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Entertainment Law
Wayne State University Law School
Hertz, Howard

Stat e Licensing

Agents and Personal Managers

Union Regulation of Agents

The overwhelming majority of working performers in these industries are represented by agents, who are heavily regulated by the unions through their “franchising” systems, i.e., licenses under which agents agree to abide by specific union regulations.

If agent lacks a union franchise, the members of that union cannot engage that agent to represent them.

Major point on which union will insist:: agent can’t commission minimum salaries(i.e., “scale” payments, or amounts received by way of reimbursement for items like travel expenses in connection with work).

Agents will seek a rate of scale plus 10% (i.e., the amount of agent commission allowed under most franchise agreements).

There is no contact between Screen Actors Guild (SAG) and Association of Talent Agents (ATA) (as of the time of writing of textbook).

Note: ATA is a nonprofit trade association of more than 100 talent agents primarily located in LA and NY, representing artist clients in film, stage, TV, radio, commercials, and literary work.

Most major agencies continue to operate under the parameters of the prior agreement BUT smaller agencies have been more aggressive regarding what funds are commissionable.

State Regulation of Agents

NY and CA both require agents to be licensed!

Serving as an agent without registering and being licensedcan carry severe penalties.

Remember: licensed and unlicensed agents are affected by the legislation of the jurisdiction.

Fundamental question: who is an agent?

Pine: a one-shot effort at securing a recording contract resulted in a decision that the “finder” was an agent.

Mandel: a non-practicing attorney, acting as a manager under a management contract that provided he was not required to procure employment, was found to be a manager rather than an unlicensed agent.

New York General Business Law—see page 29 for full terms

§ 172: license required for employment agencies

§ 181: duty of employment agencies to give each applicant for employment copy of contract and receipts of payments made by applicant

§ 185: fees

§ 187: additional prohibitions

Can’t induce employee to terminate his employment in order to obtain other employment through the agency

Can’t send someone to employer that agency knows of should knows violates state or federal laws (wages, child labor, etc.)

Can’t engage in any other business on premises of employment agency

§ 189: enforcement of provisions

§ 190: penalties for violations

California Labor Code—see page 38 for full terms

§ 1700.5: talent agents must procure a license from Labor Commissioner (LC); must be posted in conspicuous place in agency

§ 1700.21: Grounds for revocation or suspension of license

§ 1700.23: contracts between agency and artists must be submitted to LC for approval

Except for conditions of § 1000.45, contracts shall have an agreement by talent agency to refer any controversy between the artist and agency relating to terms of the K to the LC for adjustment

K will not be approved if unfair, unjust, or oppressive to artist.

§ 1700.25: Trust Fund Accounts; Disbursement of Funds; Recordkeeping Requirements

§ 100.37: Contracts with minors

§ 1700.40: Repayment of Fees

§ 1700.41: Reimbursement of artist for expenses incurred in going outside city in unsuccessful effort to obtain employment

§ 1700.44: Dispute Determination by Commissioner; Appeal

Parties shall refer controversies to LC who will hear and determine the dispute, subject to an appeal within 10 days after determination, to the superior court where it shall be heard de novo.

§ 1700.45: Validity of Contractual Arbitration Provisions

Notwithstanding § 1700.44, arbitration clauses are valid if:

(a) Clause is in agency-talent agreement, OR

(b) Clause is inserted in contract pursuant to rule, regulation, or contract of a bona fide labor union regulating the relations of its members to a talent agency, AND

(c) Contract provides reasonable notice to LC of time and place of hearings, AND

(d) Contract provides that LC or authorized representation has right to attend all hearings.

Buchwald v. Superior Court of San Francisco, 62 Cal.Rptr, 364 (Cal. Ct. App. 1967)

The musical group Jefferson Airplane sued their personal manager, Matthew Katz. Their written agreement stated that Katz was neither authorized, now would he obtain employment for the group. Jefferson Airplane claimed that, despite the contractual language, Katz did indeed procure bookings for them. Katz argued that written agreement established that he was not subject to statutory regulation.

Court looked to illegality lying behind the contract to determine whether the contract was prohibited.

General holding: procurement efforts require a license and that the substanceof the parties’ relationship, not its form, is controlling.

Agents, whether they are licensed or not, are bound and regulated by the Artists’ Managers Act (and the Talent Agency Act), which gives the Labor Commission jurisdiction over them.

Business Managers

Because the business manger is privy to the most intimate details of the client’s economic life, a very high level of fiduciary duty attaches.

ABKCO Music, Inc. v. Harrisongs Music, Ltd.(2d Cir. 1983)

Issue one: Bright Tunes Music Corp., copyright holder of “He’s So Fine” (HSF) brought copyright suit against George Harrison, and related entities, alleging that Harrison’s “My Sweet Lord” infringed. The court found that there had been a copyright infringement based on a theory of subconscious copying.

Issue two: ABKCO was Harrison’s former agent and negotiated for the purchase of Bright Tunes’ stock (including HSK). Allegation: ABKCO improperly used confidential information received from representation of Harrison.

An agent has a duty “not to use confidential knowledge acquired in his employment in competition with his principal.” This duty exists as well after the employment is terminated as during its continuance. But this rule does not cover use of information based on general business knowledge or gleaned from general business experience, and the former agent is permitted to compete with his former principal in reliance on such general publicly available information.

Evidence here is not at all convincing that the information imparted to Bright Tunes by Klein was publicly available.

An action for breach of fiduciary duty is a prophylactic rule intended to remove all incentive to breach—not simply to compensate for damages in the event of a breach.

Appellant’s conduct didn’t meet the standard required of him as a former fiduciary.

Contract Duration

Introduction

In the old days, 1920s etc., the stars were locked up in contracts with one studio for a long time, maybe like 10 years.

Nowadays, they usually do it one project at a time.

California

1. Seven Year Statute

Today, California is unique with its limitations on the duration of personal service contracts. Since so many entertainment transactions are subject to California law, the California enactments require thorough analysis.

California statute limits enforcement of personal service contracts at 7 years.

Case: De Haviland v. Warner Brothers Pictures (Cal. 1944, page 93)

Facts: The sole question is whether the provisions for suspension, and for extension of the term of the agreement, were lawful and effective insofar as they purported to bind plaintiff beyond seven years from the date her services were commenced. If they were lawful, plaintiff still owes 25 weeks of service; otherwise the contract cam to an end earlier.

Rule(s) to Remember:

The seven years means seven years and cannot be waived.

Case: Warner Bros v. Bumgarner (Cal. 1961, page 111)

Facts: There was a writers strike. Warner Bros. discontinued James Garner’s compensation under a contract because of it. They relied on the force majuere clause in the contract. Garner informed Warner that they were in breach of their obligation and told them that the contract was terminated as a result.

Analysis:

First, the contract did provide that they could refuse to pay him if the series was suspended, interrupted, or postponed. However, the Court finds that the writer’s strike did no such thing here.

So, it follows then, that that contract was breached by the company when they failed to pay him. The question, though, is whether that breach was willful, as required by the statute. Willful does not imply anything blamable, malicious, or wrong, but merely that the thing done or omitted

over, injunction only available to prevent injury from unfair competition or similar tortuous behavior or to enforce an express and valid anticompetitive covenant.

No existing employment agreement between ABC and Wolf, and there is no express anticompetitive covenant that Wolf is violating or claim of special injury from tortuous conduct such as trade secret disclosure.

Dissent thinks that there should be a 90 day injunction, which was the time that was supposed to be the transitional period during which ABC and Wolf were supposed to negotiate in good faith.

D. Notes:

Zink Communications v. Elliot: Court distinguished Wolf, granting injunction against allowing Defendant to host competing game shows, because the contract for employment had NOT expired.

KGB Inc. v. Giannoulas: Vacated injunction which didn’t allow a man to wear a chicken suit. Contract was over and no irreparable harm was shown. =

MCA Records v. Newton-John: Court said that can grant injunction against employee performance during contract term, due to a breach, but not after the term is over.

Courts tend to be hostile toward non-competition clauses for former employees. In one case, a court held that it should not require a performer to move to another area in order to obtain employment- Nigra v. Young Broadcasting of Albany, Inc. In another, however, a court held that the uniqueness of personality meant it would enforce a one year, 100-mile radius non-competition clause- Midwest Television, Inc. v. Oloffson.

If an injunction cannot be obtained against the performer to prevent the performer from working for a third party, in California at least, cannot obtain injunction against the third party itself either.

Injunction will endure for duration of the term of the contract, including unexercised option periods.

In recording agreements, there is usually a clause against re-recording material; these negative covenants usually run for 5 years from date of release of artist’s recording or 2 years from date of expiration of agreement- whichever is later.

California Injunction Statutes

1. Intro

Basically two sections of the California statutes cover this…California Civil Code 3423 and California Code of Civil Procedure 526. They are called the “9,000 plus statute). The statutes basically provide that in order to provide the basis for injunctive relief, a contract must be in writing, provide for services that are unique and extraordinary, and provide for a minimum compensation (which, until 1994, at the rate of not less than $6000 per year).

It is important to note that the $9000 plus per year rule is not a mandatory condition placed on all employers, but, ultimately, inclusion of that clause in all entertainment service contracts would have a significant economic effect on the entertainment industry and its constituent personnel.

Class Notes: The next couple cases were decided when the $6,000 rule was in effect. So now just pretend its $9,000. The Newton-John case illustrates the hazards of terms based on fixed time periods, and the Brockert case illustrates that the reference in 3423 to the stature of the artist are not mere boilerplate.

Case: MCA v. Newton-John (Cal. 1979, page 133)

Facts: Olivia Newton-John was enjoined from recording for anyone other than MCA while MCA’s action was pending or until April 1, 1982, if that date shall occur during the pendency of the action. The court rejected Newton-John’s argument that she could not be enjoined from recording for third parties because MCA did not guarantee that she