Music Rap: The Case Against Allen Grubman

In 1982, Allen J. Grubman was still a little-known music lawyer when he landed one of his biggest clients: Bruce Springsteen. The rocker's longtime manager, Jon Landau, recalls that one of the reasons he hired Grubman was "the word on the street was that Grubman's firm had done such a fantastic job for Billy Joel."

These days, Grubman, 49, is considered the most powerful lawyer in the music business, but Joel is no longer singing his praises. He's suing Grubman for $90 million, alleging fraud and malpractice. Grubman refuses to discuss the case, but in court papers, the lawyer blasts the suit as a "contrived and libelous attempt" to "smear" his firm, Grubman, Indursky, Schindler & Goldstein.

SMALL WORLD. The case is largely about conflict of interests in the music business, where everybody who is anybody knows everybody else. A clique of lawyers handles most of the deals--often while on retainer to both artists and their labels. In Grubman's case, the suit alleges that, although Joel's recording contract was with CBS Records, neither Grubman nor his firm ever "fully advised" Joel of its representation of CBS, or asked him to sign a conflict-of-interest waiver. "Isn't there a risk a lawyer isn't going to be as aggressive for the artist-client because he doesn't want to offend the record company which is hiring him to do other work?" says Joel's lawyer, Leonard M. Marks. Grubman claims the firm didn't represent CBS Records until shortly before Joel fired him.

Is there a conflict inherent in what Grubman does? "Of course there's a conflict of interest there--that's why people want Allen for their attorney," industry executive Irving Azoff says bluntly. "Allen knows everyone in the industry, so he knows who has the money and who doesn't." Grubman represented MCA acts when Azoff headed MCA Records Inc. a few years ago, but that didn't stop Azoff from hiring Grubman to represent MCA in various deals.

Grubman, whose record at Brooklyn Law School was undistinguished, admits that clients aren't buying his legal mind. Rather, he is renowned as a relentless bargainer who makes good use of his connections. "The relationships we've created allow us to do great things," says Grubman. He negotiated Michael Jackson's estimated $30 million deal with Sony Music and orchestrated Madonna's $60 million package with Time Warner Inc. His clients include superstars, plus top record companies and their executives, such as Sony Music President Tommy Mottola. "He makes you want to be in business with him," says megaproducer David Geffen.

Grubman started out as a performer. While growing up in Brooklyn, he sang regularly on a television show in Manhattan. Eventually, Grubman decided on a more practical career in entertainment law. The law student worked in the mailroom at William Morris Agency and as a CBS page. After graduating in 1967, he landed a job in a music law firm.

In 1969, Grubman struck out on his own. His firm got lucky in the 1970s signing obscure disco artists who got hot. Soon it was signing heavyweights.

Grubman credits his rise in part to forming relationships with "people who became very important." The short list: Mottola, former CBS Records President Walter R. Yetnikoff, and Geffen.

SUCCESS STORY. Grubman's relationship with Geffen shows how the lawyer nurtures such ties while promoting his own interests. The two met 12 years ago, when Geffen was negotiating a deal for Grubman's client, Hall & Oates, to join Geffen Records. Soon, Geffen wanted out of the deal. He asked Grubman to shop it to another label but agreed to honor the commitment if need be. Grubman signed the group with Arista Records, getting a better deal for the singers and himself. A year later, Geffen hired Grubman as his personal attorney.

If the Joel suit stands up, it could scare away clients on both sides for Grubman. A key claim is that Grubman "cast his allegiance" not with Joel, but with his former manager and brother-in-law, Frank Weber. According to the suit, in about 1988, Yetnikoff warned Grubman that "something was wrong" with Joel's finances because, despite the millions CBS had paid him, Joel needed to sell his Manhattan apartment so that he and his wife, model Christie Brinkley, could build a beachfront home. Grubman allegedly refused to hire an investigator because he feared Weber would fire him. In court papers, Grubman claims the conversation never took place.

Yetnikoff is expected to testify about Grubman and the music business itself. But Yetnikoff may have an ax to grind: There are recurring rumors that Grubman helped do him in at CBS Records. Even so, until the Joel case is resolved, Grubman will be haunted by some of the same people who helped make him an extraordinary success.