Music Royalty Consulting, Inc. v. Reservoir Media Management Inc.
1:18-cv-09480
S.D.N.Y.May 2, 2022Background:
- MRCI (buyer of music-publishing royalty streams) acquired by assignment (April 13, 2012) Tuff Jew/Scott Storch’s right to the writer’s share under a 2000 Publishing Agreement originally between TVT (later Reservoir) and Tuff Jew.
- Reservoir executed a June 19, 2012 Letter of Direction directing payments to MRCI; MRCI paid the purchase price after viewing that Letter as Reservoir’s consent to the Assignment.
- Storch/Tuff Jew filed Chapter 7 in June 2015; the Bankruptcy Court entered a December 4, 2017 order deeming the Publishing Agreement rejected; MRCI pursued rights as assignee in this lawsuit.
- Reservoir continued to pay and account to MRCI through early 2017 but then stopped remitting royalties after March 2017 and stopped semi-annual accountings after March/April 2018; MRCI alleges underpayment and later nonpayment.
- Key contractual provisions: anti-assignment clause (written consent not to be unreasonably withheld), two-year incontestability period for accounting objections plus a one-year suit window, an events-of-default clause allowing suspension/termination with a 90-day notice requirement, and an indemnity clause in favor of the publisher.
- Procedural posture: MRCI moved for partial summary judgment on liability and to dismiss Reservoir’s indemnification defense; Reservoir cross-moved for summary judgment and offered two experts; court ruled on summary judgment and Daubert motions.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of Assignment / Reservoir's consent (Letter of Direction) | Letter of Direction is written consent "made in connection with" the Assignment and thus unambiguously evidences Reservoir’s consent | Letter of Direction is not formal "consent to assignment," Reservoir claims no consent and later asserts duress/ coercion | Court: Letter unambiguous as written consent; Reservoir ratified/waived any duress claim by performing for years; even absent consent assignment enforceable under NY law |
| Effect of Storch’s bankruptcy rejection on Reservoir’s obligation to pay | Rejection does not extinguish accrued rights; Reservoir must pay writer’s share for compositions already delivered and exploited | Rejection (and bankruptcy filing) constituted event(s) of default allowing suspension/termination and justification for withholding payments | Court: Rejection did not "vaporize" accrued payment obligations; Reservoir could only suspend or terminate per contract but failed to give required 90-day notice and cannot indefinitely withhold royalties |
| "Specific written objection" requirement for Challenged Statements (Mar 2016, Sep 2016, Mar 2017) | Throckmorton letter and surrounding facts create ambiguity and factual dispute about whether plaintiff timely and specifically objected; equitable estoppel may apply | Letter insufficiently specific under industry practice; MRCI failed to identify the statements and bases within two years | Court: Triable issue of fact exists as to whether the objection satisfied the contract; denied summary judgment for Reservoir on this point; allowed limited expert testimony on industry meaning of the phrase |
| Indemnification/setoff (Reservoir’s defense to withhold royalties) | MRCI: assignment did not include assumption of Tuff Jew’s indemnity obligations; MRCI owes no indemnity or setoff exposure | Reservoir: indemnity clause and common-law/setoff rights allow deduction of claimed losses (including "lost value"); MRCI accepted benefits so should bear liabilities | Court: MRCI did not assume Tuff Jew’s indemnity obligations; indemnification defense and any setoff claim dismissed as matter of law; expert on lost-value excluded |
| Admissibility of industry expert (Clark Miller) | MRCI: some of Miller’s opinions invade legal questions (consent, contract meaning) or speculate on intent and should be excluded | Reservoir: Miller is qualified by industry experience to opine on customs (letters of direction, objection practices, suspension practice) | Court: Excluded Miller’s opinions on consent, suspension/right to stop payments, and parties’ intents; permitted Miller to testify limitedly about industry understanding of "specific written objection" (triable factual issue) |
Key Cases Cited
- Mission Prod. Holdings v. Tempnology, LLC, 139 S. Ct. 1652 (2019) (bankruptcy rejection does not extinguish accrued contract rights)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) (summary judgment standard)
- Celotex Corp. v. Catrett, 477 U.S. 317 (1986) (movant’s burden at summary judgment)
- Gen. Elec. Co. v. Joiner, 522 U.S. 136 (1997) (courts may exclude expert opinions with too great an analytical gap)
- Donohue v. Cuomo, 980 F.3d 53 (2d Cir. 2020) (elements required to prove breach of contract)