Judge Edward B. Moreton, Jr, Case Number: 22SMCV01221, Date: 2024-09-13 Tentative Ruling

Judge: Edward B. Moreton, Jr, Case: 22SMCV01221, Date: 2024-09-13 Tentative Ruling

Superior Court of California

County of Los Angeles – West District

Beverly Hills Courthouse / Department 205

JOCELYN DONALD p/k/a “JOZZY,”

Plaintiff,

MUSIC PUBLISHING ACCELERATOR, et al.,

Defendants.

Case No.: 22SMVC01221

Hearing Date: September 13, 2024

[TENTATIVE] order RE:

DEFENDANT-intervenor treehouse

publishing llc’s MOTION FOR

judgment on the pleadings and

motion to seal

This is a breach of contract and fraud case. Plaintiff Jocelyn Donald (or “Jozzy”) is a songwriter who has written or co-written songs for such well-known artists as Timbaland, Usher, and Fergie. Plaintiff co-wrote the remix version of “Old Town Road” by Lil Nas X and Billy Ray Cyrus which is one of the best selling singles of all time and was nominated for a Grammy.

In 2015, Plaintiff entered into a music co-publishing agreement with Defendant Music Publishing Accelerator LLC (“MPA”) in which Plaintiff granted MPA the sole right to administer her compositions, including the right to license others to exploit her songs and collect the money from those songs (the “2015 Agreement”). Pursuant to the terms of the 2015 Agreement, MPA was required to pay Plaintiff royalties and provide her an accounting. Plaintiff alleges MPA has provided neither.

Plaintiff and MPA subsequently entered into a termination agreement, whereby the parties agreed that the 2015 Agreement would be terminated as to all future compositions (the “Termination Agreement”). On the same day, Plaintiff entered into a new agreement with Sony/ATV Tunes, in which the parties agreed that all future compositions would be administered by Sony/ATV (the “Sony/ATV Agreement”). As a condition for allowing the termination, MPA got 25% of all advances, royalties and other sums that would otherwise be payable to Plaintiff under the Sony/ATV Agreement. The Termination Agreement did not impact MPA’s continuing obligation to pay royalties or provide an accounting on existing songs.

The operative complaint alleges claims for (1) breach of contract, (2) accounting, (3) fraud and (4) unfair business practices (“UCL”).

Treehouse Publishing LLC (“Treehouse”) is a member, manager and secured creditor of MPA. On July 20, 2023, this Court granted Treehouse’s motion to intervene.

This hearing is on Treehouse’s motion for judgment on the pleadings on Plaintiff’s fraud and UCL claims. Treehouse argues that the fraud claim (1) improperly attempts to re-cast a breach of contract as a fraud claim in violation of the economic loss rule, (2) is “inherently illogical” as it ties in two separate contracts, and (3) fails to plead fraud with the requisite specificity. As to the UCL claim, Treehouse argues it fails with the fraud claim and also fails because a UCL claim based on fraudulent conduct requires that the allegedly fraudulent act or practice will likely deceive the public, which is not alleged by Plaintiff.

Treehouse further moves to seal two exhibits (Exs. A, B to Wirtschafer Decl.) filed in support of the motion for judgment on the pleadings. Treehouse argues that the Court should seal Exhibits A and B as they are private contracts which contain confidential financial terms with a third party that is not party to this lawsuit and personal financial information related to Plaintiff, which are commercially valuable due to their secrecy and would provide an unfair advantage if they became available to industry competitors.

A party moving for¿judgment on the pleadings must¿meet and confer in person or telephonically with the party who filed the pleading that is subject to the motion to determine if an agreement can be reached regarding the claims raised in the motion. (Code Civ. Proc., § 439, subd. (a).) The moving party must file a declaration detailing the¿meet and confer efforts. (Code Civ. Proc., § 439, subd. (a)(3).) Treehouse submits the Declaration of Carla Wirtschafter which fails to show the parties met and conferred by telephone or in person. This fails to satisfy the meet and confer requirements of § 439. However, the Court cannot deny a motion for judgment on the pleadings based on an insufficient meet and confer. (Code Civ. Proc., § 439, subd. (a)(4).) Treehouse is admonished to comply with its meet and confer obligations in the future; otherwise, the Court will continue the hearing on its motions to allow for the required meet and confer.

MOTION FOR JUDGMENT ON THE PLEADINGS

A defendant may move for judgment on the pleadings when the “complaint does not state facts sufficient to constitute a cause of action against that defendant.” (Code Civ. Proc. §438(b)(1) and (c)(1)(B)(ii).) “A motion for judgment on the pleadings may be made at any time either prior to the trial or at the trial itself. [Citation.]” (Ion Equipment Corp. v. Nelson (1980) 110 Cal.App.3d 868, 877.)

“A motion for judgment on the pleadings performs the same function as a general demurrer, and hence attacks only defects disclosed on the face of the pleadings or by matters that can be judicially noticed. Presentation of extrinsic evidence is therefore not proper on a motion for judgment on the pleadings.” (Cloud v. Northrop Grumman Corp. (1998) 67 Cal.App.4th 995, 999 (citations omitted).)

The standard for ruling on a motion for judgment on the pleadings is essentially the same as that applicable to a general demurrer, that is, under the state of the pleadings, together with matters that may be judicially noticed, it appears that a party is entitled to judgment as a matter of law. (Bezirdjian v. O'Reilly (2010) 183 Cal.App.4th 316, 321-322 (citing Schabarum v. California Legislature (1998) 60 Cal.App.4th 1205, 1216).)

Like a demurrer, a motion for judgment on the pleadings may be addressed to the pleading as a whole or to separate counts. If addressed to the pleading as a whole, the motion must be denied if even one count is good. (Lora v. Garland (1946) 27 Cal.2d 840, 850; Heredia v. Farmers Ins. Exch. (1991) 228 Cal.App.3d 1345, 1358.) If addressed to separate counts, the motion may be granted as to some counts and denied as to others. (Steiner v. Rowley (1950) 35 Cal.2d 713, 720; Heredia, 228 Cal.App.3d at 1358.)

Fraud. Treehouse argues that Plaintiff’s fraud claim is barred by the economic loss rule because it merely alleges a breach of contract. The Court agrees.

California law makes clear that “[a] person may not ordinarily recover in tort for the breach of duties that merely restate contractual obligations.” (Aas v. Superior Court (2000) 24 Cal. 4th 627, 643, superseded by statute on other grounds as recognized in Rosen v. State Farm Gen. Ins. Co. (2003) 30 Cal. 4th 1070.) This doctrine –called the “economic loss rule” – prohibits a party from converting a breach of contract action into a tort action. A party cannot recover in tort, including on a fraud theory, for “purely economic loss due to disappointed expectations” unless the party “can demonstrate harm above and beyond a broken contractual promise.” (Robinson Helicopter Co. v. Dana Corp. (2005) 34 Cal. 4th 979, 988.) “Quite simply, the economic loss rule ‘prevent[s] the law of contract and the law of tort from dissolving one into the other.’” (Food Safety Net Servs. v. Eco Safe Sys. USA, Inc. (2012) 209 Cal. App. 4th 1118, 1130.)

Here, Plaintiff’s fraud claim is barred by the economic loss rule because it is merely a restatement of her breach of contract claim for non-performance of the 2015 Agreement. Plaintiff’s breach of contract claim alleges that MPA violated the 2015 Agreement “by failing to pay royalty amounts to [Plaintiff], by failing to provide an accounting, and by refusing to allow [Plaintiff] to audit MPA’s books and records.” (Compl., ¶¶ 16, 20.) Plaintiff then alleges that the “misrepresentations” giving rise to her fraud claim were MPA’s promise in the 2020 Termination Agreement to “abide by the terms of the [2015] Agreement,” which she alleges MPA did not do because it failed to “provid[e] royalties or accounting statements” as required in the 2015 Agreement. (Id. ¶¶ 25-27, 30.) These allegations reflect nothing more than a failure to perform under the 2015 Agreement. Because Plaintiff cannot demonstrate “harm above and beyond a broken contractual promise,” the economic loss rule precludes her from recovering in tort “for purely economic loss due to disappointed expectations.” (Robinson Helicopter Co., 34 Cal. 4th at 988-89.)

Plaintiff argues that tort damages have been permitted in contract cases where the contract was fraudulently induced. While that is true, Plaintiff has not alleged fraudulent inducement. Plaintiff has not alleged any false statements MPA made to induce her into entering into the 2015 Agreement. The misrepresentation Plaintiff alleges is in connection with the 2020 Termination Agreement, that MPA purportedly represented it would abide by the 2015 Agreement. This representation in 2020 could not have induced Plaintiff to enter into a contract five years earlier in 2015. And there is no fraudulent inducement in connection with the 2020 Termination Agreement, which was done at Plaintiff’s request; there could be no fraudulent inducement to enter into a contract Plaintiff herself wanted.

Given the foregoing, the Court grants the motion as to the fraud claim and declines to consider other grounds raised by Treehouse to dismiss the claim.

UCL. Treehouse argues that Plaintiff’s claim under California’s Unfair Competition Law (“UCL”), fails because she has not alleged fraud. The Court agrees.

Under the UCL, “any ‘unlawful,’ ‘unfair’ or ‘fraudulent’ business act or practice is deemed to be unfair competition.” (Smith v. State Farm Mut. Auto. Ins. Co. (2001) 93 Cal. App. 4th 700, 717 (2001) (referring to Business & Professions Code Section 17200 et seq.). In support of her UCL claim, Plaintiff alleges the “fraud” is “all misrepresentations about Defendants’ intent to pay [Plaintiff] her royalties”. (Compl., ¶¶ 37-39.) Because as set forth above, Plaintiff’s fraud claim fails, she cannot maintain a claim for violation of the UCL based on her deficient fraud claim. (Nein v. HostPro, Inc. (2009) 174 Cal. App. 4th 833, 841 (“Where a UCL claim is derivative of another claim that fails as a matter of law, the UCL claim must similarly fail.”); see also Khoury v. Maly’s of Cal., Inc., 14 Cal. App. 4th 612, 619 (1993) (when a UCL cause of action is based on a misrepresentation, the plaintiff must sufficiently plead its misrepresentation claim).)

Plaintiff also cannot proceed with a UCL claim based on fraudulent conduct because there are no allegations that the fraudulent act or practice complained of will likely deceive the public. “The ‘fraud’ prong of the UCL requires that ‘members of the public are likely to be deceived’ by the challenged conduct.” (Bardin v. Daimler Chrysler Corp. (2006) 136 Cal. App. 4th 1255, 1261; see also Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal. App. 4th 49, 81 (“A fraudulent practice under the UCL requires showing that members of the public are likely to be deceived.”). Because Plaintiff’s UCL claim is devoid of any such allegations and is nothing more than a recasting of a dispute about private contracts which do not provide any rights or benefit to the public, Plaintiff’s UCL claim fails as a matter of law and must also be dismissed.

An application to seal must be accompanied by a declaration containing facts sufficient to justify sealing. (Cal. Rules of Court, Rule 2.551(b)(1).) Treehouse has submitted a declaration from its counsel explaining the facts which justify sealing.

A court may order records to be filed under seal when the following conditions are met: “(1) [t]here exists an overriding interest that overcomes the right of public access to the record[s]; (2) [t]he overriding interest supports sealing the record[s]; (3) [a] substantial probability exists that the overriding interest will be prejudiced if the record[s are] not sealed; (4) [t]he proposed sealing is narrowly tailored; and (5) [n]o less restrictive means exist to achieve the overriding interest.” (Cal. Rules of Court 2.550(d).)

In ruling on a motion to seal, the court must identify (1) the specific information claimed to be entitled to protection from public disclosure, (2) the nature of the harm threatened by disclosure, and (3) any countervailing considerations. (H.B. Fuller Co. v. Doe (2007) 151 Cal.App.4th 879, 894.) Therefore, in order to prevail on his or her motion, the moving party must present a specific enumeration of the facts sought to be withheld and the specific reasons for withholding them. (Id. at 904.)

The California Supreme Court has held that the First Amendment provides “a right of access to ordinary civil trial and proceedings.” (NBC Subsidiary (KNBC-TV), Inc. v. Superior Court (1999) 20 Cal.4th 1178, 1212.) The court further noted its belief that “the public has an interest, in all civil cases, in observing and assessing the performance of its public judicial system.” (Id. at 1210.) There is a presumption of openness in civil court proceedings. (Id. at 1217.) Therefore, it is up to this Court to determine if that presumption has been overcome.

Courts must find compelling reasons, prejudice absent sealing and the lack of less-restrictive means, before ordering filed documents sealed. (Hurvitz v. Hoefflin (2000) 84 Cal.App.4th 1232, 1246; KNBC-TV, 20 Cal.4th at 1208-1209 n. 25; Champion v. Superior Court (1988) 201 Cal.App.3d 777, 787.)

A compelling reason could include the party’s right to privacy in financial records. (Valley Bank of Nevada v. Superior Court (1975) 15 Cal.3d 652, 656-657¿(there is a constitutional right to privacy in financial information);¿Cassidy v. California Board of Accountancy (2013) 220 Cal.App.4th 620, 625 (finding that there existed an overriding interest in a company’s right of privacy and confidentiality in its tax and financial records supporting the sealing¿of such records and the company’s right of privacy and confidentiality to its tax and financial records will be prejudiced if these documents are not sealed); In re Providian Credit Cases (2002) 96 Cal.App.4th 292 fn. 3 (an overriding interest could include protection of trade secret information).)

A proposed sealing must also be narrowly tailored to serve the overriding interest, such as by sealing only portions of pleadings or redacting particular text that refer to the confidential information. (In re Marriage of Burkle (2006) 135 Cal.App.4th 1045, 1052, 1070.)

Treehouse seeks to seal Exhibits A and B to the Declaration of Carla M. Wirtschafter filed in support of Treehouse’s motion for judgment on the pleadings. Exhibit A is the 2015 Co-Publishing Agreement referenced in paragraphs 2, 3, 11, 12, 13, 14, 15, 19, 25, 26, 30, and 35 of the Complaint. Exhibit B is the 2020 Sony Agreement, referenced in paragraphs 14 and 34 of the Complaint, and attached to the Sony Agreement as Exhibit D is a copy of the 2020 Termination Agreement referenced in paragraphs 14, 25, 26, 28, 29, 32, and 34 of the Complaint.

Treehouse argues that there is an overriding interest in protecting the exhibits which consist of private contracts that contain confidential financial terms, Plaintiff’s personal financial information, and terms with a third party (Sony/ATV Tunes) who is not a party to the litigation. Treehouse maintains that the information contained in Exhibits A and B is commercially valuable due to its secrecy and would provide an unfair advantage if it became available to industry competitors.

There is an overriding interest in protecting personal financial information and trade secrets. This overriding interest overcomes the right of public access. (See, e.g.,¿Cassidy v. California Bd. of Accountancy (2013) 220 Cal.App.4th 620, 624-625¿(holding that records containing private financial information should have been sealed).)

If the records are not sealed, there is a substantial risk of prejudice because industry competitors would gain an unfair advantage over Defendants and Sony/ATV Tunes in future negotiations with writers and artists.

Additionally, the sealing order is narrowly tailored to seal only the documents that reveal the confidential information. There is no less restrictive means to achieve the overriding interest, as disclosure of any portion of the agreements would substantially prejudice the parties and non-party Sony ATV/Tunes.