Entertainment Industry Contracts Involving Minors

This page undergraduate paper discusses the importance of engaging in a contract with a minor in the proper fashion, suggests certain steps that entertainment industry professionals and minors can take to protect themselves when negotiating contracts, and examines several legal cases involving minors in the music industry.

Because courts believe that adults have certain advantages when dealing in contract negotiations with minors, there are legal elements involved in contracting with a minor that are not present in contract situations between adults. Anyone entering into a business relationship requiring signing a contract with a minor or minors should be very aware of the different legal grounds involved.

In essence, relative to minors, adults are believed to be dominant parties with superior bargaining power. This is as true for entertainment industry contracts as it is for any contract, perhaps even more so. Whether the intellectual dominance of the adult is a result of more experience, superior knowledge of the industry, or acquired wisdom in the arts of exploiting the young and experienced, it is considered to be present, and necessitates a different approach to contracts than would otherwise be called for.

Because courts know that some adults take advantage of minors in contract situations they have fashioned capacity doctrines to protect minors from overreaching adults and the effects of their immaturity, inexperience or lack of judgment. The minor’s right to avoid or disaffirm contracts with adults is the keystone to that protection. As a result, courts police contracts between adults and minors by putting the burden of fair-trading on adults with the doctrine of minors’ avoidance.

One important consideration is that the law of minority looks only to the minor’s age. There has been no attempt to determine on a case-by-case basis whether a particular minor has full legal capacity. The very phrase “full legal capacity” implies no right to avoid contracts. Conceivably, some minors might be better bargainers than some adults two or three times their age.

The law however, at least for the present, deals with minors as a broad general category of those under eighteen years of age, and does not examine the capabilities or experiences of any particular minor. There are no distinctions drawn, there is simply a determination of age. In effect, anyone under eighteen is not considered under the law to have full legal capacity, and adults deal with them at their peril.

In light of this, anyone in the entertainment business entering into a contract with a minor should be aware that contracts between adults and minors are voidable, but only at the option of the minor. Minors have been given the legal right to disaffirm such contracts. (Waters)

It should be understood that the purpose of allowing minors to void a contract is meant to be a deterring factor. Voidable contracts tend to neutralize adult inclinations to mistreat minors by injecting adult caution into the transaction. Based upon prior legal precedence, minors have been deemed to lack full contractual capacity, so contracts they form with adults are voidable.

In order to protect the rights of the adult involved, there are restrictions upon a minor’s right to void a contract. Upon reaching his or her majority, the minor has a limited time either to avoid or ratify any contracts he or she has formed as a minor. If he or she fails to disaffirm them within a reasonable time, he or she will be deemed to have ratified them. The reasonable time can be relatively limited.

Contract law in many states requires that specific steps be taken in or clauses added to a contract with a minor, to ensure that the contract is valid. Often, companies will require that the minor’s parents execute a valid release, under which the parents guarantee the services of the child and agree to be held liable for damages if the child fails to perform under the terms of the contract. (Adams)

A new tendency is that courts have become concerned that some minors have used the law of minority to practice trickery and dishonesty, and take advantage of adults. The policy for protecting minors is turned completely on its head when that happens; instead of blunting adult misbehavior, courts now are discovering that they often need to neutralize the misbehavior of minors. New laws to limit such abuses are being considered in many jurisdictions, and some have been passed. An adult contracting with a minor should be aware of these changes in order to protect their interests.

Having established what basic contract law is regarding minors, and that minor’s can void any contract they enter into, it would be useful at this point to discuss the basic elements of entertainment industry agreements, before focusing upon specific cases involving minors.

Musicians, performers, producers, managers and companies in the entertainment industry all seek to promote their business, film, or music interests in a variety of ways. Both parties to an agreement should fully understand the terms on which they are contracting, especially if a minor or minors are involved. An agreement may regulate both parties’ behavior for a considerable period of time and the effects of a bad deal can be disastrous for one party or another. For this reason all contracting parties are well advised to obtain professional advice and guidance, and to make every effort to be very specific concerning all relevant details before signing any contract.

In the music business, usually the key to a successful career for an artist or group is the existence of a recording agreement with a record company, whether with a major record company or an independent. The advantage to any musician is that money is paid to the artist at the outset by way of advance and if recordings are a success, then further income will be forthcoming in the form of royalty payments. (Adams)

Notwithstanding the importance of a record deal, the terms of the deal should be considered extremely carefully by both parties, especially when minors are involved, and several questions should be asked. For example, does the contract contain an express provision that the performer consents to the exploitation of the sound recording by the record company, and what is the duration of the contract ?

Often the contract is not for a fixed duration. A record company may have option periods to renew the contract, most probably without the performer’s consent. The contract between the parties may continue until a defined number of records have been recorded by the artist and released for sale. This may not be particularly advantageous to the artist when the royalty terms are relatively low, and some minors have taken unfair advantage of their legal status to void a contract that has unexpectedly turned out to be disadvantageous to their interests.

Other issues to be considered are whether the parties are sure of the extent to which the record company is entitled to exploit the recordings, whether exploitation is limited to a particular country or to a particular format such as CDs, rather than exploitation on the Internet, whether there are penalties or termination consequences for late delivery of an album by the artist to the record company, and whether the finances are for the production dealt with in the contract. Finally, it should be clearly determined whether the record company will bear the production costs or are whether they are to be borne by the artist out of his or her advance.

In addition, minors should be aware that the record company will usually pay royalties to the artist an advance. The bigger the advance, the greater is the likelihood that the contract will contain tougher provisions for the artist. Advances will usually be nonreturnable but recoupable. That is to say, the artist’s royalties will be used to pay back the advance before the artist receives any royalties. However the artist is not under any obligation to return the advance from any other financial source. If an album is unsuccessful the record company may never recover the advance.

Minors should also know that there is no standard royalty rate. Royalty rates can be a set amount, or they may vary depending on the number of record sales, increasing if, for example, record sales hit platinum. The calculation of the royalty should be carefully considered. Are there any hidden deductions before the royalty rate is applied, such as packaging costs ? Is the royalty rate lower when the record company exploits the album abroad through a subsidiary or other company?

Not only is it important that the minor be aware of these details, it is even more important that the adult party involved specify these terms very clearly to have their interests protected as much as possible should the minor party seek to void the contract later.

There should also be accounting provisions which require the record company to maintain accurate accounts and the record company should account to the artist several times each year for such royalties. In addition, the artist may seek a right to carry out a professional audit of the accounts to ensure that they have been maintained accurately and fairly.

To protect both parties, both the artist and the record company will generally be required to give various warranties in the agreement. For example, a warranty that the artist is not bound by any pre-existing agreement or a warranty that the record company will fund and release the sound recordings, should be included. Both the minor and the adult parties should always seek professional advice on these issues, the result of failing to do so could be disastrous.

It should also be noted that the record company may seek the right to reject recordings. Where this is the case, the basis on which a rejection can be made should be carefully considered and the decision should be based upon clear, objective criteria. A right to reject any album could impact on the duration of the agreement, and lead to future legal action if a clear understanding of the terms has not been reached by both parties.

Focusing at this point upon specific cases involving contract disputes involving minors in the music industry, a woman who says she was Christina Aguilera’s former manager is suing Aguilera’s mother and current managers for breach of contract, accusing them of bilking her out of millions of dollars generated by the singer. (Grossberg)

New York publicist Ruth Inniss is seeking two-million dollars in damages from Christina Aguilera’s mother, Shelly Kearns, and five-million dollars from Aguilera’s manager at the time, Steven Kurtz, his company, Marquee Entertainment, and Dartmouth Records.

In her civil suit filed in Manhattan Supreme Court, Innis claimed to have met the teen sensation and her mother in 1993, during Aguilera’s two-year stint as a Mouseketeer on The Mickey Mouse Show. Innis claimed that Kearns agreed to let Inniss represent Aguilera once the entertainer’s contract with Disney came to an end in 1994, according to court papers. Additionally, the suit asserted that Kearns and Inniss agreed that if the singer landed a recording contract, Inniss would act as Aguilera’s sole manager and develop her singing career.

Inniss claimed Kearns broke the deal by hiring another manager for her daughter. The suit also accused Kurtz of freezing Inniss out of any business dealings. Aguilera’s lawyer was unavailable for comment. Kurtz, meanwhile, denied the charges, denied he’d ever met or heard of Ruth Inniss, and declared that he’d been Aguilera’s manager for three and a half years and was not aware of any contributions the woman has ever had concerning Aguilera’s career. (Grossberg)

This legal mess illustrates quite well what can result when very specific contract terms are not spelled out with absolutely indisputable clarity. The alleged agreements entered into appear to be quite general and vague in content, perhaps because of the youth and inexperience of Aguilera and her mother.

But the Inniss suit is not the only lawsuit that has involved the teenage star. Aguilera is now suing her ex-manager, Steven E. Kurtz of Marquee Management, for exercising what she calls improper, undue and inappropriate influence over her personal and professional activities. Aguilera says Kurtz took more than his fair share of her ample recording and concert profits.

In the Los Angeles Superior Court lawsuit, which was filed last summer, Aguilera claims Kurtz convinced the then-seventeen-year-old ex-Mouseketeer to sign an agreement that made Kurtz her personal manager and entitled him to a maximum of twenty percent of all her commissionable income for an indefinite period of time.

Aguilera accuses Kurtz, along with his father, Normand, and an associate, Katrina Sirdofsky, of taking more than the twenty percent. Aguilera also filed a petition with the state Labor Commissioner that seeks an order to void the agreement and deem it unenforceable because she was a minor when she signed it. (Farache)

She is now signed with Don Henley’s long-time manager, Irving Azoff, who perhaps should be somewhat wary of what the future may hold in store for him. Aguilera’s former manager Kurtz says in a statement that the lawsuit is nothing more than a transparent and misguided attempt to avoid paying him, but because Aguilera was a minor she will probably succeed in voiding the contract. Interesting information? At PhDify you can buy dissertations from professionals!

Kurtz has been quite vocal in his defense, and said it was disturbing that Aguilera, rather than seeking to amicably and gracefully end their working relationship, would assert false, defamatory allegations against him and others who have steadfastly protected her best interests. He expressed deep disappointment that Aguilera would wrongfully attempt to terminate their management contract when, during its term and under his management, she was awarded the Grammy for Best New Artist, each of her singles and albums achieved the number one position on the Billboard charts, she sold over ten million records, and had a very successful headlining tour.

Kurtz added that he hoped Aguilera would use her intelligence and independent mind to question the motives of those persons who have encouraged her to pursue what he and his attorneys call a baseless lawsuit. (Farache)

This latest lawsuit involving Aguilera, which claims breach of fiduciary duty, Aguilera’s lack of full legal capacity, and fraud as causes of action, was filed on Aguilera’s behalf by entertainment attorney Daniel M. Petrocelli and David A. Steinberg of Mitchell, Silberberg & Knupp. Petrocelli claimed that none of Kurtz’s comments have any merit, and that he’s only making them to deflect attention from his own long-term misconduct.

In another case involving a minor, Leann Rimes filed a lawsuit in Dallas alleging that her father, Wilbur C. Rimes, and her former manager, Lyle Walker, took more than seven million dollars from her over five years. The lawsuit claims Walker and Wilbur Rimes charged unreasonable fees and manipulated LeAnn Rimes’ company for their own financial gain. Rimes is seeking an unspecified amount of money from her own father and former manager because her attorneys claim they don’t know how much above and beyond the seven million dollars is gone. (Schrimpaher)

Wilbur Rimes’ lawyer declared that the accusations were completely false, claimed that his client’s compensation was fair, and added that he could imagine no heartbreak greater than that of a father watching helplessly as others, for their own personal gain, alienated the affections of his daughter.

Not to be ignored, Keith Trent, the lawyer for the former manager, said LeAnn Rimes still owes him money, not the other way around. Lyle Walker is the one who has been wronged, Trent asserted, and vowed that the suit would not be successful.

Rhodus said accountants hired by Rimes’ mother last fall to investigate the two men discovered that the pair had received more than eight million dollars in royalties, five million dollars more than did LeAnn Rimes received.

An artist of LeAnn Rimes’ stature should only have to pay ten percent or less for competent management services, the lawsuit stated. The plaintiffs assert that Wilbur Rimes and Lyle Walker operated LeAnn Rimes Entertainment in complete and total disregard for the rights of LeAnn Rimes, and wrongfully usurped millions of dollars from LREI and Rimes for their own benefit.

Mr. Rhorer said his client sacrificed his dreams to finance Rimes’ dreams of a musical career. LeAnn Rimes recorded her first album when she was just eleven years old and has since become one of the hottest artists in country music, even winning a pair of Grammy Awards in 1997. (Schrimpaher)

In the wake of a storm of lawsuits such as these in recent years, it is obvious that great care should be taken when contracting with minors. In cases such as Aguilera’s and Rimes’, and in more recent ones involving the Back Street Boys and N’Sync, which are very similar in that they involve minors and a swinging door of managers coming and going, it is difficult to determine who has been wronged.

The only thing that is quite apparent is that contracting with minors in today’s entertainment world is almost certain to lead to lawsuits sooner or later. The fact that any minor stands a very good chance of voiding a contract seems to just invite them to do so whenever they choose.

Bibliography

• Adams, Wilson. “Entertainment Law.” West’s Encyclopedia of American Law. Online. Available: http://www.wld.com/conbus/weal/wentert.htm. 3 November 2000.
• Farache, Emily. “Christina’s Court Fight.” EOnline. Online. Available: http://icq.eonline.com/News/Items/0,1,7253,00.html. 3 November 2000.
• Grossberg, Josh. “What a Girl Doesn’t Want.” EOnline. Online. Available: http://icq.eonline.com/News/Items/0,1,6813,00.html. 1 November 2000.
• Schrimpaher, Dustin. “Mother Protecting Leean Rimes’ Rights.” CountryCool.com. Online. Available: http://www.countrycool.com/news/05_00/12feat_z.html. 2 November 2000.
• Waters, Robert. “Limitations Placed on Minors.” Family Law. Online. Available: http://www.mycounsel.com/content/familylaw/parents/limitations.html. 4 November 2000.