Paul vs. John, George and Ringo

A legal analysis of Paul McCartney’s 1970 lawsuit
against John, George and Ringo



                                                                                By Joseph C. Self



(Editor’s note: The author, a practicing attorney in Arkansas, is also the author of essays on this site analyzing the George Harrison "My Sweet Lord" suit and the John Lennon "Roots" album lawsuit.)


The following article ran in the July 2001 issue  of Beatlefan
magazine and is reproduced here with the kind permission of
Beatlefan and its author, Joseph C. Self.  All rights are reserved

in this copyrighted article.  In other words, no "Napstering" this one!


       Much has been written over the years regarding the circumstances

that caused Paul McCartney to sue his former bandmates on the

last day of December, 1970.  His action began a series of court

battles between the Beatles and the various companies associated

with them that continued for the biggest part of the next two

decades.  This article will focus solely on the initial action

filed by McCartney and examine precisely what he sought from the

English court that heard his case.  In focusing on the factors

cited to the court that drove McCartney to seek the aid of the

legal system, this article will not review the arguments made by

the opposing parties or the order of the court beyond stating that

the relief requested (appointment of a receiver and an accounting)

was granted.  Except for the background information at the

beginning and the author's observations at the conclusion, this

piece is based solely on arguments made by McCartney's counsel in

open court on March 1 and 2, 1971.




     To understand why McCartney took such drastic action as suing

his friends and airing the Beatles' business affairs for the world

to see, a brief summary of those various dealings would likely be



     Prior to April,1967, George Harrison, John Lennon, Paul

McCartney, and Richard Starkey aka Ringo Starr were partners at

will.  As Pete Best could tell you, this meant the agreement to

work together could be terminated by any of them at any time.

However, on April 19, 1967, a partnership deed was entered into

in which the Beatles agreed that their partnership would continue

for a period of ten years, with the name of the firm being "The

Beatles & Co."  Apple Corps Limited was also brought into the

partnership with an eighty percent interest in the capital and

profits of the partnership, with Apple agreeing to pay the sum of

£800,000 to be a partner.  As corporations are treated as separate

legal entities, the Beatles were in partnership with their own

company.  The partnership agreement gave the company the right to

manage the business of the partnership and exploit the assets of

the partnership as profitably as possible.  The agreement further

provided that "proper books of accounts shall be kept by the

partnership" and that on the 31st of each year a balance sheet and

profit and loss statement for the year ending was due to each



     It was contemplated by the Beatles that their long-time

manager, Brian Epstein, would still be in charge of their affairs

for the implementation and execution of this new agreement.

However, in August, 1967, Epstein died and the Beatles' financial

affairs became even more complex.  Apple became a fully operational

company, and proceeded to lose money at an alarming rate.  In early

1969, John Lennon remarked to Ray Coleman of Disc magazine that if

things continued with their financial affairs as they had been

going, the Beatles would be broke within six months. 


     This statement caught the eye of Allen Klein, an American who

was involved in music publishing and artist management in New York

who had also served as an agent for some British musical acts, most

notably the Rolling Stones.  Klein, who controlled an American

company called ABKCO, ingratiated himself to Lennon, Harrison, and

Starr in the late winter and early spring of 1969.  McCartney,

however, was not enamored by Klein, in part because he wanted his

brother-in-law, John Eastman, to be the manager of the Beatles.

Despite the lack of unanimity within the band, on May 8, 1969, a

contract was entered into between ABKCO and Apple, executed by

Lennon and Harrison as directors of Apple, as well as the three

Beatles who wanted Klein in charge of their affairs.  McCartney

never signed the contract with Klein.


     Over the course of the next year and a half, Klein met with

mixed success as the Beatles' manager.  He renegotiated the

existing recording agreement with Capitol records for the United

States, Canada, and Mexico in which the Beatles' royalty increased

from seventeen and a half percent to twenty five percent.  He was

involved in the negotiations to free the Beatles of Nems, the

company formed by the late Brian Epstein.  He also was able to get

the film "Let It Be" into the hands of the distributors and the

album of the same name into stores.  On the other hand, the Beatles

failed to acquire control of their publishing rights from Northern

Songs, as that company was sold to ATV (a failure that, in fairness,

cannot be completely blamed on Klein).  He alienated McCartney

even further by attempting to delay the release of his self-titled

solo album and by releasing LET IT BE after it had been reworked by

Phil Spector. 


     As 1970 unfolded, it became apparent that the Beatles were not

going to be recording again, at least for the foreseeable future.

Starr had turned his attention to solo projects such as SENTIMENTAL

JOURNEY and BEAUCOUPS OF BLUES and had continued his film career.

Both Lennon and Harrison were recording solo albums which were

being produced by Phil Spector. McCartney seemed reluctant to do

anything following the release of MCCARTNEY, at least in part

because it was not clear whether revenues from solo recordings were

to be divided as per the temrs of the partnership agreement.


     While McCartney upbraided Ray Coleman for reporting John's

remarks to the world, he too had been concerned about the Beatles'

financial affairs for some time.  McCartney had appointed some

accountants to work for him in May, 1969, and as of December 10,

1970, the accountants for the Beatles Company had been unable to

produce any account for a period subsequent to March 31, 1968.  One

of the duties that Apple had to the individual Beatles was to take

care of their accounting, and the state of their financial records

led McCartney to question whether enough money was available in the

Apple accounts to pay the taxes due.  It wasn't until an appeal by

the Beatles against a provisional income tax assessment on profits

for the firm was scheduled for a hearing in December, 1970 that

McCartney and his advisors found it necessary to file an action.


 McCartney files suit against Lennon, Harrison, Starr and Apple


     In his action filed before the High Court of Justice, Chancery

Division in London, McCartney had to name as defendants the other

partners in his business.   Even though the named defendants were

John, George and Ringo, it was clear that the real target of his

suit was Allen Klein.


     McCartney sought two basic remedies.  First, he asked that a

receiver be appointed to act as a caretaker of properties and

interests in which the Beatles were involved. Second, he asked that

an accounting of the Beatles financial condition be made by someone

hired by the receiver.  According to Black's Law Dictionary, a

receiver is

     "an indifferent person between the parties to a cause,

     appointed by the court to receive and preserve the

     property or fund in litigation, and receive its rents,

     issues and profits, and apply or dispose them at the

     direction of the court when it does not seem reasonable

     that either party should hold them." 


The aim was to have someone other than the current staff at Apple

(which was working under ABKCO supervision) run the affairs of

Apple and get the financial records in order.  It was clearly

McCartney's position that the Beatles were no longer a functioning

band, and a receiver would have the primary duty of collecting

payments from various sources based on the work the Beatles had

produced up to that time. 


     Because Paul was the moving party, he bore the "burden of

proof" that such an extreme step was necessary.  After all, he was

asking a judge to intervene in business contracts that had been

entered into voluntarily by all involved, and wrest the control of

the company away from the majority of the parties to the contract,

namely John, George and Ringo.  Paul reportedly had to be pushed

into this action by his advisers, but when he and his legal staff

went to court, they seemingly brought every complaint they had

without any hesitation. 


     McCartney's attorney, Mr. David Hirst, did all the talking for

Paul during the summation, and outlined the case against the three

Beatles, Apple and by extention, Allen Klein, in an orderly and

detailed fashion.  He claimed that without a trustworthy receiver

in charge, the assets of the Beatles were in jeopardy.  There were

seven areas McCartney felt demonstrated the partnership assets were

being misused or improperly accounted for.  These were: (1) that

Allen Klein billed more money for his commissions than he was

entitled to take pursuant to the agreement that the majority of

Beatles executed with him; (2) the Defendants had entered into

contracts which affected the property of the partnership without

McCartney's knowledge or consent; (3) the abysmal state of the

bookkeeping and accounting; (4) grouped with the next two items,

the financial situation of the partnership; (5) the tax situation

of the partners; and (6) the partner's excess drawing upon

partnership assets.  Finally, the seventh factor was a very general

allegation that Allen Klein had engaged in misconduct as the

manager for the Beatles, and based on his character, the court

could assume it likely that the wrongdoing believed to have occured

to that point would continue if he were allowed to continue in his

capacity as Beatles manager.


     It was also incumbent on McCartney to show it was likely that

a court hearing the full case would agree that a dissolution of the

partnership was appropriate.  In addition to the factors set out

above, Paul claimed his artistic freedom was being curtailed by his

partners to such an extent it amounted to "unfair dealing" between

the partners.


        Allegations of Excess Payment from Apple to Klein


     Hirst began his presentation on what was probably his

strongest argument:  that Allen Klein had received excess payment

of commissions on royalties from various sources.  His first

example involved the McCARTNEY album.  Klein claimed a commission

on the royalties earned by MCCARTNEY even though it was clear that

he had no management contract with McCartney.  A point in

contention during the litigation was whether solo albums were

partnership assets, i.e. were to be divided among the partners

according to the partnership agreement.  Not surprising, Klein (and

the other Beatles) took the position that the solo records were to

be so divided (and in the case of Starr, Harrison, and Lennon, it

did not matter to Klein since he had a contract with those three

Beatles).  McCartney was adamant in his position that solo projects

were not covered by the partnership agreement. 


     At one point, John Eastman wrote to EMI Records on Paul's

behalf and asked that the royalties from MCCARTNEY be held by EMI

rather than paid to Apple, a request that EMI granted.  However,

EMI continued to supply to Apple (and thus Klein) the sales figures

for MCCARTNEY.  Upon seeing what MCCARTNEY had earned, Klein

deducted his commission for those sales from existing Apple assets.

Klein therefore was paid L72,000 pounds on royalties that had not

yet been turned over to Apple, but were still being held by EMI.

Because EMI was holding the money, McCartney had received nothing

from the sales of his record. 


     Mr. Hirst then moved to his second example of overpayment to

Klein in looking at the commissions charged on what were

unquestionably Beatles records covered by the partnership

agreement, that is releases under the name "Beatles".  Klein had

negotiated an increase in royalty payments with Capitol Records

(which controlled the United States, Canada and Mexico, the single

largest market for Beatles records) in which the royalty increased

from 17 1/2% to 25% of the wholesale price.  Even McCartney himself

approved of this renegotiation and signed the documents that put

the new rate into effect.  However, the agreement that Klein had

entered into with Starr, Harrison, and Lennon called for a

commission of 20 percent of any increase in royalties Klein was

able to secure.  When the financial records were disclosed, it was

learned that Klein was taking 20 percent of the entire royalty.  On

the sums of money the Beatles earned during 1969 and 1970, the

total Klein claimed for his management fee was L851,000.00, and

over L600,000 had already been paid to Klein; McCartney claimed

that the commission on those Capitol Records royalties should have

been no more than L250,000.00.


     (To demonstrate the effect of what Klein had done, assume the

Beatles had sales of $100,000.00 in records on a wholesale basis.

On that sum, the band would have received $17,500.00 under the old

contract, but under Klein's renegotiated contract, that sum went up

to $25,000.00.  Thus, Klein would have been entitled to a fee of

$1,500.00--20 percent of $7,500.00, representing the amount of

royalty due solely to Klein's negotiating skills.  Instead, Klein

collected 20 percent of the entire sum, or a commission of $5,000.00.)



     Klein had also claimed a commission of EMI royalties, meaning

Beatles records apart from the United States, Canada, and Mexico,

of L123,000.00, L114,000 of which had already been paid to ABKCO.

McCartney's position was that there had been no increase in those

royalty payments from the EMI sales, and therefore no commission

was due to Klein on the sale of those records. 


          Various Breaches in the Partnership Agreement


     Hirst then turned to the numerous claims of breaches in the

partnership agreement.  As noted earlier, the original contract

with Klein was presented to Paul McCartney for his consideration

and signature and under basic partnership law, could be considered

valid as ratified by the majority of the partners.  In short, Paul

got to vote along with the others, he was outvoted, and as happens

in life, was likely stuck with the decision of the majority.

However, subsequent to the execution of the contract that McCartney

refused to sign, there were a series of additional agreements

between Apple and Klein. 


     To begin with, there was no dispute that in September, 1969,

Apple Records, Inc. sent a letter to Capitol directed that Klein's

commission be paid to Klein directly, stating that ABKCO was to

receive 20 percent of all sums accruing from Capitol Records, Inc.

This letter was signed on behalf of Apple Records, Inc., by Lennon,

on behalf of the partnership by Starkey and Lennon, and on behalf

of the company Apple Corp. Limited by Harrison and Lennon.

McCartney maintained that he had never been shown those documents

prior to litigation.  The Partnership Act in England provided at

that time that a majority of partners can govern in certain cases,

but only after a full consultation with all partners.  McCartney's

position was that assuming, without conceding, the original

contract with Klein had been legal at the time, the variation on

that contract as it was related to Capitol Records had to be

discussed with him in order to be valid, and it had not been so



     A similar event took place in 1970, when a letter was sent to

EMI in which Apple authorized that 10 percent of sums due to Apple

were to be paid to ABKCO, thus granting Klein a commission on sales

outside of the US market that he would not have received under the

May 1969 agreement.  Once again, these documents were executed by

Harrison, Lennon and Starkey, and as before, McCartney professed no

knowledge of such. 


                 The Financial Records of Apple


     Hirst then went into great detail regarding the abysmal state

of the accounts of Apple.  He pointed out that after Klein assumed

the manager's position of the Beatles, there had been no one in

charge of accounting between August 1969 and January 1970.  There

was a gentleman who was in and out of England between January and

June of 1970 and then no other accountant in charge from June

through December 1970.  Not only were the state of the accounts a

problem for McCartney in determining what monies had been

erroneously paid from Apple to Klein, but there was a looming tax

problem.  In a letter to Klein in April of 1970, one of the

accountants wrote that his three previous letters regarding the

accounts had not been answered and mentioned the inland revenues

interest in the Beatles accounts.  In correspondence before the

court, the accountants were screaming that they needed full

cooperation of Klein and Apple, but were receiving no help.


                  The Financial State of Apple


     McCartney's lawyer then turned to the financial state of the

partnership itself. Without going into mind-numbing details in this

article, the sketchy information the accountants were able to

provide showed that Apple's net worth, excluding good will, was

L208,000.00.  Not a bad sum, to be sure, but there was an estimated

income tax bill of L341,000.00 coming due.  There were additional

questions about sur-tax liability.  To make matters worse,

individual Beatles had withdrawn money from the partnership

account, leaving in its place an IOU.  Lennon had withdrawn

L76,000, Starr L68,000, Harrison L20,000 and McCartney L18,000.

>From the state of their records, it did not appear that the Beatles

would be able to meet their tax obligations. 


          Objections to Klein's Suitability as Manager


     Mr. Hirst then moved to his final point regarding the jeopardy

to the assets and launched an attack on Allen Klein's character in

order to demonstrate that Klein could not be trusted.  In

addition to the matters that he had already mentioned at length

(excess commission, secret variations to the original management

agreement and accounting shortcomings), Mr. Hirst set forth how

Klein had been involved in the affairs of Maclen, a publishing

company owned by Lennon and McCartney.  Maclen was under contract

with Northern Songs to deliver a certain number of McCartney and/or

Lennon compositions each year, and in 1969, Maclen brought an

action against Northern Songs for an accounting.  However, in the

autumn of 1970, the action changed from one of an accounting to

one in which Maclen sought to repudiate the contract with

Northern.  McCartney claimed that this change in the relief

sought from Northern was done without his knowledge and consent

and that Klein was a part of it.  Further, McCartney alleged that

Klein had attempted to claim a commission for some of Maclen's

earnings back to 1967 but was prevented from the accountant from

doing so. 


     Hirst then pointed out that the practice of trying to charge

a commission for earnings prior to the management contract was

not unique in the Maclen matter.  Before the management contract

with Klein was signed with three of the Beatles in May of 1969,

there had been a rather unpleasant dissolution of the previous

management contract with Nems Enterprises.  Because of the

squabble between the Beatles and their management company, EMI

held L1,300,000 pounds until the dispute could be resolved.  It

was finally settled by July, 1969, and EMI released the money it

was holding pursuant to the agreement.  Klein charged a commission

on money that EMI paid in July, 1969, but was clearly marked as

money that was owed on March 1, 1969, some two months before any

agreement with Klein was signed.


     McCartney had several complaints with the way the film "Let It

Be" was handled.  He maintained that the contract he had signed

in 1965 with The Beatles Film Production Limited (which later

became Apple Films Limited) had expired and therefore Klein had

no authority to make a deal with United Artists for the release

of a film in which he appear.  Further, there was a letter from

Ringo Starr on behalf of Apple Films, Inc. (the American

distributing Company) and George Harrison on behalf of Apple Films

Limited on April 10, 1970 in which Apple agreed to give ABKCO. 20

percent of the monies paid to Apple Films, Inc.  The significance

of that assignment from Apple Films, Inc. was that Klein could be

paid the money in dollars rather than pounds and would not have to

pay taxes on it in England.  The Beatles share of the income earned

in America, however, would be paid through their English company.

McCartney's position was that Klein was first negotiating deals for

the release of the film "Let It Be" that he had no right to do,

and then was structuring the deal so as to avoid paying British

taxes on his commission earned by the film. 


     To conclude the section on the mistrust of Allen Klein,  Hirst

brought up that Klein had some legal problems in New York,

including a criminal conviction and trouble with the Securities and

Exchange Commission over some of his business dealings.  Hirst's

position was clear: Klein was a person that could not be trusted

with overseeing such enterprise as that of the Beatles.  In order

to drive that point home, there were several portions of the

Affidavit Klein submitted to the Court in England that were called

into question regarding his integrity.


                  The Certainty of Dissolution


     McCartney then moved to the shorter section of his argument,

that the partnership was certain to be dissolved at a future date.

Many of the factors that had been listed previously regarding the

business relationship of the parties and the jeopardy to their

assets also applied to the question as to whether this partnership

was going to be dissolved.  However, there were a couple of factors

unique to this issue.


     McCartney's clearly did not like the fact that Klein had been

forced upon him as a manager by the other three. Even so, it was

primarily the way things transpired after Klein was appointed as

manager that McCartney cited as evidence that the partnership was

not going to be able to continue.  Whatever Klein's misdeeds had

been, it was the individual Defendants, namely, Starr, Lennon and

Harrison, that appointed ABKCO as the manager.  It was the three

individual partners that engaged in dealings with Klein that

affected partnership assets without McCartney's knowledge.  This

was cited as evidence that not only did McCartney not want to do

business with Klein any longer, he didn't want to be engaged in

transaction with those that mistreated him in such a fashion.


     Hirst then moved to his final area: that the artistic

relationship between the parties had broken down and was not likely

to be patched up.  Citing the effort to delay the issue of the

MCCARTNEY album and the changes on Paul's song "The Long and

Winding Road" on LET IT BE, Hirst pointed out that McCartney's

artistic freedom was being curtailed by his partners.  This,

coupled with the previous point, amounted to "unfair dealings"

between the partners, and such a finding by the court would be

sufficient to justify dissolving this partnership.


                      Author's Observations


     As mentioned in the introduction, McCartney's motion for a

receiver was granted.  The judge did not have to rule on all the

points raised by McCartney to do so, and centered his decision,

which was temporary in nature, on the alleged misconduct of Klein.

He found there was a likelihood that the assets of the partnership

would be jeopardized if the business continued to operate in the

manner in which it had for the prior months, and found that the

partnership would probably be dissolved due to the conduct of the



     With the benefit of 30 years of hindsight, McCartney's

decision, from a purely business standpoint, was a "no-brainer".

While some of Klein's actions as manager had been approved by

McCartney, those had occurred during the initial stages of the

relationship (the Nems settlement and the Capitol renegotations).

For over a year, things had gone from marginally tolerable to

completely insufferable from Paul's viewpoint.  But looking at the

prospects of being the one to sue the others in order to rid

himself of an unbearable situation had to have been gut-wrenching.

Paul took enormous heat from his former bandmates, from the rock

press that saw him as joining "the establishment", and from a

public that viewed him as taking the initiative in breaking up the

Beatles.  Those outside the band that criticized him did not know

or fully comprehend what he felt was wrong; those inside that

disparaged him were the one that had caused much of the problems to

begin with.  The wonder of it all is not that McCartney filed suit,

but rather that it took him so long to do so. 


Copyright 2001 by Joseph C. Self.  Used by permission.