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Key Clauses in Management Agreements Part 4: Key Man Clauses

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Categories: Articles, Management, Music Contracts, Music Industry, Tags: , , , , , , , , , , , , , , , , , , , , , , , , ,

Erin M. Jacobson, Esq. - Key Man ClauseIn the last set of articles regarding management agreements, I have explained the term, commissions, and sunset commissions. In this article, I will explain what is known in the industry as the “key man clause.”

A good music attorney representing the artist will make sure there is a “key man clause” in the artist’s management agreement.

What happens if you sign with a management company and then your manager leaves the company? What if the other people at the company don’t understand your artistic vision or image, don’t jive with your personality, and/or don’t advocate for your career? I bet you’d wish you could continue working with the particular manager that has left the company, right? Right.

The scenario described in the paragraph above is exactly what the key man clause protects against. While it won’t be labeled as a “key man clause,” a good music attorney representing the artist will make sure that there is language in the agreement ensuring that if the artist’s specific manager leaves the company, the artist has the right to also leave the company and follow the manager wherever (s)he goes.

This language does not obligate the artist to leave the management company. If the artist feels there are others at the company who can manage the artist’s career just as well (or maybe better) than the leaving manager, then the artist is free to stay with the company. However, the artist does have the option to leave and follow the leaving manager at that point to protect the artist against being stuck in a management arrangement without someone that advocates for the artist.

Many management agreements don’t include this language and many artists (and some attorneys!) don’t know to ask for it.

If you need a management agreement drafted or reviewed click here to contact me now.

If you need a DIY solution in the form of a template agreement, get one from Indie Artist Resource ( CA residents click here  and non-CA residents click here).

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Are You Sure You Own Your Masters?

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Categories: Articles, Business, Music, Music Contracts, Music Industry, Record Labels, Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Erin M. Jacobson, Esq. - Master Ownership

What are Masters?

Throughout the music business, master recordings or “masters” are typically regarded as to as the original or official recording of a performance fixed in a tangible medium like tape, ProTools file, or even mp3, from which copies can be made. Masters are usually recorded in a recording studio or similar setup and these are the original tracks that get mixed and mastered (another sound processing step using the same term but with a different meaning than a master recording). Released recordings purchased on a CD or digital download are not masters, these physical goods are copies of the original masters.

Who Owns the Masters?

Common sense and matters of principle usually cause most independent artists to feel they should own their masters because they are the ones that contributed the performance and are often paying for the recordings. However, oftentimes other owners can be involved as master ownership can vary based on law as well as contract.

Some important aspects in copyright law refer to joint authorships and contributions to collective works. True joint authors that meet certain requirements will co-own a copyright and will be able to exercise the same rights in regard to that copyright. People other than the artist who were involved in the recording of the masters can make the argument that their contribution to the recording counts as a copyrightable contribution and thus makes them joint owners.

Contributors

Independent producers and engineers

These contributions can include influencing the sound whether by musical contribution or other direction, recording techniques, microphone placement, etc. Some producers and engineers are more involved than others. With engineers, it’s mostly about the recording and/or mixing techniques used. In the case of producers, they might just be advising on the sound and encouraging the best performances from the artist, or they might actually be playing instruments on the recordings or co-writing the songs. Producers and engineers may be able to argue partial master ownership based on their contributions, but many independent producers are also using contracts to ensure they own all or part of the masters in an attempt to build an income-producing catalog in addition to their producer fee and royalty. For some producers with great influence in the industry, this may be a requirement for artists to work with that producer, however, I always advise artists to make sure that giving up this ownership is actually worth the success this producer will add. Do not give up ownership (or at least not a large portion of it) without being certain that it will be worth it from a career standpoint.

Performing musicians

The contribution here is usually singing or playing instruments, but in either case it is considered a performance and the performer has rights in and to his or her performance. In some cases the vocalist or musician may simply be singing or playing exactly as instructed, and in some cases may be contributing riffs or other variances adding to the work. In either instance, just paying the vocalist or musician for services rendered may not prevent them from coming back to claim rights in their performances later. Having the vocalist or musician sign an agreement making sure they are giving up all rights to their performance and any contributions they have made is essential.

Recording Studios

Recording studios sometimes say that they own the masters and they will then release the ownership to the artist once the bill has been paid. Studios argue this because the masters were recorded on studio property, with studio equipment, and studio employees. While these arguments have been successful in past cases regarding photography, success of these arguments from a music industry standpoint would depend on the actual circumstances of the situation. While the studio does have an argument based on this contribution, these tactics serve mostly as a way for the studio to make sure it gets paid.

Most artists think because they may have paid these other people for their services, that their ownership rights are covered. However, paying for something doesn’t always mean ownership of it, especially under copyright law. Section 202 of Copyright Law says “Ownership of a copyright, or of any of the exclusive rights under a copyright, is distinct from ownership of any material object in which the work is embodied.” So while you may have tape (or hard drive) in hand, that won’t stop someone from claiming an ownership stake of the copyright.

Record Labels

Usually, a recording agreement will provide that the label will own all master recordings recorded by the artist during the term of the agreement.

“Work made for hire” is another buzz word that artists (and labels) think applies because there was payment for services – and because mostly all recording agreements include this language. A work made for hire must be made by an employee under the scope of his or her employment, or in the case of independent contractors, must be specifically commissioned by the party seeking to own the work and fall within certain categories listed in the law. In most situations where artists are recording music, the parties involved (whether it be artist v. label, artist v. recording studio, artist v. producer/engineer, etc.) are independent contractors, so the employee provision will not apply. Sound recordings are also not included in the specific categories that copyright law lists as eligible for work made for hire status. Most labels make the argument that record albums are collective works (one of the allowed work made for hire categories), but this ambiguity leaves masters open for joint ownership without a proper copyright assignment.

In the Real World

A recent example occurred where A&M Records sued a recording studio claiming one of the studio owners had rights to the master recordings for the album “Temple of the Dog”, by the band of the same name, a side project between musicians Chris Cornell (Soundgarden, Audioslave) and Eddie Vedder (Pearl Jam). The label claimed it bought the masters and the rights from the studio and had an agreement to prove it, but those on the studio side said that not all owners of the studio had signed the agreement and the owner who had not signed the agreement had not given up his rights to the recordings. The lawsuit recently settled out of court, and the tapes were returned to Chris Cornell.

 

What should an artist to do to ensure master ownership?

Artist intending to fully own their masters should have written agreements in place with everyone involved in the recording process — the studio, engineers, producers, and hired musicians. These agreements should clearly state that the artist owns the masters and include language whereby these contributors will transfer their rights in the masters to the artist.

These agreements do involve many components and complex language, so they should be drafted by an experienced music attorney. If the artist’s financial situation prevents him from hiring an attorney (or other reasons prevent hiring an attorney), then DIY templates of the appropriate agreements can be downloaded from Indie Artist Resource (For IAR templates, CA residents click here and Non-CA residents click here).

Disclaimer: This article is for educational and informational purposes only and not for the purpose of providing legal advice. The content contained in this article is not legal advice or a legal opinion on any specific matter or matters. This article does not constitute or create an attorney-client relationship between Erin M. Jacobson, Esq. and you or any other user. The law may vary based on the facts or particular circumstances or the law in your state. You should not rely on, act, or fail to act, upon this information without seeking the professional counsel of an attorney licensed in your state.

If this article is considered an advertisement, it is general in nature and not directed towards any particular person or entity.

This article was originally published on Sonicbids.com.

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Key Clauses in Management Agreements Part 3: Sunset Commissions

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Categories: Articles, Business, Management, Music Contracts, Music Industry, Royalties, Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , ,

erin m jacobson, erin jacobson, music attorney, music lawyer, los angeles, music industry, managementLast time I discussed commissions in management agreements, but what may be a surprise is that management agreements often also have another kind of commission involved – one that remains after the term of the agreement is long over and the manager and artist are no longer working together.

Management agreements often have something we attorneys in the business call “sunset clauses,” which are provisions dictating that the artist must continue to pay a commission to the manager after the term of the agreement has ended. The purpose of this clause is actually for the benefit of the manager, to protect him or her from putting in a lot of work on certain projects, only to have the term end (or the agreement terminated) and not earn any commissions from those projects in which the manager invested a lot of time, effort, and possibly money. A sunset provision is not unfair in itself. If the manager has worked on certain projects for the artist, the manager should be able to share in the money earned from those projects. However like anything in life, there are limits and the sunset provision should be fair based on the circumstances.

Sunset commissions can range in the amount of the commission and the duration for which the sunset commission needs to be paid. Often management agreements dictate the sunset commission at the full rate (often 15- 20% as I explained here) and often lasting in perpetuity, which means forever. A good music attorney will negotiate this commission down both in percentage and in duration because an artist should not be paying a manager his/her full commission rate forever when the manager is not currently working for the artist anymore. Chances are the artist is probably also working with a new manager at this time and paying a full commission to that person as well. A good music attorney should also negotiate the circumstances around sunset provision and to what the commission applies.

The negotiated sunset commission may be a certain percentage for a certain period of years and then end, or start at a certain percentage for a certain period of time then reduce to a lower percentage for a certain period of time before finally ending. This is why it is called a sunset clause, because the commission tapers off and fades away just like an actual sunset. The percentage amounts, durations, and negotiated surrounding circumstances vary depending on the negotiating power of the parties and the attorneys involved, which is why you need a good music attorney experienced with negotiating management agreements.

The sunset clause often surprises artists because they aren’t familiar with the concept and become upset when they see it in the contract, or they sign a contract with a sunset provision that is longer and larger than it should be because the artist does not understand the agreement. I will reiterate, that the sunset itself provision is not unfair, and it is fair to compensate the manager on projects the manager helped to make a success. Again, having the contract drafted or reviewed by a good music lawyer experienced with management agreements is paramount to protecting one’s interests.

If you need a management agreement drafted or reviewed click here to contact me now.

If you need a DIY solution in the form of a template agreement, click here (non-CA residents click here).

 

Disclaimer: This article is for educational and informational purposes only and not for the purpose of providing legal advice. The content contained in this article is not legal advice or a legal opinion on any specific matter or matters. This article does not constitute or create an attorney-client relationship between Erin M. Jacobson, Esq. and you or any other user. The law may vary based on the facts or particular circumstances or the law in your state. You should not rely on, act, or fail to act, upon this information without seeking the professional counsel of an attorney licensed in your state.

If this article is considered an advertisement, it is general in nature and not directed towards any particular person or entity.

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May Music Legal and Business Roundup

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Categories: Articles, Business, Legal Disputes, Legal Issues, Music Industry, Tags: , , , , , , , , , , , , , ,

cowgirl, lasso, roundup

Image via freeimages.com

Here’s a recap of my article’s this month:

 

May was actually a little quiet on legal issues making the news.  However, the big news was really a tragic one.  The world lost another amazing artist, Prince.  His death was unexpected and shocked his fans and all of us in the industry.  A great artist who leaves a great legacy.

Here’s the other top stories in music legal and business:

 

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Key Clauses in Management Agreements Part 2: Commissions

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Categories: Articles, Business, Law, Management, Music, Music Contracts, Music Industry, Royalties, Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

erin m jacobson, erin jacobson, management commissions, management agreement, contract, music attorney, music lawyer, los angelesIn a recent article I explained the term of a management agreement, and in this article I’ll discuss management commissions; arguably the other most important clause of a management agreement.

The commission is the amount of money the artist will pay the manager under the contract. This is usually done as a percentage of the artist’s gross income. Standard percentages are usually 15-20%, with 15% being more common than 20%.  I have seen the percentages range from 10-25%, but with both extremes requiring special circumstances. Some more creative deals featuring other percentages have also crossed my desk, but again, these deals require other career aspects or services not typically included in management deals.

Aside from the percentage, it is important to know if the commission is being taken on gross or net income, and what gross or net income actually includes. Management agreements in the music industry typically have a list of exclusions on gross income that are specific to aspects of an artist’s career in the music business. This is different than management agreements in other areas of entertainment and in my experience, not all attorneys (even music attorneys) know what to exclude. It is also important to note when, if any, the manager is able to share in other income aside from the main commission.

It is also common for managers to take a commission after the term of the agreement has ended – and I’ll cover that in the next article on management agreements.

Contact me now to draft or review your management agreement.

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New Video: How Much Do Artists Earn from Spotify?

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Categories: Royalties, Streaming, Videos, Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , ,

I talk about the numbers.

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Key Clauses in Management Agreements Part 1: Term

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Categories: Articles, Management, Music Contracts, Music Industry, Tags: , , , , , , , , , , , , , , , , , , , , , , ,

Management Agreement Term Length The Music Industry Lawyer Attorney Erin M JacobsonThe artist-manager relationship is one of the most important relationships in an artist’s career. The manager has to “get” the artist and the artist’s artistic vision, but also needs to have the knowledge on how to translate that vision into something that will generate mass appeal and profits. The manager also has to have the business acumen and connections to generate opportunities for the artist so that his or her career can grow. An artist needs to be able to trust the manager, feeling that not only is the manager knowledgeable, connected, and in tune with the artist’s essence, but also that the manager is at all times acting in the artist’s best interests instead of serving the manager’s own needs.

Management agreements have several important aspects that need attention and often, negotiation.

The first of these aspects is the term of the management agreement. I explained what a contract term generally means here, and for purposes of this article the “term” will refer to the length of the relationship. Traditionally, management agreements have a term between three and five years. Managers typically would want four or five years because, as they often argue, it takes a long time to create the momentum needed for an artist to really start seeing success. From a manager’s perspective, this can be true and also gives the manager the opportunity to still be representing that artist when success comes; that way the manager can receive a full commission rate at the artist’s higher income level instead of earning a percentage of the low (or no) revenues artists usually earn at the start of their careers.

On the other side of this, artists usually want to sign with a manager for the shortest amount of time possible, which allows the artist to get out of the deal faster if the manager is not delivering on promises or things just aren’t working out. There is almost nothing worse for an artist than being stuck in a bad deal that hinders the artist’s career by blocking potential opportunities while the artist waits for the deal to end.

These days I have been seeing even shorter terms on management deals, often one or two year initial terms with at least one option period attached. Both parties really need at least a year to get enough momentum going to start seeing some increased success, but it seems the management deal is following the trend of all deals in the music business by shortening terms to try to reduce risk.

What people tend to forget when thinking about the length of an artist-manager relationship is that terms can always be renewed. If the contract term length is on the shorter side, the parties can always renew the agreement at the end of the term if they still desire to work together. The parties don’t have to part ways just because a piece of paper set a time limit at some point in the past. On the other hand, if the parties feel it is time to move on, they have the freedom to do that knowing they gave it a fair chance during the time period they originally allotted.

Part 2 of this series will cover management commissions.

Contact Erin now to draft, review, or negotiate your management agreement.

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New Interview on The GenY Success Show

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Categories: Interview, Music, Music Industry Interviews, Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Erin M Jacobson music attorney lawyer authority expert networking

I recently did an interview on the The Gen Y Success Show and this has been one of my favorite interviews!  It’s a little different than some of my interviews because it’s not about the music business — this interview is about my path in becoming a music attorney, my love of music (and a few examples of my favorite bands and concerts),  my tips on how to network effectively, and more!

“…[Erin Jacobson] established herself as an authority, not only as a lawyer, but within the music industry itself.”  ~ Jason D. Bay, host of the GenY Success Show

Listen here:  The Gen Y Success Show (Online / iTunes)

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What is a Contract Term?

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Categories: Articles, Law, Music Contracts, Music Industry, Music Publishing, Record Labels, Tags: , , , , , , , , , , , , , ,

By:  Erin M. Jacobson, Esq.

A “term” of a contract usually refers to the length of time an agreement covers. For example, two parties may decide to work together for a period of three years, thus the contract would have a “three year term.” Sometimes, the term is broken up into a firm amount of time, with the option to continue working together for longer.   This could look like an initial period of two years, with a one year option. If that option is exercised, then the total term of the contract would be three years. These options are often exercisable at the discretion of one party (like a manager or a record label), making that party obligated to initial period and only obligated to the option periods if they choose to exercise them. The other party (like the artist), however, would be obligated to the entire term (initial period plus options). In other types of agreements (like certain types of music library or publishing agreements) options may automatically renew on a yearly basis, making the contract last as long as the parties are willing to continue working together.

The other way the words “term” or “terms” are used in relation to contracts is to describe certain the actual provisions of the contract. People will say things like “according to the terms of the contract,” which means the provisions of that contract. They may also refer to a specific, singular term, meaning one provision in particular. You will usually know the difference of “the term” versus “a term” or “the terms” based on the context of the conversation.

Both the term length and actual terms are important due to the fact both could bind you to an agreement not ideal for your career. You could be stuck in a deal where the term length extends much longer than it should and prevents you from signing other deals, creating other projects, and stalls your career. In a situation like that, your career in music will effectively be over because without the ongoing momentum, people will forget about you and your music, newer artists will be on the scene, and you will be on a hamster wheel trying to play catch up while the industry moves forward without you.

If the other terms of the agreement aren’t ideal, you could also be broke by paying large amounts of commissions to those you work with without anything left over for you.   You could lose your copyrights and the right to continue profiting off of your work because someone else owns it. You could even lose the right to use your own name professionally, like one artist who told me her story of not being able to register her name as a URL, because she had unknowingly signed those rights away to someone else.

It is of the utmost importance to know what you are signing and have an experienced music attorney review your contract to make sure you do not become another music industry statistic of a promising young talent whose career was crushed by your own failure to hire the right person to protect you.

If you have been offered a deal, contact Erin now to have it reviewed.

Disclaimer: This article is for educational and informational purposes only and not for the purpose of providing legal advice. The content contained in this article is not legal advice or a legal opinion on any specific matter or matters. This article does not constitute or create an attorney-client relationship between Erin M. Jacobson, Esq. and you or any other user. The law may vary based on the facts or particular circumstances or the law in your state. You should not rely on, act, or fail to act, upon this information without seeking the professional counsel of an attorney licensed in your state.

If this article is considered an advertisement, it is general in nature and not directed towards any particular person or entity.

 

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What’s the Difference Between a Music Library and a Music Publisher?

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Categories: Articles, Music Contracts, Music Industry, Music Libraries, Music Publishing, Tags: , , , , , , , , , , , , , , , ,

music library music publisher music lawyer music attorney erin jacobson erin m jacobsonMusic libraries have exploded in popularity since musicians and composers discovered synchronization (“sync”) placements as an opportunity to make money and gain exposure in the music business. However, songwriters are often confused about the differences between music libraries and music publishers, especially because many libraries are trying to cross over into the publishing space. Here’s what you need to know.

Music Publishers

Music publishers have been around since the late 1700s in America, and they serve as the overall administrators of a songwriter’s compositions. Publishers perform many functions, including:

  • managing a writer’s catalog
  • promoting the compositions in the catalog
  • getting recording artists to record songs by the writer
  • working with a writer’s record label (if the writer is also a recording artist)
  • pairing a writer with co-writers
  • getting sync placements, etc.

Traditional music publishing contracts usually follow one of the following structures:

  • Songwriter agreement: the writer transfers 100 percent of the copyright in his or her catalog of music (including what he or she writes while under contract with that publisher), and the publisher and the writer split the income from the compositions 50/50. (Note: These deals can vary slightly based on the circumstances. For instance, it’s possible that a writer’s back catalog is tied up from a previous publishing deal, and a new publisher will only get new compositions by the writer.)
  • Co-publishing agreement: the writer transfers 50 percent of the copyright in his or her catalog to the publisher. The publisher takes 25 percent of the income from the compositions and the writer receives 75 percent.
  • Administration agreement: the writer retains ownership of all copyrights in his or her catalog, and the publisher simply performs all publishing duties for an administration fee of 10 percent (leaving 90 percent of income for the writer).

Music publishing deals often come with an advance, which justifies the fact that a writer may have to transfer copyright ownership upon signing a new deal. Because publishing deals are exclusive and manage all aspects of the compositions, no retitling of compositions is required.

Music Libraries

The first music library was formed in 1927 in the United Kingdom after movies gained the use of sound technology. The main purpose of that library, and those that followed, was to license music for film (and later TV). Licensing music for film and television is still the main purpose of music libraries today.

These deals can be exclusive or non-exclusive, require a transfer of copyright ownership or not, and may retitle the writer’s compositions (or not). Many libraries realized the value of owning the catalogs of music instead of just acting as a licensing agent and making money on licensing fees. Thus, many libraries decided to do their deals on an exclusive basis and require the writer to transfer to the library a copyright ownership share in the compositions, usually at least 50 percent. Typically, these deals have some sort of threshold where the writer has to earn a certain amount in licensing fees before the obligation to transfer copyright is triggered.

On a more frequent basis, I’m seeing library deals labeled as “co-publishing” deals. These deals provide for a 50 percent copyright ownership transfer, but only a 50/50 income split, which results in less money to the writer than under a traditional co-publishing deal with a music publisher. These deals offer no advance, and require a transfer of copyright ownership triggered by a low threshold of licensing fees. If a writer is close to the threshold but hasn’t met it yet, some companies will even pony up a few hundred bucks to meet the mark, which means the writers are selling out their copyrights for a very small chunk of change.

This scenario may be acceptable for a songwriter who makes his or her living from writing for film and TV and is churning out new songs every day. But in my opinion, these terms are unacceptable for career musicians who are marketing albums, playing gigs, etc. and are seeking placements for extra money and exposure.

The benefit to a library deal over a publishing deal is that a writer can give the library only certain compositions, while leaving others in his or her catalog open to a publishing deal or another opportunity. To be fair, libraries that are incorporating more publishing-like terms in their deals are also doing the work to manage and administer the compositions. However, with many of these companies it remains uncertain whether they have the connections to get other artists to record the writer’s compositions, pair the writer with substantial co-writers, etc. Anyone can act like a music publisher, but the difference lies with whether the longstanding business model and connections that publishers have are present.

For independent or new artists, it’s easier to get a library deal than a publishing deal, but signing with a library and transferring copyrights may complicate or even prevent a writer from signing a publishing deal later.

That’s not to say that a library deal can’t be a great start for a new artist or writer – it can be a great way to earn extra income with songs that otherwise wouldn’t generate any. However, you need to look carefully at your career goals to see which path is really right for your intended career direction. It would be beneficial to consult with an experienced music attorney to discuss which type of deal is the right career choice for you.

Disclaimer: This article is for educational and informational purposes only and not for the purpose of providing legal advice. The content contained in this article is not legal advice or a legal opinion on any specific matter or matters. This article does not constitute or create an attorney-client relationship between Erin M. Jacobson, Esq. and you or any other user. The law may vary based on the facts or particular circumstances or the law in your state. You should not rely on, act, or fail to act, upon this information without seeking the professional counsel of an attorney licensed in your state.
If this article is considered an advertisement, it is general in nature and not directed towards any particular person or entity.

 

This article was originally posted on Sonicbids.com.

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