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Estate of Joe Brown v. Arc Music Group

November 22, 2011

ESTATE OF JOE BROWN, PLAINTIFF,
v.
ARC MUSIC GROUP, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Hon. Harry D. Leinenweber

MEMORANDUM OPINION AND ORDER

The late Joe Brown was a musician and founder of three Chicago record labels, the first in 1949. Brown died in 1976. In 2008, his son, Michael Brown, began looking into his father's various recordings and became convinced that his father's Estate was due fees and royalties for songs his father produced. Brown subsequently was appointed the independent administrator of his father's estate, (hereinafter, "the Estate," or "Plaintiff.")

The Estate brought the instant Complaint alleging, inter alia, breach of fiduciary duty, fraud, copyright infringement, and civil conspiracy against various defendants.

After two sets of Defendants brought Motions to Dismiss, Plaintiff sought and was granted leave to file a Second Amended Complaint. Unfortunately, that Complaint did little to clarify matters and is now the subject of Motions to Dismiss by Defendants Music Sales Corp. ("Music Sales"), Frederick Music Co. and Vincent Brandom (collectively, the "Frederick Defendants"), Katrina Music Co. and Willie C. Cobbs (collectively, the "Katrina Defendants") and Arc Music Group and Opus 19 Music, LLC (collectively, the "Arc Defendants"). For the reasons stated herein, all claims are dismissed with prejudice, except that the Estate may replead its claims for an accounting and unjust enrichment against the Arc Defendants within 30 days of the date of this Order.

I. BACKGROUND

The Plaintiff's Second Amended Complaint alleges that this Court has jurisdiction on the basis of the Copyright Act under 28 U.S.C. § 1338(a) and on the basis of diversity jurisdiction under

28 U.S.C. § 1332(a).

The following facts are taken from the Plaintiff's Second Amended Complaint, and will be presumed to be true for the purposes of Defendants' Motions to Dismiss. Joe Brown owned and operated Lawn Music Co. ("Lawn"), the JOB Record Label ("JOB"), and Ruler Record Label ("Ruler") in Chicago beginning in approximately 1949. His Estate is the successor in interest to Lawn, JOB, and Ruler, which were engaged in the business of creating, recording, producing and publishing music. During the 1940's and 1950's, these companies copyrighted hundreds of musical compositions. In particular, the Estate, according to its Second Amended Complaint, is the owner of all or a portion of certain compositions, including "This New Generation," "Dark Road Blues," and "Please Don't Leave."

Unfortunately, after laying out these basic facts, the Second Amended Complaint becomes vague and difficult to follow, providing sketchy details of alleged machinations in regard to Brown's musical compositions. For clarity, the allegations as to each Defendant will be summarized within the discussion of that Defendant's Motion to Dismiss.

II. ANALYSIS

Although each Defendant makes somewhat different arguments in support of its Motion to Dismiss, each argues that the Second Amended Complaint should be dismissed pursuant to FED. R. 12(b)(6) because it fils to state claims upon which relief can be granted.

A motion to dismiss for failure to state a claim should be granted if the complaint fails to satisfy FED.R. CIV. P. 8's pleading requirement of "a short and plain statement of the claim showing that the pleader is entitled to relief." "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, 129 S. Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The Court must construe the complaint in the light most favorable to the plaintiff and draw all inferences in its favor. Justice v. Town of Cicero, 577 F.3d 768, 771 (7th Cir. 2009).

However, "it is by now well established that a plaintiff must do better than putting a few words on paper that, in the hands of an imaginative reader, might suggest that something has happened to [it] that might be redressed by the law." Swanson v. Citibank, 614 F.3d 400, 403 (7th Cir. 2010). Rather, the plaintiff must provide enough factual detail to "present a story that holds together." Id. at 404.

Because each 12(b)(6) Motion to Dismiss presents somewhat different issues, the Court will address each individually.

A. Music Sales' Motion

Music Sales argues that dismissal is required because, at best, the Estate has alleged that Music Sales breached a contractual obligation to pay certain royalties, but it has not brought a breach of contract claim. Plaintiff seeks to recover from Music Sales for Breach of Fiduciary Duty (Count V), Fraud (Count VI), Unjust Enrichment (Count VIII), and Civil Conspiracy. (Count XI). It also seeks an accounting (Count IX) and the imposition of a constructive trust (Count X).

As it does in response to all of the Motions to Dismiss, Plaintiff points out in its response to Music Sales' Motion that the events at issue here occurred between 30 and 50 years ago. Plaintiff contends that it possesses evidence "not included in the Complaint so as not to confuse the trier of fact and to create a clear, 'short and plain statement of the claim,' as per Rule 8(a)(2)." This is all well and good, provided that Plaintiff alleges sufficient facts to provide fair notice of its claims.

However, its Second Amended Complaint is deficient in various respects. The gist of the Estate's claim against Music Sales stems from a March 6, 1964, Publishing Agreement between Lawn and Frederick Music. In the agreement, Lawn granted Frederick an exclusive license to use the musical compositions in its catalogue in exchange for royalties and other payments. See Ex. H. to Pl.'s Second Am. Compl. In 1996, Frederick Music assigned its rights under that agreement to Music Sales, which gave Music Sales the right to publish these compositions in exchange for the payment of certain royalties to Lawn. The Second Amended Complaint alleges that Music Sales has received royalties for Lawn works including "On the Road Again," "Five Long Years," and "You Don't Love Me," but has failed to pay the Estate its share. No allegation is made as to how much is allegedly owed to the Estate. Music Sales contends that it repeatedly has offered the Estate the opportunity to conduct an independent audit of Music Sales' records to verify whether any royalties are due, but Plaintiff has rejected these overtures.

1. Breach of Fiduciary Duties (Count V)

Music Sales argues that Count V must be dismissed because Plaintiff has not adequately pleaded the existence of a fiduciary duty on its part. Under Illinois law, to state a claim for breach of fiduciary duty, a plaintiff must allege: (1) the existence of a fiduciary duty; (2) breach of that duty; and (3) resulting damages. See LaSalle Bank Lake View v. Seguban, 937 F.Supp. 1309, 1324 (N.D. Ill. 1996).

Here, the Second Amended Complaint alleges merely that "after the execution of the Catalog Purchase on July 1, 1996, there existed a fiduciary relationship of trust and confidence between the Defendants and the [sic] Joe Brown and Lawn." Pl.'s Second Am. Compl. ¶ 142. This conclusory allegation is insufficient to allege a fiduciary relationship.

As a matter of law, the mere fact that Music Sales assumed Frederick's obligations under the Publishing Agreement does not mean that a fiduciary relationship was created between Music Sales and Lawn. See, e.g., Estate of Stepney v. UMG Recordings, Inc., No. 10 C 8266, 2011 WL 2119130, at *3 (N.D. Ill. May 26, 2011) (holding that contractual relationship between musician and recording company did not give rise to fiduciary duty); Mellencamp v. Riva Music Ltd., 698 F.Supp. 1154, 1159--60 (S.D.N.Y. 1988) (holding that obligations assumed by a publisher in an exclusive licensing contract were not, as a matter of law, fiduciary duties). Plaintiff cites CBS, Inc. v. Ahern, 108 F.R.D. 14, 24--26 (S.D.N.Y. 1985), for the proposition that a fiduciary duty can exist where a recording company has a contractual duty to pay royalties to an artist. However, in that case, the music group alleged that the agreement at issue expressly provided that the recording company was to hold previously earned royalties in a special account for the group's benefit. Id. at 25. The court found this allegation was sufficient to state a claim for breach of fiduciary duty, but specifically noted that a "simple contract" does not create a fiduciary relationship. Id.

Plaintiff additionally cites Apple Records, Inc. v. Capitol Records, Inc., 529 N.Y.S.2d 279, 283 (N.Y. App. Div. 1988). There, the court held that a "long-enduring" relationship of more than 25 years between the Beatles and the group's record company was indicative of a "special relationship of trust and confidence, one which existed independent of the contractual duties" and which was sufficient to state a claim for breach of fiduciary duties distinct from the alleged breach of contract. Id.

Neither case provides much support for Plaintiff's position. Plaintiff acknowledges that a fiduciary relationship arises when a relationship of trust or confidence exists between the parties, but does nothing to explain how such a relationship existed in this case or why the Publishing Agreement (or Music Sales' assumption of Frederick Music's duties under it) was anything more than an arm's length commercial transaction. See Sony Music Entm't, Inc. v. Robison, No. 01 CIV 6415, 2002 WL 272406, at *3 (S.D.N.Y. 2002) (noting that while the line between a contractual and fiduciary relationship may be blurry, "additional factors are necessary to convert a conventional business relationship into a fiduciary relationship."). As such, Count V of the Second Amended Complaint is dismissed for failure to state a claim upon which relief can be granted.

2. Fraud (Count VI)

Music Sales argues that Count VI, alleging fraud based on Music Sales' failure to pay monies for works sold as part of the Frederick Catalogue, is inadequately pleaded. Under FED. R. CIV. P. 9(b), a party must state with particularity the circumstances surrounding an alleged fraud. This means that a complaint should explain the "who, what, when, where and how" of a fraudulent scheme. DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir. 1990).

Here, the Estate contends that it has done so because it has alleged that Music Sales engaged in "concealment, deception, and failure to notify and pay the Plaintiff monies for works sold as part of the Frederick Catalogue," that this fraud has been ongoing since 1996, and that it occurred in New York and Chicago. However, although Plaintiff couches its claim in the lexicon of fraud, it boils down only to an allegation that Music Sales failed to pay royalties due under the Publishing Agreement. This may amount to a breach of contract, but is insufficient to state a claim for fraud. See Bucciarelli-Tieger v. Victory Records, Inc., 488 F.Supp.2d 702, 711 (N.D. Ill. 2007). As such, Count VI of

Plaintiff's Complaint is dismissed for failure to state a claim upon which relief can be granted.

3. Unjust Enrichment (Count VIII)

Music Sales contends that the Estate's unjust enrichment claim against it fails because a contract governs the relationship between the parties. Plaintiff points out that it is not bringing a claim for breach of contract (although it does not explain why not), but is instead alleging that Music Sales received a benefit from Joe Brown's work and that equity requires that Music Sales pay for the benefit conferred. It is true that where a party pleads breach of contract, it may plead unjust enrichment in the alternative. See Stepney, 2011 WL 2119130, at *3 (citing Horwitz v. Sonnenschein Nath and Rosenthal LLP, 926 N.E.2d 934, 947 (Ill. App. Ct. 2010)). But a plaintiff cannot do what the Estate attempts here - allege that there was a contract that it covers the claims at issue here, and that Music Sales was unjustly enriched by its breach. See Allied Vision Grp., Inc. v. RLI Prof. Techs., Inc., 916 F.Supp. 778, 781--82 (N.D. Ill. 1996) (holding that FED. R. CIV. P. 8(e)(2) does not allow a plaintiff to plead within a single count that there was an agreement and that the defendant was justly enriched). As such, Count VIII is dismissed as to Music Sales for failure to state a claim.

4. Accounting (Count IX)

Plaintiff's claim for an accounting against Music Sales also must be dismissed. Typically, to state a claim for an accounting under Illinois law, a plaintiff must show "the absence of an adequate remedy at law and one of the following: (1) a breach of fiduciary relationship between the parties; (2) a need for discovery; (3) fraud; or (4) the existence of mutual accounts which are of a complex nature." Cole-Haddon, Ltd. v. The Drew Philips Corp., 454 F.Supp.2d 772, 778 (N.D. Ill. 2006). The Estate has failed to plead adequately any of these elements. In fact, Music Sales has repeatedly offered the Estate the chance to conduct an independent audit of its records, and it has refused. Further, it is clear that a breach of contract claim would provide an adequate legal remedy for any unpaid royalties. Nor has the Estate shown the existence of a fiduciary relationship or fraud. Under these circumstances, there is no need for an accounting.

For example, in Drake Enters., Inc. v. Colloid Envtl. Techs. Co., 08 C 6753, 2009 WL 1789355, at *2-3 (N.D. Ill. June 24, 2009), the Court found that no accounting was required for claim for failure to pay patent royalties because the claim amounted to "a run-of-the-mill breach of contract claim with complicated damages calculations." See also Glovaroma, Inc. v. Maljack Prods., Inc., 71 F.Supp.2d 846, 857 (N.D. Ill. 1999) ("An accounting claim is improper without a specific, recognized factual predicate.").

Although the Estate has gone out of its way to call its claim against Music Sales everything but a breach of contract, these principles apply here. The Court notes that Music Sales filed a motion to dismiss the Estate's original complaint, in which it also pointed out that any cause of action would arise under breach of contract. The Estate has disavowed this theory, and the Court will not force the estate to pursue it. See Walker v. Gibson, 633

F.Supp. 88, 91 (N.D. Ill. 1985). However, no claim for an accounting lies against Music Sales, and ...


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