Legendary singer-songwriter Barry Manilow has filed a lawsuit against Hipgnosis Songs Fund, seeking $1.5 million in allegedly unpaid bonus funds.
According to a report by Variety, Manilow, and Nevada-based Stiletto Entertainment, they are claiming breach of contract, fraud, fraudulent misrepresentation, and negligent misrepresentation.
The legal action, filed in U.S. District Court in California, stems from a catalog acquisition deal made in 2020. The lawsuit details an initial purchase price of $7.5 million for Manilow's catalog, with provisions for additional payments based on income growth. Manilow alleges that his songs met the conditions for two additional $750,000 payments, which Hipgnosis has failed to deliver.
The legal complaint outlines specific terms of the Music Catalog Acquisition Agreement (MCAA) signed in March 2020. It states that Manilow was entitled to additional payments if the cash income received by Hipgnosis from the acquired assets increased by at least 10% year-on-year compounding for each of the first three years, and again for the first four years from purchase.
Manilow's team claims that the income generated from his catalog satisfied these conditions, with annual earnings ranging from $404,388 to $550,383 during the relevant period. However, Hipgnosis has not made the bonus payments as agreed, leading to the current legal dispute.
The lawsuit also alleges that Hipgnosis, through its founder Merck Mercuriadis, made promises about leveraging industry expertise to optimize the value of Manilow's royalties. These promises reportedly included pursuing album reissues, special compilations, and licensing agreements for various media.
Manilow's legal team asserts that Hipgnosis failed to deliver on its promises of marketing and promotion for the acquired catalog. The complaint states:
None of the promised marketing or promotion ever materialized. It has never consulted with Manilow or even attempted to so consult. It became clear that Hipgnosis made profoundly false promises. It lacked the skill, experience, and expertise to optimize the Manilow hits in play under the contract.
These allegations suggest that Hipgnosis may have overstated its capabilities and resources when negotiating the deal with Manilow. The lawsuit implies that the company's failure to execute its promised strategies has resulted in lost opportunities for maximizing the value of Manilow's music catalog.
The legal action also highlights issues with the contract execution process, noting delays and concerns about Mercuriadis's corporate authority at the time of signing.
This lawsuit comes at a challenging time for Hipgnosis Songs Fund. The company, which launched in 2018, had aggressively pursued music catalog acquisitions, spending over $2 billion on assets from various high-profile artists and songwriters.
However, Hipgnosis has recently faced financial difficulties and management changes. The company's stock value plummeted, leading to a shareholder revolt. In July, Hipgnosis was acquired by Blackstone-owned Lyra Bidco Limited, and founder Merck Mercuriadis stepped down from his position.
The Manilow lawsuit is not the only legal challenge Hipgnosis is facing. Interestingly, the company had previously sued Manilow under similar terms, alleging breach of contract. A representative for Hipgnosis stated to the Financial Times that there was "a difference in understanding of certain clauses in the sale agreement regarding bonus payments."
Barry Manilow's lawsuit against Hipgnosis Songs Fund seeks $1.5 million in allegedly unpaid bonus funds related to a 2020 catalog acquisition deal. The legal action claims breach of contract and misrepresentation, alleging that Hipgnosis failed to deliver on promised marketing efforts and bonus payments. This dispute occurs against the backdrop of Hipgnosis's broader financial challenges and recent management changes, highlighting the complexities of music catalog acquisitions and valuations in the industry.
