Trickle-Down: Written By New York Music And Entertainment Lawyer And Film Attorney John J. Tormey III, Esq.

http://www.tormey.org/trickle.htm

Law Office of John J. Tormey III, Esq. – Entertainment Lawyer, Entertainment Attorney

John J. Tormey III, PLLC

1324 Lexington Avenue, PMB 188

New York, NY  10128  USA

(212) 410-4142 (phone)

(212) 410-2380 (fax)

brightline@att.net

http://www.tormey.org/

Trickle-Down: Written By New York Music And Entertainment Lawyer And Film Attorney John J. Tormey III, Esq.

© John J. Tormey III, PLLC. All Rights Reserved.

This article is not intended to, and does not constitute, legal advice with respect to your particular situation and fact pattern. Do secure counsel promptly, if you see any legal issue looming on the horizon which may affect your career or your rights. What applies in one context, may not apply to the next one. Make sure that you seek individualized legal advice as to any important matter pertaining to your career or your rights generally.

Reports in the press of contract disputes of years past - one favorite of this music, film and entertainment lawyer which is entitled “Dixie Chicks Sue Sony” - discussed another installment in the seemingly-perennial process of music recording artists suing the record labels with which they previously signed contracts. According to “Dixie Chicks Sue Sony”, the Dixie Chicks claimed that they were due at least US$4.1 million in royalties under their contract, from their music label. See, e.g.:

http://news.bbc.co.uk/2/hi/entertainment/1514747.stm

There is a commonality between this type of music dispute, and a “net profits” or “points” dispute in the context of film or television.

This music, film, and entertainment lawyer article, on the other hand, can offer no opinion on the merits of the Dixie Chicks litigation or contract, or opine with regard to the oft-wondered question in litigations of “which side is in the right?”. The statistical odds in any music, film, or other contract litigation about royalties, net profits, or “points”, are that the case will settle pursuant to a stipulation of confidentiality. Even if we learn of the details of the Dixie Chicks contract or the case’s resolution, we’ll therefore never really know for sure about how other similar music royalty or other contract disputes may have been reconciled. But notwithstanding the sizable amounts of money at stake, the Dixie Chicks-Sony case will likely be governed by certain principles common to all music and film industry contract disputes of its kind, as any entertainment lawyer like myself will tell you.

It really boils down to the timing of when a music artist, film talent, or other artist for that matter, is or should be paid under the contract. Though this may sound pedestrian, the equation is simple. The music and entertainment lawyer opines that, “Agreeing in a contract to be paid the bulk of one’s compensation later rather than sooner, increases the odds that one will be unhappy with the dollar amount of the royalty, “back end”, “net profits”, or “points” payment(s) at that later date”. Would the Dixie Chicks-Sony music contract litigation have never occurred, if the band’s paid-up-front recording advances had been larger? No one – not music and entertainment lawyer, and perhaps not even the parties to the lawsuit themselves - will ever really know that answer for sure, either.

But one cannot argue with the equation. As argued and hammered-out between music or other entertainment lawyer counsel in the contract negotiation, a larger up-front advance to the artist or group at least reduces the magnitude of later artist dissatisfaction with the “net profits”, “points”, or royalty stream of payments that follow. Arguably the Dixie Chicks would be in a better economic position, if suing under the contract for “only” US$1.1 million rather than US$4.1 million. The general form of equation holds up across film, television, publishing, and all other entertainment, media, and related realms. You are better off the earlier you are paid.

Holding aside the Dixie Chicks contract dispute example for a moment, the practical reality for other artists in the music industry is that they often sign record contracts - or now, 360 deals - without the help of a music and entertainment lawyer, before they become commercially successful. Every successful recording artist in the music industry has historically had a “breakthrough” album. What looks like a huge advance in a contract to a starving music artist in the context of an earlier record deal, may later look like a per diem to that same artist several years later after she or he has “made it”. And indeed, the record label’s frugality is understandable. Few if any economically-rational record labels are willing to plunk down a huge contractual advance for an artist who has yet to “make it” commercially, even if they have already retained the services of the best of music and entertainment lawyers. The music and entertainment lawyer can protect the artist. But under most all circumstances (apart from one great band and keyboard player that I know in Pittsburgh), the music and entertainment lawyer is not the one also making the music.

Again, these artist-payment contract disputes, in the music industry, film industry, and otherwise, are a function of time and timing. In this light, the Dixie Chicks are essentially fighting the economic identities that elements within the music industry unilaterally assigned to them several years ago, before they were hugely famous and successful. I do not know at what point in the timeline the Dixie Chicks may have retained high-powered music and entertainment lawyer counsel. But if the band was comparably famous and successful several years ago when they signed their deal, they would have likely commanded much more by way of sizable contractual advances, and would presumably thereby have been better secured against the risk of (alleged) back-end royalty payment deprivation by the record label.

It is ironic that within the past several months prior to the suit, the Dixie Chicks were the subject of a TV news magazine show, in which at least two relevant things were said: (1) one band member suggested that the ladies in the band might soon want to leave the music and entertainment business; and (2) one band member boasted on-camera about having procured the “best [recording contract] deal in Nashville”, or words to that effect. As far as the viewer of the TV program could see, no music or entertainment lawyer was physically present on-camera along with the ladies when these statements were made.

The thrust of the news magazine program was that even with “the best deal in Nashville”, (and presumably able music and entertainment lawyer counsel), an internationally-famous musical recording act had to endure a contractual situation wherein their label was accused of holding most of the money. According to press reports, the Dixie Chicks albums “Ready to Run” and “Wide Open Spaces” sold more than 19 million units, resulting in more than US$175 million in revenue. That approaches a quarter of a billion dollars, and would normally seem to justify the retention of music and entertainment lawyer counsel, at least for future deals. And yet the band’s lead singer dolefully attested on camera that she didn’t “even” have US$1 million in the bank herself at the time of the interview. She jokingly added that her label must have remodeled its Nashville offices based upon the success of her band’s music.

“Where is all of this money going?”, asks the artist-side music and entertainment lawyer, particularly. Well, we know or suspect where it is going. It is true that launching and promoting albums, and developing artists, requires major expenditures by the record label, likely in the millions of dollars. The label has to spend money to make money. The label has to spend money on its own music and entertainment lawyers to draft and negotiate the contracts, for that matter. The film studio or television production company will deploy similar rationales when defending “net profit”, “points”, or other back-end payment arrangements. But in the case of a successful recording and touring act, at least some of the incremental money above expenditures is going towards someone’s profit. It is reasonable to assume that the Dixie Chicks sued because they didn’t think they were receiving their fair share of same under the signed contract, and then convinced one or more music and entertainment lawyer litigators to same effect.

What logical deductions can we make from this case study, that apply to other individual musicians and bands – and perhaps to other media and art forms like film, television, and publishing in the context of royalties, “net profits”, and “points”? First, we need to back up, and keep in mind the first thing that music and other entertainment lawyers learn in practice. There are two principal ways for an artist to get paid for services under a contract: (1) “fixed compensation”, and (2) “contingent compensation”. Royalties are “contingent compensation”, and in the traditional but now fast-evaporating record contract model usually contingent upon either the manufacture or the sale of (non-returned) units. Strictly defined, “contingent” also means that it is possible they will never get paid. In film, television, and other realms, “points”, “back-end”, and “net profits” are all terms suggestive of forms of contingent compensation in a contract. One of my law professors back in the 1980’s was a well-known practicing entertainment lawyer with a music, film, and television practice, and much of our classroom workshops were comprised of haggling over proposed net profit definitions in draft contracts. The song remains the same today, in large part.

Music royalty calculations and film and TV “net profit” or back-end “points” definitions often take many pages of contract text to define - as a music, film, or entertainment lawyer will tell you. In defense of the companies, this verbosity is not always simply a product of the labels and studios and their entertainment lawyers so conspiring. Rather, the income streams in the music and film and TV businesses are truly hydra-headed and fairly sophisticated, and take some care and patience to define. As an entertainment lawyer I realize that this is all scant consolation to a screenwriter working through a studio’s or network’s 50-page written contract definition of “net profits” - or, in the music context, a recording artist immersed in arcane label record contract text purporting to delineate methods of royalty computation. Yet the complexity of calculating contingent compensation is a reality of the industry to which the film net profit or music royalty definition relates.

However, make no mistake about it. Accepting any form of contingent compensation, be it net profits, “points”, music royalties or otherwise, is tantamount to accepting someone else’s “trickle-down”, as any artist-side music and entertainment lawyer will argue. That is, the artist deputizes the company to collect the artist’s money, hold it (presumably) in trust, and then remit it in installments to the artist over time on a deferred basis. Do most people even do that with their own family members? As the music and entertainment lawyer will attest from observing others, and human nature and greed being powerful motivators that they are - the company will often thereupon pay the musical or other artist when it feels like it, and how much it feels like it, sometimes no matter what the contract says. And company “deductions” from the gross payment stream to arrive at “net” or “royalties”, can become extremely creative to say the least. Music and other entertainment industry audit contract disputes often revolve around the acceptability and fairness of such “deductions” from “net profits” or “points”, as fought and argued between entertainment lawyers on either side.

There are contractual ways for musical and other artists to even the proverbial scales of justice regarding their royalties, “net profits”, “points”, or other form of contingent compensation - typically best deployed through the artist’s entertainment lawyer. The most familiar method is the deployment of contractual “accounting” and “audit” clauses or provisions. The music or other artist can endeavor to contractually require the company to remit detailed written accountings of all revenues collected, and (carefully-circumscribed) deductions taken therefrom, on a regular basis. The clauses can be drafted by the artist’s entertainment lawyer. Accordingly, the music artist can also endeavor to reserve the contractual right to audit the books and records of the record company to ensure correct remittance of royalties. In the professional entertainment industry context, audits like this take place all the time, thus ensuring a livelihood for many entertainment industry accountants, entertainment lawyers, and others. It has been reported that wholly two-thirds of all entertainment industry audits result in findings of underpayments. Usually thereafter, the parties reach an economic settlement and move on with their lives. Sometimes, they don’t, and they litigate using music or entertainment lawyers instead. And as indicated above, the majority of litigations themselves settle before going to trial.

And there is hope. Industry custom, and film, music, and entertainment lawyer practice, does often contemplate that recording and other artists may also be paid on a “fixed” as well as on a “contingent” basis. In theory, the contractually-specified recording “advance” represents a fixed up-front payment to the music artist. But many - uh - “creative” record label forms transform the advance into a contingent payment as well, at least in part - this is sometimes referred to as the “recording fund” concept. Film producer compensation may be manipulated by the studio in similar fashion, by payment into a budget as opposed to payment directly to a producer’s bank account. For example, if the musical artist receives a US$300,000 “advance” under the contract, but must himself or herself direct-pay for the first album’s recording expenses out of his or her “own” pocket, then it would behoove the artist not to blow all US$300,000 on one weekend at Monte Carlo. In other words, the bulk of that US$300,000 may not in fact be a fixed payment to the artist, but instead may need to be applied to things like studio time and fees for session musicians. There are many artists out there who briefly thought they were rich for this reason, until the record contract was actually read and reviewed with their music and entertainment lawyer. Similarly, maybe the film producer should not write a check for that Lamborghini just yet, either.

What independent and unsigned artists will discover with or without a music or entertainment lawyer, particularly those music artists with talent, is that there may be plenty of folks along the road who will be willing to bargain for their exclusive recording services, promising no money in advance, but some fuzzy and inchoate “points” later on – with or without waving a proposed contract in front of the artist. This phenomenon is usually exactly what it sounds like - Wimpy’s “I will gladly pay you Tuesday for a hamburger today”. Would-be entertainment company impresarios try to play actors and writers like this, all the time, too.

Sure, the music company and its entertainment lawyer may have a valid point that the artist should be required to share in some of the down-side risk that the recorded finished product will not sell. But by that analysis, the artist-side entertainment lawyer must also conclude that the musical artist should be paid some fixed compensation or “earnest money” up-front, and then some additional contingent compensation later should the project succeed. Otherwise, what assurance does the artist have that this company is truly serious, committed to the music project, and acting in good faith? And arguably, the up-front fixed payment to the artist should be at least sufficient to enable the artist to retain music and entertainment lawyer counsel to draft and negotiate an agreement clearly specifying how the back-end contingent compensation should be paid, and what the artist’s accounting and audit rights should be. The same rationale applies for back-end “net profits” or “points” deals in the film and television realms. The up-front payment at minimum should be the glue that cements the contract.

It is astounding, however, how many artists, typically without music or entertainment lawyer counsel, will agree to be paid for their hard work and their music or other work-product by “points” or “net profits” or other “back-end” alone, perhaps commemorated with writing on the back of a cocktail napkin, or even (gasp) on a handshake alone. Why are these artists selling themselves so short? Perhaps because they are dying for their first big break, and perhaps because they do not have sufficient confidence in their abilities such that they believe that another valuable opportunity will come along. So they don’t enlist the help of a music or entertainment lawyer, and often sign bad contracts or otherwise agree to bad deals.

But the point is, there should be some minimum standard of decency, perhaps along the lines of a well-known California case on point, Foxx v. Williams, and a California statute on point, Civil Code Section 3423:

http://codes.lp.findlaw.com/cacode/CIV/5/d4/1/3/3/s3423

http://scholar.google.com/scholar_case?case=7532225346992492111&hl=en&as_sdt=2&as_vis=1&oi=scholarr

Some deals are simply not worth an artist’s making. Some contracts are not worth signing, and perhaps shouldn’t even be allowed to be signed. Even a Santa Monica tenant desperate for a beachfront apartment should not move into a condemned premises where the floor is in danger of collapsing. And in that real estate situation, the local government - through the building code or equivalent - serves as “watchdog”, and prevents those tenants from striking those bad lease deals even if the tenant otherwise wants to do so. However, there is typically no governmental or other “watchdog” that prevents a music artist from entering into a bad recording contract, only perhaps case law and statutes that can be invoked only if the question is ever later litigated – and additionally perhaps, only an artist-side music and entertainment lawyer, if ever enlisted for the situation. Rather, as a practical matter, in the recording agreement context, the “watchdog” needs to be prospective and internalized. So too must the watchdog be internalized in every artist, in the film, television, and other industries and art forms. The music or other artist can only look to his or her common sense, and hopefully in some cases the artist’s music or entertainment lawyer’s experience and judgment - and this assessment must be made before signature of any contract.

In any case, the following is for certain. If a proposed music recording agreement with royalty covenants as exchanged between the music and entertainment lawyers does not contain these 3 components:

(A) an up-front advance “fixed compensation” payment to the music artist, (if only to show the company’s good faith, but sufficient enough that the artist will have been happy to have done the deal even if no back-end compensation is ever later collected by the artist); and

(B) an accounting clause; and

(C) an audit clause with teeth;

then, serious doubts should be raised as to whether the music artist should indeed look elsewhere for other career opportunities. At minimum, the proposed deal, as the Dixie Chicks might say, needs fixin’.

And the music artist should take heart, I suppose. Getting the “back-end payment”, “net profits”, or “points” bum’s contract rush from a company happens to music artists and other types of artists in all media and sectors, at all calibers and levels of experience and success, whether or not they are represented at the time by a music or entertainment lawyer. No matter how commercially-successful a musician becomes, there may always be doubts as to whether he or she is being royaltied or otherwise paid correctly – and sometimes it takes the music and entertainment lawyer litigators and the court system to scrutinize the contract to find out.

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My music and film law practice as an entertainment lawyer includes the drafting, editing, negotiation, and closure of all contractual matters relating to film, music, television, publishing, Internet, and all other media and art forms. If you have questions about legal issues which affect your career, and require representation, please contact me:

Law Office of John J. Tormey III, Esq.

John J. Tormey III, PLLC

1324 Lexington Avenue, PMB 188

New York, NY  10128  USA

(212) 410-4142 (phone)

(212) 410-2380 (fax)

brightline@att.net

http://www.tormey.org/

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“Performance” Clauses In Entertainment Contracts: Written By New York Entertainment Lawyer And Music And Film Attorney John J. Tormey III, Esq.

http://www.tormey.org/performance.htm

Law Office of John J. Tormey III, Esq. – Entertainment Lawyer, Entertainment Attorney

John J. Tormey III, PLLC

1324 Lexington Avenue, PMB 188

New York, NY  10128  USA

(212) 410-4142 (phone)

(212) 410-2380 (fax)

brightline@att.net

http://www.tormey.org/

“Performance” Clauses In Entertainment Contracts: Written By New York Entertainment Lawyer And Music And Film Attorney John J. Tormey III, Esq.

© John J. Tormey III, PLLC. All Rights Reserved.

This article is not intended to, and does not constitute, legal advice with respect to your particular situation and fact pattern. Do secure counsel promptly, if you see any legal issue looming on the horizon which may affect your career or your rights. What applies in one context, may not apply to the next one. Make sure that you seek individualized legal advice as to any important matter pertaining to your career or your rights generally.

Producing and editing a masterwork of recorded music is obviously a specialized art form. But so is the entertainment lawyer’s act of drafting clauses, contracts, and contractual language generally. How might the art of the entertainment attorney’s legal drafting a clause or contract affect the musician, composer, songwriter, producer or other artist as a practical matter? Many artists think they will be “home free”, just as soon as they are furnished a draft proposed record contract to sign from the label’s entertainment attorney, and then toss the proposed contract over to their own entertainment lawyer for what they hope will be a rubber-stamp review on all clauses. They are wrong. And those of you who have ever received a label’s “first form” proposed contract are chuckling, right about now.

Just because a U.S. record label forwards an artist its “standard form” proposed contract, does not mean that one should sign the draft contract blindly, or ask one’s entertainment lawyer to rubber-stamp the proposed agreement before signing it blindly. A number of label forms still used today are quite hackneyed, and have been adopted as full text or individual clauses in whole or in part from contract form-books or the contract “boilerplate” of other or prior labels. From the entertainment attorney’s perspective, a number of label recording clauses and contracts actually read as if they were written in haste - just like Nigel Tufnel scrawled an 18-inch Stonehenge monument on a napkin in Rob Reiner’s “This Is Spinal Tap”. And if you are a musician, motion picture fan, or other entertainment lawyer, I bet you know what happened to Tap as a result of that scrawl.

It stands to reason that an artist and his or her entertainment lawyer should carefully review all draft clauses, contracts, and other forms forwarded to the artist for signature, prior to ever signing on to them. Through negotiation, through the entertainment attorney, the artist may be able to interpose more precise and even-handed language in the contract ultimately signed, where appropriate. Inequities and unfair clauses aren’t the only things that need to be removed by one’s entertainment lawyer from a first draft proposed contract. Ambiguities must also be removed, before the contract can be signed as one.

For the artist or the artist’s entertainment attorney to leave an ambiguity or inequitable clause in a signed contract, would be merely to leave a potential bad problem for a later day - particularly in the context of a signed recording contract which could tie up an artist’s exclusive services for many years. And remember, as an entertainment lawyer with any longitudinal data on this item will tell you, the artistic “life-span” of most artists is quite short - meaning that an artist could tie up his or her whole career with one bad contract, one bad signing, or even just one bad clause. Usually these bad contract signings occur before the artist seeks the advice and counsel of an entertainment attorney.

One seemingly-inexhaustible type of ambiguity that arises in clauses in entertainment contracts, is in the specific context of what I and other entertainment lawyers refer to as a contract “performance clause”. A non-specific commitment in a contract to perform, usually turns out to be unenforceable. Consider the following:

Contract Clause #1: “Label shall use best efforts to market and publicize the Album in the Territory”.

Contract Clause #2: “The Album, as

delivered to Label by Artist, shall be produced and edited using only first-class facilities and equipment for sound recording and all other activities relating to the Album”.

One shouldn’t use either clause in a contract. One shouldn’t agree to either clause as written. One should negotiate contractual edits to these clauses through one’s entertainment lawyer, prior to signature. Both clauses set forth proposed contractual performance obligations which are, at best, ambiguous. Why? Well, with regard to Contract Clause #1, reasonable minds, including those of the entertainment attorneys on each side of the transaction, can differ as to what “best efforts” really means, what the clause really means if different, or what the two parties to the contract intended “best efforts” to mean at the time (if anything). Reasonable minds, including those of the entertainment lawyers on each side of the negotiation, can also differ as to what constitutes a “first-class” facility as it is “described” in Contract Clause #2. If these contractual clauses were ever scrutinized by judge or jury under the hot lights of a U.S. litigation, the clauses might well be stricken as void for vagueness and unenforceable, and judicially read right out of the corresponding contract itself. In the view of this particular New York entertainment attorney, yes, the clauses really are that bad.

Consider Contract Clause #1, the “best efforts” clause, from the entertainment lawyer’s perspective. How would the artist really go about enforcing that contractual clause as against a U.S. label, as a practical matter? The answer is, the artist probably wouldn’t, at end of day. If there ever were a contract dispute between the artist and label over money or the marketing expenditure, for example, this “best efforts” clause would turn into the artist’s veritable Achilles Heel in the contract, and the artist’s entertainment attorney might not be able to help the artist out of it as a practical matter:

Artist: “You breached the ‘best efforts’ clause in the contract!”

Label: “No! I tried! I tried! I really did!”

You get the idea.

Why should an artist leave a label with that kind of contractual “escape-hatch” in a clause? The entertainment lawyer’s answer is, “no reason at all”. There is absolutely no reason for the artist to put his or her career at risk by agreeing to a vague or lukewarm contractual marketing commitment clause, if the marketing of the Album is perceived to be an essential part of the deal by and for the artist. It often is. It would be the artist’s career at stake. If the marketing spend throughout the contract’s Term diminishes over time, so too could the artist’s public recognition and career as a result. And the equities should be on the artist’s side, in a contractual negotiation conducted between entertainment attorneys over this item.

Assuming that the label is willing to commit to a contractual marketing spend clause at all, then, the artist-side entertainment lawyer argues, the artist should be entitled to know in advance how his or her career would be protected by the label’s expenditure of marketing dollars. Indeed, asks the entertainment attorney, “Why else is the artist signing this deal other than an advance, marketing spend, and tour support?”. The questions may be phrased a bit differently nowadays, in the current age of the contract now known as the “360 deal”. The clauses may evolve, or devolve, but the equitable arguments remain principally the same.

The point is, it is not just performers that should be held to performance clauses in contracts. Companies can be asked by entertainment lawyers to subscribe to performance clauses in contracts, too. In the context of a performance clause - such as a record label’s contractual obligation to market and publicize an album - it is incumbent upon the artist, and the artist’s entertainment attorney if any, to be very specific in the clause itself about what is contractually required of the record company. It should never be left to a subsequent verbal side conversation. In other words, working with his or her entertainment lawyer, the artist should write out a “laundry-list” clause setting forth each of the discrete things that the artist wants the label to do. As but a partial example:

Contract Clause #3: “To market and publicize the Album in the Territory, you, Label, will spend no less than ‘x’ U.S. dollars on advertising for the Album during the following time period: ____________”; or even,

Contract Clause #4: “To market and publicize the Album in the Territory, you, Label, will hire the ___________ P.R. firm in New York, New York, and you will cause no less than ‘y’ U.S. dollars to be expended for publicity for and directly relating to the Album (and no other property or material) during the following time period: _____________”.

Compare Clauses #3 and #4, to Contract Clause #1 earlier above, and then ask yourself or your own entertainment attorney: Which are more hortatory? Which are more precise?

As for Contract Clause #2 and its vague unexplained definition of “first-class facilities and equipment” – why not have one’s entertainment lawyer instead just include in the contract a laundry-list clause of the names of five professional recording studios in the relevant city, that both parties, label and artist, prospectively agree constitute “first-class” for definitional purposes? This is supposed to be a contract, after all, the entertainment attorney opines. “Don’t leave your definitions, and therefore definitional problems, for a later document or a later day, unless you truly want to make a personal financial commitment to keeping more litigators awash in business debating bad clauses and bad contracts before the courts”.

If you don’t ask, you don’t get. Through the entertainment lawyer, the artist should make the label expressly sign on to a very specific contractual list of tasks in an appropriate clause, monitor the label’s progress thereafter, and hold the label to the specific contractual standard that the artist was smart enough to “carve in” in the clause through the entertainment attorney in the first instance.

* * * *

Again, consider Contract Clause #2, the “first class facilities and equipment” clause, from the entertainment lawyer’s perspective. Note that, unlike Contract Clause #1, this is a promise made by the artist to the label - and not a promise made by the label to the artist.

So, an artist might now ask his or her entertainment attorney:

“The shoe’s on the other foot, isn’t it?”

“‘First class’ in that clause is as vague and undefined a contractual standard as ‘best efforts’, isn’t it, entertainment lawyer?”

Entertainment attorney answer: “Right”.

“So, entertainment lawyer, there won’t be any harm in me, the artist, signing onto that contractual clause, will there, because I will be able to wiggle out of it if I ever had to, right?”

Entertainment attorney answer: “Wrong”.

The fact is, a contractual ambiguity in a performance clause is a bad thing - in either case - whether in the context of a label obligation to artist; or even in the context of an artist obligation to a label. The entertainment lawyer should advise that any contractual ambiguity in any clause could hurt the artist, even in the context of one of the artist’s own obligations to the other contracting party. Don’t rest on the linchpin of ambiguities in clauses when conducting business and relying on contracts - even if, in your musical art form itself, as Cameron Crowe once suggested of my first guitar hero Peter Frampton, you may happen to write “obscurantist” song lyrics while taking your own artistic license. Contracts need to be handled differently.

Here’s how ambiguity in your own contractual commitment to a label hurts you, from the entertainment lawyer’s perspective. The old-saw contractual principle of music “delivery” often finds the artist required to hand over documents to the label, as well as physical materials such as the album itself in the form of masters, digital masters, or “glass masters”, in order to get paid. By virtue of a contractually-delineated procedure vetted by and between entertainment attorneys, the label may be entitled to hold some (or even all) monies back, and not pay those monies to the artist until “delivery is complete” under the delivery clauses and delivery schedule in a contract. As one might therefore guess, “delivery” is a definite event whose occurrence or non-occurrence under the contract is oft-contested and sometimes even arbitrated or otherwise litigated by and between artists, labels, and the entertainment lawyers and litigators that represent them.

It is incumbent upon the artist and the artist’s entertainment attorney to prevent the label from drumming-up a pretextual “failed delivery” under any clause in the contract as an excuse for non-payment. In the context of Contract Clause #2 above, “first-class facilities and equipment” could easily become that pretext - the artist’s Achilles Heel in the litigation-tested contract contested between entertainment lawyer litigators. The label could simply take the position through counsel or otherwise that the delivered materials were not created at a “first-class” facility as contractually required in the relevant clause, no matter what facility was used. Why? Because “first-class” was never defined in any clause in the contractual document by either entertainment attorney on either side, as any particular facility.

And if no clause in the contract explicitly defined “first class” as an entertainment lawyer would have advised that it should do, then the artist could well be out the money, at least for the entire duration of an eminently avoidable multi-year litigation over what two dumb words mean. Worse yet, meanwhile, the label might be holding the money and laughing at the artist behind the artist’s back for his or her lack of contractual prescience. From the artist-side entertainment lawyer’s perspective, both of those horror-show possible eventualities and scenarios, are intolerable. They could have been avoided by a single, better clause – often the narrow reed upon which an artist’s success ultimately rests. (Ask Billy Joel. Ask Neil Young. Ask Bruce Springsteen. Ask George Michael. Ask John Fogerty).

What about prescience? How can this foreseeable contractual delivery dispute in the context of Contract Clause #2, be avoided by the entertainment lawyer? The simple solution in this case, again, is for the artist’s entertainment attorney to take a few extra minutes during the negotiations, and textually list-out, in a reply draft counter-proposed contract sent to the label, even if a single succinct clause, the actual facilities intended to be used. The artist-side entertainment lawyer can seek to make the label explicitly contractually pre-agree to the list of facilities, by name and address, in the body of the contract’s text. That is what a contract is for, anyway, as an entertainment attorney will tell you. When used correctly, a contract and its clauses really just comprise a dispute-avoidance tool. An entertainment contract should be a dispute-avoidance tool exchanged between entertainment lawyers. Also note that a contractual ambiguity in a clause could hurt an artist, regardless of whether it is embedded in one of the artist’s performance obligations, or even in one of the label’s performance obligations! The moral?: List all performance obligations. Break them down into discrete and understandable tasks, clause by clause. Approach it the same way an entertainment attorney would. Better yet – enlist the assistance of one before forming an opinion about the clauses or signing the contract.

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My entertainment law practice includes the drafting, editing, negotiation, and closure of personal service agreements as well as all other entertainment transactional and advisory matters in the fields of music, film, television, publishing, Internet, and all other media and art forms. If you have questions about legal issues which affect your career, and require representation, please contact me:

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“Performance” Clauses In Entertainment Contracts

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Personal Service Contracts: Written By New York Entertainment Attorney And Film And Music Lawyer John J. Tormey III, Esq.

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Personal Service Contracts: Written By New York Entertainment Attorney And Film And Music Lawyer John J. Tormey III, Esq.

© John J. Tormey III, PLLC. All Rights Reserved.

This article is not intended to, and does not constitute, legal advice with respect to your particular situation and fact pattern. Do secure counsel promptly, if you see any legal issue looming on the horizon which may affect your career or your rights. What applies in one context, may not apply to the next one. Make sure that you seek individualized legal advice as to any important matter pertaining to your career or your rights generally.

1. What Items Should Appear In A Personal Services Contract?

An entertainment attorney will opine that personal services agreements in New York, California or elsewhere can be fairly complex in regard to the issues that they present - yes, even if the total compensation payable under the personal service contract is not too large. It would be beyond the scope of this article to set forth an exhaustive list of issues for the entertainment attorney to spot in any New York or other personal services contract. But some of the key issues for talent, in a personal services agreement in the entertainment world, are considered to be:

A. Compensation: The first talent-side entertainment attorney contract concern.

How much will one be paid, and how will one be paid, under the personal services contract?

B. Credit. The second talent-side entertainment attorney contract concern.

What credit, if any, will one get for one’s work, and in what manner, pursuant to the personal services agreement?

C. Term. The third talent-side entertainment attorney contract concern.

This is a critical point: For how long will one be required to render services under the personal services contract?

D. Territory. The fourth talent-side entertainment attorney contract concern.

In what country/city/state/territory is one required to render services pursuant to the personal services agreement?

E. Media. The fifth talent-side entertainment attorney contract concern.

In what specific media can, and can’t, one’s work product be used according to the personal services contract?

F. (Non)Exclusivity. The sixth talent-side entertainment attorney contract concern.

Is the artist exclusive to the hiring party; or alternatively, can the artist work elsewhere and/or in other ways during the Term of the personal services agreement?

G. Worker Status. The seventh talent-side entertainment attorney contract concern.

Is the worker an employee, or an independent contractor, under the personal services contract (choose only one answer!)

There are actually quite a number of other issues for an entertainment attorney, or the intended signatory client, to consider, in the context of personal services contracts, in addition. The above list will certainly start the contractual dialogue or respond to the contractual dialogue of any prospective hiring party, however.

2. What Should Be Avoided In A Personal Services Contract?

Again, it would be beyond the scope of this article to set forth an exhaustive list of all contractual traps for the entertainment attorney to avoid in personal service agreements, as a matter of New York law or otherwise. Indeed, there are probably at least as many contractual traps, as there are New York and Los Angeles in-house entertainment lawyers working at these hiring corporations! (and I say this with all due respect to my friends who work in-house, of course). But some of the more colossal mistakes that an artist could make in a personal service contract, typically without first consulting an entertainment attorney, might be as follows:

A. Back-End: Taking the entirety of one’s compensation under the personal services agreement, as contingent or “back-end”. This Hollywood hustle is just as familiar a phenomenon in New York City’s TriBeCa and elsewhere, as well. The fact of the matter is, if the artist is a professional, or if the artist otherwise values his or her own skills and time, then the artist’s work product is valuable and should be recognized as such under the contract. The “buyer” of services and work product under the personal services contract should be required to put at least some earnest money on the barrel, first – whether that barrel be located in New York or anywhere else. One of the entertainment attorney’s functions should be to make this happen. And, the artist should not be expected to commence services under the personal services agreement until those numbers first show up in the artist’s bank account, whatever the numbers are negotiated to be, by and between the entertainment attorneys on either side of the contract.

B. Vagueness: Leaving the Term, Territory, Media and Exclusivity provisions vague in the personal services contract. Artists have found their careers paralyzed for huge amounts of time, due to contractual mistakes like this. No non-lawyer should try to write or edit these personal services agreement clauses on his or her own, and the drafter and/or editor of the contract really should be an entertainment attorney solely representing the artist. No one should blindly sign on to these contractual clauses as offered, particularly if they are vague. (In other words, don’t try this at home. Get professional help from an entertainment attorney, period). For example, if the artist only intended to bind himself or herself to a manager exclusively for New York work alone, imagine her surprise when the manager seeks a commission for a Los Angeles gig that the artist booked on the artist’s own.

C. Forever: Failing to limit the Term of the personal services contract to a reasonable and precise period of time. “Perpetuity”, if ever agreed to, is guaranteed to become one’s own private Hell – sort of like a New York City subway tunnel at 3:00 AM, but worse. The contractual Hell would be forever, and after all, the entertainment attorney may not live to see the artist through a period of time that long. Leaving the Term quantitatively vague in a personal services agreement is just about as bad a mistake as calling it “Perpetuity”, and an entertainment lawyer should prevent an artist from making this contractual mistake. Life is too short and valuable to make open-ended and blank-check commitments to people – in personal services contracts, or otherwise.

3. How Can A New York Entertainment Attorney Tell If A Personal Services Contract Is One-Sided In The Hiring Party’s Favor?

The answer is, if the hiring party furnished the personal services agreement to an artist, then the contract is one-sided in the hiring party’s favor! That was a rhetorical question. And the ability to answer it is not really limited to New York entertainment lawyers alone.

The hiring party is under no obligation to protect the artist’s interests in a legal document, personal services contract or otherwise. If upon receipt of the intended contractual document, you snooze, then you lose. One’s entertainment attorney is one’s hope for re-calibrating the scales of justice evenly, in this type of proposed contract and in this type of fact-pattern. The New York courts might even look to whether both sides of the contract were represented by counsel at the time of signing, before upholding the contract or any of its specific clauses. Retaining entertainment lawyer counsel could have multiple and long-term benefits throughout the life of the contract.

And many entertainment lawyers can speak to this phenomenon from their own “personal” experience. Many of us entertainment attorneys, in New York and elsewhere, have drafted, edited, negotiated, and reviewed hundreds or even thousands of contracts. Many of these were personal service agreements. If polled, few New York or other entertainment lawyers can remember even one personal service contract first offered by a hiring party to any talent clients, that was ever fair.

There is a reason why many New York and other entertainment attorneys and others in the entertainment industry refer to the first-offered personal service agreement form, as the (euphemism) “F.U. Form”. Once an artist retains entertainment lawyer counsel to represent the artist on the personal services contract, one of that entertainment attorney’s first functions is:

A. To get the hiring party to cough up a real personal services contract form in lieu of the “F.U. Form”; if not

B. Take over the drafting of the personal services agreement, entirely.

And yes, signing any entertainment industry proposed personal services agreement, either: (i) on-the-spot, or (ii) in the version exactly as first offered for signature with no contractual edits made, without an entertainment attorney advising you, often turns out to be a mistake.

Click the “Articles” button at:

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My New York entertainment law practice includes the drafting, editing, negotiation, and closure of personal service agreements as well as all other contracts and entertainment transactional and advisory matters in the fields of film, music, television, publishing, Internet, and all other media and art forms. If you have questions about legal issues which affect your career, and require representation, please contact me:

Law Office of John J. Tormey III, Esq.

John J. Tormey III, PLLC
1324 Lexington Avenue, PMB 188
New York, NY  10128  USA
(212) 410-4142 (phone)
(212) 410-2380 (fax)
brightline@att.net
http://www.tormey.org

 

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The Need For An Entertainment Lawyer In Film Production: Written By New York Entertainment Attorney And Film Lawyer John J. Tormey III, Esq.

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Law Office of John J. Tormey III, Esq. – Entertainment Lawyer, Entertainment Attorney

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The Need For An Entertainment Lawyer In Film Production: Written By New York Entertainment Attorney And Film Lawyer John J. Tormey III, Esq.

© John J. Tormey III, PLLC. All Rights Reserved.

This article is not intended to, and does not constitute, legal advice with respect to your particular situation and fact pattern. Do secure counsel promptly, if you see any legal issue looming on the horizon which may affect your career or your rights. What applies in one context, may not apply to the next one. Make sure that you seek individualized legal advice as to any important matter pertaining to your career or your rights generally.

Does the film producer really need a film lawyer or entertainment attorney as a matter of professional motion picture practice? An entertainment lawyer’s own bias and my stacking of the question notwithstanding, which might naturally indicate a “yes” answer 100% of the time - the forthright answer is, “it depends”. A number of motion picture producers these days are themselves film lawyers, entertainment attorneys, or other types of lawyers, and so, often can take care of themselves. But the filmed motion picture producers to worry about, are the ones who act as if they are entertainment lawyers - but without a license or entertainment attorney legal experience to back it up. Filmmaking and motion picture practice comprise an industry wherein these days, unfortunately, “bluff” and “bluster” sometimes serve as substitutes for actual knowledge and experience. But “bluffed” documents and motion picture production procedures will never escape the trained eye of entertainment attorneys working for the studios, the distributors, the banks, or the errors-and-omissions (E&O) insurance carriers. For this reason alone, I suppose, the job function of film production counsel and entertainment lawyer is still secure.

I also suppose that there will always be a few lucky filmmakers who, throughout the entire motion picture production process, fly under the proverbial radar without entertainment attorney accompaniment. They will seemingly avoid pitfalls and liabilities like flying bats are reputed to avoid people’s hair. By way of analogy, one of my best friends hasn’t had any health insurance for years, and he is still in good shape and economically afloat - this week, anyway. Taken in the aggregate, some people will always be luckier than others, and some people will always be more inclined than others to roll the dice.

But it is all too simplistic and pedestrian to tell oneself that “I’ll avoid the need for filmed motion picture lawyers if I simply stay out of trouble and be careful”. An entertainment lawyer, especially in the realm of film (or other) production, can be a real constructive asset to a motion picture producer, as well as the film producer’s personally-selected inoculation against potential liabilities. If the producer’s motion picture entertainment attorney has been through the process of film production previously, then that entertainment lawyer has already learned many of the harsh lessons regularly dished out by the commercial world and the film business.

The film and entertainment lawyer can therefore spare the motion picture producer many of those pitfalls. How? By clear thinking, careful planning, and - this is the absolute key - skilled, thoughtful and complete documentation of all film production and related motion picture activity. The film lawyer should not be thought of as simply the cowboy or cowgirl wearing the proverbial “black hat”. Sure, the entertainment lawyer may sometimes be the one who says “no”. But the filmed motion picture entertainment attorney can be a positive force in the production as well.

The film lawyer can, in the course of legal representation, assist the motion picture producer as an effective business consultant, too. If that entertainment lawyer has been involved with scores of film productions, then the motion picture producer who hires that film lawyer entertainment attorney benefits from that very cache of experience. Yes, it sometimes may be difficult to stretch the film budget to allow for motion picture counsel, but professional filmmakers tend to view the legal cost expenditure to be a fixed, predictable, and necessary one - akin to the fixed obligation of rent for the motion picture production office, or the cost of film for the cameras. While some film and entertainment lawyers may price themselves out of the price range of the average independent film producer, other entertainment attorneys do not.

Enough generalities. For what specific tasks must a motion picture producer typically retain a film lawyer and entertainment attorney?:

1. INCORPORATION, OR FORMATION OF AN “LLC”: To paraphrase Michael Douglas’s Gordon Gekko character in the motion picture “Wall Street” when speaking to Bud Fox while on the morning beach on the oversized mobile phone, this entity-formation issue usually constitutes the entertainment attorney’s “wake-up call” to the film producer, telling the film producer that it is time. If the motion picture producer doesn’t properly create, file, and maintain a corporate or other appropriate entity through which to conduct business, and if the film producer doesn’t thereafter make every effort to keep that entity bullet-proof, says the entertainment lawyer, then the film producer is potentially shooting himself or herself in the foot. Without the shield against liability that an entity can provide, the entertainment attorney opines, the motion picture producer’s personal assets (like house, car, bank account) are at risk and, in a worst-case scenario, could ultimately be seized to satisfy the debts and liabilities of the film producer’s business. In other words:

Patient: “Doctor, it hurts my head when I do that”.

Doctor: “So? Don’t do that”.

Like it or not, the film lawyer entertainment attorney continues, “Film is a speculative business, and the statistical majority of motion pictures can fail economically - even at the San Fernando Valley film studio level. It is insane to run a film business or any other form of business out of one’s own personal bank account”. Besides, it looks unprofessional, a real concern if the motion picture producer wants to attract talent, bankers, and distributors at any point in the future.

The choices of where and how to file an entity are often prompted by entertainment lawyers but then driven by situation-specific variables, including tax concerns relating to the film or motion picture company sometimes. The film producer should let a motion picture lawyer or entertainment attorney do it and do it correctly. Entity-creation is affordable. Good lawyers don’t look at incorporating a client as a profit-center anyway, because of the obvious potential for new business that an entity-creation brings. While the film producer should be aware that under U.S. law a client can fire his/her lawyer at any time at all, many entertainment lawyers who do the motion picture entity-creation work get asked to do further work for that same client - especially if the entertainment attorney bills the first job reasonably.

I wouldn’t recommend self-incorporation by a non-lawyer - any more than I would tell a film producer-client what actors to hire in a motion picture - or any more than I would tell a D.P.-client what lens to use on a specific film shot. As will be true on a film production set, everybody has their own job to do. And I believe that as soon as the producer lets a competent motion picture lawyer or entertainment lawyer do his or her job, things will start to gel for the film production in ways that couldn’t even be originally foreseen by the motion picture producer.

2. SOLICITING INVESTMENT: This issue also often constitutes a wake-up call of sorts. Let’s say that the film producer wants to make a motion picture with other people’s money. (No, not an unusual scenario). The film producer will likely start soliciting funds for the movie from so-called “passive” investors in any number of possible ways, and may actually start collecting some monies as a result. Sometimes this occurs prior to the entertainment lawyer hearing about it post facto from his or her client.

If the film producer is not a lawyer, then the motion picture producer should not even think of “trying this at home”. Like it or not, the entertainment lawyer opines, the film producer will thereby be selling securities to people. If the motion picture producer promises investors some pie-in-the-sky results in the context of this inherently speculative business called film, and then collects money on the basis of that representation, believe me, the film producer will have even more grave problems than conscience to deal with. Securities compliance work is among the most difficult of matters faced by an entertainment attorney.

As both entertainment lawyers and securities lawyers will opine, botching a solicitation for film (or any other) investment can have severe and federally-mandated consequences. No matter how great the film script is, it’s never worth monetary fines and jail time - not to mention the veritable unspooling of the unfinished motion picture if and when the producer gets nailed. All the while, it is shocking to see how many ersatz film producers in the real world try to float their own “investment prospectus”, complete with boastful anticipated multipliers of the box office figures of the famed motion pictures “E.T.” and “Jurassic Park” combined. They draft these monstrosities with their own sheer creativity and imagination, but usually with no entertainment or film lawyer or other legal counsel. I’m sure that some of these motion picture producers think of themselves as “visionaries” while writing the prospectus. Entertainment attorneys and the rest of the bar, and bench, may tend to think of them, instead, as prospective ‘Defendants’.

Enough said.

3. DEALING WITH THE GUILDS: Let’s assume that the film producer has decided, even without entertainment attorney guidance yet, that the motion picture production entity will need to be a signatory to collective bargaining agreements of unions such as Screen Actors Guild (SAG), the Directors Guild (DGA), and/or the Writers Guild (WGA). This is a subject matter area that some film producers can handle themselves, particularly motion picture producers with experience. But if the film producer can afford it, the producer should consult with a film lawyer or entertainment lawyer prior to making even any initial contact with the guilds. The motion picture’s producer should certainly consult with an entertainment attorney or film lawyer prior to issuing any writings to the guilds, or signing any of their documents. Failure to plan out these guild issues with film or entertainment attorney counsel ahead of time, could lead to problems and expenses that sometimes make it cost-prohibitive to thereafter continue with the motion picture’s further production.

4. CONTRACTUAL AFFAIRS GENERALLY: A film production’s agreements should all be in writing, and not saved until the last minute, as any entertainment attorney will observe. It will be more expensive to bring film counsel or a motion picture entertainment lawyer in, late in the day - sort of like booking an airline flight a few days before the planned travel. A film producer should remember that a plaintiff suing for breach of a bungled contract might not only seek money for damages, but could also seek the equitable relief of an injunction (translation: “Judge, stop this production... stop this motion picture… stop this film… Cut!”).

A film producer does not want to suffer a back claim for talent compensation, or a disgruntled location-landlord, or state child labor authorities - threatening to enjoin or shut the motion picture production down for reasons that could have been easily avoided by careful planning, drafting, research, and communication with one’s film lawyer or entertainment lawyer. The movie production’s agreements should be drafted with care by the entertainment attorney, and should be customized to encompass the special characteristics of the motion picture production.

As an entertainment lawyer, I have seen non-lawyer film producers try to do their own legal drafting for their own motion pictures. As mentioned above, some few are lucky, and remain under the proverbial radar. But consider this: if the film producer sells or options the project, one of the first things that the film distributor or film buyer (or its own film and entertainment attorney counsel) will want to see, is the “chain of title” and development and production file, complete with all signed agreements. The motion picture production’s insurance carrier may also want to see these same documents. So might the guilds, too. And their entertainment lawyers. The documents must be written so as to survive the audience.

Therefore, for a film producer to try to “fake it” oneself is simply to put many problems off for another day, as well as create an air of non-attorney amateurism to the motion picture production file. It will be less expensive for the film producer to attack all of these issues earlier as opposed to later, through use of a film lawyer or entertainment attorney. And the likelihood is that any self-respecting film attorney and entertainment lawyer is going to have to re-draft substantial parts (if not all) of the producer’s self-drafted motion picture production file, once he or she sees what the non-lawyer film producer has done to it on his or her own - and that translates into unfortunate and wasted expense. I would no sooner want my chiropractor to draft and negotiate his own filmed motion picture contracts, than I would put myself on his table and try to crunch through my own backbone adjustments. Furthermore, I wouldn’t do half of the chiropractic adjustment myself, and then call the chiropractor into the examining room to finish what I had started. (I use the chiropractic motif only to spare you the cliché old saw of “performing surgery on oneself”).

There are many other reasons for retaining a film lawyer and entertainment attorney for motion picture work, and space won’t allow all of them. But the above-listed ones are the big ones.

Click the “Articles” button at:

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My film law practice includes rights, union, financing, exhibition, distribution, production counsel, and all other transactional and advisory matters as they arise in motion pictures and in the fields of music, television, and entertainment generally. If you have questions about legal issues which affect your career, and require representation, please contact me:

Law Office of John J. Tormey III, Esq.

John J. Tormey III, PLLC

1324 Lexington Avenue, PMB 188

New York, NY  10128  USA

(212) 410-4142 (phone)

(212) 410-2380 (fax)

brightline@att.net

http://www.tormey.org/

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The Need For A Lawyer In Film Production

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