Ditto Ltd v Drive-Thru Records LLC (a Ltd liability partnership registered under the laws of the State of California)
| Jurisdiction | England & Wales |
| Judge | Master Francis |
| Judgment Date | 20 July 2021 |
| Neutral Citation | [2021] EWHC 2035 (Ch) |
| Docket Number | Case No: BL-2020-001133 |
| Court | Chancery Division |
[2021] EWHC 2035 (Ch)
DEPUTY Master Francis
Case No: BL-2020-001133
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (Ch D)
Royal Courts of Justice
Fetter Lane, London, EC4A 1NL
Justin Kitson (instructed by Trainer Shepherd Phillips Melin Haynes LLP) for the Claimant
Lisa Lacob (instructed by Keystone Law) for the Defendants
Hearing date: 19 May 2021
APPROVED JUDGMENT
I direct that this approved judgment, sent to the parties by email on 20 July 2021, shall deemed to be handed down on that date, and copies of this version as handed down may be treated as authentic.
On 3 December 2020 Master Teverson granted permission pursuant to CPR r. 6.36 to the Claimant, Ditto Limited (“Ditto”), to serve the claim in this matter on the Defendants, Drive-Thru Records LLC (“Drive-Thru”) and War Road Music Inc (“War Road”), out of the jurisdiction. The Defendants subsequently applied to set aside that order under CPR r. 11 (1) by application dated 22 February 2021. That application came before me on 19 May 2021, with Drive-Thru and War Road represented by Lisa Lacob of Counsel, and Ditto by Justin Kitson of Counsel. The hearing was prefaced by detailed skeleton arguments prepared by them both, and was followed at its conclusion by further short written submissions on relevant authorities concerning the jurisdictional gateway in tort claims under PD6B paragraph 3.1 (9), and on the authorities discussed in paragraphs 50 and 51 below concerning the place where the contract was made for the purposes of the jurisdiction gateway in contract under PD6B paragraph 3.1 (6) (a). This is my judgment on the application.
Factual background
The parties
Ditto is a limited company incorporated in England. Its registered office, which also serves as its administrative headquarters, is in Liverpool, although it also has an office in London. It has two directors, both described as CEOs, Matthew Parsons and Lee Parsons, who were between them at the relevant times the owners of the entire issued share capital in the company.
Ditto carries on business under the trading name Ditto Music as a digital music distributor. It is one of a number of corporate entities which operate under the Ditto Music brand worldwide, including Ditto Inc., a Tennessee registered company. The exact relationship between these entities is not explained in the evidence, but it is clear that Ditto Music, although initially established in the United Kingdom, is now a global operation with offices in at least 20 countries, in Europe, the United States and elsewhere. Its core business is the distribution of musical recordings to online stores such as iTunes and Spotify and collection of royalties from sales of such recordings, for which artists pay either a yearly subscription or a percentage of the royalty. It also provides more traditional record-label services including financial support for artists to record music and promoting such music.
Drive-Thru is a limited liability partnership registered in California, owned and managed by siblings Richard Reines and Stefanie Reines, both of whom reside in California. It is the vehicle through which they operate a record label which was founded by them in 1995 and enjoyed considerable success in the early years of this century in finding and promoting a number of pop-punk and indie bands. In more recent years, it has primarily been a catalogue label, holding the rights in a portfolio of music and video recordings. Before its collaboration with Ditto, the subject of the present claim, Drive-Thru licensed the exploitation of such recordings to other distributors in North America and other territories, including PIAS in Europe.
War Road is a Californian corporation of which the Reines are also the owners and managers. It is stated in evidence that the company was incorporated on 31 July 2019, which is a date later than the contract which is the subject of the present claim against it, but neither party has taken any point on this. It is the corporate vehicle through which they operate a new record label, established by them to find and promote an up-coming generation of artists and bands, the bulk of whom are based in the United States.
The Reines also provide artist management services, although it is not clear whether this is in their own name or through a corporate entity, and if so whether War Road or another similarly named company.
Events leading up to the July 2019 agreements
In July 2019 Ditto entered into two written agreements, with Drive-Thru and War Road respectively, under which Drive-Thru and War Road granted Ditto rights to exploit their portfolios of music and video recordings worldwide. In return Ditto agreed to provide funding, inter alia to facilitate the remastering, remixing and repackaging of existing Drive-Thru recordings, and the signing and development of new artists by War Road. This funding took the form of advances which were to be recouped from the royalties collected by Ditto from the licensing of the recordings to digital platforms and elsewhere, with any surplus royalties thereafter being shared between them. It will be necessary to return to consider some of the detailed provisions of these agreements in due course.
The negotiations which led to these written agreements had commenced in January 2019, initially between the Reines and Christopher Mooney. Mr Mooney was at the time employed by Ditto's sister company, Ditto Inc., as Head of US Operations, and was based in New York where he worked from home or from serviced office space in the Dumbo district, but it is common ground was acting on behalf of Ditto in these dealings. In his first witness statement filed in support of the application for permission for service out, Michael Shepherd, Ditto's solicitor, describes Mr Mooney as an employee of Ditto itself, a mistake perhaps arising from there being no clear delineation on the ground between the different corporate entities within the Ditto Music operation.
In due course Mr Mooney brought in Craig May, Ditto's Global Head of Artist and Label Services, based in its London office, who Mr Mooney describes as his then supervisor, and discussions continued between the Reines, Mr Mooney and Mr May by telephone and e-mail during February and March 2019. Mr May was responsible for liaising with Matthew Parsons on the proposed terms and then, in or before May 2019 in reducing into a legal text the broad heads of agreement which had been reached. The Reines in turn brought in their New York based attorney, Jason Matuskievicz, to finesse the terms of such text.
By 6 June 2019 draft terms of what are described as “short-form agreements” had been settled, and on 13 June 2019 Mr May sent out “clean, execution copies” of the two agreements for signature. These agreements concluded with the following words:-
It is the intention of the Licensee and Licensor that they negotiate and enter into a more comprehensive formal long form agreement incorporating the agreed terms of this Agreement together with additional terms and conditions as are standard in agreements of this kind in the music industry ( Long Form Agreement). In the event a Long Form Agreement is not concluded, the parties agree to be bound by the terms and conditions of this Agreement
Following this, the agreements contained signature blocks signalling an intention that they were to be completed by each party signing the same.
In the morning of 14 June 2019 Stephanie Reines inquired of Mr May whether he required hard copies of the signed agreement, or just digital. Mr May replied that “digital copies would suffice” and that “we can do some kind of fancy signing thing for the long form”. Richard Reines signed the two agreements on behalf of Drive-Thru and War Road the same day using the DocuSign app and returned the same to Mr May and Mr Mooney by e-mail. Subsequently, the agreements were signed by Matthew Parsons on Ditto's behalf and these were then sent by Craig May to Richard Reines by e-mail on 17 June 2019.
In its particulars of claim, Ditto states the two agreements were entered into on 17 June 2019, at the conclusion of the process described above. In his first witness statement made in support of the service-out application, Ditto's solicitor, Michael Shepherd, of Trainer Shepherd Phillips Melin Haynes, similarly states that the agreements were made on 17 June 2019. However, in a second, supplemental statement, Mr Shepherd states that the agreements were in fact concluded on 14 June 2019 when the copies signed by Mr Reines were received by Mr May. I shall return to this in considering the jurisdictional gateway which applies to contractual claims under PD6B paragraph 3.1 (6).
Finally, I should note at this stage that Ditto alleges that Mr Reines made certain representations which were untrue upon which it relied in entering into the agreements. They concern:-
a) statements concerning the income which Drive-Thru had derived from its catalogue and the interest of big-name artists in working with Drive-Thru on a new compilation album which were made in two e-mails sent by Mr Reines to Mr May and Mr Mooney on 23 February 2019 and 4 April 2019 (detailed in paragraphs 7.5 and 7.6 of the particulars of claim); and
b) other promises or statements of intent on the part of both Drive-Thru and War Road made in the course of oral discussions over the telephone (detailed in paragraphs 7.1 to 7.4 and 7.7 and 7.8 of the particulars of claim).
The terms of the two agreements
The core express terms of the first...
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