Over the years there have been many lawsuits between and among
the members of various musical bands. These lawsuits have concerned everything
from disputes over the distribution of money to the right of departing members to
use (or not to use) the band name in connection with ongoing endeavors. In most
cases, it would have been better to be safe than sorry, and get the understandings
of the band members in writing when everyone was in agreement just so all the
parties remember what they agreed to at the start.
The internal group member contract between the members of a band
is fundamentally important, but many musical groups ignore this crucial early
step. When two or more people associate for the purpose doing business they
create a partnership in the eyes of the law. General partnership law applies to
the association unless a written agreement states otherwise. General
partnership law provides, among other things, that all partners equally own
partnership property and share in profits and losses, that any partner can contractually
bind the partnership and that each partner is fully liable for the debts of the
partnership. In the case of most musical groups, a written agreement setting
forth the arrangement between and among the group members as partners is
preferable to general partnership law.
A band agreement can address issues such as who owns the group
name (and whether and in what capacity a leaving member can use the group
name), who owns what property (including not only sound equipment but
intangible property such as recording agreements and intellectual property such
as the songs and the recordings created by the group), and how profits and
losses are divided. Since it almost goes without saying that members of a band
inevitably leave and groups inevitably disband, it is important to structure an
inter-band agreement in the early stages of a career. It will function in a
sense like a prenuptial agreement when matters start to disintegrate, and it
can make the break-up process less painful.
Some bands may deal with this agreement among themselves and some
bands may have a lawyer prepare a basic inter-band agreement. If it is a fairly
equal partnership where all members are writing and performing and sharing
equally, it is a fairly simple process. However, where some members are
songwriters and others are not and/or where one member claims ownership in the
name or another makes significantly larger financial contributions than the
others, it can become a complicated process. If the band cannot work it out
among themselves, they can either sign a conflict waiver permitting the one attorney
to act solely as scribe (and not as advisor) on behalf of the group, or each
member of the group may need to get his or her own lawyer to protect each
respective member's interests. Like it or not, as artistic and creative as
forming a band can be, this is a business and it is wise to recognize that and
deal with it. These inter-band issues are better dealt with at the beginning
when everyone is optimistic and excited rather than later when tempers flare
and bitterness pervades as egos clash.
A typical band contract will address certain fundamental group
issues. One important issue is who owns the group name if one member leaves or
if a group dissolves which group of members are entitled to use the name. Under
partnership law the partners would be the joint owners of the name and any
member would probably be permitted to use the name (or maybe no members would
be allowed to use the name once the partnership is deemed dissolved). Trademark
rights are determined based on the "use" of a mark (not on who
thought of the name) so each of the members of the group would be an equal
co-owner of the group name under trademark law. The end result under either
partnership law or trademark law might be impractical.
In most cases, the band agreement will state that if a
particular founding member was the creator of the group name then only a group
comprised of that member and at least one other member can use the name. This
will apply whether one other member leaves or if the group disbands and only
the founding member and one other reform the group. There are as many different
ways this provision can be drafted as there are different group names. When a group member leaves, the remaining
members are going to want to keep the group name and are not going to want the
leaving member to dilute its value or confuse the public by using it in any
way. The band agreement provision may say that a leaving member cannot use the
name at all or that the leaving member can only mention that he was
"formerly" a member of the group (provided that such credit is
printed smaller than the member's name or his new group's name, etc.).
Rights in the group name may also concern revenues generated in
addition to rights, specifically as they concern the sale of merchandise (e.g.,
hats, t-shirts, calendars and other products and paraphernalia). The band
agreement should have a "Buy-Out/Pay Out" provision which would deal
with this financial aspect of the group name.
The band agreement will need to contain provisions regarding the
sharing of profits and losses. One provision may pertain to revenues earned
during the term while each member is in the group and another may pertain after
the departure of a member or the demise of the group. In most cases, a group just
starting out will have a provision that all profits from the group are shared
equally between all members with an exclusion for songwriting monies (which
each of the respective songwriter members would keep for themselves). Where an
established group adds new members the provision may provide that a new member
gets a smaller percentage than the founding members.
However, in most cases, during the term there is not a problem
determining appropriate revenue shares. The more complicated problem of revenue
division arises after a member departs. The agreement may provide that the
leaving member is entitled to his full partnership share of profits earned
during his tenure but a reduced percentage (or no percentage) of profits
derived from activities after his departure - or the agreement may provide for
a reduced percentage for a short period of time after departure (e.g., 90 days)
and then nothing thereafter. This is an easier issue to remedy as it relates to
live performances and sales of merchandise during those performances than it is
as it relates to record royalties. The group needs to determine what happens,
for example, when a group member performs on 3 albums but leaves before the
fourth album is recorded. Although it might be acceptable to refuse to pay the
leaving member any royalties on the fourth and future albums recorded by the
group under the record contract the leaving member signed as part of the group,
it might not be fair to refuse to pay that leaving member his share of
royalties from the 3 albums that he did record with the band. Of course, this
might vary in the agreement depending on whether the leaving member quit or was
fired.
Another important financial issue is the question of the leaving
member's share of partnership property such as band recording equipment or a group
sound system. Again, the agreement might specify a monetary payout to the
leaving member if he is terminated but forfeiture if the leaving member quits.
If merchandise with the leaving members name and likeness still in inventory is
sold after the member leaves, a decision will have to be made about whether and
how much the departed member might receive for the use of his name and
likeness.
The issue of control is also very important to deal with in inter-band
contract. In most cases, each member will have an equal vote and a majority
will rule. However, there are as many variations as there are bands. For
example, some acts might require unanimous agreement or an important member may
have two (2) votes and/or the band’s manager may have a tie-breaking vote. The
agreement may also provide that certain matters such as requiring financial
contributions from group members or incurring debts on behalf of the band
require a unanimous vote. Again, there are endless variations including
situations where a particular member makes all of the decisions or where new
members do not have a vote on band business. One interesting inter-band
arrangement was that of The Beatles. In
answer to that age-old question, "no", Ringo did not get less. In
fact, my understanding of their arrangement was that it was what might be
called a reverse democracy: each member had one vote but if any member voted
against doing something then the band would not do it. In other words, their
arrangement required unanimous consent to proceed with an activity.
Another issue of control that must be decided for the band agreement
concerns the hiring and firing of band members: how votes are calculated (e.g.,
will each member get one vote or will a particular member's vote count double)
and how many votes are needed (e.g., a majority or a unanimous vote) to fire a
group member and/or hire a new member. In most cases, a new member voted into
the group will then be required to sign on to the internal group contract. It
must also be decided how to vote on any amendments to the band agreement since this
may materially effect the relationship between the members after the group has
started. In most cases, a majority vote will be deemed determinative but some
members may prefer a unanimous vote on such things as amending the agreement
(as well as hiring or firing). This will have to be decided between and among
the members of the group.
Finally, the group’s internal agreement should contain a
comprehensive Buy-out/Pay-out provision that deals with departing members. In
most cases, whether the leaving member quits or is fired the agreement will
provide that the leaving member waives all rights in the intangible assets of
the partnership (e.g., the group name, the group contracts, etc.). If the
member quits, he might waive any right to and benefit derived from the hard
assets such as band sound equipment. If the leaving member is fired, the
agreement might provide that he or she is entitled to the pro rata percentage
of the current value of the hard assets. With respect to this payout, the band
agreement may provide that if the valuation exceeds a certain amount (e.g.,
$25,000.00) or would put the band partnership in financial distress, the payout
would be in a certain number of equal monthly installments (e.g., over 12
months).
Again, this Buy-out/Pay-out provision can be as simple or as
complicated as the band members deem necessary. There are as many variations in
this as there are differences in personalities between the members of a group.
Each member and each group must find its own balance.
Inter-band issues and disputes are many and varied. Recently, a
member of the Eagles sued the remaining members saying he was forced out of the
Eagles’ corporation by the other shareholders (and invoked provisions of the California corporate law
pertaining to minority shareholders in close corporations). Years ago an ex-member
of The Black Crowes sued his former band mates claiming that he was entitled to
an equal share of all the money they made after they threw him out of the band.
His contract claim was based on nothing more than a pie chart drawn on a
napkin. Legend has it that, years before while eating at a dinner after a band
rehearsal, each member had signed his name on his slice of the "pie"
drawn on the napkin allegedly agreeing that they would stay together and share
all of the money equally come what may. Of course, when circumstances changed
the fired member used that napkin to assert his rights.
It is difficult to form a good band and to achieve a successful
career in the music business. Any group of two or more musicians working
together would be well-advised to create and sign a good Internal Band Contract
so that the band does not later self-destruct over money and ego issues and
forfeit its hard-earned career success. In a perfect world, each member could
afford its own lawyer to quickly and inexpensively prepare and sign such an
agreement. In the real world, that may not be the case. In any event, some kind
of basic band agreement is a good starting point for any new band.
Wallace Collins is a New York
lawyer specializing in entertainment, copyright, trademark and internet law. He
was a recording artist for Epic Records before attending Fordham Law
School. Tel:(212)661-3656
/ www.wallacecollins.com
