Michael Jackson's Legal Trouble - Why You Should Read Contracts Carefully Before Signing!

Michael Jackson was an excellent singer, dancer, businessman, performer, songwriter, music producer and a lot of other things. His life can teach us a lot about things we should DO. Surprisingly, Michael's life can also teach a lot about what NOT TO DO!

Today, let us look at what it can teach us about carefully reading a legal contract before we sign it!

A Bit of Backstory:

The Music Label that caused legal problems for The Jackson 5

In his life, Michael worked with 4 record labels - Steeltown Records, Motown Records, Epic Records and Sony Music. Before working for a record label you sign a contract wherein you promise certain things, like you won't work for other labels for a certain period, you will not leave the band for a fixed number of years and so on.

MJ started as a child music star with his 4 brothers.

Joseph Jackson, the father of The Jackson 5.

Michael and his 4 brothers started as a band called The Jackson 5 when they were children. Michael was only 9 when he started performing. Their father Joseph Jackson would be their manager and would accompany them wherever they went to perform in the early days. After recording a few songs for Steeltown Records, they auditioned for Motown Records, one of the biggest labels in the US at the time. Motown liked these talented young performers and urged their father to make them sign a contract with Motown.

And Joseph and the 5 brothers did exactly that. The problem? None of the Jacksons read the contract carefully before signing it!

From Taraborrelli's book on Michael Jackson:

It's easy to understand why Joseph would just sign the deal. It was Motown, after all. However, there were significant problems with the contract, many of which would cause trouble for the family later on down the road:

1. Clause Five, for instance, stated that The Jackson 5 would be unable to record for any other label ‘at any time prior to the 59 expiration of five years from the expiration or termination of this agreement’. This was a standard Motown clause that applied whether an act was signed for seven years, five years, or, as in the case of The Jackson 5, one. So Berry Gordy's concession to Joseph Jackson proved meaningless; The Jackson 5 were still tied up for at least six years.
   

2. The third clause stated that Motown was under no obligation to record the group or promote its music for five years, even though this was purportedly a one-year contract! Some other contractual stipulations that Joseph might have questioned had he read the agreement: Motown would choose all of the songs that the group would record, and the group would record each song until ‘they have been recorded to our [Motown's] satisfaction’. However, Motown ‘shall not be obligated to release any recording’, meaning that just because a song was recorded, it would not necessarily be issued to the public. The group was paid $12.50 per ‘master’, which is a completed recording of a song. But in order for the recording to be considered a master, the song had to be released. Otherwise, they were paid nothing. In other words, they could record dozens of songs and see only one issued from that session, and that would be the one for which they'd be paid. As for the rest, well, they would just be a waste of time. It's been written that the Jacksons received a 2.7 per cent royalty rate, based on wholesale price, a standard Motown royalty of the 1960s. Actually, according to their contract, the boys would receive 6 per cent of 90 per cent of the wholesale price (less all taxes and packaging) of any single or album released. It was the same rate as Marvin Gaye, and also The Supremes, got. Marvin, as a solo artist, did not have to split his percentage, though. The Supremes had to divide it three ways. And this amount had to be split five ways among the Jackson brothers. In other words, Michael would receive one-fifth of 6 per cent of 90 per cent of the wholesale price – or a little under one-half of a penny for any single and $0.0216, about two cents, per album released (based on an assumed wholesale price of $0,375 a single and $2.00 an album).
   

3. As per the terms of the contract, Motown was obligated to pay the cost of arrangements, copying and accompaniment and all other costs related to each recording session, whether the song 60 was released or not – but these expenses and others would have to be recouped by the company from the royalties generated by sales of the records that were released. This arrangement would lead to many complaints by Motown artists, and it would be a big problem for The Jackson 5. But Joseph never imagined that the group would record so many songs that would not be issued – and they did, perhaps as many as a hundred! Later, it would be virtually impossible for the group to make any money on the ones that were released, because the boys would still have to pay for all the ones that weren't.
   

4. If Michael or any of his brothers were to leave the group, he would have no right ever to say that he was a member of The Jackson 5, ‘and shall have no further right to use the group name for any purpose whatsoever’. Joseph may not have realized it, but this could be a big problem. For instance, when Florence Ballard was fired from The Supremes in 1967, she was not able to promote herself as having been a member of the group. Her press biography for ABC, when she signed to that label as a solo artist in 1968, could state only that she was ‘a member of a popular female singing group’.
   

5. Motown could, at any time, replace any member of the group with any person the company chose. In other words, if Tito acted up, for instance, he could be bounced from the act and replaced by someone else selected by Motown, and not by Joseph.
   

6. An even more limiting clause – number sixteen – stated that ‘Motown owns all rights, title and interest in the names Jackson 5 and Jackson Five.’ In other words, they may have gone to the company as The Jackson Five, but they sure weren't going to be leaving that way. When The Supremes wanted to leave the label in 1972, they were welcome to go – but they'd have to change the group's name to something else. They stayed.
   

7. The contract with Motown could have also stated that Joseph would be obligated to hand Randy and Janet over to the company to raise as Gordy saw fit, and he might have agreed to it. The important thing was that the boys were with Motown, on any terms.

Michael's family never thought much the Motown contract being bad, since they were new to the music scene and were anxious to make it big on the music scene.

Michael, already a child star at age 11.

Nevertheless, on 26 July 1968, in tiny, barely legible handwriting, Michael signed the deal: ‘Michael Joseph Jackson’.

The Jacksons and Motown would fight in court many years after that date. In litigation against Motown, Joseph would explain, ‘I did not read these agreements nor did my sons read these agreements because they were presented to us on a take-it-or-leave-it basis. Since my sons were just starting out in the entertainment field, we accepted these contracts based on the representations of Motown lawyer Ralph Seltzer that they were good contracts.’

Ralph Seltzer would disagree, and in a way that was a bit unsettling. ‘I have no recollection of ever saying to Joseph Jackson or The Jackson 5 that the agreement being offered by Motown was a good agreement.’

Anyways, the point is: Read the legal documents carefully before signing them!

Source: Michael Jackson: The Magic, The Madness, The Whole Story, 1958-2009 by J. RANDY TARABORRELLI