“Wages of Spin” (Some Contract Law Issues)

a dollarsSuppose the host of a show like American Idol insisted that, in exchange for putting participants on air and gaining publicity, participants had to sign agreements transferring copyright and all future royalties from songs they perform on the show to the host. Suppose further that these participants signed such contracts, and ensuing royalty streams generated millions of dollars for the host, nothing to the performer. Would these agreements be enforceable? Under what legal theories could they be challenged?

Facts like these appear at the heart of longstanding, though little known, allegations against Dick Clark, host of the wildly popular arbiter of successful commercial music decades ago, American Bandstand. Though Clark faced Congressional hearings over such allegations back in the 1960s, they never went anywhere and legal claims do not appear to have been pursued. This quiescent state of affairs may reignite amid the new documentary on the subject, Wages of Spin, which suggests that artist and producer reticence to pursue legal claims is due to lack of knowledge or capacity or to how the power Clark wields in the industry has made many potential witnesses and other adversaries reluctant to challenge him.

The film, made by Shawn Swords (who, in the interest of full disclosure, is a friend of mine and high school classmate), is not so much an expose of Clark’s moral compass as an exploration of the tactics he used to run the show. As a documentary, it adopts an objective tone and viewpoint, though undoubtedly does not provide the adversarial forum to explore or test all assertions and counter-assertions that adjudication of disputes provides.

Accordingly limited, the skeletal facts may permit considering, in broad outlines, issues from the common law of contracts concerning the enforceability of such agreements. I mention four below: lack of consideration, unconscionability, illegal bargain and duress. Comments are open to add to this list—or subtract from or qualify it. (Of course, any inquiry like this skirts potentially applicable statutes of limitations, which raise additional issues concerning tolling, discovery, diligence and others that would require considerably more facts to evaluate.)

Consideration.  First, artist-producers could argue that the transfer of their rights lacked consideration. The evidence may show the transfer was not made for sufficient consideration but, at best, for the promise and delivery of time on the air and play time for the records. Under traditional theories of contract formation, however, this claim would be difficult to sustain. Courts routinely say they will not inquire into the adequacy of consideration, so long as some quid pro quo exists. It is probably enough to observe that the deals involved the exchange of royalty assignments for airplay or air time.

Unconscionability.  Second, the artist-producers could allege that, despite the presence of such consideration, the relation between the copyright royalty value and the air time was so lopsided that no reasonable person would have proposed and no rational person would have assented to it. This attempts to invoke the doctrine of unconscionability, a rarely used exception to the usual judicial deference to party determinations of the content of bargains. Although worth considering, this claim may be difficult to sustain given how the value of royalties may well have been dependent upon, and a function of, the airplay or air-time given in exchange.

Illegal Bargain.  Third, the artist-producers could assert that the arrangement amounted to an illegal bargain, one a court should not enforce. This claim could invoke the standard talk of the period that characterized as “payola” the exchange of pay for airtime. It was condemned as an unsavory practice, equivalent to a bribe, though it is not obvious that there were actual laws prohibiting it. Though many courts take the notion of illegal bargain literally, so that refusing enforcement must be based on an exchange that is in substance illegal, some courts invoke a broader sense of public policy in electing to refuse enforcement. Entertaining such a ground to refuse enforcement involves an extensive balancing of the interests in light of related public policy.

Duress.  Fourth, the artist-producers may assert that the agreements were not the product of the exercise of free will but were products of duress that Clark or his associates induced. In general, contracts formed as a result of duress may be set aside, but proving duress requires showing that the opposing side exerted an unlawful threat, improper or coercive influence or techniques to induce assent. This is likewise not a commonly invoked ground for setting aside a contract, and depends heavily on particular facts at the time of contracting. Viewers of the documentary may detect evidentiary leads and predicate assertions to provide a firmer basis for evaluating the probability that this theory to challenge enforceability of the contracts would succeed.

Remedies.  Ultimately, if artist/producers could identify infirmities in the contract formation process, whether lack of consideration, unconscionability, illegal bargain, duress, or otherwise, to what remedy would they be entitled? Since the claim is to set aside the contracts, the remedy is not a contractual remedy but a form of restitution for unjust enrichment. This considers the value of the benefit conferred by the aggrieved party on the benefited party.

In principle, this would mean all royalties under the copyrights would be accounted for and returned—plus reassignment of putative contract rights, including associated copyrights and related royalties. Given the scope of claims implicated—some 143 songs, many of them monster hits—hundreds of millions of dollars would be at stake.

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6 Responses

  1. TJ says:

    It is worthwhile to note, I think, that any sense of unfairness is undermined by the Copyright Act’s provision of an inalienable right to terminating the transfer 35 years after the grant. The rationale for the termination provision is precisely to relieve the perceived unconscionability and duress of an at-the-outset assignment.

  2. Lawrence Cunningham says:

    TJ:

    Thanks! Quite worthwhile.

  3. Jaundiced eye says:

    The recording industry is full of deals in which groups sign away many of their copyright rights in exchange for the recording company’s backing them. The company produces & promotes the artist in return for a share of the artist’s possible success.

    If the artist is already successful when it signs the artist gets a better deal.

    Aren’t these a form of aleatory contract in which the performer trades its rights for a CHANCE at success?

    The Idol contestants don’t get nothing. If they get successful exposure from the show, can’t they capitalize on that success by writing or recording other songs that aren’t covered by the Idol contract?

  4. Nancy says:

    Do you know whether copies of the DVD are available and where I could buy one?

  5. Lawrence Cunningham says:

    Nancy,

    The DVD has not been released yet, but you can sign up for it at the producer’s web site, which also contains other information about this film and others:
    http://www.characterdrivenfilms.com

  6. Billy Vera says:

    As far back as music publishing goes, it was common “consideration” for a publisher to give a dollar for the publisher’s half of the copyright. Further consideration was the publisher’s ability to get artists to record the song. That was their job. People don’t work for free.

    Today, artist/writers often are their own publishers, and consequently don’t get their songs covered by others.

    Al Jolson demanded a writer’s share to record songs, as did Tommy Dorsey, Count Basie and many others. To get a song recorded by Elvis, writer had to give publishing to the Colonel and Elvis…even Leiber & Stoller, who were crafty businessmen themselves.

    You’d have a tough time proving these other issues, as the artist could always say no. This wasn’t a Roulette Records situation, where legs could be broken.