The following e-filed documents, listed by NYSCEF document number (Motion 005) 97, 98, 99, 109, 110, 111 were read on this motion to DISMISS.

The following e-filed documents, listed by NYSCEF document number (Motion 006) 100, 101, 102, 103, 104, 105, 106, 107, 108, 112 were read on this motion to AMEND PLEADINGS.

This dispute arises from a recording agreement between artists and record labels and distributors. Plaintiffs are members of a band known as Red Queen. Defendants, Sony Music Entertainement, The Century Family Inc., Orchard Enterprises NY, Inc., and Red Distribution, LLC, are record labels and distributors.

In July 2017, plaintiffs signed a recording agreement with defendant Century under which plaintiffs agreed to record an album. The agreement provides that an album must consist of 10 newly recorded original compositions with a total running time of at least 45 minutes, plus four new studio-recorded bonus tracks ("Album 1"). The agreement's term was 12 months from the initial commercial release of the last album in the United States or 18 months after delivery [*2]and acceptance of the album.^[FN1] The agreement provides that album(s) will be released within 180 days of acceptance of recordings and required delivery materials. (See NYSCEF No. 104 at 1.)

The parties agreed that this agreement would be binding until they executed a more formal and long agreement. But the parties executed no further agreements.

Plaintiffs claim that, starting in January 2018, their music was transferred from Century to Red Music. In February 2020, Red Music received Album 1. According to plaintiffs, Red Music merged with Orchard in 2021. That same year, Orchard informed plaintiffs that it no longer intends to release the album. (See NYSCEF No. 102 at 4-5). Defendants claim they have no way to exit and terminate the agreement. (See NYSCEF No. 102 at 10-13).

On motion sequence 005, defendants move under CPLR 3211 (a) (1) and (7), to dismiss (i) the portion of plaintiffs' breach-of-contract claim seeking damages for lost profits/lost business opportunities, lost reputation, emotional damages, and punitive damages; (ii) plaintiffs' claim for breach of the implied covenant of good faith and fair dealing; (iii) plaintiffs' claim for promissory estoppel; (iv) plaintiffs' claim for intentional infliction of emotional distress; (v) plaintiffs' claim for negligent misrepresentation; (vi) dismiss plaintiffs' claim for fraudulent inducement; and (vii) the complaint against Sony in its entirety. (See NYSCEF No. 97). The motion is granted in part and denied in part.

Before this court could decide motion sequence 005, plaintiffs move under CPLR 3025 (b) for leave to file a second amended complaint (motion sequence 006). In the proposed second amended complaint, plaintiffs remove their tort claims.^[FN2] (See NYSCEF No. 102 at 9-13.) The motion is granted.

The motions are consolidated for disposition.

On this motion, plaintiffs move for leave to file their proposed second amended complaint under CPLR 3025 (b). Because this court's conclusion on this motion will determine which version of the complaint is subject to defendants' motion to dismiss (mot seq 005), the court first addresses motion sequence 006 motion. (See Sage Realty Corp. v Proskauer Rose, 251 AD2d 35, 38 [1st Dept 1998] [holding that "moving party has the option to decide whether its motion [to dismiss] should be applied to the new pleadings"].)

In their proposed second amended complaint, plaintiffs seek to drop their tort [*3]claims—for fraudulent inducement, intentional infliction of emotional distress, and negligent misrepresentation—and to focus instead on their contract claims and other claims. (See NYSCEF No. 109 at 4.) According to defendants, plaintiffs are attempting to drop their tort claims without prejudice to avoid an adverse disposition.^[FN3] Defendants thus argue that, effectively, plaintiffs have moved to discontinue their tort claims under CPLR 3217 (b). ^[FN4] (See NYSCEF No. 108 at 3-4.)

Generally, "leave to amend a pleading should be freely granted in the absence of prejudice to the nonmoving party where the amendment is not patently lacking in merit." (Davis v South Nassau Communities Hosp., 26 NY3d 563, 580 [2015] [internal quotation marks omitted].) A plaintiff is permitted to amend its complaint by dropping causes of action. (See Boaz Bag Bag v Alcobi, 129 AD3d 649, 650 [1st Dept 2015] [deeming amended complaint that dropped a claim to be the operative pleading]; Halmar Distributors, Inc. v Approved Mfg. Corp., 49 AD2d 841 [1st Dept 1975] [holding that complaint containing a claim for a permanent injunction was superseded by the amended complaint, which contained no such claim].) Accordingly, the court concludes that plaintiffs may withdraw their tort claims by filing a second amended complaint.

Defendants argue, however, that they will suffer prejudice should this court allow plaintiffs to amend their first amended complaint. Prejudice exists if there is "some indication that the defendant has been hindered in the preparation of his case or has been prevented from taking some measure in support of his position." (Kocourek v Booz Allen Hamilton Inc., 85 AD3d 502, 504 [1st Dept 2011] [internal quotation marks omitted].)

The court concludes that defendants will suffer no prejudice. Defendants will not be hindered in their preparation. Dropping the tort claims will limit the scope of future litigation. Moreover, defendants acknowledge that even if this court grants the motion to amend, defendants may choose whether to apply their pending motion to dismiss to the second amended complaint. (NYSCEF No. 111 at 1, citing Sage Realty, 251 AD2d at 38].) Further, the proposed second amended complaint does not introduce new causes of action or factual allegations. Allowing plaintiff to amend their first amended complaint will thus not prejudice defendants.

Plaintiffs' motion for leave to amend their first amended complaint is granted. The proposed second amended complaint is deemed the operative pleading.^[FN5]

Plaintiffs argue that their proposed second amended complaint, renders defendants' motion to dismiss academic. (NYSCEF No. 109 at 4.) The court disagrees.

Plaintiffs' second amended complaint does not automatically render defendants' motion to dismiss moot. As stated above, defendants, as the moving parties, have "the option to decide whether [their] motion should be applied to the new pleadings." (Sage Realty, 251 AD2d at 38.) Here, defendants effectively consented to applying their motion dismiss to the second amended complaint. They expressly rely on their prior filings and do not seek to withdraw the pending motion. Accordingly, the court applies defendants' motion to dismiss to the remaining "challenged causes of action." (Calcagno v Roberts, 134 AD3d 1292, 1292 n [3d Dept 2015].)

A. Breach of Contract

The agreement provides for a $25,000 advance on Album 1. Plaintiffs allege that Century was obligated to pay half the advance to plaintiffs upon executing the agreement, and the other half on complete delivery of Album 1 but that Sony paid the first installment of the advance more than a year after execution and that defendants did not pay the second installment. (See NYSCEF No. 102 at ¶¶ 3, 7, 10-11.) Plaintiffs also allege that defendants breached the agreement by failing to release Album 1 within 180 days of defendants' acceptance of recording masters and all required delivery materials. (See id. at ¶¶ 11, 13.) Plaintiffs seek $1 million in compensatory damages for resulting financial losses and lost opportunities. (See id. at 12).

i. Lost Profits and Opportunities

Plaintiffs allege that defendants' conduct harmed plaintiffs' reputation, slowed their career development, and caused them to lose future career prospects and opportunities. (See id. at 10-13.) Defendants argue that neither the agreement nor the parties contemplated lost profit, and that lost profits are anyway not ascertainable. (See NYSCEF No. 78 at 12-13). Defendants further argue that plaintiffs' claim for reputational damages is not actionable within a breach-of-contract action. (See id. at 12.)

To recover for lost profits on a breach-of-contract claim, plaintiff must establish that "such damages were actually caused by the breach, that the particular damages were fairly within the contemplation of the parties to the contract at the time it was made and that the alleged loss is capable of proof with reasonable certainty." (Awards.com, LLC v Kinko's, Inc., 42 AD3d 178, 183 [1st Dept 2007], affd 14 NY3d 791 [2010] [internal quotation marks omitted].)

Here, the agreement does not indicate whether the parties contemplated lost profits as recoverable damages. (See NYSCEF No. 93 at 7; NYSCEF No. 81). Moreover, defendants argue that a stricter standard applies to new businesses seeking lost profits, because those claims might lack a sufficient basis for estimating damages with reasonable certainty. (See NYSCEF No. 78 at 12, citing Kenford Co., Inc. v County of Erie, 67 NY2d 257, 261 [1986] ["If it is a new business seeking to recover for loss of future profits, a stricter standard is imposed for the obvious reason that there does not exist a reasonable basis of experience upon which to estimate lost profits with the requisite degree of reasonable certainty."].)

Plaintiffs knew that they were merely "envisioning a band at the cusp of stardom." (NYSCEF No. 107 at 2 [preamble to tour budget].) Plaintiffs concede they were emerging artists with 29,000 YouTube subscribers and only about $16,000 in streaming revenue. (See NYSCEF No. 86 at 2; NYSCEF No. 87 at 2.) Plaintiffs submit a detailed breakdown of a potential touring budget and projected revenues; the data is presented as best-case-scenario budgets and optimized revenue estimates. (NYSCEF No. 107). But the data is speculative; it lacks reference to actual lost profits or concrete missed opportunities. It would be unreasonable to expect a record label company or distributor to assume liability for lost profits attributed to an emerging artist who had never previously undertaken a tour or recorded an album. (See Awards.com, 42 AD3d at 184 ["It would be highly speculative and unreasonable to infer an intent to assume the risk of lost profits in what was to be a start-up venture."].)

Plaintiff have not shown that their loss is capable of "proof with reasonable certainty." (Kenford, 67 NY2d at 261.) This branch of plaintiffs' breach-of-contract claim is dismissed.

ii. Remittance

Plaintiffs allege that defendants breached the agreement by failing timely to pay the advance for Album 1 and the second installment at all. (See NYSCEF No. 102 at ¶19.) In addition, defendants allegedly failed to pay $20,000 in tour support for Album 1; $20,000, for video production per album; $1,500 for artwork per album; and $3,000 for photography per album. (Id.)

Here, the remittance claims are distinct from lost profit and opportunities claims. The court concludes that plaintiffs have sufficiently pleaded their remittance claims by referencing particular contractual obligations. This branch of the motion to dismiss the breach-of-contract claim is denied.

B. Promissory Estoppel

Plaintiffs allege that defendants made verbal and written promises to provide management, booking agents, and promotional efforts to plaintiffs and that plaintiffs relied on those promises. (NYSCEF No. 102 at 11). Plaintiffs argue that those promises induced them to dedicate their time, resources, and energy to furthering their music careers. (See id.) Defendants argue that the underlying promises are the same as the obligations contained within the agreement and therefore that the promissory-estoppel claim is duplicative of the breach-of-contract claim. (See NYSCEF No. 78 at 13).

The elements of a claim for promissory estoppel include "(1) a promise that is sufficiently clear and unambiguous; (2) reasonable reliance on the promise by a party; and (3) injury caused by the reliance." (Schroeder v Pinterest Inc., 133 AD3d 12, 32 [1st Dept 2015].) An estoppel claim is not viable, however, when the conduct underlying the claim is governed by an agreement. (See Pope Contr., Inc. v New York City Hous. Auth., 214 AD3d 519, 521 [1st Dept 2023].)

Plaintiffs make only a conclusory allegation of detrimental reliance. Plaintiffs say that [*4]they invested time and effort in furthering their careers, "because Defendants made clear verbal and written promises to provide management, booking agents, and promotional efforts." (NYSCEF No. 102 at ¶ 22.) But these actions reflect professional obligations, not detrimental reliance. The agreement itself contains provisions governing management, touring support, and promotion of Album 1. (See NYSCEF No. 104 at 2 -3.) And plaintiffs do not allege a promise independent of the agreement.

The branch of the motion to dismiss promissory-estoppel claim is granted.

C. Breach of the Covenant of Good Faith and Fair Dealing

Plaintiffs allege that defendants breached the covenant of good faith and fair dealing by failing to promote plaintiffs' work, make timely payments, and adhere to the agreed schedule. (See NYSCEF No. 102 at 11). In particular, plaintiffs argue that the defendants did not provide them with a long-term agreement and that the agreement does not have an unambiguous termination clause.

Defendants contend that plaintiffs make "allegations of breach [that] all relate to specific provisions of the Agreement" and therefore that the claim for breach of the covenant of good faith and fair dealing is duplicative of plaintiffs' breach-of-contract claim. (See NYSCEF No. 78 at 18).

The implied covenant of fair dealing requires that neither party destroy nor undermine the other party's ability to receive the benefits of the contract. (511 W. 232nd Owners Corp. v Jennifer Realty Co., 98 NY2d 144, 153 [2002].) A breach of the covenant of good faith and fair dealing constitutes a breach of the contract. (Boscorale Operating, LLC, 298 AD2d 330, 331 [1st Dept 2002].) A breach-of-the-covenant claim is therefore duplicative of a breach-of-contract claim when "it is premised on the same conduct that underlies the breach of contract cause of action and is intrinsically tied to the damages allegedly resulting from a breach of the contract." (Parlux Fragrances, LLC v S. Carter Enterprises, LLC, 204 AD3d 72, 92 [1st Dept 2022] [internal quotation marks omitted].)

Plaintiffs' breach-of-covenant claim arises from the contract itself. The claims sound in breach of contract, not breach of the covenant. The court therefore concludes that plaintiffs may join these claims to their breach-of-contract claim. (See Parlux Fragrances, 204 AD3d at 92 ["Because a breach of the covenant of good faith and fair dealing is a breach of the contract itself, plaintiffs may press their theory that defendants acted in derogation of the covenant in conjunction with their cause of action for breach of the license agreements."].)

The branch of the motion to dismiss plaintiffs' claim for breach of the covenant of good faith and fair dealing is granted. Plaintiffs' allegations under this claim, however, are applied to plaintiffs' breach-of-contract claim.

D. Action Against Sony

Defendants argue that Sony should be dismissed from this action, because it was not a party to the agreement. (NYSCEF No. 78 at 17.) The court agrees.

According, to plaintiffs, Century had an obligation to pay 50% of the advance on Album 1 once the parties executed the agreement on July 15, 2017. Plaintiffs allege that Sony paid the first installment of the advance for Album 1 on September 26, 2018. (See NYSCEF No. 104 at 2-6; NYSCEF No. 102 at 5). But plaintiffs allege no additional facts establishing Sony's role in the recording process or imposing any further obligations on it toward plaintiffs.

Sony was not a party to the agreement. Given that the only claim that survives this motion is plaintiffs' cause of action for breach of contract, the action is dismissed against Sony.

Accordingly, it is

ORDERED that plaintiffs' motion for leave to amend their first amended complaint (mot seq 006) is granted; and the proposed second amended complaint is deemed the operative pleading; and it is further

ORDERED that the branch of defendants' motion to dismiss the lost-profits-and-opportunities portion of plaintiffs' breach-of-contract claim (mot seq 005) is granted; and it is further

ORDERED that the branch of defendants' motion to dismiss the remittance portion of plaintiffs' breach-of-contract claim (mot seq 005) is denied; and it is further

ORDERED that the branch of defendants' motion to dismiss plaintiffs' promissory estoppel and breach-of-the-covenant-of-good-faith-and-fair dealing claims (mot seq 005) is granted; and it is further

ORDERED that the action dismissed as against defendant Sony (mot seq 005); and it is further

ORDERED that the balance of the claims in this action are severed and shall continue; and it is further

ORDERED that the parties appear for a telephonic preliminary conference on August 12, 2025; and it is further

ORDERED that plaintiff serve a copy of this order with notice of its entry on defendants and on the office of the County Clerk (using the NYSCEF document type "Notice to the County Clerk - CPLR § 8019 (c)"), which shall enter judgment accordingly.