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The Entertainment War:  Personal Manager v Talent Agent

Page history last edited by PBworks 16 years, 8 months ago

__The Entertainment War: Personal Manager v. Talent Agent
__

 

__Statement__:

Recent cases in California which have taken away personal manager’s commissions have raised concerns with artists, recording artists, personal managers and talent agents. Currently, California legislature regulates personal managers and talent agents through the Talent Agencies Act (“Talent Agencies Act” or “TAA”), California Labor Code §1700. Controversy has arisen because the wording is vague and ambiguous. The TAA prohibits unlicensed individuals from procuring jobs other than recording engagements. On one hand, the TAA is specific that a personal manager is contractually entitled to a commission for procuring the recording engagements. On the other hand, he can be barred from any commission because of his illegal activity as an unlicensed agent. This is because a personal manager procuring a recording contract for an artist without a license does not of itself violate public policy. In 1982, California legislature established the California Entertainment Commission to study the 1982 amendments and prepare a report containing recommended changes to the governor.__1/__ The report essentially concluded that the TAA was “a model statute of its kind,” and its findings were accepted by the Legislature. Since that time, the law has remained relatively unchanged.

 

__Scope__:

This article will discuss recent cases in California which illustrate the inadequacy of our current laws regarding today’s talent representation business. It will also discuss the complexity of the language itself which distinguishes “personal manager” from “talent agent” and what each can and cannot do. Finally, this article will discuss what hope there is to help rectify the situation and what steps might be taken by the legislature to resolve the current controversies.

 

__Research__:

In Hollywood, it is common practice for artists to fire their managers after they have been signed to a show and thus allowing them to avoid paying the manager a commission on their new, higher salary. It is too easy for an artist to get out of their contracts with managers. Talent agents and personal managers traditionally have performed distinct roles in the entertainment industry. An agent arranges and negotiates their clients’ employment opportunities while managers suggest which of those opportunities are worthwhile to take. With this distinction in mind, the California Legislature and the industry guilds have established specific rules that restrict what agents and managers can and cannot do.

 

Because major film and record companies are centered in California, the legislature has a historic concern for the welfare of those artists in the industry. The original law developed out of the 1913 Private Employment Agencies Law which included specific regulations of theatrical employment agencies and theatrical contracts.

 

In 1923, that law was amended to allow the Labor Commissioner to make rules and regulations and gave the Labor Commissioner initial jurisdiction to hear and determine all controversies, subject to appeal to the Superior Court on a trial de novo (new trial) basis. Since that time, the California Labor Commissioner's office has been involved in the licensing and regulation of talent agencies. In 1937, the Private Employment Law was incorporated into the California Labor Code and in 1943 "artist’s managers" became a separate category for regulation. In 1959, the "Artists' Managers Act" became its own separate chapter of the Labor Code. The legislature had become aware that the business of procuring employment in the entertainment industry was different and more complex than the business of normal employment agencies. The growing confusion over who and what to regulate in the entertainment industry was then further confused by the development of the "personal manager" profession, which as the term implies, often finds this kind of manager personally involved in all aspects of the artist’s career, including (and not the least important to the artist) the procurement of a record contract.

 

Because of the growing confusion of the terms as it pertained to the "personal manager" and the employment of “talent” agents, in 1978, the "Artists' Managers Act" evolved into the "Talent Agency Act” and the old “artist’s managers” started being referred to as “talent agencies.” The legislature was struggling with the distinction between a "talent agency" engaged "in the occupation of procuring, offering, promising or attempting to procure employment for an artist or artists" and who "may, in addition, counsel or direct artists in the development of their professional careers,” and those "personal managers" who may counsel and direct artists along with other activities but who are not supposed to deal with employment unless they become a licensed "talent agent.” The TAA originally would have required a separate "personal manager" license but those provisions were deleted before the TAA was passed. The issue of the distinction between a talent agent and a personal manager had been avoided but not resolved. The problem still remained in the music industry. Managers, not talent agents, are the part of the team usually is involved with the business of helping an artist obtain a record contract.

 

In 1982, two important amendments were added to the TAA, at first on a trial basis, with built in expiration provisions. There was the addition of language which would allow an unlicensed person, such as a personal manager, to "TAA in conjunction with and at the request of a licensed talent agency" with respect to an employment contract, but the most significant amendment was that "the activities of procuring, offering, or promising to procure recording contracts for an artist or artists shall not of itself subject the person or corporation to regulation and licensing.” These amendments were renewed in 1984, expired January 1, 1986, and then finally incorporated into the California Talent Agency Act, retroactive to the date the earlier amendments had expired.

 

The 1982 trial amendments were renewed by further amendment in 1984 and then terminated automatically by their own provisions, effective January 1, 1986. The current version of the Talent Agency Act is the product of AB 3649. Although this bill was enacted on July 24, 1986, the most controversial amendments (Section 1700.4 (a) and 1700.44 (c) and (d))__2/__ were made retroactive to January 1, 1986, the same date the provisions on the earlier versions of these amendments had expired. From January 1, 1986 until July 24, 1986, the law was in limbo as to who could legally procure record contracts for artists in California.

 

This policy recommendation was not followed until the landmark decision, Waisbren v. Peppercorn Productions, Inc., 41 Cal. App. 4th 246 (1995)__3/__. In Waisbren, the Court of Appeals reversed its earlier decision in Wachs v. Curry, 13 Cal. App. 4th 616 (1993)__4/__, and relying on the Commission’s Report, established that managers are barred from independently procuring employment even when devoting only a “minimal” or “incidental” portion of their time to these activities. Waisbren concerned a dispute between a manager, Waisbren, and his client, Peppercorn Productions. The two parties had entered into an oral contract with one another stating that, in exchange for Waisbren’s assistance in developing Peppercorn’s projects, managing its business affairs, supervising its publicity, and handling its office functions, Peppercorn would pay Waisbren 15% of its profits. Peppercorn eventually terminated this relationship, but it never paid Waisbren his commission. Waisbren accordingly brought suit in Superior Court, alleging breach of contract. Peppercorn, however, moved for summary judgment on the ground that the contract was void and that Waisbren had acted as an agent by procuring employment without first obtaining the TAA’s mandatory license.

 

Note that the Labor Commissioner had no part in the Waisbren decision. Again, the Labor Commissioner only has exclusive authority to hear cases in which the plaintiff alleges a violation of the TAA. In effect, this means that the Labor Commissioner only hears cases in which the plaintiff is an aggrieved artist. But here, the plaintiff is not an aggrieved artist who is alleging a violation of the TAA. Instead, the plaintiff is an aggrieved manager who is alleging breach of contract. Accordingly, the Labor Commissioner does not have jurisdiction over Waisbren.

 

First, the lower court adopted a broad interpretation of “procurement.” The appellate court affirmed the lower court’s opinion. Correspondingly, it upheld that court’s broad interpretation of “procurement.” In reaching this decision, the appellate court first looked to the plain language of the TAA. The TAA states that a talent agent is “a person or corporation who engages in the occupation of procuring . . . employment.” Waisbren argued that, because “occupation” can be interpreted to mean an individual’s principal business, an agent’s license is not needed unless the representative’s principal responsibilities involve procuring employment. However, the court rejected this interpretation and explained that “a person can hold a particular ‘occupation’ even if it is not his principal line of work.”

 

Second, the court noted that the TAA should be construed liberally in order to protect agents’ and managers’ clients. According to the court, “The fact that . . . unlicensed manager(s) may devote an ‘incidental’ portion of their time to procurement activities would be of little consolation to . . . client(s) who fall(s) victim to . . . violation(s) of the TAA.” The court went on to state: We refuse to believe that the Legislature intended to exempt . . . personal manager(s)from the TAA thereby allowing violations to go unremedied unless (their) procurement efforts cross some nebulous threshold from “incidental” to “principal.” Such a standard is so vague as to be unworkable and would undermine the purpose of the TAA.

 

Third, the court relied on a 1985 report by the California Entertainment Commission 5/ specifically stating that “(n)o person, including personal managers, should be allowed to procure employment for an artist in any manner or under any circumstances without being licensed as a talent agent.” The California Entertainment Commission had been created in 1982 by the California Legislature to study the TAA and to recommend a model agency-licensing bill. It should be noted that Waisbren is not the only California appellate authority on the issue of what constitutes “procurement.”

 

In Wachs, which was decided approximately one year before Waisbren, a manager who had been sued by one of his former clients for allegedly violating the TAA filed an action in the Superior Court seeking a judgment declaring the licensing provisions of the TAA unconstitutional. His argument was that those provisions were void for vagueness because it could not be determined from their language which activities required licensing. The lower court rejected this argument and the appellate court affirmed. In affirming, however, the court explained that the “occupation” of procuring employment was intended to be determined according to a standard that measures the significance of the agent’s employment procurement function compared to the agent’s counseling function taken as a whole.

 

If the agent’s employment procurement function constitutes a significant part of the agent’s business as a whole then he or she is subject to the licensing requirement of the TAA even if, with respect to a particular client, procurement of employment was only an incidental part of the agent’s overall duties. On the other hand, if counseling and directing the clients’ careers constitutes the significant part of the agent’s business then he or she is not subject to the licensing requirement of the TAA, even if, with respect to a particular client, counseling and directing the client’s career was only an incidental part of the agent’s overall duties. What constitutes a “significant part” of the agent’s business is an element of degree.

 

Four years later, in Park v. Deftones, 71 Cal. App. 4th 1465 (1999)__6/__ the Court bolstered the policy arguments underlying the Commission’s Report and the enactment of the TAA. A musical group, the Deftones, petitioned the Labor Commission to void its management agreements with its manager, Dave Park, on the grounds that Park had obtained performance agreements for the group on 84 separate occasions without possessing a talent agent’s license. The Park court, siding with the musical act, dismissed the fact that Park had not received commissions for procuring employment for the Deftones and emphasized that the “remedial purpose of the TAA and the statutory goal of protecting artists from long recognized abuses” require the possession of a license before employment may lawfully be procured.

 

The role of managers came under examination again in a lawsuit filed by Garry Shandling against his manager, Brad Grey and Grey’s company. (Garry Shandling v. Brad Grey)__7/__. Shandling claimed that Grey breached his fiduciary duties to him by taking advantage of his relationship with Shandling to further his management company, attaching himself to Shandling’s projects as a producer, and establishing a separate entertainment company by using Shandling’s services to assist in locating new talent. Shandling asserted that he was not fairly compensated for his services and contributions. Shandling and Grey recently entered into a confidential settlement of this dispute.

 

Many managers waive their management fees when they produce a client’s project so the manager receives only a producer’s fee and not his usual management fee. Some have speculated that in light of the Shandling case, a manager should always get a specific conflict of interest waiver with a client when included in a client’s project. Additionally, some attorneys recommend that if the manager creates a separate entertainment company which uses a client, the client should be included in the company. If the manager does enter into a business relationship with a client, the client should have independent legal representation.

 

In a most recent case, Yoo v. Robi, 24 Cal.Reptr.3d 740 (Cal.App. 2 Dist. 2005)__8/__ involved a musician's personal manager who engaged in a number of acts that rendered him an unlicensed agent. The musician's widow licensed two albums using recordings that the personal manager had secured and the personal manager sued to recover commissions due under the recording contract. Although the personal manager was contractually entitled to a commission for procuring the recording engagements, he was barred from any recovery because of his illegal activity as an unlicensed agent during that same period. The decision was based on a public policy to deter personal managers from engaging in unlicensed activities.

 

But, the legislation still created many questions, causing confusion in the entertainment industry among personal managers and lawyers who, relying on the text of the Talent Agency Act as it read on January 1, 1986, had to decide whether to subject themselves to licensing and regulation under the TAA or avoid involvement with the negotiation of recording contracts for artists with whose careers they were so personally involved.

 

At present, the California Legislature regulates agents and managers through the TAA. Its main purpose is to protect artists from their representatives’ business practices. It prohibits agents from giving their clients false or misleading information concerning employment engagements; from sending them to unsafe places; from allowing “prostitutes, gamblers, or intoxicated persons . . . to be employed in . . . the place of business of the talent agency”; from arranging unlawful employment for minors and from splitting fees with the employers who hire their clients. One of its main purposes was to provide a distinction between the agent and manager for preserving and enforcing the artists’ interests.

 

According to the TAA, a talent agent is “a person or corporation who engages in the occupation of procuring, offering, promising, or attempting to procure employment or engagements for an artist or artists.” It states that “(n)o person shall engage in or carry on the occupation of a talent agen(t) without first procuring a license therefor from the Labor Commissioner.” These provisions make it clear that it is illegal for a manager to do an agent’s job.

 

Currently, the Talent Agency Act, California Labor Code §1700.4 9/ defines a "talent agency" as "...a person or corporation who engages in the occupation of procuring, offering, promising, or attempting to procure employment or engagements for an artist or artists, except that the activities of procuring, offering, or promising to procure recording contracts for an artist or artists shall not of itself subject a person or corporation to regulation and licensing under this chapter. Talent agencies may, in addition, counsel or direct artists in the development of their professional careers." "Artists" are defined as "...actors and actresses rendering services on the legitimate stage and in the production of motion pictures, radio artists, musical artists, musical organizations, directors of legitimate stage, motion picture and radio productions, musical directors, writers, cinematographers, composers, lyricists, arrangers, models, and other artists and persons rendering professional services in motion picture, theatrical, radio, television and other entertainment enterprises."

 

In the event that an artist’s representative violates the TAA, that artist can complain to the Labor Commissioner. The Labor Commissioner has the exclusive authority to hear and resolve disputes regarding alleged violations of the TAA. If a manager violates the TAA by procuring employment for an artist, that artist can seek remedy from the Labor Commissioner. Usually, the Commissioner’s remedy for a manager’s violation of the TAA is the rescission of all contracts between the manager and artist and the forfeiture of all contractual commissions that were paid to the manager in violation of the procurement restriction. However, the TAA establishes a one-year statute of limitations for violations which the Commissioner interprets as limiting the forfeited commissions to money earned within the last year.

 

Sometimes there are no hard and fast rules. There is wide disagreement over what work managers can perform. Some managers believe they will not run afoul of the law as long as they work in conjunction with a licensed agent. Some argue that the loophole in the TAA is quite narrow, allowing managers to only assist in the negotiation of a contract. Others, who interpret the law more liberally, say the process of negotiating a contract can begin with a phone call to schedule an audition. In California, current problems stem from a loophole in the TAA which states that only a licensed agent can procure work for actors. If an actor can cite the law to assert that a manager broke the law by getting them work, they can end the contract. The TAA prevents managers from procuring work and enables actors to get out of management contracts without paying commissions.

 

There is a gap between the laws on the books and how business is conducted in Hollywood. Actors turn to managers so they can be introduced to agents, who typically have more clients than managers since agents are prohibited by law from charging more than 10%. Managers are not regulated, so there is no limit on their commissions. Most managers charge between 10%-20% of a client's income from acting jobs. Agents often have 100 or more clients, whereas managers, typically maintain about 15 clients, so actors often work more closely with their managers and managers often end up making calls on an actor's behalf. In the entertainment business, actors want jobs and managers want clients. Therefore, managers are going to do whatever they can to keep their clients happy and to generate income. What actors want most is a job so few actors complain until they have achieved success. When actors first start out, they do not mind paying 15% of nothing but when these actors start writing checks for $50,000, $150,000 or $1 million, then they start to question the value of the services that were provided.

 

Managers who have long thought they were protected by the law's ambiguities are becoming nervous. Adding to their concern is a recent push by the Screen Actors Guild (“SAG”) to put more sting in the TAA by slapping criminal penalties on managers if they stray into the territory of state licensed agents by performing such functions as finding clients jobs. Talent agents, managers and some actors oppose SAG's efforts saying that toughening the TAA would make it even harder for actors who are just starting out, those who have trouble getting noticed in the business, those still searching for their big break and the small-time managers who perform a variety of duties for their actor clients. Some actors cannot even get an agent. If they cannot get an agent, they are stuck and cannot get a job.

 

The TAA is unconstitutional, too vague to be enforced, applied by the State’s Labor Commission inconsistently and the violation penalties are excessive. A single violation of the TAA does not necessarily invalidate all other work performed by a manager. Under a "safe harbor" provision, a manager can assist in contract negotiations if they are given specific permission by the agent to do so but that they are barred from soliciting employment. While the TAA's initial language read that only licensed talent agents were allowed to procure work, the modification allows unlicensed individuals "to act in conjunction with, and at the request of, a licensed talent agency in the negotiation of an employment contract."

 

The TAA outlines limited circumstances in which managers can actually procure employment. Recognizing that a new and upcoming recording artist usually cannot secure the services of an agent without a recording agreement in hand, the TAA permits unlicensed individuals to engage in “procuring, offering, or promising to procure recording contracts for an artist or artists.” Additionally, managers may negotiate employment contracts for clients so long as the manager acts “in conjunction with, and at the request of, a licensed talent agent.” It is the ambiguity of that clause that causes concern. It can literally mean anything from scheduling an audition as it can mean anything from passing on a headshot to scheduling an audition that has provided ammunition for actors who decide to ditch their managers once they hit pay dirt. Efforts to secure recording contracts for artists "shall not of themselves subject a person or corporation to regulation and licensing" under the Talent Agencies Act. (California Labor Code §1700.4(a).__10/__)

 

Recently, the trend has been for high profile talent to decide not to use an agent and simply rely on an attorney and/or manager. If a top movie star can make $15 million or more per picture, someone in that position might think that he or she does not need an agent because he or she is so well known that employment opportunities will come to him or her anyway. Such high priced talent might not want to give up the 10% commission, which could be substantial. Some talent may simply decide to pay an attorney by the hour to negotiate his or her deals. However, the artist should be careful in this regard because agents sometimes perform services some attorneys do not, such as “packaging” deals and agents may also help clients obtain lucrative sponsorship deals or help them transition into new careers (e.g., an actor becoming a recording artist).

 

In that regard, today’s managers are also turning toward being managers who also act as producers. Once managers opt for producers’ fees in lieu of commissions, they have an interest in limiting production costs which means that they have an interest in limiting the amount of money that their clients get paid. This is a conflict of interest but it is a conflict of interest that the regulatory scheme fails to consider. Until recently, this failure was never much of an issue. In other words, the regulatory scheme’s failure to consider this conflict was never really a problem because the conflict never actually materialized. Although traditional manager had an incentive to limit the amount of money that their clients were paid, they had no real power to place limits on their clients’ compensation because they simply lacked any power over production development.

 

The manager/producers, however, do have the power to control production and development. This is because many of today’s manager producers actually own production companies and so wield significantly more bargaining power than traditionally defined manager/producers do. These production companies are more than mere producers, so they actually have control over production development. This means that they have some power to limit the amount of money that their clients get paid.

 

As a matter of fact, some of these manager run production companies are so powerful that they sometimes are the dominant producers of their clients’ work. In other words, some of them are so strong that they can develop their clients’ work largely by themselves, with little interference from other producers. This development magnifies the conflict of interest problem in two ways.

 

First, it gives management companies extensive control over production development and so gives them almost absolute power to limit their clients’ compensation.

 

Second, it effectively allows managers to act as agents because it gives them the authority to procure employment for their clients. These managers, after all, are stand-alone employers, and they can funnel their clients into their own productions by hiring them directly. Although this sounds like prohibited procurement, the Labor Commissioner in Chinn v. Tobin, California Labor Comm'r Case No. 17-96 (1997)__11/__; has concluded otherwise. In Tobin, the Commissioner explained that a person or entity who employs an artist does not “procure employment” for that artist, within the meaning of California Labor Code §1700.4(a)__12/__, by directly engaging the services of that artist. . . . (T)he “activity of procuring employment,” under the Talent Agencies Act, refers to the role an agent plays when acting as an intermediary between the artist whom the agent represents and the third-party employer who seeks to engage the artist’s services. This would mean that every television or film production company that directly hires an actor, . . .without undertaking any communications or negotiations with the actor’s . . . talent agent, would itself need to be licensed. To suggest that any person who engages the services of an artist for himself is engaged in the occupation of procuring employment . . . is to radically expand the reach of the Talent Agencies Act beyond recognition. Tobin, then, carves out a big exception to the rule prohibiting manager procurement. The manager succeeded in having dismissed a proceeding against him before the California Labor Commission under the state's Talent Agencies Act. The decision was termed “a rare victory for personal managers."__13/__

 

So long as managers take active roles in production development, they can circumvent the TAA’s licensing requirement by hiring their clients directly. But because these managers effectively act as agents, they face agent-like conflicts of interest.

 

About 30 complaints are filed with the state each year and the number is growing that allege that a manager crossed the line into job procurement. The cases are usually cut-and-dried. At least 90% of the cases in the last 20 years have been determined in favor of the artists.

 

 

__Conclusion__:

Entertainment law is the body of law and legal principles that has developed and evolved over a decade of years for businesses and professionals in the fields of entertainment, motion picture, television, theatre, music, interactive media and the internet. Each of these fields has its own unique features but is subject to the same legal concepts, rules, statutes, regulations, case law, practices, customs, and legal principles.

 

The reality of today’s entertainment industry is very different from the model upon which the traditional regulatory scheme is based. Many of today’s managers need to procure employment for their clients, and many of them have started to represent bankable artists. Many of today’s managers simply do not resemble traditional managers. This creates a problem. Today’s managers procure employment for their clients because agents have an incentive to represent only established, bankable artists. Many agents have policies against signing artists who have insufficient track records and reputations.

 

In order to develop their reputations, then, many of these agentless artists seek the assistance of managers. The problem with this is that the only real way for managers to develop these artists’ reputations is by procuring employment for them. But the TAA expressly forbids them from doing that. Of course, these managers can obtain TAA licenses, but doing so necessarily subjects them to franchise requirements and so prevents them from receiving compensation that adequately reflects their services. In today’s world, managers face a no-win situation: either they violate the TAA and run the risk of being penalized by the Labor Commissioner, or they acquire agency licenses and subject themselves to unduly restrictive guild requirements.

 

Industry commentators have pointed out that, faced with this catch 22, most managers choose to forego state licensing and to procure employment anyway. In other words, many of today’s managers act as unlicensed agents for their up-and-coming clients. Although the TAA technically forbids them from doing this, it does so irrationally. It ignores the fact that, given how agents behave, managers need to procure employment in order to make their clients bankable. It also ignores the fact that many clients want their managers to procure employment for them. The traditional scheme is inadequate because it fails to consider the reality of today’s entertainment industry. As explained above, even when managers incidentally procure employment, they incur substantial risks, namely, the rescission of management contracts and the disgorgement of commissions. This is troubling because many artists use this situation to their advantage. They retain managers in their early years to get employment and then they get the Labor Commissioner to rescind their contracts once they establish their reputations.

The representation of an artist needs depends on may factors including the income he or she is generating, the field he or she is involved in and his or her future needs and goals. At present, the laws are flawed. Artists have an agent because the law requires you to have one. The artist has a manager because he helps your career. The entertainment business is hard enough. The law should allow the artist to have more than one person, an agent and a manager, doing anything they can to get their clients work.

 

California law regulates the daily affairs of talent agents but no regulation delineates the duties of a personal manager. They are almost entirely unregulated except to the extent that the TAA imposes a negative duty on them not to procure employment. After leaving these issues literally untouched for a decade, the legislature would now have to address the current conflict of interest between the manager/producer and talent agent/packaging fees problem as well. At present, the problem has been compounded. The managers, talent agents and artists who are involved in the most serious conflicts of interest and crossovers are usually rich. These parties have an interest in protecting their considerable assets and the means to do so. I feel our government could spend its time and money in a more needed manner than trying to determine whether to protect millionaire clients from their millionaire managers and agents.

 

1 California Entertainment Commission 1985 Report.

2 California Labor Code §§1700.4 (a) and 1700.44 (c) and (d))

3 Waisbren v. Peppercorn Productions, Inc., 41 Cal. App. 4th 246 (1995).

4 Wachs v. Curry, 13 Cal. App. 4th 616 (1993).

5 California Entertainment Commission 1985 Report.

6 Park v. Deftones, 71 Cal. App. 4th 1465 (1999).

7 Garry Shandling v. Brad Grey, Los Angeles County Superior Court case filed January 15, 1998, settled July 2, 1999; http://www.eonline.com/News/ Court/9801.shandling. html?newsrellink.

8 Yoo v. Robi, 24 Cal.Reptr.3d 740 (Cal.App. 2 Dist. 2005).

9 California Labor Code §1700.4.

10 California Labor Code §1700.4(a).

11 Chinn v. Tobin, California Labor Comm'r Case No. 17-96 (1997).

12 California Labor Code §1700.4(a).

13 19 Entertainment L. Rptr. 8:11 (January 1998).

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