Recording artist Kanye West and music publisher EMI are currently embroiled in dueling lawsuits with each other regarding an alleged breach of West’s co-publishing contract with EMI. West, who filed a complaint against EMI in court in California, asserts that California law should govern the terms of the contract. He also asserts that the contract amounts to a contract for personal services that began in 2003, thus violating a California statute that limits personal services contracts to seven years or less. Conversely, EMI filed a complaint in New York, asserting that New York law governs due to the choice of law provision in the contract. EMI also asserts that West’s complaint in California constitutes a breach of contract because it directly violates this choice of law provision.
Given the noteworthiness of the parties, it should be interesting to see the two lawsuits play out, and it provides an opportunity to discuss North Carolina’s approach to choice of law provisions in business contracts.
Choice of Law Provisions in North Carolina
North Carolina only recently enacted the North Carolina Choice of Law and Forum in Business Contracts Act (“Choice of Law Act”). The terms of the act expressly limit its application to business contracts, or a contract “entered into primarily for business or commercial purposes[,]” as opposed to employment or consumer contracts. Unlike the statute this act replaced, parties to a business contract are now generally permitted to select North Carolina in a choice of law provision, regardless of the specific circumstances of the parties or the contract. Under the previous statute, the enforceability of a North Carolina choice of law provision could be challenged for one or both of the following reasons:
- that the subject matter of the contract lacks a reasonable relation to North Carolina; or
- that application of North Carolina law would be contrary to a fundamental policy of the state whose law would apply if not for the choice of law provision.
The new Choice of Law Act explicitly forecloses a challenge of such a provision for either reason, making success on any such enforceability challenge much more difficult. As a result, it gives parties to a business contract broad discretion to include a choice of law provision that selects North Carolina.
However, with the dispute between Kanye West and EMI providing guidance, one should be careful when selecting the state in a choice of law provision. Differences in state law, such as the existence of the seven-year limit on personal services contracts in California, can prove fatal to any subsequent dispute arising out of the rights and obligations pursuant to the business contract. Therefore, before electing North Carolina in a choice of law provision, determine how the laws of the Tar Heel state will interpret and enforce the contract, because the new Choice of Law Act has largely eliminated the grounds for challenging the provision’s enforceability.
If you have questions regarding a business contract or dispute, please give us a call at (704) 457-1010 to schedule a consultation. For more information regarding our firm, attorneys, and practice areas, please visit http://www.lindleylawoffice.com/.