RIAA seeks to curb abuse of bankruptcy by artists

In Braxton's wake, group to limit contract bailouts

WASHINGTON — Recording artists would no longer be able to exit contracts as a condition of bankruptcy under an amendment to the bankruptcy code proposed by the Recording Industry Assn. of America.

RIAA’s support of the provision has sparked outrage among performers, their reps and some entertainment lawyers because it is specifically targeted at recording artists. “This unfairly singles out artists,” said Bruce York, national executive director of the American Federation of Television and Radio Artists. He added that current law protects record companies who file for bankruptcy in bad faith. “Nothing is needed,” York said.

The provision was introduced quietly by the RIAA in a bill now in front of the House Judiciary Committee. In the arcane language of congressional legislation, the provision is narrowly focused on “contracts affecting intellectual property rights to recordings of artistic performance.”

Current law allows a judge to vacate a contract as a condition of bankruptcy. The ability to exit the contract is allowed so that individuals can reorganize their financial affairs without fulfilling the terms of an agreement.

But the RIAA insists that the legislation is not seeking a “special interest” exemption as its opponents are claiming, but instead is trying to close a loophole in current law. “Unscrupulous lawyers are extorting record labels into rewriting existing record contracts — ones they freely entered for their clients — by threatening bankruptcy,” RIAA prexy and CEO Hilary Rosen said.

But musicians maintain that current law adequately protects recording companies against attempts to exploit bankruptcy law to get out of a contract. “(C)ourts have dismissed the bankruptcy cases of entertainers when there were no grounds for filing the bankruptcy other than to exit an existing contract,” a coalition of musicians stated Wednesday, adding: “Until there is adequate proof that performers are abusing the bankruptcy laws and that these existing remedies don’t work, Congress should not deprive performers of a right given to others under Chap. 11.”

Several sources said the RIAA is trying to win support for its provision in the wake of Toni Braxton’s recent bankruptcy filing in a Los Angeles court. Braxton filed for bankruptcy eight weeks after failing to renegotiate her contract with LaFace Records, a division of Arista Records. TLC went also went through a similar wrangle with LaFace after filing for bankruptcy.