Greenfield v. Philles Records, Inc.

98 N.Y.2d 562; 780 N.E.2d 166; 750 N.Y.S.2d 565 (2002)

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Nature of the Case

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Facts

In the early 1960s, Veronica Bennett (now known as Ronnie Greenfield), her sister Estelle Bennett and their cousin Nedra Talley, formed a singing group known as 'The Ronettes' (P). P met Phil Spector, a music producer, and composer, in 1963 and signed a five-year 'personal services' music recording contract (the Ronettes agreement) with Spector's production company, Philles Records, Inc (D). Ps agreed to perform exclusively for D and in exchange, D acquired an ownership right to the recordings of the Ps' musical performances. The agreement also set forth a royalty schedule to compensate Ps for their services. After signing with D, Ps received a single collective cash advance of approximately $15,000. Ps had some serious hits, but the group disbanded in 1967 and D eventually went out of business. Other than their initial advance, Ps received no royalty payments from D. D's began to capitalize on a resurgence of public interest in 1960s music by making use of new recording technologies and licensing master recordings of Ps' vocal performances for use in movie and television productions, a process known in entertainment industry parlance as 'synchronization.' Ds earned considerable compensation from such licensing and sales, but no royalties were paid to Ps. Ps sued for breach of contract action in 1987, alleging that the 1963 agreement did not provide D with the right to license the master recordings for synchronization and domestic redistribution, and demanded royalties from the sales of compilation albums. Ds argued that the agreement granted them absolute ownership rights to the master recordings and permitted the use of the recordings in any format, subject only to royalty rights. The Supreme Court ruled in Ps' favor and awarded approximately $3 million in damages and interest. The Appellate Division affirmed, concluding that Ds' actions were not authorized by the agreement with Ps because the contract did not specifically transfer the right to issue synchronization and third-party domestic distribution licenses. Permitting Ps to assert a claim for unjust enrichment, the Court found that Ps were entitled to the music recording industry's standard 50% royalty rate for income derived from synchronization and third-party licensing.