December 6, 2007
I/M/O THE ESTATE OF TIFFANY EVANS, MINOR, RESPONDENT,
YOUR CASTING CONNECTION, L.L.C., A/K/A SOURCE ENTERTAINMENT GROUP, L.L.C., APPELLANT.
On appeal from the Superior Court of New Jersey, Chancery Division, Probate Part, Atlantic County, C-40-03.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued October 29, 2007
Before Judges S.L. Reisner, Gilroy and Baxter.
This appeal arises from a dispute over the provision of artist management services for Tiffany Evans, a young singer (Tiffany or the minor). Tiffany's former manager, an entity known as Your Casting Connections, L.L.C., and also known as The Source Entertainment Group (Source), appeals from paragraphs 3vi, 5, and 6 of a trial court order dated May 12, 2006.*fn1
Source had been Tiffany's artist manager since the beginning of her career, when she was nine years old. According to Source, its principals Diane Kirman and Sal Dupree were the child's mentors, without whose professional help she would have not have had a singing career in the first place. She relied on them and in turn they developed her talent and helped her obtain a recording contract and other significant financial benefits. In particular, Sal Dupree was her voice coach.
On March 28, 2003, when the minor was ten years old, Source and her parents applied to the Atlantic County General Equity judge, pursuant to N.J.S.A. 3B:12-1, for approval of a management agreement dated October 2, 2002, allowing Source to manage the minor's career, and a supplemental agreement dated March 11, 2003. These agreements, which lasted for a term of three years, were notably one-sided in that paragraph 19 of the October 2002 contract (incorporated by reference in the March 2003 contract) gave Source an absolute right to extend and renew the agreements for an additional three years, but did not give any similar right to the minor to terminate or non-renew the contracts after three years. Thus, at the age of ten, the minor was committed by these agreements to retaining her artist manager for six years with no termination option.
After appointing John Ridgeway as the minor's guardian ad litem, the judge required that certain changes be made to the Source contract; these changes were reflected in a new contract signed on June 11, 2003. Significantly, paragraph 19 of the new contract included Source's option to renew the contract, but also gave the minor a guarantee that her mentors at Source would continue their involvement with her, and gave her an income guarantee, failing either of which condition she could cancel:
[T]his Agreement may be terminated at the end of the initial three year term if the Artist has not, during that term, had gross receipts of not less than $300,000 and in addition may terminate this Agreement at any time if Diane Kirman and Sal Dupree cease their involvement with the Artist or extinguish their interest in [Source].
The court also approved the creation of Tiffany Evans, L.L.C., an entity authorized to contract with recording companies and others on the minor's behalf, and permitted Kirman to serve as manager of that L.L.C.*fn2 The court permitted 20% of Tiffany's revenues to be paid to Source as management commissions. In an order dated December 10, 2003, the court also retained "jurisdiction over the minor's professional business affairs."
In March 2006, the minor's guardian ad litem filed a motion to compel accountings by the Tiffany Evans L.L.C. and by a trust set up to receive the minor's income. He also sought the court's guidance regarding the minor's desire to terminate her management agreement with Source.*fn3 He recited that he had spoken to the minor, who was "upset but very capable of expressing her dissatisfaction with her current management arrangement" and suggested that she was intelligent and articulate enough to express her views directly to the court. However, "in light of [the minor's] age and the personal nature of her disappointment," the guardian ad litem requested that the court establish "a protective arrangement to maintain the confidentiality of this situation." In response, the attorney for the Tiffany Evans, L.L.C. submitted a letter together with an array of financial information. The letter recited, among other things, that for the past two and half years, the minor had not earned the amount of money initially expected, allegedly due to delays engendered by her recording company.
Hector Baldonado's law firm*fn4 submitted a letter on the minor's behalf, urging that the court expeditiously decide the matter due to the upcoming release of her album, and difficulties engendered by the alleged conflict of interest between Kirman in her roles as principal of Source and as principal of Tiffany Evans, L.L.C. In reply, Source submitted a letter and a certification from Kirman. Among other things, Kirman certified that her "co-manager is Sal Dupree who was the original person who discovered Tiffany Evans." She also certified to continuing conflicts between Source and the minor's father over control of her career, and contended that the application reflected the father's wishes and not those of the minor. She attached a number of emails and other communications purporting to document that the father had interfered with the minor's career.
The application was scheduled to be heard before a second judge. That judge conducted a hearing on April 7, 2006, during which, with the agreement of all parties, he conducted an onthe-record in-chambers interview with the minor. At oral argument before us, Source conceded that this was proper in order to address the issue of whether the efforts to terminate the Source contract truly reflected the minor's wishes.
At that April 7 hearing, the judge also heard from the L.L.C's attorney Mr. Westmoreland and Ridgeway, who were both present during the 2003 court proceedings and were familiar with the formation of the June 2003 contract. Westmoreland explained that the first judge's primary concern in the 2003 proceedings was to protect the child's income for the future, since the money she had earned prior to the 2003 proceedings had "apparently been spent."*fn5 Westmoreland and Ridgeway agreed that the first judge had insisted on adding the $300,000 "revenue benchmark" to paragraph 19 of the June 2003 contract. Westmoreland and Ridgeway also agreed that the initial three years ran from the June 2003 date of the contract approved by the court, and that the clause concerning Kirman's and Dupree's continued participation was added at the request of Tiffany's parents. The attorneys disagreed on whether the $300,000 benchmark had been reached; that was one reason why Ridgeway wanted an accounting. On this issue, the court noted that it appeared that without a $200,000 payment from a talent contest, the benchmark had not been reached. The attorneys also acknowledged an issue as to whether certain advances paid by the recording company for the child's living expenses counted toward the benchmark.
The judge also closely questioned Baldonado's associate under oath, concerning the propriety of his attempt to terminate the minor's contract with Source without prior court approval and without the consent of the guardian ad litem. During that colloquy, the judge indicated that while he believed he could decide to authorize Tiffany to terminate the management arrangement, he did not think he could also resolve the underlying dispute between the minor and the management company. In other words, he believed that his only option was to authorize her to terminate Source and let her take the risk that in some other proceeding, Source might sue her for doing so.
At this hearing, the guardian ad litem also urged the court to protect the confidentiality of the proceedings because they involved a minor and her personal relationships as well as confidential financial information. Source's attorney joined in that request and also suggested that the minor and/or her family be evaluated by a mental health professional to be sure that her parents were not exercising undue influence over her. The judge also heard from an attorney for the recording company who indicated that "if the manager and artist are not speaking to each other, then that creates a problem."
Finally, at the April 7 hearing, the judge interviewed Tiffany. The minor provided an articulate, cogent explanation of the problems she was having with Mr. Dupree, his requests that she mention his name at her public appearances, his yelling at her, browbeating her, cursing at her, and finally saying that he no longer wanted to work with her. As a result, she felt she no longer could work with Dupree and also felt she could no longer work with Kirman because Kirman took Dupree's side. She indicated she did feel comfortable working with Baldonado's firm.
After returning to the courtroom, the judge indicated to all parties that he found Tiffany to be "a very mature young woman for her age and I don't have any reason to question that she's able to speak her own mind and isn't being unduly influenced by anyone." He also indicated that he would schedule another proceeding on April 26, and that at that proceeding he was not inclined to take testimony but did "intend to resolve the dispute about management and the various legal issues that are presented." He gave the parties until April 21 to make additional submissions. All parties were to have access to the transcript of the judge's interview with Tiffany.
On April 17, 2006, the judge entered an order sealing the record of the proceedings with consent of all parties, giving all parties leave to make additional written submissions, temporarily putting the guardian ad litem in control of the minor's career, and setting another hearing date for April 26.
In a letter to the court dated April 20, 2006, Westmoreland advised the judge that Dupree had "informed me that he would cease all further contact with Tiffany, including the free voice lessons he had always given her." This is consistent with the representations made to us at oral argument by both parties. Westmoreland also indicated based on an accountant's gross income statement that Tiffany had earned far in excess of $300,000. He attached a series of accounting statements pertaining to Tiffany's finances. In response, Tiffany's counsel submitted an analysis of the same numbers and contended that the $300,000 benchmark had not been reached. His submission also contended that the Source contract was unconscionable, inconsistent with standard industry practice, and was reached without benefit of experienced entertainment counsel.
The guardian ad litem submitted a report concluding that "the divide and mistrust between management [Source] and the Evans family is deep and most likely unable to be repaired," and that her recording company emphasized that "a strong Management/Family relationship is critical to Tiffany's success." He repeated conversations in which Tiffany advised him that Dupree cursed at her and said he no longer wanted to be affiliated with her. He concluded that the "current management arrangement" was not "in the best interest of Tiffany's professional career." He also recommended that regardless of her potential liability under the Source contract, it was in Tiffany's best interest to terminate her relationship with Source.
On April 24, 2006, new counsel for Source filed a motion returnable on April 26, seeking to terminate the agreement by which Tiffany's parents received some support from her earnings, to enjoin her father from interfering with the Source contract, and to disapprove Tiffany's contract with her personal attorneys at the Baldonado firm. Counsel also submitted a brief and certifications opposing termination of the Source contract.
The brief asserted in the alternative that the court should not terminate the contract, or that if the court exercised its equitable power to allow Tiffany to replace Source, it should ensure that Source received its commissions for the "full duration" of the contract absent a "future determination" that Source breached the contract. Source argued that a testimonial hearing would be required before the court could determine whether continuing with the Source contract would harm the minor's well-being. Source included a certification from Kirman alleging that Tiffany's father had repeatedly interfered with Kirman's efforts to manage the minor's career. Notably, Kirman's certification did not deny that Dupree had refused to continue working with Tiffany.
The trial judge held a further hearing on April 26, 2006.*fn6
Source did not produce any testimony or certification from Dupree to rebut Tiffany's testimony that he was abusive to her and that he refused to continue to be her voice coach. At that hearing, Kirman acknowledged under oath that Dupree "said that he no longer is going to be teaching Tiffany. He doesn't feel that he's the teacher for her anymore, but he's still going to be involved in the management and the day-to-day management." She asserted that "Sal has sort of worn two hats. He has taught Tiffany as her vocal coach from day one and then he also works in management."
With respect to the financial arrangements, Kirman asserted her understanding that for purposes of the three year termination clause, the Source contract began running from October 2, 2002. She also admitted that the $200,000 from the talent contests came in before the June 2003 contract. She agreed that the provision requiring the $300,000 benchmark was not added to the contract until June 2003. She testified that as of October 2005, she asked the accountants for a report as to whether the $300,000 mark had been reached in accordance with the contract, but she did not share this information with Tiffany or her family so that they could decide whether to terminate the contract. Kirman also contended that even if the contract was terminated under the termination clause, Source would be entitled to its 20% commission on any contract it had already negotiated for Tiffany even if those contracts lasted another twenty years.
The judge also allowed Mr. Evans to make a long statement, which focused on the breakdown of the relationship with Source and his concern that Source was vilifying him. Without objection from any party, the judge then met off-the-record with Mrs. Evans and Tiffany.*fn7 After the meeting, he indicated on the record that they had confirmed "that the existing management arrangement isn't viable, that the relationship has just failed to the extent that . . . at least as Tiffany expresses it, brings [into] question whether she continues to want to perform or pursue her career at this point." He also indicated that he explained to them the potential for further litigation if the Source agreement were to be terminated.
After discussing the ambiguities in the contract, the judge suggested that he might conclude that "I should vacate [the June 2003] order that approved that contract because it wasn't well-founded." Source's attorney argued that before the court determined that the contract was too ambiguous to enforce, he should hear testimony from the witnesses who were involved in negotiating the contract. The guardian ad litem also suggested a hearing to resolve apparent ambiguities in the contract including the effective date, and the method of calculating the gross receipts for purposes of the $300,000 benchmark.
In an oral opinion placed on the record on April 27, 2006, the trial judge determined that the management arrangement between Source and Tiffany and her family was no longer viable. He made no finding of fault on either side. However, he determined that Tiffany and her family felt comfortable with Baldonado and wanted him to be her manager. Since Tiffany Evans, L.L.C. was the vehicle by which the minor contracted for performances, the judge removed Kirman as principal of the L.L.C. and substituted Baldonado. Recognizing that Source might have a continuing claim to commissions arising from the minor's current contract with her recording company, the judge ordered that Baldonado would not be entitled to any monies arising out of that contract, and that Baldonado could not renegotiate the contract without court permission. The judge also concluded that the June 2003 order "was entered in error, that it shouldn't have been entered." He therefore determined to vacate the order, leaving the contract subject to the minor's right to void it, or to terminate it. He recognized that the minor could take the position that the contract should be terminated because the $300,000 benchmark was not reached or because Dupree "is no longer providing voice lessons." However, he did not determine whether she in fact had a legal right to do so. He held out the possibility that with additional negotiations, Baldonado might be able to salvage the agreement with Source. But failing that, Baldonado was authorized "to take whatever action he wants with respect to that agreement, including if he thinks it's appropriate, declaring it void, unapproved and Tiffany was a minor, or acting to terminate it." He concluded that if the agreement was voided, Source would no longer be entitled to its 20% commission on Tiffany's earnings.
The judge's explanation for his decision was as follows. He concluded that the relationship between Tiffany and Source had deteriorated to the point where it could jeopardize the minor's "well-being" and her career. The judge concluded, based on R. 4:50-1(f), that there were extraordinary circumstances justifying vacating the June 2003 order. He concluded that there were "a variety of problems" with the provisions of the order concerning the right to terminate after three years if the $300,000 benchmark was not reached. He concluded that the start date for the three-year period was unclear. He concluded on the face of the agreement "that [the first judge] would have intended the three years to run from the date the agreement was executed [June 2003] . . . but what does it do? It creates a problem" which could lead to litigation.
Rather than resolve the issue by holding a testimonial hearing, the judge concluded that the fact of a possible ambiguity justified voiding the court's approval. He next reasoned that there was an issue as to whether the $200,000 from the talent contests was to be included in the $300,000 threshold. His "sense from looking at the agreement is that that isn't what was contemplated because that money was received before the agreement was executed." However, he was uncertain as to whose intention mattered in construing the contract -- the parties' intentions or the first judge's intention. He also noted that he could not resolve the benchmark issue at that time in any event, because the June 2006 deadline had not passed yet. He further noted questions as to whether advances from the recording company for the family's living expenses should be included in the $300,000 and whether Kirman could manipulate the $300,000 limit simply by asking the record company for advances.
Finally, the judge focused on Dupree's lack of involvement, and whether that justified terminating the contract. The judge observed that he could hold a plenary hearing and decide that issue as well and, thereby, resolve the potential breach of contract claims that might be filed against Tiffany in the future. However, rather than hold a hearing to resolve the issues, thereby sparing the parties the prospect of future collateral litigation, the judge determined that "the proper perspective for me is to simply say [the first judge] could not possibly have [contemplated] when he approved that agreement that it would give rise to this type of litigation when this young lady was only 13-years-old, and I don't believe he would have approved it if he knew that there were those kind of potential ambiguities, and it's for that reason that I think it's appropriate for me to today vacate the order that approved the agreement which simply puts the L.L.C., presumably through Mr. Baldonado, in a position to address what happens with the agreement."
In response to the judge's decision, Source's counsel argued that the record was incomplete and did not permit the court to make a finding that the court's approval was improvident. However, Source's counsel asked that instead of voiding the approval ab initio, the court should make a finding "that continuation of a contract with a minor is not in her well-being, that . . . continued performance would not be in her best interest, and what the courts do there . . . they can be asked to revoke [approval], and . . . revocation of the approval of the contract shall not affect any right of action existing at the time of the revocation." In other words, he sought to retain for his client the economic benefits it had earned up to the point of revocation. Source's counsel had no objection to the court's remaining proposals for Tiffany's management on a prospective basis. The court rejected his proposal and determined instead to "vacate the prior approval" on terms that permitted Baldonado to decide what to do about the contract.
The decision was memorialized in the May 12, 2006 order now on appeal. Consistent with the judge's decision, the order indirectly enabled Tiffany to terminate her contract with Source. The order appointed Hector Baldonado as the new manager of Tiffany Evans L.L.C., an entity previously created to enter into contracts on the minor's behalf. Paragraph 5 vacated, on the court's own motion pursuant to R. 4:50-1(f), the prior court order dated June 6, 2003 approving an Artist/Manager Agreement between Tiffany and Source, and authorized Baldonado to terminate the agreement or to declare it void, after consulting with the minor's family and her guardian ad litem. Paragraph six provided that if Baldonado terminated the agreement or declared it void, management commissions would no longer be paid from the minor's revenues. Section 3vi precluded Baldonado from receiving any compensation under an existing contract between Tiffany Evans and her recording company.
By letter dated June 15, 2006, Baldonado gave Source notice that pursuant to the judge's May 12 order, Tiffany and her L.L.C. had elected to void the Source contract. His letter was sent shortly after the three-year anniversary of the June 3, 2003 version of the contract.
On this appeal, Source raises the following contentions:
POINT I: THE COURT ABUSED ITS DISCRETION BY GRANTING RELIEF FROM THE JUNE 6, 2003 ORDER PURSUANT TO R. 4:50-1(f).
POINT II: SOURCE ENTERTAINMENT WAS DEPRIVED OF ITS DUE PROCESS RIGHTS WHEN THE COURT SUA SPONTE VACATED THE JUNE 6, 2003 ORDER APPROVING THE MANAGEMENT CONTRACT, AUTHORIZED MR. BALDONADO TO VOID THE MANAGEMENT CONTRACT AND DEPRIVED SOURCE ENTERTAINMENT FROM ANY FUTURE INCOME UNDER THE MANAGEMENT CONTRACT.
POINT III: THE COURT COMMITTED REVERSIBLE ERROR BY AUTHORIZING MR. BALDONADO TO TERMINATE AND/OR VOID THE MANAGEMENT CONTRACT.
A. Pursuant To One Interpretation
Of Paragraph 5(i), The Court Improperly Authorized Mr. Baldonado To Void And/Or Terminate The Management Contract.
B. Pursuant To A Second
Interpretaton Of Paragraph 5(i), The Court Incorrectly Allowed Mr. Baldonado To Void And/Or Terminate The Management Contract By Providing The Improper Remedy.
POINT IV: THE MAY 12, 2006 ORDER INTERFERES WITH SOURCE ENTERTAINMENT'S RIGHTS UNDER THE MANAGEMENT CONTRACT.
We review a trial judge's ruling under R. 4:50-1(f) for abuse of discretion. Hous. Auth. of Morristown v. Little, 135 N.J. 274, 283 (1994); Johnson v. Johnson, 320 N.J. Super. 371, 378 (App. Div. 1999). However, we do not defer to the trial judge's interpretation of the law as applied to the facts. Johnson, supra, 320 N.J. Super. at 378; see also Manalapan Realty v. Manalapan Twp. Comm., 140 N.J. 366, 378 (1995).
We begin by commenting on the procedure followed in the trial court. The guardian ad litem filed an application for direction, which the trial court properly considered on an expedited basis in light of the undisputed evidence that the minor's career was in crisis. We find no merit in Source's contention that it lacked notice as to the potential relief to be awarded. Not only did the judge tell the parties that he was considering voiding the court's approval of the contract, but that was one of the obvious purposes of the guardian ad litem's application. The judge also properly began by questioning the parties and their counsel in an attempt to efficiently determine what facts were genuinely in issue. As discussed below, however, we part company with the trial judge on some of his conclusions.
Based on our review of the record in light of the applicable legal standard, we agree with the result reached by the trial judge insofar as he permitted the minor to obtain her release from the contract prospectively. We disagree with his conclusion that the ambiguities in the contract justified voiding the contract ab initio.
Whether a contract is ambiguous is a matter of law to be decided by the court. Cooper River Plaza East, LLC v. Briad Group, 359 N.J. Super. 518, 528 (App. Div. 2003). We agree with the trial judge that the Source contract is ambiguous in a number of respects, including when the three years began and ended, and how the $300,000 earning benchmark was to be calculated. Under some circumstances, ambiguity alone will justify a court in declining to enforce a contract. For example, in Cooper River, we affirmed the trial court's refusal to enforce an ambiguous deed restriction pursuant to the principle that "[a]n ambiguous restriction will not be enforced in equity so as to impair the alienability or use of property." Id. at 529. However, that principle is clearly not applicable here. More to the point, all of the ambiguities cited by the trial court bear upon the minor's right to terminate the contract after three years. They do not in themselves justify voiding the contract ab initio so as to deprive Source of the benefit of whatever it may have earned by its past performance under the contract. Additionally, where parties have partially performed a contract, it may be inequitable to entirely deprive a party of all benefit otherwise earned by its past performance, absent a breach or other justification for such a remedy. See Jones, v. Gabrielan, 52 N.J. Super. 563, 572 (App. Div. 1958); Boyce v. Doyle, 113 N.J. Super. 240 (Law Div. 1971).
Moreover, the fact that there were ambiguities in the Source contract did not justify terminating the court's approval even prospectively, without further proceedings to determine whether the ambiguities could be resolved. See Schor v. FMS Financial Corp., 357 N.J. Super. 185, 191 (App. Div. 2002). The court could have taken testimony from the parties and their attorneys from the 2003 proceedings concerning the negotiation of the agreement, and could have made findings as to the proper interpretation of the contract. Such a hearing could also potentially have led to a finding that there was no meeting of the minds between the parties as to the conditions under which the minor could terminate the contract, thus justifying voiding the contract prospectively. By failing to take any of these steps, the court potentially left the minor open to a plethora of collateral litigation.
We are persuaded, however, that wholly apart from any ambiguity in the contract, there was sufficient undisputed evidence to justify the court in permitting the minor to terminate the contract based on Dupree's refusal to continue to be involved with her as her voice coach. It is abundantly clear from Source's own submissions that Dupree was the child's mentor and that the Source contract was based on Dupree's services as such. There is no dispute on this record that the clause requiring his continued involvement with her was placed in the contract at her parents' insistence.
Source's submissions support the conclusion that the artist/manager agreement was a service contract based on the child's personal and professional relationship with the principals of Source. The record is conspicuously devoid of any response from Dupree to the minor's allegations that he was foul-mouthed and abusive to her and ultimately refused to continue as her voice coach. We conclude that his refusal to continue that relationship justified the minor, or Baldonado on her behalf, in terminating the Source contract. Dupree's refusal to continue as the minor's voice coach would also have amply justified the trial court in revoking its approval of the contract on a prospective basis.*fn8 We therefore modify the May 12, 2006 order to clarify that the court's approval of the contract was revoked as of that date, as opposed to revoking approval retroactively as of June 3, 2003. We conclude that Baldonado's June 15, 2006 letter was effective to void or disaffirm the contract as of the date of his letter.
The conclusion that the minor was entitled to be released from the contract prospectively, however, does not necessarily answer the question of what, if any, future financial benefits Source is entitled to reap from the recording contract and other contracts it negotiated for the minor prior to termination of the Source contract. See Jones v. Gabrialan, supra, 52 N.J. Super. at 572. Indeed, this appears to be the real issue driving Source's appeal.
Source contends it is entitled to ongoing commissions and residuals, potentially for decades into the future. The minor contends that the contract should be deemed void ab initio, entitling Source to no additional monies. In support of that position, Baldonado contended to the trial court, on the minor's behalf, that certain commission provisions of the Source contract are so inconsistent with industry standards as to be unconscionable and that the court should not have approved the contract without input from entertainment counsel for the minor. There may be other issues as well that bear upon Source's right to continued compensation. In that connection, we emphasize that we intimate no view as to whether Source is entitled to further financial benefits under the contract; we only conclude that the record was insufficient to enable the trial court to revoke the court's approval of the contract ab initio.
The minor's defense to Source's claim for future compensation is based in part on her contention that the trial court should not have approved the contract in the first place. Because that issue cannot be decided without further evidentiary proceedings and must be decided by the Chancery judge, we conclude this litigation should be remanded to the trial court.*fn9
Accordingly, we remand this matter to the trial court for further proceedings to resolve the question of what, if any, further financial benefits Source is entitled to based on its past performance under the contract. We recognize that resolution of this dispute may require the court to decide legal as well as equitable issues. However, the trial court has jurisdiction to decide all of those issues and it is our view that the entire controversy should be decided in one proceeding instead of being fragmented into multiple lawsuits.
In light of our disposition of this appeal, we do not address Source's additional arguments concerning the propriety of voiding the contract ab initio. To the extent not addressed here, the parties' remaining arguments, including the minor's contention that Source lacks standing, and Source's argument that Baldonado could not be authorized to terminate the contract on the minor's behalf, are without sufficient merit to warrant discussion in a written opinion. R. 2:11-3(e)(1)(E).
Modified in part, and remanded.