When a promise leads to a lawsuit, no one wins. That may seem obvious to us, here, now, from a remove, yet it happens over and over again. Steely Dan was an iconic band, one that had an impact across the music industry for decades. They also, unfortunately, became a very high-profile estate dispute, then an ongoing litigation story that lingered for years. That’s all over the media. We’re glad it’s out there because it’s an excellent lesson, but as Steely Dan fans, we’re sorry. It’s not a good look for anyone involved.
One of the members of Steely Dan, Walter Becker, died in September 2017 after a long illness. He was one of the founders in 1972, along with long-time friend and collaborator Donald Fagen.
Steely Dan made its way to the Rock and Roll Hall of Fame by fusing rock, jazz, and funk and continuously changing their sound over the years. Fagen and Becker were also excellent businessmen who recognized early on that a band is just another form of a company and needed to be run as such.
Shareholders in Steely Dan Inc.
They executed a buy-sell agreement on Halloween, 1972. They split ownership of Steely Dan fifty-fifty and agreed that with the death of a founder/owner, the survivor would get the right to buy out the other’s share from their estate.
Specifically, “if any of its signees dies or leaves the band, the band's corporation has the right to immediately repurchase their shares at book value ... any transfer of those shares to another person is still subject to the agreement."
So far, so good. Except that four days after Becker’s death, Fagen received a notice from the estate’s executor that the buy-sell agreement “is of no force or effect.” They further insisted that Becker’s widow be immediately appointed a director/officer of Steely Dan.
Buy-Sell Agreement Litigation
Fagen sued to enforce the buy-sell contract. Of course, any business decisions – say, selling song rights to movies or television, licensing to Spotify – went on hold with the pending litigation.
To add insult to injury, the estate owns the Steely Dan website and social media presence. Fagen, still performing as Steely Dan, has been effectively frozen out from publicizing Steely Dan online, a development that is only financially hurting everyone involved – including the estate, which is, of course, largely dependent on Steely Dan residuals.
After Becker's death, Fagen is now the only remaining signee of the contract to hold shares in Steely Dan Inc.
By the time Becker died in 2017 he’d been ill for some time with cancer. In a recent interview with Tablet, Fagen was asked if writing and performing in his late bandmate's absence was a “weird” experience.
““Well, it wasn’t that weird because he was ill for almost a decade before his death, and he hadn’t been as active,” he replied. “I was used to trying to keep things afloat. Though the fact that he simply isn’t there is kind of frightening. But in a way he’s always there. He’s in my body. We’ve been together for so long, he’s like my brother, you know.”
Now, Fagen's only comments refer to “the thousands of lawyers involved in this thing.”
What Happens When Shareholders Stop Thinking Ahead
Two shareholders formed a closed corporation, executed a series of contracts and, thinking ahead, a buy-sell agreement to protect themselves down the road.
That’s the good news. The bad news is that once signed, they put the buy-sell away and never reviewed it. Please note, when they formed the company and signed the contracts they had produced one album that bombed so utterly that promotional copies of their single are much more readily available than sold copies to collectors.
They took off from there and dominated the charts for a decade while also being critical darlings of the music press. Their circumstances changed radically but they never revisited their shareholder agreements.
