A US appeals court has overturned the 2024 ruling that said hip hop group 2 Live Crew could reclaim ownership of albums they recorded in the 1980s by exercising the termination right in US copyright law.
However, in reaching that conclusion, the Eleventh Circuit Appeals Court did not consider the ‘work for hire’ debate that is at the centre of most termination rights disputes involving artists and record labels, including the dispute between 2 Live Crew and the label that controls their records, Lil Joe Records.
Instead the appeals court solely investigated what happens when copyright law and bankruptcy law collide. Because one of the members of 2 Live Crew, Mark Ross, filed for bankruptcy in 2000 and, Lil Joe Records argued, in the process lost his right to terminate his 1980 record contracts. The appeals court agrees.
Which is bad news for Ross - or, actually, his estate - but also for the other two members of 2 Live Crew that wanted to exercise the termination right. Because, with co-created works, a majority of the collaborators must seek termination. Ross now can’t and fourth member David Hobbs was not involved in the termination right claim to start with.
Therefore, the appeals court judges conclude, “because a majority of 2 Live Crew did not exercise their termination interests”, Lil Joe Records “still owns the copyrights to these five albums”. And “we reverse the district court’s contrary conclusion and remand for proceedings consistent with this opinion”.
Under US copyright law, an artist or songwriter who transfers copyrights in their work to a business partner - like a record label or music publisher - via a record or publishing deal, can terminate the transfer and reclaim the rights after 35 years.
Unless, that is, the artist or writer was employed on a ‘work for hire’ basis when their music was created, in which case whoever commissioned the work and hired the artist or writer is the default first owner of the copyright. Which means no rights were ever transferred and therefore there is no transfer of rights to terminate.
When artists try to terminate decades old record deals and reclaim rights in their old recordings, labels often claim those record deals were work for hire arrangements. That’s basically what is happening in the ongoing dispute between Salt N Pepa and Universal Music. And it also happened in the 2 Live Crew v Lil Joe Records dispute.
2 Live Crew’s early albums were originally released by a label owned by one of its members, Luther Campbell. Campbell and his label also went bankrupt, in the 1990s, which is when Lil Joe Records - owned by Joseph Weinberger, who had been general counsel and CFO for Campbell’s record company - acquired the copyrights in the records.
In 2020, Campbell and Ross joined with the estate of a third member, Christopher Wong Won, to exercise the termination right and reclaim those rights. Weinberger argued 2 Live Crew’s 1980s deals were work for hire agreements, but a jury rejected those arguments and said the Campbell, Ross and the Wong Won estate’s contract termination was valid. Though by that point Ross had died.
Weinberger also argued that Ross didn’t have a termination right because of his bankruptcy during the original legal battle. However, the judge in the district court - Darrin Gayles - ruled by summary judgement that the bankruptcy had not affected Ross’s rights in terms of copyright law. So the jury only had to consider the work for hire arguments.
But Gayles was wrong, the Eleventh Circuit now says. The appeals judges write that, “when someone files for bankruptcy, the Bankruptcy Code says that all that person’s interests in property enter the bankruptcy estate”. The bankruptcy estate being a standalone legal entity that is created automatically at the point a person declares they are bankrupt.
Ross’s termination right in relation to the 2 Live Crew copyrights was one of those ‘interests in property’. And while that right wasn't discussed during Ross’s bankruptcy proceedings, the “Bankruptcy Code says that any property in a bankruptcy estate that isn’t addressed by the bankruptcy court remains property of the estate”.
Copyright law does actually say that a creator’s termination right is “personal and inalienable”, which technically means it can’t be waived or given away. However, the Eleventh Circuit says, under bankruptcy law, “Ross’s termination interests entered his bankruptcy estate regardless of whether [copyright law] made them personal and inalienable”.
Unlike other high profile termination rights disputes, this ruling is less significant in terms of how it might impact other artists, as it only matters for those that have been through bankruptcy. And for artists where both bankruptcy and the exercising of termination rights is in the future, it could be that an agreement during the bankruptcy process could protect the termination right.
The appeal judges add, “although we conclude that Ross’s termination interests were property of the bankruptcy estate at the time he purported to exercise them, our decision is limited. We do not address how termination interests should be treated in bankruptcy. And we do not decide today what Ross’s heirs need to do to exercise those interests in the light of his bankruptcy”.