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FILED: NEW YORK COUNTY CLERK 03/16/2023 05:04 PM INDEX NO. 656312/2022
NYSCEF DOC. NO. 82 RECEIVED NYSCEF: 03/16/2023
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
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SAMSUNG ELECTRONICS CO., LTD., : Index No.: 656312/2022
: (Hon. Melissa A. Crane)
Plaintiff, :
:
-against- : [Motion Sequence No. 004]
:
:
MPEG LA, L.L.C., :
:
Defendant. : ORAL ARGUMENT REQUESTED
:
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MPEG LA’S REPLY MEMORANDUM OF LAW IN FURTHER
SUPPORT OF ITS MOTION TO DISMISS SAMSUNG’S SECOND CAUSE
OF ACTION IN ITS AMENDED COMPLAINT FOR BREACH OF THE
IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING
WINDELS MARX LANE & MITTENDORF, LLP
Craig P. Murphy
John D. Holden
Delton L. Vandever
Philip M. Taylor
Benjamin J. Kusmin
156 West 56th Street
New York, New York 10019
(212) 237-1000
Attorneys for Defendant MPEG LA, L.L.C.
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TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES .......................................................................................................... ii
PRELIMINARY STATEMENT .....................................................................................................1
ARGUMENT ...................................................................................................................................3
POINT I
SAMSUNG CANNOT STATE A CLAIM FOR
BREACH OF THE IMPLIED COVENANT ............................................................................3
POINT II
THE COURT PREVIOUSLY DISMISSED SAMSUNG’S IMPLIED
COVENANT CLAIM AND CAN AND SHOULD DO SO AGAIN .......................................6
POINT III
SAMSUNG’S BREACH OF IMPLIED COVENANT CLAIM
COLLAPSES INTO ITS BREACH OF CONTRACT CLAIM ................................................7
CONCLUSION ................................................................................................................................9
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TABLE OF AUTHORITIES
Page(s)
Cases
Am. Home Assur. Co. v. Port Auth. of New York & New Jersey,
40 Misc. 3d 1236(A) (Sup. Ct. N.Y. Cty. 2013) ................................................................. 8
Beatrice Invs., LLC v. 511 9th LLC,
177 A.D.3d 551 (1st Dep’t 2019) ....................................................................................... 6
Cobalt Partners, L.P. v. GSC Cap. Corp.,
97 A.D.3d 35 (1st Dep’t 2012) ........................................................................................... 6
Gay v. Farella,
5 A.D.3d 540 (1st Dep’t 2004) ........................................................................................... 6
JN Contemp. Art LLC v. Phillips Auctioneers LLC,
29 F.4th 118 (2d Cir. 2022) ................................................................................................ 8
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Defendant MPEG LA, L.L.C. (“MPEG LA”) respectfully submits this Reply
Memorandum of Law in further support of its motion to dismiss, with prejudice, for failure to state
a claim, the second cause of action asserted by Samsung Electronics Co., LTD. (“Samsung”) in its
amended complaint alleging breach of the implied covenant of good faith and fair dealing under
the Licensing Administrator Agreement (the “LAA”).
PRELIMINARY STATEMENT
Samsung alleged that MPEG LA breached the implied covenant of good faith and fair
dealing under the LAA by orchestrating the Licensors’ amendment of the AAL to punish Samsung.
The Court dismissed that claim because it was too vague. The Court gave Samsung the chance to
plead facts, alluded to by counsel, that MPEG LA “snuck the amendment” in “under cover of
night.” Apart from its Memorandum of Law suggesting Samsung is in denial that its claim was
even dismissed, Samsung has failed to do so. Not even close. In fact, having led this Court during
oral argument to believe that MPEG LA snuck the amendment in through the back door, Samsung
now has the audacity to state: “Nowhere does Samsung allege that MPEG LA tricked a Licensor
into voting as it did, or that Licensors have complained about MPEG LA’s voting procedures.”
(Samsung Opp. Mem. (NYSCEF Doc. No. 70) p. 8 (emphasis added).)
Undermining its claim even further, Samsung also now concedes that MPEG LA may
indeed propose amendments to the AAL. And the only new facts alleged by Samsung are that
voting was conducted by confidential ballot (i.e., just like used by States across the U.S.) and
MPEG LA specifically informed Licensors (i.e., did not trick them) that a failure to respond would
be counted as a “yes” vote (i.e., a manner recognized under the AAL). As shown in MPEG LA’s
moving papers and herein, both are proper and no negative inferences can be reasonably drawn
from either. Thus, despite its liberal use of the word “foment” substituting for arguments lacking
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in merit, Samsung’s renewed claim for breach of the implied covenant is even less tenable now
than before and must be dismissed.
Nor do any of the three exhibits that Samsung attaches to its opposition papers show that
MPEG LA acted underhandedly or deceitfully.1 In fact, Exhibit 3 discredits Samsung’s arguments.
First, it shows that MPEG LA, far from trying to sneak in the amendment, actually followed up
with Licensors to remind them that a failure to respond would be counted as a vote for approval
and gave them an additional opportunity to respond. (Samsung Ex. 3 (NYSCEF Doc. No. 74) at
MPEGLA_00019544 (“As mentioned below, your failure to communication approval or
disapproval will be counted as a vote for approval. If you do wish to communicate your approval
or disapproval to me …, we will accept it if received by 09:00 US EDT Monday June 22 but not
later.”).) Second, it shows that, far from trying to trick Licensors into voting for a 50% reduction
in royalties, MPEG LA had to talk this Licensor down from demanding a 100% reduction.
Third, it shows that MPEG LA was not seeking to punish Samsung. This Licensor initially
indicated its disapproval of the amendment because it thought Samsung should get nothing, let
alone 50%. (Samsung Ex. 3 at MPEGLA_00019544.) MPEG LA responded because if the
Licensor was prepared to approve terminated Licensors getting nothing, which was not proposed,
then it was reasonable to expect it would approve the proposal giving them 50%. MPEG LA went
on to explain that “[t]he purpose of the amendment is to recognize the continued support that
nonterminated Parties give to the License” and “[i]t cannot be to punish terminated Parties.” (Id.
at MPEGLA_00019543.) It is only in this context, moreover, that MPEG LA asked the Licensor
to reconsider the potential unintended effect of its vote. (Id.)
1
In Exhibit 1, a terminated licensor similarly situated to Samsung and without voting rights complains about
the amendment but did not bring suit. In Exhibit 2, a Licensor exercises its right to vote and does not say it was tricked.
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ARGUMENT
POINT I
SAMSUNG CANNOT STATE A CLAIM FOR
BREACH OF THE IMPLIED COVENANT _
Samsung cannot state a claim against MPEG LA for breach of the implied covenant
because MPEG LA did nothing wrong. In allowing Samsung to replead its claim, the Court was
clear that Samsung must allege facts showing that MPEG LA did something “illegal” or
“underhanded,” i.e., “[i]t has to be bad faith.” (Tr. (NYSCEF Doc. No. 48) pp. 24:16-22; p. 25:7,
9-14.) The Court emphasized that, otherwise, Samsung runs into the line of cases that MPEG LA
did what it is permitted and expected to do under the contract. (Id. p. 25:9-14 (“I don’t think it’s
enough that they had revenge in mind because you are not accusing them of doing anything
underhanded. You need more because then I am running into the line of cases that are like, [w]ell,
they were allowed to do it under the contract, so you don’t have a good faith and fair dealing
claim.”). Here, Samsung runs headlong into these cases. Samsung admits that MPEG LA is
allowed to propose amendments to the AAL and Samsung has not pleaded any illegal or
underhanded acts by MPEG LA.
First, Samsung now admits that MPEG LA may propose amendments to the AAL, although
it clings to the nonsensical argument that contractual amendments should not be allowed to amend
the contract if it affects Samsung: “Samsung’s claim in no way impacts MPEG LA’s ability to
propose amendments under Section 6.3, or any other provision of the AAL, so long as MPEG LA
does so in a manner that does not seek to rob Samsung of the benefit of its bargain.” (Samsung
Opp. Mem. p. 13 (emphasis added).) If Samsung’s theory were correct, then amendment
provisions would not matter and votes would not matter because any Licensor or terminated
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Licensor could simply object that an amendment applying to any licensor is invalid simply because
it affected them. That is not how the contract is written and that is not the law.
Second, in its Amended Complaint, Samsung does not allege any of the supposed bad acts
by MPEG LA. Samsung concedes: “Nowhere does Samsung allege that MPEG LA tricked a
Licensor into voting as it did, or that Licensors have complained about MPEG LA’s voting
procedures.” (Samsung Opp. Mem. p. 8 (emphasis added).) This, in and of itself, should put an
end to Samsung’s breach of implied covenant claim. Despite whatever counsel may have alluded
to on the record, it dared not do so in the Amended Complaint because it is not true. It was all
puffery. MPEG LA did not trick the Licensors by sneaking an amendment in under the cover of
night and, despite being given the opportunity, Samsung has not asserted any facts that it did.
As shown in MPEG LA’s moving papers, moreover, there is nothing nefarious with the
manner in which MPEG LA conducted the vote. (See MPEG LA Mov. Mem. (NYSCEF Doc. No.
64) at Point I.) Samsung argues that it should be entitled to an inference that MPEG LA prevented
Licensors from communicating with each other by conducting the vote by confidential ballot.
(Samsung Opp. Mem. p. 8.) That is not a reasonable inference; that is bald speculation. Samsung
does not cite an ounce of support for such a conclusion, which goes against common experience.
To even suggest that MPEG LA could stop any of these sophisticated Licensors from speaking to
each other is preposterous, as Samsung well knows from having been a Licensor itself.
Samsung also argues that, under rules of contract construction, MPEG LA is precluded
from informing Licensors that a non-response counts as an affirmative vote because the AAL
allows such a voting method to amend the definition of the HEVC Standard but is silent as to the
method to be used for other amendments. (Samsung Opp. Mem. p. 10.) Samsung’s argument
misses the mark. The now admitted fact that the AAL allows such a voting method shows that the
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procedure is not deceitful or underhanded. To assert otherwise would be to assert that the
Licensors, including Samsung, intentionally adopted a deceptive voting method. Further, given the
AAL’s otherwise silence on voting procedures, it was quite reasonable for MPEG LA to use the
one method that it knows the Licensors have approved.
Samsung further argues that MPEG LA is demanding that “Samsung prove its entitlement
to relief at the pleading stage” by faulting Samsung for “failing to reference a single Licensor that
claims it was duped or tricked into its vote.” (Samsung Opp. Mem. p. 7.) That is not so. Rather,
MPEG LA faults Samsung for not alleging a single fact supporting its claim that MPEG LA
engaged in an underhanded or deceitful act, including that a single Licensor was actually duped or
tricked by MPEG LA. As the Court stated in dismissing MPEG LA’s counterclaim for breach of
the implied covenant, “it is telling that nowhere does MPEG [LA] allege that Samsung was
successful in convincing the other licensors to abandon MPEG [LA].” (Tr. p. 35:14-16.) The same
reasoning applies here in that nowhere does Samsung allege that MPEG LA actually duped or
deceived the Licensors in to voting for the amendment.2 In essence, then, MPEG LA did not do
anything it was not expressly allowed to do under the agreements, and a good faith and fair dealing
claim cannot change that. The claim must be dismissed.
2
This is the very argument Samsung made in seeking to dismiss MPEG LA’s implied covenant counterclaim.
As argued by Samsung: “Do you see an allegation in the complaint that a single licensor quit the MPEG pool at our
behest? No. So it’s a big, So what?” (Tr. p. 18:9-1 (emphasis added)), and “The point they make is, We spoke to other
licensors. They don’t allege a single licensor has left the pool, so it’s a big nothing burger.” (Id. p. 28:4-7 (emphasis
added)). The same must apply here. In suggesting that MPEG LA did something deceitful or underhanded to trick the
Licensors into voting for the amendment, Samsung’s failure to argue that a single Licensor was tricked or deceived
means it is “a big, So What” or a “big nothing burger.”
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POINT II
THE COURT PREVIOUSLY DISMISSED SAMSUNG’S IMPLIED
COVENANT CLAIM AND CAN AND SHOULD DO SO AGAIN__
There can be no question of the Court’s authority to dismiss Samsung’s renewed claim for
breach of the implied covenant, especially since Samsung’s new allegations only serve to
undermine its claim further. Contrary to Samsung’s suggestion, “the law of the case doctrine does
not apply to the court’s comment at oral argument, particularly because the court’s earlier
determination was based on a different iteration of the complaint.” Beatrice Invs., LLC v. 511 9th
LLC, 177 A.D.3d 551, 551 (1st Dep’t 2019); see also Cobalt Partners, L.P. v. GSC Cap. Corp.,
97 A.D.3d 35, 39 (1st Dep’t 2012) (“Law of the case did not require the court to deny the motion
to dismiss the second amended complaint, even though it had previously denied the motion to
dismiss the amended complaint. Law of the case is a discretionary doctrine, and the second
amended complaint differed from the amended complaint.”) (internal citations omitted); Gay v.
Farella, 5 A.D.3d 540, 541 (1st Dep’t 2004) (“Since the original complaint was superseded by the
amended complaint, rendering the sufficiency of the allegations in the original complaint
academic, the law of the case doctrine did not bar the Supreme Court from entertaining the
defendants’ motion to dismiss the amended complaint.”) (internal citations omitted).
Further, the Court never held that Samsung has a viable implied covenant claim as
Samsung now seems to argue in an alternate reality. In fact, the Court started by saying “I don’t
really see it here.” (Tr. p. 2:13-14; see also p. 7:9-14.) And the Court concluded by dismissing the
claim because there were no factual allegations that MPEG LA did anything wrong: “But the
problem is that this isn’t anything they weren’t – you know, I’m not sure it’s enough…. I’m not
sure this makes it across the line for good faith and fair dealing. You are not accusing them of
doing anything illegal, really. That’s the problem I have.” (Id. p. 24:16-22.) The Court emphasized
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that “[i]t has to be bad faith.” (Id. p. 25:7.) The Court then stated: “I don’t think it’s enough that
they had revenge in mind because you are not accusing them of doing anything underhanded. You
need more because then I am running into the line of cases that are like, [w]ell, they were allowed
to do it under the contract, so you don’t have a good faith and fair dealing claim.” (Id. p. 25:9-14.)
Samsung has not and cannot remedy this fatal defect in its claim.
Samsung argues that “MPEG LA’s second attack on Samsung’s implied covenant claim
thus fares no better than the first.” (Samsung Opp. Mem. p. 1.) MPEG LA’s first motion to dismiss
was granted and its current motion can and should be granted as well.
POINT III
SAMSUNG’S BREACH OF IMPLIED COVENANT CLAIM
COLLAPSES INTO ITS BREACH OF CONTRACT CLAIM
If it was uncertain before, Samsung now makes it abundantly clear that its breach of implied
covenant claim is nothing more than a repeat of its breach of contract claim. At oral argument and
in its amended complaint, Samsung relies on Section 3.12 of the LAA as underpinning its breach
of implied covenant claim. (See Tr. p. 8:10-12 (“You, MPEG LA, agreed as part of the contract
you entered into with Samsung that you would act in good faith – and I can pull up the language
….”); pp. 25:22-26:1 (“And, your Honor, I will just wrap it up with 3.12 of the LAA: ‘The
Licensing Administrator agrees to use commercially reasonable best efforts to fully and in good
faith cooperate with each licensor in connection with the subject matter of this agreement.’”); Am.
Cmpl. ¶ 24 (“[i]t also must be read alongside MPEG LA’s obligation, in Section 3.12 of the
LAA”).) Samsung belatedly recognizes, however, that Section 3.12 did not survive its termination
of the LAA. (Samsung Opp. Mem. p. 12.)
So what does Samsung do to avoid this conundrum? It pivots and now argues that its “claim
does not rely on a breach of an implied covenant arising out of Section 3.12; instead … the implied
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covenant claim is tied to the express, surviving right to royalties in Section 11.5.2.” (Samsung
Opp. Mem. p. 12.) Samsung says that “Section 11.5.2 of the LAA . . . provides that the right to
royalty payments pursuant to Sections 6.3 and 6.4 of the LAA survives termination.” (Id. p. 11.)
Samsung then says that it has “an express right to receive its royalty distributions that had ‘accrued
… as of the date of expiration or termination,’ LAA § 11.5.2, and MPEG LA’s actions have
deprived Samsung of that right.” (Id.) But that is no different from Samsung’s breach of contract
claim and collapses into it, i.e., that MPEG LA allegedly breached by not paying royalties under
Section 11.5.2 of the LAA.
Accordingly, Samsung’s claim for breach of the implied covenant must be dismissed as
redundant. See, e.g., JN Contemp. Art LLC v. Phillips Auctioneers LLC, 29 F.4th 118, 128 (2d Cir.
2022) (“A claim for violation of the covenant survives a motion to dismiss only if it is based on
allegations different from those underlying the breach of contract claim, and the relief sought is
not intrinsically tied to the damages that flow from the breach of contract.”); Am. Home Assur. Co.
v. Port Auth. of New York & New Jersey, 40 Misc. 3d 1236(A) (Sup. Ct. N.Y. Cty. 2013)
(dismissing implied covenant claim which “stems from the same facts as the breach of contract
claim, asserting, at bottom, that American Home breached the Policy by not paying claims in a
timely manner”).
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CONCLUSION
For the foregoing reasons, MPEG LA's motion to dismiss Samsung's second cause of
action in its Amended Complaint, with prejudice, should be granted in its entirety.
Dated: New York, New York
March 16, 2023
WINDELS MARX LANE & MITTENDORF, LLP
By: ~ ~·~
Cr g . Murphy
Joh . Holden
Delton L. Vandever
Philip M. Taylor
Benjamin J. Kusmin
156 West 56 111 Street
New York, New York 10019
(212) 237-1000
Attorneys for Defendant MPEG LA, L.L.C.
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CERTIFICATION OF WORD COUNT
PURSUANT TO COMMERCIAL DIVISION RULE 17
I hereby certify that this Reply Memorandum of Law in Further Support of MPEG LA's
Motion to Dismiss Samsung's Second Cause of Action in its Amended Complaint for Breach of
the Implied Covenant of Good Faith and Fair Dealing complies with Commercial Division Rule
17 (22 N.Y.C.R.R. 202. 70(g)) and contains 2,683 words, excluding the caption, table of contents,
table of authorities, and signature block, according to the word count by the Microsoft Word
software used to prepare the document.
Dated: March 16, 2023
New York, New York
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Preview
FILED: NEW YORK COUNTY CLERK 03/16/2023 05:04 PM INDEX NO. 656312/2022 NYSCEF DOC. NO. 82 RECEIVED NYSCEF: 03/16/2023 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK ------------------------------------- x SAMSUNG ELECTRONICS CO., LTD., : Index No.: 656312/2022 : (Hon. Melissa A. Crane) Plaintiff, : : -against- : [Motion Sequence No. 004] : : MPEG LA, L.L.C., : : Defendant. : ORAL ARGUMENT REQUESTED : ------------------------------------- x MPEG LA’S REPLY MEMORANDUM OF LAW IN FURTHER SUPPORT OF ITS MOTION TO DISMISS SAMSUNG’S SECOND CAUSE OF ACTION IN ITS AMENDED COMPLAINT FOR BREACH OF THE IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING WINDELS MARX LANE & MITTENDORF, LLP Craig P. Murphy John D. Holden Delton L. Vandever Philip M. Taylor Benjamin J. Kusmin 156 West 56th Street New York, New York 10019 (212) 237-1000 Attorneys for Defendant MPEG LA, L.L.C. {12158317:6} 1 of 13 FILED: NEW YORK COUNTY CLERK 03/16/2023 05:04 PM INDEX NO. 656312/2022 NYSCEF DOC. NO. 82 RECEIVED NYSCEF: 03/16/2023 TABLE OF CONTENTS Page TABLE OF AUTHORITIES .......................................................................................................... ii PRELIMINARY STATEMENT .....................................................................................................1 ARGUMENT ...................................................................................................................................3 POINT I SAMSUNG CANNOT STATE A CLAIM FOR BREACH OF THE IMPLIED COVENANT ............................................................................3 POINT II THE COURT PREVIOUSLY DISMISSED SAMSUNG’S IMPLIED COVENANT CLAIM AND CAN AND SHOULD DO SO AGAIN .......................................6 POINT III SAMSUNG’S BREACH OF IMPLIED COVENANT CLAIM COLLAPSES INTO ITS BREACH OF CONTRACT CLAIM ................................................7 CONCLUSION ................................................................................................................................9 {12158317:6} i 2 of 13 FILED: NEW YORK COUNTY CLERK 03/16/2023 05:04 PM INDEX NO. 656312/2022 NYSCEF DOC. NO. 82 RECEIVED NYSCEF: 03/16/2023 TABLE OF AUTHORITIES Page(s) Cases Am. Home Assur. Co. v. Port Auth. of New York & New Jersey, 40 Misc. 3d 1236(A) (Sup. Ct. N.Y. Cty. 2013) ................................................................. 8 Beatrice Invs., LLC v. 511 9th LLC, 177 A.D.3d 551 (1st Dep’t 2019) ....................................................................................... 6 Cobalt Partners, L.P. v. GSC Cap. Corp., 97 A.D.3d 35 (1st Dep’t 2012) ........................................................................................... 6 Gay v. Farella, 5 A.D.3d 540 (1st Dep’t 2004) ........................................................................................... 6 JN Contemp. Art LLC v. Phillips Auctioneers LLC, 29 F.4th 118 (2d Cir. 2022) ................................................................................................ 8 {12158317:6} ii 3 of 13 FILED: NEW YORK COUNTY CLERK 03/16/2023 05:04 PM INDEX NO. 656312/2022 NYSCEF DOC. NO. 82 RECEIVED NYSCEF: 03/16/2023 Defendant MPEG LA, L.L.C. (“MPEG LA”) respectfully submits this Reply Memorandum of Law in further support of its motion to dismiss, with prejudice, for failure to state a claim, the second cause of action asserted by Samsung Electronics Co., LTD. (“Samsung”) in its amended complaint alleging breach of the implied covenant of good faith and fair dealing under the Licensing Administrator Agreement (the “LAA”). PRELIMINARY STATEMENT Samsung alleged that MPEG LA breached the implied covenant of good faith and fair dealing under the LAA by orchestrating the Licensors’ amendment of the AAL to punish Samsung. The Court dismissed that claim because it was too vague. The Court gave Samsung the chance to plead facts, alluded to by counsel, that MPEG LA “snuck the amendment” in “under cover of night.” Apart from its Memorandum of Law suggesting Samsung is in denial that its claim was even dismissed, Samsung has failed to do so. Not even close. In fact, having led this Court during oral argument to believe that MPEG LA snuck the amendment in through the back door, Samsung now has the audacity to state: “Nowhere does Samsung allege that MPEG LA tricked a Licensor into voting as it did, or that Licensors have complained about MPEG LA’s voting procedures.” (Samsung Opp. Mem. (NYSCEF Doc. No. 70) p. 8 (emphasis added).) Undermining its claim even further, Samsung also now concedes that MPEG LA may indeed propose amendments to the AAL. And the only new facts alleged by Samsung are that voting was conducted by confidential ballot (i.e., just like used by States across the U.S.) and MPEG LA specifically informed Licensors (i.e., did not trick them) that a failure to respond would be counted as a “yes” vote (i.e., a manner recognized under the AAL). As shown in MPEG LA’s moving papers and herein, both are proper and no negative inferences can be reasonably drawn from either. Thus, despite its liberal use of the word “foment” substituting for arguments lacking {12158317:6} 1 4 of 13 FILED: NEW YORK COUNTY CLERK 03/16/2023 05:04 PM INDEX NO. 656312/2022 NYSCEF DOC. NO. 82 RECEIVED NYSCEF: 03/16/2023 in merit, Samsung’s renewed claim for breach of the implied covenant is even less tenable now than before and must be dismissed. Nor do any of the three exhibits that Samsung attaches to its opposition papers show that MPEG LA acted underhandedly or deceitfully.1 In fact, Exhibit 3 discredits Samsung’s arguments. First, it shows that MPEG LA, far from trying to sneak in the amendment, actually followed up with Licensors to remind them that a failure to respond would be counted as a vote for approval and gave them an additional opportunity to respond. (Samsung Ex. 3 (NYSCEF Doc. No. 74) at MPEGLA_00019544 (“As mentioned below, your failure to communication approval or disapproval will be counted as a vote for approval. If you do wish to communicate your approval or disapproval to me …, we will accept it if received by 09:00 US EDT Monday June 22 but not later.”).) Second, it shows that, far from trying to trick Licensors into voting for a 50% reduction in royalties, MPEG LA had to talk this Licensor down from demanding a 100% reduction. Third, it shows that MPEG LA was not seeking to punish Samsung. This Licensor initially indicated its disapproval of the amendment because it thought Samsung should get nothing, let alone 50%. (Samsung Ex. 3 at MPEGLA_00019544.) MPEG LA responded because if the Licensor was prepared to approve terminated Licensors getting nothing, which was not proposed, then it was reasonable to expect it would approve the proposal giving them 50%. MPEG LA went on to explain that “[t]he purpose of the amendment is to recognize the continued support that nonterminated Parties give to the License” and “[i]t cannot be to punish terminated Parties.” (Id. at MPEGLA_00019543.) It is only in this context, moreover, that MPEG LA asked the Licensor to reconsider the potential unintended effect of its vote. (Id.) 1 In Exhibit 1, a terminated licensor similarly situated to Samsung and without voting rights complains about the amendment but did not bring suit. In Exhibit 2, a Licensor exercises its right to vote and does not say it was tricked. {12158317:6} 2 5 of 13 FILED: NEW YORK COUNTY CLERK 03/16/2023 05:04 PM INDEX NO. 656312/2022 NYSCEF DOC. NO. 82 RECEIVED NYSCEF: 03/16/2023 ARGUMENT POINT I SAMSUNG CANNOT STATE A CLAIM FOR BREACH OF THE IMPLIED COVENANT _ Samsung cannot state a claim against MPEG LA for breach of the implied covenant because MPEG LA did nothing wrong. In allowing Samsung to replead its claim, the Court was clear that Samsung must allege facts showing that MPEG LA did something “illegal” or “underhanded,” i.e., “[i]t has to be bad faith.” (Tr. (NYSCEF Doc. No. 48) pp. 24:16-22; p. 25:7, 9-14.) The Court emphasized that, otherwise, Samsung runs into the line of cases that MPEG LA did what it is permitted and expected to do under the contract. (Id. p. 25:9-14 (“I don’t think it’s enough that they had revenge in mind because you are not accusing them of doing anything underhanded. You need more because then I am running into the line of cases that are like, [w]ell, they were allowed to do it under the contract, so you don’t have a good faith and fair dealing claim.”). Here, Samsung runs headlong into these cases. Samsung admits that MPEG LA is allowed to propose amendments to the AAL and Samsung has not pleaded any illegal or underhanded acts by MPEG LA. First, Samsung now admits that MPEG LA may propose amendments to the AAL, although it clings to the nonsensical argument that contractual amendments should not be allowed to amend the contract if it affects Samsung: “Samsung’s claim in no way impacts MPEG LA’s ability to propose amendments under Section 6.3, or any other provision of the AAL, so long as MPEG LA does so in a manner that does not seek to rob Samsung of the benefit of its bargain.” (Samsung Opp. Mem. p. 13 (emphasis added).) If Samsung’s theory were correct, then amendment provisions would not matter and votes would not matter because any Licensor or terminated {12158317:6} 3 6 of 13 FILED: NEW YORK COUNTY CLERK 03/16/2023 05:04 PM INDEX NO. 656312/2022 NYSCEF DOC. NO. 82 RECEIVED NYSCEF: 03/16/2023 Licensor could simply object that an amendment applying to any licensor is invalid simply because it affected them. That is not how the contract is written and that is not the law. Second, in its Amended Complaint, Samsung does not allege any of the supposed bad acts by MPEG LA. Samsung concedes: “Nowhere does Samsung allege that MPEG LA tricked a Licensor into voting as it did, or that Licensors have complained about MPEG LA’s voting procedures.” (Samsung Opp. Mem. p. 8 (emphasis added).) This, in and of itself, should put an end to Samsung’s breach of implied covenant claim. Despite whatever counsel may have alluded to on the record, it dared not do so in the Amended Complaint because it is not true. It was all puffery. MPEG LA did not trick the Licensors by sneaking an amendment in under the cover of night and, despite being given the opportunity, Samsung has not asserted any facts that it did. As shown in MPEG LA’s moving papers, moreover, there is nothing nefarious with the manner in which MPEG LA conducted the vote. (See MPEG LA Mov. Mem. (NYSCEF Doc. No. 64) at Point I.) Samsung argues that it should be entitled to an inference that MPEG LA prevented Licensors from communicating with each other by conducting the vote by confidential ballot. (Samsung Opp. Mem. p. 8.) That is not a reasonable inference; that is bald speculation. Samsung does not cite an ounce of support for such a conclusion, which goes against common experience. To even suggest that MPEG LA could stop any of these sophisticated Licensors from speaking to each other is preposterous, as Samsung well knows from having been a Licensor itself. Samsung also argues that, under rules of contract construction, MPEG LA is precluded from informing Licensors that a non-response counts as an affirmative vote because the AAL allows such a voting method to amend the definition of the HEVC Standard but is silent as to the method to be used for other amendments. (Samsung Opp. Mem. p. 10.) Samsung’s argument misses the mark. The now admitted fact that the AAL allows such a voting method shows that the {12158317:6} 4 7 of 13 FILED: NEW YORK COUNTY CLERK 03/16/2023 05:04 PM INDEX NO. 656312/2022 NYSCEF DOC. NO. 82 RECEIVED NYSCEF: 03/16/2023 procedure is not deceitful or underhanded. To assert otherwise would be to assert that the Licensors, including Samsung, intentionally adopted a deceptive voting method. Further, given the AAL’s otherwise silence on voting procedures, it was quite reasonable for MPEG LA to use the one method that it knows the Licensors have approved. Samsung further argues that MPEG LA is demanding that “Samsung prove its entitlement to relief at the pleading stage” by faulting Samsung for “failing to reference a single Licensor that claims it was duped or tricked into its vote.” (Samsung Opp. Mem. p. 7.) That is not so. Rather, MPEG LA faults Samsung for not alleging a single fact supporting its claim that MPEG LA engaged in an underhanded or deceitful act, including that a single Licensor was actually duped or tricked by MPEG LA. As the Court stated in dismissing MPEG LA’s counterclaim for breach of the implied covenant, “it is telling that nowhere does MPEG [LA] allege that Samsung was successful in convincing the other licensors to abandon MPEG [LA].” (Tr. p. 35:14-16.) The same reasoning applies here in that nowhere does Samsung allege that MPEG LA actually duped or deceived the Licensors in to voting for the amendment.2 In essence, then, MPEG LA did not do anything it was not expressly allowed to do under the agreements, and a good faith and fair dealing claim cannot change that. The claim must be dismissed. 2 This is the very argument Samsung made in seeking to dismiss MPEG LA’s implied covenant counterclaim. As argued by Samsung: “Do you see an allegation in the complaint that a single licensor quit the MPEG pool at our behest? No. So it’s a big, So what?” (Tr. p. 18:9-1 (emphasis added)), and “The point they make is, We spoke to other licensors. They don’t allege a single licensor has left the pool, so it’s a big nothing burger.” (Id. p. 28:4-7 (emphasis added)). The same must apply here. In suggesting that MPEG LA did something deceitful or underhanded to trick the Licensors into voting for the amendment, Samsung’s failure to argue that a single Licensor was tricked or deceived means it is “a big, So What” or a “big nothing burger.” {12158317:6} 5 8 of 13 FILED: NEW YORK COUNTY CLERK 03/16/2023 05:04 PM INDEX NO. 656312/2022 NYSCEF DOC. NO. 82 RECEIVED NYSCEF: 03/16/2023 POINT II THE COURT PREVIOUSLY DISMISSED SAMSUNG’S IMPLIED COVENANT CLAIM AND CAN AND SHOULD DO SO AGAIN__ There can be no question of the Court’s authority to dismiss Samsung’s renewed claim for breach of the implied covenant, especially since Samsung’s new allegations only serve to undermine its claim further. Contrary to Samsung’s suggestion, “the law of the case doctrine does not apply to the court’s comment at oral argument, particularly because the court’s earlier determination was based on a different iteration of the complaint.” Beatrice Invs., LLC v. 511 9th LLC, 177 A.D.3d 551, 551 (1st Dep’t 2019); see also Cobalt Partners, L.P. v. GSC Cap. Corp., 97 A.D.3d 35, 39 (1st Dep’t 2012) (“Law of the case did not require the court to deny the motion to dismiss the second amended complaint, even though it had previously denied the motion to dismiss the amended complaint. Law of the case is a discretionary doctrine, and the second amended complaint differed from the amended complaint.”) (internal citations omitted); Gay v. Farella, 5 A.D.3d 540, 541 (1st Dep’t 2004) (“Since the original complaint was superseded by the amended complaint, rendering the sufficiency of the allegations in the original complaint academic, the law of the case doctrine did not bar the Supreme Court from entertaining the defendants’ motion to dismiss the amended complaint.”) (internal citations omitted). Further, the Court never held that Samsung has a viable implied covenant claim as Samsung now seems to argue in an alternate reality. In fact, the Court started by saying “I don’t really see it here.” (Tr. p. 2:13-14; see also p. 7:9-14.) And the Court concluded by dismissing the claim because there were no factual allegations that MPEG LA did anything wrong: “But the problem is that this isn’t anything they weren’t – you know, I’m not sure it’s enough…. I’m not sure this makes it across the line for good faith and fair dealing. You are not accusing them of doing anything illegal, really. That’s the problem I have.” (Id. p. 24:16-22.) The Court emphasized {12158317:6} 6 9 of 13 FILED: NEW YORK COUNTY CLERK 03/16/2023 05:04 PM INDEX NO. 656312/2022 NYSCEF DOC. NO. 82 RECEIVED NYSCEF: 03/16/2023 that “[i]t has to be bad faith.” (Id. p. 25:7.) The Court then stated: “I don’t think it’s enough that they had revenge in mind because you are not accusing them of doing anything underhanded. You need more because then I am running into the line of cases that are like, [w]ell, they were allowed to do it under the contract, so you don’t have a good faith and fair dealing claim.” (Id. p. 25:9-14.) Samsung has not and cannot remedy this fatal defect in its claim. Samsung argues that “MPEG LA’s second attack on Samsung’s implied covenant claim thus fares no better than the first.” (Samsung Opp. Mem. p. 1.) MPEG LA’s first motion to dismiss was granted and its current motion can and should be granted as well. POINT III SAMSUNG’S BREACH OF IMPLIED COVENANT CLAIM COLLAPSES INTO ITS BREACH OF CONTRACT CLAIM If it was uncertain before, Samsung now makes it abundantly clear that its breach of implied covenant claim is nothing more than a repeat of its breach of contract claim. At oral argument and in its amended complaint, Samsung relies on Section 3.12 of the LAA as underpinning its breach of implied covenant claim. (See Tr. p. 8:10-12 (“You, MPEG LA, agreed as part of the contract you entered into with Samsung that you would act in good faith – and I can pull up the language ….”); pp. 25:22-26:1 (“And, your Honor, I will just wrap it up with 3.12 of the LAA: ‘The Licensing Administrator agrees to use commercially reasonable best efforts to fully and in good faith cooperate with each licensor in connection with the subject matter of this agreement.’”); Am. Cmpl. ¶ 24 (“[i]t also must be read alongside MPEG LA’s obligation, in Section 3.12 of the LAA”).) Samsung belatedly recognizes, however, that Section 3.12 did not survive its termination of the LAA. (Samsung Opp. Mem. p. 12.) So what does Samsung do to avoid this conundrum? It pivots and now argues that its “claim does not rely on a breach of an implied covenant arising out of Section 3.12; instead … the implied {12158317:6} 7 10 of 13 FILED: NEW YORK COUNTY CLERK 03/16/2023 05:04 PM INDEX NO. 656312/2022 NYSCEF DOC. NO. 82 RECEIVED NYSCEF: 03/16/2023 covenant claim is tied to the express, surviving right to royalties in Section 11.5.2.” (Samsung Opp. Mem. p. 12.) Samsung says that “Section 11.5.2 of the LAA . . . provides that the right to royalty payments pursuant to Sections 6.3 and 6.4 of the LAA survives termination.” (Id. p. 11.) Samsung then says that it has “an express right to receive its royalty distributions that had ‘accrued … as of the date of expiration or termination,’ LAA § 11.5.2, and MPEG LA’s actions have deprived Samsung of that right.” (Id.) But that is no different from Samsung’s breach of contract claim and collapses into it, i.e., that MPEG LA allegedly breached by not paying royalties under Section 11.5.2 of the LAA. Accordingly, Samsung’s claim for breach of the implied covenant must be dismissed as redundant. See, e.g., JN Contemp. Art LLC v. Phillips Auctioneers LLC, 29 F.4th 118, 128 (2d Cir. 2022) (“A claim for violation of the covenant survives a motion to dismiss only if it is based on allegations different from those underlying the breach of contract claim, and the relief sought is not intrinsically tied to the damages that flow from the breach of contract.”); Am. Home Assur. Co. v. Port Auth. of New York & New Jersey, 40 Misc. 3d 1236(A) (Sup. Ct. N.Y. Cty. 2013) (dismissing implied covenant claim which “stems from the same facts as the breach of contract claim, asserting, at bottom, that American Home breached the Policy by not paying claims in a timely manner”). {12158317:6} 8 11 of 13 FILED: NEW YORK COUNTY CLERK 03/16/2023 05:04 PM INDEX NO. 656312/2022 NYSCEF DOC. NO. 82 RECEIVED NYSCEF: 03/16/2023 CONCLUSION For the foregoing reasons, MPEG LA's motion to dismiss Samsung's second cause of action in its Amended Complaint, with prejudice, should be granted in its entirety. Dated: New York, New York March 16, 2023 WINDELS MARX LANE & MITTENDORF, LLP By: ~ ~·~ Cr g . Murphy Joh . Holden Delton L. Vandever Philip M. Taylor Benjamin J. Kusmin 156 West 56 111 Street New York, New York 10019 (212) 237-1000 Attorneys for Defendant MPEG LA, L.L.C. 9 12 of 13 FILED: NEW YORK COUNTY CLERK 03/16/2023 05:04 PM INDEX NO. 656312/2022 NYSCEF DOC. NO. 82 RECEIVED NYSCEF: 03/16/2023 CERTIFICATION OF WORD COUNT PURSUANT TO COMMERCIAL DIVISION RULE 17 I hereby certify that this Reply Memorandum of Law in Further Support of MPEG LA's Motion to Dismiss Samsung's Second Cause of Action in its Amended Complaint for Breach of the Implied Covenant of Good Faith and Fair Dealing complies with Commercial Division Rule 17 (22 N.Y.C.R.R. 202. 70(g)) and contains 2,683 words, excluding the caption, table of contents, table of authorities, and signature block, according to the word count by the Microsoft Word software used to prepare the document. Dated: March 16, 2023 New York, New York 10 13 of 13