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How The Major Labels Screw Artists: Jurisdiction & Venue

Legal Issues

from the letting-out-the-secrets dept

Mon, Sep 10th 2012 12:36pm -

Last year, entertainment lawyer Marty Frascogna made some waves by explaining the various hidden “gotchas” in major label contracts that could set up a situation where a band had sold over a million albums, but was still in debt. A few months later, we had him analyze an actual record label contract that had become public as evidence in a legal dispute (most of the time, those things are kept very, very secret).

Marty’s back with some new work, this time a video explaining some more of the little clauses that most musicians probably overlook in their contracts, but which allow the major labels to screw over artists. Key terms this time around: jurisdiction and venue. We’ve seen this in other arenas as well — and lots of online service providers also uses these clauses in the terms of service you sign — basically trying to force you to use a court that’s convenient for the company, but not for you.

This is one of those clauses that most people just skip right over. But, of course, it can make a big difference especially if — as Frascogna uses in his example — you’re 3,000 miles away, and the label owes you lots of money. It can be more expensive to actually get to the court in question than the money that’s owed to you. His suggestions are to push back and seek a jurisdiction and venue that’s better for you, though he admits that’s unlikely to happen. I’m less convinced by the next two suggestions: mandatory mediation and binding arbitration. Those are certainly cheaper than full on litigation, but there are details that matter there as well. Various studies have shown that, at least with arbitration, the big companies win a ridiculous percentage of the time — and it’s often because (even if the arbitrator is agreed upon by both parties) the arbitrator is going to do a lot more business with the big company over time and wants to be on the “recommended” list. So they have incentives to side with the company in order to “keep the business.”

Either way, it’s good to see Frascogna back to revealing some of the “tricks of the trade” of the major labels in setting up a contract that is inherently biased against artists.

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Comments on “How The Major Labels Screw Artists: Jurisdiction & Venue”

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89 Comments
Anonymous Coward says:

Re: Re: Re:

Whats the point of being offensive?
I mean, it doesn’t further the conversation any and it doesn’t find common ground to help everyone involved get richer/fame/etc.

As far as I can tell, Mike just wants the artists to get their fair due, unlike the embarrassingly horrible contracts that so many popular artists have brought to light.

Join the conversation and get the industry past the shameful behaviors of the past and help find a solution where everyone is happy to work with those providing the contracts.

Not an Electronic Rodent says:

Re: Re:

You forgot to mention also ignoring that most starting musicians probably haven’t spent 5 years studying contract law to be able to understand the (deliberatly) obtuse legalese fineprint of the contract and probably can’t afford a lawyer to explain it all and that the law, especially as regards civil law, is outrageously biased towards whoever has the most money.

Anonymous Coward says:

Re: Not just record companies

Concur this is SOP for every entity that has a decent set of existing Terms and Conditions and uses them during the ordinary course of business. Presumably, the Ts and Cs also contain a “choice of law” and a “conflict of law” provision. A bit surprising they were not mentioned since they are part and parcel of venue and jurisdiction clauses.

average_joe (profile) says:

Marty’s back with some new work, this time a video explaining some more of the little clauses that most musicians probably overlook in their contracts, but which allow the major labels to screw over artists. Key terms this time around: jurisdiction and venue. We’ve seen this in other arenas as well — and lots of online service providers also uses these clauses in the terms of service you sign — basically trying to force you to use a court that’s convenient for the company, but not for you.

This is standard fare in many contracts. Nothing special about the major labels doing it. The fact that you point it out says more about you and your crusade than it does about anything else.

I’m less convinced by the next two suggestions: mandatory mediation and binding arbitration. Those are certainly cheaper than full on litigation, but there are details that matter there as well. Various studies have shown that, at least with arbitration, the big companies win a ridiculous percentage of the time — and it’s often because (even if the arbitrator is agreed upon by both parties) the arbitrator is going to do a lot more business with the big company over time and wants to be on the “recommended” list. So they have incentives to side with the company in order to “keep the business.”

Not even one link to back up your claim. Shocker.

Rikuo (profile) says:

Re: Re:

Joe, read my comment up above.

I was correct. Knew what you were going to say. I knew you would ignore the fact that the band were owed royalties, but because of their contract, were barred from getting those royalties back in a way that is cost effective. So it basically lets the label run rampant withholding royalties.

average_joe (profile) says:

Re: Re: Re:2 Re:

I didn’t say it was this site. I said it was one of Mike’s other sites. I even provided a link. And you don’t sign anything to indicate your assent to the contract. Read the contract over there for yourself if you want to know its terms. But be careful, Mike uses the same exact “tricks of the trade” as the evil labels.

BentFranklin (profile) says:

Re: Re:

This is standard fare in many contracts. Nothing special about the major labels doing it. The fact that you point it out says more about you and your crusade than it does about anything else.

You know that and I know that but most independent musicians don’t know that, or how it will affect them. And yes, it is standard fare — for large entities seeking to take advantage of smaller entities — which is exactly what RIAA members are doing.

Anonymous Coward says:

Re: Re:

I must say, that you are an improvement on quality of substance from Bob, but these “your tie is ugly”-arguments does not really suit anyone.

It is completely standard fare to determine jurisdiction and venue in many kinds of contract. The specific problem arises from labels having offices in several cities and thereby gaining this very suspicious advantage. Not a lot of independent companies can muster up as advantageous venues as someone based in 51 states. It is therefore biased towards the major labels using the geographical hide and seek.

“Your tie is ugly”-argument follows.

For the second point, there is a logical reasoning supporting his statement, but I agree that the statement needs some statistical evidence for it too. The existence of “good” statistical evidence in this case will probably fall to subjective measures or too little data, so without some kind of argument (almost anything will do against a logical argument!) for why it is true, will be enough to at least give you some ammunition against his side of the argument. Just asking for proof is never an argument against anything in itself.

I suppose your name is Shocker or do you really throw another “your tie is ugly” out there?

Gwiz (profile) says:

Re: Re:

This is standard fare in many contracts. Nothing special about the major labels doing it. The fact that you point it out says more about you and your crusade than it does about anything else.

No AJ, the fact that Mike has pointed this out goes to show that Mike wants the artists to actually get paid for their work. Letting artists know that they could be screwed by this overlooked legal loophole in their contracts is a extremely moral thing to do.

And it also provides yet another prime example of how something that is perfectly legal to do (putting questionable clauses into contracts) can be immoral (screwing artists out of their compensation).

Anonymous Coward says:

Re: Re: Re:4 Re:

The point is, if Mike thinks that a venue clause in a contract is such a bad thing, why is it part of his own terms and conditions?

What is in the label contracts is pretty much exactly what Mike put in his own contract online. What happens if he fails to pay Marcus for his wonderful contributions? If Marcus wants to take him to court, he would be forced to do so in California, which would be a great expense to him (especially to collect the $10 or so Mike probably pays).

So is Mike potentially “screwing the help” here? It seems that he uses the same terms as the labels, so perhaps he could do so in the future – at least by his own standards set in the post.

Anonymous Coward says:

Re: Re:

“The fact that you point it out says more about you and your crusade than it does about anything else.”

Actually, the fact that you made this statement says more about your crusade than it does anything else.

There’s a whole video to go with this post. Did you watch it? He’s the one bringing this up. Mike is providing commentary. Doesn’t that display more about HIM (the lawyer in the video) than it does about MIKE?

Shocker, I know!

Are you mad? Is the idea that some band might watch this and wise up going to be bad for your future in ripping off bands as a lawyer representing the record labels?

T-Dog (profile) says:

Unconscionable?

If every label includes these clauses, wouldn’t they become unconscionable due to lack of choice/disparity in bargaining power, and if challenged in the jurisdiction of the artist’s choosing, shouldn’t the court trash the clause so the artist has some recourse? If they have NO CHOICE but to sign a contract with that clause, shouldn’t it be unenforceable?

Also, “just go without” isn’t an option courts consider too much when dealing with unconscionability…

LDoBe (profile) says:

Re: Unconscionable?

I like the idea that since all the labels do this kind of thing, that makes it unconscionable on the grounds of having no other choice.

BUT, by that logic, Microsoft’s EULA for Windows XP Pro would be unconscionable as well, since the only way to use XP legally is to agree to the EULA, and the EULA has an applicable law clause that specifies the jurisdiction as Washington State, or Ontario if in Canada.

Atkray (profile) says:

Business oppertunity?

It seems that the imbalance in arbitration (and I have seen the question of imbalance talked about alot with the recent change to EBay’s TOS) that if someone were to create and publish a list of the actual ratios of the decisions of arbitrators in favor of corporations vs individuals, it would be very helpful. Might force a leveling out where arbitrators would strive to have a 50:50 balance so both parties would choose them.

average_joe (profile) says:

Either way, it’s good to see Frascogna back to revealing some of the “tricks of the trade” of the major labels in setting up a contract that is inherently biased against artists.

Let’s look at the Terms & Conditions of Mike’s own website:

18.3 Governing Law; Jurisdiction

These Terms will be governed by and construed in accordance with the laws of the State of California, without giving effect to any principles of conflicts of law. You agree that any action at law or in equity arising out of or relating to these Terms or Floor64 will be filed only in the state or federal courts in and for Santa Clara County, California, and you hereby consent and submit to the personal and exclusive jurisdiction of such courts for the purposes of litigating any such action.

Source: https://www.insightcommunity.com/terms.php

LMAO! Duplicity thy name is Masnick.

silverscarcat says:

Re: Re: Re: Re:

“So when Mike does it, it’s OK, but when the big, bad, evil labels do it, it’s the devil!”

Because, you ignoramus, Mike doesn’t offer to pay anyone, no one pays Mike any money, for anything.

the labels are SUPPOSED to pay artists and, if you watched the video, you’d understand why.

Clear enough for you?

If not, let me explain more clearly.

If you’re owed as much as $15,000 from a major label and you have to go to California instead of having a court fight in your back yard (if you are from Florida for example), it costs WAY too much (upwards of hundreds of thousands of dollars) to try and get the $15,000 that you are owed.

And then, let’s not even get into the problems of international distributors and records.

So, is THAT clear enough for you?

average_joe (profile) says:

Re: Re: Re:2 Re:

Because, you ignoramus, Mike doesn’t offer to pay anyone, no one pays Mike any money, for anything.

Mike doesn’t pay anyone? Then why does his contract talk about paying people?

It says: “Commission Cases are assigned to specific individuals for a pre-determined fee. Challenge Cases are made available to subgroups within the Insight Community with compensation awarded to a group of those respondents deemed to provide the best answer.”

Weird. It’s almost like you’re clueless.

average_joe (profile) says:

Re: Re: Re:4 Re:

Can none of you even admit that it’s funny that Mike complains about the “tricks of the trade” and about how the evil companies are “basically trying to force you to use a court that’s convenient for the company, but not for you” but then he does the same exact thing himself? I mean, I know you guys all love Mike, but this is hilarious.

And where were you when Mike was being rude to me and calling me names just earlier today?

Niall (profile) says:

Re: Re: Re: Re:

Whilst at face value you look like you have a point (minus the childish name-calling – wouldn’t it have been easier to ask him nicely about it instead of pointing and laughing?), you are to a large extent comparing apples with oranges. Just about any company will have venue-specific language in contracts – otherwise you’d have even more idiot stuff happening, like someone in NY being sued by some company from CA in a venue like, say, East TX…

Mike is involved in a company based (solely as far as I am aware) in California, so it makes sense that it operates in this jurisdiction. If I ran a company, I’d expect it to operate under a Scottish jurisdiction and not be subject to random whims of US law. However, the labels are pretty ubiquitous and likely have offices in most major cities – but you can probably safely bet that a NY artist is given a contract based in CA, and vice versa.

Again, it’s also a matter of scale as well. Mike isn’t ‘scamming artists’ that we are aware of, let alone on the scale and in the multiple ways the labels are.

Anonymous Coward says:

Re: Re: Re: Re:

“So when Mike does it, it’s OK,”

Citation needed?

I mean, in reference to these royalties he has been screwing people out of.

But heck, you’re not here to debate how the labels screw over artists, you’re here to argue for your ego. IF you really wanted to prove Mike wrong, you’d use logic and reason, instead of grasping at straws.

average_joe (profile) says:

Re: Re: Re:2 Re:

LOL! Mike himself conceded the point and changed his own terms & conditions, yet you refuse to acknowledge that I had a point. Mike complained thusly: “We’ve seen this in other arenas as well — and lots of online service providers also uses these clauses in the terms of service you sign — basically trying to force you to use a court that’s convenient for the company, but not for you.” But then he himself was using the same type term that he was lambasting. I don’t know if Mike’s ever ripped anybody off. That wasn’t my point. My point, which I made explicitly and clearly, was that Mike’s own terms contained the very clause that he deemed to be evil. This stuff isn’t hard.

Anonymous Coward says:

Re: Re: Re:3 Re:

Your response: “So when Mike does it, it’s OK, but when the big, bad, evil labels do it, it’s the devil!”

To this question: “Is Techdirt screwing artists out of royalties?”

So you were implying that Techdirt doesn’t pay artists for royalties, which is ridiculous since Techdirt is not a record company.

Instead of admitting you were wrong, like Mike, you opted to justify what you had said in a half-assed egotistical stupor.

I find it funny that you’re more concerned about proving him wrong, than actually addressing the issue brought up by the article.

average_joe (profile) says:

Re: Re: Re:4 Re:

Instead of admitting you were wrong, like Mike, you opted to justify what you had said in a half-assed egotistical stupor.

I see from the context that you could think the “it” in my sentence referred to royalties. It did not. The poster who I was responding to was responding to my point where I was only talking about the clause in his TOS. That poster changed the subject. I did not mean to give the impression that I was saying Mike has screwed anyone. He may have screwed every person he’s ever done business with (wouldn’t surprise), or he may not. I don’t know. But the fact remains that I meant to infer or claim anything on that subject either way. If I thought I had done anything wrong, I would gladly admit it. Good job smoking me out on this.

Anonymous Coward says:

Re: Re: Re:5 Re:

“Good job smoking me out on this.”

One good turn deserves another, though I’m sure you slap yourself on the back every time you prove Masnick wrong.

The fact remains that you only jumped in with your opinion to prove someone wrong. To me, that’s hilarious because as much as the people who share your ideology on copyright complain about Mike’s ego and his reporting, you make yourselves look just as bad to the opposing side.

If that’s all you’re here for, fine, but don’t act like you’re here to make meaningful discussion.

Niall (profile) says:

Re: Re: Re: Re:

So why are you more interested in ‘shafting’ Mike, rather than acknowledging the ‘evil’ of the labels?

“Look, Mike’s being evil in a tiny tiny fraction of the way that the big bad labels are, everyone see how eeeevil he is! What, no the labels being evil doesn’t matter, you’ve got to see how eeeevil Mike is!”

average_joe (profile) says:

Re: Re: Re:

So when Mike uses the same type clause, there’s absolutely nothing wrong with it. But when the labels do it, it’s evil. And what about everyone else who does it? This really is standard language that you probably agree to more than you realize. This article is just more evidence of Mike’s incessant need to demonize the labels, and the very thing he’s complaining about is something he himself does to his offerees.

herodotus (profile) says:

Re: Re: Re: Re:

“So when Mike uses the same type clause, there’s absolutely nothing wrong with it. But when the labels do it, it’s evil.”

I don’t know about evil. I don’t think the point is that it is wrong to try to get a favorable venue in a contract. I think the point is that, because labels have been known to be somewhat lax about making royalty payments, the issue of venue becomes rather more acute for artists.

In other words, the clause isn’t evil in itself, but only when labels (or anyone else) use it to get away with not paying royalties.

Has Mike failed to pay anyone money that he owes to them?

The Groove Tiger (profile) says:

Re: Re: Re: Re:

Well, I think we have to congratulte average_joe on his heel face turn!

He convinced Mike that he had some really bad jurisdiction issues on his terms of use, and talked him into removing them! I think that means we’ll be seeing more of this kind of selfless behaviour on him from now on, where he’ll call off all those abusive music labels on their contracts and convince them to remove them.

Guess he’s not as hopeless as I thought. Welcome to the Light Side.

Anonymous Coward says:

Re: Re:

Also worthwhile to note:

18.3 Governing Law; Jurisdiction

These Terms will be governed by and construed in accordance with the laws of the State of California, without giving effect to any principles of conflicts of law.

Hence, jurisdiction and venue in Santa Clara County, and applicable law is that of California without reference to its conflict of law provisions.

These types of terms are commonplace in business contracts, be such contract one with a label, the sale of goods and services, etc. Nothing new here that necessitates calling out labels as somehow pulling a fast one.

Anonymous Coward says:

Re: Re: Re:

These types of terms are commonplace in business contracts, be such contract one with a label, the sale of goods and services, etc. Nothing new here that necessitates calling out labels as somehow pulling a fast one.

Yeah, but if you were predisposed to think the labels were pure evil, then this would be exactly the type of thing you whine about–even if you yourself do/did the same thing on your site.

Anonymous Coward says:

There is only one good problem with this slam story: it’s bunk.

When you sign a contract (ANY contract) in the US, it will always have wording to define venue in case of dispute. Most often, it is the home state of the company, and this is pretty normal when you think about it. After all, if they didn’t have a venue clause, they could required to retain council in all of the states and territories separately, and be forced to deal with litigation that might come up in any of them.

When you take away that basic issue, the rest of the story sort of falls apart. Clearly, if a band from Florida had the desire to sign a contract with a California company, and that contract contained clear language regarding venue, then they have nothing to bitch about.

Anonymous Coward says:

Re:

Nope, it doesn’t. However, I can say whatever nasty and crude things I like. If it offends you then I am incredibly sorry you have such sensitive feelings.

Since you’re a person with such thin skin, maybe you should find non-internet activities to engage in. It is well known that everyone on the internet is a hooligan. Perhaps you should play shuffleboard or join a knitting circle instead.

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