Judge Allows Profits Lawsuit Against Universal Music Over Drake Albums

Cash Money may have settled with Lil Wayne, but its legal problems — now Universal's — aren't over.
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Aspire Music Group, the record label that first signed musical superstar Drake to a contract in 2008, has been given the green light to pursue a major profits lawsuit against Cash Money Records and UMG Recordings.

The plaintiff was a company co-founded by Cortez Bryant, who once served as Lil Wayne's manager. After Aspire signed Drake, it furnished the musician's services in 2009 to Young Money Entertainment, a joint venture between Cash Money and Lil Wayne. Under the agreement, Aspire was to get one-third of net profits from the exploitation of Drake's first six solo albums as well as a third share in the copyrights.

Drake (full name: Aubrey Drake Graham) has since become one of the most successful artists on the planet, and Cash Money has been brought to court on several occasions for allegedly not properly sharing the spoils. Lil Wayne recently settled his own $51 million lawsuit, but that doesn't completely end the controversy as Aspire has brought its own claims in New York state court against Cash Money and Universal (UMG).

Last week, New York Supreme Court Judge Barry Ostrager largely rejected a motion to dismiss.

Cash Money argued there was an incontestability provision in the agreement whereby Aspire needed within two years of receiving an accounting statement to provide written objections. Since Aspire hadn't, the defendant moved for dismissal on the basis that Aspire had failed to meet the conditions of its deal.

"The Money Defendants' purported frustration of Aspire's ability to perform any of these apparent conditions precedent necessitates denial of the Money Defendants' motion to dismiss," responds Ostrager. "Here, Aspire alleges the Money Defendants provided deceptive statements reflecting no monies due to Aspire and eventually ceased providing Aspire with any accounting statements. Aspire has provided documentary evidence of at least one request to conduct an audit of Cash Money and Cash Money's purported failure to adequately respond."

Ostrager also rejects a statute of limitations argument except with respect to claims arising out of accounting statements provided before March 2010. The judge points to a tolling agreement between the parties that extended the time period in which Aspire could sue.

The responsibility — or liability — could fall on Universal's shoulders. That's because in an amended complaint Aspire alleges — "adequately," according to the judge — Universal is the equitable owner of Cash Money and the "alter ego" of Cash Money.

Cash Money was co-founded by Bryan "Birdman" Williams, and Universal technically isn't the label's owner.

However, according to Aspire's complaint, Universal took advantage of Cash Money's cash flow problems by satisfying debt in exchange for control. The companies are said to share office space and an intermingled business affairs department. Cash Money also is dependent on advances and direct payments from Universal. It's enough for the judge at this point to see Universal as really controlling the business operations of Cash Money.

The lawsuit further contends that after Universal took control of Cash Money, the distribution agreements were renegotiated to provide Universal with higher fees. Because distribution fees are deducted from defined net profits in the Aspire agreement, Aspire asserts it lost significant revenue from the exploitation of Drake's albums.

"Regardless of whether Cash Money's purported relinquishment of its business to Universal is partially the result of freely executed contracts between the parties, the inquiry into whether, and to what extent, the contractual relationship between the two parties transformed over time into that resembling an alter ego relationship is necessarily fact intensive and requires discovery," writes Ostrager in rejecting Universal's dismissal motion.

Here's the full decision.