Fredianelli v. Jenkins
931 F. Supp. 2d 1001, 2013 WL 1087653, 2013 U.S. Dist. LEXIS 35757 (2013)
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Rule of Law:
An implied partnership is not formed based on profit-sharing alone where one party retains unilateral control over all essential business and creative decisions, as a degree of shared management and control is a primary and virtually essential element of a partnership.
Facts:
- Anthony Fredianelli helped form the band Third Eye Blind ('the Band') in 1993 but was replaced before rejoining in late 1999 as a 'hired musician' at the request of frontman Stephan Jenkins.
- Upon rejoining, Fredianelli was told by band members that after a two-year 'probationary period,' he would become a full member and co-owner.
- Around March 2003, the Band's manager, Eric Godtland, allegedly informed Fredianelli that the band members had agreed to make him a full member pursuant to an unsigned document titled 'Third Eye Blind Inter Party Agreements' (the 'Agreement').
- Following this 2003 meeting, Fredianelli stopped receiving a weekly retainer and began receiving 25% of the net touring revenue, a share that later increased to one-third after another member departed.
- Despite this arrangement, Stephan Jenkins retained exclusive and unilateral authority over all of the Band's business, creative, legal, and financial decisions.
- The terms of the unsigned Agreement regarding democratic decision-making and specific merchandise royalty splits were never followed, and corporate shares were never distributed to Fredianelli.
- In early 2008, Jenkins unilaterally reduced Fredianelli's share of touring revenue from one-third back to 25%.
- In December 2009, after a dispute related to Fredianelli's testimony in a separate lawsuit involving the Band's former manager, Fredianelli was effectively frozen out of the Band.
Procedural Posture:
- Anthony Fredianelli sued Stephan Jenkins, Bradley Hargreaves, and various Third Eye Blind corporate entities in the U.S. District Court for the Northern District of California.
- Fredianelli filed a First Amended Complaint asserting six causes of action, including breach of contract and a claim for declaratory relief establishing him as a co-owner.
- The Defendants filed a motion for summary judgment, asking the court to dismiss all of Fredianelli's claims before trial.
- The court reviewed the evidence, including ruling on the admissibility of certain declarations under the sham affidavit rule, and considered the Defendants' motion for summary judgment.
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Issue:
Does an informal understanding and course of conduct, including sharing in net touring revenues, create an enforceable partnership or co-ownership agreement in a musical group when one member retains unilateral control over all business and creative decisions?
Opinions:
Majority - Chen, J.
No. An enforceable partnership or co-ownership agreement is not created where one party lacks any meaningful participation in the management and control of the business, even if they share in some of the profits. To establish the existence of a partnership, there must be evidence of an association of persons to carry on as co-owners, which is primarily evidenced by the right to participate in management and control. Here, Fredianelli's own deposition testimony established that Jenkins maintained absolute, unilateral control over all band decisions, making an analogy that he was 'the United States' and the other members were 'smaller countries.' The court found no enforceable express contract because there was no evidence of mutual consent to the unsigned 'Agreement,' its terms were largely ignored, and the manager lacked authority to bind the Band to an ownership deal. Furthermore, no implied partnership existed because the essential element of shared control was absent. While Fredianelli shared in net touring revenues, this was insufficient to establish co-ownership, especially since it was treated as wages for tax purposes and he did not share in other revenue streams like merchandise as a partner would. However, the court found that a separate, enforceable agreement for sharing net touring revenues did exist, and allowed Fredianelli's claims for breach of that specific agreement and for an accounting of those revenues to proceed.
Analysis:
This decision underscores that in the absence of a clear, signed contract, control is the dispositive factor in determining whether a partnership exists in a creative enterprise like a band. It clarifies that profit-sharing, a common arrangement for musicians, is not sufficient on its own to establish co-ownership or partnership rights under the law. The ruling serves as a significant precedent for disputes within bands and similar groups, emphasizing that courts will look beyond informal titles like 'member' to the actual power dynamics of decision-making. The case is a strong admonition for artists and collaborators to formalize their business relationships in writing to avoid ambiguity regarding ownership, control, and compensation.
