ENTERTAINMENT NEWS: FORCE MAJEURE CLAUSES WREAK HAVOC ON TALENT DEALS

STUDIOS INVOKE FORCE MAJEURE TO JETTISON TALENT DEALS AS WRITERS STRIKE CONTINUES

As the strike by Hollywood’s writers enters its third month, studios have started to terminate overall talent deals with producers and writers. Dubbed “Black Friday” and “Black Monday” by the trades, virtually every major television production arm terminated deals this past Friday and Monday. ABC Studios started the carnage on Friday, January 11. On Monday, January 14, CBS Paramount Network TV, Universal Media Studios, 20th Century Fox Television and Warner Bros. TV followed suit with their own cuts.

The studios’ efforts to jettison these deals raises interesting issues and brings to the forefront potential strategies by artists who can use contractual rights to apply pressure to their studios.

WHAT IS FORCE MAJEURE?

The legal doctrine of “force majeure” was historically related to the defense of “impossibility” — i.e., that it was physically impossible to abide by contractual terms, thus excusing performance. The early application of the doctrine related mostly to “Acts of God.” The Civil Code states the defense as follows: “[P]erformance of an obligation . . . or any delay therein, is excused . . . [w]hen it is prevented or delayed by an irresistible, superhuman cause, or by the act of public enemies of this state or of the United States.” So the historical legal doctrine of “force majeure” (generally) does not include “human acts” such as labor strikes.

Modern entertainment contracts, however, need not rely upon the historical “force majeure” legal doctrine. Most modern agreements expressly include “strikes,” “lockout” or “labor disputes” within their definition of “force majeure events.” And by now, the industry custom embraces the concept that guild actions such as the ongoing WGA strike falls within the standard “force majeure” definition in industry agreements.

TYPICAL CONTRACT REMEDIES

Whether a strike or a labor dispute is included within the “force majeure” definition is only the first step of the analysis. Industry agreements generally provide for a remedy in the event of “force majeure” for the producer/studio or the talent or both. Most agreements permit the suspension of the agreement if “force majeure events” prevent the development or production of the project. If that event continues for a longer period of time, the agreement typically allows the producer/studio right to “terminate” the agreement. Studios have begun to do just that in the past week.

However, I have seen some agreements which give the artist the right to give “notice of intent to terminate” the agreement upon the studio’s suspension of that agreement. The artist’s notice then puts the onus on the studio to “reinstate” the agreement or allow the agreement to terminate.

WHAT’S HAPPENING NOW

Studios suspended their deals with writers when the WGA went on strike. As the studios now announce the termination of talent deals, studios seem to be selective in selecting which deals to cut. Variety reports that ABC slashed only deals with producers and writers who are not currently working on major series — and not deals with any who are crucial to current projects. In other words, studios seem to be thinning their herd but continue to hold on to their most crucial talent assets.

So, I foresee a very interesting game of chicken in the upcoming weeks if the WGA strike continues. The top talent, who presumably have all had their deals suspended, can exercise any contractual right to terminate their deal. I would expect that only the top artists — the artists most coveted by a studio — would have that right and that those deals would be among a studio’s richest. Such a move could force studios to choose between losing valuable creative assets or reinstating expensive deals.

Rumor has it that some studios are countering this possibility by taking the position that, instead of “force majeure” being the cause of any suspension, that the talent suffers from a “disability” and unable to perform — thus preventing talent from attempting to terminate their deals. That argument seems to be a stretch, given that “labor disputes” are routinely included in the “force majeure” definition. Given the potential stakes, that could be an issue worth litigating.

These are stressful times. And while blogging about strategies and machinations is interesting, the economic toll on those who are caught up in this tussle cannot be forgotten. Artists with overall talent deals and their representatives need to analyze whether pressure on a studio can be brought to bear through the exercise of contractual rights.