California Law Business, November 7, 1994
Lawyer's Dilemma: Top L.A. music attorney Don Engel faced a no-win situation when a Boston court ordered him to testify.
By Di Mari Ricker
For San Francisco music attorney David Phillips of [Phillips & Erlewine], it was "an attorney's dream." For Los Angeles music attorney Don Engel of Engel & Engel, the same experience ranged from "weird" to "devastating."
What they were describing were the events of a recent trial in Boston involving the rock group of the same name. Mr. Engel, who defended the group's guitarist, Tom Scholz, found himself in a litigator's Twilight Zone: on the witness stand being questioned by the plaintiff's counsel.
The case centered on a common refrain in the music industry: royalties. Paul Ahern - who began his involvement with the group Boston as its original personal manager and went on to manage the careers of Mr. Scholz and others - sued Mr. Scholz over royalties he claimed were owed him from Boston's third album, "Third Stage," which was released by MCA Records in 1986 and sold more than three million copies. Ahern v. Scholz, 91-10586-H.
Mr. Scholz countersued, claiming Mr. Ahern still owed him royalties from the first Boston album, which sold more than 10 million copies, and the second album, which sold more than five million copies.
After a three-week trial, a jury awarded $547,000 to Mr. Ahern and the judge ordered Mr. Scholz to pay Mr. Ahern's attorney's fees.
What transported the case into the Twilight Zone was not the verdict, but rather the court's order that Mr. Engel, "testify as an expert witness against my own client," Mr. Scholz, says Mr. Engel.
"That was an impossible situation to be in. I was put in the position of committing perjury or hurting my client," says Mr. Engel, who recently prepared a motion for a new trial based on that order and several other grounds.
Mr. Engel's Catch-22 arose from his longterm representation of Mr. Scholz and his work negotiating a contract between the band and the MCA label for the third Boston album. When the delivery of that album was delayed in 1983, CBS sued the band and Messrs. Ahern and Scholz. Mr. Scholz as band leader, paid Mr. Engel $1.7 million for defending that case and for negotiating a subsequent contract with MCA. Those legal fees were crucial to last month's trial because they had been deducted as recording costs for the third album. They were shown as a portion of the $4.5 million in "artists costs" deducted on an accounting of the third album, which an accountant prepared several years ago in connection with Mr. Ahern's demand for royalty payments from that album.
That accounting purported to show that nothing was owed to Mr. Ahern and that Mr. Ahern, in fact, had a deficit of $100,000 on the album. Although Mr. Ahern's contract would have entitled him to a 12 percent share of any artist royalties, the group was nearly $1 million in the red after all costs on the album were deducted - including the $1.7 million payment to Mr. Engel.
At the trial, Mr. Phillips called Mr. Engel to the stand and elicited his opponent's extensive background representing a host of music heavy-hitters, among them Don Henley and Luther Vandross. Mr. Phillips then asked whether, in Mr. Engel's experience, the phrase "recording costs" in recording agreements includes legal fees.
"I was stunned," says Mr. Engel. "I looked at [Judge Edward F. Harrington] and said, 'You want me to answer that? The judge said, 'You're an expert. Answer the question.'"
The only answer, of course, was "no" - the answer Mr. Engel gave.