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Greenfield v. Philles Records - 98 N.Y.2d 562, 750 N.Y.S.2d 565, 780 N.E.2d 166 (2002)

Rule:

Long-settled common-law contract rules still govern the interpretation of agreements between artists and their record producers. The fundamental, neutral precept of contract interpretation is that agreements are construed in accord with the parties' intent. The best evidence of what parties to a written agreement intend is what they say in their writing. Thus, a written agreement that is complete, clear, and unambiguous on its face must be enforced according to the plain meaning of its terms.

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." They met defendant 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, defendant Philles Records, Inc. The plaintiffs agreed to perform exclusively for Philles Records and in exchange, Philles Records acquired an ownership right to the recordings of the Ronettes' musical performances. The agreement also set forth a royalty schedule to compensate plaintiffs for their services. After signing with Philles Records, plaintiffs received a single collective cash advance of approximately $ 15,000. The Ronettes recorded several dozen songs for Philles Records, including "Be My Baby," which sold over a million copies and topped the music charts. Despite their popularity, the group disbanded in 1967 and Philles Records eventually went out of business. Other than their initial advance, plaintiffs received no royalty payments from Philles Records. Defendants subsequently began to capitalize on a resurgence of public interest in 1960s music by making use of new recording technologies and licensing master recordings of the Ronettes' vocal performances for use in movie and television productions, a process known in entertainment industry parlance as "synchronization." While defendants earned considerable compensation from such licensing and sales, no royalties were paid to any of the plaintiffs. As a result, plaintiffs commenced this breach of contract action in 1987, alleging that the 1963 agreement did not provide Philles Records with the right to license the master recordings for synchronization and domestic redistribution, and demanded royalties from the sales of compilation albums.  Defendants thereafter 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. Supreme Court, New York County, ruled in plaintiffs' favor and awarded approximately $ 3 million in damages and interest. The Appellate Division affirmed, concluding that defendants' actions were not authorized by the agreement with plaintiffs because the contract did not specifically transfer the right to issue synchronization and third-party domestic distribution licenses. Permitting plaintiffs to assert a claim for unjust enrichment, the Court found that plaintiffs were entitled to the music recording industry's standard 50 percent royalty rate for income derived from synchronization and third-party licensing. The defendants appealed.

Issue:

Can an artists' transfer of full ownership rights to a master recordings of musical performances carry with it the unconditional right of the producer to redistribute those performances in any technological format?

Answer:

Yes

Conclusion:

The state high court held that the contract signed by the singing group gave the record production company unconditional ownership rights to the group's master recordings. Nevertheless, the contract also required payment of royalties to members of the group. Thus, the court remitted the case to the trial court for recalculation of its judgment based on the state high court's finding that members of the signing group were entitled to payment of royalties. The court also noted that California law governed the issue of whether one of the group's members had relinquished her right to receive royalties when she was divorced and she had not relinquished that right.

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