoons points to Reeves' testimony that he had

relationships with various lawyers in and around 1988

and 1989. (C.P. 56.1 C.R. at 11; C.D. 56.1 C.R. at *6-7.)

The Songwriter Agreements were signed by Reeves,

other co-writers of the Run-D.M.C. songs and Rush

Groove. (C.P. 56.1 C.R. at 10; Lepera Decl. 2, Ex. 1.)

Protoons was not a direct party to the agreement;

however, the contract specifically provides that Protoons

"shall be deemed third party beneficiaries" of the

agreement. (C.P. 56.1 C.R. at 15). Protoons' rights are

set forth in paragraphs 9 through 14 of the agreement.

(C.P. 56.1 C.R. at 10; Lepera Decl. 2, Ex. 1.) An

assignment from Rush Groove to Protoons was

explicitly anticipated in the contract. The contract

provides that "[Rush Groove] may assign this

agreement to Protoons Inc., including any or all of [Rush

Groove's] rights and interests hereunder and the

benefits of Writer's warranties, representations,

authorization, duties,

[*10]

obligations, liabilities and

indemnifications hereunder." (C.P. 56.1 C.R. at 15.)

Paragraph 14 of the agreement further provides, in

relevant part,

Writer [i.e., Reeves] shall look solely to [Rush

Groove] for any and all payments due in connection

with the use, reproduction and other exploitation of

the Composition and in connection with the

enforcement of any rights or remedies which Writer

may have hereunder, even if Profile or Protoons

suspend their obligations to account and/or pay

royalties or other sums to [Rush Groove]. Under no

circumstances shall Writer look to Profile or

Protoons for any payments in connection with the

use, reproduction or other exploitation of the

Composition.

Writer

hereby

releases

and

testimony because an earlier account was ambiguous,

confusing, or simply incomplete."

Rojas v. Roman Catholic

Diocese of Rochester, 660 F.3d 98, 106 (2d Cir. 2011)

(quotation marks and citation omitted). A cursory review of the

transcript of the deposition in question reveals the ambiguous

and confused nature

[*9]

of the colloquy between Reeves and

Protoons' attorney. Furthermore, Reeves and Reach have

advanced a plausible explanation for any discrepancy, in

observing that "Reeves became tired and struggled to focus

over the course of a very long deposition day, which by the

end, left him confused and exhausted by Protoons['] repetitive

and circular questioning," with appropriate citation to telling

sections of the deposition transcript. (C.D. 56.1 C.R. at *5.)

2014 U.S. Dist. LEXIS 159139, *6

;

112 U.S.P.Q.2D (BNA) 1896, **1898

Page 4 of 11

discharges Profile Records Inc., Protoons, Inc.,

Promuse, Inc. and their officers, principals, heirs,

executors, administrators, successors, licensees

and assigns from all actions, suits, debts, dues,

sums of money, accounts, reckonings, bonds, bills,

specialties, covenants, contracts, controversies[,]

agreements, promises, variances, trespasses,

damages, judgments, executions, claims and

demands whatsoever, whether or not reflected in

demand letters, in law, admiralty or equity,

which

[*11]

against Profile Records Inc., Protoons,

Inc., Promuse, Inc. and their officers, principals,

heirs, executors, administrators, successors,

licensees and assigns Writer ever had, now has, or

hereafter can, shall or may, have for upon, or by

reason of any matter, cause or thing whatsoever

from the beginning of the world and continuing in

perpetuity relating to the copyrights and all other

rights in and to the Composition.

(emphasis added) (C.P. 56.1 C.R. at 16-17.) The

contract further states that "it is agreed that the

prevailing party in any finally adjudicated court action

between the parties shall be entitled to recover the

reasonable attorney's fees incurred by such party in

connection therewith." (Id.)

Rush Groove did, in fact, assign its rights in the Run-

D.M.C. songs to Protoons. In 1998, Rush Groove,

Protoons, and other relevant partiesbut not Reeves

entered into an agreement in which Rush Groove

confirmed its transfer of the relevant copyrights to

Protoons. ("1998 Agreement.") (Id. at 21.) The

agreement provided, inter alia, that Protoons would

succeed to all rights, warranties, representations, and

indemnifications made to Rush Groove. (Id.)

Reeves received and accepted payments from Rush

Groove until

[*12]

1990. (Id. at 19.) Subsequently, he

ceased receiving payments in connection with the Run-

D.M.C. works in question. (Id.) The works, meanwhile,

went on to have a measure of commercial success; for

example, "Run's House" became the theme song of an

MTV television show also called "Run's House" in 2005.

(Id. at 75.) Reeves ultimately became indigent and was

homeless in 2006 and 2007 while "Run's House" aired

on MTV. (Id. at 7.) Protoons contends that, despite the

assignment, the contractual language makes clear that

Rush Groove was still responsible for making

accountings to Reeves. (E.g., C.D. 56.1 C.R. at *84-85.)

Reeves and Reach allege, however, that they could not

pursue a claim against Rush Groove because it went

out of business in 1999. (C.D. 56.1 C.R. at *14.)

Protoons replies that Reeves could have sued Rush

Groove or its principals because Rush Groove was

"never an incorporated company, but rather was a

business entity run by its principals, Russell Simmons

and Lyor Cohen."

8

(Id.)

[**1900]

Reeves did not bring suit against Rush

Groove, nor did he take any legal action for nearly two

decades after he stopped receiving royalty payments. In

2007, Reeves entered into an agreement with Reach in

which Reeves transferred to Reach 50% copyright

interest in the works (or his income participation rights in

them) in exchange for $55,000 and Reach pursuing

additional payments for the songs on his behalf

(including through litigation). (C.P. 56.1 C.R. at 29-30;

see also Lepera Decl. Ex. 13 at 7; ECF No. 213.)

Reeves authorized Reach to pursue litigation to enforce

their joint interest in Reeves' works. (C.P. 56.1 C.R. at

28-29.)

In May 2008, before filing a lawsuit, Reach contacted

Protoons regarding Reach's claim to a copyright interest

in Reeves' Run-D.M.C. works. (Id. at 38.) The parties

differ as to the precise content of the subsequent

communications between the two companies. Protoons

asserts that it made the contract known to Reach in a

number of ways. It first says that its counsel on or about

June 2, 2008 verbally told Reach that Reeves had

assigned his copyright interests in the Run-D.M.C.

works and that Reach "would be responsible for costs" if

it pursued legal action against Protoons. (Id. at 38-39;

Lepera

[*14]

Decl. 40, Ex. 39 [Levinsohn Depo.

69:22-70:7].) It further asserts that its counsel e-mailed

Closter that Protoons' copyright flowed from "signed

agreements." (Id. at 40.) Finally, it claims that Closter

had obtained the confidential 1998 Agreement which

did not include Reeves but confirmed Rush Groove's

assignment to Protoons by October 27, 2007. (C.P.

56.1 C.R. at 34.)

Reeves and Reach argue that they were not aware of

the detail in the Songwriter Agreements, especially the

covenant not to sue. They instead argue that on June 2,

2008, Protoons' counsel only told them that Reeves had

"signed away all his rights" and that Protoons would

"bury" Reach in litigation fees if they filed suit. (Id. at 38-

8

Russell Simmons was the Chairman and CEO of Rush

Groove and co-founder of the hip hop music label Def Jam

Records; Lyor Cohen was a principal of Rush Groove Music

and former leader of two of the music industry's major labels

(Island Def Jam Music Group and the Warner

[*13]

Music

Group).

2014 U.S. Dist. LEXIS 159139, *9

;

112 U.S.P.Q.2D (BNA) 1896, **1899

Page 5 of 11

39) Specifically, Reeves and Reach assert that

Protoons' counsel did not disclose that the Agreements

contained covenants not to sue Protoons; they do not

allege that the statement that Reeves has "signed away

all of his rights" was misunderstood. (Id. at 39.) They

allege that Protoons' counsel said that Reach would be

"responsible for costs," rather than attorney's fees per

se. (Id.) Reeves and Reach further allege that Protoons

did not disclose the identities of the parties to the

agreements, the dates of the agreements,

[*15]

or

other important details that would allow proper context.

(Id.) The parties agree that at no point in this 2008

correspondence did Protoons provide Reach with

copies of the Songwriter Agreements. (See e.g., C.D.

56.1 C.R. at *33-40, *72.)

In July 2008, Reach indicated to Protoons its intention to

file suit in order to enforce Reeves' putative copyright

interests in the Run-D.M.C. works. (C.P. 56.1 C.R. at

41.) On September 3, 2008, Reeves and Reach filed

their first lawsuit against Protoons, Warner/Chappell, et

al., in the Southern District of New York. (Id. at 42.) See

Reach Global et al. v. Warner/Chappell Music, Inc., et

al., No. 08-cv-7722 (LTS).) As discussed supra, Reeves

and Reach initiated the instant action on June 17, 2009.

(Id. at 43.)

On July 20, 2009, after the current litigation began,

Protoons confirmed to Reeves and Reach that it was in

possession of the Songwriter Agreements. (Id. at 44.)

On January 2010, Protoons provided copies of the

Songwriter Agreements in its files. (Id. at 45.)

II. STANDARD OF REVIEW

Summary judgment may not be granted unless a

movant shows, based on admissible evidence in the

record, "that there is no genuine dispute as to any

material fact and the movant is entitled to judgment as a

matter of law."

Fed. R. Civ. P. 56(a)

. The moving

party

[*16]

bears the burden of demonstrating "the

absence of a genuine issue of material fact."

Celotex

Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91

L. Ed. 2d 265 (1986)

On summary judgment, the Court

must "construe all evidence in the light most favorable to

the nonmoving party, drawing all inferences and

resolving all ambiguities in its favor."

Dickerson v.

Napolitano, 604 F.3d 732, 740 (2d Cir. 2010)

Once the moving party has asserted facts showing that

the nonmoving party's claims cannot be sustained, the

opposing party must set out specific facts showing a

genuine issue of material fact for trial.

Price v. Cushman

& Wakefield, Inc., 808 F. Supp. 2d 670, 685 (S.D.N.Y.

2011

: see also

Wright v. Goord, 554 F.3d 255, 266 (2d

Cir. 2009)

. "[A] party may not rely on mere speculation

or conjecture as to the true nature of the facts to

overcome a motion for summary judgment," because

"[m]ere conclusory allegations or denials . . . cannot by

themselves create a genuine issue of material fact

where none would otherwise exist."

Hicks v. Baines, 593

F.3d 159, 166 (2d Cir. 2010)

(citations omitted): see

also

Price, 808 F. Supp. 2d at 685

("In seeking to show

that there is a genuine issue of

[**1901]

material fact

for trial, the non-moving party cannot rely on mere

allegations,

denials,

conjectures

or

conclusory

statements, but must present affirmative and specific

evidence showing that there is a genuine issue for

trial.").

Only disputes relating to material factsi.e., "facts that

might affect the outcome of the suit under the

[*17]

governing law"will properly preclude the entry of

summary judgment.

Anderson v. Liberty Lobby, Inc.,

477 U.S. 242, 248, 106 S. Ct. 2505, 91 L. Ed. 2d 202

(1986)

, see also

Matsushita Elec. Indus. Co., Ltd. v.

Zenith Radio Corp., 475 U.S. 574, 586, 106 S. Ct. 1348,

89 L. Ed. 2d 538 (1986)

(stating that the nonmoving

party "must do more than simply show that there is

some metaphysical doubt as to the material facts ). The

Court should not accept evidence presented by the

nonmoving party that is so blatantly contradicted by the

record . . . that no reasonable jury could believe it."

Scott v. Harris, 550 U.S. 372, 380, 127 S. Ct. 1769, 167

L. Ed. 2d 686 (2007)

; see also

Zellner v. Summerlin,

494 F.3d 344, 371 (2d Cir. 2007)

("Incontrovertible

evidence relied on by the moving party . . . should be

credited by the court on [a summary judgment] motion if

it so utterly discredits the opposing party's version that

no reasonable juror could fail to believe the version

advanced by the moving party.").

III. DISCUSSION

This action concerns Protoons' claim against Reeves for

breach of contract, and against Reach for tortious

interference with contract. Reeves and Reach fail to

raise a triable issue of fact as to either claim, and

Protoons is entitled to judgment as a matter of law.

A. Breach of Contract

In order to make out a colorable breach of contract

claim, a plaintiff must show: (1) an agreement; (2)

adequate performance by plaintiff; (3) breach by the

defendant; and (4) damages.

Fischer & Mandell LLP v.

Citibank, N.A., 632 F.3d 793, 799 (2d Cir. 2011)

.

2014 U.S. Dist. LEXIS 159139, *13

;

112 U.S.P.Q.2D (BNA) 1896, **1900

Page 6 of 11

Protoons argues that Reeves materially breached

[*18]

his "unambiguous covenant not to sue" Protoons, as

outlined in the Songwriter Agreements that he signed in

1988 and 1989. (Protoons' Mem. of L. in Supp. 2, ECF

No. 215.) Specifically, it claims that, by bringing suit

against Protoons to assert its copyright claim, Reeves

breached the contractual term that he not "look to Profile

or Protoons for any payments in connection with the

use, reproduction or other exploitation of the

Composition[s]." (C.P. 56.1 C.R. at 16-17.)

The parties dispute whether (1) this covenant not to sue

in the Songwriter Agreements is valid, and (2) whether

Protoons has been damaged as required by the fourth

element of a breach of contract claim.

1. Contract Validity

Reeves argues at various points of its briefs that the

Songwriter Agreements are (1) unenforceable, (2)

invalid for failure of consideration, (3) invalid because of

unilateral mistake, and (4) unconscionable.

9

First, Reeves fails to raise a triable fact as to the

enforceability of the contract. He argues that the release

provision of the Songwriter Agreement is unenforceable

because it "can only release past claims." (Reeves and

Reach's Mem. of L. in Supp. 10.) Here, though, the

contract explicitly states that the covenant not to sue

applies to future claims. The contract obligates Reeves

9

To demonstrate the validity of the Songwriter Agreements,

Protoons first relies on judicial rulings from previous stages of

the case to demonstrate that Reeves transferred his copyright

to Rush Groove. (Protoons' Mem. of L. in Opp'n. 7, ECF No.

234.) However, even if Reeves conceded that he signed the

Songwriter Agreements,

[*19]

he is not precluded from later

challenging the agreements as unconscionable. See

Rompalli

v. Portnova, 09 Civ. 3083 (RMB) (FM), 2010 U.S. Dist. LEXIS

58289, 2010 WL 2034396 (S.D.N.Y. May 5, 2010)

.

Furthermore, while Judge Swain found that Protoons

adequately plead its breach of contract counterclaim as "the

clear and unambiguous terms of the Songwriter Agreements

prohibit Reeves from seeking to recover royalties from

Protoons," allowing the breach of contract claim to go forward

at the motion to dismiss stage is not a ruling on the merits.

Reach Music Pub., Inc. v. Warner/Chappell Music, Inc., No. 09

Civ. 5580 (LTS) (GWG), 2011 U.S. Dist. LEXIS 100969, 2011

WL 3962515, at *4 (S.D.N.Y. Sept. 7, 2011)

.

At summary

judgment, the Court has the opportunity to consider evidence

produced during discovery that supports legal defenses. See

Oppel v. Empire Mut. Ins. Co., 92 F.R.D. 494 (S.D.N.Y. 1981)

(finding that it was not prevented from considering legal

defenses that were previously rejected in a motion to dismiss

stage).

to look

[*20]

solely to Rush Groove for outstanding

royalty payments and plainly releases Protoons of any

claim from the "beginning of the world and continuing in

perpetuity." (C.P. 56.1 C.R. at 16-17.) The contract

provides that if Protoons suspended its obligations to

Reeves, "neither Profile nor Protoons shall have any

obligation to [Reeves] and no such suspension shall

affect the validity or enforceability of this agreement."

(Id.) Such explicit language is undoubtedly enforceable.

See

McMahan & Co. v. Bass, 250 A.D.2d 460, 461, 673

N.Y.S.2d 19 (1st Dep't 1998)

("a covenant not to sue

also applies to future claims and constitutes an

agreement to

[**1902]

exercise forbearance from

asserting any claim which either exists or which may

accrue").

Next, the contract is also not invalid for failure of

consideration. Reeves agreed to sign a contract that

included a release and covenant not to sue; in

exchange for the rights he gave up in the agreement,

Reeves received a healthy royalty rate. Reeves

received royalty payments until 1990; that bargained-for

exchange suffices to demonstrate consideration.

Next, Reeves similarly fails to raise a triable issue

regarding invalidity because of a unilateral mistake. He

argues that he "was never aware of any of the facts

concerning

[the

contracts']

contents

and

[*21]

execution." (Reeves and Reach's Mem. of L. in Supp.

14.) However, "[t]hat the party claiming unilateral

mistake merely misunderstood the legal significance of

a provision of the contract is not a ground for

rescission."

Lemus v. Manhattan Car Wash, Inc., No. 06

Civ. 15486 (MHD), 2010 U.S. Dist. LEXIS 33263, 2010

WL 1372705, at *9 (S.D.N.Y. Mar. 26, 2010)

. Moreover,

Reeves was one of several co-writers signing the

agreements. Even if Reeves was the sole writer to

misunderstand the unambiguous covenant not to sue

Protoons, he cannot invalidate the contract on these

grounds.

Finally, the parties focus much on their argument on

whether the contracts are unconscionable. Under New

York law, an unconscionable contract is one which "is

so grossly unreasonable or unconscionable in the light

of the mores and business practices of the time and

place as to be unenforceable according to its literal

terms."

Gillman v. Chase Manhattan Bank. N.A., 73

N.Y.2d 1, 534 N.E.2d 824, 828, 537 N.Y.S.2d 787 (N.Y.

1988)

. "For a contract to be held unconscionable, the

party alleging the defect must generally show both

substantive and procedural unconscionability."

Clinton v.

Oppenheimer & Co. Inc., 824 F. Supp. 2d 476, 483

2014 U.S. Dist. LEXIS 159139, *17

;

112 U.S.P.Q.2D (BNA) 1896, **1901

Page 7 of 11

(S.D.N.Y. 2011)

. Here, Reeves has not raised a triable

issue as to procedural unconscionability.

Several factors contribute to the determination of

whether

a

contract

clause

is

procedurally

unconscionable, including "(1) the size and commercial

setting

[*22]

of the transaction; (2) whether there was a

'lack of meaningful choice' by the party claiming

unconscionability; (3) the 'experience and education of

the party claiming unconscionability;' and (4) whether

there was 'disparity in bargaining power.'"

Dallas

Aerospace, Inc. v. CIS Air Corp., 352 F.3d 775, 787 (2d

Cir. 2003)

(quoting

Gillman, 534 N.E.2d at 828

).

The

purpose of this doctrine is "not aimed at disturbance of

allocation of risks because of superior bargaining power

but, instead, at the prevention of oppression and unfair

surprise."

Matter of State of New York v. Avco Financial

Service, 50 N.Y.2d 383, 406 N.E.2d 1075, 1078, 429

N.Y.S.2d 181 (1st Dep't 1980)

(internal citations

omitted); see also

Reznor v. J. Artist Management.

Inc., 365 F.Supp.2d 565, 576 (S.D.N.Y. 2005)

(finding

no oppression or "lack of bargaining power" where a

rock performer entered into a one-sided management

contract, despite the claim that he was "duped" into it).

The

Second

Circuit

has

rejected

procedural

unconscionability claims based on a plaintiff not reading

the agreement, being offered an agreement on a "take it

or leave it" basis, and not having a college degree.

Ragone v. Atlantic Video at Manhattan Center, 595 F.3d

115, 122 (2d Cir. 2010)

.

Reeves and Reach nonetheless point to evidence that,

inter alia, Reeves lacked memory of signing the

agreements, he was unrepresented by counsel at the

time, he did not keep any copies of the agreements, he

did not read much less understand the

agreements, and he "never even had an inkling that he

was agreeing to refrain from

[*23]

suing Protoons."

(Reeves and Reach's Mem. of L. in Supp. 11, ECF 219.)

There circumstances do not, however, raise an issue of

fact as to procedural unconscionability. First, no

evidence contradicts that the signatures are Reeves. In

addition, failure to read an agreement one signs is no

defense. New York law has long provided that "one

cannot generally avoid the effect of a release upon the

ground that he or she did not read it or know its

contents."

Touloumis v. Chalem, 156 A.D.2d 230, 232,

548 N.Y.S.2d 493 (1st Dep't 1989)

; see also

Gillman,

534 N.E.2d at 829

.

Similarly, there is "no requirement in

the law that consultation with a lawyer must occur in

order to render a contractual obligation enforceable."

Skluth v United Merchants & Mfrs., 163 A.D.2d 104,

107, 559 N.Y.S.2d 280 (1st Dep't 1990)

.

Many

agreements are entered into without counsel on one

side, the other, or both. The language of the contract is

plain on its face, and Reeves does not allege that he

was prevented from further researching the provisions

to gain a better understanding of their effect.

Furthermore, Reeves was one of several signees of the

Songwriter Agreements, and was not uniquely

disadvantaged by negotiating with a bigger entity.

Accordingly, Reeves and Reach cannot demonstrate

facts that satisfy the procedural unconscionability

factors outlined in

Dallas Aerospace, Inc.

They cannot

defeat

[*24]

summary judgment based on the argument

of contract invalidity.

[**1903]

2. Damages

Reeves breached the valid covenant not to sue when he

filed his lawsuit in 2008, but the Court must still find

damages to award Protoons summary judgment on its

breach of contract counterclaim. Protoons argues that it

was foreseeable to Reeves that Protoons would incur

damages of attorneys' fees if Reeves breached the

covenant not to sue. (Id. at 19-20.)

It points to the

express fee provision, and notes that Reeves is liable

for attorneys' fees because its lawsuit was brought in

"obvious breach [of covenant] or otherwise on bad

faith." (Protoons' Mem. of L. in Supp. 21) (citing

Artvale,

Inc. v. Rugby Fabrics Corp., 363 F.2d 1002, 1008 (2d

Cir. 1966))

.

10

The breach of the covenant not to sue

necessarily resulted in attorneys' fees, and the Court

must effectuate the unambiguous covenant not to sue

and attorneys' fee provision. In addition, Protoons is at

least nominally damaged by Reeves' failure to comply

with his contractual obligations; to find otherwise would

render the covenant not to sue meaningless. See, e.g.,

McCoy Associates, Inc. v. Nulux, Inc., 218 F. Supp. 2d

286, 294 (E.D.N.Y. 2002)

(noting that "[w]henever there

is a breach of contract or the invasion of a legal right[,]

the law infers some damage") (internal citations

omitted);

C.K.S. Ice Cream Co. v. Frusen Gladje

Franchise, Inc., 172 A.D.2d 206, 567 N.Y.S.2d 716, 718

(1st Dep't 1991)

("Even if it were shown that no actual

10

Protoons also points to the fact that at the motion to dismiss

phase, Judge Swain found that the attorney's fees and costs

allegation was "pertinent, and sufficient, with respect to the

claim of breach of the covenant not to sue."

Reach Music

Pub., Inc. 2011 U.S. Dist. LEXIS 100969, 2011 WL 3962515,

at *5

. While the Court again comes to that same conclusion,

allowing the claim to go forward at the motion to dismiss stage

is not a ruling on the merits.

2014 U.S. Dist. LEXIS 159139, *21

;

112 U.S.P.Q.2D (BNA) 1896, **1902

Page 8 of 11

damages

[*25]

have been sustained, plaintiff would

seem entitled to proceed to trial at least on its contract

cause of action[,] if only to vindicate its right to nominal

damages.")

The Second Circuit, in its interpretation of New York

law,

11

prevents parties from recovering damages in the

form of attorney's fees for a good faith violation of a

covenant not to sue, unless there exists clear

contractual language providing for attorneys' fees. See

Artvale, 363 F.2d at 1008

;

Sauer v. Xerox Corp., 5

Fed.Appx. 52, 56 (2d Cir. 2001)

(upholding the

dismissal of a counterclaim alleging a violation of an

express covenant not to sue because there was "no

affirmative indication that violation of this provision of

the lease gives rise to an independent cause of action

for attorney's fees.");

Bellefonte, 757 F.2d at 529

(upholding the district court's dismissal of a counterclaim

for expenses incurred in defending a lawsuit because

the covenant

[*26]

not to sue lacked a clear provision

for recovery of litigation expenses and the plaintiffs suits

"were not brought in bad faith");

Associated Financial

Corp. v. Kleckner, No. 09 Civ. 3895 (JGK), 2010 U.S.

Dist. LEXIS 78398, 2010 WL 3024746, at *5 (S.D.N.Y.

Aug. 3, 2010)

("Under the American Rule, legal fees are

not generally recoverable for breach of a covenant not

to sue unless there is a separate contractual provision

providing for such a recovery or unless the suit was

brought in obvious breach of the covenant or otherwise

brought in bad faith.");

Kamfar v. New York Restaurant

Group, Inc., 347 F. Supp. 2d 38, 51 (S.D.N.Y. 2004)

(a

party "normally may not recover damagesi.e.,

litigation expensesfor breach of a covenant not to sue

unless the parties specifically intended such recovery").

Violation of a covenant not to sue where there is also an

express attorneys' fees provision, as here, is also

sufficient for a finding of damages. Reeves spends most

of his argument looking to Artvale, wherein a plaintiff

violated its covenant not to sue by filing an

[*27]

unsuccessful patent suit.

Artvale, 363 F.2d at 1004

.

The

defendant counterclaimed, seeking attorneys' fees for

11

The Second Circuit opinion in Artvale did not state explicitly

whether its holding was based on New York or federal

common law, but subsequent cases have treated Artvale as

expressing the Second Circuit's view of New York law on this

issue. See

Bellefonte Re Ins. Co. v. Argonaut Ins. Co., 586

F.Supp. 1286, 1288 (S.D.N.Y. 1984)

, aff'd,

757 F.2d 523

;

Versatile Housewares & Gardening Systems, Inc. v. Thill

Logistics. Inc., 819 F. Supp. 2d 230, 245 (S.D.N.Y. 2011)

("Artvale and its progeny are generally taken to be the Second

Circuit's view on New York law").

breach of the covenant. Id. The Second Circuit affirmed

the trial court's dismissal of the counterclaim, noting

that, in the absence of language providing otherwise,

the "primary function [of a covenant not to sue] is to

serve as a shield rather than as a sword..."

Id. at 1008

.

"[W]hether a party who has breached a covenant not to

sue is liable for litigation expenses inflicted on his

adversary . . . appears to hinge on what the parties

intended by their contract." Id. Absent contractual

language to the contrary, a party is not liable for his

opponent's litigation expenses even when the suit is

brought in conflict with a covenant not to sue, so long as

it was "claimed in good faith that [the covenant not to

sue] had been obtained by unfair means." Id.; see also

Bellefonte, 757 F.2d at 529

;

Kamfar,

[**1904]

347 F.

Supp. 2d at 51

(dismissing a breach of contract claim

even where a defamation suit violated the unambiguous

covenant not to sue because "the contractual language

is silent, the breach is not obvious . . . and there is no

evidence of bad faith.")

In following the reasoning of

Artvale

and its progeny, the

Court first asks if the Songwriter Agreements include

express language

[*28]

entitling Protoons to litigation

expenses should there be a breach of a covenant not to

sue. If yes, a simple demonstration of litigation

expenses by Protoons is sufficient to meet the damages

prong of a breach of contract claim. If no, the Court then

asks if Reeves brought this suit claiming in good faith

that the covenant not to sue had been obtained by

unfair means.

There is express language in the Songwriter

Agreements providing, "it is agreed that the prevailing

party in any finally adjudicated court action between the

parties shall be entitled to recover the reasonable

attorney's fees incurred by such party in connection

therewith." (C.P. 56.1 C.R. at 16-17.) Reeves argues

that this "prevailing party" provision does not apply to

Protoons because Protoons' rights are explicitly

elucidated in paragraphs 9 through 14, and the

provision appears in paragraph 15 wherein Protoons is

not mentioned. However, as explicitly anticipated in the

contract, Rush Groove assigned its rights to Protoons.

In the very first paragraph of the contract, Reeves "sells,

assigns and transfers his interest in the song to Rush

Groove, "its successors and assigns, for the world."

Moreover, the contract provides that Reeves

[*29]

"specifically acknowledges that [Rush Groove] may

assign this agreement to Protoons Inc., including any or

all of [Rush Groove]'s rights and interests hereunder."

(C.P. 56.1 C.R. at 15.) One of Rush Groove's

contractual rights includes the right for reasonable

2014 U.S. Dist. LEXIS 159139, *24

;

112 U.S.P.Q.2D (BNA) 1896, **1903

Page 9 of 11

attorneys' fees. As expressly provided for in the

contract, all of Rush Groove's rights including the

"prevailing party" provision were assigned to

Protoons. Protoons thus inherits the "prevailing party"

provision and can use it in conjunction with Reeves'

covenant not to sue Protoons. As the contract expressly

provides for attorneys' fees and Protoons has

established damages of attorneys' fees and costs as a

result of Reeves' lawsuit,

12

Reeves cannot raise a

triable issue as to damages for his breach of contract.

13

B. Tortious Interference

Protoons' second counterclaim alleges that Reach

tortiously induced Reeves to breach the covenant not to

sue and related releases contained in the Songwriter

Agreement by purchasing the rights to the Run-D.M.C.

compositions and jointly filing suit with Reeves. To

withstand summary judgment as to a tortious

interference claim under New York law, Reach must

raise a triable issue as to one of four elements: (1) that

a valid contract exists between Reeves and Rush

Groove; (2) that Reach had knowledge of

[*31]

the

contract; (3) that Reach intentionally and improperly

procured the breach of the contract; and (4) that the

breach resulted in damage to Protoons. See

White

Plains Coat & Apron Co., Inc. v. Cintas Corp., 460 F.3d

281, 285 (2d Cir. 2006)

(citing

Foster v. Churchill, 87

N.Y.2d 744, 665 N.E.2d 153, 156, 642 N.Y.S.2d 583

(N.Y. 1996))

. Reach does so only as to the element of

knowledge.

12

The parties agree that Protoons has incurred substantial

attorneys' fees and costs in defending against the lawsuits

filed by Reeves and Reach; however, Reeves and Reach

argue that Protoons unnecessarily caused and expanded the

litigation. (C.P. 56.1 C.R. at 53). The Court only needs to find

that Protoons has established the element of damages for its

breach of contract counterclaim.

13

With Protoons having established damages of attorneys'

fees

[*30]

and costs that resulted from Reeves' breach, the

Court need not turn to the question of whether Reeves brought

this suit in good faith. See

Artvale, 363 F.2d at 1008

("[W]e

would not read such a covenant, without more, as intended to

subject to damages a plaintiff who claimed in good faith that it

had been obtained by unfair means.") Nonetheless, Reeves

cannot assert good faith in his lawsuits against Protoons

where the contract explicitly protected Protoons from suit and

required Reeves to instead collect from Rush Groove. Reeves

and Reach argue that Rush Groove ceased operations,

meaning that Reeves could not recover from them; but

Reeves can still sue Rush Groove or its two principals Russell

Simmons and Lyor Cohen. (C.D. 56.1 C.R. at *14.)

The first and fourth elements have already been

addressed supra; there exists a valid contract, the

breach of which resulted in attorneys' fees and costs to

Protoons. As to the third element, the intentional

procurement of a breach element requires a plaintiff to

establish that but for the allegedly tortious conduct of

the defendant, the third party would not have breached

her contract. See

Sharma v. Skaarup Ship Management

Corp., 916 F.2d 820, 828 (2d Cir. 1990)

.

Furthermore,

"to be actionable, the interference must be intentional

and not incidental to some other lawful purpose."

HealthChem Corp. v. Baker, 915 F.2d 805, 809 (2d

Cir. 1990)

. Here, Reach

[**1905]

signed an agreement

with Reeves for copyright interests wherein the only way

Reach could profit necessitated suing Protoons. Reach

selected and paid for lawyers to file a lawsuit on Reeves

behalf. It intentionally induced Reeves to pursue claims

against Protoons in violation of his signed agreements

in hopes that it could then profit from the copyright.

The heart of this dispute lies in the second element of

tortious interference whether Reach

[*32]

had

knowledge of the covenant not to sue. Here, there is a

genuine dispute as to that material fact, preventing

either party from winning judgment on the tortious

interference claim as a matter of law. While sufficiently

clear that Reach had general knowledge of the

Songwriter Agreements before filing its first action on

September 3, 2008, it is not clear if Reach had the

necessary knowledge of the covenant not to sue

contained therein.

Reach must have actual knowledge of the covenant to

be held liable for tortious interference. See

MedTech

Products, Inc. v. Ranir LLC, 596 F. Supp. 2d 778, 796

(S.D.N.Y. 2008)

("New York law is clear on its

requirement that a defendant charged with tortuously

interfering with a contractual relationship have actual

knowledge of the breached contract."). A claim for

tortious interference will not lie if "[a] reasonably prudent

person would not, in the circumstances, have assumed,

as a matter of law, that there was a binding agreement."

American Cyanamid Co. v. Elizabeth Arden Sales

Corp., 331 F.Supp. 597, 608 (S.D.N.Y. 1971)

.

However,

plaintiff need not have perfect knowledge of the

contract. See

B. Lewis Productions, Inc. v. Angelou, No.

01 Civ. 0530 (MBM), 2005 U.S. Dist. LEXIS 9032, 2005

WL 1138474 (S.D.N.Y. May 12, 2005)

("knowledge

need not have to be p