Millions at Stake: How 2 Live Crew Beat Bankruptcy to Reclaim Their Music

The 90s hip-hop group 2 Live Crew won big in their copyright case against Lil’ Joe Records. Scott Hervey and Jamie Lincenberg break down termination rights, bankruptcy, and what it means for artists reclaiming their work on this episode of The Briefing.

Watch this episode on the Weintraub YouTube channel.

 

Show Notes:

Scott:
In mid-October, a Miami federal jury handed a win to Luther Luke Campbell and the heirs of Mark Ross and Christopher Wong Won of the 2 Live Crew in their long-running copyright reclamation lawsuit against Lil’ Joe Records. The Master Sound recordings were transferred in 1990 to Skywalker Records, the label that once released the iconic 2 Live Crew albums.   The court case had its twists and turns, including a ruling earlier this month that copyright termination rights survive bankruptcy. I’m Scott Hervey with the Entertainment and Media Group at Weintraub Tobin, and I’m joined today by Jamie Lincenberg, and we’re going to talk about this case on this installment of The Briefing.

Jamie, welcome back to the briefing. It’s been a little while.

Jamie:
Yeah, thanks for having me.

Scott:
Jamie, before we get into this, I don’t know. I thought we’d chat about what’s on your desk. Is there anything interesting that you’re working on?

Jamie:
There’s a lot on my desk, always. But let’s see. Lately, I’ve been working on some production legal for a feature film that is going to start principal photography on Sunday. So, it’s been tying up all the loose ends, making sure that we have all of the financing in place, and getting ready to roll camera.

Scott:
It’s always busy right before the start of principal photography, for sure. Yeah. All right. Well, let’s get into this. Just some quick background. So, Skywalker Records was formed by Luther Luke Campbell, and it was the record label that owned the master recordings to all five. I didn’t know they had that many, but all five of the 2 Live Crew albums. Now, the name Campbell and Skywalker should ring a bell with those of you that follow copyright law, because Campbell was one of the name parties in a case that transformed copyright law, literally. Campbell versus A Cuff Rose, which introduced the concept of transformative use into the lexicon of copyright law and fair use. Skywalker later changed its name to Luke Records.

Jamie:
In 1995, Luke Records then filed for bankruptcy. Joseph Weinberger, a tax lawyer that served as Luke Records’ CFO and In-House Counsel, bought the rights to 2 Live Crew’s master recordings out of bankruptcy for $800,000, and he then formed his own label, Lil Joe Records, to distribute them.

Scott:
In 2020, Luke Campbell, Mark Ross, and the heirs of Chris Juan, served a notice of termination on Little Joe Records and others purporting to terminate the transfer of the rights to the various 2 Live Crew albums that were transferred to Skywalker Records via a 1987 recording agreement, and then the subsequent transfer from Skywalker/Luke records to Little Joe records pursuing to a bankruptcy court purchase.

Jamie:
Scott, as we know, Section 203 of the Copyright Act permits authors, or if the authors are not alive, their surviving spouses, spouses, children or grandchildren, or executors, administrators, personal representatives or trustees, to terminate grants of copyright assignments and licenses that were made on or after January first, 1978, when certain conditions have been met.

Scott:
On the effective date of termination, all rights in the work that were conveyed by the terminated grant revert to the author.

Jamie:
Copyright termination rights were created by Congress in the 1976 Copyright Act. They allow authors or their heirs to terminate or cancel a prior grant of copyright, even if they previously sold or licensed it. This gives them a chance to recapitulate capture control over their work after a set period. The idea behind this really is simple. The initial value of a work is often really hard to determine, and artists can therefore be at a disadvantage. These rights are considered inaliable, which means they really can’t be signed away or contracted out.

Scott:
So the 2 Live Crew argued that the Section 203 termination terminated the initial transfer from the band to Skywalker Records/Luke Records, and that the recapture effected a termination of Little Joe’s ownership of the master. Little Joe, who filed the lawsuit challenging the recapture, argued that, one, all five albums were created as a work for hire for Luke Records, and two, that Luke Records’ bankruptcy proceeding terminated the band’s recapture rights under Section 203.

Jamie:
The work for hire argument is a viable defense to a recapture claim.

Scott:
Yeah, that’s correct. Copyrighted works that are works made for hire or works for hire are specifically excluded from Section 203. But that argument from Little Joe Records didn’t fly. The jury ultimately found that the albums were not works for hire, but the bankruptcy argument was something new.

Jamie:
It is. So in addition to Luke Records’ bankruptcy filing, Campbell, individual individually filed for personal bankruptcy protection. As part of that reorg plan, all copyright rights to 2 Live Crew’s music and compositions were transferred to Little Joe, free and clear of any and all lean’s claims, encumbrances, charges, set offs, or recoupments of any kind. As part of the reorg plan, Luke Records and Campbell agreed to receive no royalties, whether as an artist, producer, writer, publisher, or in any other capacity on any of those masters or compositions.

Scott:
The reorganization plan did not mention future termination rights, and neither of the remaining members of the 2 Live Crew filed any claims in bankruptcy, asserting that they owned any rights or were entitled to any rights appurtenant to any of the 2 Live Crew copyrights that were transferred to Little Joe. However, subsequent to the bankruptcy filing, Ross filed for bankruptcy, and he settled a claim brought by Little Joe in the Bankrupt Matter, whereby Ross acknowledged that other than the writer’s performance rights, Ross had no rights, master or publishing rights, to any previous recording’s owned by Little Joe records.

Jamie:
Lil’ Joe also sued Wong Won. In settling that claim, Won agreed that Little Joe owns all right title and interests to all copyrights in the albums conveyed to Little Joe in the bankruptcy of Luke Records and Luther Campbell. So it seems that Lil Joe has tied up all ownership rights to the albums with all of the band members. Why then did the court find that the Campbell bankruptcy and the settlement agreements entered into by Ross and Juan did not prevent the band members from bringing a termination claim?

Scott:
Yeah, that’s an interesting question. So in bankruptcy, a debtor’s property is generally transferred into an estate that creditors can access. Little Joe argued that a copyright termination right could fall under, quote, property of the estate in bankruptcy, meaning that those rights could be used to satisfy creditors. But the question of whether a copyright termination right could constitute, quote, property of the estate, close quote, which typically includes most of the debtor’s legal and equitable interest at the time of filing hadn’t been decided before. So the big question was, whether copyright termination rights, being personal and inalienable, fit that definition?

Jamie:
In order to answer that question, the court had to look at the intent of Section 203. The Court said that Congress established termination rights specifically to protect artists, not to create assets for creditors. The House report that accompanied the 1976 Copyright Act made it clear termination rights are designed to protect authors from unremunerative deals due to unequal bargaining positions. So under federal law, these rights are more of a personal safeguard for the author rather than a traditional property interest. So the court finds that the termination rights aren’t property in the traditional sense because they’re personal to the author and generally non-transferable in bankruptcy. But what about the settlement agreements by Juan and Ross, which memorialized Lil Joe’s ownership of the copyright in the albums.

Scott:
Section 203 of the Copyright Act mentions that termination rights exist, notwithstanding handing any agreement to the contrary. In other words, even if an author signs something in bankruptcy court or a settlement agreement or other type of agreement waiving these rights, that waiver wouldn’t likely hold up.

Jamie:
So, Scott, is the takeaway here that termination rights are resilient against bankruptcy claims?

Scott:
To an extent. The court does leave open that a termination right can be relinquished during a bankruptcy. The court notes that there is no evidence in the record to support a finding that Campbell, Ross, or Juan relinquished their termination rights to the two Little Joe during the bankruptcies or as part of the settlement agreements. Neither the bankruptcy filings nor the settlement agreements mention a transfer of these termination rights. So there’s no indication that either Ross, Campbell, or used their termination rights as leverage during negotiation. And the court found that there’s no evidence that they were even aware of these termination rights during the bankruptcy proceeding and during the settlement proceeding. The court notes that even if a copyright termination right can be divested, it was not done properly here. So that leaves it open to the possibility that termination rights can be transferred if they are are specifically transferred and specifically mentioned and referenced in whatever document the parties are entering into to affect a transfer of those termination rights.

Jamie:
Right. This is really interesting, Scott. I’ve never really looked too far into the transfer of termination right, but I think this is definitely interesting and good to bring to everyone’s attention.

Scott:
Yeah, I Jamie. Thanks for joining me today. That’s all for today’s episode of The Briefing. Thanks to Jamie for joining me today, and thank you, the listener or viewer, for tuning in. We hope you found this episode informative and enjoyable. If you did, please remember to subscribe, leave us a review, and share this episode with your friends and colleagues. If you have any questions about the topics we covered today, please leave us a comment.