Everything You Ever Wanted to Know About Entertainment Law (But Were Afraidto Ask)

I get those flyers in the mail from the National Business Institute advertising upcoming Continuing Legal Education seminars on a near daily basis. I’ve attended a bunch of NBI CLE classes in the past and I generally think that they provide a pretty good value. Having said that, I had to laugh today when I received a brochure for an upcoming seminar called “Entertainment Law 101”. I know two of the presenters and they are excellent attorneys. What I found amusing was the breadth of the program. In 7 hours they propose to cover
1. Film Industry Basics
2. Music Industry Basics (including record deals, 360 deals and publishing deals)
3. Copyright law
4. Literary Purchase agreements
5. Acting Agreements
6. Legal compliance in fund raising and securities law
7. Insurability of Entertainment risks

If I had time I would list all of the individual sub-category listings.

I think they are going to cover more in one day than I cover in the entire semester entertainment law course I teach. Clearly any one of these topics merits at the very least an entire day of study. Perhaps the real point of the seminar is to scare other lawyers away from the practice of entertainment law (as if they shouldn’t be scared away already). That’s generally how I feel after I spend a couple of hours in an estate tax seminar.
If you’re interested though, here’s the link: http://www.nbi-sems.com/SemTeleDetails.aspx/Entertainment-Law-101/Live-Seminar

I should also point out that the Nashville Bar Association puts on excellent Entertainment Law CLE’s twice a year, at the end of August and the beginning of December.

Contracting With Minors

Watching a Justin Bieber documentary with my daughter (there goes my indie cred) I am reminded that the median age of music performers is getting younger. This trend has been apparent since Taylor Swift's initial success. I am sure that I am not the only Nashville lawyer who has faced a singing 10 year old in my office. However, signing minors to contracts is serious business and is often misunderstood. Legally, minors can't contract. Hence contracts signed by minors are generally unenforceable, unless a very specific process is followed. This process varies from state to state. In Tennessee the process is covered by the "Tennessee Protection of Minor Performers Act". T.C.A. Sec. 50 5-201 which sets forth a court approval procedure for "contracts pursuant to which a minor person is employed . . . or agrees to perform or render artistic or creative services". The process may include a provision by which the court appoints a guardian ad litem to represent the minor's interest.

Interestingly, the statute contains an apparently little known section that requires a trust to be set up for a portion of a minor's earnings. While most practitioners are generally aware of this statute very few people seem to be aware of this section, meaning, I am not sure how often the statute is followed in short-term employment situations (such as hiring a child actor for a small movie role or local commercial). However for any type of long-term personal services contracts such as a recording agreement, publishing agreement or management agreement. court approval is absolutely essential in order to have a valid binding contract. There are also other issues to consider in these types of agreements, including choice of law and jurisdiction. Sometimes these contracts are affirmed in more than one state. If your company is thinking about contracting with a minor, the important thing is to not ignore this court approval process.

The Rick James Lawsuit

I have been following with interest the recently filed case Rick James v. UMG Recordings, Inc. in which attorneys for a trust established by the late James A. Johnson, Jr. have sued Universal Music Group over the same contractual royalty clause successfully litigated by the plaintiffs in F.B. T. Productions v.Aftermath Recordings, a case tacitly upheld by the United States Supreme Court.
The well-known clause found in numerous pre- digital recording agreements provides “ with respect to records sold by (Motown’s) licensees…Motown will pay…a royalty equal to fifty percent (50%) of Motown’s net receipts based on actual sales…” The plaintiff’s argument is that this clause applies to income from digital downloads and ringtones etc. Universal has blatantly argues that such sales are not third party licenses but are something called “resale agreements”. This defense ignores the plain language of these agreements and the 9th Circuit said as much. The labels simply did not anticipate that this type of income would exist when they drafted these contracts but they still need to honor their contractual commitments if they choose to exploit the source of the income.
The most interesting thing about the Rick James case is the plaintiff’s attempt to have the case certified as a class action lawsuit. The potential damages could be astronomical—just think of the potentially affected artists on Motown’s roster.
Of course the operative words are “could be”. The big question in my mind is how many artists and how many contracts does this apply to? How many successful recording artists from the pre-compact disc era are still operating under their original (non-renegotiated) contracts and if so, how many labels are still treating legitimate third party license income as something else entirely? I am not really sure how many artists this affects. However, the 9th Circuit case apparently had some effect on another class action case originally filed by the Allman Brothers against Sony/BMG. This case had been dismissed once before and apparently has been reinstated. Both of these cases and the cases that are sure to follow in the wake of the F.B. T. Productions case are significant and well worth watching.

Legal Fees

I have written before about legal fees, and last month I read an article Rob Johnson wrote for the November 15th issue of the Wall Street Journal:

Legal Advice…On A Budget

He reports that many law firms now offer legal advice to start-up businesses at either a discounted or flat fee. This is not a news flash. Here is a little secret: most attorneys I know are happy to offer services to start-up businesses for a flat fee or a reduced rate. It only makes sense to help bring certainty for the new small business. I offer this for routine services, such as drafting wills, forming a corporation or limited liability company or applying for a trademark. I, like most attorneys, strive to develop long-term relationships with clients. In fact, the only areas of legal practice that are incapable of being handled with set fees are litigation and sometimes contract negotiation, and these areas can be handled with a negotiated cap on fees. I have also read some intriguing articles about charging fees in litigation on a “per item” basis. Whether you are working with me or another attorney, always feel free to inquire about flat fees or at least good faith estimates of what your legal services may cost.

Thank You, Thank You Very Much

I spent the afternoon in a fairly useless pursuit of some arcane information about a Tennessee statute. However, as is often the case when doing research on the Internet, I stumbled upon a fascinating website:

www.preslaw.net.

This website consists of a collection of all the decided cases involving the King. This stuff makes for fascinating reading. When I was in law school, I did a long research project on the right of publicity, which essentially did not exist in Tennessee until Elvis died in 1977. Now, reading this website, I realize that Elvis' litigious afterlife has the makings of a law school class, if not an entire curriculum.

I DISAGREE WITH MOSES AVALON

I am a big fan of Moses Avalon, the former record producer, writer and teacher who wrote the influential book “Confessions of a Record Producer.” I like the book so much I put it on a recommended reading list at the university where I teach Music Business Law.

However, I must take issue with something Avalon said in a recent blog. In a post called “The New Team” (8/3/09), he basically advised new artists that they no longer needed lawyers as part of their “team.” I found this advice fairly short-sighted. While it is true that there are no longer the sheer number of record deals and publishing deals out there, there is no shortage of people with their hands out looking to make a buck off of young artists. These range from the traditional allies like managers and booking agents to a vast array of “new model” promoters, consultants, etc. Artists need lawyers to counsel them as to how to best work with and compensate these people. We are also called on to advise about all sorts of new “services” for artists; these seem to appear every day, and they range from brilliant technological developments to glorified pyramid schemes. Additionally, artists still have to deal with the basic issues of figuring out what the revenue sources are in the music business (i.e., how to get paid) and how to structure their internal agreements and protect their intellectual property.

With all that in mind, and hoping that I still had a place on the new “team,” I recently attended a Nashville Bar Association Continuing Legal Education Seminar entitled:

Challenges for the Entertainment Lawyer in a “Do It Yourself” World.

While I was pleased with the program in general, I was a bit disappointed that they did not address the topic raised by the title of the seminar, nor did they confront Moses Avalon’s assertions head-on. However, I was impressed by my friend Lynn Morrow’s presentation “Legal Challenges for the Indie Artist” during which she listed eighteen separate legal issues an independent artist should consider before releasing a record (I would reproduce the list here but Lynn wisely copyrighted her work).

One of the points Lynn made in her presentation is that now more than ever, if we as lawyers are advising independent artists, we are advising them as small business people and I think this is a really important mission. Years ago, I was on a panel myself with a number of well-known lawyers and judges, and one of the questions that came up was how do you prepare yourself to be an entertainment attorney. I said, among other things, that I found it helpful to develop a background in the general practice of law (e.g., knowing a little about business formation, divorce, collection law, bankruptcy, wills and estates, even landlord/tenant law – which comes up a lot more often than one might think). One of the lawyers on the panel (who shall remain nameless) blasted me because he thought that spending time on general practice basics was a waste of time in dealing with the entertainment industry. I disagreed with him then and I still do. Of course, if he has an endless supply of major label clients with the ability and willingness to pay him for the deals he negotiates for them, then I see his point, but it’s not really like that out here in the less rarified air of the real world. Plus, I know that as lawyers, we get a lot of satisfaction from helping clients set up and run their business the right way. This is one way I believe entertainment lawyers can remain relevant and part of the team as this new model of the entertainment industry develops. We are also the first person who gets called when the team falls apart.