For the virgins out there who would like to get a taste of litigation (or sadomasochists who just can’t get enough), I have come up with some simple rules to keep you embroiled in litigation for years to come.
These rules are needed because of the explosion of lawsuits in and around the film biz.
More and more folks are coming out of the woodwork to claim their ideas have been ripped off (“The Last Samurai” folks are currently involved in such a tussle). Also, complicated split-rights deals and fancy pre-sales arrangements with foreign partners are becoming the norm, and they’re are fraught with legal peril (consider the hot water Franchise got itself into by making foreign deals).
So, remember, if and when the legal boom is lowered on you and your pet project, keep these strictures in mind:
- Rely on oral agreements. Why put it in writing? It’s just so much more fun to let the court system sort out what was said. So go ahead, start principal photography relying on someone’s oral promise to arrange financing, and don’t forget to issue a press release (perhaps several) announcing the boatloads of cash promised you.
- If you are inclined for some reason to put it in writing, use a short deal memo or term sheet, and make it ambiguous as to whether it is intended to be legally binding.
For extra zest, include a vague allusion to the parties’ intention to enter into a subsequent long-form agreement, since that will give the judge something to ponder when, as is inevitable, the long-form pact is never circulated, much less signed.
As the coup de grace, incorporate by reference “customary terms and conditions,” since that will give expert witnesses plenty to debate for years to come.
Once you have covered your bases with those maneuvers, you can omit any discussion of at least half the important issues, since the ultimate goal is to replicate the certainty of an oral agreement.
- The next best approach is to go in the opposite direction and use a long-winded contract. A hundred pages or more is best. Salt it with capitalized words without definitions, and pepper it with incorrect cross-references to other paragraphs to keep everyone on their toes.
Attach as an exhibit pages and pages of standard terms and conditions that contradict the main agreement, and use half of that exhibit to restate the default rules that would apply anyway if the issues weren’t mentioned, but slightly misstate the default rules to leave everyone wondering if the difference were intended.
And never include either a table of contents or a table of defined terms, to make everyone hunt through hundreds of pages every time they are looking for any particular topic or definition.
- In all contracts, use lots of industry words that sound good but have multiple meanings, such as “co-production,” “attached” and “first-look.” It also helps to add unenforceable edicts, such as, “This is not a partnership.”
- Only do business with schemers, dreamers and screamers. Your goal is to do business only with eggshell-skinned, borderline paranoid schizophrenics. Irrationality is a must. Don’t check the reputation — or litigation history — of the people you do business with, since the litigation odds increase if you roll the dice. Or better yet, look for those with a legacy of litigation, as they are more likely to repeat it.
- Never opt for simplicity. Never use one entity when three would do, and add multiple layers of tax-sheltered financing, even when the transaction costs exceed the benefit. Never state in one sentence a thought that could be expressed in a paragraph — or two.
- Always insist on exclusive jurisdiction in your home city when the other side is a foreign company. This way, you will be able to litigate twice — once at home and once in the foreign country when you attempt to enforce your judgment there to reach assets.
- Provide for mandatory arbitration. Don’t worry; it usually takes as long and is as expensive as regular litigation, but there is nothing like that helpless feeling when the arbitrator rules against your sure-fire case, since as a practical matter there is no appeal. Yes, if you like the high-stakes risk of litigation, you’ll love arbitration.
- Don’t waive a trial before a jury, particularly if you are a big corporation. The goal is to get the adrenaline pumping, and nothing quite achieves it like the risk of a multimillion-dollar verdict at the hands of a jury of your peers.
- Don’t include a clause providing for attorney fees to the winner. You want the other side to find an under-employed attorney with nothing else to do and nothing to risk by taking on the case on a contingent fee basis.
- And never, ever settle! It’s the principle of the thing, lawyers’ fees be damned. Think of the long-term adverse consequences of settling — people might think you were reasonable.
Schuyler Moore is a partner at the law firm of Stroock & Stroock & Lavan, author of “The Biz: The Basic Business, Legal and Financial Aspects of the Film Industry,” and an adjunct professor at the UCLA School of Law and the UCLA Anderson School of Management, teaching Entertainment Law.