My article on the IPO of the New York Stock Exchange co-authored with economist Jennifer Kuan of the Stanford Institute for Economic Policy Research has now appeared as a chapter in an edited collection called Global Stock Exchanges: The Dawn of a New Era, published the Icfai University Press in Hyderabad, India. We argue in the paper that the IPO may break down the institutional mechanisms at the Exchange that help guarantee accurate information flow from issuing firms to investors.

Dawn of a new era

I raised concerns about the UAW GM VEBA deal here in an interview with the BNA’s Daily Labor Report.

VEBA risks questioned

One of the stories about the possible settlement between the studios and the WGA suggests that the informal bargaining has been so productive that there may not need to be a resumption of so-called “formal” negotiations with AMPTP. As The New York Times put it:

“The agreement may come without renewed formal negotiations between the television and movie writers and the Alliance of Motion Picture and Television Producers, though both sides still need to agree on specific language of key provisions. If that process goes smoothly, an agreement may be presented to the governing boards of the striking Writers Guild of America West and Writers Guild of America East by the end of next week, the people said.”

That raises an interesting question: why stick the AMPTP in between the real decision makers and the guilds? What value is there in wasting time with an “industrial relations-era” HR type like Counter and his crowd? Content creation is the centerpiece of the new digital era and it seems that it is time for the producers to be willing to take the time themselves to negotiate these contracts in person with talent directly. After all, isn’t this why the Studio execs are the ones making the big bucks? I would think their shareholders – which, after all, include many pension funds and mutual funds managed for the benefit of union members – would agree.

Deal to End Writers’ Strike May Be Near – New York Times

The headline is bold but the text says there is only “cautious optimism that a settlement to the more than three month-old strike may soon be at hand.”

Breakthrough in WGA talks y

The LA Times is reporting a near end to the WGA strike, too. This is looking more real by the hour.

Writers, studios said to be moving closer to deal

The New York Times is reporting that a deal with the WGA is near….

Deal to End Hollywood Writers’ Strike May Be Near – New York Times

I will listen in on this conference call by entertainment lawyer Jonathan Handel and report back later today.

Digital Media Law: Conference Call Presentation Friday on Strike

The California Supreme Court issued its unanimous opinion in Marathon Entertainment v. Blasi today. (Link below in next post.)

The Blasi case arose when actor Rosa Blasi reneged on paying her managers at Marathon Entertainment a commission. She claimed that it was illegal under California law for Marathon to act as a talent agent which it allegedly did when it procured roles for her. She tried to have her contract with them declared void. Marathon argued that it was not governed by the Talent Agencies Act and that even if it was it should still be paid for those services that it provided legally to Blasi.

Here is my summary of the Court’s key points (along with some editorializing) from its unanimous decision:

1) The California Talent Agencies Act applies by definition to any person who procures work for an actor. As the Court concluded: “Any person who procures employment — any individual, any corporation, any manager — is a talent agency subject to regulation…. Consequently, as the Courts of Appeal have unanimously held, a personal manager who solicits or procures employment for his artist-client is subject to and must abide by the Act.” Thus, it does not matter what title one uses – agent or manager – if one is engaged in procurement of work one is an agent and thus covered by the TAA. And this is true even in the case of single incidents of procuring such work.

This result is precisely what Marathon, the managerial firm repping Blasi, wanted to avoid. The court brushed aside the claim of Marathon that because the Talent Agencies Act has the word Agencies in the title that it somehow should not apply to managers.

The court concludes that the TAA applies to “managers” “to the extent they stray into doing the things
that make one a talent agency under the Act” The court concurred with the California Entertainment Commission’s approach: it is not managers or agents per se that are subject to the TAA but the “activity of procuring employment.” Anyone who does that is subject to the requirements of the TAA, no matter what one calls oneself.

2) Did Marathon “procure employment” for Blasi? They did, the court states, agreeing with the Labor Commissioner and the lower court. But not aparently for Blasi’s role in Strong Medicine, despite Blasi’s claim that they did.

3) So if Marathon procured employment without a license in violation of the TAA, what is the remedy available to Blasi? If a manager procures employment for an actor but is not licensed under the Act can an actor refuse to pay the manager?

The court notes that the TAA does not provide an answer. It is silent, “completely silent,” the court notes. So in cases like this courts turn for answers to other sources of law. Here they turn to the longstanding common law principle of “severability.” In California back in 1872 the legislature put into law its view of that common law provision, as the court notes: “Adopted in 1872, [the Civil Code] codifies the common law doctrine of severability of contracts: ‘Where a contract has several distinct objects, of which one at least is lawful, and one at least is unlawful, in whole or in part, the contract is void as to the latter and valid as to the rest.’… By its terms, it applies even — indeed, only — when the parties have contracted, in part, for something illegal. Notwithstanding any such illegality, it preserves and enforces any lawful portion of a parties’ contract that feasibly may be severed.”

While the Labor Commissioner may void a contract between a manager and an actor it does not have a duty to do so. As the court concludes: “The Labor Commissioner is empowered to void contracts in their entirety, but nothing in the Entertainment Commission’s description of the available remedies suggests she is obligated to do so, or that the Labor Commissioner’s power is untempered by the ability to apply equitable doctrines such as severance to achieve a more measured and appropriate remedy where the facts so warrant.” The Labor Commissioner retains the equitable option to sever.

The court took a polite swipe at more recent Labor Commissioner decisions denying managers the right to recover: “With due respect, the Labor Commissioner’s assessment of the legislative history and case law is mistaken; as we have explained, neither requires the rule she proposes. And any view that it would be better policy if the Act stripped the Labor Commissioner (and the superior courts in subsequent trials de novo) of the power to apply equitable doctrines such as severance would be squarely at odds with the Act’s text, which contains no such limitation.”

4) So with this analysis undertaken, what about applying it to the facts of this case? Since the court now allows for the possibility of compensation for genuine managerial as opposed to unlicensed services (i.e., procuring employment), will Blasi have to pay Marathon for what Marathon claims were other ordinary managerial services?

One argument to support non payment made by Blasi was that severability could not be applied to a contract that called for payment for a wide range of undifferentiated services. But the court held that that was not an obstacle since a court could figure out whether or not a manager has provided legal services alongside of illegal, employment procuring, services.

A second argument made by Blasi was that the illegal, or unlicensed, conduct of Marathon should render the entire contract with her managers void. But the court said it was appropriate for the Labor Commissioner or courts to consider the “central purpose” of the contract and “if they determine in a given instance that the parties intended for the representative to function as an unlicensed talent agency or that the representative engaged in substantial procurement activities that are inseparable from managerial services, they may void the entire contract. For the personal manager who truly acts as a personal manager, however, an isolated instance of procurement does not automatically bar recovery for services that could lawfully be provided without a license.”

This “central purpose” doctrine, the court admits, will require a “case-by-case” fact specific inquiry: “Inevitably, no verbal formulation can precisely capture the full contours of the range of cases in which severability properly should be applied, or rejected. The doctrine is equitable and fact specific, and its application is appropriately directed to the sound discretion of the Labor Commissioner and trial courts in the first instance. As the Legislature has not seen fit to preclude categorically this case-by-case consideration of the doctrine in disputes under the Act, we may not do so either.”

Thus, the case is remanded to the trial court for precisely this “fact specific inquiry” to determine if Marathon indeed performed legal services for Blasi for which they deserve to be paid.

Some may argue that this leaves the law unsettled: after all is said and done, what will the contours of the “central purpose” doctrine really look like? The court could have developed a more nuanced, reliable and predictable approach to that doctrine but chose not to do so. That leaves a gray area for talent, managers, agencies and the lawyers who represent them. Or put another way it suggests that the parties to such contracts now have an option: negotiate more fully and clearly ex ante or risk letting the terms of the contract be defined by the Labor Commissioner or the courts ex post. This looks like a variant of what legal scholars call a “muddy default” rule – if the parties to a contract are unwilling to spend the time up front to resolve a potential problem then it will be left up to the courts or Labor Commissioner, who will be free to fashion a solution as they see fit.

5) In a final concluding comment, however, the court did strongly indicate the need to address the fundamental cause of the problems in this area. It noted that there is a “black market” now in unlicensed talent agencies that creates the potential for abuse. Talent looking for a leg up in the industry may fear complaining about abusive managers would lead to black listing. A broad right to renege on contracts may be of little use for those who are at the greatest risk but instead can be used against well-intentioned managers by successful talent who are “in a position to turn and renege on commissions.” Thus, the court believes the state legislature and guilds need to revisit the design of an appropriate enforcement regime for the TAA.

The California Supreme Court weighed in on the long running dispute over the appropriate roles of Hollywood talent managers and agents today in a unanimous opinion. While I am still digesting the 31 page opinion, the long and short of it is actress Blasi may have to pay up to her former managers at Marathon if they can prove on remand that certain facts are indeed true. I will get back to you with a fuller analysis in a few hours.

The widely respected director of the China Labour Bulletin, Han Dong Fang, is calling into question the relevance of the Chinese government labor arm, the ACFTU.

As the AFP noted recently:

At least one strike involving more than 1,000 workers occurs every day in China’s manufacturing hub in the Pearl River Delta area, underscoring rising labor unrest in the country, a labor activist said Tuesday. All the protests in the key manufacturing base in southern China are self-organized, “questioning the relevance” of the official All-China Federation of Trade Unions (ACFTU), said Han Dongfang, who monitors the Chinese labor movement from Hong Kong.

Labor unrest growing in China