Breaches of exclusivity obligations can leave advertisers with little recourse
SAG-AFTRA and the industry should create a streamlined dispute resolution process for these claims that could mirror the one for pension and health allocation claims available through the Industry-Union Standing Committee.
March 24, 2014 at 04:00 AM
5 minute read
The original version of this story was published on Law.com
This, the final article in a series examining recent developments and ongoing issues related to the Screen Actors Guild – American Federation of Television and Radio Artists (SAG-AFTRA) Commercials Contract, will discuss the potential recourse advertisers and their advertising agencies have when a performer breaches the exclusivity obligation he or she has under an agreement to perform scale commercial production services.
First, it's important to note a distinction in contracting with scale performers versus overscale performers: When negotiating with scale performers, Section II(9)(B) of the SAG-AFTRA Commercials Contract stipulates that commercial producers cannot make changes, alterations, or additions to the Standard Employment Contract unless such modifications are more favorable to the performer than the Standard Employment Contract. Producers are, however, able to negotiate to include additional legal protections, such as a morals clause with a termination right and remedies for breach, and other remedies for a breach of the performer's obligations (including breach of exclusivity, which will be the focus of this article), by negotiating and paying performers on an overscale basis.
By way of illustrating the limitations of a scale agreement in the face of a breach of a performer's exclusivity, imagine that a beverage company hires an actor, at scale, to appear as the face of the brand in an upcoming television campaign. The first commercial airs, and later in the year, the same actor is seen featured in a competitor's commercial, despite her agreement not to render services to any competitor during the term of the original beverage company's use of its commercials. Now the value of its rights to use that performer have been diminished, and the beverage company should be compensated for the loss; however, the beverage company's agreement with her at scale could not have included a remedy for this situation, as the beverage company was bound to the terms of the Standard Employment Contract for a scale performer. The beverage company would naturally want to address the issue with its competitor, to try to get the other beverage company to stop running their commercial. But it would likely not be able to stop the other company from using the actor in a competing commercial with an injunction unless there were a viable tortious interference claim, whereby the other advertiser knew about the pre-existing obligation the actor was breaching by rendering services for its brand. The beverage company that hired the actor initially would likely be left without any recourse in this situation.
Historically, SAG-AFTRA's stance on performers who breach exclusivity obligations was set forth in Section 16 of the SAG-AFTRA Commercials Contract, which continues to state that any breach of exclusivity is to be considered a serious breach of the agreement that could result in substantial damages being assessed against the performer. This meant that SAG-AFTRA considered a breach of exclusivity to be a violation of a fundamental aspect of the agreement — “one of the foundations for use fees.” And Section 16 makes it the union's policy to make members aware of their responsibility to adhere to exclusivity agreements. But this provision alone had no real teeth.
The Memorandum of Agreement negotiated in 2013 addressed this issue with a step toward a concrete remedy by providing that an arbitrator can consider, as a remedy for a breach of a principal performer's exclusivity obligation, allowing the aggrieved advertiser to continue to run the commercial but withhold payment of future holding fees and residuals. The union recognized the need for a stronger provision here, setting advertisers up to be able to bring arbitration against a performer who breaches exclusivity obligations. It is left in the hands of the arbitrator to consider, among other possible remedies, loss of holding fees and residuals otherwise due to the performer for the remainder of the usage period. While no doubt a step in the right direction, the new provision regarding exclusivity breaches in the 2013 Memorandum may not be enough.
That an advertiser would need to bring an arbitration against a performer who breaches exclusivity obligations, when such breaches are usually apparent and do not give rise to much fact-finding, is problematic given the expense and time investment of arbitration. As discussed, for scale performers, advertisers cannot negotiate for a clawback or withholding of holding fees and residuals remedy at the outset of the relationship because it would violate Section II(9)(B) of the Commercials Contract as a change to the Standard Employment Contract that is less favorable to the principal performer. But advertisers should, as a default, be able to rely on damages in the form of withholding fees and residuals. Currently, this can be used as a settlement tactic at best, with the advertiser arguing that loss of future holding and use fees would likely result if the parties arbitrated, but it is not a formal course of action that the union has ratified. At the very least, SAG-AFTRA and the advertising industry should create a streamlined dispute resolution process for these claims that could mirror the one for pension and health allocation claims available through the Industry-Union Standing Committee.
This article was written with the help of Davis & Gilbert associate Anne DiGiovanni.
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View AllLululemon Faces Legal Fire Over Its DEI Program After Bias Complaints Surface
3 minute readOld Laws, New Tricks: Lawyers Using Patchwork of Creative Legal Theories to Target New Tech
Lawsuit Against Amazon Could Reshape E-Commerce Landscape
Trending Stories
- 1A Meta DIG and Its Nvidia Implications
- 2Deception or Coercion? California Supreme Court Grants Review in Jailhouse Confession Case
- 3State Bar of Georgia Presents Access to Justice Pro Bono Awards
- 4Tips For Creating Holiday Plans That Everyone Can Be Grateful For
- 5Red Tape, Talent Wars & Pricey Office Space Greet Firms Entering Saudi Arabia
Who Got The Work
Michael G. Bongiorno, Andrew Scott Dulberg and Elizabeth E. Driscoll from Wilmer Cutler Pickering Hale and Dorr have stepped in to represent Symbotic Inc., an A.I.-enabled technology platform that focuses on increasing supply chain efficiency, and other defendants in a pending shareholder derivative lawsuit. The case, filed Oct. 2 in Massachusetts District Court by the Brown Law Firm on behalf of Stephen Austen, accuses certain officers and directors of misleading investors in regard to Symbotic's potential for margin growth by failing to disclose that the company was not equipped to timely deploy its systems or manage expenses through project delays. The case, assigned to U.S. District Judge Nathaniel M. Gorton, is 1:24-cv-12522, Austen v. Cohen et al.
Who Got The Work
Edmund Polubinski and Marie Killmond of Davis Polk & Wardwell have entered appearances for data platform software development company MongoDB and other defendants in a pending shareholder derivative lawsuit. The action, filed Oct. 7 in New York Southern District Court by the Brown Law Firm, accuses the company's directors and/or officers of falsely expressing confidence in the company’s restructuring of its sales incentive plan and downplaying the severity of decreases in its upfront commitments. The case is 1:24-cv-07594, Roy v. Ittycheria et al.
Who Got The Work
Amy O. Bruchs and Kurt F. Ellison of Michael Best & Friedrich have entered appearances for Epic Systems Corp. in a pending employment discrimination lawsuit. The suit was filed Sept. 7 in Wisconsin Western District Court by Levine Eisberner LLC and Siri & Glimstad on behalf of a project manager who claims that he was wrongfully terminated after applying for a religious exemption to the defendant's COVID-19 vaccine mandate. The case, assigned to U.S. Magistrate Judge Anita Marie Boor, is 3:24-cv-00630, Secker, Nathan v. Epic Systems Corporation.
Who Got The Work
David X. Sullivan, Thomas J. Finn and Gregory A. Hall from McCarter & English have entered appearances for Sunrun Installation Services in a pending civil rights lawsuit. The complaint was filed Sept. 4 in Connecticut District Court by attorney Robert M. Berke on behalf of former employee George Edward Steins, who was arrested and charged with employing an unregistered home improvement salesperson. The complaint alleges that had Sunrun informed the Connecticut Department of Consumer Protection that the plaintiff's employment had ended in 2017 and that he no longer held Sunrun's home improvement contractor license, he would not have been hit with charges, which were dismissed in May 2024. The case, assigned to U.S. District Judge Jeffrey A. Meyer, is 3:24-cv-01423, Steins v. Sunrun, Inc. et al.
Who Got The Work
Greenberg Traurig shareholder Joshua L. Raskin has entered an appearance for boohoo.com UK Ltd. in a pending patent infringement lawsuit. The suit, filed Sept. 3 in Texas Eastern District Court by Rozier Hardt McDonough on behalf of Alto Dynamics, asserts five patents related to an online shopping platform. The case, assigned to U.S. District Judge Rodney Gilstrap, is 2:24-cv-00719, Alto Dynamics, LLC v. boohoo.com UK Limited.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250