Musicians, Managers and Cocaine

Rock & Roll Hall of Fame inductee, Sylvester Stewart, better known as “Sly Stone,” from Sly & The Family Stone, performed at Woodstock in 1969.  He performed classic hits like “Everyday People,” and “Hot Fun in the Summertime.”  He was one of the first artists to mix soul, funk and elements of psychedelic music in the 1960’s and 1970’s, at about the time the “Godfather of Soul,” James Brown was first doing the same.  Sly & The Family Stone influenced songwriters and musical performers such as Prince, Public Enemy, Parliament, The Red Hot Chili Peppers, Fatboy Slim, Lenny Kravitz, The Beastie Boys and the author of this blog article – just to name a few.

How can a musical artist who has been so influential – so successful – spend a large part of his life in financial crisis?  Some of the answers to this sad, but unfortunately familiar question appear below in this article.

This past Tuesday, the Court of Appeals of the State of California, Second Appellate District affirmed a lower court ruling and held, in essence, that all of Sly Stone’s royalty claims are invalid.

Leading up to this decision were various claims asserted by Stewart against his one time friend and manager Ken Roberts, Sony, Warner/Chappell Music, Inc., Broadcast Music, Inc. (a/k/a “BMI”) and other music industry players.  He alleged that he is owed past and future royalties for songs he wrote and produced totaling “tens of millions” of dollars.  Stewart made the short-sighted decision to assign his BMI royalty rights to his then manager Roberts in 1975.  He also alleges that in 1989, he entered into an “Employment Agreement” and “Shareholders” agreement with individuals Glenn Stone and Stephen Topley who he believed to be acting has his managers, but who controlled all of his royalty income, and who later borrowed millions of dollars secured by his future royalties.

During this time period, Stewart was suffering from cocaine addiction and was subject to tax liens and levies.  The California appellate court paraphrased Stewart’s claim in this regard as follows:

Stewart engaged in substance abuse…resulting in a lifelong addiction to cocaine and sedatives. This allegedly made him “particularly susceptible to…duress and undue influence….  p.5.

Stewart described an incident in 2008 in which they told him that he would receive no further advances of funds, from the companies they controlled which were organized to circumvent the tax liens and levies.  Thereby Stewart claims he was left virtually destitute and dependent on friends for support and housing.

The appellate court on Tuesday ruled against Sly Stone in all respects.  It held that he had no standing to sue BMI because it was undisputed that he assigned his right to receive all such payments to his manager. It held that an assignment of his right to receive royalties from Sony was unambiguous, and he therefore also lacked standing to sue Sony.

Another lesson for any recording artist, songwriter or other owner of copyrights: The court also rejected Stewart’s argument that because the 1989 Assignment did not include the word “irrevocable,” that he retained the right to revoke it. The court disagreed and held that an unlimited assignment normally transfers title (permanently).

— Have a qualified music and copyright lawyer read your contracts before signing them.

—An artist manager is not an adequate substitute for an artist’s attorney.

—Part of lawyer’s job is to protect artists from managers, and vice versa (managers should have legal counsel also).

Not only did the musician not recover a single dollar, an award of the Defendants’ litigation costs was assessed against him – despite being represented by a heard of attorneys from various law firms.

It is not the intention of this article to create the impression that all managers unfairly exploit and manipulate their artists.  Our law firm represents artists and managers.  Not all music companies unfairly withhold royalties.  My father, Arthur Santucci worked with artists such as Aerosmith, AC/DC, Curtis Blow, Luther Vandross, Riot, Sammy Hagar, The Cars and Molly Hatchet when I was a child in the 1970’s and through the beginning of the 1980’s.  I am still in contact with several of his music industry colleagues and artists from that era and I have never heard a negative word about him, his ethics or his business practices.  In fact, he left his New York City artist management company in the early 1980’s because of his disgust with the business practices in the industry.  His experience, and the lessons he taught me were the seed that caused me to pursue a career in entertainment and intellectual property law.

With the proper team in place, musicians, songwriters, performers and producers can avoid these common pitfalls.  An essential part of this team is an experienced lawyer and/or law firm skilled in the areas of entertainment law, copyright law, trademark law, contract law, licensing law, litigation – and who knows the music business.

Michael I. Santucci
Santucci Priore, P.L.
Managing Partner

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Photo Credit: Flickr User epiclectic

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