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Conflict suits shake up lawyers

A recent flurry of lawsuits over alleged conflicts of interest–not to mention the stiffening of the rules in the California State Bar’s code of professional conduct– has sent a tremor through Hollywood’s small but powerful community of entertainment lawyers.

That was the conclusion yesterday of Michael Sherman, a partner at Jeffer, Mangels, Butler & Marmaro, who talked to a group of industry professionals about conflicts within entertainment law.

“The world of entertainment lawyers is a concentrated, small crowd,” Sherman said. “And within this group, lawyers are not only handling legal matters, but also business and deal-making for clients. The lines between lawyering, agenting and managing have blurred.”

Since Hollywood itself tends to be a very small, in-crowd kind of business community, it’s not surprising that lawyers often find themselves representing more than one client in a single or multiple deal transaction.

“The state bar’s rules do not prohibit conflicts of interest, so long as there are written disclosures given to the clients informing them of the conflicts,” Sherman said.

Yet Sherman admitted that some of the entertainment industry’s legal eagles haven’t bothered to make full disclosure.

In making disclosure to a client, Sherman said, state bar rules specify it must be done when an attorney has a legal, business, professional or personal relationship with a person or biz that presents a conflict or a potential conflict to his client.

There are also instances where a lawyer must also get written consent from a client in order to continue representation. This is especially relevant in many package deals, where attorneys often represent talent and the studios.

While conflicts are proving to be a dilemma, Sherman noted that the way lawyers are often paid in Hollywood — receiving a percentage fee arrangement as opposed to billing for hours–also can prove problematic.

While the incentive to close the deal may be greater in that case, which could be to everyone’s benefit, the lawyer also could be putting his own interests ahead of his client’s in some instances.

Since most of Hollywood’s legal eagles are paid in this fashion, Sherman said , the result has been that a lot of industry contracts have shrunk to four or five-page “deal memos.”

“As soon as the deal memo is signed, the lawyer has made his money,” Sherman said. “And the time is then not spent drawing up the longer contracts that cover all of the details. So when these memos are reviewed later on, a lot of the details aren’t covered.”

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