Rival Talent Managers’ Dispute Over American Idol Winner Phillip Phillips Stays “Home” at the California Labor Commission, Holds Commercial Division in Stay Decision

When the winner of the 11th season of American Idol, Phillip Phillips, sang “I’m going to make this place your home” on his 2012 breakout single, “Home,” he may have been predicting the petition that he would later file with the California Labor Commission (“CLC”).  In that petition, Phillips sought to void the talent management agreement that he was required to sign with 19 Entertainment, Inc. – one of the now-bankrupt companies behind production of American Idol – in order to participate as a semifinalist on the show.  Following a September 23, 2016 decision by Commercial Division Justice Salinan Scarpulla staying 19 Entertainment’s suit against Phillips’ new talent manager pending resolution of the California proceeding, the CLC may be “home” for 19 Entertainment’s fight over Phillips for the foreseeable future.

In the New York suit, captioned 19 Entertainment, Inc. v. McDonald,[1] Phillips’ estranged talent manager alleged that rival manager Michael McDonald “poached” Phillips by persuading him to sign with his company, Mick Management, despite knowing that the artist had an existing exclusive management relationship with 19 Entertainment.  19 Entertainment claimed that it had propelled Phillips to stardom, helped him earn around $5 million by the end of 2013, and was diligently performing under its contract with Phillips when McDonald interfered.  In the suit, 19 Entertainment asserted claims for tortious interference with contact, tortious interference with prospective contractual relations, and unjust enrichment against McDonald and Mick Management.

By the time 19 Entertainment brought its suit in New York, Phillips had already lodged a petition with CLC seeking a determination that 19 Entertainment had violated California’s Talent Agencies Act by acting as his talent agent without a license and steering him to jobs with affiliates for the company’s benefit in breach of its fiduciary duties, thereby rendering the management contact void and unenforceable. 

In October 2015, McDonald moved to stay the New York action under CPLR § 2201, arguing that the outcome of the first-filed CLC case could moot 19 Entertainment’s New York suit, since the causes of action would fail in the absence of a valid contract between 19 Entertainment and Phillips.  CPLR § 2201 authorizes a court to “grant a stay of proceedings in a proper case, upon such terms as may be just.”  Although the First Department has at times required complete identity of the parties to justify such a stay, it has also upheld stays where the parties in the two actions are not completely identical but a stay is supported by “the familiarity of the [other] court with the issues, the substantial identity of the parties, and interdependence of the issues,” or by “issues of comity, orderly procedure, and judicial economy.”[2]

In this case, Justice Scarpulla granted McDonald’s stay motion despite the absence of complete identity of parties—the CLC proceeding pits 19 Entertainment directly against Phillips, while the New York suit involves 19 Entertainment against Phillips’ new manager, McDonald.  The court reasoned that 19 Entertainment’s “first cause of action here is that Defendants tortiously interfered with the very Agreement whose validity is the central issue of the CLC action,”[3] and as a result, “the CLC’s determination ‘may dispose of or limit issues which are involved in [this] action.’”[4]  Further, the court pointed to “the interest in judicial economy, comity with California, and respect for its important public policy.”[5]

The Commercial Division’s decision in 19 Entertainment serves as a reminder to litigants to consider whether a strategically advantageous procedural device such as a stay may be available even where a formal element – such as complete identity of parties in this case – is not strictly met.

By Jordan M. Engelhardt and Muhammad U. Faridi

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