## Facts

- Universal-MCA Music Publishing (Universal/MCA) was a music publisher that held exclusive publishing rights in musical compositions written by Todd Gaither, Kelly Price, and Jeremy Graham (the MCA cowriters).
- Sean Combs was a songwriter and a co-owner of Bad Boy Entertainment, Inc., and served as Bad Boy’s president and CEO.
- In 1996, Combs and Bad Boy entered into a recording agreement that included a controlled-composition clause limiting royalties payable for certain compositions to below the statutory rate.
- In 1997, Combs and the MCA cowriters coauthored several songs and expressly agreed on each writer’s ownership share and royalty rate for those songs.
- After the songs were exploited commercially, the MCA cowriters and MCA alleged they made repeated efforts to collect composition royalties tied to the coauthored works.
- Bad Boy allegedly took the position that no (or reduced) royalties were owed because the controlled-composition clause in the Combs–Bad Boy recording agreement capped the royalties payable.
- Plaintiffs alleged that Combs’s dual role—as a cowriter owing obligations to collaborators and as the executive controlling Bad Boy—created a conflict of interest.
- Plaintiffs claimed Combs and Bad Boy structured and relied on the controlled-composition clause to deprive the cowriters (and their publisher) of royalties, and that Combs personally benefited from the arrangement at the cowriters’ expense.
- Plaintiffs sued, asserting (among other theories) breach of fiduciary duty arising from the cowriter relationship and Combs’s alleged self-interested conduct in connection with royalty arrangements.
- Defendants moved to dismiss for failure to state a claim, arguing that no fiduciary relationship exists between co-songwriters as a matter of law.

## Issues

1. Whether the complaint sufficiently alleged a fiduciary relationship between Sean Combs and his co-songwriters such that Combs owed duties of loyalty and fair dealing in matters affecting royalty income from the coauthored songs.
2. Whether allegations that Combs, while also running Bad Boy, used the controlled-composition clause to withhold or reduce royalties stated a claim for breach of fiduciary duty sufficient to survive a motion to dismiss.

## Decision

- The court denied defendants’ motion to dismiss to the extent it sought dismissal of the fiduciary-duty theory at the pleading stage.
- Accepting the pleaded facts as true and drawing reasonable inferences for plaintiffs, the court concluded the complaint adequately alleged a relationship of trust and confidence arising from the collaboration and Combs’s asserted position and conduct.
- The court held it could not determine, as a matter of law on a motion to dismiss, that no fiduciary relationship could exist under the alleged circumstances, including Combs’s dual roles and the alleged use of the controlled-composition clause to the cowriters’ detriment.
- Because the complaint plausibly alleged self-dealing and resulting nonpayment of royalties, the case was allowed to proceed beyond the pleading stage.

## Legal Principles

- On a motion to dismiss for failure to state a claim, the court accepts the complaint’s factual allegations as true and affords the plaintiff the benefit of favorable inferences; dismissal is proper only if the pleading fails to state any legally cognizable claim.
- A fiduciary relationship may arise from a relationship of trust and confidence and is not limited to formal categories; whether such a relationship exists can depend on the parties’ dealings and relative positions.
- Where one collaborator allegedly controls or influences the commercial exploitation and payment stream for jointly created works, and is also alleged to have acted in a conflicted role to divert benefits, a breach-of-fiduciary-duty claim may be sufficiently pleaded.
- Allegations of conflict of interest, self-interested conduct, and withholding of royalties can support a fiduciary-duty claim at the pleading stage even if defendants dispute the existence or scope of any duty.

## Conclusion

Universal-MCA Music Publishing and the MCA cowriters alleged that Sean Combs, while acting both as a coauthor and as Bad Boy’s chief executive, used a controlled-composition clause in a recording agreement to reduce or eliminate royalty payments owed on jointly written songs. The court held that, taking the allegations as true, plaintiffs plausibly pleaded a relationship of trust and confidence and alleged self-interested conduct harmful to the cowriters’ royalty interests, so the fiduciary-duty claim could not be dismissed at the outset.


Universal-MCA Music Publishing v. Bad Boy Entertainment, Inc., 2003 WL 21497318, 2003 N.Y. Slip Op. 51037(U) (2003)