Contract Disputes
Hipgnosis Songs Fund, one of the most influential players in the catalog acquisition market run-up of recent years, and Barry Manilow are embroiled in a pair of lawsuits over $1.5 million in unpaid bonuses Manilow’s team claims Hipgnosis agreed to when it acquired his catalog.
Hipgnosis Songs Fund sued first in the High Court in London on August 12, saying they do not owe Manilow these bonuses, and that Manilow, Manilow Productions and Stiletto Entertainment are in breach of contract for not turning over certain payments they received from Sony Music. The “Mandy” singer and his management company sued back in United States federal court in California on Aug. 28, claiming that Hipgnosis does owe Manilow $1.5 million in bonuses, and that the fund did not actively promote his work, thereby avoiding these performance-linked bonuses — logic Hipgnosis calls flawed.
In other circumstances, this may have been treated like a mundane contract dispute. But Manilow’s legal team allege in the suit that Hipgnosis, through its founder Merck Mercuriadis — the man behind the formerly London-listed fund’s famous appetite for acquisitions — falsely represented that it had the people and know-how to increase the money generated by Manilow’s master recordings. Mercuriadis is not party to either lawsuit, and through a spokesperson he declined to comment for this article.
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According to a copy of the contract included in Hipgnosis’ lawsuit, the company acquired 100% of Manilow’s worldwide income (excluding SoundExchange royalties) from his master recordings for $7.5 million. Two bonus payments were to be paid out if, for the first payment, the income Hipgnosis received from its share of the assets increased by at least 10% year-on-year compounding for each of the first three years; and if, for the second payment, the income Hipgnosis received increased by at least 10% year-on-year compounding for years one through four.
Manilow’s legal team says in its suit that Hipgnosis described promotional strategies that included album reissues, special compilations and synch deals, as well as less traditional strategies like a YouTube Karaoke channel, Instagram giphy packs and Copacabana-themed dance trends.
“Hipgnosis did not carry out a single one of its touted promotional strategies; upon information and belief, it did nothing at all in order to keep the cash income below the levels required to meet the condition precedent for the additional purchase price payments,” Manilow and Stiletto Entertainment’s legal team alleges in the complaint. Manilow also missed out on expected complementary increases in the value of his publishing royalties and his Las Vegas residency, they claim in the suit.
In its suit, Hipgnosis alleges that Manilow, Manilow Productions and Stiletto Entertainment breached their contract that laid out when bonuses would be paid because Manilow & co. received two royalty payments from Sony — for the period from July 1 to December 31, 2022, and January 1 to June 30, 2023 — that they ought to have turned over to Hipgnosis but didn’t. In addition, Hipgnosis says in the lawsuit that Sony Music suspended payment of royalties for the period from July 1 to December 31, 2023. Sony Music through a spokesperson declined to comment.
Regardless, Hipgnosis says in the suit it does not owe the bonuses because the income received never met the performance targets, and it is seeking to recover 100,000 pounds from Manilow and his production and management teams.
“The matter of the bonus payment is a routine contractual matter regarding interpretation of certain contract clauses,” a Hipgnosis spokesman said in an emailed statement. “While we regret that this couldn’t be resolved directly between the parties, the court is now best placed to offer a final and definitive opinion on this matter. We have full confidence in our position and the legal process.”
Representatives for Hipgnosis also dispute Manilow’s team’s logic that Hipgnosis did not promote his works so as to keep the income levels below the thresholds that would trigger the bonus payouts, saying that logic is false because acquisition deals are structured to incentivize Hipgnosis to optimize the asset. Performance bonuses by definition are paid out when the asset does well, which benefits the artist and Hipgnosis, they say.
“Hipgnosis’ model is based on a strong alignment of interest between songwriters and artists and our business,” Hipgnosis’ spokesperson said in the emailed statement. “We continue to hold Barry and his music in the highest possible regard. To suggest that Hipgnosis would deliberately withhold promotional efforts for these recordings would not make commercial sense. These claims are baseless, and we will defend them vigorously should that be necessary.”
Manilow’s case is currently a one-off. However, the board of Hipgnosis Songs Fund said that, as of Sept. 30, 2023, it was liable to pay out as much as $68.1 million in catalog bonus provisions across 10 catalogs, of which the disputed Manilow bonuses are just one. Hipgnosis Songs Fund has since been taken private by Blackstone and no longer discloses this level of financial data.
Megan Thee Stallion is hurling new accusations at her record label 1501 Certified Entertainment, including that the company is trying to make itself “judgment-proof” by draining its bank accounts.
In an updated version of her long-running lawsuit, the “Savage” rapper’s lawyers claimed Wednesday that they had unearthed evidence that 1501 founder Carl Crawford had “dissipated millions of dollars held in 1501’s primary bank account,” including funds that will potentially be owed to Stallion.
“Instead of following its financial manager’s advice and holding the contested funds in reserve, 1501 has chosen to enrich itself and its consultants, leaving less than ten thousand dollars in the account,” Megan Thee Stallion’s lawyers wrote. “Based on 1501’s undercapitalization, it is highly probable that 1501 will be judgment-proof by the time Pete is able to obtain a final judgment on the merits of her claims.”
As a result of this “fraudulent transfer of assets,” Megan Thee Stallion’s lawyers demanded that the judge overseeing the case impose extraordinary restrictions while the case continues to play out.
“Pete seeks the appointment of a receiver to take possession of 1501 until this dispute is resolved, or in the alternative, the appointment of a receiver to take possession of all of 1501’s bank accounts and any other bank accounts controlled or owned by Carl Crawford, including the bank accounts to which the money siphoned out of the bank account was transferred into.”
In a statement to Billboard, 1501’s attorneys sharply disputed the new claims from Megan Thee Stallion (real name Megan Pete).
“1501 strongly disagrees with the substance of Ms. Pete’s recent filings,” said Kenneth D. Freundlich of Freundlich Law and LeElle B. Slifer of Winston & Strawn LLP. “The allegations are without merit and we are confident that 1501 will prevail on these motions and ultimately recover the substantial money that Ms. Pete owes 1501.”
A rep for Megan Thee Stallion did not return a request for comment on the new filing.
The star rapper has been fighting with 1501 for more than two years, claiming the company duped a young artist into signing an “unconscionable” record deal in 2018 that was well-below industry standards. Megan Thee Stallion says that when she signed a new management deal with Jay-Z’s Roc Nation in 2019, she got “real lawyers” who helped her see that the deal was “crazy.”
She filed the current case in February 2022, claiming 1501 had wrongly classified her Something For Thee Hotties as something less than an “album” — a key distinction, since she owes a set number of albums under her record deal. 1501 then quickly countersued, arguing that Thee Hotties contained just 29 minutes of original material and obviously did not meet the definition of an “album.”
The two sides then escalated the case last summer. Megan Thee Stallion filed a new complaint seeking more than $1 million in damages over claims that 1501 had “systematically failed” to pay enough royalties. 1501 then fired back with new accusations of its own, claiming it’s actually Megan Thee Stallion who owes “millions of dollars.”
Until Wednesday’s bold new accusations, it had appeared that tempers might actually be cooling. In an interview with TMZ in February, Crawford expressed some regret over his public feuding with Megan Thee Stallion and said he would be “taking a different approach” in the future: “I never had problems with Megan Thee Stallion, but this social media stuff turned it really sour.”
But in addition to Wednesday’s new allegations about 1501’s bank accounts, Megan Thee Stallion’s lawyers also filed a separate motion asking the judge to summarily rule that 1501 had breached its contracts with Megan Thee Stallion. The reason? They say 1501 has chosen to categorically deny all requests to license Megan’s music until the case is resolved — representing a “flagrant breach” of the deal.
“In furtherance of its relentless efforts to sabotage Pete and her career, 1501 has taken the unlawful and unjustifiable position that it will continue to deny every single licensing request until its publishing claim in this litigation is resolved,” Megan Thee Stallion’s lawyers wrote. “1501 has taken this draconian position out of spite, a fact that 1501’s representatives have admitted under oath.”
The judge overseeing the case ruled in December that the battle will ultimately need to be decided by a jury. A trial is currently set for August, but after Wednesday’s new filings it’s unclear if the case will be able to stick to that schedule.
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