12/09/2010

"360 Deals": Do they create fiduciary relationships?

Royalty disputes between recording artists and record labels often degenerate into breach of contract claims, and, almost as often, breach of fiduciary relationship claims too. Courts have regularly held that the artist-label relationship does not impose a fiduciary duty on record companies. But Atlanta lawyer Douglas Okorocha thinks that the recent advent of "360 deals" may be a game-changer. In A Full 360: How the 360 Deal Challenges the Historical Resistance towards Establishing a Fiduciary Duty between Recording Artist and Record Label - an article soon to be published in the UCLA Entertainment Law Review - Okorocha acknowledges that "Courts have historically denied claims that artists and their respective record labels are fiduciaries to one another." But he suggests that
360 deals can invoke a fiduciary duty among artist and label because they have the potential to transform the relationship into a partnership. A partnership is defined as an association of two or more persons to carry on as co-owners of a business. Partnerships carry with them fiduciary obligations. If artist and label are found to be partners under a 360 deal, then, as a matter of law, they become fiduciaries.
The question of whether artists and labels have fiduciary relationships matters, because if they do, artists may have greater rights and better remedies than they would with breach of contract claims alone.