Bob Donnelly is a New York entertainment lawyer. One of his proudest accomplishments is a settlement he and Attorney General Eliot Spitzer came to with record companies. The settlement had to do with ‘Suspense Account’ Funds, where the record companies did not have updated addresses for certain musicians and were holding their royalty funds in these accounts. The settlement reclaimed $35 million, which was then dispersed among many of the rightfully owed musicians.
Interview conducted by Alyssa Waters.
There is talk that the music law field is a dying business. Do you feel that this is true, or has the business simply changed?
Well, it’s certainly not dying and I hope it never dies because if it dies that means the music dies. The correct term would be it’s shrinking.
What happened around the year 2000 is what we sometimes call the ‘Napster Revolution’ where the whole business paradigm, which we operated under for probably 35 years prior, disappeared virtually overnight.
As a result of a sharp decline in ‘hard good’ (CD) sales, there are fewer major record deals, fewer major record companies, and the deals that are out there by the Indies are usually much smaller deals.
Due to the confluence of all of these things happening in a short span of time, this caused the law firms and music companies to let people go. As a result there are fewer people who make a living exclusively from music. I think that caused a lot of lawyers to go back to becoming truly Entertainment Lawyers, doing some film, some television, and some book deals.
And so I don’t think it’s that music lawyers have died off, I think that they have just changed their shingle and now sell themselves as full-blown Entertainment or Intellectual Property Lawyers.
Have there been any particular cases that you have worked on that you especially enjoyed being a part of?
Several years ago when Eliot Spitzer was the Attorney General for the state of New York I approached him with a case that I felt strongly about. Every time the accountants for the bands I represent would go to the major labels and do an audit of royalties I would always tell them to look at something called the ‘suspense accounts.’ And in these accounts there would always be money owed to our clients.
What suspense accounts were really created to do was to capture income when the record company didn’t know what to do with the income.
Let me give you an example. Imagine you were signed to Atlantic Records in the mid-1990s. You were there for three years and your contract ended or you were terminated. And let’s say for the sake of argument, when you left you were un-recouped $20,000.
Therefore you were thinking you were never going to see another dime from Atlantic, so you don’t bother to give them an update on your addresses as you move in the subsequent years.
And, sometimes in the subsequent years what would happen is one of your songs would be used in a movie or some other synch use, which would generate a bunch of money and suddenly the red balance of $20,000 would get wiped out and you would now be owed money.
Say you were owed $25,000. What the record labels were doing was sending you a letter to the address you were living at when you left them (but you are no longer living there).
So, the record companies were happy to hold onto that $25,000 and make interest on it until you had a music lawyer call and claim your money.
This was the most legitimate use of suspense account money. Unfortunately, the record companies also expanded the suspense account fund to include a lot of other things that were not as legitimate.
I got to thinking that there’s a lot of money in these accounts that belongs to artists so I tried to bring it as a class action lawsuit.
I would approach an artist and say, “Listen you may not be aware of this but you’re owed $25,000 by Atlantic Records and if I call Atlantic on your behalf today they will release that money.
But what I would like you to do is to not claim the money but leave it there for now, let us use you as a class action plaintiff. And when the lawsuit is resolved several years from now you will have the undying admiration of musicians everywhere and of course you’ll get your $25,000 at that time.’
Not surprisingly every musician would look at me and say, ‘Wait a minute, so I can get $25,000 today or I can get $25,000 five years from now? I want the money today.’
So, we couldn’t bring that lawsuit as a class action.
But I got an idea that if we could convince the Attorney General that the money the record companies were holding fell into the category of monies that were ‘escheat funds,’ what most people call the ‘Abandoned Property Statute.’
A prime example of these funds is when banks issue a full page in the newspaper saying, ‘Are you owed money by our bank? If you are please get in contact with us and claim your money.’
Then the advertisement would have 5,000 names in one-point type of the people who they’d lost the means of contacting. For those people who banks cannot find the owners of those funds in 3 to 5 years they’re typically required to turn that money over to the State Treasury, this is also the case for real estate security deposits and insurance funds among other things.
I made the case to Attorney General Spitzer that the record royalties that had fallen into these suspense accounts were worthy of the same treatment as other forms of abandoned property and that he should pursue the record companies to reclaim this money.
I made a deal that I would help him with no compensation to myself if, were he successful in finding this money, he would give the artist community a chance to find the rightful people who were owed this money before they had to go through the state bureaucracy and miles of red tape in order to get it.
He was very happy to go along with that and we settled with all the major record companies. $35 million was reclaimed and we made a lot of artists very happy. That is the case for which I am most proud.
Have you cultivated any relationships with artists over the year, and are you still friends?
Oh yes, I’ve been in practice for over 40 years and it would be hard to not be proud of the friendships that I’ve made with artists over the years.
The ‘dirty secret’ is that those of us on the business side of the music business would probably do this for free because we love it so much and we have the opportunity to work with creative people whose work we admire, and it allows us to feel that we are in a very tiny way contributing to their art.
I’m very proud of the friendships that I’ve been lucky enough to make through this business. I’ve been blessed.
About Bob Donnelly
Bob Donnelly has represented music industry clients for over 40 years. He is a partner at The Fox Rothschild Law Firm. He received his J.D. at St. John’s University School of Law and a Master’s Degree from Columbia University. Some of his accomplishments include convincing Congress to repeal an anti-artist “Work-for-Hire” bill, a Central Park free concert series that included artists such as James Taylor, Diana Ross, and Simon & Garfunkel, and forming a music publishing administration company called Modern Works Music with Dan Coleman that is now the 25th largest music publisher in the U.S.
About Alyssa Waters
At the time this interview was conducted, Alyssa was an exchange student at the University of Texas at San Antonio. She enjoys dancing, playing music, and writing songs. Her aspirations include becoming an Entertainment Lawyer, and performer. Additionally, Alyssa recently released her first single, Alyssa Waters – “What Does That Say About Me?”