Royalty Agreement Does Not Entitle Bob Dylan’s Co-Songwriter Share Proceeds of Dylan Catalog Sale

Does an assignment by a co-songwriter of that co-songwriter’s rights in exchange for a performance and use royalty entitle the co-songwriter to a share of the sale proceeds when the rights are later sold by the other co-songwriter to a third party? No, according to Justice Barry Ostrager’s recent decision in Levy v. Zimmerman.[1] In his decision, Justice Ostrager dismissed a suit filed by the estate of songwriter Jacques Levy in the New York County Commercial Division seeking a share of the more than $300 million in proceeds from the sale by Bob Dylan of his song catalog to Universal Music Group.  In dismissing the case, Justice Ostrager ruled that a 1975 contract unambiguously limited Levy’s rights to a 35% royalty on the performance and use of the ten songs he co-wrote with Dylan in the early 1970s. 

Background

Levy v. Zimmerman is a dispute between the estate of songwriter Jacques Levy and Robert Zimmerman, better known as Bob Dylan.  Levy and Dylan collaborated to write ten songs in the early 1970s, including seven songs in Dylan’s bestselling album Desire.[2]  In 1975, Dylan (through his company Ram’s Horn Music) and Levy signed a contract (the “1975 Agreement”) that detailed, among other things, Levy’s rights related to the ten songs (the “Compositions”).  The contract provided that the songs would become Dylan’s property, and that Levy would receive a 35% royalty on any income from their performance and use.[3] 

In late 2020, Dylan sold his entire song catalog to the Universal Music Group for more than $300 million.[4]  Following the sale, Universal continued to pay a 35% royalty to Levy’s estate (Jacques Levy passed away in 2004) on the understanding that Universal was an assignee of Dylan’s obligations under the 1975 Agreement.  But Levy’s estate contended that it was also entitled to a portion of the sale to Universal.  When Dylan declined to pay Levy’s estate a portion of the proceeds, the estate (Claudia C. Levy, executrix) sued Dylan, along with Universal Music Group, Inc. and Universal Music Publishing Inc. (together “Universal”) for (1) breach of the 1975 Agreement; (2) breach of agreement effecting the Catalog Sale between Dylan and Universal (the “Universal Agreement”); and (3) tortious interference with contract.[5]

The Ruling

Justice Ostrager dismissed Levy’s claim for breach of the 1975 Agreement based on the language of that agreement, which the Court found unambiguous.  First, the Court determined that Levy had no rights in the Compositions beyond those established by the contract because the agreement provided that the Compositions “shall automatically be and become sole property of [Dylan], everywhere and forever” and that “[Levy] hereby sells, assigns, transfers and sets over unto [Dylan] all [Levy’s] right, title and interest in and to the Compositions.”[6]  This provision extinguished, according to the Court, any ongoing ownership rights Levy may have had in the songs.

To determine what payment was owed to Levy in exchange for assigning his rights, the Court identified a 35% performance-and-use royalty as the exclusive compensation.  This royalty was set forth in a contract provision that entitled Levy to “thirty-five (35%) percent of any and all income earned by the Compositions and actually received by [Dylan] from mechanical rights, electrical transcriptions, reproducing rights, motion picture synchronization and television rights, and all other right therein (expressly excluding any income or royalties earned in respect of printed editions of the Compositions) in the United States and Canada.”[7] 

The 1975 Agreement also provided that Levy “shall not be entitled to any compensation or remuneration other than as in this Agreement specifically provided.”[8]  According to Justice Ostrager, this clear language “unambiguously limits plaintiffs’ compensation to 35% of monies received by Dylan for licensing rights granted to third-parties for the performance and use of the Compositions but not for any portion of the proceeds from Dylan’s sale of his complete copyrights.”[9]  Those copyrights, the Court reiterated, “were explicitly vested in [Dylan] alone pursuant to the express terms of the 1975 Agreement.”[10]

Since the language of the 1975 Agreement unambiguously foreclosed Levy’s claim, the Court ruled that parol evidence (i.e. evidence beyond the four corners of the contract) was not admissible.[11]  Nonetheless, Justice Ostrager noted that none of the additional evidence submitted by Levy was not persuasive, including a lengthy “‘expert’ affidavit” that “purport[ed] to interpret the 1975 Agreement.”[12]

Finally, the Court denied leave to replead.  Since the Complaint specifically relied on provisions in the 1975 Agreement that unambiguously foreclosed Levy’s claim, the Court found that amendment would be futile, and the claim was dismissed with prejudice.[13]

No Standing to Enforce Agreement Between Universal and Dylan

The Court next dismissed Levy’s claim for a breach of the Universal Agreement—an agreement to which Levy was not a party.  This claim was based on a third-party beneficiary theory.  Justice Ostrager noted that New York recognizes third-party beneficiary claims only when either (1) “the third party is the only one who could recover for the breach of contract” or (2) “when it is otherwise clear from the language of the contract that there was ‘an intent to permit enforcement by the third party.’”[14] 

The Court found that Levy did not establish either basis for a third-party claim.  Levy was not the only party who could enforce the Universal Agreement, since Dylan “undeniably could sue the Universal Defendants for any nonpayment of monies due or other breach of [the Universal Agreement.]”[15]  And Levy could not identify any language in the contract evincing an intent to permit Levy to enforce the agreement.  Indeed, as Justice Ostrager noted, Levy was “not truly seeking to enforce the Universal Agreement,” but instead was “seeking to enforce [his] compensation rights under the 1975 Agreement.”[16]

Tortious Interference with Contract

Finally, the Court turned to Levy’s claim against Universal for tortious interference with the 1975 Agreement.  Such a claim requires a plaintiff to establish that (1) a valid contract existed between plaintiff and a third party, (2) that the defendant knew of the contract, and then (3) intentionally procured a breach of that contract.[17]  Turning to Levy’s claim, the Court noted that “the most obvious deficiency in plaintiffs’ tortious interference claims is that there was no breach of the contract (i.e., the 1975 Agreement).”[18]  Furthermore, even if Dylan had breached that contract, the Court concluded that the plaintiffs did not plead any facts to establish that Universal caused such a breach.[19]

After dismissing Levy’s tortious interference claims, Justice Ostrager rejected Levy’s request to take discovery.  He noted that “discovery is not permissible as a ‘fishing expedition’ to ascertain whether a cause of action exists.”[20]  That was particularly true in this case, “[a]s plaintiffs here have failed to offer a single, nonconclusory allegation to support their tortious interference claims.”[21]

Conclusion

The Commercial Division ruled in Levy v. Zimmerman that a performance-and-use royalty does not include a share of the proceeds when the assigned copyrights are later sold to a third party.  Rather, according to Justice Ostrager, the third party simply steps into the shoes of the original assignee and continues to pay the royalty.  More broadly, this case is another reminder that a plaintiff cannot invoke external evidence to override the unambiguous language of a contract.  As Justice Ostrager’s analysis reiterates, New York courts do not look beyond the four corners of an agreement to support an interpretation that is contrary to the clear language of the contract.