Nine Inch Nails lead singer Trent Reznor’s claim that his former management contract is unconscionable was dismissed because the contract terms were not unusual for the music industry, but the court ruled that a jury must decide whether the manager breached a fiduciary duty by committing fraud and conversion

by Mustafa Abdul-Rahman

        Nine Inch Nails lead singer Trent Reznor is in a legal cat fight with his former manager John A. Malm Jr.

        Reznor started it by firing his management company J. Artist Management, which is wholly owned by Malm, claiming that Malm had “run Reznor’s finances into the ground.” Malm responded by filing a breach of contract claim for $1.5 million in unpaid commissions from the Nine Inch Nails’ 1994-1995 tour.

        Next, Reznor filed a separate lawsuit that alleged Malm breached his fiduciary duty by fraudulently inducing Reznor into business agreements which Reznor claims are unconscionable. Reznor took issue with the term of the management contract that provided for Malm’s 20% commission to be taken out of gross revenue. Reznor also alleged that Malm gained full ownership of NIN trademarks and the NIN merchandising company through fraud. Reznor claimed that Malm transferred Reznor’s money to jointly held companies without his authorization.

        Both sides filed summary judgment motions. Federal District Court Judge Jed S. Rakoff dismissed Malm’s breach of contract claim for unpaid commissions from the NIN 1994-1995 tour because the applicable period of limitations had expired.

        But Reznor’s breach of fiduciary duty, fraud and conversion claims survived summary judgment because a reasonable jury could find in favor of Reznor on those issues. However, Judge Rakoff did dismiss Reznor’s unconscionability claim because Reznor did not lack bargaining power when entering the agreement and the contested terms were not unusual for the music industry.

        Trent Reznor was represented by Daniel A. Platt of Katten Muchin Zavis & Rosenman in New York. John A. Malm, Jr. and J. Artist Management, Inc., were represented by Thomas More Lopez of Esanu Katsky Korins & Siger in New York and by Debra Jean Horn of Meyers Roman Friedberg & Lewis in Cleveland.

Reznor v. J. Artist Mgmt., 365 F.Supp.2d 565, 2005 U.S.Dist.LEXIS 6805 (S.D.N.Y. 2005)