CONTRACT LAW
Record Labels, Artists

Madonna’s Maverick Records label has filed a legal action against Warner Music Group and Time Warner Inc. for breach of contract accusing the record company and its former parent of mismanagement and improper accounting that cost the singer and her partners millions of dollars. The lawsuit, filed in Los Angeles Superior Court, is the latest chapter in a long-running dispute between Madonna and Warner over Maverick, a joint venture the singer and record company launched in 1992. In the suit, Beverly Hills, California based Maverick accuses Warner Music and the other defendants of “engaging in acts of self-dealing and profit-taking, falsely accounting for receipts and expenses of the partnership … and secretly attempting to seize partnership opportunities for their own benefit.” Maverick claims Warner violated the venture agreement by failing to pay for “guaranteed” services like radio promotion, marketing and sales meant to support Maverick artists. The suit also contends Warner obscured label profits by using “artificial and improper accounting methodology to create the false impression of losses.” Madonna and her partners own a combined 60 percent stake in Maverick, whose artist roster includes Alanis Morissette and Michelle Branch. Warner owns the remaining 40 percent : Madonna’s Tadpole Records Inc. and companies owned by her label partners, Guy Oseary and Ronnie Dashev, are also named as plaintiffs. The lawsuit asks the court to declare that the three partners have the right to end the joint partnership agreement and do business with other companies. Madonna and her partners also seek unspecified compensatory and punitive damages. Maverick asserts in the lawsuit that the label has generated more than $900 million in sales and profits of more than $100 million for Warner Music Group since Maverick was formed. Warners have filed a sealed lawsuit in Delaware, asking the court to affirm that Maverick’s claims are baseless, according to the court documents filed Thursday in Los Angeles. In a statement, Warner Music Group called Maverick’s claims “baseless, unsubstantiated and without merit.”

See : http://news.bbc.co.uk/1/hi/entertainment/music/3570563.stm#
COMMENT :Whilst this is an action by one label against another label it contains some of the elements common to actions brought by artists against labels. Record contracts are notoriously complicated and some accounting provisions often contain (a) standard accounting terms whose main purpose is to delay payments to artists and (b) numerous royalty reduction clauses whose main purpose is to reduce the normal royalty otherwise payable to the artist. One of George Michael’s complaints in his 1994 UK law suit against Sony was that his CD royalty was artificially reduced by a clause which meant he was only paid 75% of his normal royalty on all his CD sales. Michael Jackson is currently embroiled in a dispute with Motown; even the Beatles brought action against their then label Capitol to secure proper accounting. The Recording Artists’ Coalition has been lobbying for change in the way labels account to artists (see below for a link). But Madonna and Maverick’s action is very high profile and of course brought at the time when new owners are taking over at Warner Music. It will interesting to see if the Warners attempt to settle the law suit or move towards (public) litigation.

For more information in this area of COPYRIGHT on Law Updates see:
Law Updates October 2003 Jackson falters in suit against Motown and Universal
Law Updates June 2003 US Court hammers Majors accounting practices
Law Updates June 2003 Michael Jackson launches action against Motown
Law Updates June 2003 California Senate to consider draft law to oblige record labels to calculate royalties

You can see the Recording Artists’ Coalition comment on ‘Recording Industry Practices’ athttp://www.recordingartistscoalition.com/rip.html

Panayiotou v Sony Music Entertainment (UK) Limited [1994] WLR 241, EMLR 229 (the ‘George Michael’ Case)