Louis Armstrong, James Brown and Ray Charles each overcame impoverished childhoods to achieve worldwide acclaim. Each of their philanthropic aspirations rely on income from royalties. While the Louis Armstrong Educational Foundation (the Armstrong Foundation) continues to receive royalty income in the six figures, the fate of the Ray Charles Foundation and James Brown’s yet-to-be funded I Feel Good trust are subject to current litigation that endangers each of their foundation’s revenue streams.1
Louis Armstrong (1901-1971)
Sometimes it takes a life-threatening illness to serve as an impetus to reflect on one’s life and legacy. In the case of Louis Armstrong, it happened in March 1969. While hospitalized in New York City’s Beth Israel Hospital, he wrote an essay “Louis Armstrong + The Jewish Family in New Orleans, LA, The Year of 1907,” which described a loving family who helped him buy his first musical instrument, a cornet. He also began thinking of forming a charitable foundation to give back to the world “some of the goodness he had received.”
When Louis was a young man, “Black Benny” advised him to always have a white man in his corner to protect him.2 For more than 30 years, his manager Joe Glaser, with his reputed mob connections, was that person. It was Joe’s attention to the professional and personal details that allowed Louis to focus solely on his music. Joe was both manager for Louis and sole owner of International Music Group (IMG), which owned Louis’ music publishing copyrights. In the music industry, it’s a common practice for artists to receive royalty income in exchange for assigning their copyrights in their compositions to music publishers and the copyrights in their sound recordings to record companies, but Joe’s role as manager and as assignee of the copyrights supported some allegations that Joe may have exploited Louis. However, when Joe died, he bequeathed to Louis ownership of IMG, effectively doubling Louis’ wealth from approximately $500,000 to $1 million.
When Louis died in 1971, he bequeathed $5,000 each to his sister and to his cousin and left everything else to his widow, Lucille. Lucille died in 1983. She left bequests of $10,000 for each of her four grandnieces and nephews and a $1,000 insurance policy for her niece, Elizabeth Rolle. Not satisfied, Elizabeth and another niece, Barbara Swift, challenged the will, claiming undue influence and improper execution because one of the witnesses wasn’t in the room when Lucille signed the will. Subsequently, the nieces settled for $5,000 each. Lucille bequeathed her home to New York City for a museum; everything else was left to the Armstrong Foundation.
Nearly half a century after Louis’ death, his foundation continues to receive significant annual revenue in royalties; in a typical year, the value of the receivable royalty income ranges from $150,000 to $250,000. In fact, the bylaws provide that no fundraising is to be done by the Armstrong Foundation and that all monies are to be raised from the estate’s royalties or by licensing his image or music.
Although many foundations regard the Internal Revenue Service 5 percent annual net distribution requirement as a ceiling rather than a floor, the Armstrong Foundation typically grants between 14 percent and 18 percent of the fair market value of the assets. Recent recipients include the Louis Armstrong House Museum in Queens, New York, youth programs at Jazz at Lincoln Center in New York City and the Louis Armstrong Center for Music and Medicine at New York City’s Beth Israel hospital.
It was fortuitous that Louis received the ownership of his intellectual property interests back from his manager. Most other musicians weren’t so lucky. The Copyright Act of 1976 (the Act) aimed to protect artists and their families “because of the unequal bargaining position of authors, resulting in part from the impossibility of determining a work’s value until it has been exploited.”3 Under the Act, a copyright for a work created on or after Jan. 1, 1978 lasts for the author’s life, plus 70 years. The legislation allowed, for any copyrights created post-Jan. 1, 1978, for the original creator who had transferred any rights to the copyright, to have a non-assignable, non-waivable right to terminate such transfers 35 years after they’d been granted. If the creator dies before exercising the termination right, a class of statutory heirs consisting of the surviving spouse, children and grandchildren may exercise that right.4 Interestingly, the right to terminate doesn’t apply to “works for hire.”
However noble the intentions of this legislation, it’s had the adverse consequence of limiting artists from effectively passing on their royalty rights to charitable organizations. Although musicians who’ve retained their copyright interests may pass them on to charity by will, in those cases in which the musicians assigned their copyright interests to the music publisher or record company, the heirs’ right to terminate the assignment may thwart the musicians’ charitable intentions. For example, currently the philanthropic intentions of James Brown, and to a lesser degree Ray Charles, are in danger of being upended because of the attempts by their respective heirs. Whether the heirs will be successful is a matter of current litigation.
James Brown (1933-2006)
James Brown was known as “The Godfather of Soul” and “The Hardest Working Man in Show Business.” His 2000 estate plan was relatively simple: It provided for his personal effects to be distributed to his six adult children, for $2 million to establish a fund for the educational needs of his grandchildren and for the rest of his assets to fund the I Feel Good trust for scholarships for financially needy and deserving students at schools in South Carolina and Georgia.
Eleven years after his death, his dream of using his fortune to fund scholarships appears to be in ruins, with millions spent in legal and fiduciary fees, and not a single penny used for the educational purposes that James intended.
Although his formal schooling ended at age 12, he valued education and self-reliance. He wrote and recorded songs such as “Don’t Be a Dropout” and “I Don’t Want Nobody to Give Me Nothing (Open Up the Door, I’ll Get It Myself).” One of his songs most closely associated with him is “I’m Black and I’m Proud.”
It’s unlikely he would be proud of what’s happened to his fortune, which has been valued at anywhere between $5 million and over $100 million.
James’ estate plan had an in terrorem clause so that anyone who challenged it would be disinherited. Unmarried when he signed the documents, he included a provision that he was intentionally not providing for any past, current or future wives or for any children other than the six named children. Subsequently, he participated in a marriage ceremony to Tommie Rae Hynie who had signed a prenuptial agreement foregoing any rights to his estate. Ten months later, she gave birth to James, Jr. Three years into the marriage, James sought an annulment claiming she was already married. In a subsequent consent decree, Tommie Rae waived any claim of a common law marriage.
James accurately predicted that his estate would be a mess. Since his death in 2006, the legal squabbles over his estate have involved over 90 lawyers and several lawsuits consisting of more than 4,000 pages. It’s the subject of best-selling author James McBride’s recent book, Kill ‘Em and Leave: Searching for James Brown and the American Soul.
Despite her prior waivers of her rights, Tommie Rae contested the will and trust. She and five of his six children claimed the estate plan was invalid because James signed the documents as a result of undue influence.
The South Carolina Attorney General intervened and negotiated a 2008 compromise agreement with Tommie Rae, on behalf of herself and James, Jr. and the six adult children and their children. The agreement acknowledged James, Jr. as an heir. The compromise created a new trust called the “Settlement Entity.” Tommie Rae and the children and grandchildren waived any intellectual property rights they may have had under federal law on behalf of themselves and their heirs, instead agreeing to surrender these rights to the Settlement Entity. In exchange, Tommie Rae was granted 23.7 percent of the Settlement Entity, which included her son’s share, and the six children were each granted 4.79 percent of the Settlement Entity, with the remaining 47.5 percent to fund a new charitable trust.
Although not in accordance with James’ wishes, this compromise assured that at least some of his wealth would be used for charitable purposes. Without this agreement, there was a risk that if the will challenge was successful, the I Feel Good trust would receive nothing. Even if the trust overcame that hurdle, if Tommie Rae were found to be his surviving spouse, she might be able to claim an elective share of one-third of the probate estate. Finally, if the heirs exercised their rights to terminate the copyrights, it would have an adverse impact on the revenue stream supporting the I Feel Good trust.
In a 2013 decision, the South Carolina Supreme Court ruled that the agreement was invalid on the grounds that it didn’t meet the statutory requirements of being just and reasonable. In regard to the claim of undue influence, the majority opinion stated that:
Brown had a reputation as a strong-willed individual who did not take orders from others, and he made his desires abundantly clear during his lifetime. We find there is no reasonable basis for the undue influence claim asserted here other than as a means to dismantle Brown’s estate plan. The result is to enable those who were disinherited to obtain Brown’s assets to the detriment of the charitable entity that Brown so fervently desired.5
The opinion noted that the Attorney General’s “primary job is the enforcement of charitable trusts, and in this case, the compromise dismantles the existing charitable trusts, to great ill effect on James’ estate plan.”6
The case was remanded back to the circuit court with instructions to appoint suitable fiduciaries to oversee the estate and trust in accordance with James’ wishes and to evaluate the propriety of all fees and to order all unearned or unapproved fees be returned to James’ estate.
Since the 2013 South Carolina Supreme Court decision, there’s continued to be various lawsuits on many outstanding issues. Hopefully, it will turn out better than Charles Dickens’ tale in Bleak House of the interminable probate lawsuit Jarndyce v. Jarndyce.
Ray Charles (1930-2004)
James’ only provision for his children was his personal property, and therefore, there was relatively little for them to be deterred by the in terrorem clause. Ray Charles didn’t make that same mistake. In December 2002, two years before his death, he gathered 10 of his 12 adult children7 and offered each of his 12 children $500,000 in trust. In exchange, they acknowledged that this would be the entirety of their inheritance and that they waived any claims against his estate.
The sole beneficiary of his estate was the Ray Charles Foundation, which he created in 1986 as the Robinson Foundation for Hearing Disorders, Inc.8 (the Foundation). Although he lost his vision at the age of seven, the sense of hearing was paramount to him, as he once observed, “No ears, no music, no Ray.”9 The primary assets of the $46 million Foundation are real estate, cash and savings; only $5.6 million are intangible assets. In terms of revenue, in 2015, the Foundation received approximately $2.6 million from various music interests. Like the Armstrong Foundation, it’s prohibited from soliciting donations.
Each of the 12 children agreed to these terms. Nevertheless, in 2010, six years after Ray’s death, seven of the children filed termination notices for 51 songs authored by Ray either in whole or in part. In response, the Foundation filed suit in U.S. District Court for the Central District of California, asserting in part that these works aren’t subject to termination because they were “works for hire.” In the alternative, the Foundation alleged that if the works weren’t works for hire, because Ray had re-negotiated his contracts in 1980, the purported terminations were null and void. Furthermore, the Foundation sought the return of $500,000 from each child for breach of good faith.
The district court dismissed the case because the Foundation lacked standing. It noted that the children’s exercise of their termination rights weren’t claims against Ray’s estate because the probate estate had been closed since 2006. It also ruled that the children were entitled to their attorney’s fees to be paid by the Foundation under California’s anti-SLAPP statute. On appeal, in 2015, the U.S. Court of Appeals for the Ninth Circuit reversed the lower court and ruled that the Foundation had standing and remanded the case for further proceedings.
Impact on Philanthropic Intentions
The observation of Shakespeare’s King Lear that, “How sharper than a serpent’s tooth it is to have a thankless child” seems applicable to the situation of Ray’s seven children who, despite each receiving $500,000 in trust, are seeking to terminate the assignment of their father’s copyrights. If those children are successful, their termination of the assignment of the copyrights won’t be fatal to the Foundation because it has substantial other assets. James’ philanthropic aspirations may not be so fortunate. Commentators such as Professor Tonya M. Evans of the University of New Hampshire’s School of Law in Concord, N.H. have argued for the need for legislation to prevent the travesty of an artist’s charitable plans from being upended by surviving family members.10 The examples of James Brown and Ray Charles support the need for such legislation.
—The author would like to thank Paul Sennott of the firm Sennott & Williams, LLP in Boston, for his assistance regarding the practices of the music industry and copyright law.
1. The scope of this article is limited to an explanation of the foundations of these three music icons; for a comprehensive explanation of the intersection of estate planning and intellectual property law, see Ryan J. Connell, “How to Handle a Client’s Intellectual Property,” Trusts & Estates (June 2015), at p. 17.
2. Louis Armstrong, Louis Armstrong: In His Own Words, at p. 160 (Oxford University Press, New York 1999).
3. See H.R. Rep. No. 99-1476, at p. 124 (1976).
4. Unlike copyrights, which may be bequeathed by will, the right to terminate a copyright license passes only to heirs. See 17 U.S. Code Section 203 (1976).
5. Wilson v. Dallas, 403 S.C. 411, 438 (S.C. 2013).
6. Ibid., at p. 450.
7. The other two children were incarcerated.
8. Ray Charles’ given last name was “Robinson.”
9. Ray Charles and David Ritz, Brother Ray: Ray Charles’ Own Story, at p. 323 (Da Capo Press, Boston 2004).
10. Tonya M. Evans, “Statutory Heirs Apparent: Reclaiming Copyright in the Age of Author-Controlled, Author-Benefiting Transfers,” 119 W. Va. L. Rev. 297 (2016).