{"id":2310,"date":"2019-02-20T00:41:25","date_gmt":"2019-02-20T06:41:25","guid":{"rendered":"http:\/\/blogs.luc.edu\/compliance\/?p=2310"},"modified":"2019-02-20T00:41:25","modified_gmt":"2019-02-20T06:41:25","slug":"the-issue-with-attorney-conflicts-of-interest-in-the-entertainment-industry","status":"publish","type":"post","link":"https:\/\/blogs.luc.edu\/compliance\/?p=2310","title":{"rendered":"The Issue with Attorney Conflicts of Interest in the Entertainment Industry"},"content":{"rendered":"

Shelly McGough<\/i><\/span>\u00a0<\/i><\/span><\/i><\/p>\n

Associate Editor<\/i><\/span>\u00a0<\/i><\/span><\/i><\/p>\n

Loyola University Chicago School of Law, JD 2019\u00a0\u00a0\u00a0 <\/i><\/span><\/p>\n

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\u2019s Rules of Professional Conduct.\u00a0 However, the past few decades have shed light on the <\/span>unusual practices<\/a>\u00a0of attorneys in the entertainment industry, particularly on how they handle<\/span>\u00a0<\/span>conflicts of interest.\u00a0 Generally, these attorneys encourage clients to waive conflicts of interest, and those clients are all too happy to do so.\u00a0 This practice only serves to further blur the lines in an already complicated area of legal ethics.<\/span>\u00a0<\/span><\/b><\/p>\n

<\/p>\n

Cases in which Entertainment Attorneys Were Sued by Clients for Conflicts<\/b><\/span>\u00a0<\/span><\/p>\n

In 1992<\/a>, singer-songwriter Billy Joel filed a lawsuit in the New York State Supreme Court against his attorney, Allen Grubman.\u00a0 The suit stemmed from a breach of fiduciary duty arising from a conflict of interest involving Grubman\u2019s representation of both Joel and his record label, Sony Corporation of America.\u00a0 Sony ultimately settled out of court, allegedly fearing that a judgment for Joel would raise some serious questions regarding the validity of other artists\u2019 contracts that Grubman had also negotiated while representing both Sony and the artist.\u00a0<\/span>\u00a0<\/span><\/p>\n

Joel\u2019s lawsuit was one of the first high profile cases<\/span>\u00a0<\/span>involving such conflicts of interest,<\/span>\u00a0<\/span>but<\/span>\u00a0<\/span>it was far from the last.\u00a0 <\/span>In 2013<\/a>, Lil\u2019 Kim sued her former attorney, Sunny<\/span>\u00a0<\/span>Barkats<\/span>, for $2 million, in part for simultaneously representing her and a branding company he launched on her behalf.\u00a0 Conflicts of interest have also arisen in litigation involving the estates of Jim Croce and Jimi Hendrix.\u00a0<\/span>\u00a0<\/span><\/b><\/p>\n

Duties Owed to Clients<\/b><\/span>\u00a0<\/span><\/p>\n

In most areas of the law, attorneys typically limit their relationships with clients to that of<\/span>\u00a0<\/span>the traditional attorney-client relationship.\u00a0 In contrast, attorneys in the<\/span>\u00a0<\/span>entertainment\u00a0industry<\/a>\u00a0often wear multiple \u201chats;\u201d as representative, counselor, negotiator, and even manager.\u00a0 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.<\/span>\u00a0<\/span><\/p>\n

Rule 1.7<\/a>\u00a0of the ABA\u2019s Model Rules of Professional Conduct (\u201cMRPC\u201d) governs<\/span>\u00a0<\/span>conflicts of interest that arise with current clients.\u00a0 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.<\/span>\u00a0<\/span><\/p>\n

Attorneys are required to act in the <\/span>best interest<\/a>\u00a0of the client, not in the \u201creasonably fair\u201d interest of the client.\u00a0 The best interest of one client, however, is often in opposition of the best interest of another in cases of<\/span>\u00a0<\/span>cross-representation.\u00a0 Take this scenario for example: an attorney represents both the artist and the record label in negotiating a contract.\u00a0 The artist might push for more money,<\/span>\u00a0<\/span>more albums, and greater ownership interest in the music; the record label<\/span>\u00a0<\/span>will<\/span>\u00a0<\/span>push for the opposite.\u00a0 More likely than not, this conflict of interests would materially limit the attorney\u2019s judgment in considering alternatives, and the attorney would not be able to act in the best interest of both clients.<\/span>\u00a0<\/span><\/b><\/p>\n

Consent to Conflicts<\/b><\/span>\u00a0<\/span><\/p>\n

However, there is a reason some call the music industry <\/span>\u201cincestuous\u201d<\/a>: clients often desire the entanglements and connections entertainment lawyers bring to the table.\u00a0 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.<\/span>\u00a0<\/span><\/p>\n

Rule 1.7<\/a>\u00a0allows attorneys to get around conflicts by the client giving informed consent to the conflict, confirmed in writing.\u00a0 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.<\/span>\u00a0<\/span><\/p>\n

The problem in the entertainment industry is that it\u00a0appears that some entertainment attorneys believe that all conflicts are waivable.\u00a0 Yet, representation generally becomes <\/span>prohibited<\/a>\u00a0if the attorney cannot reasonably conclude that he will be able to provide competent and diligent representation.<\/span>\u00a0<\/span><\/p>\n

There are also <\/span>instances<\/a>\u00a0in 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. \u00a0For example, if the attorney needs to disclose Client A\u2019s confidential information to Client B<\/span>\u00a0<\/span>in order for<\/span>\u00a0<\/span>Client B to have adequate information to decide whether to consent to the conflict, the attorney will have to obtain Client A\u2019s informed consent to disclose that information to Client B.<\/span>\u00a0<\/span><\/b><\/p>\n

The Real Issues<\/b><\/span>\u00a0<\/span><\/p>\n

By its very nature, the entertainment industry functions through connections\u2014the \u201cwho you know\u201d rather than the \u201cwhat you know.\u201d \u00a0This undeniable fact leads to a vast amount of waivers of conflict, which is a reason for concern.<\/span>\u00a0<\/span><\/p>\n

First,<\/a>\u00a0entertainers 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\u2019s work. \u00a0Not only does this damage the attorney-client relationship, it can negatively impact the public perception of the legal profession.<\/span>\u00a0<\/span><\/p>\n

Second<\/a>, 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. \u00a0Because 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.<\/span>\u00a0<\/span><\/b><\/p>\n

What\u2019s Next?<\/b><\/span>\u00a0<\/span><\/p>\n

Attorney conflicts of interest and the rules that govern them are by no means simple and clear-cut\u2014there\u2019s a <\/span>good reason<\/a>\u00a0why large national and international law firms employ entire departments to analyze and clear conflicts of interest. \u00a0<\/span>\u00a0<\/span><\/p>\n

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. \u00a0<\/span>\u00a0<\/span><\/p>\n

It\u2019s much more likely that the industry will carry on as it has been with business as usual\u2014at least until there\u2019s a lawsuit that cannot be settled and a court rules on the conflicts issue.<\/span>\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

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\u2019s Rules of Professional Conduct.\u00a0 However, the past few decades have shed light on the unusual practices of attorneys in the entertainment industry, particularly on how they handle\u00a0conflicts of interest.\u00a0 Generally, these attorneys encourage clients to waive conflicts of interest, and those clients are all too happy to do so.\u00a0 This practice only serves to further blur the lines in an already complicated area of legal ethics.\u00a0<\/p>\n","protected":false},"author":19,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[227,483,484,734,1233,1368,1744],"class_list":["post-2310","post","type-post","status-publish","format-standard","hentry","category-uncategorized","tag-attorney-ethics","tag-conflicts","tag-conflicts-of-interest","tag-entertainment-industry","tag-legal-ethics","tag-music-industry","tag-rule-1-7"],"_links":{"self":[{"href":"https:\/\/blogs.luc.edu\/compliance\/index.php?rest_route=\/wp\/v2\/posts\/2310","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.luc.edu\/compliance\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.luc.edu\/compliance\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.luc.edu\/compliance\/index.php?rest_route=\/wp\/v2\/users\/19"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.luc.edu\/compliance\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2310"}],"version-history":[{"count":0,"href":"https:\/\/blogs.luc.edu\/compliance\/index.php?rest_route=\/wp\/v2\/posts\/2310\/revisions"}],"wp:attachment":[{"href":"https:\/\/blogs.luc.edu\/compliance\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2310"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.luc.edu\/compliance\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2310"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.luc.edu\/compliance\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2310"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}