Labor, Guilds and Pitfalls for Talent

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Contents

Entertainment Unions

  • the influence of a union comes from a voluntary agreement with the producers (but they really have no choice)

Producers- Really in charge of the movie. Director is really only working on stuff going on in the set. If there is a clash between a producer and director, a studio may find it less costly and disruptive to remove a producer than a director. Most producers are not independent and may rely heavily upon studios for financing and distribution of their pictures. Level of work for a producer depends on their experience. Producers get many credits because the Producer’s Guild is not recognized as a union or a guild by the studios. Studios consider producers as part of management and have refused to enter into a collective-bargaining agreement that would restrict the studio’s ability to grant credits. Studios can even give producing credits away as perks to persons who have not earned them. 2 Types- Executive Producer who is the dealmaker and financier. Line producer who is in charge of logistics for the shoot. He will hire crew, order supplies and equipment and make sure that everything the director needs to make the films I available when needed (usually hired by the executive producer).

Director- The director is the person primarily responsible for supervising the creation of a film or television program. Charged with keeping the production on budget and on schedule. A director is typically hired on an exclusive basis, preventing him from accepting outside employment and working on more than one film at a time. Final Cut- Usually the director does not have the right of final cut which is the power to determine the composition of the final edited version of the picture. Studios may insist on reserving this right to protect their investment. Miscellaneous- Television show, the director has a more limited role.

Director’s Guild (DGA)- The agreement acknowledges that the director contributes to all creative elements (and be consulted of them) in the making of a motion picture. With few exceptions, a producer may assign only one director to a film. The director must be provided a private office at the studio. A studio cannot replace a director who directs 100% of the principal photography except for gross willful misconduct. The director is entitled to post-production creative rights. These creative rights include the right to be present at all times and to be consulted throughout the entire post-production period. Directors have a right to make a “director’s cut.”

Studios- Supply financing and have the distribution marketing arms.

Life of Film- 1) Development; 2) Pre-production; 3) Production; 4) Post-Production (scoring, editing, looping)

Literary Acquisition Contract- IS an agreement to acquire all or some rights in a literary property such as a book or a play. Producers typically use it to buy a screenplay or movie rights to a book. Just like real property, the owners will disclose their copyright registration number so that buyers can check the copyright records and review the chain of title to be sure that they are getting all the rights they want. Seller’s Rights- A writer who allows adaptation of his work into film might want to retain book rights, stage rights, radio rights and the right to use his characters in a new plot. Buyers may usually obtain a Right of First Negotiation to these remaining rights. Writer also usually retains the right to use characters in a new plot. Buyer’s Rights- Right to Change- No buyer is going to invest large sums of money to develop a screenplay only to find itself in a vulnerable position, unable to change a line of dialogue without the author’s permission. Buyer’s will also want sellers to make certain warranties, or promises. The writer will often warrant that the work does not defame or invade anyone’s privacy, or infringe on another’s copyright. Buyer’s also want writers to stand behind their warranties and indemnify buyers in the event a warranty is breached (or insurance when the writer is poor). Another provision is an agreement that the seller not let the property fall into the public domain. The buyer will want the right not to make the production as well. Also the rights to assign his rights to another without the writer’s consent. Right of Last Refusal would discourage third-party offers because why should Universal pictures spend time negotiating the terms of a sale with the writer, only to have the deal supplanted at the last moment by WB?

Negative Pickup- Someone gets a finished product and another studio finds the film and picks it up. This is the purpose of the film festivals.

Good Terms- “Including without limitation” “For emphasis but not by way of limitation”

Deal Memo- Has incomplete sentences, mostly bullet points. Often they are signed.

Equity- broadway, live performance for actors

WGA Credits- Producers do not have the unfettered power to award writing credits. Credit Process- The WGA contract provides that a production company must send each writer a copy of the final shooting script and a “notice of Tentative Credits.” If a writer agrees with the tentative credits, he does nothing. If he disagrees, he must protest within the time specified in the notice. Writers may meet on their own and try to agree how credit should be allocated. If they cannot agree the matter will be resolved through arbitration. Arbitration- Writers have the right to challenge a reasonable number of arbiters. Three arbiters are selected from those remaining on the list. Identities remain confidential. At the request of any participating writer, the identities of the writers are not revealed to the arbitrators. Each writer may submit a written statement of his positions to the arbiters. Each draft should have your name on it and you should make a copy of it. But the arbitration has to be decided fast, as one of the reasons why producers allowed WGA to determine credits. See Marino. Specifics- They will read draft of the script and allocate credit. A writer whose work represents 33% of a screenplay is entitled to a screenplay credit. However, for original screenplays, subsequent writers must contribute 50% to the final screenplay to receive a credit. The Guild guarantees the writer of an original screenplay a minimum credit of a shared story credit (irreducible story minimum). Admission- You need 24 credits for admission, which are not allocated evenly. The most is 24 for a screenplay in a feature-length film. Initiation fee is $2,500. Rights- WGA agreement sets the minimum terms for options and purchases of material from professional writers and the minimum terms for the employment of writers for feature films and television programs. Guild members are prohibited from writing for non-signatory companies, and are encouraged to contact the Guild to ensure that any production company seeking to hire them is a signatory. The Guild encourages writers to negotiate more favorable terms known as “overscale” deals. Generally the employer is entitled to one revision within 14 days of first submission. Two meeting Rule- The second meeting has a story commitment. The company must indemnify the writer against claims or actions respecting material assigned to the writer.

Union Misconduct- Whether a union has breached the duty of fair representation. 1) Must decide whether the alleged union misconduct involved the union’s judgment, or whether it was procedural or ministerial; 2) If the conduct was procedural or ministerial, then the P may prevail if the union’s conduct was arbitrary, discriminatory, or in bad faith. However if the conduct involved the union’s judgment then the P may prevail only if the union’s conduct was discriminatory or in bad faith. Marino.

New Adaptations- A lot of unions will want lots of money for new adaptations for work. There might also be a treble damages clause. This is the reason why you don’t see new DVDs of old shows. Need to look at the specifics of the contract Muller.

Loan-Out Company- writers, directors, and actors often incorporate themselves by setting up “loan-out companies.” Most of those benefits have now been abolished, although some pension and health-plan benefits remain. In these companies, an employer contracts with the incorporated company. The company is called a “loan-out” company because it loans out the talent’s services. Inducement Agreement- Studios will want the talent to sign this agreement as insurance in case the talent breaches the contract the studio can sue both the company and the person.

Employment Agreement- Writers- It is risky for companies to hire writers because they have to pay whether the work is any good. So some employers have the writer follow several steps to test him such as a) treatment/outline; b) first-draft screenplay; c) second draft; d) rewrite; e) polish. The Writers Guild sets minimums for each step and a payment scale. Deferred payments are iffy and used in low budget films where the producers can’t afford to pay everyone full price so pay some of the pay is deferred upon a studio purchasing the work. Contingent payments are the most risky. Additional compensation is when producers give writers about 50% for a sequel and 33% for a remake. Don’t forget force majeure clause. Actors- The actor’s employment agreement will grant the producer the right to use the name and likeness of the actor in the film and maybe for merchandising, in which case the actor will be entitled to a percentage participation of the revenues. Agreements may contain a morals clause that requires the actor to conduct himself so as not to violate public conventions or subject himself to public hatred, contempt or ridicule. The employer may want to purchase life, accident or health insurance covering the actor. Minors- California law provides that a minor cannot disaffirm a contract if the contract has been approved by the Superior Court beforehand (via petition).

Types of Unions

SAG

Screen Actors Guild (highlighted in class)

  • Jurisdiction
    • Movies, Prime time TV, Most TV commercials, Educational films.
  • To Join
    • Get hired as a principal on SAG production, (the producer will have to pay a fine, b/c he could not find a SAG member for the part)
      • it is difficult to prove there are no SAG actors available
        • this is easiest for young children
    • Points system extras
      • you don't have to be in SAG to be an extra
    • Join AFTRA and perform as principal under AFTRA
      • there is no criteria for joining AFTRA
  • Global Rule One: "No member shall work as a performer or make an agreement to work as a performer for any producer who has not executed a basic minimum agreement with the Guild which is in full force and effect."

AFTRA

American Federation of Television and Radio Artists

  • Jurisdiction
    • Videotaped TV, Life TV, some TV commercials, all radio commercials, newspapers, discs jockeys
  • To Join
    • Just pay a fee

Actors' Equity (Equity)

  • Broadway plays

DGA - Directors Guild

WGA - Writers Guild of America

Marino v. Writer's Guild of America

(9th Cir. 1993) Circuit Judge Hernandez

  • Marino wrote a screenplay and do did Coppola and Puzo
  • WGA started arbitration to determine screenwriting credits
  • it was determined the two other guys would receive sole credit
  • he requested a PRB hearing and they discovered that one of the abitors hadn’t read his treatment
  • the arbiter read it and reaffirmed his prior decision
  • Marino filed an action in state court
    • Marino contests that the arbitration procedure to determine screenwriting credit is fundamentally unfair
    • that the WGA failed to follow its own procedures
    • that the DC should have granted his motion to know the identity of the abitrators
  • WGA procedure
    • 1. A special committee conducts a hearing where evidence is presented
    • 2. A three individual panel, who remain anonymous, make a decision on creativity in isolation based on the written materials
    • 3. Review by the Policy Review Board – upon request they look to see if there is a serious deviation from the policy of the Guild or the procedures in the Manual

Marino should’ve raised his argument on the anonymity and bias in front of the abitrators

  • he should have raised his concerns before they found against him
    • though this might not have been a good way to address the problem of arbitrator bias

Analysis on the Union’s Breach of Fair Representation:

  • 1. Whether the alleged misconduct “involved the union’s judgment, or whether it was ‘procedural or ministerial’”?
  • 2. If the conduct was procedural or ministerial, then the plaintiff may prevail if the union’s conduct was arbitrary, discriminatory, or in bad faith? If the conduct involved the union’s judgment, then “the plaintiff may prevail only if the union’s conduct was discriminatory or in bad faith.”
    • mere negligence isn’t sufficient
    • to be arbitrary, “the union must have acted in ‘reckless disregard’ of the [union member’s] rights”

Ct. says adoption of procedures is a matter of judgment and although this isn’t the same as would be done in court, it is necessary in the industry for determining credit

Comments on this case:

  • this is one of the few examples of what goes into guild arbitration
  • the guild written opinions are not public
  • the federal scheme provides a lot of deference to guild arbitration
  • the thought is that this is set up through a union of writers so it is fair
  • this arbitration procedure allows problems between writers to be solved quickly – which is important to producers

IATSE - International Alliance of Theatrical Stage Employees

Teamsters

  • not an entertainment union but when you are making a movie, you will need vehicles and they will most likely insert themselves into your production

Exclusivity

  • Guild members can only work for guild signatories
  • Guild signatories can only employ guild members

Subversions of Exclusivity

  • Exclusivity works only on a union-by-union basis, not across unions
  • Working outside the union's jurisdiction (geographical or categorical)
    • But see, e.g., "Global Rule One" (you cannot work for non-union signatories anywhere in the world)
  • Individual can go "financial core" ("fi core")
    • You do not have to be in the union to benefit form the collective bargaining as long as you pay the financial core of the bargaining process.
    • the person won't have to pay for the party fund, lobbying, etc
    • you can work on union and non-union productions
    • SAG doesn't want people to know about this because it undermines their power
  • Production companies can have signatory subsidiaries and non-signatory subsidiaries.

CBA (Collective Bargaining Agreements) basics

  • Employers generally have the upper hand in bargaining
  • Workers negotiate as a collective against individual employers of industry employers grouped together
  • As a group, workers get far more favorable terms than they would bargaining individually
  • Union bargaining is an antitrust exemption
    • usually working together to set prices would be a problem
  • Individual workers and employers cannot negotiate or wave guild minimums
  • Individual workers can always get more than the minimum, and an employers can offer more than the minimums

Unions increase costs

  • Minimum wage/prices
  • Health care & benefits contributions
  • Residuals - when the movie or tv show is running again, additional payments are made
  • Type-of-work limitations (IATSE)
    • craft unions say someone who is a set director can't build anything
    • even on a small production, you will need one of everything
  • Duration-of-work limitations
  • Various bargained-for perks

How Unions serve as barriers to entry

  • Some have difficult membership criteria
  • They require the production companies to make large Production deposits (in the 6 figure range) required for production companies. This makes it hard for small productions.

Unions Circumscribing Entertainment Content and Distribution

  • barriers to entry*
  • New use fees - for use in the movie theaters is an old use, if you want to distribute the film on video or in other way would be a "new use" and you have to pay new use fees.
    • if you change mediums (broadcast television, motion picture, home video) you are required to pay new fees for the new distribution channel and this can inhibit doing that
      • Ex. tribute to Lee Marvin from movies to DVD
    • this is a lump sum paid for moving over – it is not a per unit basis
    • the new use fees are in the collective bargaining agreement
    • you could produce something as an experimental agreement and not pay up front but you will owe almost every dollar to the union on the back end
  • Same people writing, directing, acting can cause lack of change over time
  • Fewer and less risky productions are made because of increased expenses of union production

Contracting Tools

Devices in Contracts Dealing with Transactions

Representations
  • statement of fact (something that happened in the past; present fact, existing condition)
    • could be something that happened in the past, present
  • seller will want to include “Best of my belief…best of my knowledge…or as far as I know”
    • Within my knowledge
    • so to recover on the indemnification, you will have to prove bad faith – making representations that are knowingly false


Warranties
  • promise that a representation is true
    • sometimes this includes a covenant
Covenant
  • promise that something will remain true into the future
Indemnities
  • a collateral assurance where one party promises to make good a loss by another party should a representation, warranty or covenant be breached
  • “the teeth”
  • ordinary a literary agreement will contain an express indemnity
    • seller = the writer
    • buyer = the producer
  • you can be indemnified for any expenses (even if the person suing loses)
  • Types of Indemnifications
    • all litigation expenses v. final judgments
    • could have a dollar amount cap
    • does it include attorney’s fees
  • producers want this as a matter of production – but it is only as good as the assets of the indemnitor
    • so producers will also get E & O Insurance
      • this policy says if there is an infringement of IP rights, the insurer will pay the judgment and the litigation expenses of fighting it
  • Reasons for wanting indemnification
    • creates a lien against the indemnitor
    • will give the writer incentive to be on your side in litigation
  • Caution:
    • it is no defense in copyright law to say that you bought the rights from someone in good faith
    • the same is true with distributing a television program
      • if there is infringing content in Oprah, the small station who purchased it at NATPE is still liable
Muller v. Walt Disney Productions

(S.D.N.Y. 1994) J. Goettel

  • arose out of a contract to conduct the score for Fantasia
  • the Philadelphia Orchestra Association sued Disney for money for using the song “The Right of Spring”
  • Disney is saying if they didn’t have the rights it was because of the conductor Stokowski’s screw-up, so they sued his estate (Muller)
  • Disney is arguing there was an implied indemnification

Issue 1: Was there an express indemnification?

  • Ct. says there is nothing to even remotely suggest an express duty to indemnify
    • clause 7 demonstrates that Disney knew how to create and express indemnification provision

Issue 2: Was there an implied indemnification?

  • Ct. applies CA law to determine there was no implied indemnification
    • Two Options for finding an implied indemnification in CA
      • implied by the contractual language not specifically dealing with indemnification
        • the doctrine isn’t applicable to the facts alleged by Disney
      • equities of a particular case
        • there was nothing special about the contractual relationship that would support this
        • delivering an airtight agreement wasn’t of the essence of the Disney agreement with Strokowski
          • What was of the essence? to conduct and to provide the music


The producer will want a representation that it is the original work of the author, they want a warranty that this representation is true and an indemnity (where if the movie is made, but the copyright infringed someone else’s work) that the author will pay losses if the representation is breached.


Indemnification Negotiating Points

  • There are many different levers within an indemnification that the buyer and seller can negotiate on…
    • All litigation expenses v. final judgments?
    • Cap $$ (up to $100,000 maybe)(maybe the indemnification should cap at the amount paid to the writer – where then the writer would not stand to lose more money than they could gain from the contract)
    • Attorneys fees


The buyer wants the broadest possible


The seller wants the most circumscribed indemnities


Indemnification Clauses are contract principles – they are applicable between the contracting parties – THEY DO NOT APPLY TO THIRD PARTIES

Other Contract Terms - Litwak Chapter 5 – Notes

Right of First Negotiation – after this period expires (or if you’re taking this to a different medium) you have to come to us first and negotiate with us first – “in good faith” – requires that the writer negotiate here first, rather than with a third party

  • The legal affect of this is that it keeps you from talking to other people – a prohibition to negotiating with other parties for a period of time
    • doesn’t obligate you to make an agreement with that party
    • this has a bargained for value
    • after the period of time, you can talk to a third party
    • There is no agreement to agree here – just an agreement to go here first


Right of Negotiation – non-exclusive, has really no affect other than to say the writer has to meet with one studio (it has no real legal affect in court)

  • Contracts are not merely legal instruments, not merely to allocate duties and responsibilities; they are methods of business communications, they function as ways for business persons to communicate with each other
  • This statement may have no legal affect, but business persons may just take it as a cue to sit down and negotiate


Right of Last Refusal – (aka – Right to Match) – if you go and talk to someone else, work up a deal, before you go through with it, you must come back to us and see if we want to match that offer

  • This often just becomes a deal killer – the other party isn’t going to want to put a huge effort into negotiations if you are obligated to go back to another party who has this right of last refusal or right to match
  • It’s like poisoning the water

Muller v. Walt Disney Productions

  • FACTS: Muller is the executor of the Estate of Stokowski, who was the conductor of the music in Fantasia. Stokowski worked for the Phil Harmonic at the time and was suppose to get a release from the Orchestra for their work in the movie, which he apparently did not. Now the Orchestra is suing Disney and Disney is seeking indemnificaiton from Stokowski's estate.
  • ISSUE: Can Disney ask for indemnity from Stokowski's estate?
  • HOLDING: No, there was an indemnifiaction clause in another part of the contrat so Disney knew how to make an agreement.
  • REASONING: 1) Disney knew how to make an espress agreement 2) if Stokowski didn't deliver the agreement with the Orchestra they could have sued him for breach of contract and moved on to another conductor
    • But they didn't worry about the lack of documents until the movie did well

Marino v. Writers Guild of America

  • FACTS: Marino claimed to have been a writer for the "Godfather III" and did not get writer's credit with Coppola and Puza. He went to arbitration for it and the arbitrators sided with Coppola and Puza.
  • ISSUE: Marino is claiming that the arbitration procdures are fundamentally unfair and were not followed. He also wants to know the identity of the arbitrators.
  • HOLDING: Issues with the arbitration process need to be raised during the process. Anonymity is an important part of the process and is part of the agrement, so he can't know the identity of the arbitrators.
  • Two-step analysis used to determine whether union breached duty of fair representation
    • Whether misconduct involved the union’s judgment, or whether it was procedural or ministerial
    • If conduct was procedural or ministerial then the plaintiff may prevail if conduct was arbitrary, discriminatory or in bad faith; if conduct involved union’s judgment, then plaintiff may prevail only if discriminatory or in bad faith
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