February 1, 2008

A Shift of Power (Entertainment Law)

The California Talent Agencies Act (Ca. Lab. Code § 1700.5 et seq.) was enacted by the California legislature in 1986 to protect artists against potential abuses by professionals who handled the business aspects of their careers.  It requires any person who procures (or attempts to procure) employment for a qualified artist (e.g., actor, writer, director, singer, etc.) to be licensed as a talent agent under the Act.  This is not a facile process.  In order to qualify for licensure, prospective California talent agents must submit extensive background information for character evaluation, file fingerprints, pay fees and post a $10,000 bond, and if they are approved by the Labor Commissioner’s office, they remain subject to many other specific regulations throughout their careers.

By contrast, “talent mangers” are not subject to any such professional regulation.  Although managers often provide important services to artists such as financial advice, career strategizing and scheduling management, they oftentimes cross the line and enter the regulated realm of talent agents.  For example, if a California manager negotiates the fee for an appearance on a television show on behalf of his actor client, he may very well be deemed “attempting to procure employment” for that actor.  If that manager is not a licensed talent agent, and was not working at the direction of a licensed talent agent, he will have violated the law.  Although violations of the Talent Agencies Act are not prosecuted criminally, transgressors have heretofore been exposed to potentially ruinous financial consequences.  Specifically, if a manager merely made one telephone call to book an artist, the artist would be able to void the entire management contract and disgorge all fees paid by the artist to the manager.  Until very recently, this has been a gun that artists could hold to the heads of managers who were not particularly careful about how they serviced their clients.

In 2000, I established a precedent in the California Labor Commissioner’s office that exemplified this type of power artists have traditionally wielded over their managers in California.  I represented a screenwriter whose manager never significantly contributed to the advancement of her early career.  Shortly after my client decided not to renew that manager’s contract, she acquired a proactive talent agent and promptly sold two screenplays for an amount in excess of $2 million.  In an unsurprising development, the former manager emerged from the woodwork and claimed that even though the screenplay sales occurred after the termination of his management contract, he was still due a 15% commission on both sales because the two screenplays were developed while the management contract was in force.  Part of my defense was the assertion that the manager violated the Talent Agencies Act and was consequently not entitled to any commissions.  The manager (who was not a licensed talent agent) balked arguing that he never attempted to procure employment on behalf of my client -- but he did admit that he sent her screenplays out to numerous potential buyers.  His lawyers contended that these sales efforts were no different than selling any other property she owned such as her car or her house, and that they did not constitute any “attempt to procure employment”.  The Labor Commissioner found in my favor after I presented expert testimony about certain aspects of the entertainment industry.  Specifically, I established that the customs and practices involved in the sales of screenplays always contemplate the issue of whether a screenwriter will be hired to do perform rewrite or a polish after the screenplay is sold.  These are future services for which writers would be paid according to WGA standards.  The Labor Commissioner therefore ruled that a manager who attempts to sell a writer’s screenplay will be deemed to have been attempting to procure a “rewrite” or a “polish” unless there is compelling evidence to the contrary.  There was no such evidence in that case, and so my client was spared any obligation to pay commissions on the $2 million she earned.  Writers gained an advantage over their managers with this legal precedent which was emblematic of a trend that favored artists for years to come.

However, power now seems to be shifting to managers in light of the recent California Supreme Court case, Marathon Entertainment, Inc. v. Blasi (2008) 174 P.3d 741.  In Marathon, the California Supreme Court held that a manager’s violation of the Talent Agencies Act does not necessarily entitle an aggrieved artist to void an entire management agreement.  Instead, the ruling instructs that such illegal portions of a manager’s performance can be deemed “severed” from the remainder of the disputed contract, and the offending managers can still be entitled to collect commissions on all legal services rendered thereunder.  Artists can still raise unlicensed procurement of employment as a defense in these matters, however the Labor Commissioner’s office and the courts will now analyze to what extent managers’ conduct was legal on a case-by-case basis.  If the procurement activity was de minimus, the unlicensed manager is now likely to keep a substantial portion of his commissions.  This is no longer an all-or-nothing proposition, and as a result, licensed talent agents in California have lost an important battle in their turf war against unregulated managers.

©Schwartz Law Group 2015
SLG Publications