‘Outright Betrayal’ Over a Music Industry Windfall

Marshmello
The Shuttered Venue Operators Grant program offered a windfall for many big-name artists. Photo: Paul Morigi/Getty Images
Matthew Belloni
December 1, 2022

Since the dawn of Vaudeville, talent agents and other representatives have been trying to figure out creative ways to make money off creativity. Here’s a brand new one that comes with a bonkers backstory and, as is often the case in Hollywood, a nasty lawsuit.

Remember in late 2020, when the U.S. government decided to give more than $15 billion in cash to the operators of entertainment venues that were decimated by Covid? Starting in April 2021, independent concert halls, movie theaters, football stadiums, museums and other gathering spots just needed to prove that they had lost more than 90 percent of their revenue due to the pandemic, and the Small Business Administration would reimburse losses up to $10 million each. Not bad. The program helped a lot of teetering indie venues.

But what if I told you that individual musical artists, indeed some of the most successful touring acts of the past few decades, also quietly cashed in on the Shuttered Venue Operators Grant program? It’s true, according to a new and previously unreported legal filing. These acts are said to have included Marshmello, Alice in Chains, Common, George Thorogood, Deadmau5, Nickelback, The Prodigy, Leann Rimes, Vampire Weekend, Melissa Etheridge, Smashing Pumpkins, and Lil Wayne. Together about 70 artists, all connected to one business management firm, were given about $200 million in government money, according to the suit. And there were probably many others.

How? The SVOG program, in two phases, reimbursed traditional theaters and stadiums—places like the Rose Bowl, which got $9.6 million, and a total of 91 New York venues in Hell’s Kitchen and the Midtown theater district, which reportedly received a combined $221 million. These weren’t loans; they were grants. And the program also included music promoters, certain talent agencies and “performing arts organization operators,” a somewhat vague term that Laurence Leader, a longtime music agent at ICM Partners before leaving in 2019 to become a consultant, thought could be interpreted broadly to include the loan-out corporation for a musical act. It was perhaps a stretch, but he looked closely at the government’s definition: “Any entity (including a theatrical management business) whose principal business activity is to create, produce, perform, and or present live performances for audiences in qualifying venues…” Any entity

So Leader, through his London Calling company, submitted an application for a jazz artist client, and boom, it was accepted. Millions of dollars were granted, and Leader then took a 15 percent commission for himself. Everyone was happy.  

Here’s where it gets interesting. Leader figured this idea could be scaled, meaning that he could submit applications for tons of musical acts that scrapped planned tours during Covid. So he shared the idea with Michael Oppenheim, a business manager with NKSFB, one of Hollywood’s oldest and most connected money management firms. The world of talent business management is small, insulated, and secretive—I’ve spent time with these guys (they’re almost all guys), and they don’t even like admitting who their clients are. And in this community, NKSFB, now owned by Focus Financial Partners, is considered among the very top-tier firms, representing thousands of artists. Leader thought Oppenheim could help NKSFB’s clients quietly benefit en masse from his strategy, and Leader would pocket millions in commissions for his efforts.  

However, Mickey Segal, then the NKSFB managing partner, is said to have looked at the SVOG language and concluded that it would not apply to music acts. Or at least that’s what Paul Anka, the legendary crooner and a client of NKSFB, was told, according to the court filing. So Leader asked Oppenheim, whom he’d known for 40 years, if he could come in and pitch his plan confidentially to the firm. In July 2021, Leader indeed did his presentation, explaining the strategy, how it had worked for his jazz client (who also used NKSFB), and that he expected a 15 percent commission if the firm wanted to deploy it (10 percent for Anka—he was a friend). Leader faced more skepticism, he claims, and when he followed up a week later with an email, Oppenheimer replied: “Laurence, we are discussing as a firm what to do. We will let you know when we come to a conclusion.”

You can tell where this is going. NKSFB ghosted Leader, yet is said to have used the strategy he pitched to file SVOG applications for dozens of clients, a fact that Leader says he only discovered because he recognized the firm’s address on the SVOG website for its grantees. D’oh! Leader claims he recently confronted Oppenheimer about the “outright betrayal” of stealing his idea, and Oppenheim is said to have told Leader he simply didn’t think the firm’s clients would want to pay Leader a commission. So Leader is suing in L.A. for $30 million (15 percent of the $200 million), plus punitive damages, claiming a breach of an “Implied in fact” contract, similar to when a screenwriter pitches a studio and the studio makes the movie without the screenwriter.

Will he win? Who knows, it might be tough to establish any kind of ownership over the idea to exploit the language of a government program. But I litigated a couple of these implied-in-fact contract cases when I was an attorney, and it’s true that the idea doesn’t have to be copyrighted, it just has to be novel to the person you give it to, and there needs to be an understanding that you will be paid for its use. “California law has long been clear that ideas are protectable, whether it’s a movie or television show or something else of value, which makes total sense because without that protection good ideas would not be shared,” Richard Busch, Leader’s lead lawyer, told me today. “This case involves that longstanding principle, and we look forward to the litigation of it.” Oppenheim didn’t return my call.