Ellington Heirs Lose Bid to Change Foreign Royalties Calculations

Nothing in the contract signed by Ellington on Dec. 19, 1961, precluded EMI from making arrangements with affiliated foreign subpublishers which have, over time, worked out to the disadvantage of the Ellington heirs, Judge Abdus-Salaam observed. “If the parties intended to bind future affiliates, they would have included language expressing that intent,” she wrote.

Judge Robert Smith said in a concurring opinion: “I agree with the majority's result, but not its reasoning. As a general proposition, it seems wrong to me that, when a contract is written to bind 'any ' affiliate' of a party, its effect should be limited to affiliates in existence at the time of contracting. That invites parties to create new affiliates, and to have them do what the old affiliates are prohibited by the contract from doing.'” But Judge Smith added: “For many years before this litigation began, EMI provided semi-annual royalty statements to the Ellington estate, and later to plaintiff individually, which clearly disclosed that affiliated subpublishers were getting the same 50% of foreign royalties that unaffiliated ones previously got. These disclosures go back at least to 1994, and plaintiff personally received them beginning in 2002. The record discloses no complaint by anyone about the split until September of 2008.”

In a dissent, Judge Jenny Rivera said that two lower courts were wrong in dismissing Paul Ellington's claim without consideration of his contention that EMI has “manipulated” the net receipt provision in the 1961 contract to exclude foreign affiliate revenues. “The agreement lends itself to more than one interpretation concerning the net revenue sharing provision, and appellant's interpretation seems reasonable, or at least as reasonable as the one proposed by EMI.” Judge Rivera wrote.

Duke Ellington died in 1974, leaving behind what Judge Rivera referred to as a body of work of “undeniably great creative and monetary value.” Other premier compositions, including “In a Sentimental Mood,” “It Don't Mean a Thing (If It Ain't Got That Swing)” and “East St. Louis Toodle-O,” were also covered by the 1961 contract. The contract provided for a $100,000 payment to Ellington or his heirs, plus royalty payments on a per-song basis, for use of the composer's works.

Richard Scarola, managing partner of Scarola Malone & Zubatov in Manhattan, represented Paul Ellington. Scarola said that, while he was disappointed with the ruling, he believes it does not foreclose attempts to challenge other aspects of payments of foreign royalties, such as their being collected by a single entity rather than distinct corporate subsidiaries as consolidation continues in the music industry.

Joel Stashenko is the Albany Bureau Chief for The New York Law Journal, an ALM sibling of Entertainment Law & Finance.

The New York Court of Appeals, the highest court in the state, decided that a copyright renewal that Duke Ellington signed in 1961 didn't unfairly deprive his heirs of a portion of foreign royalties on the music giant's works, such as “Mood Indigo” and “Sophisticated Lady.”

In Ellington v. EMI Music, 156, the court of appeals ruled 5-2 that “clear and unambiguous” provisions govern EMI's obligations to Ellington's grandson Paul Ellington and the composer's other survivors. Judge Sheila Abdus-Salaam, writing for the majority, said a plain reading of the contract says Ellington or his heirs are entitled to 50% of the net revenues received from the composer's works from foreign subpublishers. The agreement was originally signed by Ellington and Mills Music Inc., which has become EMI.

The fact that EMI has come to use affiliated foreign subpublishers in an arrangement that allows the publisher to reduce the amount of royalties that must be turned over to the Ellington family on foreign sales, a development not contemplated in 1961, doesn't directly violate any terms of the 1961 contract, Judge Abdus-Salaam wrote. According to the judge, “EMI's corporate reconfiguration did not ' 'avoid the understanding of the parties.' Rather, the parties merely did not account for the possibility that the publisher would eventually affiliate with foreign subpublishers.”

Nothing in the contract signed by Ellington on Dec. 19, 1961, precluded EMI from making arrangements with affiliated foreign subpublishers which have, over time, worked out to the disadvantage of the Ellington heirs, Judge Abdus-Salaam observed. “If the parties intended to bind future affiliates, they would have included language expressing that intent,” she wrote.

Judge Robert Smith said in a concurring opinion: “I agree with the majority's result, but not its reasoning. As a general proposition, it seems wrong to me that, when a contract is written to bind 'any ' affiliate' of a party, its effect should be limited to affiliates in existence at the time of contracting. That invites parties to create new affiliates, and to have them do what the old affiliates are prohibited by the contract from doing.'” But Judge Smith added: “For many years before this litigation began, EMI provided semi-annual royalty statements to the Ellington estate, and later to plaintiff individually, which clearly disclosed that affiliated subpublishers were getting the same 50% of foreign royalties that unaffiliated ones previously got. These disclosures go back at least to 1994, and plaintiff personally received them beginning in 2002. The record discloses no complaint by anyone about the split until September of 2008.”

In a dissent, Judge Jenny Rivera said that two lower courts were wrong in dismissing Paul Ellington's claim without consideration of his contention that EMI has “manipulated” the net receipt provision in the 1961 contract to exclude foreign affiliate revenues. “The agreement lends itself to more than one interpretation concerning the net revenue sharing provision, and appellant's interpretation seems reasonable, or at least as reasonable as the one proposed by EMI.” Judge Rivera wrote.

Duke Ellington died in 1974, leaving behind what Judge Rivera referred to as a body of work of “undeniably great creative and monetary value.” Other premier compositions, including “In a Sentimental Mood,” “It Don't Mean a Thing (If It Ain't Got That Swing)” and “East St. Louis Toodle-O,” were also covered by the 1961 contract. The contract provided for a $100,000 payment to Ellington or his heirs, plus royalty payments on a per-song basis, for use of the composer's works.

Richard Scarola, managing partner of Scarola Malone & Zubatov in Manhattan, represented Paul Ellington. Scarola said that, while he was disappointed with the ruling, he believes it does not foreclose attempts to challenge other aspects of payments of foreign royalties, such as their being collected by a single entity rather than distinct corporate subsidiaries as consolidation continues in the music industry.

Joel Stashenko is the Albany Bureau Chief for The New York Law Journal, an ALM sibling of Entertainment Law & Finance.