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Johnny Depp: His Suit Against His Financial Management Firm and the Laws of Agency and Defamation
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 Mr. Depp has filed suit against the Management Group, the firm he hired to handle his finances.  The suit alleges that the Management Group is guilty of gross negligence, self-dealing, and fraud in handling Mr. Depp's funds and resources. The Management Group has responded with a countersuit that alleges the problem was not their mismanagement but rather was Mr. Depp’s “irresponsible and profligate spending.” The following are examples listed in the countersuit::

  • 200 paintings
  • Jewelry
  • 70 guitars
  • 45 luxury vehicles
  • $18 million yacht
  • $75 million in real estate purchases
  • 12 storage lockers for storing his collection of Hollywood memorabilia
  • $30,000 per month on wine
  • $5 million to shoot the ashes of Hunter Thompson into the sky on a rocket.

Maria Puente, “Depp’s financial saga in detail,” USA Today, February 6, 2017, p. 5D.  Mr. Depp recently disputed the allegations saying that, "It's insulting to say that I spent $30,000 on wine. "Because it was far more." And Mr. Depp corrected the record on Mr. Thompson's ashes.  He spent $7 million, not $5 million because he needed a bigger rocket to "get Hunter into the sky" at an arc higher than 151 feet (the height of the Statue of Liberty. Stephen Rodrick, "The Trouble With Johnny Depp," Rolling Stone, June 21, 2018. 

 

General agents, such as the Management Group have expansive authority and little accountability.  They are an agent in a general agency relationship.  Under a general agency (often called a “personal representative” in Hollywood), the principal has turned over the authority for all business matters.  With access to accounts, authority to issue checks, and the use of credit lines and cards, there are often few internal controls and no audits.  Need and opportunity, and you have two corners of the fraud triangle. 

 

Mr. Depp has made $650 million over the course of his 35-year career, but, the best estimates leave him with about $75 million.  Among the missteps Mr. Depp has alleged are that the Management Group failed to pay his taxes and that substantial penalties resulted. The Management Group is also claiming damages from Mr. Depp's false statements about their work, noting that his spending, and not mismanagement have caused the losses. The Management Group has the e-mails that warned Mr. Depp about his expenditures.  The trial will delve into who did what and who didn't do what.  The Management Group is prepared with contra arguments: that Depp has a $2-million-a-month compulsory-spending disorder and does not accept counsel on investments, noting "Wine is not an investment if you drink it as soon as you buy it."  Mr. Depp also alleges that the Management Group invested his money without permission and did not give back any of the returns from the investments that it made using Depp's funds. 

 

It is possible and wise to puts some checks and balances on general agents.  For example, there can be restrictions on amount for checks and or the use credit cards or credit lines for amounts over $500, $1,000, $10,000 – whatever amount the principal wishes to place as a restriction.  Any amounts above the agreed-to maximum must be approved by the principal.  The principal can also restrict the types of authority, i.e., no real property transactions, no credit lines, without principal approval.  In Mr. Depp's case, he is alleging that the foreclosure on one of his many homes was the result of the Management Group's failure to make payments. The principal can also break up responsibilities between two agents, with the goal of having one keep an eye on the other, a sort of checks and balances system.

  

The suit's allegations about the Management Group's self-dealing would be a breach of an agent's fiduciary duty, grounds for termination as well as recoupment of any losses Mr. Depp experienced along with an accounting for any profits made.  If Mr. Depp's allegations, that he has made publicly as well as in his complaint, are true, then there is no defamation.  If they are false, then the Management Group would recover damages, which could include the loss of clients  and their revenue streams as a result of Mr. Depp's statements.

 

DISCUSSION STARTERS

Make a list of the things Mr. Depp should have done differently.

Make a list of the thing the Management Group should have done differently.