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Content-Licensing Payment Dispute Involves Whether Fiduciary Relationship Was Created
A fiduciary relationship occurs when one party places trust and confidence in another party to in good faith carry out the obligations owed to the first party. New York case law holds that fiduciary relationships typically don't arise from "conventional business relationships," such as in royalty payor-payee settings.
A recent New York federal court decision in a dispute between a broker that sublicenses program content and a broadcaster that sublicensed content from the broker considered the interaction of contract language and extra-contractual elements of the parties' relationship to determine whether a fiduciary relationship existed. VideoElephant Ltd. v. Blake Broadcasting LLC, 21-CV-0503 (S.D.N.Y. 2024).
From a historical perspective, consider first that when the Beatles sued their longtime U.S. record label for underpayment of royalties, the New York Appellate Division found a fiduciary relationship existed because: "The business dealings between Capitol Records and the Beatles date back to 1962, when the still unacclaimed Beatles entrusted their musical talents to defendant Capitol Records. It is alleged that this relationship proved so profitable to defendant that at one point the Beatles constituted 25 to 30 [percent] of its business. Even after the Beatles attained their remarkable degree of popularity and success, they still continued to rely on Capitol Records for the manufacture and distributing of their recordings. It can be said that from such a long enduring relationship was born a special relationship of trust and confidence, one which existed independent of the contractual duties …" Apple Records Inc. v. Capitol Records Inc., 137 A.D.2d 50 (N.Y. App. Div. 1st Dept. 1988). Also see Apple Corps Ltd. v. Capitol Records Inc., 13 Misc.3d 1211[A] (Sup. Ct., N.Y. County 2006)).
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