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.
Photo Credit: Flickr User epiclectic
The advent of the Internet has created several interesting and distinct legal questions. One such question is whether the maintenance of an interactive website alone can subject a non-resident defendant to personal jurisdiction in a forum state that the defendant has no other contacts with. The Eleventh Circuit and other Courts of Appeal around the country have clearly ruled that maintenance of an interactive website alone is insufficient to establish minimum contacts necessary to confer personal jurisdiction.
However, another interesting question arises from this legal principle. Can a non-resident defendant who has no contact with a forum state, other than an interactive website fully accessible worldwide, be subjected to litigation in a foreign state where the only sale into that state by the defendant was one manufactured by the plaintiff for the purpose of obtaining jurisdiction? Common sense would lead some to the conclusion that this should not be a proper way to subject a non-resident defendant to jurisdiction in a foreign state. What does the law say?
An oft cited principle of personal jurisdiction under the Federal Due Process clause is that a non-resident defendant must purposefully avail itself of the benefits of conducting business in the forum state or purposefully direct activity into the forum state. The purposeful availment/direction requirement “ensures that a defendant will not be haled into a jurisdiction solely as a result of ‘random,’ ‘fortuitous,’ or ‘attenuated’ contacts.” See, Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985) (noting that contacts resulting from the “unilateral activity of another party or third person” are not attributable to a defendant).
In intellectual property cases it is common for a plaintiff to seek personal jurisdiction over a non-resident defendant based upon Internet sales made to the plaintiff itself or to plaintiff’s counsel or its representatives/agents through the non-resident defendant’s website. Many courts hold that such forum related contacts manufactured by the plaintiff are not sufficient to evidence purposeful direction by a non-resident defendant into the forum state. See, e.g., Millennium Enters., Inc. v. Millennium Music, LP, 33 F. Supp. 2d 907, 923 (D. Or. 1999); Carefirst of Md., Inc. v. Carefirst Pregnancy Ctrs., Inc., 334 F.3d 390, 395, 400-01 (4th Cir. 2003); ISI Brands, Inc. v. KCC Int’l, Inc., 458 F. Supp. 2d 81, 88-89 (E.D.N.Y. 2006); Shamsuddin v. Vitamin Research Prod., 346 F. Supp. 2d 804, 811-817 (D. Md. 2004).
It appears that such manufactured contacts can be sufficient only when accompanied by evidence of other contacts with the forum state. See, e.g., Chloe v. Queen Bee of Beverly Hills, LLC, 616 F.3d 158, 166-167 (2d Cir. 2010); Cartier v. Seah LLC, 598 F. Supp. 2d 422, 425 (S.D.N.Y. 2009).
The law appears unsettled on this issue but if you find yourself being sued in a state in which you have minimal or no contacts, the attorneys at the law firm of Santucci Priore, P.L. can assist you in protecting your rights. We are a full service, Fort Lauderdale-based firm focusing on intellectual property, business and entertainment law and litigation.
 The Second Circuit refused to expressly address the issues of: 1) “whether the‘single act’ of shipping the counterfeit bag to an agent of the plaintiff, by itself, constitutes an act of trademark infringement,” or 2) whether personal jurisdiction is proper over a non-resident Defendant based on one “manufactured” contact with the forum initiated by the Plaintiff or its representatives. Chloe, 616 F.3d at 165 n.3.