ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Wednesday, March 9, 2011

Warner Bros vs Charlie Sheen: The First Salvo After The Last Straw

Well, it happened - Warner Brothers fired Charlie Sheen.  Several questions raised in my previous post about Charlie Sheen have been answered by the termination letter (TL) dated March 7th 2011:

  • I speculated that the gloves might 'come off' in response to Charlie's rant against Charles Lorre, creator of Two and a Half Men; The TL indicates that this, in conjunction with another bizarre interview (held on the same day), tried Warner Bros.' patience to the limit.  The last straw was Charlie's non response to the request for confirmatory notice of treatment that Warner Bros. requested after the show was put on hiatus. 
  • The time for gritted teeth and walking on eggshells is over.  No longer willing to put a good face on things, Warner Brothers has replaced the (forced) smile with the menacing growl of its notice of intention to seek legal remedy.  Notice of this intention was served in the TL thus:
    • "Mr Sheen's conduct constitutes breach of contract, breach of the covenant of good faith and fair dealing and tortious interference with Warner Bros.'s contracts with third parties, among other causes of action.....In any ensuing arbitration, Warner Bros. will seek recovery of all of its damages including lost revenue from the show and all other damages the law allows."
  • Time Warner was sensitive to the possibility that it might be accused of illegal or immoral motives for standing by the self destructing actor after all.  The letter states "in halting production of Two and a Half Men...Warner Brothers took the only responsible action open to it - morally and legally - in these painful circumstances.  Warner Bros. would not, could not, and should not attempt to continue 'business as usual' while Mr Sheen destroys himself as the world watches".
  • There was in fact a morals clause in Charlie's contract, albeit an unusually narrow one.  If the producer in good faith was of the opinion that a felony offence involving moral turpitude had been committed, or if the actor was indicted or convicted of such an offence, the clause conferred on the Producer the right to treat the commission of those acts as an actionable breach.  Sheen's proud assertion that Warner Bros did not have the power to 'dominate and totally interfere with my personal life', was therefore not entirely true.  In fact Warner Bros.statements in the TL indicate further that regardless of whether Charlie was hired to play himself or not, he was not at liberty to cross the line of criminal conduct, or bring the network in disrepute by his self destructive behavior.  The letter further states that "his admitted extreme cocaine use violates his obligation under ....the Terms & Conditions not to engage in any extra-hazardous activity without Producer's prior written consent..."
  • I suggested that the lack of a morals clause could cut both ways - freeing Charlie from the moralistic control of the network while absolving the network from responsibility for his poor choices.  In detailing the actions justifying their invocation of the morals clause, Warner Bros pointedly refers to Charlie's alleged supply of illegal drugs to a third party in the TL rather than Charlie's alleged personal use of such drugs. 
  • Good faith and fair dealing have come into it - Warner Bros claims that it has discharged it's contractual duties of good faith and fair dealing to Charlie while asserting that Charlie has failed to do so.
  • I mused on how reputational mud just didn't seem to stick to 'Teflon Charlie' and wondered if Warner Bros. would resort to some 'teflon abrasive', if the gloves were to come off.  Well they have, they did, and the mud slinging has not merely stained his reputation.  In the eyes of some, he's mired in the mud.
  • Charlie's mental health is now squarely in issue.  The TL opens with a direct attack on his mental state:
    • "At the outset, let us state the obvious: Your client has been engaged in dangerously self-destructive conduct and appears to be very ill. For months before the suspension of production, Mr Sheen's erratic behavior escalated while his condition deteriorated.....Now the entire world knows Mr Sheen's condition from his alarming outbursts over just the last few weeks....". Later, the letter continues "In any event, Warner Bros is entitled to suspend Mr Sheen's employment...due to his "Incapacity" including..."any physical or mental disabilities, which due to the unique nature of the Performer's Obligations, are not subject to reasonable accommodation". 
  • Warner Bros utilises speculative comments about Charlie Sheen's mental condition by a number of talking head medical experts in alleging mental disorder/mental incapacity:
    • A number of health care experts observing Mr Sheen during these interviews have commented that he (1) appears to be 'manic' and/or 'bipolar,' (2) he suffers from a 'hypomanic' psychological state; (3) potentially poses a dangerous threat to himself and others; (4) requires immediate professional care."
  • The suspension of the show was indeed a first discreet step towards distancing and ultimately disengaging from Charlie.
  • Warner Bros relies on several grounds for termination.  I suggested earlier that consistently failing to be in a fit condition to work, bringing the network into disrepute, and being charged with a serious felony were possible grounds for termination.  The TL asserts that Warner Bros is entitled to terminate Charlie Sheen's contract because :
    • he is not in a fit state to work due to mental incapacity or a serious health condition
    • they have reason to believe that he has committed at least one felony involving moral turpitude, and thus breached his morals clause
    • he has engaged in (harmful) PR activities without authorization.. 

Other grounds relied upon are that:

  • by failing to perform material obligations (the TL asserts that his condition prevents him from doing so) Charlie committed an immediate default, also that, 
  • by refusing or failing to return to work, he also repudiated his obligation to perform,
  • his incapacity, once persisting over a (fairly limited) period, constitutes a default justifying suspension, and,
  • force majeur events have occurred as a result of his hampering production of the show, his being out of control (of Warner Bros.), his illness and loss of weight (disfigurement), and his breaches of contract.

The TL summarizes the case for termination by observing "based on the totality of Mr Sheen's statements, conduct and condition, including but not limited to his refusal to offer any cure in response to the notice of suspension, Warner Bros. is exercising its rights to terminate the Agreement under the provisions specified above."

Warner Bros. terminated Charlie's contract summarily, asserting the right to terminate, with written notice, for a serious health condition or uncured incapacity (lasting for more than 10 consecutive days, or 15 days over the course of the year), or anytime following suspension for a default.  Charlie Sheen's contract obviously contained an arbitration clause, as the TL states "...Warner Bros. has submitted this dispute to required by the Agreement....We look forward to your cooperation with the arbitration process."  The letter further insists in a heading that "This Dispute Must Be Arbitrated'.

  Though short of a cliff hanger, we are left with several questions.  Will Charlie Sheen respond with 'all barrels blazing', or will he back down - or at least adopt a less confrontational approach - to begin to attend to the repair of his disintegrating life?  Will he submit to arbitration, or fight for his day in court? Will there be a response, from health care officials, to the deepening allegations about his mental state?  To what extent will his alleged mental state/incapacity lessen the brunt of the legal storm he has unleashed?  Who will represent him - legally, publicly - now? (Reports of recent firings and resignations from his support team suggest that he will need to recruit new representatives.)

The first salvo, in what is likely to be a drawn out sensational (ist) legal battle, has been dispatched.  Brace yourselves for the next episode of this tragic drama, in which family, mental health officials, and law enforcement officials may have more than a walk on role.


Eniola O. Akindemowo.

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