The Boss takes control after a bitter ten-month struggle with manager Mike Appel. An exclusive report on the legal battle
At 3 a.m. on May 28th, after ten months of legal battles and nearly two years after Born to Run had catapulted him to national celebrity, Bruce Springsteen and his former manager, Mike Appel, settled their differences and parted ways forever. The move finally enabled Springsteen to record a followup to Born to Run with Jon Landau, the producer of his choice. But despite pronouncements of satisfaction with the terms of the settlement, both sides paid dearly for the truce (Springsteen, especially, lost much valuable time). The case is a textbook example of a financially naive musician learning the meaning of money only upon success. And Springsteen's success is the only thing that separates him, in this regard, from countless other aspiring musicians.
Even though two key figures in the case, Springsteen and Landau, are close friends with various Rolling Stone writers and editors (Landau himself is a contributing editor), details of the settlement are sketchy. Springsteen, Landau and Appel refuse to discuss the case; the only court document relating to the settlement is a single sheet of paper that says the matter has been resolved, and neither party can sue again. In addition, several thousand pages of depositions, which insiders say are both colorful and revealing, were suppressed by the parties involved and never entered the public record. A vow of silence may well have been part of the settlement, but even that no one will confirm.
Appel appears to have made out well; his attorney, Leonard Marks, calls the settlement "a complete victory for Appel." Marks says the settlement provides the former manager with "substantial economic benefits, including a share of the profits from the first three albums." Also included is a five-year deal between Laurel Canyon Productions, Appel's company, and CBS Records, a third party to the litigation. "Substantial" reportedly means Appel will receive several hundred thousand dollars from Springsteen and CBS for relinquishing his interest in Springsteen.
Springsteen's chief concern, though, was not money but his freedom. His lawyer, Peter Parcher, says, "If Leonard Marks really says that he had a 'complete victory,' then it's just not so. I would suggest that the press observe who's producing Bruce's next LP; whether or not Laurel Canyon Music or Management has anything to do with it; and who now controls the entire catalog of previous songs."
Indeed, the three contracts (for publishing, recording and management) which bound Springsteen to Appel's Laurel Canyon Productions have been rescinded. His recording agreement with Columbia Records has been renegotiated, reportedly at a handsome rate (neither Columbia nor Springsteen would make the figures available), and Springsteen will now administer all of his publishing. Appel will continue to receive some proceeds from the records and publishing from Springsteen's first three albums, but he will not administer them. Such a major concession establishes a precedent for future artist-manager disputes, or at least those in which an artist is more interested in creative control than cash.
Springsteen paid a heavy price in lost time. He had planned to begin recording his fourth LP June 1st, 1976. Instead, he started exactly one year later. Springsteen also alleged in an affidavit sworn last December 8th that the delay hindered his songwriting: "Ever since the issuance of the court's preliminary injunction order, I have started countless numbers of songs which I have been unable to develop to their potential for lack of a proper recording opportunity . . . many of these songs will never be finished."
In 1971 Mike Appel, who looks like a tough Paul McCartney, was a song and jingle writer for the Wes Farrell Organization. "Doesn't Somebody Want to Be Wanted," written with his partner Jim Cretecos, had been a big hit for the Partridge Family. He and Cretecos then made an outside move, producing the first album by Sir Lord Baltimore (described by a former Mercury A&R man as "a heavy-metal joke").
In 1971 Bruce Springsteen was playing clubs in Asbury Park, New Jersey. He knew nothing of Appel. He did know that his career was at a low ebb; in five years as a professional musician he'd never even made $5000 in a year. Tinker West, a surfboard manufacturer who was Springsteen's manager at the time, suggested that Appel might be a port of entry into recordmaking. In the fall of 1971 Springsteen met with Appel, who was impressed but told Bruce to write some more songs and pay him another visit later. Springsteen decided to leave Asbury Park for California, hoping he might find his break there.
After about four months of travel and touring, Springsteen returned to Appel in March 1972 and signed with Appel's new management and production company, Laurel Canyon. For music publishing he signed with Sioux City Music, owned by Appel's partner, Cretecos. An audition with Columbia A&R man John Hammond, a subsequent Columbia Records contract and the first two LPs, both of which sold fewer than 200,000 copies, quickly followed the signings with Appel and Cretecos.
It's important to note here that money had never been one of Springsteen's priorities. Had his attitude about finances been different, he and Appel would probably never have had their contretemps. What Springsteen wanted, to the exclusion of almost everything else, was to make a great rock & roll record – and to find someone who believed in him without reservation. Appel was his man.
Mike Appel believed that Springsteen belonged in rock's pantheon alongside Dylan, Presley, the Stones and the Beatles. "When he sang," Appel said last year in a Record World interview, recalling their second meeting, "I couldn't believe what I heard. There was no doubt in my mind that this was a major, major talent find." A former associate confirms this: "He thought Bruce was the greatest, bar none. He also thought his way of dealing with the money was protecting Bruce. His plan was to set up proper books and run the business legitimately when everything broke for Bruce."
But before that happened, another believer appeared on the scene. Jon Landau bumped into Springsteen in early April 1974. The musician was reading an enlarged display copy of Landau's review of his The Wild, the Innocent & the E Street Shuffle; it filled a window at Charlies, a Cambridge bar where Springsteen was playing a benefit for a local friend. Landau introduced himself as the author, asked what Springsteen thought of the review, and the two became friends. Later that month, after seeing a Springsteen concert at the Harvard Square Theater, Landau wrote an impassioned review from which Columbia Records culled the now famous line, "I have seen the future of rock & roll and its name is Bruce Springsteen," for its advertising campaign.
Landau and Springsteen continued to communicate by phone, and after the sessions for Born to Run – with Appel at the helm – had floundered for several months, Springsteen asked Landau to become involved. Landau left his job as records editor of Rolling Stone, a position he had held for six years, and became coproducer. Soon Appel began to resent Landau, for logical reasons. Landau's influence over Springsteen was increasing, and he eventually replaced Appel as Springsteen's major personal and artistic confidant. In addition, it was clear to Appel that Landau was skeptical of his competence.
In 1975 Born to Run, produced by Appel, Springsteen and Landau, made Springsteen a star. He appeared simultaneously on the covers of Time and Newsweek. But Appel's contracts were about to run out, and he suggested to Springsteen that they renegotiate. According to Leonard Marks: "When things started looking up, Appel offered to renegotiate the contracts with Springsteen – including giving him half the stock of all Laurel Canyon companies. Springsteen said he didn't want to deal with a written contract but wanted to work it out with Appel on a day-to-day basis with a verbal agreement based on trust. Appel had an audit done by Mason & Company and then sent Springsteen a letter saying that 'the books are open' and inviting another outside audit by Springsteen."
Springsteen, on Landau's advice, retained Mike Mayer of Mayer, Nussbaum and Katz, who also represented Landau's music business affairs, for the negotiations. Springsteen also had accountant Stephen Tenenbaum audit the money received and disbursed up to that point. Still, as late as March 1976, Springsteen remained confident of reconciliation with Appel.
The first legal blow was struck by Appel. In May 1976 he sought, through the New Jersey State Court, to attach funds from a week of Springsteen concerts in Redbank, New Jersey. Appel wanted the money held in escrow until he could draw his management commission from Springsteen. He was denied by the court.
Then Springsteen and Landau, who were discussing the artist's fourth album, learned that Appel was planning to prevent Landau's involvement in that album. Springsteen filed a massive lawsuit on July 27th, 1976, as the result of both Appel's desire to block Landau as producer and Tenenbaum's independent accounting of Laurel Canyon's financial records. Tenenbaum reported in an August 9th affidavit that Appel "conducted Springsteen's business in a slipshod, wasteful and neglectful manner; that he failed to maintain adequate and complete books and records relating to Springsteen's activities; and that enormous amounts of expenses and cash disbursements are charged to Springsteen which are in large measure unsubstantiated." His conclusion: "My audit reveals a classic case of the unconscionable exploitation of an unsophisticated and unrepresented performer by his manager for the manager's primary economic benefit."
Leonard Marks replies: "When Springsteen's lawyers sent Tenenbaum in they gave him leeway to maximize any possible claims against Appel as a negotiating device. Later on, Springsteen's new lawyers saw that it was useless because it was so biased and full of holes that you could drive a truck through it. When the Tenenbaum audit was finished, they wouldn't even give us a copy until several months after the litigation started." (Springsteen lawyer Peter Parcher says, "As I recollect it, the Tenenbaum audit was being completed just as I came into the case. I sent Marks a copy of it after I saw it.")
The crucial charges in Springsteen's suit against Appel were fraud (representing himself as a knowledgeable and experienced businessman), undue influence and breach of trust. In the legal parlance of Springsteen's lawsuit, Appel, as an artist manager, had a "fiduciary" duty – a constant obligation, by the trust Springsteen placed in him, to act first and honorably in the best interests of his client.
But the Laurel Canyon management, according to claims made by Springsteen's lawyers in the lawsuit, formalized a massive conflict of interest that ran directly counter to that fiduciary obligation. The agreement provided that Appel's managerial responsibility was suspended in any of Springsteen's dealings with Laurel Canyon companies; it also denied Springsteen the right to retain any advisers other than Appel. In other words, in dealings with Appel's nonmanagement companies, Springsteen was on his own.
The recording agreement between Springsteen and Laurel Canyon gave Springsteen about 18¢ per album sold; the agreement between Laurel Canyon and CBS gave Appel's firm a minimum royalty of 40¢ per record. In addition, the CBS agreement itself was a boondoggle. It stated that Laurel Canyon would provide CBS with ten Springsteen albums; Laurel Canyon's production deal with Springsteen, however, called for only five LPs. Springsteen said he was never advised of his rights in these matters. He also said he had seen only one page of the CBS-Laurel Canyon agreement, which he signed, appropriately enough, on the hood of a car in a New Jersey parking lot.
Appel replied to Springsteen's suit two days later, July 29th, by seeking a permanent injunction in New York State Supreme Court barring Springsteen and Landau from entering the recording studio together. Only Laurel Canyon had the right to appoint a producer, Appel said in an affidavit, and that producer would be the "winning combination," as he put it, of himself and Springsteen. The threat of a permanent injunction had been underestimated by Springsteen's legal team. The case was assigned to Judge Arnold Fein, who has a reputation for taking the phrase "unique and exclusive" services in personal-management contracts at face value until otherwise demonstrated. Fein issued the injunction, and Appel suddenly gained the upper hand.
Appel had made Landau the issue in the case, charging in his affidavit that Landau saw in Springsteen "a potential gold mine," and that he had engaged in "a campaign to sabotage the relations between Springsteen and myself." Appel termed it "a classic example of bad faith and piracy." Consequently, Landau became the pivotal figure in the ensuing injunction battle. "The real issue appears to be whether Landau may act as the producer over the plaintiff's objection," wrote Fein in his decision granting the preliminary injunction. "Landau has no rights under these agreements."
Although CBS had been named as a defendant in Appel's state action, the company's policy of staying out of artist-manager disputes forced it into a neutral position during the early stages of the case. In an August 6th affidavit, Bruce Lundvall, president of CBS Records, said CBS intended to exercise its contractual right to Springsteen "without taking a position on the side of Mr. Springsteen or the plaintiff." As late as September 7th, CBS executive vice-president Walter Dean still characterized CBS as an "innocent third party."
When Fein upheld Appel's injunction at a second hearing on September 15th, Appel was clearly in a position to do just what CBS Records Group president Walter Yetnikoff says Appel told him he would: " . . . to fight and possibly destroy, through legal means, that which he had created, namely Springsteen's career."
By this time Springsteen knew he was "fighting for my life," as he told Judge Fein. Appel was not compelled to settle out of court; he was winning at every turn. Although Springsteen was no longer generating income for him, Appel had received a sizable royalty payment from CBS in May 1976 – he could wait years, letting the suit run its course. And even if the issues at hand came to trial, they were so marginal that there would have to be another trial to finally settle the issues of the validity of the contracts.
In October Springsteen switched from Mayer, Nussbaum and Katz, primarily contract negotiators, to Peter Parcher, a highly skilled litigator and former law partner of Michael Tannen, who was retained at about the same time as a contract negotiator.
From the moment Parcher entered the case it began turning in Springsteen's favor. Earlier, Springsteen had given a deposition so damaging to his own case that Appel mailed portions of it to the press. For example, Leonard Marks asked Springsteen if Appel had not in fact computed his commission at 20% – rather than 50% – in all financial statements. Springsteen responded that Appel had, but did not explain that Appel had given him only one financial statement in their entire legal relationship. (Leonard Marks explains: "Springsteen was constantly in the red for his first three albums. Financial statements were meaningless.")
But with the benefit of Parcher's advice, Springsteen's performance at deposition proceedings, according to insiders, was akin to his stage act. Colorfully and authoritatively, he parried each of Marks' allegations that Appel, not Springsteen, was the real architect of his success. If he was fighting for his life, he was adding to his battle all the considerable knowledge of stagecraft at his command. Friends said Bruce was proud of himself; he knew he was beating a fine attorney at his own game. As the record began to roll back, rumors of a settlement began circulating.
In his decision, Fein had left an opening for a trial to resolve the "underlying issue" in the case. Parcher took this to mean Appel's alleged breach of fiduciary duty – the issue on which Springsteen had filed his original federal complaint. On November 18th Parcher submitted an affidavit which in effect asked that the federal and state issues be linked into one trial. The affidavit was bolstered by affidavits from both Jim Cretecos, who noted he was considering suing Appel, and a former Appel employee, Robert Spitz. They alleged that Appel had reneged on promises he had made to Springsteen at the outset of their relationship. Moreover, Spitz claimed that "on numerous occasions Appel stated to me that he hoped Springsteen never became aware of those agreements. Appel also expressed to me on numerous occasions that he was aware that a court of law would find them unconscionable."
The key affidavit in the case was submitted by Springsteen himself on December 8th. First, he asked that he be allowed to record an album (for which CBS had agreed to advance recording costs), with Landau producing, and have it placed in the court's possession pending the outcome of the trial. Fein denied this request.
But Springsteen also detailed the potential damage the enforced absence from recording was doing to his career. Included in this account is a ringing defense of Landau, which was a forceful rebuttal to Appel's charge that he and Bruce were the "winning combination": "Landau has brought to the studio higher qualities which have given tremendous stride to my creative development. Specifically, with respect to the writing of musical compositions, I enter the studio with virtually millions of scattered ideas to which Landau, through his unique ability to communicate with me . . . has been able to provide the focus and direction necessary to shape my thoughts into finished musical compositions. Landau's ability to communicate with me stems from the simple fact that I trust him.
"[Appel's] interest in this action is strictly financial," Springsteen said in closing. "My interest is my career, which up until now holds the promise of my being able to significantly contribute to, and possibly influence, a generation of music. No amount of money could compensate me if I were to lose this opportunity."
On March 22nd, 1977, Springsteen won the motion to submit an amended answer to Appel's complaint. Thus, he was able to assert a fiduciary defense, join the issues in the federal and state cases and take the offensive once more. For the first time since the injunction was issued, Springsteen was in a position to win if the case came to trial. And at this point a settlement became imminent; a little over two months later the parties came to an agreement and the books were closed.
But Springsteen, in his own way, will have the last word. It's in a song which he sang on his last couple of tours. Though it's not necessarily about his relationship with Appel, it might as well be. Its crucial phrase, sung straight from a broken heart, is: And when the promise was broken, I cashed in a few more dreams. At the end of the song, there's a line that tells what might have been. It's so touching that you almost wish he and Mike Appel could still share it. "We were gonna take it all," he sings defiantly, "and throw it all away."