ContractsProf Blog

Editor: D. A. Jeremy Telman
Valparaiso Univ. Law School

A Member of the Law Professor Blogs Network

Thursday, November 17, 2005

Reality TV Shows, Confidentiality Clauses and Liquidated Damages Clauses

Like most (all?) "reality" TV shows, the Apprentice TV show imposes a contractual gag order on participants covering every aspect of the participant's experience.  The contract couples that covenant with a liquidated damages clause requiring participant-breachers to pay $5 million plus attorneys' fees and disgorge their profits.

In 2001, a similar clause was invoked in a Survivor dispute (Survivor and Apprentice are both produced by Mark Burnett).  Then, last week, this clause was invoked again agaist two Apprentice participants (Markus and Jennifer W.) due to their public claims that the show's editing is misleading and that The Donald is sexist.

I've always found the gag order + liquidated damages clause in these reality TV show agreements problematic for three reasons:

1) The $5M liquidated damages should be prima facie unenforceable because it does not vary with the type of breach.  There's a wide range of public disclosures that might occur, some significant (blowing the entire season by preannouncing the winner) and some trivial (such as a snarky comment about Trump's choice of ties).  A one-size-fits-all liquidated damages clause does not appear to represent a reasonable estimate of the damages in these different contexts.

Even if the clause is not a penalty, I wonder if it violates public policy.  There's no question that the agreement could protect the producers' trade secrets, but the clauses often go far beyond that, limiting participants' abilities to discuss their experiences, criticize the show or even enforce their legal rights.  At some point, extensive gag orders violate public policy.  See, e.g., People v. Network Associates, Inc., 195 Misc. 2d 384 (N.Y. Sup. Ct. Jan 6, 2003) (enjoining the use of a clause prohibiting product reviews and product comparisons of anti-virus software).

2) Liquidating the damages has the perhaps-unintended consequence of capping the TV show producer's damages.  If a participant disclosure really blew the entire season, would $5M be enough?

3) I believe that liquidating damages significantly reduces the likelihood of getting injunctive relief.  (After all, it's hard to argue that damages are insufficient if the parties have agreed upon damages in the contract).  So, if the TV show producers ever tried to stop publication of unwanted disclosures, I wonder if the liquidated damages clause would sink any chance of equitable relief.

For these reasons, I would think the TV show producers (and their lawyers) would know better than to include such a high-risk clause in their contracts.  On the other hand, despite its legal shakiness (and its even-more-dubious prospects for producing judgments that could be collected), the clause nevertheless may be effective at deterring unwanted behavior.  After all, what participant wants to test the clause at the peril of being wrong and on the hook for $5M?

Meanwhile, despite the draconian threat, information has dribbled out about the behind-the-scenes shenanigans of reality TV shows.  My favorite article discusses life on "Loser Island."

[Eric Goldman]

http://lawprofessors.typepad.com/contractsprof_blog/2005/11/reality_tv_show.html

Celebrity Contracts | Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341bfae553ef00d83459a03569e2

Listed below are links to weblogs that reference Reality TV Shows, Confidentiality Clauses and Liquidated Damages Clauses: