Tom Petty files for bankruptcy
By Salley Rayl
Rolling Stone #297 — August 9, 1979
With a third album and a California tour in the offing, Tom Petty filed a formal bankruptcy in Los Angeles on May 23rd. The petition is a proposal for economic rehabilitation — as opposed to complete liquidation of assets — and means that Petty is seeking more time to pay off his debts while retaining possession of his money and personal property. Petty claimed debts of $576,638 against assets of $56,845. As part of the petition, he also motioned to have his contracts with ABC Records and Shelter Records rejected by the bankruptcy court. Petty says this would allow him to sign with another record company for more money and to reorganize his financial affairs to be of more benefit to his creditors.
The petition temporarily stays all state court proceedings in a suit involving Petty and MCA Records; MCA claims that Petty’s contract with ABC Records was validly transferred to MCA after it purchased ABC last March (RS 289). While several MCA sources charge that Petty is using the bankruptcy petition as a legal maneuver to get out of his MCA contract, Tony Dimitriades, Petty’s comanager (with Elliot Roberts), says, "We have a listing of debts and no money to pay them. What MCA would pay us now is simply not enough money to pay for the album, let alone the rest of the debts."
Petty, whose last album, You’re Gonna Get It, went gold, claims there is no clause in his ABC contract stipulating that he could be assigned to another company in case of a sale. MCA disagrees. Last April, MCA and Shelter both filed suits against Petty for breach of contract. "There no no express clause that clearly and unequivocally states that Petty’s contract is not assignable," says Robert Dudnik, an attorney with Rosenfeld, Meyer, and Susan, a law firm on retainer by MCA. "If there were such a clause, there wouldn’t be a lawsuit. We think a clause permitting assignment is in the contract. Petty doesn’t."
In the meantime, Petty’s album — which is "ninety percent done," according to publicist Paul Wasserman — remains in limbo. Ironically, MCA has loaned Petty about $40,000 for the tour, acknowledging that the loan has nothing to do with the controversy over the contract. Petty’s Los Angeles dates at the Universal Amphitheatre on July 28 and 29th are already sold out.