Business Law: Rihanna Sues Accountants for Alleged ‘Gross Mismanagement’ #Fiduciaryduty

EBITU LAW GROUP, P.C. Business Law

It is very important, especially for business owners and creative talents (musicians, designers, actors actresses et. al), that when you hire professionals to render professional services for your businesses or for you as an independent contractor, you don’t just dump your tasks, issues/problems  on them and disappear. With how busy most business owners and creative talents are, this is all too common. However,  not all professionals are created equal and dumping your issues and walking away can be a very costly mistake.

The following case illustrates the need to always check and cross check the tasks you have hired professionals to do.

This can be a periodic checking in. You will need to carve out the block of time to do so and make sure you understand the explanations given to you.

Popular artist Rihanna sues her ex-accountants. Below is an excerpt of the alleged facts as reported by the Wall Street Journal.

“Pop star Rihanna is suing her former accountants, saying they spent years mismanaging her finances and cost her millions of dollars during a recent tour.

The lawsuit, filed in federal court in Manhattan, accuses the singer’s former accounting firm, Berdon LLP, and two accountants of causing “significant financial losses.” In addition, “gross mismanagement” of the singer’s finances cost her millions of dollars during her 2010 “Last Girl on Earth” tour.

“Between 2005 and 2010, Tourihanna suffered significant financial losses due to Defendants’ financial mismanagement and other acts and omissions,” the lawsuit states. Tourihanna was the concert touring company established by Berdon on Rihanna’s behalf, according to the suit.

Rihanna, who goes by her real name, Robyn Fenty, in the lawsuit, seeks unspecified damages from the firm and the two accountants. A spokeswoman for New York-based Berdon did not immediately return a message seeking comment.

The lawsuit lays out Rihanna’s musical career, which took off at the age of 16 when she signed with Island Def Jam Music Group and moved from her native Barbados to the U.S. The lawsuit portrays the singer—known for pop staples like “Umbrella”—as a financial amateur who placed a great deal of trust in her accountants as she rose to fame and wealth. . .” – Wall Street Journal

The reporting above talks about “trust” and “gross mismanagement.” I’ll zoom in on a couple of things for you all to note:

When allegations like the above are made, some of the important claims that would most likely be  included in the complaint filed in court include:

1. Breach of Fiduciary Duty – I have discussed, in the past, a breach of an implied covenant of good faith and fair dealing.  The concept of fiduciary duty is slightly different. It essentially says I have placed you in a position of trust and that trust requires that you don’t screw me over. You should look out for my interest, first, rather than yours.

Rihanna basically accuses her ex-accountants of looking out for themselves in a business dealing where they should have been lookingout for her, first. Essentially they were allegedly “self-dealing.”

2. Constructive Fraud – It is also not unusual to see a claim of constructive fraud in a case like this. The argument is that Rihanna’s ex-accountants used deceit and other unfair methods to make millions off her. For my general discussion on fraud, click here for the Transylmania investor case.

3. Unjust Enrichment – Finally, one more concept I will discuss here is that of Unjust Enrichment. It is also not unusual to see a claim of unjust enrichment as part of the complaint filed with the court. The argument for unjust enrichment is simple. If the ex-accountants are permitted to keep the millions they allegedly deceifully obtained from Rihanna, then the argument goes that it would be unfair i.e. unjust as they should not have had that money in the first place.

For questions about the topics I cover here, please feel free to contact me via email.

-Uduak Oduok, Esq.
(uduak@ebitulawgrp.com)

Photocredit: Dephisticate/Creative Common License