Tuesday, April 12, 2011

Handshake Deals Are Alive And Well In Hollywood

Handshake deals, oral or verbal agreements. Call them what you will, they still hold weight in Hollywood.

A show developer has won a $4 million claim against A&E...again! this time in appeals court. The high court upheld the South Carolina court award to the plaintiff who pitched and developed the hit reality show Flip This House (remember the housing bubble? yeah, back then).

Apparently Richard Davis, a real estate broker and house-flipper, brought the show idea to A&E, with an oral agreement to split the show profits 50-50 in exchange for Davis developing and appearing on the show, even though the compensation wasn't nailed down in writing at that time. Davis appeared in the first season of the show but left as a result of the compensation dispute to develop a competing show for TLC.

The S.C. court recognized the validity of the original oral agreement, and this week that decision was upheld by the higher court.

THR makes the point that this should be a lesson to producers to memorialize their agreements with followup documentation. Indeed. I draw a slightly different conclusion, namely that producers should not assume that their deal partners will fail to remember, have supporting evidence for or to enforce their oral agreements with producers.

The oral agreement has an interesting history in Hollywood. In spite of the famed Samuel Goldwyn line that "an oral agreement isn't worth the paper it's printed on," the handshake deal is still a valid contract and its breach can still be taken seriously by courts.

Erickson Law, on its blog, cites the case of Lisa Kudrow and her verbal deal with former manager Scott Davis who sued for unpaid commissions based on that agreement. The court did take the agreement as valid, and the case was appealed on other issues. As for how to prove that such a deal was in place, Erickson attorney Erin O'Kane suggests "there are several ways to do this including having witnesses to the agreement, showing that the parties acted in reliance of the terms of the agreement, and providing evidence that supports the existence of the agreement."

Of course, no discussion of this subject in recent history would be complete without telling the tale of the the case that sent shock-waves through the entertainment world, the famous Basinger vs. Main Line case, settled in 1993. In that case, Kim Basinger was ordered to pay $8.9 million to Main Line Pictures for breach of her oral agreement to appear in “Boxing Helena,” a picture on Main Line’s slate. In that case, Basinger switched agencies after getting the script and agreeing to the role. The new agent at ICM, who stood to make no commission on the deal, advised her against the role. Main Line alleged that was the motive for the advice from ICM, and claimed that the agent induced the actress to breach her agreement. Both ICM and Basinger got sued, although the judge later dropped ICM from the suit.

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The apparent reason that ICM got off the hook, based on motions from the lawyer who rep’d both ICM and Basinger, was that the advice from the agent was in her best interest and protected by law. (However bad that advice turned out to be, I might add).

The Variety article from that time discusses various motives on the part of the agency, and tactics such as “script control” in order to have a rationale for backing out. However, Main Line had followed up with a deal memo (so they did follow THR’s admonition).

But, deal memo or none, as evidenced by the recent judgment with the A&E house-flipper deal, the oral agreement by itself holds weight.

I’ve had my own share of nerve-wracking experiences with talent backing out of deals that were made by their Rep’s, notably while working on Disney's "Cinemagique" starring Martin Short, produced initially for the Paris theme park. Cinemagique involved a host stepping into and interacting with the movie characters in a collage of clips, and as such involved moral rights in Europe, since we would be altering the original footage (see the Oprah blog entry, below). It was a complicated clearance mess. When one of the biggest stars of the time (or his rep) took back a permission they had given us months before, shortly before our launch date, I found myself essentially being deposed by a VP of Legal for the studio. I had just barely enough info in my file to document who said what, when. That harrowing experience really made me a believer in the confirming letter (or e-mail), itself a form of deal memo, to affirm the oral agreement made in a phone conversation.

With the advent of email, I’d say that this happens less. Rather than a phone conversation, these agreements are more commonly made in an email before the agreement is formally signed. That email traffic, saved, is a pretty good safeguard.

Of course, there is nothing like the signed agreement in hand. But many TV shows would never be produced, let alone make it to air if a signed agreement had to be in hand. Deal memorandums, follow-up confirmations (even a polite thank you email worded along the lines of “so happy to hear your client has agreed to this use”) can go a long way. These provide the electronic paper trail that can be used in case of a dispute, and which will also serve to protect the producer in the event of a lawsuit or an E&O claim.

One place an oral agreement is going to do you no good is in the case of a minor. Even written contracts have been disaffirmed by minor actors, exemplified by the Vanessa Hudgens (of High School Musical fame) case with former lawyer Brian Schall. The star claimed that $150,000 in wages to the lawyer weren't payable because the contract was signed when she was 16. Schall sued in 2007 and the case was settled in 2009.

Brian Wilson, of the Beach Boys (pictured here in a publicity photo of the band, rear center) sued to reclaim his publishing which was sold by father and former band manager, Murry Wilson, for $700,000 to Irving Music in 1969. It's quite a wild story as Wilson had a long string of problems with drugs and the mental difficulties undoubtedly brought on by them. His relationship with the father was very contentious as well, with claims of abuse. Pertinent to this discussion is this, according to the LA Times article at the time, "The lawsuit claims that in 1962 Brian and Murry Wilson agreed orally to divide profits from their new publishing company, called Sea of Tunes, and that between 1962 and 1969, the son wrote or co-wrote more than 100 songs for the company. But, the court filing claims, since Brian was underage and there was no court approval of the oral agreement, the contract was not legal."

Although Wilson didn't recover his copyrights, he was awarded $25 in damages and unpaid royalties.