Multi-party agreements – what does majority approval mean?
Even in an interesting world of advising on investments into infrastructure and businesses in emerging markets, it’s refreshing to get an intervention from the Sex Pistols on interpreting arrangements between multiple parties. The recent case of Jones v Lydon (No.1)concerning the future exploitation of the Sex Pistols’ music provides an interesting analysis of the ability of the majority decision makers to bind the minority when the minority is in disagreement with the rest of the individuals.
In 1998 the five band members of the Sex Pistols / their estates entered into a band member agreement (the “BMA”) which dealt with decisions as to the future exploitation of the band’s music. The BMA specifically provided for majority decisions on licensing matters which would bind the minority.
Late last year, certain of the band members were approached to licence the Sex Pistols’ music in a series of TV programmes reflecting the life of the band member, Steve Jones, to be directed by Danny Boyle. All the parties to the BMA were in agreement with licensing the Sex Pistol’s music for use in the programme with the exception of John Lydon with the result that Steve Jones and Paul Cook sought an order from the court that John Lydon be required to give his consent and execute any necessary licences and documents in such regard. John Lydon contended that he was not obliged to give his consent and the other parties to the BMA were estopped from relying on the majority decision provision in the BMA based on the historic conduct of the band members in requiring unanimity for such requests. John Lydon subsequently amended his pleadings to plead reliance, detriment and unconscionability.
The Court ruled that, on the facts, none of the parties to the BMA ever treated the BMA as being unenforceable or considered unanimity as being required to deal with the exploitation of the Sex Pistols’ intellectual property over and above the letter of the BMA. The fact that many historic decisions made under the auspices of the BMA were unanimous was not relevant. Accordingly, John Lydon’s claim that the other parties were estopped by convention by acquiescence was not substantiated. Factually, the band members had never given any encouragement that unanimity was required, hence no grounds had been established to support an estoppel case.
Further, the Court concluded that John Lydon had made an informed decision to enter into the BMA – it was part of a wider sale of certain of his publishing interests at that time and provided the other band members with a degree of protection in respect of licensing and other matters.
In relation to the change of pleadings to unconscionability, there had been no acts of detriment, in the absence of which there was no case for claiming it was unconscionable for the claimants to enforce the terms of the BMA.
The Court concluded that the claimants were entitled to invoke the majority voting rules in the BMA against John Lydon and that an implied term existed whereby he could be required to sign all documents as were necessary to give effect to the majority decision. Such actions were reasonable and equitable and necessary to give business efficacy to the BMA.
CONCLUSION AND COMMENTS
So, while very much a case on its own facts, it is worth noting that “majority rule” means precisely that – so that a history of unanimous consent will not, of itself, convert a majority decision making process into one requiring unanimity or otherwise give rise to a successful estoppel argument.