‘Free Agency’ Sought by Pop Singer : Litigation: Grammy-winner Luther Vandross is using a 50-year-old California law designed to release actors from long-term studio deals, but Sony is fighting back with a countersuit.

In a test case that industry observers feel could revolutionize contractual relationships in the record business if successful, Luther Vandross has sued Sony Music Entertainment Inc. to end his decade-long association with Epic Records.

“This case is not about money,” Vandross’ attorney Don Engel said Friday. “It’s about artistic freedom. It’s about Luther’s career. He feels that Sony has pigeonholed him and has not done all it could to expand his audience.”

The Grammy-winning singer, who has recorded eight albums for Epic since 1981 with estimated U.S. sales of 10 million, is basing his claim on a controversial California law designed 50 years ago to free actors from long-term studio deals. The law is untested in the music business.

Under the so-called “seven-year” statute, entertainers cannot be tied to any company for more than seven years. Some record company attorneys maintain the statute won’t hold up in court, but they have been reluctant to test it because it could lead to a wholesale exodus of veteran artists. If upheld, artists could attain a free-agency status every seven year similar to that of professional athletes.

To avoid testing it, companies have usually rewritten the contracts of best-selling artists, offering higher royalty rates and other considerations before the seven-year limit is reached.

“There has never been a significant decision regarding the seven-year ruling in the music industry,” said entertainment attorney Don Passman, who represents such pop stars as Janet Jackson and Don Henley. “If this goes to court, the ruling would be unprecedented.”

Though the Vandross suit was filed quietly on Jan. 3 in Los Angeles County Superior Court in Santa Monica, it wasn’t until this week that news of the suit began circulating in the industry.

Sony responded to the legal challenge last week by countersuing Vandross in New York state court for breach of contract--again quietly to avoid widespread publicity about the legal issue. Sony is also seeking a partial summary judgment on $1.9 million in unpaid loans to the singer. A hearing on the matter is scheduled in New York on March 13.

Officials at Sony--who last week petitioned the Santa Monica court to transfer the case to New York, where the seven-year statute does not apply--defended their actions.

“In order to protect its rights, Sony Music was forced to sue Luther Vandross in New York,” a company spokesman said Friday. “Mr. Vandross is seeking to end his relationship with the company, betraying the spirit and good faith of his contract and leaving Sony Music no choice but to enforce its legal rights.”

Most record companies have gone to great lengths to prevent artists of Vandross’ stature from jumping ship.

In Vandross’s case, Sony/Epic has renegotiated and amended his contract five times since March 23, 1981, and maintains that he still owes them another six albums. Sony views the last amendment in Vandross’ deal--dated Nov. 24, 1986--as a new contract.

Engel rejected the Sony position that the 1986 amendment constituted a new contract. He maintained that the 1981 contract is the one that is in force.

But the attorney does not believe that a ruling upholding the “seven-year” statute would be detrimental to the music industry.

“It would create a free market for artists and companies alike,” Engel said “I don’t believe it would hurt the companies in the long run. If a company loses one superstar after seven years, it would be able to balance that loss off by picking up a different star freed up from another label. Let’s face it. Seven years is long enough. No companies in any other field in the entertainment industry tie up artists any longer than that. It’s simply unheard of.”

Even if Vandross won the case, there is still some question as to who would get the revenues from his next six albums.

Five years ago, the Recording Assn. of America--the organization that represents most of the major U.S. record companies--succeeded in securing an amendment to the law that grants record firms the right to sue and recover damages for any product still owed the company by a performer opting to break his or her contract by invoking the seven-year statute.

“If Luther does leave, Sony might be able to sue him for potential damages for the failure to deliver the albums he would owe them under the contract,” said music business attorney Jay Cooper. “Luther could be responsible for a substantial amount of damages.”