The not-so-secret $600 million sale of Michael Jackson’s music assets to industry giant Sony was the subject of a heated hearing in a Los Angeles courtroom Friday, with lawyers for Katherine Jackson arguing that estate co-executors John Branca and John McClain should be held “in contempt” for closing the deal while she’s still appealing a ruling on the matter.
The eye-watering sale, first reported by Billboard and confirmed Friday by Rolling Stone, was negotiated by the executors to take advantage of an asset market that was “by far” the “hottest it had ever been,” a recent appellate brief filed by the estate says. The pact purportedly lets the estate maintain “effective control over Michael’s music” while diversifying its range of assets, the filing reads.
Though the exact terms of the deal remain sealed, the estate gets to keep control of “all critical decisions relating to the exploitation of Michael’s name, image and likeness rights, to protect and preserve his legacy,” the estate says. It also will “continue to exercise day-to-day control over merchandising and monetization of the estate’s trademarks and related rights,” the recent appellate brief reveals.
On Friday, a lawyer for Katherine said he believes the deal, which closed in recent months, represents a violation of court orders because Katherine’s appeal of a prior ruling on the transaction is still pending.
“On March 1st, I sent letter to the estate asking for an explanation as to the authority they used as the basis in order to proceed with the transaction, and – crickets. No response at all. We don’t understand why this is not contempt of this court,” lawyer Robert E. Allen said. He proposed setting a court date to take up the matter of holding co-executor John Branca in contempt.
But Los Angeles County Superior Court Judge Mitchell Beckloff, who’s been overseeing Michael Jackson’s estate since his death in 2009, said the executors had authority to close the deal. He said it was true that Katherine’s appeal meant that his “blessing” of the deal had been put on hold, but he said the executors were free to move ahead knowing they would be “personally on the hook” if their actions led to lawsuits.
“I didn’t preclude them from entering into the transaction,” the judge said. “The estate wanted an order saying they could proceed with the transaction and be insulated from liability. They were asking for a blessing in a sense that they would not be liable, personally, for the transaction if they got sued. So, now, they’re liable for the transaction if they get sued.”
A lawyer for the estate said her side always knew it didn’t need the court’s permission to proceed, but it sought such permission whenever possible. She said in this case, timing was important. “The executors have a very, very good reason for proceeding with the transaction,” estate lawyer Jeryll Cohen said without elaborating.
In filings, the executors say the estate was saddled with debt and on the verge of bankruptcy when Michael Jackson died. “Exercising the powers granted in Michael’s will as confirmed by the probate court, they entered into business transactions involving the estate’s assets that skyrocketed the estate’s value to over $2 billion,” the recent appellate filing signed by estate lawyer Jonathan P. Steinsapir said.
But issues remain, so the probate case is still open, meaning the trusts set up for Michael’s three children and his mother have not yet been funded. One problem is a tax dispute with the IRS involving over $700 million in alleged unpaid taxes and penalties. And Michael Jackson’s companies are again the defendants in revived lawsuits from two of his molestation accusers, Wade Robson and James Safechuck. The men claim the companies are liable for their alleged abuse as children.
On Friday, Cohen said the executors were objecting to a six-figure legal bill submitted to the estate from Katherine’s lawyers. One of her attorneys said the refusal amounted to revenge on Katherine for objecting to the asset transaction.
“We wouldn’t be here if the estate wasn’t trying to punish Katherine Jackson for having the temerity to challenge their actions. If this was attorney fees incurred to handle some other piece of litigation, they would have paid,” lawyer Adam Pines with Glaser Weil argued. “What the executors appear to be doing is waiting for Mrs. Jackson to pass away.”
Cohen scoffed at that assertion: “The executors do not pay any beneficiaries’ attorneys’ fees. This is not a matter of punishing Mrs. Jackson.” The judge, who is retiring next month, set a follow-up hearing for March 22.