Opinion ID: 2744910
Heading Depth: 2
Heading Rank: 1

Heading: Net Revenue Actually Received

Text: As stated, the royalty provision provides that the Second Party will pay to the First Parties a sum equal to fifty (50%) percent of the net revenue actually received by the Second Party . . . from foreign publication (Agreement, ¶3 [a] [emphasis added]). This language is not ambiguous, as a plain reading of the provision indicates that plaintiff, through payment to the First Parties, is entitled to receive 50% of the net revenue actually received from foreign subpublishers. The Agreement does not state what percentage of the net receipts generated from the foreign sale of the relevant musical compositions is to be retained by the foreign subpublishers. Rather, it states only that whatever amount EMI actually received would be split equally with the First Parties. The Agreement - 7 - - 8 - No. 156 contemplates that the royalties paid to the First Parties would be based on the revenue remitted to EMI itself. Although at the time the Agreement was executed the parties apparently did not contemplate that EMI would affiliate itself with foreign subpublishers, the percentage retained by the affiliated foreign subpublishers is not an amount actually received by EMI, but a fee for the subpublishers' services. The royalty provision makes no distinction between affiliated and unaffiliated foreign subpublishers. Therefore, the courts below properly declined to read such a distinction into the contract as it does not appear to have been the intent of the parties that such a distinction be included, primarily because they were understandably unaware that such a change in the industry would occur. Nonetheless, the Agreement does not prevent EMI from using affiliated foreign subpublishers, and it does not prevent the affiliated foreign subpublishers from retaining a portion of the total sale owed to them for their services, prior to remitting the remainder to EMI.2 Thus, the phrase net revenue actually received is not ambiguous. 2 Plaintiff's argument that defendant may have breached the covenant of good faith and fair dealing by paying its affiliate foreign subpublishers rates that far exceed the market rate paid to unaffiliated subpublishers was raised for the first time in this Court, and is unpreserved. Although the parties mentioned in their Appellate Division briefs a hypothetical case where EMI may have breached the covenant of good faith and fair dealing, plaintiff did not plead that claim and did not squarely make that claim prior to his appeal to this Court. - 8 - - 9 - No. 156