Steely Dan in Fight over Band Ownership
Donald Fagen, one of the founders of the band Steely Dan, is engaged in a dispute with Delia Cioffi, the widow of his former partner Walter Becker.
Becker died in September, 2017.
Steely Dan was founded in 1972, disbanded in 1981, and reunited in 1993. The band, with a revolving group of studio musicians as well as the two founders, sold more than 40 million albums and earned four Grammy Awards.
The dispute involves a "buy/sell" contract the band members signed on Halloween, 1972.
A buy/sell agreement is a contract between co-owners of a business that usually requires one partner to sell his or her shares back to either the business or the surviving partner, based on a set price or formula. This both compensates the family members of the deceased partner and lets the business to go on operating without undue disruption.
As NPR reported,
The contract ... says that if any of its signees dies or leaves the band, the band's corporation has the right to immediately repurchase their shares at book value. The contract also says that any transfer of those shares to another person is still subject to the agreement.
Since Becker's death, Fagen is the only living person to have signed the contract.
According to Forbes,
The buy/sell agreement, if enforceable, would entitle Fagen to purchase Becker’s 50% ownership of the band and, therefore, be the sole owner and retain 100% control of the band.
Not in Force?
Cioffi's lawyers now claim that the 1972 agreement is no longer in force and that it wasn't in effect when Becker died.
According to Rolling Stone, Fagen claims that he received a letter from Cioffi "stating that, as director or officer of Steely Dan, she is entitled to 50 percent ownership of the band."
Fagen is seeking a declaratory judgement that the '72 agreement still is in effect. He's also suing the band's former business management firm and tour accounting company.
According to Fagen's attorney,
Mr. Fagen believes Mr. Becker's estate is entitled to receive all normal royalties on the songs they wrote together. But this case is about the future of the band, and we will vigorously defend the contract.
Forbes suggests that the case offers four lessons for band members:
1) Create a Legacy Plan
A proper legacy plan will isolate the band and all of its rights and assets separate from the band members’ estates and more traditional assets (e.g., stocks, bonds, etc.), and provide for the separate and continual management of those assets for as long as possible, i.e., in perpetuity.
2) Provide for a Seamless Transition upon the Death of a Band Member
If a band is a legal entity, such as a Limited Liability Company (LLC) owned by a trust, the ability of a member's estate or heirs to bring a claim against the trust would be limited.
3) Update the Estate/Legacy Plan as Needed
The 1972 agreement was drafted before the band's first album was released and was never updated to reflect the band's success.
4) Buy/Sell Agreements Don't Work Well for Bands
Buy/Sell agreements don't work well for bands because it's difficult to say what a band (unlike, for example, a taco stand) is "worth." A band's value lies not just in the royalties from its sound recordings but also in images of band members. Also, the value of a band can go up or down after a member dies.