Valensi Rose, PLC partner, Gary F. Torrell, prevailed on behalf of his client La Toya Jackson by successfully opposing a trustee’s motion to obtain additional royalties due to the internationally renowned entertainer. Mr. Torrell said, “This was a very challenging case, to convince a judge in New York that Ms. Jackson’s creditors should not obtain additional royalties, even though they had not received any payment. Luckily, the judge agreed with my arguments and issued a well-reasoned opinion in favor of our valued client.”

A written trust agreement allowed the trustee to collect Ms. Jackson’s royalties for a specified time period, pay the priority claims of the trustee and his lawyers, and then distribute the balance to certain creditors. Because the priority claims exceeded $780,000, they were expected to consume nearly all of the royalties collected during the term of the creditor trust. As a result, the trustee filed a motion seeking to extend the term for an additional five years and thereby obtain additional royalties for the benefit of creditors.

On August 5, 2010, the Honorable James M. Peck issued a published opinion denying the motion. The court agreed with Mr. Torrell’s argument that it would be unfair and inequitable to Ms. Jackson to grant the motion, despite no distributions to creditors, because Ms. Jackson had honored the trust agreement and was not responsible for the trustee’s high fees, which had consumed the allocated royalties.

The judge also interpreted the trust agreement to not permit an extension of the term to allow creditors to obtain additional royalties otherwise due to Ms. Jackson.

Click the links below to review the full decision and the article featured in Law360.com.

http://www.nysb.uscourts.gov/opinions/jmp/2531_422_opinion.pdf