## Facts

- David M. Ehrlich, a California resident and New York-admitted attorney, worked in the music business as a manager through his entity DME Management.
- Robert Diggs, a New York resident, was a rap artist known professionally as “RZA” and “Prince Rakim” and associated with Gravediggaz and later Wu-Tang Clan.
- On July 1, 1993, Ehrlich and Gravediggaz entered a written “shopping/finders” agreement for Ehrlich to serve as the group’s exclusive representative to negotiate a major-label recording deal.
- On July 2, 1993, Gravediggaz entered a recording contract with Gee Street Records that included an option for Diggs’s solo recording services.
- In August 1993, Gravediggaz allegedly entered an oral management agreement with Ehrlich under which Ehrlich would receive 15% of the gross earnings of the group and each member for entertainment-related work commenced or entered into while he served as manager.
- The alleged management agreement was terminable at will by either side.
- Diggs later entered a solo recording contract with Gee Street on December 20, 1996; Diggs asserted it was independent of earlier arrangements, while Ehrlich alleged it was linked to the earlier option.
- Ehrlich sued for commissions on Diggs’s earnings, including earnings from group work, solo work, production work, and later group membership.

## Issues

1. Whether New York or California law governed the statute-of-frauds question for the alleged oral management agreement.
2. Under the governing law, whether the oral management agreement was unenforceable under the statute of frauds.
3. Whether the alleged oral management agreement was too indefinite to be enforceable.

## Decision

- The court applied New York choice-of-law rules and selected California law for the statute-of-frauds analysis.
- Under California law, the court held the alleged at-will oral management agreement was not barred by the statute of frauds because it was terminable within one year by either party.
- The court rejected the argument that the alleged agreement was too indefinite, finding adequate alleged terms (including a 15% commission and defined scope tied to entertainment-related work during the management period), with industry custom supporting contractual meaning.
- The court denied the defendant’s motion to dismiss and alternative motion for summary judgment as to the core claims based on the alleged oral management agreement.

## Legal Principles

- In determining the enforceability of an oral contract, a federal court sitting in diversity applies the forum state’s choice-of-law rules to select the governing state law.
- Under California’s statute of frauds, an oral employment-type agreement that is terminable at will by either party falls outside the one-year provision because it is capable of performance within one year.
- A contract is not unenforceable for indefiniteness where the pleadings plausibly allege essential terms such as compensation and a workable definition of covered services or earnings; industry practice may inform the content of management duties and commission expectations.
- Fact disputes over whether later agreements and earnings are sufficiently connected to the alleged management relationship generally are not resolved against the plaintiff on a motion to dismiss or at summary judgment when the record does not eliminate material factual disputes.

## Conclusion

The court held that California law governed the statute-of-frauds issue and that an at-will oral artist-management agreement could be enforced notwithstanding the lack of a writing; it also found the alleged agreement sufficiently definite, allowing the commission-based claims to proceed past dismissal and summary judgment.


Ehrlich v. Diggs, 169 F. Supp. 2d 124 (E.D.N.Y. 2001)