About two years ago, Douglas Jack Agu aka Runtown was a relatively unknown artist. However, all that changed when he met and signed a recording contract with EricMany Ltd., a record company (label) owned by a wealthy businessman named Prince Okwudili Umenyiora (aka “Dili”). While Runtown was beginning to gain momentum in Nigeria and the Nigerian diaspora with his hit single ‘Gallardo,’ his new relationship with his label took him to greater heights. For example, the label invested in his song and video, ‘Lagos to Kampala’ featuring Wizkid that was highly instrumental in placing Runtown on the global music map as an artist to watch.
In his record contract with EricMany Ltd., Runtown agreed to assign his copyrights in his sound recordings (masters) to the label, provide his services as a recording and performing artist, exclusively, to the label, produce three albums; and give three months notice if he chose to terminate the contract. Equally significant is that both designated and agreed that any dispute that arose between them would be resolved under the laws and processes of Nigeria. This is called a “choice of law and forum” clause.
Despite the seeming success for Runtown, the relationship between him and his label deteriorated. The label claims this is because Runtown materially breached his record contract by providing his services to third parties and without its knowledge. Specifically, Runtown and Bugu Aneto Okeke, his manager, tried to organize a U.S. tour with promoters without the label’s knowledge.
Runtown, in turn, accused the label of a material breach of their recording contract. First he claimed the label owner Dili had a history of fraud and was deceitful in his relationship with Runtown. He cited Dili’s alleged conviction for fraud in the United States and his alleged ban from entering the UK as a showing of his deceitful character. In addition, he claimed the company made promises it never fulfilled, including a promise of having him collaborate with Nicki Minaj. He also claimed that there were royalty payments he never received and that remain unaccounted for. Worse, he claimed Dili threatened and pulled a gun on him.
Unmoved by Runtown’s version of the facts, the label filed an interim injunction (a restraining order) in a Nigerian federal court requesting that the court stop Runtown from recording, performing and using his stage name; and Runtown’s manager and his manager’s companies from promoting Runtown without the label’s consent. The Nigerian court granted the label’s request.
I discussed the above facts last week when the story broke. This week, the story takes a new twist. The label, aware of Runtown’s plans to perform in the U.S., as part of his ‘Ghetto University’ tour, decided to also stop him in the states.
The U.S. Restraining Order Against Runtown & his Manager
On June 3, 2016, EricMany Ltd. filed a Temporary restraining order (TRO), through its New York attorney, in the United States District Court, Eastern District of New York, preventing Niyi Fatogun, a New York promoter, Vibesland Entertainent LLC (owned by Fatogun), Runtown’s manager and the companies owned by the manager from promoting Runtown in the U.S. The label also sought to stop Runtown from performing in the U.S.
The label argued that financial compensation was unlikely to be a sufficient remedy and it had suffered irreparable harm that was very difficult to assess. It explained that it has: invested $600,000 in Runtown’s career, its contract with Runtown applied “worldwide,” Runtown was the sole artist signed to the label, the label would suffer a serious damage to its business reputation if Runtown is allowed to just walk away, no artist would ever want to sign a record deal with it, and it would be financially bankrupt if it was unable to recoup its investment. The label produced a copy of the restraining order from the Nigerian court; and pointed that Runtown had a collaboration with Wizkid. It explained that Wizkid is an artist with a collaboration with Drake titled ‘One Dance’ and the song was already top in the U.S. The perceived notion was that “Nigerian music is on the verge of crossing over” into mainstream America.
Fatogun, the New York promoter who was the only defendant present in court to personally represent himself and his company, objected to the label’s arguments against him and his company. He argued that Runtown and his manager asked him to help them organize and promote a U.S. tour for Runtown starting with two shows in California. The first show was to begin the weekend of June 3, 2016 and was to be held in Oakland, California. Fatogun said he spoke with the record company and thought he had consent but when the brouhaha hit social media, he told all parties he was no longer interested and would cancel the tour.
At issue for the judge during the hearing was ensuring that the label had given proper notice to all defendants prior to the hearing so they could be present in court to challenge the label’s request for a restraining order, among other things. The judge concluded the label gave the proper notice. The judge also granted the label’s request for a restraining order against Runtown, his manager and his manager’s companies but not against Fatogun. The judge said this was because Fatogun said he would/had cancelled the tour. However, the judge refused to dismiss Fatogun from the case.
Why is a U.S. Court Ruling on a Case that Should be in a Nigerian Court & Apply Nigerian Law?
The obvious question is what is a dispute stemming from a contract signed by Nigerians in Nigeria, with the intent that Nigerian laws and court processes apply, doing in a U.S. court?
Here is how the judge answered this question: “[w]ithout determining whether the Nigerian court’s order is binding on this court, this court nonetheless finds that the Nigerian court’s injunction weighs in favor of granting a temporary restraining order against Runtown because another court of competent jurisdiction has already enjoined (stopped) defendant Runtown from performing as a singer, musical artiste or performer, etc.”
The court’s reasoning above is what I disagree with.
First, if in fact there is a breach, EricMany Ltd. has a right to pursue and recoup its investment, legally. If there is a legal basis for pursuing its case on U.S. soil, then by all means the label should do so. As you all know, I have been unequivocally clear in my writings, You Tube videos and also podcasts that artists or industry professionals who misbehave in their countries do not get a pass when they replicate such bad behavior on a foreign soil or act as ambassadors for U.S. brands. Examples include Rick Ross, Nas and Wizkid. Despite my strong position on the issue of artists behaving badly, I believe due process must be followed and also one sovereign nation should try as much as possible to stay out of the affairs of another.
Second, as to my due process point, I believe there is still an issue as to whether proper notice was in fact given to Runtown, his manager and the manager’s companies. The notice in this case was served by email, after the label’s alleged attempts to serve the aforementioned defendants. The problem here is I highly doubt some of these defendants had functional emails to make service proper. The lack of a basic functional email is a common problem that plagues the industry. It is so bad that many promoters have been deceived by hackers who pretended to be the artists or their managers and as a result lost large sums of money, and earned bad reputations. A recent example is Wizkid who had an impersonator that for three years successfully defrauded many promoters. She was finally caught and detained last week.
Also, even a basic website for the average Nigerian artist is hard to find. Wizkid, with all his popularity, is yet to have a basic website and a credible functional email. Therefore, I highly doubt service by email to the email addresses sent, whatever they may have been and especially as to Runtown’s manager’s companies, were valid.
Third, as to the issue of sovereign nations respecting each other’s boundary lines, I think the specific question the judge should have first asked is, “does a U.S. federal court have the right to recognize a foreign court’s judgment where the judgment is an interim injunction (a temporary order) and involves a breach of contract affecting intellectual property rights in the foreign nation? The answer in my view is “no.” While U.S. courts routinely recognize and/or enforce monetary judgments made by foreign courts, they do not readily do the same where equitable judgments i.e. injunctions etc. are concerned. This is for numerous reasons including the concerns of lack of finality of the judgment. Here, the Nigerian court is yet to resolve this case in its finality. Therefore, a U.S. court’s attempt to recognize, or enforce the ruling by the Nigerian court against Runtown and other defendants’, in my view, is improper and should be challenged.
Fourth, a very important issue is the choice of law and forum clause provision in the contract. Even the court recognizes the explicit language of the contract that says Nigerian law and processes govern. It also flagged the fact that the record company did not present any information regarding Nigerian contract law; and the record contract’s dispute resolution provision under Nigerian law. Yet, the court moved forward with issuing the restraining order. That to me is where the court really got it wrong.
The parties clearly chose Nigerian law and processes for a reason (costs, convenience, location, familiarity etc.) and are bound by their contractual choice. Also, Runtown and his manager entered into an agreement with Fatogun, the promoter in New York, but Fatogun cancelled his contract with them. Contract law in the U.S. is state specific. So, after the nullification of the Niyi-Runtown contract, there should be no further ruling on what the rest of the states in the U.S. should be doing with Runtown.
Fifth, assuming the court looked at the fact that the contract involves intellectual property rights (federal law) that belong to the label, i.e. Runtown will be performing the master recordings owned by the label across the U.S.; I still think there is a problem. This is because implicit in the court’s ruling is that Nigerian intellectual property law is the same with the United States. While there are many parallels, it is not the same.
For this and so many other reasons folks, I think the judge got it wrong.
Here is what I think happened from the judge’s view. The judge looked at this case from a purely practical standpoint. An emergency paperwork has been filed asking for a restraining order. The label claims losses will be significant and incalculable if it does not obtain a restraining order. I think the judge looked at all the documents/evidence, heard the testimonies, realized there was a potential with the choice of law forum clause, flagged the fact that there was no briefing on Nigerian contract law but did not want to deal with it. The judge then thought about the fairest result and decided, “how about I grant the TRO because $600,000 in investment is a lot of money to lose and play safe by still protecting the defendants just in case my ruling is incorrect.To protect the defendants, I will order EricMany Ltd. to post a $5,000.00 bond. That amount, if it turns out I am incorrect, will compensate Runtown, his manager and his manager’s company. In the meantime, I will just move this fight over to a different department where the judge there can deal with the legal drama on June 14, 2016, at the preliminary injunction hearing.”
These are my thoughts. What’s yours? Share. I’d be curious to know.
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