Dre’s Day in Court

Andre Young, better known as rapper-producer Dr. Dre, is seeking restitution for unpaid royalties, the reinstatement of his copyrights, and an injunction to keep Death Row Records Inc. from selling the rights of his 1992 album, The Chronic, to the highest bidder.

Death Row Records filed for Chapter 11 bankruptcy in April 2006. A court-appointed trustee has been attending to the company’s fiduciary responsibilities, which included determining whether to reorganize or dismantle the company by selling its music assets. Citing significant gaps in the labels financial records, the administrator concluded that selling the assets was more expedient.

Young surrendered his 50% ownership stake in the label as well as his right of rescission (or the unmaking of the contract) in 1996, when he signed an agreement with Death Row CEO Marion “Suge” Knight Jr. that relinquished his claims to copyrights for The Chronic in exchange for royalties. Reportedly, Young was paid $3 million, but Death Row later stopped the payments.

Young’s attorneys argue that this breach and Death Row’s distribution of the music without Young’s permission effectively defaulted the contract and that Young’s record masters and publishing rights should be returned to him. The court dismissed Young’s first suit in October 2007, but now the case is up for appeal. According to a court report, Young filed a claim against the Death Row estate in the amount of $8 million.

“What strikes me about these guys at Death Row Records is they were more sophisticated than people would think,” says David Pullman, founder, chairman, and CEO of the Pullman Group, L.L.C., an investment bank and specialty finance company servicing the entertainment and intellectual property industries. “Adding the language stating no rescission was smart. If you don’t expect to pay people royalties, then it is really smart.”

A hearing was scheduled for Feb. 26 in U.S. Bankruptcy Court in Los Angeles to approve the bidding procedures and the leading bid, made by Warner Music Group Corp. for $25 million. The money from the auction will allow Death Row Records to pay creditors who have already received a judgment against the company. They include a $1.1 million claim by the Internal Revenue Service and a judgment of $107 million awarded to Lydia Harris whose former husband Michael Harris claimed to finance the label in 1992. The latter also has a suit against the company for $117 million. Nearly another $50 million in other claims and litigations are still being resolved. This does not include a settlement agreement with Afeni Shakur, mother of the deceased rapper Tupac Shakur, who made an out of court settlement but reinstated her claim in the event that the settlement cannot be reached.

Precedent indicates that Young will likely win past royalties and royalties going forward, says Pullman. “No one disputes that he should get paid royalties. He did not give up those claims,” says Pullman. “[This suit] is a bargaining chip to make sure that the people who acquire the [music assets] understand that they have to deal with Young.