24/7 Records, Inc. v. Sony Music Entertainment, Inc. And Sheridan Square Entertainment, Llc, Doing Business as Artemis Records, No. 04-5563-Cv

429 F.3d 39, 2005 U.S. App. LEXIS 24034
CourtCourt of Appeals for the Second Circuit
DecidedNovember 8, 2005
Docket39
StatusPublished
Cited by31 cases

This text of 429 F.3d 39 (24/7 Records, Inc. v. Sony Music Entertainment, Inc. And Sheridan Square Entertainment, Llc, Doing Business as Artemis Records, No. 04-5563-Cv) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
24/7 Records, Inc. v. Sony Music Entertainment, Inc. And Sheridan Square Entertainment, Llc, Doing Business as Artemis Records, No. 04-5563-Cv, 429 F.3d 39, 2005 U.S. App. LEXIS 24034 (2d Cir. 2005).

Opinion

JACOBS, Circuit Judge.

This dispute arises out of a record distribution agreement (the “Agreement”) between producer 24/7 Records, Inc. (“24/7”) and distributor Sheridan Square Entertainment, LLC d/b/a Artemis Records (“Artemis”). The dispute was sparked by 24/7’s production of a cover version of “The Ketchup Song (Heh Hah).”

24/7 alleges that Artemis breached its obligation to distribute the Ketchup Song, wrongfully terminated the Agreement, and (among other things) made overcharges and underpayments. 24/7 further alleges that Sony Music Entertainment, Inc. (“Sony”), whose affiliate distributed the original Ketchup Song, pressured Artemis to cancel distribution of the song and to terminate the Agreement, and thereby tor-tiously interfered with the Agreement and violated New York’s unfair competition laws (Artemis and Sony are referenced collectively as “Appellees”).

24/7 appeals from a judgment entered on September 20, 2004 by the United States District Court for the Southern District of New York (Cedarbaum, /.), dismissing the complaint on Appellees’ motion for summary judgment. We affirm in part, and reverse in part.

BACKGROUND

24/7, an independent Florida-based record label, entered into a distribution agreement with Artemis, making Artemis the “sole and exclusive” distributor of all 24/7 recordings released in the United States for an initial term of three years. The Agreement contemplated that RED Distribution, Inc. (“RED”), a Sony subsidiary, would perform certain distribution tasks on Artemis’s behalf. As of November 2002, there were eleven 24/7 records in distribution (with other recordings in preparation), including the Ketchup Song.

Earlier in 2002, a group called “Las Ketchup” recorded “The Ketchup Song (Heh Hah).” That recording was distributed by a Sony affiliate, Columbia Records. The Ketchup Song became a success overseas, and soon after, 24/7 recorded a cover performed by a group called “The Hines Girls.” Distribution of 24/7’s Ketchup Song began at the latest on November 5, 2002, with a CD jacket *41 featuring a ketchup bottle with a label arguably suggestive of the Heinz ketchup label.

Shortly after 24/7’s Ketchup Song was released, Artemis halted distribution, claiming (in a November 7, 2002 letter from Artemis’s Executive Vice President of Business and Legal Affairs Adrian White to 24/7’s CEO Lou Pace) that continued distribution of the song “might infringe rights owned by the distributor” of the Las Ketchup version, and might trigger a trademark dispute with H.J. Heinz Co. 24/7 alleges that those reasons were pretextual; that the true reason Artemis pulled the plug on the Ketchup Song was corporate pressure by Sony, which wanted no competition for the original Las Ketchup recording; and that Artemis pulled the plug on the entire distribution agreement for the same reason, a move that allegedly led to 24/7’s demise. Artemis claims that the Agreement was never terminated.

The complaint in this action alleges that Artemis breached the Agreement by: [i] failing to fulfill its contractual obligation to distribute 24/7’s Ketchup Song single (the “Ketchup Song claim”); [ii] wrongfully terminating the Agreement (the “termination claim”); and [iii] among other things, failing to pay 24/7 royalties and wrongfully charging or overcharging 24/7 (the “miscellaneous claims”). 1 The complaint also alleges that Sony pressured Artemis to cancel the distribution of the Ketchup Song single and to terminate the Agreement, thereby tortiously interfering with the Agreement and violating New York’s unfair competition laws. Artemis and Sony moved for summary judgment, arguing principally that [i] cancellation of the distribution of the Ketchup Song was justified by concerns over potential copyright and trademark liability; [ii] that Sony did not induce Artemis into cancelling distribution of the Ketchup Song; and that [iii] Artemis never terminated the Agreement. The district court granted Appellees’ motion for summary judgment, and dismissed the complaint.

DISCUSSION

We review the district court’s grant of summary judgment de novo, reviewing the evidence in the light most favorable to 24/7. See Anthony v. City of New York, 339 F.3d 129, 134 (2d Cir.2003). Summary judgment is proper if “there is no genuine issue as to any material fact” and Appel-lees are “entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c).

I. Breach of Contract

a. The Ketchup Song

24/7 claims that Artemis breached the Agreement by failing to distribute 24/7’s Ketchup Song. The district court held that, regardless of Artemis’s actual motivations for halting distribution, 24/7 failed to obtain a copyright license from Sony for use of the song; 2 that a copyright license was a condition on distribution by Artemis; and that 24/7 therefore cannot assert that Artemis breached any obligation to distribute that work. We agree.

The Agreement is governed by New York law, under which, 24/7 must prove *42 the following to make out a claim for breach of the Agreement: [i] the existence of a contract; [ii] the adequate performance of the contract by 2U/7; [iii] the breach of the contract by Artemis; and [iv] damages. Eternity Global Master Fund Ltd. v. Morgan Guar. Trust Co., 375 F.3d 168, 177 (2d Cir.2004). 24/7 cannot establish that its own performance was adequate. See Merritt Hill Vineyards, Inc. v. Windy Heights Vineyard, Inc., 61 N.Y.2d 106, 113, 472 N.Y.S.2d 592, 460 N.E.2d 1077 (1984) (“[A] contracting party’s failure to fulfill a condition excuses performance by the other party whose performance is so conditioned.”).

Section 4.01 of the Agreement states:

[U/7] solely shall be responsible for, and shall pay all costs in connection with, each of the following:
* * Hi Hi Hi :ii
(b) The securing, in vmting, of all necessary licenses, consents and permissions required for the distribution of Records hereunder, including, without limitation, from recording artists, producers, other performers, music publishers, unions and guilds, and other Persons rendering services or granting rights in connection with the Recordings and the Records.

(emphasis added). In section 10.01, 24/7 “represent[s] and warrant[s]” that it either has,

or prior to release hereunder shall have, and shall at all times thereafter continue to have in effect a valid and enforceable grant of rights or license ...

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Bluebook (online)
429 F.3d 39, 2005 U.S. App. LEXIS 24034, Counsel Stack Legal Research, https://law.counselstack.com/opinion/247-records-inc-v-sony-music-entertainment-inc-and-sheridan-square-ca2-2005.