ContractsProf Blog

Editor: Jeremy Telman
Oklahoma City University
School of Law

Wednesday, February 16, 2022

Comedians' Suit Against Pandora Is No Joke!

According to Rolling Stone Magazine, the estates of some comedians, as well as some comedians who are still alive, are suing Pandora for breach of copyright.  Robin Williams' estate is seeking over $4 million; George Carlins' estate is seeking $8.4 million.  All together, five comedians have filed suit seeking over $40 million collectively.  

Robin Williams
Rolling Stone 
quotes from the complaint:

While it is commonplace in the music industry for companies like Pandora to enter into public performance licensing agreements with performance rights organizations like BMI and ASCAP for musical compositions, these entities do not license literary works. Therefore, it was the responsibility of Pandora to seek out the copyright owners and obtain valid public performance licenses.

The comedians' record labels have shared their recordings on Pandora.  However, the comedians claim, the recordings are separate from the jokes, which remain the intellectual property of their creators.  As Variety explains here, the comedians claim "that they should be treated like singer-songwriters, earning a separate royalty for the underlying 'literary work' in addition to the performance of it."  

Just a quick anecdote about Robin Williams.  I saw him perform live stand-up in San Francisco.  I think it must have been in the late 1980s.  I went with a friend to a comedy club.  At the end of the scheduled performances, the M.C. got up and said, "Hey, Robin Williams is here, and he wants to do a set.  Do you all want to stick around and give him a listen?"  It was late, but it was Robin Williams.  We indicated our enthusiastic assent.  

He was clearly excited to try out some material.  He had more energy than the small space could contain.  The material was raw.  Most of the jokes didn't fly.  He was sweating and agitated.  After about ten minutes, the M.C. came back and, apologizing to Robin Williams, said that by city ordinance, he had to stop.  I guess they were already past the time when comedy clubs were supposed to shut down.  Robin Williams pleaded, could he do one more bit?  The M.C. allowed it.  It was Robin Williams.  The last bit wasn't much better than the others, but he was trying so hard.  He attempted to engage in "safe comedy" by placing a condom over the microphone.  Edgy?  In desperation, the club cut the lights and the mike.  It seemed there was no other way to get him to stop.

It was not the best stand-up I've ever seen, but it was certainly the most memorable.  I loved that he was still so eager for an audience, that he was still so hungry to create new comedy, and ultimately that he, by that time, rich beyond imagining, possessing iconic fame, was still so naked and vulnerable and pathetically desirous of our approval.   

Watching Robin Williams cover himself in inglorious flop-sweat reminded me of Robert Musil's essay, Flypaper.  Musil observes the moment when the flies stop struggling to escape the flypaper's grasp and relax a bit into their fate, freezing in ridiculous poses.  "They no longer hold themselves up with all their might, but sink a little, and at that moment appear totally human."  Never did I see anyone look more human than Robin Williams did as he utterly bombed in a San Francisco comedy club.  

February 16, 2022 in Celebrity Contracts, Music, Recent Cases, Web/Tech | Permalink | Comments (2)

Wednesday, January 19, 2022

Quentin Tarantino gets sued, demonstrating that NFTs are about contracts after all

I’m excited to teach copyright this semester and while I miss teaching contracts, there is a lot of synergy between the two subjects.  So, I was interested to read that the director Quentin Tarantino is being sued by Miramax in an action claiming copyright infringement and breach of contract.  The lawsuit involves Tarantino’s efforts to auction pages of the script from Pulp Fiction as non-fungible tokens or NFTs. 

(Readers of this blog are of course familiar with NFTs, thanks to Juliet Moringiello and Christopher Odinet’s article and Jeremy Telman’s blog post on it here).

The issue is whether Tarantino owns the rights to the NFTs.  That will depend on the contract between Tarantino and Miramax and whether the language the parties used was broad enough to capture this type of technology – technology that wasn’t contemplated at the time the parties entered into their agreement.

 

January 19, 2022 in Celebrity Contracts, Film, Film Clips, Miscellaneous | Permalink | Comments (2)

Tuesday, January 18, 2022

Prince Andrew and the Awesome Power of Contracts Law

Andrew
Image by Titanic Belfast, CC BY 2.0 , via Wikimedia Commons

Here's the problem about writing about the British Royal Family.  If you are someone who cares about the Royals, you know approximately 1.7 million times more about them than I do.  If you don't care about the Royals, nothing in the post will be of the slightest interest to you.  And yet, there is a big story out there; contracts law is at the center of it.  I am somewhat compulsive.  Sigh.  Here we go.

Earlier this month, Sid DeLong posted about the argument that Virginia Roberts Giuffre's suit against Prince Andrew alleging sex trafficking should be dismissed based on a Settlement Agreement and Release that she entered. into with Jeffrey Epstein in 2009. Last week, Judge Lewis Kaplan denied Prince Andrew's motion to dismiss in a 46-page opinion.  In that opinion, Judge Kaplan carefully considers whether Prince Andrew was among the defendants whom the parties intended to release or whether he is a third-party beneficiary of the Agreement.  At this point in the litigation, Judge Kaplan concluded, it is too early to rule definitively on either argument.  Judge Kaplan also rejects the so-called "Dershowitz argument."  That is, because Ms. Giuffre dismissed her claims against Mr. Dershowitz when the Agreement was raised as a potential defense, the same result should obtain here.  Judge Kaplan avoided speculating on why the Release might be helpful to Mr. Dershowitz but insisted in any case to consider independently the Release's applicability to every potential defendant. 

There is more to the opinion, but the rest of it does not really touch on contracts law or the law of third-party beneficiaries, so we will leave it to others to expound.  What interests us for now is the Crown's response to this opinion. 

As Dan Bilefsky of The New York Times reports here, that response was "quick and punishing." Upon learning of Judge Kaplan's decision, Buckingham Palace issued a statement.  It reads, in full:

With The Queen's approval and agreement, The Duke of York’s military affiliations and Royal patronages have been returned to The Queen.

The Duke of York will continue not to undertake any public duties and is defending this case as a private citizen. 

He may no longer use the honorific "His Royal Highness," and he had to surrender his military titles.  The BBC, perhaps a more reliable source on this subject, clarifies, "Like Harry and Meghan, Prince Andrew retains his title HRH but will not use it in any official capacity."  I'll assume you all know to which "Harry and Meghan" the BBC refers, and I will leave it at that.

January 18, 2022 in Celebrity Contracts, Current Affairs, In the News, Recent Cases | Permalink | Comments (1)

Thursday, January 6, 2022

Sid DeLong, Is Prince Andrew a Third-Party Beneficiary of the Giuffre Release?

“Yes Virginia, There is a Santa Clause”: The Giuffre Release
Sidney DeLong

Andrew
Image by Titanic Belfast, CC BY 2.0 , via Wikimedia Commons

Denied the benefits of three years of law school, the general public must learn what it can about contract law in piecemeal fashion, in the school for scandal afforded by news reports of highly publicized cases. Thus, for example, the Stormy Daniels controversy introduced everyone to the law of mandatory arbitration, non-disclosure agreements, and temporary restraining orders.

Seen as a teaching moment, the sexual abuse lawsuit brought by Virginia Roberts nee Giuffre against Prince Andrew may further educate the laity about the arcana associated with general releases and third-party beneficiary law. It also may give an incidental education in the state of legal prose.

Last Monday, the court unsealed a Settlement Agreement and Release entered into by Virginia Roberts (Giuffre’s maiden name) and Jeffrey Epstein (below, right) in 2009. The agreement settled her lawsuit and released all her then-pending tort claims against Epstein. Her allegations included that he trafficked her, while a minor, to his powerful friends, who included politicians, academicians, and “royalty.” The Release states that it was executed in connection with a non-prosecution agreement entered into by a Florida federal prosecutor and Epstein, an agreement that was later to become controversial in itself when he was prosecuted in New York.

In her current lawsuit against Prince Andrew, Giuffre alleges that he was a friend of Epstein who sexually assaulted her on multiple occasions when she was a minor.  Without admitting any of her allegations, he has pleaded as an affirmative defense that she released her claims against him when she signed the Epstein release, even though he was not a party to the Epstein lawsuit and is not named in the release. Instead, he claims that he is an unnamed third-party beneficiary of the release because it extends to “any other person or entity who could have been included as a potential defendant” to the Epstein lawsuit. 

The Settlement Agreement and General Release contains language that, although it is boilerplate familiar to many litigators, would strike most laypersons and many lawyers as bizarre. Like many other forms of contractual boilerplate, release boilerplate grows by accretion and never seems to diminish. As a result, it contains many terms that have no application to this controversy.

Thus, the agreement binds not only Giuffre and Epstein in the singular, but also in the plural:

Virginia Roberts and her agent(s), attorney(s), predecessor(s), successors(s), heir(s), administrator(s), and/or assign(s)/(hereunder, “First Parties”) and Jeffrey Epstein and his agent(s), attorney(s), predecessor(s), successors(s), heir(s), administrator(s), and/or assign(s)/(hereunder, “Second Parties”).

All this means that in form the agreement is between two large groups of people, real and imaginary. More significantly, the agreement also refers to a third group of unnamed persons: “any other person or entity who could have been included as a potential defendant (“Other Potential Defendants”).

The First Parties not only “release“ the Second Parties and the Other Potential Defendants from the Giuffre claims, but also “remise, release, acquit, satisfy, and forever discharge” them.

When the drafter(s) entitled the document a “General” release they were not kidding.  The released claims include not only the tort claims Giuffre brought against Epstein in the lawsuit, but also (take a deep breath)

all, and all manner of, action and actions of Virginia Roberts, including State or Federal, cause and causes of action (common law or statutory), suits, debts, dues, sums of money, accounts, reckonings, bonds, bills, specialties, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, executions, claims, and demands whatsoever in law or in equity for compensatory or punitive damages that said First Parties ever had or now have or that any personal representative, successor, heir, or assign of said First Parties hereafter can, shall, or may have, against Jeffrey Epstein, or Other Potential Defendants for, upon or by reason of any matter, cause, or thing whatsoever (whether known or unknown), from the beginning of the world to the day of this release.

Holmes

For a unique experience, legally trained readers may, for once in their professional life, actually read this passage word-for-word, preferably aloud, and reflect on its meaning. They might then reflect on the fact that no living person fully understands every word of this paragraph. Non-lawyers may be surprised that, as Holmes famously remarked, the law finds no difficulty under the objective theory of contract in holding parties to the terms of agreements that neither of them may correctly understand.

If we had world enough and time, it would be highly rewarding to parse this language, lingering lovingly over each word, imagining what drafting disaster in what ancient agreement led to its inclusion in the ever-growing, immortal mass that is the result. Does anyone remember what a “specialty” is? What “variances” might Epstein have committed against Giuffre, assuming one can commit a variance?

Sadly, courts do not always ignore such boilerplate. In the infamous decision, Hershon v. Gibraltar Building & Loan Assoc., Inc., 864 F.2d 848 (D.C. Cir. 1989) a general release with even more extravagant language that was intended only to settle five business claims was held to have inadvertently cancelled a debt of $265,000 owed by the released party to the releasing party in a completely unrelated and uncontested loan.The majority rested on a rather punitive application of the plain meaning theory of contract, visiting the sins of the drafters on their clients. Under Hershon’s reasoning, the Giuffre release would discharge any claim of any sort that she might have had against anyone who might have been a “possible defendant” in her action against Epstein, such as his insurer.

Jeffrey_Epstein_mug_shotThe unique feature of the release is not that it refers to “the beginning of the world”: they all do. Rather, it is that it extends to “said Second Parties and any other person or entity who could have been included as a potential defendant ('Other Potential Defendants').” In a sea of everyday lawyer prose, the phrase “who could have been included as a potential defendant” sticks out like a sore thumb. The phrase has no settled legal meaning, and so the litigants have focused on it intently, as it limits the scope of the The unique feature of the release is not that it refers to “the beginning of the world”: they all do. Rather it is that it extends to “any other person or entity who could have been included as a potential defendant (“Other Potential Defendants”).” In a sea of everyday lawyer prose, the phrase “who could have been included as a potential defendant” sticks out like a sore thumb. The phrase has no settled legal meaning and so both litigants have focused on it intently, as it limits the scope of the release.  According to NPR, Giuffre’s lawyers, for example, have argued that it did not include Prince Andrew because, inter alia, he could not have been sued in the jurisdiction where the action was brought. His lawyers argue that, although innocent of any wrongdoing, he is clearly in the category of unnamed “royalty” whose crimes were alleged in the Epstein complaint and who might have been sued along with Epstein.

There were easily-imagined reasons for Epstein’s lawyers to employ the ambiguity so as not to name the “powerful friends” that Epstein wanted to shield with this settlement. But in this case, professional coyness might encourage a court sympathetic to the plaintiff to refuse to read their names into the agreement.

A final question is whether a release can be a “third-party beneficiary contract.” First, a release is not a contract as the Restatement defines it because, as Restatement (Second) of the Law: Contracts § 278, cmt. c acknowledges. A release is not a promise that creates rights and duties but instead extinguishes rights and duties. But there is no reason the Release may not be construed to extinguish claims against third parties if that is the intent. Protection of third parties is common in tort settlements.

Under Restatement (Second) of the Law: Contracts § 302, a third party may enforce a promise whenever the promisee manifests an intention that third parties have enforcement rights and that they are appropriate to achieve the promisee’s purposes. If Epstein intended to give the unnamed friends the benefit of the release, it should be “enforceable” by those third parties if the court resolves the issue noted above as to their identity.

Two things raise doubts about whether Epstein manifested an intent that Andrew be able to enforce the release. First, the release seems not to have been disclosed to Andrew until discovery in the pending case. Than alone argues against Andrew being an intended third-party beneficiary.

A second, related doubt about third party rights arises from the following term.

Additionally, as a material consideration in settling, First Parties and Second Parties agree that the terms of this Settlement Agreement are not intended to be used by any other person nor to be admissible in any proceeding or case against or involving Jeffrey Epstein, either civil or criminal. (emphasis added).

Is Prince Andrew an “other person” who is trying to “use the terms” of the agreement? Or does the term “other person” not include the previously mentioned “Other Potential Defendants”? Does the phrase “in any proceeding or case against or involving Jeffry Epstein” modify the clause limiting the intended use by other persons, so that Prince Andrew may argue that he may use the release because this is not a case “against or involving” Epstein?

What lessons might the public learn from this combination of verbal overkill and under-specificity in Settlement Agreement and General Release? Perhaps that lawyers are paid by the word rather than the thought.

January 6, 2022 in Celebrity Contracts, Commentary, Current Affairs, In the News | Permalink | Comments (3)

Tuesday, December 28, 2021

Unilateral Contracts in the News: Found Dog Edition

My students think I hate unilateral contracts.  It's not true.  I hate the statute of frauds and the parol evidence rule.  I'm fine with unilateral contracts.  They are interesting. They are also uncommon.  That is to say, they make up a tiny percentage of the universe of contracts.  That's why they show up in the news.  

As reported in the New York Times, Daniel Sturridge, an English football (soccer) star, made a video after his dog, Lucci, a Pomeranian, disappeared from his Los Angeles home.  In the video, Mr. Sturridge offered a reward, "20 Gs, 30 Gs, whatever" to anybody who helped him to recover the dog.  Soon thereafter, Foster Washington, found the dog.  

Small Dogs
Mr. Sturridge claims that he already paid Mr. Washington a reward.  On Tuesday, a judge found otherwise.  Mr. Sturridge now plays in Australia.  When he was signed as a striker with Liverpool in 2013, the contract was valued at $20 million.  Lucci is valued at $5300.  Mr. Washington has three children and makes $14/hour working as a security guard.  His utterance may have been too vague to be considered a clear offer.  Is it a promise to pay 20 G? 30? Whatever?  Is it an invitation to bargain?  Don't care.  You are rich.  A poor man helped you out, thinking you would honor your pledge to provide a reward.

Pay the man.

December 28, 2021 in Celebrity Contracts, In the News, Recent Cases, Sports | Permalink | Comments (2)

Tuesday, December 7, 2021

More On Compensation Inequity: College Football Edition

Yesterday, I ranted about executive compensation.  Today, I will rant about compensation paid to college football head coaches.  If you think that college football coaches deserve to be, in most states, the highest paid public employees, feel free to tune out.

Recently, a friend recommended that I listen to a story at the start of this Advisory Opinions podcast.  I don't want to ruin the story, I've put it below the fold.   If you want to listen, it just takes up the first two or three minutes of the podcast, which I do not otherwise recommend.

I bring up the story in this context because I recently was conversing with a neighbor who had various criticisms of Dr. Fauci.  Among Dr. Fauci's misdeeds, according to my neighbor, is that he is the highest-paid employee of the federal government.  It's true.  According to Forbes, Dr. Fauci's annual compensation is now over $400,000, and in the decade between 2010 and 2019, he earned $3.6 million.  Okay, so let's use football coaches' salaries to put that in perspective.  

First, according to the New York Times, Louisiana State University (LSU), a public institution, is paying its new coach $9 million/year.  That is well over twice what Dr. Fauci made over ten years.  At the same time, it is paying its former coach $17 million to step aside, so that former coach will be paid nearly five times what Dr. Fauci made over ten years, and he will make it for doing precisely nothing. 

LSU
Second, and this is crucial, Dr. Fauci is the highest paid federal employee because people who understand his role (that is, not Senator Rand Paul), know that he is an incredibly dedicated, effective public servant who has provided unparalleled leadership since the AIDS crisis.  If Dr. Fauci were to leave public service and work in the for-profit bio-tech sector, he could easily command salaries akin to what we pay corporate executives in those fields -- that is, many multiples of what he makes as a public servant.  Before one criticizes Dr. Fauci for making $400,000 a year, consider that the opportunity cost for him to do so by working as public employee is likely $1-2 million/year.

LSU's new coach, on the other hand, is guaranteed a bonus of $500,000 if LSU manages to win half its games, which would be a pretty unimpressive accomplishment for a team that has won three national championships since 2003.  That's right, on top of his salary, which is already twenty-two times higher than Dr. Fauci's, LSU's coach will get a bonus in excess of Dr. Fauci's salary if the team underperforms during his first year as badly as it did this year.

For my money, an Anthony Fauci is worth more than the best football coach in the country.  For my money, investing in great scientists who can guide our country through catastrophic health crises makes more sense than investing in men who can win college football games.  I would also venture to guess that the secondary effects of investing in science, in terms of gains in useful knowledge that can be applied to future medical challenges, greatly outweigh the benefits of having a successful college football team in the state.   As this story from the Guardian makes clear, most college sports programs operate at a loss.  Mad about the high tuition and fees you are paying for your child's education at a public university?  Maybe you should talk to your legislators about the high costs of college sports programs.  And those costs could be cut very easily if every state paid its coaching staff a decent but not excessive wage.  Salaries in line with what full professors in competitive fields like, law, business, medicine, or engineering, seem about right to me.  University presidents are also absurdly overcompensated, given that they take on no downside risk, but that can be a subject for some other post.

And since anybody who disagrees with me probably stopped reading a long time ago, let me add that the United States is the only country in the world that operates this way, and it is wholly irrational.  Universities are primarily about education and research.  Young people who are primarily interested in athletics can pursue that dream through developmental leagues, like the rest of the world has.  Teams in those leagues could be located in or near college towns, and universities that want to create a connection between the teams and their institutions can offer scholarships to the athletes who play on those teams.  Those students may have to attend part-time, as athletics is their day job.  Still, universities could provide support so that those students can succeed either as athletes, or as students, or as both, if they have the requisite aptitudes in both areas.  Given that very few students athletes become professional athletes, and professional athletic careers are very short on average, very little is lost if students choose to try their luck in the lottery of professional sports and then pursue college eduction at the age of 25 or 29.

Continue reading

December 7, 2021 in Celebrity Contracts, Commentary, Sports, True Contracts | Permalink | Comments (0)

Wednesday, November 17, 2021

Jay-Z Convinces a Jury that the Jay-Z-Branded Fragrance Stinks!

Beginning in 2009, Jay-Z, entered into a series of agreements with Parlux Fragrance and parent company Perfumania (Plaintiffs).  The agreements granting them an exclusive license to use the Jay-Z trademark for manufacture, promotion, distribution, and sale of fragrances and related products.

According to the Complaint, the parties agreed that Plaintiffs could use the Jay-Z trademark on certain products and that Jay-Z (right, in a 1988 photo Jay-Z_1988) would not unreasonably withhold permission to use the trademark.   In 2013, Plaintiffs launched Gold Jay Z fragrance.  Plaintiffs maintain that, in order for a celebrity fragrance to succeed, the celebrity has to actively promote it, and they allege that Jay-Z was obligated under a licensing agreement to do so but breached those contractual obligations.

Plaintiffs claim multiple breaches by Jay-Z including: (i) declining to be interviewed, (ii) failing to provide a quote for an upcoming Women's Wear Daily article, (iii) failing to make various promotional appearances at Macy's in support of the product, (iv) declining to provide a quote or statement for the press release in connection with the product launch, (v) or to provide quotes or complete "Q & As" for Elle, Glamour, or Cosmopolitan, and (vi) rejecting five different concepts for a promotional contest involving a giveaway of an 18-carat gold bottle of GOLD JAY-Z created by Jacob the Jeweler valued at $20,000, and instead keeping the prototype gold bottle.

In the litigation, Jay-Z contended that Parlux proceeded with the launch despite knowing these promotional events conflicted with Mr. Carter’s Magna Carta World Tour, which made him unavailable for these promotional events.  In his testimony, according to Allhiphop.com, Jay-Z did not like the promotional work that Plaintiffs put together for the branded fragrances, calling it "B-rate" and called their efforts "crappy, lazy work."

Gold Jay-ZAfter the initial launch, Plaintiffs began developing concepts for additional products for the brand but it was unclear whether these additional requests were included in the original product development plan. Jay-Z and his people felt under no contractual obligation to approve new products under the agreements.  Plaintiffs argued that Jay-Z's refusal to aid them in the development of new products was a breach of his obligations.

Jay-Z and his attorneys broadly argued that Plaintiffs failed to understand how to properly market his luxury brand and protect his products from being sold "on the shelves of Walmart between hand sanitizer and Tic-Tacs," as his attorney said in his opening statement.  Jay-Z counterclaimed, seeking $2.7 million in unpaid licensing fees.

On November 10, 2021, a New York jury, after a three-week trial, took only two hours to reject both parties' breach of contract claims.

Thanks to my research assistant, Alyssa Cross, for helping me with this stinky assignment.

November 17, 2021 in Celebrity Contracts, Recent Cases | Permalink | Comments (0)

Wednesday, November 3, 2021

Carole Baskin Sues Netflix for Breach of Contract. Thanks, Carole!

I'll admit it.  I watched Tiger King.  My students at the time insisted that I do so.  My friends warned me away, because I don't like watching people being cruel to animals.  People told me that you either love it or hate it.  I did neither.  I get the over-the-topness of the series.  That part was fun, but I resented the way the series encouraged identification with its main character, Joe Exotic.  He's a complicated human.  I don't know if anybody merits the treatment they get from our criminal justice system.  But he should not be allowed anywhere near large cats.  I was also dimly aware that fans of the show had adopted Joe Exotic's perspective and treated Carole Baskin as a villain, accepting the false equivalence Joe Exotic tried to establish between his operation, which exploited animals for profit and bred them irresponsibly, and Carole Baskin's animal rescue preserve. 

White Tigers
Image by Zvi Roger, CC BY 3.0, via Wikimedia Commons


Now Tiger King II is about to come out.  Carole Baskin wants no part of it, and she is suing to enjoin use of footage of her from the first shoot in the second series.  She claims breach of contract The Complaint is here.

The Complaint is basically a vehicle for Baskin to tell her side of the story.  Much of it is taken up with the achievements and awards and recognition of her Big Cat Rescue organization.  Joe Exotic is introduced as follows. 

 Joe Exotic . . ., the operator of a private roadside zoo and prolific breeder of big cats and purveyor of cub petting services [sic] sought to discredit and silence the Baskins' [sic] and their advocacy through years of constant and persistent intimidating and libelous social media attacks and physically during one incident at Big Cat Rescue.

The Complaint explains how Joe Exotic retaliated against Ms. Baskin, misappropriating her intellectual property and hiring a hitman to execute her.  The former led to his bankruptcy; the latter led to his prosecution and conviction.  
 
According to the Complaint, Ms. Baskin participated in Tiger King without knowledge of what the show was really about.  She was under the impression that the aim of the documentary was to expose the exploitation and cruelty to animals involved in big cat breeding, a subject-matter aligned with her organization's mission.  Prior to the release of The Tiger King, Ms. Baskin alleges, the producers showed her three videos that were supposed to represent the nature of the project.  These videos left Ms. Baskin with the impression that the producers were engaged in an animal-welfare documentary which would portray her as a heroine.  

The heart of Ms. Baskin's current suit against the producers is her claim that the releases she signed allowing use of footage filmed with her was only with respect to a single "documentary motion picture."  She did not agree to participate in a second series, and when approached by the producers, her response was "No. And lose my number."  That's gold, baby!  If only that were in the new series!  Sorry.  

If you watch the trailer for the new series, linked to in ¶ 36 of the Complaint, prepare to be overwhelmed with the powerful stench of desperation.  Joe Exotic is in prison.  His zoo is shut down.  The film makers chase after similarly despicably situated persons, i.e., other polyamorous, gun-toting, purported animal-lovers, committed to money-making and lawless libertarianism.  Prepare also for unsubstantiated allegations, artfully edited and cross-cut to look as plausible as the rampant criminality and exploitation that was the very stuff of Joe Exotic's business.  The desperation comes from the producers, who, as the breathless editing of the trailer makes clear, no longer have a story to tell but want to mine this vein until it is completely tapped out.  It also comes from Netflix, which has recently made clear that it is committed to the view that the only thing worse than being talked about is not being talked William_H._Macyabout.

It is only because I am not a participant in cancel culture that I will not cancel my Netflix subscription in protest of their decision to release Tiger King II.  Also, the new season of Shameless just became available, and the forthcoming season of Ozark is one of the few things I have to look forward to in this life.

November 3, 2021 in Celebrity Contracts, Commentary, Recent Cases, Television | Permalink | Comments (0)

Tuesday, November 2, 2021

More Unilateral Contract News: Texas GOP Politician Pays out $25,000

Yesterday, we noted that Elon Musk's "offer" to donate $6 billion to solve world hunger was couched in conditions that rendered it non-binding.  Musk's offer likely was not serious.  Rather, it was a more clearly provocative version of the attempted jest in Lucy v. Zehmer.   It was more of a taunt than it was a charitable pledge.  In the alternative, Musk's offer could be characterized as an illusory promise.  Musk demanded proof that the UN World Food Program demonstrate its ability to do the work for which it won the Nobel Peace Prize in 2020.  He likely considered himself the lone arbiter of the adequacy of the evidence, and he was prepared to move the goalposts.

You can vote for your favorite characterization of Musk's Tweet by taking this Twitter poll.  Don't like any of the options?  Leave a comment!

Dan PatrickBut today, we have word of a real offer accepted through completed performance.  We posted ten months ago about Texas Lieutenant Governor Dan Patrick's offer of $25,000 for anyone who comes forward with evidence of voter fraud in connection with the 2020 Presidential election.  There was some skepticism expressed in the comments regarding the enforceability of the offer or of its duration.  One of my students, not satisfied with the efforts of the Republican governor, Republican secretary of state, or the Trump-appointed U.S. Attorney for Georgia, had to be restrained from undertaking her own investigation into electoral fraud in that state.  

But now, via Professor Miriam Cherry's reliable nose for contracts news, we learn from the Dallas Morning News that Dan Patrick (left) has cut his first check.  Alas, it does not relate to systematic voter fraud, and the fraud did not occur in Georgia.  It did occur in another contested state, Pennsylvania, but the fraud consisted of a single case of voter fraud by a Republican voter who tried to vote twice, once on his own behalf, and once for his son, a registered Democrat.  The Dallas Morning News describes the recipient of the $25,000 check as "the scion of a family of Democratic operatives."  What a strange phrase!  Is that on his c.v.?

In any case, let's credit Dan Patrick for doing the honorable thing and paying up.  On the other hand, it's not like he was paying out his own money.  The money came from his campaign war chest, which stands at $23 million right now.  In addition, maybe it is also time for Mr. Patrick to acknowledge what his offer really reveals.  Even with a pretty generous economic incentive (he set up a fund of $1 million), nobody was able to successfully claim the reward by having uncovered evidence of voting fraud by Democrats.  That is extraordinary, and extraordinarily telling.  Mr. Patrick ought to acknowledge that fact and concede that the allegations of election fraud in the 2020 elections had and have no basis in fact. Alas, according to the Dallas Morning News, Mr. Patrick had no comment.

November 2, 2021 in Celebrity Contracts, Current Affairs, In the News, True Contracts | Permalink | Comments (3)

Wednesday, October 27, 2021

Sullivan v. O'Connor Revisited through Linda Evangelista's Suit

Sullivan v. O'Connor is an old chestnut of contracts lore, which we have memorialized in prior posts here and here.  One of the joys of teaching contracts is that musty old cases turn up periodically in new guises.  If none of your students remember Lady Duff, they might remember Maya Angelou or Britney Spears.

Linda Evangelista 2004
Image by jusez from Hong Kong, China - Flickr, CC BY 2.0

Everything old is new again.  Musty old Sullivan v. O'Connor is reborn, as according to the New York Times, the former supermodel Linda Evangelista (left) is suing the company behind a cosmetic procedure known as "CoolSculpting," alleging that her experience with the procedure has left her "brutally disfigured."  And the great thing for us is that her complaint alleges causes of action sounding not only in tort but also in contracts (sort of)!

Ms. Evangelista alleges that Zeltiq Aesthetics, Inc (Zeltiq) marketed its CoolSculpting System, a non-invasive alternative to liposuction surgery, and failed to warn consumers of serious adverse side-effects associated with CoolSculpting, such as paradoxical adipose hyperplasia (PAH).  Rather, Zeltiq claimed that CoolSculpting was "the safe, non-invasive way to reduce fat in common trouble areas that tend to be diet- and exercise-resistant."  

CoolSculpting apparently involves killing fat cells in targeted areas by freezing them.  The dead cells are then absorbed by the body and excreted in the four-six months following treatment.  Ew.

Although Zeltiq disclosed in its SEC filings that PAH was a known side-effect to the CoolSculpting System, Ms. Evangelista alleges that it did not disclose that risk to consumers.  She alleges that her career was cut short in 2016 after she underwent seven rounds of CoolSculpting treatments.  Some of the treated areas swelled rather than reducing, and Ms. Evangelista was diagnosed as suffering from PAH, a risk about which she claims neither Zeltiq nor her dermatologist warned her.

When Ms. Evangelista complained to Zeltiq about her condition, the company offered to pay for corrective liposuction surgery on condition that Ms. Evangelista sign a confidentiality agreement and release.  Ms. Evangelista refused to sign the document but proceeded nonetheless with the corrective surgery, which was painful and required her to wear compression garments for several months, making it impossible for her to work.  Despite two rounds of corrective surgery, each of which required "length and painful" recoveries, Ms. Evangelista's condition did not improve.  As a result, she claims that she suffered permanent disfiguring injuries that have made it impossible for her to work as a model.

She alleges causes of action sounding in products liability, negligence, breach of express and implied warranties, various types of fraud, and a violation of New York's consumer protection statutes.  She also alleges promissory estoppel. 

It's hard to see how she gets to her $50 million in alleged damages on a promissory estoppel claim.  It seems like the best that would get her would be reimbursement for her medical expenses associated with the corrective surgeries.   According to the complaint, that will only get her $38,000.  Similarly, while breach of warranty claims can be quite generous, they cannot be speculative.  Even if she can show her career was cut short due to the side-effects she suffered after treatments, how can we know that, but for that her disfigurement, she would have earned $50 million.  Ms. Evangelista would have to show that the value of contracts that she was forcded to decline due to her condition amounted to $50 million.  

More likely, the warranty and promissory estoppel claims are sideshows.  The main event will be her products liability and tort claims.  She alleges significant mental harms in addition to her physical harms, including severe social anxiety and agoraphobia.  The torts claims seem like a more reliable path towards the stratospheric damages that Ms. Evangelista seeks.

H/T David Oedel

October 27, 2021 in Celebrity Contracts, Famous Cases | Permalink | Comments (0)

Tuesday, October 5, 2021

Scarlett Johansson Settles Black Widow Suit

Black_Widow_(2021_film)_posterAs Sid Delong noted in his post about the case from August, Ms. Johannson's litigation strategy was unusual and a bit mysterious.  She sued Disney for tortiously interfering with her contractual relations with Marvel, a Disney subsidiary, without suing Marvel for breach of contract.  The case was catnip for law profs interested in contracts, torts, remedies, the Marvel movies, and Ms. Johansson.

Alas, as is so often the case, Ms. Johansson settled her claims against Disney.  The details of the settlement have not been made public.  However,  in separate statements, the parties seem to have decided to kiss and make up.      

As reported on the BBC, Disney's content chairman said of Ms. Johansson, "We appreciate her contributions to the Marvel Cinematic Universe and look forward to working together on a number of upcoming projects," and he proceeded to plug a forthcoming movie.  Even though the report is on the BBC, let's not forget that Disney owns ABC, so it never forgets to Always Be Celling.  

For her part, Ms. Johansson, whose Black widow character is a Russian assassin turned Avenger, said "I'm incredibly proud of the work we've done together over the years and have greatly enjoyed my creative relationship with the team."  More of a whimper than a bang.

Will the actor be haunted for sucking up so shamelessly in order to move on with her career, just as the Natasha Alianova character (the Black Widow) is haunted by the fact that in her attempt to assassinate General Dreykov, she gravely injured his daughter, Antonia Dreykov (Taskmaster)?  We're just asking questions here.

October 5, 2021 in Celebrity Contracts, Recent Cases | Permalink | Comments (0)

Wednesday, September 29, 2021

Groundhog Day Moment: Trump Loses a Case Involving a Non-Disclosure Agreement

Groundhog
Neither of these creatures is Bill Murray

You know that moment in the film Groundhog Day when Bill Murray's character wakes up to "I Got You Babe" and thinks the DJs have screwed up and played yesterday's tape by accident?  If I just went with the headline "Trump NDA Ruled Unenforceable," you would have shaken your head and yelled at your computer, "Dude, refresh your feed!"  After all, we've already run stories about unenforceable Trump nondisclosure agreements (NDAs) here and here and here and here.  

And now comes the case of Omarosa  Manigault Newman (Omarosa) who wrote a book about her time in the Trump White House.  In 2018, the Trump Campaign sought arbitration to enforce an NDA into which Omarosa alleged entered in 2016.  According to NBC News, Omarosa alleges in her book, Unhinged: An Insider's Account of the Trump White House that Trump was a racist and also that he was in severe mental decline during his Presidency.  Not having read the book, I can only wonder whether Omarosa cited as evidence of that decline her own hiring to work in the White House based on her appearance in three separate season of Mr. Trump's reality television show, The Apprentice.

According to The New York Times, the arbitrator deemed the Trump NDA too vague to be enforced.  It apparently prohibited Omarosa from revealing confidential information, but that term was defined so broadly as to capture just about anything, including mere opinions critical of Mr. Trump.  In addition to ruling in Omarosa's favor, the arbitrator also granted her attorneys' fees.  Gracious as always, Trump issued a statement, reprinted in Rolling Stone, in which he acknowledged defeat and praised Omarosa for besting him on the law and the facts.  

Just kidding. 

He said: “I gave Omarosa three attempts at The Apprentice and she failed. At her desperate request I gave her an attempt at the White House and she failed there too, people truly hated her.”

Stephanie Grisham's tell-all about Melania Trump is due out next week.  Stay tuned.

September 29, 2021 in Celebrity Contracts, Current Affairs, In the News, Recent Cases | Permalink | Comments (0)

Wednesday, September 8, 2021

Bob Dylan Wins Suit Against Co-Creator of "Hurricane" & Remains the Champion of the World

Guthrie Center
By Peter Greenberg - Own work, CC BY-SA 3.0

Writing as I do from Oklahoma, home state to the Bob Dylan ArchiveLevy v. Zimmerman caught my eye.  What's that you say?  How can there be a Bob Dylan archive in Tulsa, Oklahoma?  Why, it makes perfect sense if you think about it.  It's right next to the Woody Guthrie Center (right).  You should come and visit!  And if you're hungry after that, you can come to my home city, OKC, and dine at Nonesuch, America's best new restaurant, according to Bon Appetite!  Just sayin'.

Anyway, back in the early 70s, Bob Dylan collaborated with Jacques Levy to write ten songs, seven of which, including "Hurricane," were included in Dylan's 1975 album Desire (my second favorite Dylan album after Blood on the Tracks).  I'm confused as to why Bob Dylan, America's great minstrel, needs help writing songs, but such are the uncontested facts.  Levy was entitled to royalties on the songs, and he received $1 million.  Levy died in 2004, but his estate and his publishing company seek an additional $1.75 million.   Dylan sold his catalog of 600 songs to Universal Music Group (Universal) for $300 million, and plaintiffs allege that $1.75 million is their fair share of that sale.

Dylan 1966
Dylan 1966

As in the case that was the subject of yesterday's post, we are dealing here with a creator who contracts away his intellectual property rights in exchange for royalties.  The court found that Dylan was the copyright holder and that Levy had no claim for breach of contract arising under the catalog sale to Universal.

This ruling was largely based on the contracts designation of Levy as an "employee" hired to help with composition and entitled only to limited royalties.  Plaintiffs attempted to counterpunch, arguing that limiting the contract to that characterization elevated form over substance.  They produced detailed expert testimony from Bob Kohn, who characterized the relationship between Dylan and Levy as giving rise to "joint works" and a shared "undivided interest" in the songs.  

Mr. Kohn was fighting above his weight class.  Justice Barry Ostrager of New York's Supreme Court, New York County  cut him to ribbons:

In sum, the "expert" affidavit offered by Bob Kohn purporting to interpret the 1975 Agreement is inadmissible to offer an opinion as to the legal rights and obligations of the parties under the unambiguous contract . . . . Kohn's opinion is, in any event, unpersuasive as it distorts the plain language in the Agreement. Defendants' limited citation in their moving papers to Kohn's treatise does not change that result, as the Court is not relying on any extrinsic evidence to interpret the Agreement.

As Mr. Levy might have put it, Justice Ostrager

could take a man out with just one punch
But he never did like to talk about it all that much
"It’s my work", he’d say, "and I do it for pay
And when it’s over I’d just as soon go on my way"

He ruled based on the unambiguous meaning of the agreement:

[T]he Agreement unambiguously limits plaintiffs' compensation rights to 35% of monies received by Dylan for licensing rights granted to third-parties for the performance and use of the Compositions but not for any portion of the proceeds from Dylan's sale of his complete copyrights related to the Compositions that were explicitly vested in him alone pursuant to the express terms of the 1975 Agreement.

Justice Ostrager also dismissed Plaintiffs' claims against Universal as third-party beneficiaries of the catalog sale.  Plaintiffs could make no claim to the status of third-party beneficiaries to that sale.  He likewise dismissed their tortious interference claim.  Absent a breach of contract, there can be no such claim. 

In a case such as this, it seems inevitable that one of the parties would lament: 

How can the life of such a man
Be in the palm of some fool’s hand?
To see him obviously framed
Couldn’t help but make me feel ashamed
To live in a land
Where justice is a game 

H/T @NY_Contracts

September 8, 2021 in Celebrity Contracts, Music, Recent Cases | Permalink | Comments (1)

Monday, August 2, 2021

Sid DeLong on the Scarlett Johansson Suit Against Disney/Marvel

INDUCING BREACH OF CONTRACT: A STUDY IN SCARLETT

Sidney W. DeLong

JohanssonThe tort of inducing breach of contract continues to fascinate. In Periwinkle Entertainment Inc. v The Walt Disney Co., Scarlett Johansson (left), the star of Black Widow sued Disney for tortiously inducing Marvel Studios, a subsidiary of Disney, to breach its contract with her.  The complaint alleges that Marvel entered into a contract with Johansson to act in Black Widow. Because Johansson’s compensation was largely to be determined by box office receipts, the contract required Marvel to make an exclusive “wide theatrical release” of the film for a period of time, “the standard exclusive theatrical window.” Instead, citing the COVID pandemic, Disney caused its subsidiary Marvel to release the movie simultaneously with Disney’s release of the movie through its streaming service, Disney+. Viewers were permitted to watch the movie without going to theaters, which Johansson alleges diverted revenues from theaters, costing her millions.

The complaint provokes several questions. Johansson sued only Disney, not Marvel. Normally, claims of tortious inducement against a third party are joined with claims for breach of contract against the contract breacher. Various reasons relating to preclusion on factual and legal issues dictate that the all defendants should be bound by the same action. Then why did Johansson not sue Marvel as well as Disney? Did its contract contain a mandatory arbitration clause (and if not, why not?)? If it did, then the arbitration clause, if well-drafted, should have included claims against Marvel’s parent, Disney. That shoe may drop later.

The complaint pleads two counts of tortiously inducing breach. Normally a parent company should not be liable for causing a subsidiary to breach a contract. A court usually ignores the separate identities of parent and sub in claims that have concerted activity as an element (cf. the “bathtub conspiracy” cases in antitrust). But here it seems that the parent had an economic motive to divert revenue from the sub to its streaming services and away from Johansson by causing the sub to delay theater release of the film, in violation to its contractual obligation to Johansson. That seems to justify treating Disney as a separate, third-party who is a stranger to the contract with the sub.

A final question concerns remedies. Perhaps because it was hastily drafted, the complaint is sparse on its remedial prayers, seeking only punitive damages in the separate counts, but adding a catch-all ad damnum for all money damages caused by the tort. Damages for inducement usually equal the expectation damages for breach of the underlying contract. But these expectation damages may be speculative, given the uncertainties of the imaginary box office receipts that would have occurred with a weeks-long exclusive theater release.

But the tort claim, if established, should also justify a restitutionary remedy against Disney, measured by its unjust enrichment resulting from its wrongdoing. That calculation too, may be complex, however if one must determine how much of its streaming revenues were caused by its wrongdoing.  

If another reminder were needed, Periwinkle demonstrates anew that Contracts and Remedies students should be familiarized with the tort of wrongfully inducing breach of contract as another weapon in their litigation arsenal.

August 2, 2021 in Celebrity Contracts, Commentary, Current Affairs, Film, In the News, Recent Cases, Television | Permalink | Comments (0)

Tuesday, July 13, 2021

Roy Moore's Claims Against Sacha Baron Cohen Dismissed

In 2018, Roy Moore, former Chief Justice of the Alabama Supreme Court, former U.S. Senate candidate agreed to be interviewed by Sacha Baron Cohen.  As is his wont, Cohen misrepresented the purposes of the interview.  It did not go well, as you can see below, and the problems go well beyond Cohen's mock unibrow:

Moore and his wife sued Cohen for intentional infliction of emotional distress and fraud.  Moore added an additional cause of action for defamation.

In a ruling issued today, Judge John P. Cronan of the S.D.N.Y. dismissed Moore claims, as barred by a contractual waiver, and dismissed Mrs. Moore's claims as barred by the First Amendment.  We have covered Mr. Cohen's encounters with the law of waivers before (linking to five other posts!).  The outcomes have been pretty uniform.  The only twist here is that Mrs. Moore didn't sign a waiver, but that's where the First Amendment comes in.  Read all about it on some other blawg.

As to the contracts issues, Mr. Moore signed a consent agreement that expressly waived each of the claims that he attempted to bring.  One might be concerned that the law should not protect those who knowingly commit fraud but get away with it because they made you sign a consent agreement in which you waived any fraud claim.  New York law refuses to enforce "general releases."  But this agreement was not a general release, and even if it were, even a general releases is enforceable where, as here, the release language clearly, unambiguously, and specifically encompasses the claims brought.

July 13, 2021 in Celebrity Contracts, Recent Cases, Television | Permalink | Comments (0)

Monday, July 12, 2021

Contracts and Promissory Estoppel Issues in the Bill Cosby Case

Bill_Cosby_1965 (1)
Bill Cosby, 1965

Well-known actor and comedian William (Bill) Cosby, who was sentenced to 3-10 years in prison for sexual assault, was recently released.  The grounds for release?  Breach of a promise not to prosecute. 

Back in 2005, District Attorney Bruce L. Castor, Jr. who investigated allegations of sexual assault brought by Andrea Costand, determined that a criminal trial against Mr. Cosby could not be won.  He issued a signed press release in which he announced that "insufficient, credible, and admissible evidence exists upon which any charge against Mr. Cosby could be sustained beyond a reasonable doubt."  D.A. Castor issued the press release in order to prevent Mr. Cosby from invoking his Fifth Amendment not to testify in any civil suit that Ms. Costand might bring.   Ms. Costand brought that suit, which resulted in a $3.38 million settlement, but not until after Mr. Cosby had been deposed and had admitted to some of the acts that Ms. Costand alleged.  He admitted that he had given her Benadryl tablets, but claimed that the ensuing sexual encounter was consensual.  He also admitted that he had provided quaaludes to other women with whom he wanted to have sex.

Fast forward ten years, and we have a new D.A., Risa Ferman, who decided to reopen the case against Mr. Cosby and use the deposition testimony.  When Mr. Cosby objected, the trial court found that a press release announcing an exercise of prosecutorial discretion is not a contract.  What D.A. Castor was offering was transactional immunity, but the trial court found that he had not done so in accordance with the relevant Pennsylvania statute.   Immunity comes from a court, not from the exercise of a prosecutor's discretion.  Even a prosecutor's promise not to prosecute could be withdrawn.  They don't even have to cross their fingers.  Moreover, no promissory estoppel claim could be made out, because reliance on any alleged promise from the prosecutor would have been unreasonable.  

Bill_Cosby_1990
Bill Cosby, 1990

In Mr. Cosby's appeal to the Supreme Court of Pennsylvania, Middle District, the relevant issue was:

Where: (a) [District Attorney Castor] agreed that [Cosby] would not be prosecuted in order to force [Cosby’s] testimony at a deposition in [Constand’s] civil action; (b) [the district attorney] issued a formal public statement reflecting that agreement; and (c) [Cosby] reasonably relied upon those oral and written statements by providing deposition testimony in the civil action, thus forfeiting his constitutional right against self-incrimination, did the Panel err in affirming the trial court’s decision to allow not only the prosecution of [Cosby] but the admission of [Cosby’s] civil deposition testimony?

The Supreme Court affirmed the trial court's finding that prosecutor Castor had not granted Mr. Cosby immunity from prosecution.  However, the Supreme Court overturned the trial court's determination with respect to Mr. Cosby's reliance claim, holding that:

[W]hen a prosecutor makes an unconditional promise of non-prosecution, and when the defendant relies upon that guarantee to the detriment of his constitutional right not to testify, the principle of fundamental fairness that undergirds due process of law in our criminal justice system demands that the promise be enforced.

BillCosby 2006
Bill Cosby, 2006

In explaining its decision, the Supreme Court says lots of nice things about how prosecutors have vast powers and ought to be subject to principles of fundamental fairness.  I don't have the expertise in criminal law to know whether fundamental fairness dictated that Mr. Cosby must be released.  I suspect that very few criminal defendants, lacking Mr. Cosby's resources, would be able to win their releases based on claims that the prosecutor had treated them unfairly.  

As a general matter, the reliance claim would seem weak in other, comparable contexts.  Here, immunity could only be granted through a particular process, and that process was not followed.  In an ordinary contractual context, a court would likely find unreasonable reliance on a vague promise when that promise could only be effected through following some well-established procedure that was not followed in this instance.  It would be one thing if Mr. Cosby were on his own, but he was a sophisticated party represented by able counsel.  But the Supreme Court held that sophistication is not part of the inquiry here and concluded that it was reasonable for Mr. Cosby to rely on the conclusions and advice of counsel.  Whether or not their reliance was reasonable seems not to matter.

There was also some question of actual reliance here.  Mr. Cosby's testimony in depositions was consistent with what he had already told investigators in the criminal proceedings.  He admitted to providing Ms. Costand with Benadryl; he admitted to sex acts with her afterwards.  He claimed that the sex was consensual.   How can he claim reliance on a promise of non-prosecution when he had already admitted to facts to which he testified in deposition?  True, he also admitted to other acts, but to the extent that those acts subjected him to criminal prosecution, it is hard to see how a promise not to prosecute him with respect to his relationship with Ms. Constand is relevant to his choice to testify as to prior acts.  But the Supreme Court found that Mr. Cosby is entitled to a presumption that he only testified in reliance on D.A. Castor's promise that he would not be criminally prosecuted.  Fruits of the poison tree, I suppose.

The Supreme Court rejected the option, favored by the concurring and dissenting Justices, to simply suppress the evidence obtained through Mr. Cosby's depositions and grant a new trial.  Instead, the Court characterized its remedy as a grant of specific performance of D.A. Castor's promise not to prosecute.  That strikes me as an odd formulation.  Specific performance is not a remedy for promissory estoppel; it is a remedy for breach of contract.  And if we say that, but for his reliance on D.A. Castor's promise, Mr. Cosby would have invoked his Fifth Amendment rights in his depositions, that might have led to a remedy akin to what the concurring and dissenting Justices proposed.  But the majority could have reached its conclusions without speaking of specific performance.  As a result of the broken promise, Mr. Cosby was denied his due process rights, and the appropriate remedy is to vacate his conviction and enjoin any future prosecution relating to the subject matter of D.A. Castor's promise.

Thanks to Sydney Scott, for her research assistance!

July 12, 2021 in Celebrity Contracts, Current Affairs, Recent Cases | Permalink | Comments (5)

Tuesday, June 29, 2021

Rich Paul and the Role of Sports Agents in the NBA

As reported in Isaac Chotiner's New Yorker article, Lebron James’s Agent Is Transforming the Business of Basketball, Rich Paul has been changing the way athletes and agents negotiate with teams. Paul, the agent for LeBron James and other N.B.A all-stars, started his agency, Klutch, nine years ago.

Paul and James became friends in 2002 when James -- only seventeen—was expected to be N.B.A.’s No.1 draft pick. When the two first met, Paul was twenty-one and selling vintage jerseys out of his trunk. James took an interest in one of the jerseys, the two struck up a friendship and stayed in touch. They bonded over being Black kids who grew up in the inner city and the difficulties that come with that.  That background has given Paul a unique advantage when advising young players with similar experiences growing up.  Paul's mother struggled with drug addiction.  His father died of cancer while he was in college. He would have finished, he said, because it was important to his father.  But after his father died, Paul's business ambitions took over.

LeBronCav
Photo by Keith Allison

Their contractual relationship began the summer of 2003, when James signed with the Cleveland Cavaliers. James began paying Paul a salary of $48,000. According to Chotiner, James regarded the payments as “an investment in what the relationship could become.” A few years later, Paul began working for James then-agent Leon Rose, at Creative Artists Agency (CAA).

Paul left CAA and formed Klutch Sports Group in 2010 after the controversial announcement made by James on “The Decision” —an  ESPN live broadcast—in which he declared he was leaving the Cavaliers. James declared “I’m going to take my talents to South Beach and join the Miami Heat.”  The press took a very dim view of "The Decision," but James has no regrets (or will admit to none), and his move from Cleveland to Miami became the model for later moves by star players who want to dictate where they play and with whom they play.  

Paul began to develop powerful influence in the N.B.A with James as his star client. They have become associated with “player empowerment.” Player empowerment is the influence that athletes wield as they change teams and build new fan bases. The argument in favor of player empowerment is that too much control has been in the hands of teams who can trade a player on a whim. Players should have some say in where they work and live. This philosophy allows the league’s best athletes to have the most leverage because they bring in the fans, jersey sales, and general revenue. Paul believes players should have more power over who and where they sign with.

The dynamic between the league, athletes, and player empowerment, is intertwined with race. Historically, basketball—a majority Black sport—has always been run by white owners. As players have become increasingly more outspoken about politics, the league has had to follow suit, like embracing the Black Lives Matter movement.

The dynamic in NBA player contracts has certainly changed, at least at the top of the NBA food chain.  The game used to be that owners would lock in young players to multi-year contracts.  If the players underperformed or became injury-prone, the owners retained the ability to trade them.  If the players exceeded expectations, they were systematically underpaid until their contract came up for re-negotiation.  Sorry Scottie Pippen.  Now, the star players can reverse the option.  With Paul's help, they star prospects can now negotiate generous contracts but retain some contractual flexibility to move to different teams, and the league and the owners seem relatively powerless to prevent them from doing so.

Critics of player empowerment say it has put too much power in the hands of players. Bomani Jones, a sports journalist for ESPN state that player empowerment is a catchall for the fact that the league has done a terrible job empowering team, and that the N.B.A. has a problem with real estate; they have teams in places where young Black men do not want to live.

Although Paul is proud and willing to fight for his clients, he struggles with the impression that he is constantly battling with teams. He said that perception is all wrong. “What I am focused on was how to educate the athletes. It’s one thing to be a black man in America it’s a totally different thing to be a black athlete.”

For Black athletes, Paul explained, the sudden wealth of an NBA contract comes with a ‘black tax.’ Black tax is the difference in experience black athletes face compared to that of white athletes. For some Black athletes, their number of dependents is higher, their education may be lower, their financial literacy lower, and their family infrastructure is lesser. Paul and others at Klutch say they see their job not only as making money for players, but also teaching them how to spend it. Furthermore, family members of young athletes historically have only seen White men in a position of agent or head coach, so that is who they tend to seek out and listen to. It is difficult for Paul to represent White athletes because they do not seek him out and they do not expect or trust Black agents.

LeBron_James_Lakers
Photo by All-Pro Reels

Klutch became known for driving hard bargains, especially for James. Paul's reputation was cemented when James joined the Lakers in 2018. The following year, Paul pressured New Orleans Pelicans to trade Anthony Davis to the Lakers—which cemented the roster that enabled the Lakers to win the NBA championship in 2020.  Paul's strategy has aggressive:  he let it be known David was demanding a trade and that the he really wanted to be traded to the Lakers.  Davis's value to the Pelicans dipped precipitously.  He didn't want to play for the team and he didn't want to risk injury.  Paul effectively called the bluff of the owners.  They disapproved of the tactics, but Paul forced them to recognize the market power their star players wield.   The N.B.A. fined Davis fifty thousand dollars for the trade demand.   Why even bother?

Paul’s success has led to debate about what it takes to be a good agent. Paul cannot match his rivals in formal education.  Most other agents are lawyers or have lawyers. But Paul understands the business, and he understands the psychology of the players, the agents, and the "Euro men in their fifties" who still make the decisions for teams. Now for Paul’s star clients, the job is about finding new ways to wield power, including using the media. In 2018 Paul negotiated an unconventional deal for NBA prospect Darius Bazley. Bazley reneged on a commitment to play for Syracuse University but was later paid $1 million for an internship at new balance. The next year the NCAA announced a new rule: agents could not represent college athletes unless they themselves had a college degree. Then James took to Twitter and dubbed the new regulation #TheRichPaulRule. Within a week the NCAA rescinded the rule.

Chotiner's article provides a behind-the-scenes look at how Paul recruits clients.  He recounts a Zoom call between Paul and an NBA-prospect's mother.  Paul encourages the young athlete to talk about his teammates and his team mentality, about his enthusiasm for playing defense and being a play-maker rather than just a scorer or showboater.  The mother quickly grasps that the strategy is to spout cliches to counteract the prejudices about young Black athletes her son is likely to encounter.  But to her, it sounds like forcing her son to repress his personality and bow before these new White masters.  Paul is playing the long game.  For him, it is not about bowing down to anyone.  it's about achieving a balance that enables young stars to rise.   

Once players rise to stardom, they have more freedom to speak for themselves.  Klutch has athletes speak out on political or social issues. Michael Jordan would not even say whether he preferred classic Coca-Cola or new Coke.  James has spoken out on the killing of George Floyd, police brutality, and Georgia’s restrictive voting laws. Paul said that however the players decide to involve themselves is up to them, and that they should not be tone-deaf to things happening around them. 

Durant
Photo by Keith Allison 

The new model works well for the star players, but does it improve the sport?  From my perspective in Oklahoma City, I still hear complaints about Kevin Durant's abandonment of the Thunder.  I hear this from White fans, and I suspect that, while the NBA's popularity bridges racial gaps in the U.S., the people buying (unbelievably expensive) seats in stadiums and (unbelievably expensive NBA gear) are mostly White. 

I've only been here a year, and with COVID, people aren't thinking much about attending sporting events (other than college football, which never stopped here), but nobody has ever brought up the Thunder in conversation with me since I arrived.  I follow basketball a little, but I can't name a single Thunder player.  I follow the Bulls, but I know at the start of every season that the Bulls do not have three all-stars, so they will not be in serious competition for the championship.  Seems like a doomed model for small-market cities like New Orleans, Oklahoma City, and the New York Knicks.

Bobby_Bonilla_PiratesStill, it seems preferable to baseball contracts where, for some reason, owners lock themselves in to multi-year contracts valued in the hundreds of millions of dollars with players who are nearing their peaks and will be paid tens of millions late in their careers.  Such older players often are of limited value to the club, often relegated to the roll of designated hitter.   I wonder whether, for that reason, the average age on American League teams is a bit higher than on National League teams.  On the one hand, perhaps it is nice that these players get to enjoy the riches denied them in their primes.  On the other hand, it must frustrate elite athletes to compete and under-perform.  It also hurts their teams, because salary caps prevent baseball teams with older, expensive players from trading for top players still in their prime.

Thanks to ContractsProf Blog Intern, Alyssa Cross, for her research assistance!

June 29, 2021 in Celebrity Contracts, In the News, Labor Contracts, Sports, True Contracts | Permalink | Comments (0)

Tuesday, June 15, 2021

Keeping with our Martial Arts Theme: Influencer Wins A Technical Knock-out in SDNY

Yesterday, we posted about a boxing match.   Today, we move on to mixed martial arts.

Have you ever wanted a behind-the-scenes look at how YouTuber "influencers" make money?  I certainly have.  I asked my daughter what seemed to me the obvious question: Why would anybody take seriously an endorsement from an "influencer" when you know that influencers get paid to endorse products and that their endorsement is thus effectively meaningless?  Her shrug, accompanied by an eye-roll spoke volumes.  

Fortunately, Jed Rakoff, of the Southern District of New York, just decided an influencer case, Brueckner v. You Can Beam, LLC,  that reveals quite a few details about how these deals work (H/T New York Contract Decisions Twitter Feed), although I admit I still don't really understand the premise behind these deals.

Josh Brueckner (Brueckner), for those who don't know, is a professional mixed martial arts athlete and influencer.   On February 1, 2020, he entered into an agreement with You Can Beam LLC (Beam), a nutritional supplements company.  The agreement provided that Brueckner would post (i) at least six promotional Instagram posts a year about Beam's nutritional supplements, (ii) at least one Instagram story per week mentioning a Beam product, and (iii) at least one YouTube video a month on Brueckner's YouTube channel, including Brueckner's coupon code and a link to the You Can Beam website in any YouTube videos. Even if the video was not about Beam’s products, Brueckner was required to link his coupon code in the description box. In exchange, he was to be paid a monthly fixed rate of $15,000 and a commission of $4 per unit sold using Brueckner's coupon code or link.  Wow, so that's how that works.  Thanks, Judge Rakoff!

COVIDThe initial term of the agreement was one year, but then came COVID.  On March 17, Beam told Brueckner to “hold off” on the posting due to COVID-19 restrictions, because "everything with this virus has put us on hold unfortunately.” Beam still paid Brueckner his $15,000 for March, but they also sent him a termination notice dated April 8, 2020.  Contending that the termination was not in accordance with the contract terms, Brueckner filed suit on April 28th.  I'll say this for him, he's quick.  Beam counterpunched, alleging that Brueckner had been in breach of the agreement since February 28th, when Beam had sent him notice that he had failed to include a link and discount code in his YouTube videos as required under the parties' agreement.  Beam's counterpunch failed to land.

Brueckner moved for summary judgment, and he won.  Beam's sent its February 28 notice to the wrong address.  As a result, Brueckner was never properly put on notice that he was in breach.  Moreover, Brueckner clearly cured the alleged breach within the 10-day period provided for in the agreement.  As a result, he was not in breach when Beam instructed him to  Sydney Cropped"hold off" on his influencing activities, and it was thus Beam, not Brueckner that was in breach. The Court granted Brueckner’s motion for summary judgment, finding Beam liable on Brueckner's breach of contract claim and dismissing Beam's breach of contract counterclaim.

Brueckner sought an additional $75,000 for the five months on the contract.  It is not clear if he could also seek to recover the $4 per sale he would have been entitled to but for Beam's breach.  As a side note, if you can offer reductions on each sale via coupon and pay an influencer $4 per sale, doesn't it seem like your product is overpriced?  Or is it common that most of what we pay for goes to marketing and not product.  Do I pay more for Progressive Insurance than Geico because Progressive has to pay Flo, while Geico stiffs its gecko?

H/T to ContractsProf Blog Intern Sydney Scott (left) for research on this post.

June 15, 2021 in Celebrity Contracts, Recent Cases, Sports | Permalink | Comments (0)

Monday, June 14, 2021

A Reason to Be Interested in the Mayweather/Logan Paul Fight

If you watched boxing legend Floyd Mayweather's exhibition bout against YouTuber Logan Paul, you should not have been disappointed.  That's because your expectations should have been very low.  I know very little about boxing, but I learned in researching this piece that Mayweather is a boxer, not a puncher, so he was unlikely to injure Logan Paul dramatically.  Logan Paul, on the other hand, although nearly twenty years younger and far bigger, was unlikely to land any clean blows on Mayweather.  And that is what ensued.  Mayweather landed nearly twice as many punches while throwing about half as many.  Paul demonstrated that he could take a punch and that he, quite literally, has thick skin, which likely serves him well in his line of work.

Dubai_Jumeirah_Beach
Dubai, Jumeirah Beach by pe-sa


But there is one area in which the exhibition match delivered quite the wallop: contractual controversy.  This fight, after all, was about making money.  According to legalreader.com, Mayweather sued the fight's promoter, PAC Entertainment Worldwide, when he did not  receive an initial payment of $30 million, a portion of his guaranteed $100 million take, which was due in March.  The fight was supposed to take place in Dubai, but PAC could not pull that off. Mayweather claimed that PAC's breach meant that he no longer had to perform and he was owed $122.6 million.  For that amount of money, I too would be willing to not fight Logan Paul.  The fight occurred in Miami last week, organized by a different promoter.  


AlyssaWhether and how much Mayweather can recover may turn on his take from the June 6th event.  Presumably Mayweather was only going to fight Logan Paul once.  Whatever he made will be subtracted from his provable damages as mitigation.  We'll see if we hear more about this in the coming months.

H/T to ContractsProf Blog Intern Alyssa Cross (left) for research on this post.

June 14, 2021 in Celebrity Contracts, Recent Cases, Sports | Permalink | Comments (0)

Monday, April 19, 2021

Liberty University Sues former President Jerry Falwell, Jr. for Breach of Contract

Last year, Jerry Falwell, Jr. (pictured, far right) Falwell Jrresigned as President and Chancellor of Liberty University, a Christian educational institution founded by his father.  As reported in the Washington Post, he was to receive $10.5 million in compensation in exchange for resigning and agreeing not to work for another university for two years.  Although Falwell stated that there was no legal "cause" for his resignation, reasonable minds might differ about that.  The Post points to his allegedly racist and anti-Muslim remarks, and his attempts to silence dissent at Liberty, but that conduct does not seem to have been the source of the problem.  The complaint does not reference it.

Rather, Liberty's complaint indicates that the Board called for Falwell's resignation because he had displayed erratic behavior, posing for revealing photos in questionable taste and showing signs of alcoholism severe enough to warrant treatment.  Falwell himself stated that his wife had had an extramarital affair and that he was resigning, in part because he was bored and in part because he did not want his wife's conduct to reflect poorly on the university.  

LibertyLiberty now seeks to recover Falwell's $10 million severance payment.  Most of Liberty's allegations relate to rather tame but also highly peculiar episodes of debauchery just scandalous enough to be inappropriate for a university president and certainly off-brand for Liberty.   The most important allegation is that Falwell concealed from the university his wife's affair with Giancarlo Granda and also concealed Granda's alleged blackmail of the Falwells, a scam that allegedly went on for years.

Count one of the complaint alleges breach of contract/conversion.  I am not sure why those two causes of action are lumped into one.  The allegations in that count suggest other causes of action as well, such as theft of trade secrets, misappropriation of funds, and breach of fiduciary duty, but perhaps under Virginia law, all of those are captured under breach/conversion.  The factual allegations are that Falwell did not use his Liberty e-mail to conduct Liberty business, that he shared confidential information with third parties, and that he stored information relating to his business dealings on Liberty's behalf on servers to which Liberty does not have access.  Liberty estimates its damages relating to this claim at $250,000, a number that it acknowledges it may need to revisit.

Count two alleges breach of fiduciary duty, but again there seem to be several breaches here.  First, when Liberty negotiated a generous compensation package with Falwell in 2019, Falwell failed to disclose that his wife had engaged in an extramarital affair and that the family was being blackmailed by her former paramour.  Had Liberty known these facts, it would not have entered into the 2019 agreement, which required the generous severance package that Liberty now seeks to recover.  Falwell also failed to disclose his alcoholism, which caused him to engage in conduct harmful to Liberty's reputation.

In Count three, Liberty repeats its prior allegations but now characterizes them as a conspiracy under Virginia statutory law.  The statute entitles Liberty to treble damages, and thus Liberty seeks to recover $30 million instead of just $10 million, plus punitive damages.  

Ordinarily, it would be an odd thing to require a party to a contract to disclose that their spouse had engaged in an extramarital affair and that the couple was now being blackmailed by a jilted lover.  Arguably, it is not odd here, as Liberty's reputation is linked to Falwell's.  I'm not sure how a court can draw that line, but perhaps the Martha Stewart case is instructive

It's a bit hard to tell what is going on here.  After he was terminated, Falwell sued Liberty for defamation.   Falwell took a voluntary dismissal of the suit, without prejudice to re-filing.  Liberty appended his complaint to its complaint, and Falwell's complaint is the source for many of Liberty allegations in its suit.  Oops.  One would expect that both parties would be happy to move on, rather throwing bad money after other bad money.  None of this reflects well on the board.  After all, why would any university promise to pay a president departing under a cloud $10 million?  Falwell's lavish lifestyle and vacations could not have entirely escaped the attention of the board. 

Perhaps alcoholism is more of a symptom than a cause.  Where did I read something about a camel and a needle?

April 19, 2021 in Celebrity Contracts, Commentary, Recent Cases | Permalink | Comments (0)