Sony Can't Enforce Agreement With EMI Executive

A New York Supreme Court judge has thrown out a suit by Sony Music Entertainment against a competitor record company and one of the competitor's top executives, who allegedly breached a $3 million employment contract with Sony. Sony Music Entertainment Inc. v. Werre, 601441/09.

Sony claimed that Ronn Werre, the chief operating officer of EMI's North American operations, used the agreement with Sony as a “stalking horse” to win a more lucrative deal with British-based EMI. But in March, New York County Supreme Court Justice Bernard Fried dismissed the action, holding that Sony had no right to enforce the agreement with Werre because “the contingency set forth in paragraph 2 therein, namely Werre's availability for employment on April 1, 2010, did not occur.”

Werre entered into negotiations with Sony early last year. Sony, which has under contract artists such as Alicia Keys, Ke$ha, and Beyonce', claimed Werre told Sony that his employment contract with EMI did not bar him from working with a competitor after his EMI contract expired on March 31, 2010.

In February 2009, Sony and Werre signed a letter agreement, stating that Werre would come on board as president of Sony's commercial music group on April 1, 2010, provided the executive had not entered into any agreement “which would in any manner preclude or prevent you from giving freely, and Sony receiving, the exclusive benefit of your services.” Paragraph 25 of the agreement stated that it had been offered to Werre based on his representation that “as of the commencement of your employment ' you will not be under any written or oral agreement” that would prevent Sony from fully benefiting from his services.

Some two months later, Werre told Sony he had decided to remain at EMI. On May 8, 2009, the same day EMI announced it had appointed Werre as COO of its North American business, Sony filed breach of contract and fraud claims against EMI and Werre. Alleging it had fired the president of its commercial music group to make way for Werre, Sony accused Werre of “using his contract with Sony Music as a stalking horse to solicit a more lucrative contract from EMI with enhanced job responsibilities.” And Sony contended EMI signed a new contract with Werre knowing that it would “completely undermine” his agreement with Sony.

On a motion to dismiss, EMI and Werre maintained that no contract between Sony and Werre had been formed because the agreement was contingent on a condition that never took place ' Werre joining Sony on April 1, 2010. “This cagey and contingent offer clearly, did not, because it could not, create any restrictions on either Werre or EMI in extending Werre's pre-existing employment relationship with EMI,” the defendants argued in court papers.

The defendants maintained that Sony entered into the “non-binding offer” with “the hope that EMI would terminate Werre's employment and thereby allow Sony to hire Werre immediately.” When “its own tortious plan” failed, Sony “turned a blind eye to the facts” and filed suit, according to the defendants' brief.

Sony countered that the so-called prevention doctrine applied, which provides that a party cannot avoid a contractual obligation by preventing the condition precedent from occurring. “[I]t is the very antithesis of good faith to act as Werre did by preventing a condition precedent from being fulfilled,” Sony argued.

Justice Fried found Sony's arguments unpersuasive. The judge held that Werre could not have breached paragraph 25 of the agreement, because this provision only became operative “as of the commencement of [Werre's] employment with [Sony].”

The prevention doctrine “applies only when there is a binding contract in effect that contains the condition precedent in question,” the judge wrote. “In the instant case, by contrast, the contract is not binding on the parties until the condition precedent occurs,” he added.

Justice Fried also dismissed the fraud claim, finding that allegations that Werre entered into the agreement without any intention of honoring it did not state a cause of action.

John G. Hutchinson and Martin B. Jackson of Sidley Austin represented EMI. Mara B. Levin and David Feuerstein of Herrick, Feinstein represented Werre.

“This was simply a case of sour grapes. Mr. Werre's agreement with Sony was contingent on ' and enforceable only in the case of ' his separation from EMI, which never occurred,” Levin said in a statement. “We're pleased that Mr. Werre is so highly regarded and in such professional demand, but when the court applied the law to these facts it found that Mr. Werre did nothing wrong and Sony simply had no basis for complaining.”

Benjamin E. Rosenberg and Robert W. Topp of Dechert represented Sony. Rosenberg said that Sony would appeal.

A New York Supreme Court judge has thrown out a suit by Sony Music Entertainment against a competitor record company and one of the competitor's top executives, who allegedly breached a $3 million employment contract with Sony. Sony Music Entertainment Inc. v. Werre, 601441/09.

Sony claimed that Ronn Werre, the chief operating officer of EMI's North American operations, used the agreement with Sony as a “stalking horse” to win a more lucrative deal with British-based EMI. But in March, New York County Supreme Court Justice Bernard Fried dismissed the action, holding that Sony had no right to enforce the agreement with Werre because “the contingency set forth in paragraph 2 therein, namely Werre's availability for employment on April 1, 2010, did not occur.”

Werre entered into negotiations with Sony early last year. Sony, which has under contract artists such as Alicia Keys, Ke$ha, and Beyonce', claimed Werre told Sony that his employment contract with EMI did not bar him from working with a competitor after his EMI contract expired on March 31, 2010.

In February 2009, Sony and Werre signed a letter agreement, stating that Werre would come on board as president of Sony's commercial music group on April 1, 2010, provided the executive had not entered into any agreement “which would in any manner preclude or prevent you from giving freely, and Sony receiving, the exclusive benefit of your services.” Paragraph 25 of the agreement stated that it had been offered to Werre based on his representation that “as of the commencement of your employment ' you will not be under any written or oral agreement” that would prevent Sony from fully benefiting from his services.

Some two months later, Werre told Sony he had decided to remain at EMI. On May 8, 2009, the same day EMI announced it had appointed Werre as COO of its North American business, Sony filed breach of contract and fraud claims against EMI and Werre. Alleging it had fired the president of its commercial music group to make way for Werre, Sony accused Werre of “using his contract with Sony Music as a stalking horse to solicit a more lucrative contract from EMI with enhanced job responsibilities.” And Sony contended EMI signed a new contract with Werre knowing that it would “completely undermine” his agreement with Sony.

On a motion to dismiss, EMI and Werre maintained that no contract between Sony and Werre had been formed because the agreement was contingent on a condition that never took place ' Werre joining Sony on April 1, 2010. “This cagey and contingent offer clearly, did not, because it could not, create any restrictions on either Werre or EMI in extending Werre's pre-existing employment relationship with EMI,” the defendants argued in court papers.

The defendants maintained that Sony entered into the “non-binding offer” with “the hope that EMI would terminate Werre's employment and thereby allow Sony to hire Werre immediately.” When “its own tortious plan” failed, Sony “turned a blind eye to the facts” and filed suit, according to the defendants' brief.

Sony countered that the so-called prevention doctrine applied, which provides that a party cannot avoid a contractual obligation by preventing the condition precedent from occurring. “[I]t is the very antithesis of good faith to act as Werre did by preventing a condition precedent from being fulfilled,” Sony argued.

Justice Fried found Sony's arguments unpersuasive. The judge held that Werre could not have breached paragraph 25 of the agreement, because this provision only became operative “as of the commencement of [Werre's] employment with [Sony].”

The prevention doctrine “applies only when there is a binding contract in effect that contains the condition precedent in question,” the judge wrote. “In the instant case, by contrast, the contract is not binding on the parties until the condition precedent occurs,” he added.

Justice Fried also dismissed the fraud claim, finding that allegations that Werre entered into the agreement without any intention of honoring it did not state a cause of action.

John G. Hutchinson and Martin B. Jackson of Sidley Austin represented EMI. Mara B. Levin and David Feuerstein of Herrick, Feinstein represented Werre.

“This was simply a case of sour grapes. Mr. Werre's agreement with Sony was contingent on ' and enforceable only in the case of ' his separation from EMI, which never occurred,” Levin said in a statement. “We're pleased that Mr. Werre is so highly regarded and in such professional demand, but when the court applied the law to these facts it found that Mr. Werre did nothing wrong and Sony simply had no basis for complaining.”

Benjamin E. Rosenberg and Robert W. Topp of Dechert represented Sony. Rosenberg said that Sony would appeal.