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Counsel Concerns: Lawyer Ethics Rule In Play in Suit By Business Manager Against Rap Artist
The U.S. District Court for the Western District of North Carolina dismissed a conversion counterclaim by rapper Chingy against his former business manager Leslie King, who is a lawyer, on the ground that the artist hadn't established that a royalty purchase agreement he signed with the lawyer was void for allegedly violating the state's attorney ethics rule. Viper Publishing Inc. v. Bailey, 3:17-CV-00314. However, the district court allowed the artist to pursue the ethics rule as an affirmative defense in the underlying lawsuit the attorney's music company has filed against Chingy.
King's Viper Publishing sued Chingy for allegedly breaching a contract under which Viper claims it obtained the right to Chingy's digital performance royalties from his sound recordings. Chingy argues he thought the purchase agreement included only one of his tracks.
Under the conflict-of-interest provision of Rule 1.8 of the North Carolina's Rules of Professional Conduct, when an attorney acquires “an ownership, possessory, security, or other pecuniary interest directly adverse to a client,” the lawyer must in writing make full disclosure to the client and advise the client to seek independent counsel for the transaction, as well as obtain informed written consent from the client.
But District Judge Graham C. Mullen found: “The only allegation describing any type of current relationship between [Howard] Bailey [i.e., Chingy] and King consists of the statement that King provided 'advice' and 'assistance' from 'time to time' to Bailey. Bailey does not describe the type of advice or assistance provided by King, nor does he even allege that the advice and assistance was legal in nature. … At the time the [music royalty] Purchase Agreement was negotiated and signed, Bailey alleges only that he asked King to help him secure financing [to record a single track], and that when those efforts were unsuccessful, King offered to finance the project. Neither of these actions would lead a person in Bailey's position to reasonably believe that he and King shared an attorney-client relationship.”
On the other hand, District Judge Mullen noted: “Bailey does not need to plead an affirmative defense with the same level of specificity. Rather, in light of the allegations contained in the Complaint, it is clear that such a[n ethics] violation, if proven, would qualify as a valid defense to Viper's breach of contract claims.”
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Stan Soocher is Editor-in-Chief of Entertainment Law & Finance as well as an entertainment attorney and a book author. He is also a tenured Associate Professor of Music & Entertainment Studies at the University of Colorado's Denver Campus. For more information: www.stansoocher.com.
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