50 Cent Scores $14.5M Settlement of Legal Malpractice Claim

E50 Cent Legal Malpractice Claimditor’s note: this post was originally published on 10/23/2015. It has been updated to reflect recent developments.

Rapper 50 Cent, best known for the 2003 album “Get Rich or Die Tryin’”, scored a $14.5 million malpractice claim settlement from Seattle-based law firm Garvey Schubert Barer (GSB), according to documents filed in U.S. bankruptcy court in Connecticut.

However, he won’t get to spend any of it, as he owes his share after legal fees to creditors, per the terms of plan he filed to emerge from bankruptcy, which he filed last year (see below).

Background

Business Insider reported that 50 cent, whose legal name is Curtis James Jackson III, sued his former law firm for $75 million in 2015, alleging malpractice and inadequate representation in a licensing deal and other matters.

Headphones Venture

According to the court filings, Garvey Schubert Barer represented Jackson from 2010 through 2014, including in various matters involving Bradenton, Florida-based Sleek Audio LLC, which develops audio headphones.

Jackson reached an agreement with Sleek Audio to develop and market a wireless headphone called “Sleek by 50”, and invested a total of $2 million in the company. He likely hoped to duplicate the success of rapper Andre Young (a/k/a Dr. Dre), who co-founded Beats Electronics, which Apple purchased for $3 billion in 2014.

However, Jackson alleges that Sleek Audio never marketed or sold the Sleek by 50 headphones, so he created SMS Audio, LLC in 2011 to develop and market headphones under his own brands, “Street by 50” and “Sync by 50.”

Jackson appeared on QVC television in 2012 to promote his headphones, and sold over $175,000 worth in nine minutes.

Jackson claims that Garvey Schubert Barer and its attorneys told him that his headphones didn’t infringe on Sleek Audio’s intellectual property rights.

Arbitration

Sleek Audio filed an arbitration claim against Jackson for lost profits and revenues, due to the similarities between the “Sleek by 50” headphones and Jackson’s SMS headphones. Garvey Schubert defended him.

The Bradenton Herald reported that the arbitrator ruled that Jackson breached confidentiality, misappropriated trade secrets and violated a non-disclosure agreement with Sleek Audio in taking the headphone designs, and ordered him to pay Sleek $16.2 million in damages and attorneys fees.

The U.S. District court in Miami affirmed the award in March, 2014.

Legal Malpractice Claim

50 Cent’s malpractice suit alleges that in defending him in the arbitration matter, “GSB and attorneys Beckner, Moon and Trinchero failed to employ the requisite knowledge and skill necessary to confront the circumstances of the case.” Further, “among GSB’s numerous failures was its inexplicable decision not to call technical and damages experts to rebut expert testimony offered by Sleek — failures relied upon by the arbitrator in crediting Sleek’s experts and entering an eight-figure award in Sleek’s favor.”

Law Firm Response

Business Insider reported that the law firm issued this statement in response to Jackson’s lawsuit: “… Mr. Jackson’s complaint against GSB omits a number of relevant facts and misstates a number of others…Our attorneys properly counseled Mr. Jackson and his sophisticated team of financial and operational advisors about the transactions and the arbitrations with Sleek…We look forward to demonstrating that our attorneys handled the Sleek matters appropriately in all aspects.”

Bankruptcy Filing

Jackson filed for bankruptcy in July, 2015, after a jury ruled that he must pay $5M to a woman for posting her sex tape online without her permission. Punitive damages were later tacked on, which brought the total award to $7M.

His bankruptcy filing listed both his total assets and liabilities as being in the range of $10M – $50M.

According to his attorneys, the filing “permits Mr. Jackson to continue his involvement with various business interests and continue his work as an entertainer, while he pursues an orderly reorganization of his financial affairs.”

In May, 2016, a bankruptcy court judge approved a plan that would enable him to emerge from bankruptcy by paying “up to $23.4 million in future earnings to his creditors.”

In addition to the $7M he owed for the defamation suit, and the arbitration award, which had grown to over $18M with interest, Jackson owed “$4 million to mortgage lender SunTrust Banks Inc. and $1.2 million to ASCAP for advance payments on song royalties. All told, his debts total $32.6 million.”

Under the plan approved by the judge, Jackson “will repay between 74% and 92% of his debts over the next five years”. His assets included “a 21-bedroom Connecticut mansion once owned by boxer Mike Tyson, valued at $8.25 million, which will be sold; about $10.6 million in cash and securities; and a Bentley valued at $167,000. He also included 70% of whatever he wins from a pending malpractice lawsuit.” (emphasis added)

After the malpractice claim settled, Jackson’s attorney stated “We are informed that these proceeds, together with other funds contributed by Mr. Jackson should position the estate to provide for the remaining obligations to be satisfied in connection with this successful Chapter 11 reorganization plan,” and he expected Jackson to emerge from bankruptcy “very shortly.”

 Settlement

According to the terms of the malpractice claim settlement, neither party admitted to wrongdoing and both agreed not to disparage each other. That could be why the rapper revised an Instagram post dissing his former lawyers. The post shows a photoshopped image of Jackson sitting on a wallet full of money.

A Garvey Schubert spokesman said that it’s common for parties to settle in the face of uncertain costs.

“In this case, through mediation, we reached an agreement that resolves our differences of opinion and enables both parties to move on,” the firm said.

Further, “GSB maintains sufficient insurance to cover a settlement of this type.”

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About Curtis Cooper

Curtis Cooper is principal of Lawyers Insurance Group – Broker For Great Law Firms, which helps attorneys optimize their malpractice coverage. Contact him by phone: (202) 802-6415, or email: ccooper “at” lawyersinsurer.com.