What Recent Record Label Lawsuits Reveal About the Hidden Clauses in Music Contracts
Photo by: Kike San Martin
Introduction
When most people hear that a famous artist has sued a record label, they immediately assume the dispute involves copyright infringement or someone stealing a song.
In reality, many of the most significant lawsuits in the music industry have nothing to do with unauthorized copying. Instead, they arise from the contracts artists signed years—or even decades—earlier.
Recording agreements are among the most complex commercial contracts in the entertainment industry. Beyond provisions governing ownership of master recordings, these agreements often contain detailed clauses addressing royalty accounting, recoupment of advances, audit rights, territorial licensing, distribution, royalty reporting, and, in some circumstances, an artist's ability to reclaim rights that were transferred years before.
Many of those provisions receive little attention when the agreement is signed. Yet decades later, they can determine who owns an artist's catalog, who receives millions of dollars in royalties, and whether litigation becomes unavoidable.
Two recently filed lawsuits illustrate this reality.
In one case, Latin music icon Ricardo Montaner is asking a federal court to determine who owns the master recordings of five early albums after asserting that his contractual rights reverted to him and that Universal Music has improperly interfered with his ability to exploit those recordings through a new distributor.
In another, Grammy Award-winning producer Jermaine Dupri and his So So Def companies allege that Sony Music underreported, failed to report, or improperly accounted for millions of dollars in royalties over the course of more than three decades, raising questions about royalty statements, international accounting, producer royalties, recoupment, and audit rights.
Although both lawsuits involve major record labels, they present entirely different legal questions.
Together, these disputes provide an opportunity to examine some of the most overlooked provisions found in recording agreements—and why artists, producers, managers, and music companies should understand them long before a disagreement reaches the courthouse.
(If you’d like to learn more about common legal disputes in music industry contracts, read this article.)
Case #1: Ricardo Montaner v. Universal Music
Unlike many copyright disputes, this case is not about whether someone copied Montaner's music without permission. Nor is it a dispute over songwriting credits or unpaid royalties alone.
Instead, the central question is considerably more fundamental: Who owns the master recordings of five albums that launched Montaner's career?
According to the complaint filed in the United States District Court for the Southern District of Florida, Montaner and his company, Montaner Legacy Music LLC, seek a declaratory judgment establishing that they—not Universal Music —are the rightful owners of five albums recorded between 1986 and 1992.
Montaner alleges that he originally signed a recording agreement with the Venezuelan label Love Records in November 1986 and recorded the five albums pursuant to that relationship. The parties later entered into a settlement agreement—or finiquito under Venezuelan law—in 1993 that allegedly terminated the earlier contractual relationship and restored all rights in the recordings to Montaner.
Years later, Universal Music Venezuela—through a series of corporate acquisitions and assignments involving the former Love Records catalog—claimed ownership of those same recordings. Montaner further alleges that the parties entered into a 2001 distribution agreement that itself recognized him as the owner of the albums, yet he never received royalties under that agreement.
(If you’d like to learn more about what are the different types of royalties from music, read this article.)
After serving notices asserting that his rights had reverted, Montaner entered into a distribution agreement with ADA Latin in 2025 in an effort to commercially exploit the recordings through a new distribution partner.
According to the complaint, that transaction triggered the present litigation.
Montaner alleges that Universal, sent letters to ADA Latin claiming ownership of the albums and demanding that the distributor cease exploiting them.
Rather than waiting for the conflict to escalate further—or risking litigation involving multiple parties within the distribution chain—Montaner filed suit seeking a judicial declaration establishing ownership of the recordings, also alleging damages exceeding $1 million.
The court has not yet determined who ultimately owns the recordings or whether the defendants' competing ownership claims are legally valid. Those questions remain to be resolved through the litigation process.
Why a Declaratory Judgment Was the Right Lawsuit
While it may seem unusual that Montaner filed a lawsuit asking a court to declare who owns his recordings instead of simply seeking damages.
In reality, a declaratory judgment action is often one of the most effective tools available when the primary dispute is not about recovering money, but about determining the parties' respective legal rights before additional harm occurs.
A declaratory judgment allows a court to resolve a controversy by determining the rights, obligations, or legal relationships of the parties without requiring one party to wait until additional damages have accrued. In commercial disputes involving intellectual property and contracts, these actions are frequently used to resolve uncertainty surrounding ownership, licensing rights, contractual interpretation, and other issues that directly affect ongoing business relationships.
According to the lawsuit, Montaner had entered into a new distribution agreement with ADA Latin after concluding that he owned the rights to the recordings. However, Universal allegedly sent letters to ADA asserting that its affiliate—not Montaner—owned those recordings.
From a business perspective, this creates a problem.
A distributor generally wants certainty that the party delivering a catalog actually possesses the legal authority to do so. If competing ownership claims exist, the distributor risks becoming embroiled in litigation, defending copyright infringement claims, or facing allegations that it commercially exploited recordings without authorization.
As a result, distributors often decline to accept disputed catalogs until ownership issues have been resolved. Even where a distribution agreement has already been executed, an unresolved ownership dispute may delay releases, interrupt royalty payments, or expose multiple parties to potential liability.
For that reason, obtaining a judicial declaration regarding ownership can provide legal clarity, and can remove a substantial commercial obstacle that prevents the catalog from being fully exploited.
That is why Montaner's complaint seeks more than monetary damages. The plaintiffs ask the court to declare that Montaner is the rightful owner of the five albums and to prohibit the defendants from interfering with the plaintiffs' ability to exploit those recordings.
Reversion Rights: Why Artists Sometimes Get Their Music Back
One of the most interesting aspects of Montaner's lawsuit is that it centers on the concept commonly referred as reversion rights: the ability for rights previously granted to a record label or other music company to return to the artist.
Rights may return to an artist through several different mechanisms depending on the language of the parties' agreement, the law governing the contract, or, in some cases, applicable copyright statutes.
For example, some recording agreements contain contractual reversion clauses, providing that ownership or exclusive rights will automatically revert to the artist after a specified number of years or upon the occurrence of certain conditions.
In addition to contractual mechanisms, U.S. copyright law also provides creators with statutory opportunities to reclaim certain rights that were transferred decades earlier. Sections 203 and 304 of the Copyright Act allow authors, under specific circumstances and subject to detailed procedural requirements, to terminate prior grants of copyright and recapture those rights after prescribed periods of time.
Although the precise application of those statutory termination provisions depends on numerous factors—including who originally owned the copyright, whether the work qualifies as a work made for hire, when the grant was executed, and whether the statutory notice requirements have been satisfied—their existence has become increasingly significant as artists seek to regain control over catalogs that continue generating substantial revenue decades after their initial release.
Case Study No # 2: Jermaine Dupri v. Sony Music
If Ricardo Montaner's lawsuit is ultimately about ownership, Jermaine Dupri's lawsuit asks a very different question: How do you know whether a record label has paid you everything?
Unlike disputes over who owns a music catalog, royalty accounting cases generally do not arise because an artist receives no payments at all. Instead, they often center on whether the payments that were made accurately reflect the revenue generated under the parties' agreement.
That distinction lies at the heart of Jermaine Dupri's lawsuit against Sony Music. Filed in the United States District Court for the Southern District of New York, the lawsuit was brought by Jermaine Dupri together with So So Def Recordings and So So Def Productions after what the complaint describes as a contractual relationship with Sony Music spanning more than three decades.
The plaintiffs allege that Sony failed to properly report and pay millions of dollars in royalties earned. The allegations span numerous well-known artists and recordings, including Kris Kross, Xscape, Da Brat, Jagged Edge, Usher, Mariah Carey, Bow Wow, J-Kwon, and Bone Crusher.
The plaintiffs allege a series of accounting irregularities affecting multiple categories of revenue over many years. Among other allegations, the complaint asserts that Sony failed to report certain producer and override royalties associated with Kris Kross's first two albums for more than two decades, leaving more than $2.2 million allegedly unpaid. It further alleges that royalty statements produced in 2023 and 2024 reflected more than $30 million in foreign sales relating to the Kris Kross account that had not previously been reported to the plaintiffs.
The lawsuit also alleges that Sony underreported producer royalties relating to Xscape's debut album by more than $960,000 and improperly withheld more than $1 million associated with Da Brat's Funkdafied. Additionally, the complaint challenges the accounting of Xscape's recoupment account, alleging that it is economically implausible for two platinum-certified albums released in the early 1990s to continue carrying substantial unrecouped balances decades later.
Many of these alleged discrepancies came to light only after a royalty audit conducted in 2025. The parties subsequently entered into a tolling agreement while attempting to resolve the dispute without litigation before the lawsuit was ultimately filed.
Sony, for its part, has publicly disputed the plaintiffs' characterization of the dispute, stating that the matter concerns an ongoing royalty accounting disagreement that the parties had been actively attempting to resolve prior to the filing of the lawsuit.
These allegations remain unproven, and the court has not yet determined whether Sony's royalty accounting complied with the parties' contractual obligations.
The lawsuit highlights one of the most technically challenging aspects of the modern music business: royalty accounting. Unlike many commercial disputes, royalty cases often require courts—and accounting experts—to reconstruct decades of financial records, interpret highly technical contractual provisions, analyze multiple categories of royalty income across numerous territories, and determine whether complex accounting methodologies accurately reflected what the parties' agreements required.
That complexity explains why many royalty disputes do not begin with litigation. Instead, they often begin with a simple question: "Can I verify that these royalty statements are accurate?"
Audit Rights: One of the Most Valuable (and Least Exercised) Protections in a Record Deal
One of the most important contractual protections available to artists, producers, and other royalty participants is also one of the least understood: the audit clause. Nearly every major recording agreement contains some version of an audit provision. While the language varies from contract to contract, these clauses generally give the artist, more specifically professionals retained on the artist's behalf, the right to inspect the record label's books and records to verify whether royalties have been calculated and paid in accordance with the agreement.
A record label periodically issues royalty statements reflecting the revenue generated by the recordings and the amounts payable. If the artist believes those statements contain errors, or simply wants to verify their accuracy, the audit clause provides a mechanism to examine the financial records supporting those calculations. In practice, however, the process is more complex.
A typical royalty statement may span dozens, or even hundreds, of pages. It often breaks down income by recording, territory, distribution channel, royalty category, accounting period, applicable royalty rate, reserves, recoupment balances, deductions, and numerous other variables.
For artists whose catalogs have generated revenue for decades, the accounting may involve thousands of individual transactions occurring across multiple countries, currencies, distributors, digital service providers, licensing arrangements, and contractual relationships.
Reviewing that information requires specialized expertise. For that reason, artists typically retain accounting firms that specialize in entertainment royalty examinations. These professionals analyze royalty statements, identify discrepancies, interpret complex accounting provisions, and calculate whether additional royalties may be owed under the contract.
That process can take months. Depending on the scope of the audit, accountants may examine years of royalty statements, ledgers, records, accounting reports, distributor statements, and other documentation. Even then, discovering an accounting discrepancy does not automatically result in payment.
In many cases, the audit simply becomes the beginning of another negotiation. The parties may disagree about the interpretation of contractual language, the proper accounting methodology, whether particular deductions were authorized, or whether certain categories of revenue should have been reported differently. As a result, many royalty disputes are resolved through settlement discussions following the audit rather than through immediate litigation.
According to Jermaine Dupri's complaint, that sequence is exactly what occurred here. The plaintiffs allege that many of the accounting discrepancies underlying the lawsuit were identified through a 2025 audit conducted by their accounting firm. Rather than proceeding directly to court, the parties allegedly entered into a tolling agreement while attempting to negotiate a resolution before litigation was ultimately filed.
Nevertheless, audits are expensive. Specialized entertainment accountants often spend hundreds of hours reviewing royalty records, and the cost of the examination may be substantial. For artists with relatively modest royalty streams, the expense of conducting an audit may exceed the amount ultimately recovered, making the process economically impractical.
That economic reality explains why audit rights, despite being available in many recording agreements, are exercised far less frequently than many artists realize. The decision often becomes a business judgment that weighs the anticipated recovery against the cost, complexity, duration, and potential consequences of challenging the label's accounting.
Recoupment: Why a Platinum Album Can Still Show a Negative Royalty Balance
Many artists assume that once an album becomes commercially successful, royalty payments will naturally follow. In reality, commercial success alone does not necessarily mean that royalties become immediately payable. Under many traditional recording agreements, a record label advances significant sums to an artist long before any revenue is generated. Those advances may include recording budgets, producer fees, marketing expenditures, promotional costs, tour support, music video expenses, and other contractually designated costs.
These payments are often referred to collectively as advances because they represent money paid before the label has recovered its investment. Rather than requiring the artist to repay those advances directly out of pocket, most recording agreements provide that the label will recover—or recoup—those expenditures from the artist's future royalty account. In practical terms, this means that royalties generated by the recordings are first applied toward reducing the artist's outstanding recoupment balance before additional royalty payments become due.
For example. Suppose a label advances an artist $500,000 to record and promote an album. If the artist's royalty account generates $300,000 during the first several accounting periods, those royalties may be applied entirely toward reducing the recoupment balance, leaving the artist with an outstanding balance of $200,000 and no royalty payment despite the commercial success of the recordings.
Only after the recoupable balance has been satisfied, and assuming the contract does not provide otherwise, would additional royalties generally become payable to the artist. Where questions regarding recoupment frequently emerge is regarding what expenses are actually recoupable, how those expenses are allocated, whether multiple projects are cross-collateralized, how revenues are credited, and whether the label's accounting accurately reflects the reduction of the recoupment balance over time.
It is also important to recognize that commercial success and recoupment are not necessarily synonymous. An album may sell millions of copies—or generate hundreds of millions of streams—yet still carry an outstanding recoupment balance if the contract permits additional costs to be charged against the royalty account or if multiple projects are contractually linked through cross-collateralization provisions.
For that reason, artists should avoid evaluating royalty statements based solely on an album's public success. The relevant question is not simply how much revenue the recordings generated, but rather how the contract requires that revenue and expenses be accounted for.
Five Contract Provisions Every Artist Should Understand Before Signing a Record Deal
(1) Ownership of the Master Recordings
Ownership determines who controls the commercial exploitation of the recordings, including streaming, digital distribution, physical releases, synchronization licenses, remasters, compilations, and future licensing opportunities. Artists should clearly understand whether they are transferring ownership permanently, granting an exclusive license for a specified period, or retaining ownership altogether. As the Montaner litigation illustrates, questions surrounding ownership can remain economically significant decades after the music was originally recorded.
(2) Reversion and Termination Provisions
Artists should also understand whether—and under what circumstances—their rights may eventually return. Some agreements contain negotiated reversion clauses allowing ownership or exclusive rights to revert after a specified period or upon satisfaction of certain contractual conditions. In other situations, artists may have statutory rights under applicable copyright law or contractual rights arising from later amendments or settlement agreements.
(3) Royalty Accounting
Receiving royalty statements is only the beginning. Artists should understand:
how royalties are calculated;
which revenue streams are included;
how frequently statements are issued;
what deductions may be applied;
how foreign income is reported;
how producer royalties are handled;
whether reserves or other accounting adjustments are permitted.
(4) Audit Rights
Artists should carefully review their contracts to learn:
how often audits may be conducted;
applicable notice requirements;
how far back records may be examined;
whether interest is payable on underpayments;
whether the label must reimburse audit costs if discrepancies exceed a specified threshold.
(5) Recoupment and Cross-Collateralization
Artists should fully understand how advances and expenses affect future royalty payments. Questions worth asking include:
Which expenses are recoupable?
Are marketing costs included?
Are music videos recoupable?
Will multiple albums or projects be cross-collateralized?
When is an account considered fully recouped?
How are recoupment balances reflected on royalty statements?
The disputes involving Ricardo Montaner and Jermaine Dupri serve as powerful reminders that a recording agreement is not merely a contract governing the release of an album. It is the legal framework that may determine ownership, accounting, and financial rights throughout an artist's entire career.
(If you’d like to learn about other famous court cases, like what is going on with Daddy Yankee’s lawsuits, read this article)
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