In a move that music industry insiders have characterized as a “bombshell,” American Idol season 11 winner, Phillip Phillips, launched a legal action last week to void his agreements with 19 Entertainment, Inc., the producer of the hit talent show. Shortly after becoming a contestant on the show, Phillips entered into at least four different agreements with 19 Entertainment and its affiliates: (i) a management agreement; (ii) a merchandising agreement; (iii) a recording agreement; and (iv) a songwriter/co-publishing agreement. Because these agreements contain confidential information, they are being kept under seal during the legal proceeding. However, given the leverage that shows like American Idol have over their contestants, industry insiders have speculated that the terms are probably most favorable to 19 Entertainment. Now, almost three years after winning season 11, Phillips has grown tired of what he alleges to be a series of “oppressive” agreements. Although Phillips apparently terminated these agreements in December 2014, Phillips and his legal team have escalated the controversy by accusing 19 Entertainment of unlawfully acting as a “talent agency” in violation of California law and for breaching its fiduciary duty to Phillips. In addition to seeking to void the agreements, Phillips is requesting that 19 Entertainment disgorge and repay Phillips any and all monies or other things of value improperly received under the agreements by 19 Entertainment (e.g., commissions, fees, profits, advances, etc.).
Under the California Talent Agencies Act (California Labor Code, Sections 1700-1700.47) (“TAA”), only licensed talent agencies are allowed to procure or attempt to procure employment or engagements for an artist (e.g., musicians, actors, writers, etc.). One exception is that a talent agency license is not required for someone to procure a “recording contract” for an artist. In cases of controversy arising under the Talent Agencies Act, the parties must refer the matters in dispute to the California Labor Commissioner. This is done by filing a Petition to Determine Controversy under California Labor Code section 1700.44, which is what Phillips filed in legal documents dated January 21, 2015.
In the Phillips Petition, Phillips alleges that 19 Entertainment has “constantly manipulated” him into accepting jobs and entering into other transactions that were for the benefit of 19 Entertainment rather than for his benefit. Further, Phillips accuses 19 Entertainment for repeatedly violating the Talent Agencies Act by attempting to procure and actually procuring employment for Phillips, even though 19 Entertainment was not a licensed talent agency. The Petition lists more than 30 different appearances and performances that 19 Entertainment procured for Phillips, including spots on the Today Show, Letterman, Jimmy Kimmel Live, Ellen, The View, The Tonight Show, MTV, the NBA All-Star Game, and the World Series. For most upstart singer-songwriters like Phillips, gigs like these would be welcomed with open arms.
While Phillips states in the Petition that he “remains grateful for the opportunity American Idol provided him,” this appreciation does not extend to the “oppressive, fatally conflicted 19 Entertainment, Inc.” In terms of the conflict of interest, Phillips points out that 19 Entertainment and its affiliates serve as both his management company and his record company. Therefore, when it came time to re-negotiate his record deal due to his substantial success as a recording artist, Phillips claims that 19 Entertainment “failed to secure even a single improvement to the terms of [his] Recording Agreement.” Further, Phillips alleges in the Petition that 19 Entertainment repeatedly withheld material information from him regarding important career matters, including 19 Entertainment’s exploitation of Phillips’ intellectual property and marketing matters relating to his records. For example, Phillips claims that he was not informed of the name of his most recent album until it was announced in the press.
While copyright disputes and digital music streaming have dominated the recent conversation in the music business, the legality of American Idol’s agreements with its contestants is sure to grab its share of attention in the coming months. At the very least, it may cause other talent shows like The Voice and America’s Got Talent to reevaluate their contestant agreements, at least as it pertains to procuring work for its contestants.