Court Ruling for Sly Stone's Financial Downfall

The psychedelic funk superstar alleged that in 1989, he was induced into giving up much of his song royalties by a manager and attorney fueling his drug addictions. Sony Music and Warner Music won't have to pay for that.

The subject of the ruling is Sly Stone, born as Sylvester Stewart, who as the front man for Sly and the Family Stone, blazed a path for a progressive mixture of funk, soul and psychedelic music and whose songs like "Everyday People" and "Hot Fun in the Summertime" remain well-played on radio.

Stone's troubles with drugs and the Internal Revenue Service are well known, but in a lawsuit over "tens of millions" of dollars in allegedly misappropriated royalties against nearly three dozen individuals and entities, including an ex-manager, a lawyer and Sony, Warner and Broadcast Music, Inc (BMI), he detailed the full extent of his financial troubles and poor deal-making. Unfortunately, for Stone, an appeals court isn't giving him much relief.

We'll pick up Stone's story in the mid-70's when already a successful musician, he began to run into some personal problems that required Ken Roberts, Stone's friend and one-time manager, to advance some money and pay off some debts. In return, Stone irrevocably assigned Roberts his BMI-administered performance-right royalties.

Then, in 1980, the IRS levied a multi-million dollar tax lien upon Stone's income. For about the next 15 years, much of the money that was derived from Stone's hit songs was routed to government tax collectors.

In 1985, Stone sold his publishing interest in most of his existing musical compositions to Michael Jackson's MiJac Music company, but retained the songwriter's share of the royalties. But that too ended up with the IRS.

Full Ruling Here... http://www.courts.ca.gov/opinions/nonpub/B236286.PDF

The California Appeals Court ruling on Thursday only addresses the liability of the big music companies -- Sony, BMI and Warner -- that allegedly allowed royalties to be diverted without doing the necessary due diligence.

In short, Stone may have made bad deals in lifetime, but for the purposes of holding these companies accountable, the appeals court affirms that he has no standing to sue. He can't allege breach of contract against BMI because he assigned his royalty payments to Roberts. He can't make various claims against Sony because the record label "properly relied on" those 1989 agreements presented when figuring out where to direct royalties. Similarly, he can't sue Warner. Quoting the trial judge, the appeals court notes "the royalty companies were simply doing what they were instructed to do for years upon years.”

In the ruling, an appeals court overturns the trial judge's ruling that Roberts lacked standing to sue BMI. It also waives away BMI's contention that his claim of breach of contract is barred by statute of limitations, although the appeals judge says he can only possibly collect for four years prior to the launch of the lawsuit for allegedly bad actions. Yes, BMI paid out to Majoken, but the appeals court says "that is neither the beginning nor the end of the story" as "BMI had a contractual duty to insist on written instructions from Roberts" when in 1996, it changed where the money was going.

Read More... http://www.hollywoodreporter.com/thr-esq/sly-stones-financial-downfall-detailed-561175