As a Dallas business lawyer, I find valuable lessons in breach of contract lawsuits involving sports and entertainment stars. Today’s example is Rapper Jay Z’s dispute with a Long Island perfume vendor that’s ended up in a New York state court lawsuit.
According to news reports, Jay Z (a.k.a. Shawn Carter) may have violated a licensing deal to promote “Gold Jay Z” perfume. Among other things, he was allegedly compensated with a total of 1.1 million in company stock and stock warrants.
However, the vendor says Jay Z didn’t honor his contractual obligations to promote the fragrance to the public, such as mentions in social media and participating in interviews about the product.
Even if you’re rich as a successful rapper, the perfume company’s demands in court are enough to keep you awake at night wondering how to pay if you end up losing — $18 million in alleged damages, a demand for punitive damages, and other remedies.
So, what’s are the lessons to learn from this licensing deal gone bad?
1. Due Diligence
Whether it is a licensing deal or another contract that’s important to your company, performing due diligence on the other party is essential.
A simple Google search for “Jay Z lawsuit” would have revealed that the rapper has been involved in multiple lawsuits, including claims for breach of contract. Regardless of the merits of such claims, a litigation track record is a warning sign that you should prepare to end up in court if things go south…and use that factor to help you decide whether or not to go forward with the deal.
In contrast, if you were considering doing a business deal with NBA Hall of Famer Michael Jordan, due diligence would reveal that his litigation typically involves misuse of his name in advertising without compensation (i.e. someone wrongfully profited using his name without a license to do so). And when he’s donated the damages awarded to charity, it’s an indication that Jordan’s primary interest is in protecting his brand.
On the other hand, you’d also discover that Michael Jordan does not “do deals for anything less than $10 million.” That piece of information might deter you from approaching him to star in commercials for your company’s products or services.
2. Clarity Reduces Breach of Contract Risks
Without having the actual agreement to review, it’s unclear what was said (or left unsaid) about Jay Z’s obligation to promote the perfume. However, simple clear instructions in a contract for each party eliminates many misunderstandings that lead to lawsuits.
If I were the business attorney that prepared this licensing deal, I would have encouraged my client to insist on specific action items to be taken by the rap musician to market the fragrance.
For example, promotion in social media would have included specific identification of the media platforms (e.g. Facebook, Twitter, Google+, Pinterest), a minimum number of promotions for each platform, and ideally a timetable for such activities. If necessary, the business agreement would have provided for the company to create the content to be distributed by Jay Z in his social media accounts so that one of his assistants could simply copy-and-paste the material into the platforms for distribution.
If Jay Z was supposed to do interviews as part of the marketing campaign, the licensing agreement would ideally describe each media outlet conducting the interviews and set a base number of interviews as being acceptable.
3. Performance-Based Compensation
As with any business deal, it’s rarely a good idea to give the other party on the front end what he wants and then hope for performance to occur later.
The perfume seller could have tied the award of stock and stock warrants to specific measurable marketing and advertising activities to be done by Jay Z. For example, for every 10 tweets about the fragrance, the rapper would receive XX shares in the company. There could even be a bonus structure in place where Jay Z received additional compensation by exceeding the minimum promotional requirements and/or when perfume sales met certain targets.
No matter the type of deal, your business lawyer can follow these tips to help you get what you want without suing for breach of contract for damages.