Universal Says It Will Appeal Hallyday Case

Universal Music France is planning to appeal a decision by a French labor tribunal ordering the company to hand over to one of its leading artists the masters to his complete catalog.

LONDON -- Universal Music France is planning to appeal a decision by a French labor tribunal ordering the company to hand over to one of its leading artists the masters to his complete catalog.

The ruling by the Conseil des Prud'hommes in Paris came July 28 in a case brought by veteran rocker Johnny Hallyday against his record company, Universal Music France.

The 61-year-old artist signed a new contract with Universal in December 2002. According to the terms of the contract, Hallyday was due to record six albums for the company. But in 2003, he began questioning the terms of the deal. On Jan. 5, he declared that he was "resigning" from Universal and taking the case to the Prud'hommes.

Under French labor law, recording contracts are considered to be "working" contracts, and artists are technically considered employees of the label. Therefore, they can "resign" before the end of their term in case of a conflict with their "employer."

Universal and Hallyday's representatives worked out an arrangement. Universal said it accepted Hallyday's resignation, and the artist agreed to record one more album for the company, to be released before Dec. 31, 2005.

In the July 28 ruling, the Conseil des Prud'hommes in Paris confirmed the artist's resignation, effective Dec. 31, 2005. However, the court decided to defer until next year a ruling on whether to grant Hallyday a damages claim of 50 million euros ($60.3 million) against Universal Music France.

In addition, the court asked for an analysis of all contracts between the artist and the record company, especially those in which the company "lent" money to Hallyday. Universal is said to have lent Hallyday 107 million francs ($19.9 million) between 1978 and 1997.

The most contentious issue ruled on by the tribunal is the handover of more than 1,000 tracks recorded by Hallyday during his tenure with the company. After his two debut albums in the early '60s on then-indie label Vogue (now part of BMG), Hallyday signed with Philips, which became part of PolyGram, later to merge with Universal.

Paris-based intellectual property lawyer Gerald Bigle says the court's decision can be interpreted as "a conservatory measure destined to offer some safeguards to the artist-employee." However, Bigle finds it confusing that the labor tribunal could mix labor laws with IP rights. "The Conseil des Prud'hommes has no jurisdiction over IP issues," he says. "I doubt that a civil court would have reached the same decision."

Sources close to Universal say the management was "stunned" by the court's decision. A Universal Music France spokesperson said the company would appeal the ruling.

In a statement, Universal says the tribunal has not found it guilty of wrongdoing. Universal notes "with surprise" the court's decision to link the handover of the masters to the end of the exclusive contract, which was mutually agreed upon by the two parties. Universal says this decision is "contrary to the contractual will of both parties, contrary to usage, contrary to Universal's right of ownership." Universal says the decision will lead to "the paralysis of the exploitation of Johnny Hallyday's catalog."

Bigle admits that the ruling regarding the masters is ambiguous. "It says Hallyday has the possession of the masters -- which in itself is quite peculiar because it [amounts to transferring] assets owned by a company to an employee -- but does not say who has the exploitation rights. If he wants to exploit the catalog, he will have to clear it with all the other rights owners, and that includes not only Universal, but also all the authors and composers."

He adds, "If, for the sake of discussion, the works end up not being exploited, it could create a series of conflicts between other rights owners and Hallyday, who can claim they are deprived of the revenues they could have expected from the exploitation of the works."

A source close to French author society SACEM says that "if the whole Hallyday catalog was to remain unexploited because of differences between Universal and Hallyday, this would have massive consequences not only for SACEM, which collects a significant level of royalties from the use of Hallyday's works, but for all the authors and composers who penned works for him. There's a lot of money at stake."

Jerome Roger, director general of French indie labels body UPFI, says the ruling is of "major significance." He elaborates, "If the exclusive contract between an artist and a record company can be broken so easily by a labor court, and if artists can be handed the masters to works that they have not produced [financially], it will create a climate of extreme insecurity with the industry."

Roger says the ruling comes at a "period of great tension between major companies and artists. A lot of artists are dismayed and unsettled by what is happening with major companies. Many have handed back their contracts, but there are also a few number who are unhappy with their relationships and who are looking at pursuing the same road as Hallyday. My feeling is that we haven't seen the end of these procedures."