Mediating Entertainment Industry Cases
Mr. Factor was a Former Partner & Member of the Executive Committee, Cooper, Epstein & Hurewitz for several years.
Since becoming a full-time neutral in 2001, Mr. Factor has mediated numerous entertainment industry and related intellectual property disputes. It became readily apparent that successful negotiated outcomes in the industry are much more about respecting and building industry and professional relationships than about who is “legally” right or more likely to win at trial.
Entertainment disputes are rarely, if ever, binary disputes between a plaintiff and a defendant.
The entertainment plaintiff and defendant will commonly have law firms and agents with strong financial and professional ties to competing talent, writers, directors, musicians and artists, as well with production companies, studios and sometimes unions whose continued association and support is essential to their long term survival and success in the industry.
The path to successful outcomes is often created by enlarging the scope of the negotiation to include benefits of low cost to one litigant that are of high value to another, which frequently means seeking industry alliances beyond the named litigating parties and their immediate business associates.
Recognizing and constructively using industry ties and relationships is often the best, and sometimes the only, way to achieve a mutually satisfactory outcome in what will otherwise become a scorched earth, highly publicized trial in which sometimes everyone loses either money, friends, relationships or a combination of all three!
A few examples may be helpful. Each is a mediation of an industry dispute in which the cause of the dispute was not dissimilar to the current unanticipated disruptions caused by the pandemic and our resultant industry shutdown.
- Multi-million financing for major film production falters and star withdraws. Mutual dissatisfaction as production company lost as much as $1,000,000 prior to filming being cancelled and talent lost other potentially significant opportunities. Resolved after full day mediation and several hours of follow-up calls to industry agents and talent who were also clients of the entertainment law firm and were interested in working with the star who had withdrawn.
- Validity of pay-or-play movie contract disputed when movie could not be made because of external financial considerations arising from the 2007-08 financial meltdown (i.e., “the great recession”). Several creative resolutions addressing the needs of the talent and the production company based on a resetting of the priorities of reimbursements to the production company and payments to the key talent from an anticipated future movie deal, along with a renegotiation of the split on anticipated revenues from merchandise opportunities related to the projected movie.
The negotiated result was uncertain; however, it provided greater financial opportunities for each of the parties than equally uncertain litigation over who should have been responsible for the losses incurred when “the great recession” closed production.
- Multimillionaire ‘tax motivated’ investors sought “net profits” from a major Hollywood studio when a low budget movie became an unexpected international blockbuster (several hundreds of million in grosses), and a foreign tax shelter deal in which the claimants had invested became hugely profitable. Mr. Factor was the third mediator, after earlier efforts at resolution left the previously ‘tax motivated’ investors unsatisfied and several millions of dollars apart with the studio and the movie’s talent. Because the parties were into a new tax year, and the taxes had been paid on the large earlier distributions, claw backs, and a reallocation of the profits, were not practical.
By focusing on the probability of one or more sequels, an agreement was structured that involved the redistribution of a low seven figure sum of money with a restructured future deal that had the potential to be a ‘franchise” success for all of the participants. It turned out to be just so, with the making of multiple profitable sequels rather than expensive litigation which would have undoubtedly resulted in the loss of both the investors and the original talent from participating in the sequels!
- $1 million-plus settlement to an unpaid software manufacturer in China from an American wholesaler and retailer of computer games associated with upcoming major movie sequel and re-release of original film. This was paid through an inventory exchange of movie merchandise that was to be manufactured in China for an upcoming movie. The software manufacturer contributed free design services and reduced costs to assure a much larger guaranteed purchase of the goods from the American studio with reference to the upcoming movie sequel.
- Partners in a voice-over agency negotiate a buy-out structured as a guaranteed payment which provided a tax efficient solution that neither were able to come up with on their own because of the hostilities between the litigating parties and counsel.