Lil’ Joe Records v. Won — Eleventh Circuit Rules Copyright Termination Rights Trapped in Bankruptcy Estate

Background

The rap group 2 Live Crew — Luther Campbell, Mark Ross, Christopher Wong Won, and David Hobbs — recorded five albums between 1986 and 1989. They signed a deal granting the sound recording copyrights to Luke Records, a company owned by Campbell. In 1995, Luke Records sold those copyrights to Lil’ Joe Records during bankruptcy proceedings.

In 2000, Ross filed for personal Chapter 7 bankruptcy. Nobody — not Ross, not the trustee, not the court — ever mentioned his future right to reclaim the 2 Live Crew copyrights in the bankruptcy filings.

Two decades later, in 2020, three of the four group members (Campbell, Ross, and Wong Won’s heirs) served a termination notice under Section 203 of the Copyright Act. That provision gives artists the right to “claw back” their copyrights 35 years after granting them away. Because 2 Live Crew had four members, three of four constituted the required majority. But Lil’ Joe Records argued that Ross’s vote didn’t count — his termination rights, it said, were still locked inside his old bankruptcy estate.

The Court’s Holding

The Eleventh Circuit agreed with Lil’ Joe Records and reversed the district court. Writing for a unanimous panel, Judge Brasher addressed a question of first impression: whether copyright termination interests under Section 203 are swept into a bankruptcy estate under Section 541 of the Bankruptcy Code, even though the Copyright Act declares them inalienable.

The court held they are. Section 541(a)(1) brings “all legal or equitable interests of the debtor in property” into the bankruptcy estate. Termination interests — contingent rights to reclaim intellectual property — qualify as “interests in property” under this broad definition. And Section 541(c)(1) applies “notwithstanding any provision in applicable nonbankruptcy law” that restricts transfer, which overrides the Copyright Act’s inalienability rule.

The court drew on its own precedent in In re Smith, where it held that Alabama’s statutory right of redemption entered a bankruptcy estate despite state law declaring it a “personal privilege” that could not be alienated. The same logic applied here: while the Copyright Act defines the scope of termination interests, federal bankruptcy law determines whether they enter the estate.

Because Ross never scheduled his termination interests in his bankruptcy, they were never administered, abandoned, or returned to him. Under Section 554(d) of the Bankruptcy Code, unscheduled property remains in the estate until the court orders otherwise. Ross therefore lacked authority to exercise those interests when he signed the termination notice in 2020. Without his valid participation, only two of four members voted to terminate — one short of the statutory majority.

Key Takeaways

• Bankruptcy trumps copyright inalienability. Even though the Copyright Act says termination interests are personal and cannot be transferred, the Bankruptcy Code’s broad sweep captures them. Artists who file for bankruptcy should be aware that their future termination rights may be at risk.
• Unscheduled assets stay in the estate. In Chapter 7, any property not mentioned in the bankruptcy filings remains property of the estate indefinitely. This creates a trap for artists who don’t realize their future copyright interests are assets that must be disclosed.
• The majority requirement is strict. Section 203 requires a majority of co-authors to agree on termination. Losing even one member’s vote — here, because of a decades-old bankruptcy — can defeat the entire termination effort.
• The court left questions open. The panel expressly declined to address how termination interests should be treated in bankruptcy going forward, or what Ross’s heirs would need to do to reclaim the rights. Those issues remain for the district court on remand.

Why It Matters

This is the first federal appellate decision addressing head-on whether copyright termination rights survive bankruptcy. The answer — that they don’t, practically speaking — has sweeping implications for musicians, authors, and other artists who have ever filed for bankruptcy protection. Many artists, especially those who were commercially successful decades ago, may have filed for bankruptcy without realizing they were forfeiting their future right to reclaim their creative works.

For the music industry specifically, this decision matters because Section 203 termination rights are becoming exercisable for a wave of works from the late 1980s and early 1990s. Record labels and publishers now have a powerful new defense: if any co-author in a group filed for bankruptcy and didn’t schedule their termination interests, the entire termination effort may fail for lack of a majority.