Santa Barbara Attorney A. Barry Cappello and His Client, Courtney
Love, Are After Some Very Big Prey--the Universal Music Group.
They Could Really Score. Or They Could Be Eaten Alive.
By Kathleen Sharp
The corporate decor at Universal Music Group is high-tech
modern, but here, in the Santa Barbara law offices of A. Barry Cappello, it's the Wild
West. To the left is a rattlesnake, coiled and ready to strike. To the right is a bronze
statue of a bucking bronco. A muffled hysteria unspools as faxes, phones and modems
transmit the breaking news about Cappello's high-profile entertainment case against UMG.
Overlooking all this is a striking William Koerner painting
that depicts a stickup unfolding in broad, God-fearing daylight. A gunman stands in the
doorway, a glint in his eye, six-shooter aiming at some well-to-do patrons, who reach for
the sky. His accomplice, a comely maiden, collects the firearms and money from everyone
inside this honky-tonk saloon. What's so striking is the audacious swash of the
self-styled buckaroo, which in broad brush strokes is precisely how the $40-billion-a-year
music industry sees Cappello. As one entertainment lawyer snorted: "He's never tried
a music case, which is pretty clear based on his complaint."
Earlier this year, Cappello filed suit in Los Angeles
Superior Court against Universal Music Group on behalf of his client, rock and movie star
Courtney Love. She and her grunge band, Hole, are suing the record label, the biggest in
the world, for $30 million plus punitive damages. The trial--expected early next
year--threatens to reveal some of the industry's closely guarded accounting secrets. Love
claims the practices are fraudulent, and Cappello, who admits he'd never seen a recording
contract until this year, accuses UMG of breaking its promises, withholding accounting
records and rolling in "unjust enrichment." Furthermore, he says, UMG broke
Love's contract when it acquired a slew of other music labels, then abruptly closed hers.
If Love and her lawyer can persuade a jury, they could push
the entire merger-mad recording industry off its post. A Love victory would mean,
conceivably, that any musician could walk away from a record company if the label with
which it signed no longer exists and the musician is shuffled to another one. A verdict
against UMG could hog-tie the entire industry, in which 90% of recordings are produced and
promoted by five entertainment conglomerates, all of which share the same basic contracts,
pipelines and policies. Such a ruling could open up the music business to new blood, more
bands and lower consumer prices.
Of course, UMG doesn't see it that way. It accuses Love,
her attorney and the horse they rode in on of creating "a new special constitutional
right for wealthy rock stars." In court documents, UMG calls Love's suit an
"irrelevant and scurrilous attack on the recording industry" and derides
Cappello's legal brief for its "vague, catchall" allegations. But last month, a
Los Angeles Superior Court judge ruled that Cappello could take his client's case to
trial, based on four of the 15 original claims. Eventually, 12 everyday people will decide
if Cappello and Love, a Golden Globe nominee for best actress for "The People vs.
Larry Flynt," are two off-the-wall, half-cocked mavericks, as UMG claims, or if they
have a legitimate beef.
UMG won't comment on the record, but Cappello doesn't mince
words. "Universal needs a good knock to the head," he says. "It's gotten
very arrogant lately, especially after the decision with Napster [which closed down the
free music Internet site]. Universal feels high and mighty now, so it's time for their
comeuppance."
The 59-year-old Cappello can be warm and charming. He has a
publicist and a media packet that bulges with glowing profiles of him and his firm,
Cappello & McCann. When asked about his career, he delivers a monologue that is
impressive for both its significant achievements and its long-windedness. He recounts how
he won the first toxic spill case against Big Oil in the 1970s; scored the first
multimillion-dollar lender liability swipe against a major bank in the 1980s; how he now
dogs corporate villains and is basically a rebel without a pause.
In this bougainvillea-choked town, there are far more
attorneys than high-rises and few are better known than Cappello. In private practice
since 1977, he's had some 30 lawyers pass through his revolving double doors, a large
number for a small-town boutique firm. "I'm proud of them all," says Cappello.
The ex-employees are now members of the unofficial Cappello alumni club, where they're
inducted with a quip: "The fact that you worked for Barry means you're smart. The
fact that you left him means you're smarter."
Cappello has been called a shark, a piranha and a
barracuda, although he denies feeding that image. "It's a media thing, you
know." Associates say he carefully cultivates that predatory handle. "He'll make
a quick slashing attack, but if the aquarium glass is thick enough he'll go away,"
says retired lawyer Jeremy Hass. On the other hand, "the weak, the timid or idiotic
will get slaughtered."
Cappello forged his reputation in the maelstrom of campus
unrest. In 1968, he was chief trial deputy in the Santa Barbara County district attorney's
office, just as UC Santa Barbara students were protesting the Vietnam War. Co-workers
remember the 27-year-old Young Republican strutting around the office, smoking a cigar and
wearing a holstered gun.
"Barry was in favor of the death penalty and didn't
believe in legalizing drugs," says Pat McKinley, who was hired by Cappello and is now
an assistant DA. He hated making deals, but he had a sense of humor. Cappello, his boss,
David Minier, and others "had a lot of fun disguising ourselves as hippie rioters,
jeering and yelling at police cars," says Minier, now a Madera County Superior Court
judge.
But Cappello's law-and-order stance helped turn the
community of Isla Vista into a fortress under siege. In June 1970, after 700 students were
jailed for violating a 7:30 p.m. curfew during finals, Cappello wanted to prosecute. A
judge freed the students, which infuriated Cappello's office enough to bar the judge from
hearing more student cases. This, in turn, outraged local citizens, who called for
investigations into alleged judicial and police abuses.
Cappello knew it was time to move on, says Minier. "If
he didn't get into a higher-profile job, he knew he'd silently slip away." It just so
happened that the city attorney had retired in the midst of what could be an explosive
case. A blowout at Platform A, operated by Union Oil and other firms, had spilled tons of
black crude into the Santa Barbara Channel in January 1969, and the city, among three
other public entities, filed a $560-million damage suit. But two years later, the suit was
mired in the system. Cappello, who had virtually no civil law experience, lobbied hard for
the city attorney job and got it. Says Minier: "He convinced the City Council that
he'd learn all the civil law he needed to know."
Cappello requested more funds and started amassing damning
evidence against the oilmen. "In the end, it was going to be me, the oil company's
lead lawyer and a judge," says Cappello. "That was all it was going to be when
it came time to fight." His bulldog approach worked. Just as they were heading into
trial, the oil firms settled for $9.4 million, which at the time was the most ever paid in
oil pollution damages in the United States. Cappello basked in the media spotlight the
deal attracted and today gives the impression that he alone brought down Big Oil. "I
don't want to take anything away from Barry, who is bright and aggressive," says
Marvin Levine, the county attorney who filed the original suit, "but there were four
of us working on the case, which got started before he got involved."
Success whetted Cappello's appetite for more trophy-sized
game. From his public service days he'd learned that he could handle hot- button,
big-bucks cases even when pitted against large law firms. "I wanted to be in business
litigation and take big cases to trial," he says.
In 1977, he joined a local firm, where he started to hear
about another unexploited niche: small businesses that went bankrupt after bankers
abruptly called in their loans. Cappello reviewed files, with visions of large lawsuits in
his head, but found only a few cases against banks and none whose verdicts exceeded
$30,000. In general, small businesses couldn't afford to pursue their bankers because of
the high costs associated with litigation. Then Cappello met Ian Allison, head of
Lumbermans Mortgage. The firm had defaulted on its mortgage. The lender seized not only
Lumbermans deed of trust, but its letter of credit, too. "The bank callously took
it," Cappello says.
He crafted a theory that seems obvious today but was
groundbreaking at the time: A loan is a contract, governed by contract law. Essentially
Cappello argued that the lender broke the contract by seizing the letter of credit and
wove a tale about a heartless banker ruining a salt-of-the-earth employer. In 1982, the
jury awarded Cappello's client $7.5 million, which California Lawyer called the first
multimillion-dollar lender-liability verdict. (The story was headlined: "Santa
Barbara's Resident Barracuda.") The case was later settled for $5 million, which
muted some of its thunder, but Cappello had found his calling.
His watershed case arrived in 1985. A Sonoma County
apple-growing family, the Jewells, had fallen on hard times. Bank of America, which had
worked with the family for 30 years, assured them it would help if the family signed over
all ranch and equipment deeds. When they did, the bank foreclosed the very next day.
Cappello sued the bank and won $37 million in a jury trial (the bank was found guilty of
fraud and breach of duty), an astounding figure at the time. But the case went to the
appeals court, where Cappello lost in a "bizarre, unjust verdict." He adds:
"To this day, it's a real sore spot for me." But it's a testament to his
promotional skills that the case that ended in such a humiliating defeat remains his claim
to fame.
"He's a pioneer in lender liability cases," says
Ian Allison, who gave Cappello the stuffed rattler. And, by the late 1980s, Cappello had
helped pave the way for other such lender cases, which produced a collective $200 million
in verdicts against banks.
By then Cappello's personal life was collapsing; his
marriage of 20 years ended in divorce because, he says, he'd spent so much time away from
his wife and three children. He began dating Lori Russell, a woman 22 years his junior. In
1996 they were married by retired Superior Court Judge Bruce Dodds, who still laughs about
the ceremony. The maid of honor was a Dalmatian; the best man was a Doberman pinscher. No
guests were present as the groom placed on the bride's finger a diamond ring bigger than a
Ludens cough drop. "We didn't want a big to-do because it was more about the two of
us and our dogs," says Russell. Earlier this year, baby Dominic was born, and
Cappello is redesigning his hilltop house to include a playroom.
"Lori has been my salvation as far as my life is
concerned," says Cappello. She's also kept her husband abreast of today's pop
culture. "Musically, I was stuck in the 1950s and 1960s until I met her," he
says. "Now," adds Russell, "we educate each other about different groups
and songs."
The education of Barry Cappello included a Hole concert in
Santa Barbara last summer. He'd never heard of the group, but when he saw lead
singer/guitarist Courtney Love perform, her image became indelible. Love was magnetic, and
200 fevered fans clambered onstage. Cappello marveled at Love's ability to control the
crowd with a word or signal. He was dumbfounded by the musician's unflinching faith in the
mob--Love threw herself into the standing-room-only crowd, which carefully, almost
reverently, passed the rock star's body over the roiling human sea.
"It was an amazing performance," he says, still
shaking his head a year later. "I'd never seen anything like that."
What he didn't know was that Love was enmeshed in a power
struggle with her label, UMG. As outlined in court records, Hole rocketed to fame around
1990 and was deluged with record contracts. In 1992, the group signed with Geffen Records,
which was known for nurturing its artists. David Geffen had sold his label in 1990 to the
entertainment conglomerate MCA, which in turn sold it to Matsushita Electric Industrial
Co. But the founding management team was still intact, says Love's manager, James Barber.
"Lew Wasserman and Sid Sheinberg let their guys [like David Geffen] run the label as
they saw fit."
In 1995, however, Seagram Co. bought MCA and later changed
its name to Universal. Seagram spent $10 billion buying other music houses, including
rap-label Interscope Records. It then slashed costs at its other labels, just as Hole's
second Geffen album, "Celebrity Skin," was released in September 1998. A month
later, UMG announced it was shutting down Geffen and later shuffled Hole over to
Interscope, one of the labels Hole had spurned in 1992. There her band's album was
ignored, Love claims. (According to Soundscan, Hole's 1994 album, "Live Through
This," sold 1.5 million copies; "Celebrity Skin" sold 1.3 million copies.)
Love tried to negotiate a better deal. But UMG balked,
saying she still owed five more albums on the first contract. When her seven- year
contract ended in 1999, Love informed Interscope that she would no longer record for the
label. In January 2000, UMG sued Love for breach of contract. Her lawyers urged her to
settle, but she fired them. In June 2000, a few weeks before Cappello saw Love in concert,
Seagram was purchased by Vivendi, which began as a French water utility company.
Love spent a year looking for a new lawyer. She, Barber and
Hole guitarist Eric Erlandson drafted a complaint, charging UMG with everything from
restraint of trade to cheating on royalties. Barber discussed the complaint with other
entertainment attorneys, he says. But they just "looked at us and said, 'Hey, it's
always been like that.' " The band stepped outside the tight circle of entertainment
lawyers but found only litigators who weren't comfortable trying a music case, or who had
egos bigger than a rocker's. Then they heard about Cappello, who had just finished an
entertainment case involving the creator of a children's TV series and a producer.
"Barry listened to us," says Barber. The fact
that Cappello had seen Hole in concert was a big plus. Once he was hired, Cappello spent
hours with Barber, who taught him the ABC's of the music world. Critics snicker at
Cappello's initial ignorance of the industry, but he says such greenness often is his
strength. "In my business, virtually every case is something new, whether it's oil,
banking or records," he says. "My specialty is trial cases."
Cappello doesn't seem to have a self-esteem problem, but
his ego has tripped him in the past. In the 1990s, he personally sued the partnership that
owned Santa Barbara's El Paseo, a historic Spanish arcade of shops and restaurants
downtown. Cappello had performed services and billed the partnership for $300,000. But
some of the partners questioned his bill, which, Cappello admitted, contained mistakes.
The partnership offered to pay him $250,000. But Cappello sued, and his complaint included
two partners who had never retained him. The two men then sued Cappello for legal
malpractice, and the resulting dogfight so hobbled the El Paseo partnership that it sought
bankruptcy protection. By then the judge had dismissed the two partners from the case,
prompting the two to drop their malpractice suit against Cappello. But Cappello then sued
the two men and their attorneys for malicious prosecution, claiming if their case had any
merit, they would have pursued it. It was the pri! nciple of the thing, says Cappello,
whose malicious prosecution case was thrown out. Finally, a judge awarded Cappello
$190,000 in the fee-dispute case, but none of his legal fees, which town wags joked
approached the value of the property. Says one attorney: "Barry plays dirty and
tough." Cappello says he just zealously protects his client's interests. But even
this trait sometimes works against him.
According to court documents, Cappello was dating Lori
Russell when her car was rear-ended by an uninsured motorist. The police report noted
minor damage and no injuries. Russell and Cappello filed an insurance claim of $15,000,
the maximum on her policy, but Allstate offered $1,000, so the couple went to arbitration.
There Russell revealed that she had started seeing a doctor 17 months after the accident
without, as required, telling her insurer. The arbitrator found it "troublesome"
that she had withheld this information, but awarded her $15,000 anyway. Then Russell sued
Allstate, accusing it of bad faith. At trial, Allstate argued that Russell had received a
$15,000 "windfall," and that she and her boyfriend had "sandbagged"
the insurer to set up the bad faith case. The jury found fault on both sides, and gave
Russell 18 cents and no attorney fees. Russell appealed and lost.
The 1999 verdict was seen as a slap in Cappello's face.
Says Dodds, "He shouldn't have tried. He got too emotional about it and lost
perspective." After that, says one of his opponents, Kenneth Chiate of Pillsbury
Winthrop, "Barry kind of dropped off the planet."
The way Barry Cappello figures it, Hollywood is a service
industry. A musician provides the art and a record label offers the services to sell the
art. But standard record contracts include a clause that says the label can assign its
services--forward a contract--to whomever it chooses, even if the artist objects.
"That's like saying I can give this [lawsuit] to the ambulance chaser down the
street," Cappello says. "My argument is that personal services go both ways. How
could Courtney sign with Geffen and then land with a label she doesn't even want?"
In off-the-record comments, UMG indicates it has rounds of
ammunition too: Love was so busy becoming a movie star, she didn't have time to fulfill
her contract; she's a 37-year-old has-been, a once avant-garde artist who now vogues at
Hollywood premieres draped in haute couture.
How, entertainment attorneys wonder,will the headstrong
siren react if she's attacked as an ex-drug addict, ex-stripper, once- neglectful mom who
used to score heroin with her now-dead husband, Nirvana's Kurt Cobain.
This battle will not be courtly. But Cappello thrives in
the mud ring, with its warm Klieg lights and buckets of legal tender. As he talks about
this case, he gestures around his office, with its green baize colors and shiny brass
fixtures. At one end sits that ornery coiled rattlesnake; at the other is the painting of
the stick-up man and maiden. Beyond the second-story window sits Cappello's nemesis, the
Bank of America. Inside, his voice booms like a pipe organ, ringing about his mission to
fell this new-found enemy: "So far, there's been no movement of troops, no cavalry
sweeps. This is just the artillery exchange," he says.
If the self-styled gunslinger is true to form, he may just
blaze a trail into the honky-tonk music business. At least until the appeal.
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