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When Songwriter Publishing Agreements Are Rejected in Bankruptcy

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Copyright © American Bankruptcy Institute Rejection of Songwriter Publishing Agreements in Bankruptcy January 2019 BY PETER RUSSIN, JAMES MOON AND MEAGHAN MURPHY T he music industry is no stranger to artist and songwriter bankruptcies — TLC, Toni Braxton and James Taylor, to name just a few. A common need for bankruptcy in the music industry is to get out from under burdensome agreements with record labels and publishers. Songwriters frequently enter into publishing agreements with music pub- lishers. Typically, the songwriter writes a certain number of songs over a specified term, transfers a portion of the copyrights of those songs to the publisher, and the publisher exploits the songs. 1 The songs earn royalty income, which is apportioned between the publisher, which receives the "publisher's share," and the songwriter, who receives the "writer's share." The publisher collects the royalties, retains the publisher's share and remits the writer's share to the songwriter. This article examines what happens to the writer's share when a songwriter files for bank- ruptcy and rejects his/her publishing agreement. If the songwriter is relieved of his/her future obligation to write and deliver songs, is the publisher relieved of its obligation to pay the writer's share for songs that were already delivered? Is the publisher then entitled to keep the writer's share for itself? As argued in this article, the answer to both of these questions is "no." 11 U.S.C. §365 Section 365 of the Bankruptcy Code is one of the most powerful weapons in a debtor's arsenal. Under § 365 (a), a debtor may assume or reject any of its executory contracts and unexpired leases. It is well established that executory contracts must be assumed or rejected in their entirety. 2 A debtor may not "cherry-pick" and assume the executory obligations in a contract that he or she deems beneficial while rejecting those executory obligations within the same contract that the debtor deems burdensome. 3 If a debtor wishes to assume an executory contract that is in default, the debtor must cure existing defaults or provide adequate assurance that any defaults will be promptly cured, as well as compensate for damages and provide adequate assurance of future performance. 4 If an executory contract 1 Although this article references the transfer of copyrights, the issues discussed herein do not implicate 11 U.S.C. §365 (n) concerning intellectual property licensing agreements. The copyright transfer in the publishing agreement typically is, and for the purpose of this article is assumed to be, a fully executed sale of the copyright or portion thereof. 2 See, e.g., In re MF Glob. Holdings Ltd., 466 B.R. 239, 241 (Bankr. S.D.N.Y. 2012). 3 See, e.g., In re Chira, 367 B.R. 888, 899 (S.D. Fla. 2007). 4 11 U.S.C. §365(b)(1), (B) and (C). Meaghan Murphy Meland Russin & Budwick, PA; Miami James Moon Meland Russin & Budwick, PA; Miami Peter Russin Meland Russin & Budwick, PA; Miami

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