Curb v. Tim McGraw Round One

I have slowly been trying to write a short book about some of the common disputes that arise in the music business. I had just begun work on the chapter concerning recording agreements and I thought to my self, "this topic has been done to death. What else is there to write about?" Then came the news two weeks ago about Tim McGraw's preliminary victory over Curb Records in the Davidson County Chancery Court.

This case has all of the necessary elements of a legal drama – high-powered artist battles even higher-powered label over arcane language in a recording agreement first entered into in 1992.

As I understand it, Curb first sued McGraw claiming that he had not delivered the required number of albums under the agreement, even though he in fact had delivered what he considered to be the final album under the agreement in 2010 (and Curb even released a single from the recordings).McGraw has counterclaimed alleging that Curb's actions (including multiple releases of greatest hits albums) are "a naked attempt to create a perpetual recording contract, forcing Tim McGraw into a repressive environment of infinite duration …".

I am assuming that the hearing held on November 30 concerned Curb's attempt to enforce the injunctive relief provisions of its agreement and to keep McGraw from recording for another label during the course of the litigation. I have reviewed McGraw's answer and counterclaim and have to say that it is one of the most eloquent pleadings I have ever encountered. (here's a link:www.tennessean.com/assets/pdf/DN174765524.PDF). It literally reads like a novel where you follow McGraw's career from 1992 through 2010 as well as a textbook analysis of how the delivery process and recording restrictions in a recording agreement can be manipulated.

I don't know how this will play out but if it goes further it will provide fascinating insight into some of the more esoteric provisions of recording agreements, often ignored during negotiations. It may also show us how some these overlooked provisions might come back to bite both parties.

The Indemnity Clause

Do you want to see a client’s eyes glaze over? Heck, do you want to see a lawyer’s eyes glaze over? Then spend a little time reviewing the indemnity cruise of a typical recording contract or music publishing agreement. Here’s an example:


Indemnity: Writer hereby indemnifies, saves and holds Publisher, its successors and assigns, and its parent, subsidiary and affiliated companies and its and their respective officers, employees and agents harmless from any and all liability, claims, demands, loss and damage (including, without limitation, reasonable attorneys' fees and court costs) arising from or connected with any claim, demand or action or by a third party which is inconsistent with any of the warranties, representations or agreements made or assumed by Writer in this Agreement which is reduced to a final adverse judgment or settled with Writer’s written consent. Pending the determination and/or settlement of any claim, demand or action which is inconsistent with any of the warranties, representations, covenants or agreements made or assumed by Writer in this Agreement, Publisher shall have the right, at Publisher's election, to withhold payment to Writer of any monies otherwise payable to Writer under this or any other agreement between the parties, and or any of their affiliates in an amount reasonably related to the amount of that claim, demand or action and the reasonably estimated amount of Publisher's costs, expenses or other damages in connection therewith (including, without limitation, legal costs and attorneys' fees). Upon the resolution of any claim, any monies withheld by Publisher as aforesaid may be used by Publisher to satisfy Writer's indemnity obligations hereunder and to the extent that the withheld sums exceed such indemnity obligations they shall be treated as additional Receipts. Publisher shall have the right, at Publisher's election and without limitation for any reason, to withhold and recoup and recover the amount of any and all costs and expenses (including, without limitation, legal costs and reasonable attorneys' fees) which are paid or incurred by Publisher or on Publisher's behalf to defend, respond to, negotiate or prosecute any claim, demand or action which is inconsistent with any of Writer's warranties, representations, covenants or agreements hereunder from any monies payable to Writer hereunder or under any other agreement to which Publisher or Publisher's affiliates are a party. Notwithstanding the forgoing, any amount so withheld shall be released if (and to the extent that) legal action shall not have been commenced with respect thereto in a court of competent jurisdiction within one (1) year following such withholding, it being agreed, however, that Publisher shall have the right to again withhold monies thereafter in the event such claim continues to be asserted, is reasserted or suit is later filed. Writer shall reimburse Publisher, on demand, for any payments made by Publisher at any time with respect to the actual amount of any claim, demand or action to which this indemnity applies. Writer shall have the right at Writer's expense, to participate in the defense of any such claim, demand or action with counsel of Writer's choice. The defense and settlement of that claim, demand or action, however, shall be controlled and determined in Publisher's sole discretion.


This is the clause, usually buried somewhere towards the end of the agreement that nobody wants to deal with but it is hugely important. Most people have some hazy idea of what indemnity means, informed perhaps by the classic film noir “Double Indemnity” rather than Black’s Law Dictionary. Nevertheless, here’s how Blacks’ defines indemnity “ A collateral contract or assurance by which one person engages to secure another against being damnified by the legal consequences of an act or forbearance on the part of one of the parties or some third person. Term pertains to liability for loss shifted from one person held legally responsible to another person”.

In plain English, this means that the indemnifying party assumes the responsibility for any legal consequences caused by their acts or warranties. The problem of course is that in its unmodified, un-negotiated form, the indemnifying party can be responsible for even all unsubstantiated or invalid claims asserted against the indemnified party. As everyone knows, anyone can sue anyone else for anything under the sun, so it is important to try and limit one’s exposure for all the various claims that can arise, especially those that are bogus.

I have always argued from an artist’s perspective that an artist should not be responsible for nuisance claims filed against a record company or a publishing company. At some basic level, those companies should be in a better position to absorb the cost of defending these claims as a cost of doing business. I have been involved in defending against many of these types of nuisance claims and while they are almost always dispensed with, the cost can be staggering.

The negotiation of this section of an agreement is always different and can head off in a multitude of directions. Very often, an artist can limit their liability to claims actually reduced to judgment or settled with their consent. The important part is to know what to ask for.

Termination of Assignments of Sound Recording Copyrights

A few weeks ago I wrote an article for Billboard Magazine about the Copyright Office amending the rules regarding termination of assignments of copyright. The editor wisely omitted the last sentence where I mused about whether the Copyright Office would ever take a stand on the issue of artists attempting to terminate their assignments of sound recording copyrights.

Now the New York Times has addressed the issue in an August 15 article “Record Industry Braces for Artist Battles Over Song Rights”. The article is a great primer on this complex and controversial matter. While it is clear that one of the purposes of the Copyright Act of 1976 was to give songwriters and other authors the right to recapture their work after 35 years, it is not clear whether or not the same rights apply to recording artists. This is because the termination provision specifically excludes “works made for hire” and nearly every recording contract from the 1970s on refers to sound recordings a “works made for hire”. The problem for the record companies is that the Copyright Act also has a very specific definition of “works made for hire” and sound recordings are not part of that definition. Further most record contracts go to great lengths to state that the artist is an independent contractor and not an employee of the record company, which further damages the work made for hire argument.

The New York Times article also addresses some of the confusing side issues in this debate. For example, how will the law address other “authors” of a sound recording including producers and engineers? How will the law affect artists who sign contracts in other countries subject to different laws (e.g. every major band from England)?

Although there is much discussion and debate on the issue, the battle will properly commence until January 1, 2013 when works created on or after January 1, 1978 become eligible for termination. Things are going to get very interesting. I would urge any recording artist who executed an agreement during the 1970’s to have that contract reviewed by a lawyer asap.

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.