The artist, the spouse, and breach of fiduciary duty

I am not an artist. Even my stick figures do not look like stick figures. That is probably why I ended up in law; no artistic skills were required in law school, on the bar exam, or in the actual law practice (except for maybe doodling during depositions). However, my summer extern is a talented photographer, and as we started talking about her art, this jointly written article is the product of those discussions.

Consider this hypothetical: A is a world-renowned musician. A’s talents have been showcased at concerts worldwide, and A has played at the White House and Buckingham Palace and in almost every major concert venue globally. Copies of A’s music are preserved at the Smithsonian. A guitar, once owned by A, recently sold for millions of dollars at auction. However, A has pulled back and stopped performing as much. However, when A does perform, it is still in packed concert venues. B met and married A when they were struggling musicians almost forty years ago. B, recognizing that A’s career was gaining more traction, decided that B would manage the business side of A’s career. B’s business acumen and, as well as B’s protection of A and A’s career, are as legendary as A’s guitar skills themselves. Like with many marriages, when you are also business partners, one, if not both, relationships begin to sour. Such was true with A and B. Though their marriage ended, they remained business partners through the jointly owned entity - which controlled A’s music. The new entity, A&B Music, controls all rights and interests in A’s music, including licensing rights (which have very sparingly been granted). Recently, a large music conglomerate offered to purchase A’s music catalog with an offer of $150 million plus additional incentives, which could top $225 million. B, seeing this as a great business opportunity, wants to sell to prepare for the future and estate planning purposes. A does not want to lose control of the music and how it could be commercially or politically used, and refuses to sell but cannot buy B’s interest. B brings a Request for Order (RFO) for the sale of the music catalog and argues that A has breached A’s fiduciary duty to B by refusing to sell.

“Congress shall have the power to promote the progress of science and useful arts by securing, for limited times, to authors and inventors the exclusive right to their respective writings and discoveries.” (U.S. CONST. ART. I, §8). The Copyright Act of 1976 lays out the basic framework for copyright law. The Act provides that the “’Copyright owner,’ with respect to any one of the exclusive rights comprised in a copyright, refers to the owner of that particular right.” (17 U.S.C.A. §101.) Section 102(a) provides that “Works of ownership include the following categories: (2) musical works, including any accompanying words.” (17 U.S.C.A. §102(a)(2)) Section 201 provides that “(a) Initial Ownership—Copyright in a work protected under this title vests initially in the author or authors of the work. The authors of a joint work are co-owners of copyright in the work.” (17 U.S.C.A. §201(a))

California Family Code, Section 760, states: Except as otherwise provided by statute, all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is community property. In re Marriage of Worth, 195 Cal.App.3d 768, 773, 241 Cal.Rptr. 135, 136 (1987), the Court stated that “[we] analysis begins with the general proposition that all property acquired during marriage is community property. (California Civil Code, § 5110.) Thus, there seems little doubt that any artistic work created during the marriage constitutes community property (Citations omitted). Neither party is arguing that the music created by A is not community property. Instead, it is the opposite; A worked so hard during the marriage to make the music and its success, which is why it is a valuable asset to the marriage. The question is, who gets to control it? The artist who created it or the spouse who is equally entitled to the revenue generated from it?

In 1927, Bela Lugosi starred as Count Dracula in the stage adaptation of Bram Stroker’s novel Dracula and ultimately revised the role appearing in the Universal Pictures production of the movie. Lugosi never commercialized his success from the role, though he was linked to his movie portrayal of the character for the remainder of his life and even after his death. Lugosi v. Universal Pictures, 25 Cal.3d 813, 818, 160 Cal.Rptr. 323, 326 (1979). Lugosi’s heirs sued Universal “assert[ing] that from 1960 [Lugosi died in 1956] until the [filing of the suit], Universal entered into many licensing agreements which authorized the licensees to use the Count Dracula character.” (Id. at 817). The trial court granted damages and an injunction to the Lugosi heirs, finding that “Lugosi’s likeness that was used in the merchandising of Count Dracula notwithstanding the fact that other actors (Christopher Lee, Lon Chaney and John Carradine) appeared in the Dracula role in other Universal films.” The trial court further concluded that: “Lugosi during his lifetime had a protectable property or proprietary right in his facial characteristics and the individual manner of his likeness and appearance as Count Dracula; that said property or proprietary right was of such character and substance that it did not terminate with Lugosi’s death but descended to his heirs; and that (they) acquired all right, title and interest in and to said property under the will of Lugosi.” (Id. at 817). The case was ultimately overturned at the California Supreme Court which found that “the right to exploit name and likeness is personal to the artist and must be exercised, if at all, by him during his lifetime.” (Since changed by statute, see California Civil Code, § 3344.1).

A is alive, but A’s argument opposing the RFO is similar to that of Lugosi’s family and others have made since then. Namely, this is my legacy, and I should have the right to control my artistic work (or name, likeness, etc.). A recognizes the financial issues but states that A has not breached the fiduciary duty owed to B because A has a right to protect A’s legacy, like Lugosi. A argues that Rodrigue v. Rodrigue, (5th Cir. 2000) 218 F.3d 432, 435, is controlling. There, the Court found there is no pre-emption of community property laws by the Copyright Act. However, the Court stated that “[w]e are satisfied that the conclusion we reach today—that an author-spouse in whom a copyright vests maintains exclusive managerial control of the copyright but that the economic benefits of the copyrighted work belong to the community while it exists and to the former spouses in indivision thereafter—is consistent with both federal copyright law and Louisiana community property law and is reconcilable under both.” (Emphasis added.) B argues a 5th Circuit decision is not binding in California. Further, the A&B entity owns the music catalog, which is a joint community property asset, not A solely any longer. (17 U.S.C.A. §201(d)(1).)

Family Law, Section 721, creates a broad fiduciary relationship between spouses in their transactions with each other. This relationship “imposes a duty of the highest good faith and fair dealing on each spouse, and neither shall take any unfair advantage of the other.” (Section 721(b).) It also subjects the relationship to the same rights and duties applied to nonmarital partners under the Corporations Code. Family Code, Section 1101, states “(a) A spouse has a claim against the other spouse for any breach of the fiduciary duty that results in impairment to the claimant spouse’s present undivided one-half interest in the community estate, including, but not limited to, a single transaction or a pattern or series of transactions, which transaction or transactions have caused or will cause a detrimental impact to the claimant spouse’s undivided one-half interest in the community estate.” (Emphasis added)

California Corporation Code, Section 16404 (e) states, “A partner does not violate a duty or obligation under this chapter or under the partnership agreement merely because the partner’s conduct furthers the partner’s own interest.” In this instance, A’s refusal to have his musical compositions used for commercial purposes. However, Family Code § 1101 states in pertinent part that “(a) A spouse has a claim against the other spouse for any breach of the fiduciary duty that results in impairment to the claimant spouse’s present undivided one-half interest in the community estate, including, but not limited to, a single transaction or a pattern or series of transactions, which transaction or transactions have caused or will cause a detrimental impact to the claimant spouse’s undivided one-half interest in the community estate.”

B argues that the sale should be ordered under Section 1101(e). B argues, “[i]n any transaction affecting community property in which the consent of both spouses is required, the court may, upon the motion of a spouse, dispense with the requirement of the other spouse’s consent if both of the following requirements are met: (1) The proposed transaction is in the best interest of the community. (2) Consent has been arbitrarily refused…” B argues that both are met because of the financial windfall of this significant amount of money that benefits the community. A is arbitrarily refusing to grant the sale for personal reasons without legal basis. B further argues under In Re: Marriage of Hokanson, 68 Cal.App.4th 987, 80 Cal.Rptr. 699 (1998), that if A continues to delay the sale and the value drops, B seeks the court to hold A responsible for a diminution in value.

A argues the sale should be blocked as a matter of public policy and fairness. Copyright law seeks to protect an individual’s freedom of expression, but ordering a sale would seemingly defy this underlying principle. Furthermore, a sale would impose an unreasonable interference with the artist’s autonomy and freedom to dispose (or not to dispose) of his art. As an artist, the right to control one’s art is paramount to all other competing interests. Ordering an artist to sell away the fruits of their labor would be unjust in pursuing fairness. A argues that the court should adopt the Rodrigue approach.

Moreover, doing so would give the co-owner more rights than the creator of the artistic work. A ruling of this type could have long-ranging consequences for artists. Additionally, A’s music could accrue more value over time, so a present sale might arguably not benefit either party but could be a wrong business decision.

So where does the ability to control one’s artistic view mesh with a fiduciary duty owed to one’s spouse? It depends. . .