IP Law Daily, COPYRIGHT—S.D.N.Y.: An exchange of emails is enough to bind KEM to a royalty contract—even if a formal writing is never reached, (Oct 11, 2023)

By Matthew Hersh, J.D.

The exchange of emails along with partial performance by the singer is enough to make the agreement binding.

The business manager for a prominent R&B performer adequately stated a claim that he was deprived out of his share of tour royalties even though the contract on which he premised his lawsuit was never formally reduced to writing, the federal court for Manhattan has held. The court, in refusing to dismiss the business manager’s breach of contract claim, found that even though the parties intended to memorialize the agreement in a later writing that never materialized, the alleged emails themselves—along with the R&B performer’s partial performance of the agreement—were enough to allow the lawsuit to proceed (Plaid Takeover, LLC v. Owens, October 6, 2023, Cote, D.).

The lawsuit arises out of the now-broken relationship between musical artist KEM and his business manager. KEM, a singer-songwriter whose formal name is Kim Owens, released four albums on the Motown label between 2001 through 2014, three of which reached gold or higher status. Gerald Isaac, through his company Plaid Takeover, managed KEM’s business from 2016 until earlier this year, when the relationship between the two broke down. The business manager then sued his former client for damages under a wide range of theories, including breach of contract, unjust enrichment, and copyright infringement.

The singer-songwriter moved to dismiss certain of the claims, leading to this opinion.

Breach of contract. The court declined to dismiss the business manager’s breach of contract claim. The breach of contract claim went to the amount of commissions that the business manager was entitled to earn. In short, the complaint asserted, the parties reached an agreement over an exchange of emails in August and September of 2021 to increase the commission rate from 10% to 15% for KEM’s upcoming tour. But while the parties discussed terms in their emails, the complaint acknowledged, they never entered into the formal agreement that their negotiations contemplated. Did the complaint fail as a result? The court found that it did not.

The business manager stated a claim, the court noted, because he alleged all of the elements necessary to constitute a binding agreement. Under New York law, an agreement may be enforced “even though the parties may desire a more elaborate formalization of the agreement.” The relevant questions are whether the parties have reached agreement on all of the key terms, whether there has been partial performance, and whether there has been an express reservation of intent not to be bound in the absence of a formal writing. Those factors pointed in favor of the business manager, the court noted. The exchange of emails alleged in the complaint addressed new commission rates and extension of the agreement—the only terms genuinely at issue in the negotiations. The complaint alleged that KEM partially performed by directing his accountants to pay at the higher rate (at least until he terminated the deal entirely). And while the original agreement did require all modifications to the agreement to be in writing, the court noted, the complaint alleged that KEM waived that provision by paying the higher rate before terminating. Those allegations were enough to proceed with the contract claim.

Copyright infringement. But while the business manager’s breach of contract claim would go forward, his copyright infringement claim would not. The business manager claimed that he created for KEM a video backdrop, or “video wall,” for his concerts—a backdrop that KEM continued to use, without his authorization, after he terminated the management agreement. But KEM argued that even if all those things were true, he had an irrevocable license to continue using the video wall even after termination. The court agreed.

KEM had a license to use the wall, the court found, because such a license was implicit within the terms of the management agreement. The agreement contemplated, among other things, that the business manager would procure “artistic material for [KEM’s] exploitation as an artist,” that the business manager would incur the expenses in connection with the creation of that content, and that KEM would “compensate” the business manager for his work. Moreover, the court noted, the business manager’s complaint alleged that he “allowed KEM to use the content freely, without further compensation.” To be sure the court noted, these provisions did not add up to an express license. But they suggested “the existence of, at the very least, an implied license,” the court reasoned.

Moreover, the court found, this implied license could not be revoked by the business manager after KEM’s termination of the agreement. Until the dispute arose, the court noted, the business manager allowed KEM to use the video wall “in exchange for the compensation KEM paid” for his work. That consideration made the license irrevocable, the court said. The business manager could therefore be compensated for the wall, if at all, by enforcement of the contract.

Unjust enrichment. The court also found that the business manager’s unjust enrichment claim was preempted by the Copyright Act. The unjust enrichment claim alleged that KEM was enriched by his continued use of album images, an animated trailer, and other photos or audio-visual media allegedly owned by the manager. But this was precisely the nature of rights protected by the Copyright Act, the court noted. An attempt to re-spin them as state law claims would therefore fail.

The Case is No. 1:23-cv-03014-DLC.

Attorneys: Hillel Ira Parness (Parness Law Firm, PLLC) for Plaid Takeover, LLC. Jonathan David Davis (Jonathan D. Davis, PC) for Kim Lamont Owens p/k/a Kem.

Companies: Plaid Takeover, LLC

Cases: Copyright NewYorkNews