Cameo Clips

Management Agreements/Unconscionability

A 1989 management agreement between musician Trent Reznor and his manager John Malm wasn't unconscionable, a Manhattan federal district court decided. Reznor v. J. Artist Management Inc., 04 Civ. 3808. Malm, who was a part-time music promoter in Cleveland, where Reznor's career was launched, began managing Reznor in the 1980s. After Reznor's group, Nine Inch Nails, signed a recording contract with TVT, Malm retained attorney Michael Toorock, who he had hired to represent Reznor's interest in the recording contract negotiations, to prepare a written management agreement. Toorock then used a management agreement for another client to which he added material terms supplied by Malm, including a 5-year term and commission rate, so that Malm and Reznor “could see what a management agreement looked like” (though Toorock claimed he didn't intend to represent either party as negotiations progressed). Reznor subsequently signed the agreement when Malm presented it to him.

In response to Reznor's claim that the agreement was unconscionable, the district court noted: “There is no allegation here that Reznor lacked bargaining power relative to Malm or that Malm pressured him into signing any deal. … While it is possible that Reznor could have commanded more favorable terms [eg, Malm's commission was based on 20% of artist gross income] had he driven a tougher bargain, there is no admissible evidence that the objected-to provisions in the management agreement were unusual for the industry, let alone that they violated any public policy.”

Among its other rulings in the case, the district court went on to deny summary judgment to Reznor on his claims of breach of fiduciary duty by Malm, noting in part that “by the time Malm began authorizing loans to the jointly owned companies [of Malm and Reznor] … there remains considerable dispute as to the extent to which Reznor was aware of and implicitly or explicitly consented to these actions.” The district court then denied Malm's motion for summary judgment on Reznor's claim of fraud in the inducement of the 1989 management agreement, of its 1994 continuation and of other agreements, stating “A jury could find that Malm made material misstatements of fact in the making of these agreements, including representing to Reznor that Toorock was protecting his legal interests.”

Finally, the court dismissed all the claims Reznor brought against the accountant Malm had hired to examine the financial condition of Malm's management company, the Malm-Reznor companies and Reznor personally. According to the court: “[T]here is no evidence that [the accountant Richard] Szekelyi breached any standard of care in preparing and presenting these reports [of Reznor's finances to Reznor in 2002 and 2003]. … [But] after establishing that Szekelyi owed a duty of care with respect to these reports, [Reznor] argues that Szekelyi failed to counsel Reznor adequately concerning certain other transactions. Because Szekelyi was not Reznor's accountant or business manager, he owed Reznor in his individual capacity no such duty with respect to other transactions.”

A model's claim that a products company used her likeness in connection with packaging and advertising beyond the authorized time, in violation of the Illinois Right of Publicity Act (IRPA), wasn't preempted by the federal Copyright Act, the U.S. Court of Appeals for the Seventh Circuit decided. Toney v. L'Oreal U.S.A. Inc., 03-2184. The IRPA, 765 Ill. Comp. Stat. 1075/1-60, states in part that a “person may not use an individual's identity for commercial purposes during the individual's lifetime without having obtained previous written consent from the appropriate person.” The appeals court had earlier affirmed a district court finding that the right of publicity claim was preempted but then vacated its prior ruling. In the most recent development in the case, the appeals court first found that even though the model June Toney's complaint didn't use the word “identity,” the complaint did allege “unauthorized commercial use of her likeness by the defendants under the IRPA. The complaint does not explain the legal theory that Toney relies upon, but it was not required to do so.”

Examining the federal Copyright Act, the appeals court noted: “[W]e find that Toney's identity is not fixed in a tangible medium of expression. There is no 'work of authorship' at issue in Toney's right of publicity claim. A person's likeness – her persona ' is not authored and it is not fixed. The fact that an image of the person might be fixed in a copyrightable photograph does not change this. From this we must also find that the rights protected by the IRPA are not 'equivalent' to any of the exclusive rights within the general scope of copyright that are set forth in [17 U.S.C.] Sec. 106. Copyright laws do not reach identity claims such as Toney's. … Unlike copyright law, 'commercial purpose' is an element required by the IRPA. … The fact that the photograph itself could be copyrighted, and that defendants owned the copyright to the photograph that was used, is irrelevant to the IRPA claim. The basis of a right of publicity claim concerns the message ' whether the plaintiff endorses, or appears to endorse the product in question.”

Management Agreements/Unconscionability

A 1989 management agreement between musician Trent Reznor and his manager John Malm wasn't unconscionable, a Manhattan federal district court decided. Reznor v. J. Artist Management Inc., 04 Civ. 3808. Malm, who was a part-time music promoter in Cleveland, where Reznor's career was launched, began managing Reznor in the 1980s. After Reznor's group, Nine Inch Nails, signed a recording contract with TVT, Malm retained attorney Michael Toorock, who he had hired to represent Reznor's interest in the recording contract negotiations, to prepare a written management agreement. Toorock then used a management agreement for another client to which he added material terms supplied by Malm, including a 5-year term and commission rate, so that Malm and Reznor “could see what a management agreement looked like” (though Toorock claimed he didn't intend to represent either party as negotiations progressed). Reznor subsequently signed the agreement when Malm presented it to him.

In response to Reznor's claim that the agreement was unconscionable, the district court noted: “There is no allegation here that Reznor lacked bargaining power relative to Malm or that Malm pressured him into signing any deal. … While it is possible that Reznor could have commanded more favorable terms [eg, Malm's commission was based on 20% of artist gross income] had he driven a tougher bargain, there is no admissible evidence that the objected-to provisions in the management agreement were unusual for the industry, let alone that they violated any public policy.”

Among its other rulings in the case, the district court went on to deny summary judgment to Reznor on his claims of breach of fiduciary duty by Malm, noting in part that “by the time Malm began authorizing loans to the jointly owned companies [of Malm and Reznor] … there remains considerable dispute as to the extent to which Reznor was aware of and implicitly or explicitly consented to these actions.” The district court then denied Malm's motion for summary judgment on Reznor's claim of fraud in the inducement of the 1989 management agreement, of its 1994 continuation and of other agreements, stating “A jury could find that Malm made material misstatements of fact in the making of these agreements, including representing to Reznor that Toorock was protecting his legal interests.”

Finally, the court dismissed all the claims Reznor brought against the accountant Malm had hired to examine the financial condition of Malm's management company, the Malm-Reznor companies and Reznor personally. According to the court: “[T]here is no evidence that [the accountant Richard] Szekelyi breached any standard of care in preparing and presenting these reports [of Reznor's finances to Reznor in 2002 and 2003]. … [But] after establishing that Szekelyi owed a duty of care with respect to these reports, [Reznor] argues that Szekelyi failed to counsel Reznor adequately concerning certain other transactions. Because Szekelyi was not Reznor's accountant or business manager, he owed Reznor in his individual capacity no such duty with respect to other transactions.”

A model's claim that a products company used her likeness in connection with packaging and advertising beyond the authorized time, in violation of the Illinois Right of Publicity Act (IRPA), wasn't preempted by the federal Copyright Act, the U.S. Court of Appeals for the Seventh Circuit decided. Toney v. L'Oreal U.S.A. Inc., 03-2184. The IRPA, 765 Ill. Comp. Stat. 1075/1-60, states in part that a “person may not use an individual's identity for commercial purposes during the individual's lifetime without having obtained previous written consent from the appropriate person.” The appeals court had earlier affirmed a district court finding that the right of publicity claim was preempted but then vacated its prior ruling. In the most recent development in the case, the appeals court first found that even though the model June Toney's complaint didn't use the word “identity,” the complaint did allege “unauthorized commercial use of her likeness by the defendants under the IRPA. The complaint does not explain the legal theory that Toney relies upon, but it was not required to do so.”

Examining the federal Copyright Act, the appeals court noted: “[W]e find that Toney's identity is not fixed in a tangible medium of expression. There is no 'work of authorship' at issue in Toney's right of publicity claim. A person's likeness – her persona ' is not authored and it is not fixed. The fact that an image of the person might be fixed in a copyrightable photograph does not change this. From this we must also find that the rights protected by the IRPA are not 'equivalent' to any of the exclusive rights within the general scope of copyright that are set forth in [17 U.S.C.] Sec. 106. Copyright laws do not reach identity claims such as Toney's. … Unlike copyright law, 'commercial purpose' is an element required by the IRPA. … The fact that the photograph itself could be copyrighted, and that defendants owned the copyright to the photograph that was used, is irrelevant to the IRPA claim. The basis of a right of publicity claim concerns the message ' whether the plaintiff endorses, or appears to endorse the product in question.”