Alicea v. LT'S BENJAMIN RECORDS

Citations: 762 F. Supp. 2d 299; 2011 U.S. Dist. LEXIS 2459; 2011 WL 208309Docket: 3:10-cr-30002

Court: District Court, D. Massachusetts; January 11, 2011; Federal District Court

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A copyright infringement lawsuit has been filed by five musical artists against multiple defendants, including UMG Recordings and Daddy Yankee, seeking damages for various claims including breach of contract and emotional distress. The UMG/Machete defendants and the Daddy Yankee defendants submitted motions to dismiss, arguing that the plaintiffs failed to state claims under Federal Rule of Civil Procedure 12(b)(6). The Daddy Yankee defendants further claimed lack of personal jurisdiction and improper venue under Rules 12(b)(2) and 12(b)(3), respectively. Magistrate Judge Kenneth P. Neiman recommended allowing the UMG/Machete motion to dismiss counts related to emotional distress while denying the remainder of the claims. Conversely, the Daddy Yankee motion was recommended to be allowed in full due to personal jurisdiction and venue issues. The District Judge adopted the Report and Recommendation, granting the UMG/Machete motion in part and dismissing all claims against the Daddy Yankee group. The case will proceed to a pretrial scheduling conference under Magistrate Judge Neiman. No objections to the recommendations were filed within the specified timeframe.

When considering a Rule 12(b)(6) motion to dismiss for failure to state a claim, the court must accept the complaint's allegations as true and draw reasonable inferences in favor of the plaintiff. Federal Rule of Civil Procedure 8(a)(2) mandates a concise statement of the claim to provide the defendant fair notice. According to Bell Atl. Corp. v. Twombly, a complaint must present a plausible claim for relief to survive such a motion. A claim is deemed plausible if it contains factual content supporting a reasonable inference of the defendant's liability. In contrast, under a Rule 12(b)(2) motion for lack of personal jurisdiction, the plaintiff bears the burden of proving jurisdiction, which includes demonstrating compliance with the state's long-arm statute and adherence to the Due Process clause. This requires the plaintiff to provide proof of material jurisdictional facts beyond the pleadings, although the court does not act as a factfinder but rather assesses whether the proffered facts support jurisdiction.

The background details reveal that the plaintiffs, who are musical composers, producers, arrangers, and performers, allege unauthorized use of their works in musical compositions on specific albums. The plaintiffs claim that their works were included in the album "Luny Tunes Presents: Erre XI" and a composition titled "Salgo Pa La Calle," the latter of which was featured as a track on another album and in a film soundtrack called "Talento de Barrio." In Spring 2007, non-appearing defendants "Luny" and "Tunes" invited plaintiff Lionize to their studio in Puerto Rico, where he recorded and participated in the album as part of the duo "Erre XI." Lionize entered into exclusive management and recording agreements with LT's, promising him royalty payments. Following his arrival in Puerto Rico, Lionize recommended three additional individuals, now plaintiffs, to assist in completing the album.

Luny invited members of the Springfield Crew in June 2007 to sign "exclusive" agreements with LT's, leading to a collaborative effort over seven to twelve months where they composed, produced, and performed 30-40 musical works. During this period, they lived in poor conditions in a room called the "Luny Bin." The Crew produced notable compositions, including "Salgo Pa La Calle," but allege they have not received royalties from the albums "Luny Tunes Presents: Erre XI" and "Talento de Barrio." They claim that Luny Tunes Defendants and Daddy Yankee used their works without proper attribution, commercially releasing them through various distributors while claiming sole authorship. The albums have reportedly achieved significant commercial success, with "Talento de Barrio" selling over one million copies worldwide.

Additionally, the Plaintiffs assert that Luny contracted "Thilo," now a plaintiff, as a producer in 2004, who has received minimal royalties. They allege a distribution agreement existed between Luny, LT's, and UMG from 2004-2007, followed by a 2007 Profit Sharing Agreement that required exclusivity for UMG, which UMG claims was breached by Luny. The Plaintiffs argue they are third-party beneficiaries of this agreement.

The court is addressing UMG/Machete's motion to dismiss, recommending dismissal of the emotional distress claims but denying dismissal of the vicarious copyright infringement and breach of contract claims. The Daddy Yankee Defendants' motion to dismiss is also under consideration, with recommendations for dismissal based on personal jurisdiction and venue issues. UMG/Machete's motion specifically targets counts related to vicarious copyright infringement, emotional distress, and breach of contract.

Plaintiffs' emotional distress claims, directed solely at Defendant Luny, will be dismissed as UMG/Machete is no longer a target due to Luny's default. The court recommends granting UMG/Machete's motion regarding Counts VII and VIII. Count VI, concerning vicarious copyright infringement, will not be dismissed. Although UMG/Machete argues the claim is invalid due to a lack of copyright registration, Plaintiffs assert they have complied with registration requirements and provided evidence of pending registrations. The court finds that Plaintiffs have sufficiently alleged compliance, allowing Count VI to survive the motion to dismiss. Lastly, UMG/Machete contends that Plaintiffs lack standing for a breach of contract claim under the 2007 Profit Sharing Agreement, but Plaintiffs argue they are third-party beneficiaries under the agreement. The court leans towards supporting Plaintiffs' position on this matter.

To recover as a third-party beneficiary of a contract, the intent of the original parties to benefit the third party must be clear from the contract's language and context. In Massachusetts, contract interpretation is a legal question for the court unless ambiguity exists. A contract is deemed ambiguous if its terms are inconsistent or can reasonably support differing interpretations. The court may find ambiguity if the language has multiple meanings that reasonable individuals might dispute. In the current case concerning the 2007 Profit Sharing Agreement, the court preliminarily finds the contract ambiguous based on conflicting interpretations from both UMG/Machete and the Plaintiffs regarding the benefits conferred. UMG/Machete argues that the contract states LT is solely responsible for compensating its producers, implying no obligation to the Plaintiffs. Conversely, the Plaintiffs cite language indicating they are third-party beneficiaries, suggesting the agreement involves their services and fees. The court concludes that determining the Plaintiffs' status as third-party beneficiaries involves factual questions that cannot be resolved at the motion to dismiss stage, recommending denial of UMG/Machete's motion regarding Count X. Regarding the Daddy Yankee Defendants, the court addresses personal jurisdiction first, determining that it lacks jurisdiction over these defendants and will not proceed to the merits of the case.

The court examines the personal jurisdiction over the corporate entities El Cartel and Los Cangris in relation to Daddy Yankee. Plaintiffs seek to pierce the corporate veil to attribute Daddy Yankee's contacts to these entities, but the court finds that the Plaintiffs have failed to provide sufficient evidence to justify this action. Courts typically maintain respect for corporate formalities unless compelling evidence is presented, which the Plaintiffs did not offer, as their claims rely solely on speculation rather than concrete facts or legal precedent.

Consequently, personal jurisdiction will be evaluated only concerning Daddy Yankee. For establishing jurisdiction, the court notes that the Plaintiffs must demonstrate that the Massachusetts long-arm statute applies and that exercising jurisdiction aligns with due process. The court focuses on due process, which necessitates either specific or general jurisdiction. Specific jurisdiction requires that the defendant's contacts with Massachusetts relate directly to the plaintiff's claims, while general jurisdiction pertains to continuous and systematic contacts with the state, regardless of the claims.

The Plaintiffs argue for both specific and general jurisdiction, but Daddy Yankee contends that neither applies and that venue is improper. The court finds Daddy Yankee’s arguments more compelling. Specific jurisdiction is assessed using a three-part test: the claim must arise from the defendant's activities in the forum state, the defendant must have purposefully availed themselves of conducting activities there, and the exercise of jurisdiction must be reasonable based on various factors.

The court evaluates the three prongs necessary to establish personal jurisdiction over Daddy Yankee, focusing on his contacts with Massachusetts. 

1. **Relatedness**: Daddy Yankee contends that none of his activities in Massachusetts are related to the claims made against him. The court agrees, finding that the Plaintiffs have not provided sufficient evidence linking Daddy Yankee's contacts—such as a 2009 concert, retail sales of his music, an endorsement contract with Reebok, and an awards ceremony at Harvard—to the lawsuit. Specifically, he did not perform the song "Salgo Pa La Calle" at the concert or the award ceremony, and the endorsement contract involved a separate entity, DY Merchandising LLC. Thus, the court concludes that there is no relatedness between Daddy Yankee's contacts and the claims.

2. **Purposeful Availment**: Daddy Yankee argues that he did not purposefully avail himself of Massachusetts laws, asserting that his travels to the state were minimal and not voluntary. The court clarifies that purposeful availment requires more than random contacts; it necessitates a connection to the plaintiffs' claims. Since the court already found no relatedness, it concludes that purposeful availment is also absent.

3. **Reasonableness**: Daddy Yankee claims that requiring him to defend the lawsuit in Massachusetts would be unreasonable, considering the "Gestalt" factors. The court examines these factors, which include the defendant's burden, the state's interest in the case, the plaintiffs' need for relief, judicial efficiency, and the interests of various sovereigns. The court finds that the factors collectively weigh against establishing jurisdiction, particularly emphasizing the undue burden on Daddy Yankee, who resides in Puerto Rico, suggesting that requiring him to travel to Massachusetts would disrupt his professional commitments.

In summary, the court determines that the Plaintiffs have failed to demonstrate sufficient connections between Daddy Yankee and Massachusetts, resulting in a lack of personal jurisdiction.

Daddy Yankee contends that the most effective resolution of the controversy lies where the majority of evidence and witnesses are located, specifically in Puerto Rico, where the music was created. He argues that Massachusetts lacks sufficient interest in the claims against him and that the common interest of sovereigns does not align with Massachusetts. The court concurs, noting that since the main claims arise under federal copyright law, there are no compelling state interests justifying the case remaining in Massachusetts, despite the plaintiffs’ interest in litigating there.

Regarding general jurisdiction, the court finds it lacking, as Daddy Yankee does not maintain "continuous and systematic" contacts with Massachusetts. His limited interactions do not meet the threshold established by precedents, such as nationwide tours and merchandise sales, which do not suffice to establish general jurisdiction. His affidavit confirms he is a Puerto Rico resident without property, bank accounts, or tax obligations in Massachusetts, leading to the conclusion that his business activities do not equate to the necessary contacts for general jurisdiction. 

Furthermore, the court asserts that dismissal is warranted on venue grounds, highlighting that the plaintiff bears the burden of proving proper venue under Rule 12(b)(3). For copyright cases, proper venue is where the defendant or their agent can be found, but since there is no personal jurisdiction over Daddy Yankee in Massachusetts, significant venue issues arise. Consequently, the court recommends granting the motion to dismiss based on both personal jurisdiction and venue.

The court recommends granting UMG/Machete's motion to dismiss Counts VII and VIII, while denying it for other counts. The Daddy Yankee Defendants' motion to dismiss is approved based on personal jurisdiction and venue issues. The Luny Tunes Defendants remain unaddressed due to incomplete service, with a default entered against one. Plaintiffs incorrectly assert that the 2007 Profit Sharing Agreement is attached to their complaint and suggest that both agreements are incorporated; however, they have not objected to UMG/Machete providing the actual agreements. The court has not evaluated other counts (IV, V, and XI) against UMG and Machete as they were not briefed. The agreement specifies payment terms for Machete and LT Producers. Parties are notified that objections to the findings must be filed within ten days, detailing the specific recommendations contested, or they risk losing the right to appeal.