The Issue with Attorney Conflicts of Interest in the Entertainment Industry

Shelly McGough 

Associate Editor 

Loyola University Chicago School of Law, JD 2019   

All attorneys, in every jurisdiction in which they are admitted to the bar and in every area of practice, have an obligation to comply with that jurisdiction’s Rules of Professional Conduct.  However, the past few decades have shed light on the unusual practices of attorneys in the entertainment industry, particularly on how they handle conflicts of interest.  Generally, these attorneys encourage clients to waive conflicts of interest, and those clients are all too happy to do so.  This practice only serves to further blur the lines in an already complicated area of legal ethics. 

Cases in which Entertainment Attorneys Were Sued by Clients for Conflicts 

In 1992, singer-songwriter Billy Joel filed a lawsuit in the New York State Supreme Court against his attorney, Allen Grubman.  The suit stemmed from a breach of fiduciary duty arising from a conflict of interest involving Grubman’s representation of both Joel and his record label, Sony Corporation of America.  Sony ultimately settled out of court, allegedly fearing that a judgment for Joel would raise some serious questions regarding the validity of other artists’ contracts that Grubman had also negotiated while representing both Sony and the artist.  

Joel’s lawsuit was one of the first high profile cases involving such conflicts of interest, but it was far from the last.  In 2013, Lil’ Kim sued her former attorney, Sunny Barkats, for $2 million, in part for simultaneously representing her and a branding company he launched on her behalf.  Conflicts of interest have also arisen in litigation involving the estates of Jim Croce and Jimi Hendrix.  

Duties Owed to Clients 

In most areas of the law, attorneys typically limit their relationships with clients to that of the traditional attorney-client relationship.  In contrast, attorneys in the entertainment industry often wear multiple “hats;” as representative, counselor, negotiator, and even manager.  These attorneys, who take on such additional roles, are not exempt from their ethical obligations, and still owe each client the highest degree of integrity, loyalty, fiduciary responsibility, and transparency. 

Rule 1.7 of the ABA’s Model Rules of Professional Conduct (“MRPC”) governs conflicts of interest that arise with current clients.  Simply put, according to the rule, there is a conflict of interest in two instances: (a) where there is direct adversity between clients, or (b) the attorney is materially limited in his representation of one client because of his obligations to another. 

Attorneys are required to act in the best interest of the client, not in the “reasonably fair” interest of the client.  The best interest of one client, however, is often in opposition of the best interest of another in cases of cross-representation.  Take this scenario for example: an attorney represents both the artist and the record label in negotiating a contract.  The artist might push for more money, more albums, and greater ownership interest in the music; the record label will push for the opposite.  More likely than not, this conflict of interests would materially limit the attorney’s judgment in considering alternatives, and the attorney would not be able to act in the best interest of both clients. 

Consent to Conflicts 

However, there is a reason some call the music industry “incestuous”: clients often desire the entanglements and connections entertainment lawyers bring to the table.  And if they have to sign a waiver of a conflict of interest in order to take advantage of those connections, then so be it. 

Rule 1.7 allows attorneys to get around conflicts by the client giving informed consent to the conflict, confirmed in writing.  Informed consent means that each client must be made aware of the circumstances of the representation and reasonably foreseeable ways that the conflict could have adverse effects on the interests of the client. 

The problem in the entertainment industry is that it appears that some entertainment attorneys believe that all conflicts are waivable.  Yet, representation generally becomes prohibited if the attorney cannot reasonably conclude that he will be able to provide competent and diligent representation. 

There are also instances in which the attorney cannot obtain informed consent because he cannot disclose information to one client as it is confidential information the attorney obtained from the other client.  For example, if the attorney needs to disclose Client A’s confidential information to Client B in order for Client B to have adequate information to decide whether to consent to the conflict, the attorney will have to obtain Client A’s informed consent to disclose that information to Client B. 

The Real Issues 

By its very nature, the entertainment industry functions through connections—the “who you know” rather than the “what you know.”  This undeniable fact leads to a vast amount of waivers of conflict, which is a reason for concern. 

First, entertainers new to the business do not have the knowledge, instinct, or resources to hire independent legal counsel to consult on issues of conflicts of interest, further perpetuating an industry standard where studios and labels, with the assistance of their attorneys, are able to dictate terms to most artists and gain majority ownership in the artist’s work.  Not only does this damage the attorney-client relationship, it can negatively impact the public perception of the legal profession. 

Second, an argument has previously been made that because clients in this industry not only consent to conflicts of interest, but openly pursue them, entertainment attorneys should somehow be held to a less stringent ethical standard.  Because Rules of Professional Conduct apply to all attorneys in all jurisdictions and in all industries, this argument must fail, or it would set a dangerous precedent for legal professionals to argue that industry specific practices require separate ethical standards. 

What’s Next? 

Attorney conflicts of interest and the rules that govern them are by no means simple and clear-cut—there’s a good reason why large national and international law firms employ entire departments to analyze and clear conflicts of interest.   

Perhaps there is a need for a spotlight on attorneys in the entertainment industry, if not for the purpose of amending the conflicts of interest rules to establish a bright-line rule, then for a greater enforcement of the current rules.   

It’s much more likely that the industry will carry on as it has been with business as usual—at least until there’s a lawsuit that cannot be settled and a court rules on the conflicts issue. 

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