Legal Question in Business Law in Texas

Re: band split execpt one and the others think the stuff is theirs, is it?

Practice observation: bands are often afflicted by the problem that, on the one hand, they have need for rather sophisticated legal services in order to structure them to deal with the multitude of problems that they face (both as to their intellectual property and entity issues), while on the other hand they most often lack the financial resources to pay for those badly-needed services. I have seen unpaid bills where we have tried to provide the full range of planning services, and also have seen litigation in cases where there was no such planning (often the parties then pay a high multiple of the fees that they "saved" by not hiring a lawyer at the planning stage). Further, the very nature of an entity composed of highly-creative and often eccentric people makes membership changes and conflicts even likelier to occur than would be the case in more conventional businesses.

This case is not at all unusual. The default presumption at law is that the band was a partnership. The band may never have had a formal accounting process, and may never have filed partnership tax returns, so the accounting process is unlikely to be quick or easy. Normatively, when a partnership is dissolved, there is a "winding-up" process where all of the non-cash assets are sold, the debts are paid, and then the remaining assets (if any) are first allocated to the capital accounts of each partner (distributed to the partners in proportion to their economic interests in the partnership) and, after all capital accounts are zeroed, the remainder in proportion to their partnership interests. Not the easiest thing to do if there were never capital accounts calculated in the first place.

So, my guess would be that there are lots of issues that need clarification. Ownership of the band name, and of the copyright in both compositions and performances of the band's original songs, have to be allocated. And, yes, the amount of money contributed to the partnership by individual band members DOES influence their distribution rights (because it increases their capital accounts).

On balance, however, because the accounting reconciliation process may cost more than the assets are worth, I would suggest that the parties consider mediation as an alternative to an adversarial process.

Best wishes,

LDWG

Re: band split execpt one and the others think the stuff is theirs, is it?

Mr. Graves' analysis is quite good, as is his conclusion. Sorting out who owns what in court is a very expensive undertaking.

The dissolution of a partnership requires a full accounting for all the members as to who owns what, and the distribution of partnership assets. Unless there's some written agreement as to distribution of shares, the legal presumption is that it's a partnership of equals; i.e. five members, each gets 1/5 of the assets after the liabilities have been paid off.