Plaintiff Toto brought the action against Sony Music based on a dispute over the amount of royalties owed under the parties' recording contract. Sony moved to dismiss, and the motion was granted in part and denied in part. The primary issue in the case ise the royalty rate for music distributed through download and mastertone providers (e.g., iTunes, eMusic, Amazon.com and Verizon Wireless).
The magistrate judge found that Toto's first claim based on royalty accountings for the audit period should be dismissed as contractually time barred. The parties agreement had a 3 year limitation period (i.e., claims had to be brought within 3 years from the royalty report). Toto's argument that August 2010 and December 2011 documentation restarted the time limitation was unavailing. However, the magistrate judge found that the portion of Toto's first claim based on royalty accountings for the post-audit period should not be dismissed with respect to the digital download issue. In other words, Toto stated a claim for breach of the recording contract for the period within the contractually agreed to 3 year limitation period.
The magistrate judge also found that Toto failed to plead the elements of equitable estoppel. The Court held that purposefully delaying an audit was not a ground for invoking equitable estoppel. Also, participation in settlement negotiations was not a ground for invoking equitable estoppel.
The magistrate judge also found that Toto's claim for breach of the implied covenant of good faith and fair dealing should be dismissed. The claim did not state a distinct cause of action based on a separate set of facts and was not independent of the breach of contract claim. The good faith and fair dealing claim was duplicative of the breach of contract claim.